[1] These are appeals in files A-24-04 and A-25-04 against a decision of a judge of the Tax Court of Canada, dated August 28, 2003, whereby Mr. and Mrs. Mahy's appeals were allowed. Both taxpayers had challenged decisions of the Minister of Human Resources Development made under the Old Age Security Act, R.S.C. 1985, c. 0-9 (OASA) regarding applications for a spouse's Allowance (Allowance) and payment of a Guaranteed Income Supplement (GIS) pursuant to the OASA.

[2] At issue before us is the meaning of "income" under section 2 of that Act:

2. "income" of a person for a calendar year means the person's income for the year, computed in accordance with the Income Tax Act, except that

(a) there shall be deducted from the person's income from office or employment for the year

(i) a single amount in respect of all offices and employments of that person equal to the lesser of five hundred dollars and one fifth of the person's income from office or employment for the year,

(ii) the amount of employee's premiums paid by the person during the year under the Employment Insurance Act, and

(iii) the amount of employee's contributions made by the person during the year under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,

(b) there shall be deducted from the person's self-employment earnings for the year the amount of contributions made in respect of those self-employed earnings by the person during the year under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,

(c) there shall be deducted from the person's income for the year, to the extent that those amounts have been included in computing that income,

(i) the amount of any benefit under this Act and any similar payment under a law of a provincial legislature,

(ii) the amount of any death benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act, and

(iii) the amount of any social assistance payment made on the basis of a means, a needs or an income test by a registered charity as defined in subsection 248(1) of the Income Tax Act or under a program provided for by an Act of Parliament or a provincial legislature that is neither a program prescribed under the Income Tax Act nor a program under which the amounts referred to in subparagraph (i) are paid, and

(d) there shall be deducted from the person's income for the year three times the amount, if any, by which

(i) the total of any amounts that may be deducted under section 121 of the Income Tax Act in computing the person's tax payable for the year

exceeds

(ii) the person's "tax for the year otherwise payable under this Part" (within the meaning assigned by subsection 126(7) of the Income Tax Act for the purposes of paragraph 126(1)(b) of that Act) for the year;

2. « _revenu_ » Le revenu d'une personne pour une année civile, calculé en conformité avec la Loi de l'impôt sur le revenu, sous réserve de ce qui suit_:

a) les montants suivants sont déduits du revenu de la personne tiré d'une charge ou d'un emploi pour l'année_:

(i) un montant unique pour l'ensemble des charges et emplois qu'elle occupe, égal au cinquième de son revenu tiré de charges ou d'emplois pour l'année, jusqu'à concurrence de cinq cents dollars,

(ii) les cotisations ouvrières qu'elle a versées au cours de l'année en vertu de la Loi sur l'assurance-emploi,

(iii) les cotisations d'employé qu'elle a versées au cours de l'année en vertu du Régime de pensions du Canada ou d'un régime provincial de pensions au sens de l'article 3 de cette loi;

b) sont déduites des gains de la personne tirés d'un travail effectué à son compte pour l'année les cotisations qu'elle a versées au titre de ces gains au cours de l'année en vertu du Régime de pensions du Canada ou d'un régime provincial de pensions au sens de l'article 3 de cette loi;

c) les montants suivants sont déduits du revenu de la personne pour l'année, dans la mesure où ils ont été inclus dans le calcul de ce revenu_:

(i) les prestations prévues par la présente loi et les prestations semblables versées aux termes d'une loi provinciale,

(ii) les prestations de décès prévues par le Régime de pensions du Canada ou par un régime provincial de pensions au sens de l'article 3 de cette loi,

(iii) les prestations d'aide sociale versées, compte tenu des ressources, des besoins ou des revenus, par un organisme de bienfaisance enregistré, au sens du paragraphe 248(1) de la Loi de l'impôt sur le revenu, ou dans le cadre d'un programme prévu par une loi fédérale ou provinciale, exception faite des programmes visés par règlement pris en application de la Loi de l'impôt sur le revenu et de ceux aux termes desquels les montants visés au sous-alinéa (i) sont versés;

d) est déduit du revenu de la personne pour l'année trois fois l'excédent éventuel du total visé au sous-alinéa (i) sur le montant visé au sous-alinéa (ii)_:

(i) le total des montants déductibles en application de l'article 121 de la Loi de l'impôt sur le revenu dans le calcul de l'impôt payable par la personne pour l'année,

(ii) l' « _impôt payable par ailleurs pour l'année en vertu de la présente partie_ » , au sens où cette expression s'entend au paragraphe 126(7) de cette loi pour l'application de l'alinéa 126(1)b) de cette loi, de la personne pour l'année.

Subparagraph 2(c)(i) is the relevant provision for this appeal. There is no dispute that the income referred to here in section 2 is the net income computed in accordance with the Income Tax Act (ITA) and from which deductions found therein can be made.

[3] Three issues are raised by the appellant. The first relates to the meaning of "income". Was the Tax Court judge right in holding that the term "income" as defined by that section may include a negative income, in this case, minus ($2,736.00)? The appellant also submits that the judge erred in deciding that the Minister had miscalculated the GIS for Mr. Mahy. Finally, he complains that the judge was remiss in his duty to provide sufficient reasons for his decision.

[4] A short summary of the facts and the respondents' position is in order for a proper understanding of the debate.

Facts and Respondents' position

[5] On May 29, 1997, the respondent's spouse, Marie Mahy, submitted an application for an Allowance payable under the OASA. The respondent, Maurice Mahy, requested payment of a GIS.

[6] By Notice of Assessment dated April 12, 2001, the respondent and his spouse were assessed for the taxation year of 2000. The Minister of National Revenue found that for the year 2000, the respondent's net income was $6,275.00 and that his taxable income was $2,343.00. The respondent's spouse's net income amounted to $7,480.00 and her taxable income was $2,735.00.

[7] To determine the amount of the Allowance and the GIS payable under the OASA during the payment period of July 2001 to June 2002, it was necessary to calculate the joint income of the respondent and his spouse for the 2000 taxation year. Both individual incomes are determined according to section 2 of the OASA. Mr. Mahy reported an income of minus ($2,736.00) calculated as follows:

Net income $6,275.00

Less GIS received ($3,932.00)

Less OASA pension received ($5,079.00)

Total ($2,736.00)

[8] Since Human Resources Development Canada (HRDC) interpreted section 2 as not allowing for a negative income result, the respondent's income of minus ($2,736.00) was adjusted to $0.00. The respondent's spouse's income was determined to be $2,736.00:

Net income $7,481.00

Less Allowance received ($4,745.00)

Total $2,736.00

The amounts of the Allowance and the GIS were therefore determined based on a joint income for the 2000 taxation year of $2,736.00.

[9] On September 14, 2001, the respondent and his spouse wrote a letter requesting that the calculation of the Allowance and GIS be redetermined using a joint income of $0.00 instead of $2,736.00. They suggested this was the correct number since the respondent's income for the 2000 taxation year had actually been minus ($2736.00) which should have cancelled out the respondent's spouse's income of $2736.00 for a joint income result of $0.00.

[10] The appellant confirmed the original calculation in a decision dated October 17, 2001. The respondent and his spouse then filed an appeal with the Office of the Commissioner of Review Tribunals. By letter dated July 18, 2002, the Commissioner transferred the respondent's case (as well as that of his spouse) to the Tax Court of Canada pursuant to subsection 28(2) of the OASA.

The decision of the Tax Court

[11] The judgment of the Tax Court reads as follows:

The appeal from the decisions of the Minister of Human Resources Development made under the Old Age Security Act for the period July 1, 2001 to June 30, 2002, including the decision dated October 17, 2001, which was appealed to the Review Tribunal and referred to this Court pursuant to subsections 28(1) and 28(2) of the said Act is allowed and the said decisions are vacated.

[12] Section 18.23 of the Tax Court of Canada Act imposes upon the Court an obligation to give reasons for its judgment:

18.23 The Court shall give reasons for its judgment but, except where the Court deems it advisable in a particular case to give reasons in writing, the reasons given by it need not be in writing.

18.23 La Cour motive ses jugements, mais elle ne le fait par écrit que si elle l'estime opportun.

[13] In Gupta v. Canada, [1998] F.C.J. No. 415, this Court observed "that the spirit of that provision would appear to be that the reasons should be sufficient so that a reasonable taxpayer can understand essentially why he has won or lost". Reasons are not only important to an individual, but also to the government department involved which is entrusted with the duty to administer the Act in the public interest and to make proper allocations and payments of benefits. It is therefore equally entitled to an explanation as to why a certain decision is made: see Canada (Minister of Human Resources Development) v. Quesnelle, [2003] F.C.J. No. 267, at paragraphs 10-11.

[14] Several considerations underlie the requirement to give adequate and sufficient reasons beyond those already expressed: ensuring the accountability of the judiciary for its actions, enabling parties to exercise a meaningful right of appeal, assisting the reviewing Court in exercising its appellate function, avoiding the promotion of unnecessary review of decisions due to a lack of adequate reasons, addressing principles of unsettled law or providing guidance with respect to litigious legislative provisions: see R. v. Sheppard, [2002] 1 S.C.R. 869, at pages 896-899.

[15] In the present instance, the judge, in effect, gave no reasons in support of his conclusion that the appeals be allowed and the decisions of HRDC be vacated. The judge's cryptic conclusion and justification for it can be found in the following terms in the transcript of the hearing (see Appellant's Record, page 126):

Mr. JUSTICE Okay, I am prepared to render judgment.

I had done a fair bit of research prior to today and I have a memo that is almost as thick as some of the papers you gentlemen have submitted. And without going into a very long dissertation, in my opinion the position of the appellants is correct. The calculation of income in the way that the appellant wishes it to be done in my opinion is correct and, consequently, the appeal is allowed.

[16] I have no hesitation in concluding that these reasons were inadequate in the circumstances. Only through a reading of the whole transcript and the pleadings can one learn that the judge in fact decided that income under the OASA includes a negative income. But nowhere is there a justification, an explanation or a rationale for such conclusion. This brings me to a review of that conclusion.

Whether the judge erred in holding that the word "income" under section 2 of the OASA includes a negative income

[17] Relying upon the interpretation given to it in the ITA, the appellant submits that the word "income", both under the ITA and the OASA, means a positive amount and does not include or refer to a negative income as claimed by the respondents and found by the judge. In other words, that the concept of negative income does not exist under both legislations and is, in fact, an oxymoron.

[18] There is no doubt that, under the ITA, "income" refers to either a zero amount or a positive amount. Paragraphs 3(c), (d), (e) and (f) of that Act envisage as income the amount of a taxpayer's gains which exceeds his deductions and losses and, where the amount is nothing as a result of the deductions and losses exceeding the gains, paragraph 3(f) then deems the income to be an amount equal to zero: see Kutcha v. Canada, [1999] F.C.J. No. 1427 (F.C.A.).

[19] In addition, section 257, found in the Interpretation section, deems a negative amount obtained by or in accordance with an algebraic formula to be nil (or zéro in French) unless it is specifically provided otherwise:

257. Except as specifically otherwise provided, where an amount or a number is required under this Act to be determined or calculated by or in accordance with an algebraic formula, if the amount or number when so determined or calculated would, but for this section, be a negative amount or number, it shall be deemed to be nil.

257. Sauf disposition contraire, tout montant ou nombre dont la présente loi prévoit le calcul selon une formule algébrique et qui, une fois calculé, est négatif doit être considéré comme égal à zéro.

[20] In Fiset v. Canada (Minister of National Revenue - M.N.R.), [1988] T.C.J. No. 16, the Chief Judge of the Tax Court of Canada concluded from the definitions of the different sources of income in the ITA that "income" meant a positive amount and was not merely a simple numeral concept which could be either a positive or a negative amount or a lack thereof.

[21] In Canada v. McLaren (T.D.), [1991] 1 F.C. 648 (F.C.T.D.), MacKay J. analysed the word "income" in both its grammatical and ordinary sense as well as in its context in the ITA. Also referring to the Carter Commission, Report of the Royal Commission on Taxation (1966), vol. 1, pages 9, 10 and 482, he found that "income" means the "net accretion of economic power", a definition suggested in that Report, and that this concept does not apply where there is no income or the income is zero. He concluded, rightly so in my view, that "income" under the ITA means or refers to a positive amount.

[22] I agree with the Tax Court in Fiset and the Federal Court, Trial Division in McLaren (T.D.) that the ITA contains no notion of negative income. The result of the exceeding of gains over deductions and losses is either income or no income in the year. Income is, therefore, either a positive amount or zero. Counsel for the appellant informed the Court that he was not aware of any concept of negative income under the ITA. While the ITA speaks in terms of a negative amount in section 257 that is deemed to be nil (zéro in French), it does not make use of the terms "negative income".

[23] In section 2 of the OASA, Parliament used the notion or concept of "income". I have no reason to believe that the notion of "income" under the OASA would lose its usual conceptual meaning, especially in view of the interaction that section 2 makes with the computation of income under the ITA. Nothing in the OASA expressly or specifically indicates or requires that the notion of "income" be conceptually distorted into positive and negative income.

[24] Moreover, such a distortion runs counter to a purposive interpretation of the OASA. Subparagraph 2(c)(i) allows for a deduction from income the amount of any benefit received by a pensioner under that Act. It is a social measure designed to assist low-income pensioners. The purpose of that deduction is not to create or determine a loss, but simply to ensure that the benefits of pensioners under the OASA are not reduced by reason of receiving such income. The purpose of these deductions is also to determine the amount of the benefits payable and whether a pensioner is entitled to receive maximum benefits. Thus, a pensioner is entitled to a payment of maximum benefits when, pursuant to section 2, he has no income or zero income. Where the pensioner has a spouse, maximum benefits are available to them if they jointly have no income or if their joint income is zero. Under the legislative scheme, even if they had a negative or minus income, it would not increase the amount of the maximum benefits payable to these pensioners. Conversely, any income left after the deductions authorized by subparagraph 2(c)(i) will reduce the amount of benefits in a proportion established by the legislative scheme.

[25] Assuming, for the sake of argument, that the concept of negative income does exist, one situation where it could come into play is, as in the present case, where a pensioner has a spouse and uses his negative income to offset the income of his spouse, or vice versa, so as to artificially bring their joint income to zero. I say artificially because there is in fact a net income effectively received by one member of the couple. In such a situation, the deduction from income is not taken, as the OASA intends, to ensure that the benefits payable will not be reduced by reason of receiving such income, but rather to increase, to the maximum payable, benefits that would otherwise have been less.

[26] Furthermore, a deduction for negative income allows, in these circumstances, the respondents and persons in a similar situation to be better off than those pensioners who really have no income. This is so because the respondents would receive payment of the maximum benefits under the OASA in addition to an income that they have.

[27] With respect, I do not think that it was the intent of section 2 of the OASA to create such unfairness and disparity of treatment among the recipients of benefits. Nor was it the intent of Parliament, as the interpretation proposed by the respondents would entail, to discriminate against single individuals who would never benefit from a so-called negative income because, as previously mentioned, they can never get more than the maximum benefits which they get when they have no income or zero income. I believe that the judge erred when he ruled that the concept of negative income exists under the OASA and that the negative income of one member of a couple can be used to reduce or offset the income of the other member.

Whether the judge erred in holding that the GIS was miscalculated

[28] The judge vacated the decision of HRDC fixing the GIS payable to Mr. Mahy. The amount was established pursuant to subsection 22(2) of the OASA, according to the following formula: [(A-B) x C] - D/4. As we shall see, only "D" in this formula is affected by the joint income of the respondents.

[29] "D" in that formula is the residual family income of the pensioner and his or her spouse for a month. The residual family income is defined in subsection 22(1) and its amount is obtained and determined by the means of another formula: A - B.

[30] In that formula, "A" refers to the respondents' monthly joint income (annual income of $2,736.00 _ 12 = $228.00/month). "B" is the product obtained by multiplying four-thirds of the rounded pension equivalent by the spouse's special qualifying factor for the month which, in this case, is one. There is no dispute that this amount, pursuant to section 7, is $438.00 which, multiplied by four-thirds, adds up to $584.00. Thus "D" is [A - B], that is to say the monthly joint income minus the results of four-thirds of the rounded equivalent.

[31] In the present instance, it does not matter whether, in the computation of "D" (the residual family income), one uses a joint income of $2,736.00 as HRDC did or a joint income of 0 as the respondents wish because, in either scenario, "B" is greater than "A" as the following illustrates:

D = A - B

A: $228.00 if joint income is $2,736.00

0 if joint income is 0

B: $584 i.e. 4/3 of the rounded pension equivalent

D = A - B

D = $228.00 - $584.00

D = 0 - $584.00

D = 0

Thus D remains the same and, therefore, the amount of the GIS is not affected whether one joint income or the other is used for the determination of "D". Consequently, the judge erred in vacating HRDC's decision regarding the determination of the residual family income.

[32] For these reasons, I would allow the two appeals and set aside the decision of the Tax Court of Canada. There will be no costs since the appellant did not seek them.

"Gilles Létourneau"

J.A.

"I agree

J. Richard C.J."

"I agree

Marshall Rothstein J.A."

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKETS: A-24-04

STYLE OF CAUSE: MINISTER OF HUMAN RESOURCES DEVELOPMENT v. MAURICE MAHY

PLACE OF HEARING: Winnipeg, Manitoba

DATE OF HEARING: September 29, 2004

REASONS FOR JUDGMENT : LÉTOURNEAU J.A.

CONCURRED IN BY: RICHARD C.J.

ROTHSTEIN J.A.

DATED: October 12, 2004

APPEARANCES:

Mr. Michel Mathieu FOR THE APPLICANT

Mr. Joe Mahy for: ON THEIR OWN BEHALF

Mr. Maurice Mahy,

Mrs. Marie Mahy

SOLICITORS OF RECORD:

Mr. Morris Rosenberg, FOR THE APPLICANT

Deputy Attorney General of Canada

Ottawa, Ontario