Shaklee Canada Inc. v. Minister of National Revenue, [1996] 1 CTC 180

Linden J.A.: — The issue in this appeal is whether certain vitamin, mineral and fibre products marketed and sold by Shaklee Canada Inc. are exempt from taxation under the Excise Tax Act as being “food for consumption”. The relevant provisions, as they read at the appropriate time, are as follows:

50(1) There shall be imposed, levied, and collected a consumption or sales tax at the rate specified in subsection (1.1) on the sale price of all goods

(a) produced or manufactured in Canada

51(1) The tax imposed by section 50 does not apply to the sale or importation of the goods mentioned in Schedule III...

Schedule III, Part V, the foodstuffs exemption, states:

Food and drink for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of the food and drink)....

Thus, any “goods” that are considered to be “food” are exempt from tax. No one disputes that the goods in question were “for human consumption”. The narrow issue on this appeal, therefore, is whether the trial judge erred in denying the exemption. In my view, he did not.

Facts

The appellant, Shaklee Canada Inc., manufactures, distributes and sells certain nutritional, household and personal care products. Eight of the nutritional products — being vitamins, minerals, and fibre in tablet, powder, capsule, and wafer form are the subject of the present dispute.

For the period July 1, 1985 to September 30, 1986, Shaklee’s sales revenues from the goods in issue totalled $16,948,970.65. Pursuant to the Excise Tax Act, Shaklee reported and paid federal sales tax of $1,180,402.82 on this sum. On December 8, 1986, Shaklee submitted a refund claim to the Minister of National Revenue for the full amount of the tax paid. It contended that the goods in issue were “food ... for human consumption” within the meaning of section 1 of Part V of Schedule III of the Act, and were therefore exempt from tax. The Minister rejected the refund claim. Shaklee then filed a notice of objection. By a decision dated November 5, 1987, the Minister disallowed the objection on the ground that the goods were not food products. The taxpayer appealed to the Canadian International Trade Tribunal.

Tribunal decision

The Tribunal agreed with the Minister. It reasoned that the disputed goods are not “food” within the common understanding of that term. After reviewing the evidence before it, the Tribunal stated:

The Tribunal concludes from its examination of the evidence, the dictionary definitions, the labels of the products and the appellant’s literature that the goods in issue are not food, but are supplements designed to prevent or correct certain dietary deficiencies in humans. The evidence has revealed that normal persons consuming a normal diet probably do not need supplements for their diets and that there are enough vitamins, minerals and fibre in most Canadian food baskets to properly metabolized [sic] the food that a person takes in. It was also established that the goods in issue contribute very little to the amount of energy that people consume and are not controlled by appetite. Moreover, the evidence showed that the consumption of the goods in issue is a solution where the diet is deficient.

The Tribunal is further of the view that, while from a nutritionist point of view, the vitamins, minerals and fibre sold by the appellant might be included in the word “food,” they are not included in the common understanding of the word “food.” It is clear to the Tribunal that when the word “food” is used, its popular meaning would not include the goods in issue. On this point, the Tribunal agrees with Dr. Patrick that if a plate of vitamins was offered to the ordinary man on the street, he would not accept that as food. It is not something that would normally be served at a meal or used in the preparation of ordinary staple table foods.

The Tribunal went on to say that the legislative history of section 1 of Part V of Schedule III, the exempting provision for foodstuffs, reinforces the conclusion that the disputed goods are not “food.” In the Tribunal’s opinion, this exemption never included such products as the goods in issue. The Tribunal further decided, after looking at certain legislative developments of pertinent sections, that the goods were included under the definition “health goods,” which, prior to 1985, existed as a pharmaceutical exemption under Schedule III. Beginning July 1, 1985, however, the exemption was repealed. With few changes to the wording, a definition of “health goods” was included in subsection 2(1) of the Act for a different purpose, which need not be explained here. From this and the other statutory evidence, the Tribunal drew three conclusions:

First, Parliament never intended to encompass the goods in issue in the exempting provision for “foodstuffs.” Second, the goods in issue were encompassed under the language that used to be found in section 1 of Part VIII of Schedule III before May 23, 1985, and that is now found in the definition of “health goods” in subsection 2(1) of the Act. Third, the repeal of the specific exemption for “health goods” removed that class of goods from the scope of Schedule III.

The taxpayer’s appeal was thereby dismissed.

Trial decision

The Tribunal decision was appealed to the Trial Division of this Court. The trial judge affirmed the Tribunal’s disposition of the case, and substantially agreed with its reasoning. He stated:

I find the issue before me to be capable of simple description in the following terms. If the goods in issue are food for human consumption, then they are exempt and the plaintiff must succeed. It matters not that they might also be health goods. If they are both food for human consumption and health goods, then under the words-in-total-context approach to determining the object and spirit of the taxing provisions here in question, the goods are exempt as food for human consumption and it is irrelevant that they are also health goods. If Parliament had intended to except out from the food for human consumption exemption goods that are also health goods, it could simply have said so. Whether consciously or not, it did not.

In considering whether the goods are “food”, the trial judge considered how that term would be commonly understood. In respect of this, he found both the dictionary definitions and the expert testimony unhelpful.

He stated:

I do not find the dictionary definitions that have been cited to me to be very helpful in, to paraphrase in part the quotation from C*t*, determining what the person in the street, of at least average intelligence, well-acquainted with the language in which the Excise Tax Act is written, and informed of all the relevant facts, would conclude in this matter. No evidence was before me on this issue. None of the witnesses who appeared before me was qualified to express an opinion in this regard. I therefore rely on my own analysis.

The trial judge then looked at two factors in particular*the product labels and the marketing scheme by which the products are sold*and concluded that the products are not food. He stated:

On balance, I am satisfied that the person in the street, if all of the conditions prescribed in the quotation and paraphrasing of C*t* above were met, including her or his being informed of the dictionary definitions to which I was referred, would conclude that the goods in issue are dietary supplements or nutritional supplements and not food.

This conclusion, he felt, was consistent with a test set out in the Exchequer Court decision, K. v. Planters Nut and Chocolate Co., [1951] Ex. C.R. 122, [1951] C.T.C. 16, 51 D.T.C. 454, per Cameron J. stated (at page D.T.C.458):

It is equally clear to me that when in Canada the words “fruit” and “vegetables” are used, their obvious and popular meaning would not include “nuts” of any sort, or the peanuts, salted peanuts or cashews sold by the defendant. Counsel for the plaintiff suggested a test which I think apposite. Would a householder when asked to being home fruit or vegetables for the evening meal bring home salted peanuts, cashew nuts or nuts of any sort? The answer is obviously “no”.

Adopting this test, the trial judge concluded:

Against the same test, I conclude that a householder asked to bring home “food” for the evening meal, or any meal, would not bring home the goods in issue.

Analysis

The issue before us is the same as that which was before both the Tribunal and the trial judge, and concerns whether the goods in issue are “food”. Resolving this issue is, of course, a matter of statutory interpretation. Courts have developed well-tested rules for interpreting statutes, many of which appear and reappear in the various cases. One such rule is that the words of a taxing statute must be interpreted in light of all the relevant contextual factors. This is the words-in- total-context approach articulated by MacGuigan J.A. in Lor-Wes Contracting Ltd. v. Minister of National Revenue, [1985] 2 C.T.C. 79, 85 D.T.C. 5310 (F.C.A.) at page 83-84 (D.T.C. 5313). It is a very important rule and has a significant bearing on cases like the present. Another rule, equally important to the present case, is that Parliament is presumed to use words in their ordinary and common meaning. (Pfizer v. D.\Minister of National Revenue, [1977] 1 S.C.R. 456, 68 D.L.R. (3d) 9, at 463, per Pigeon J.) Professor C*t* put this rule as follows:

As it is presumed that the legislator wishes to be understood by the citizen, the law is deemed to have been drafted in accordance with rules of language in common use. [1]

Statutes are presumed to be written for the people they affect, and Courts will strive for interpretations that respect as much as possible this presumption within the constraints of other competing, contextual factors.

The goal of all of these rules is to give effect to Parliament’s intent. To aid this process, Courts often refer to dictionaries. They may also consider the testimony given by expert witnesses, or other relevant aids such as academic and government publications. It is important to remember, however, that none of these aids are decisive. In the final analysis, a Court must exercise its own judgment in weighing all the relevant factors in the factual and legislative context of the case.

In a vigorous and thorough argument, Mr. Roman urged the Court to “think young” and not to rely on the first impression of the meaning of the word “food”. He suggested that the dictionary meaning, as elaborated upon by the experts, should be adopted by the Court and that a clear, modern definition of food be articulated, one which would include vitamins, minerals and fibres. I am unable to respond to this plea. This type of legislation is written for the ordinary person, not for experts. Dictionary definitions, experts’ testimony, and nutritionists’ understanding of what is food sound rather technical to my ears, as they did to the trial judge. They tend towards abstraction, and use terms of a scientific nature. Take, for example, the following very typical dictionary definition:

1. That which is eaten or drunk or absorbed for the growth and repair of organisms and the maintenance of life; nourishment, nutriment, aliment. [2]

By this definition, “food” could be almost any ingestible substance, barring poison, but including water. It seems to me that a definition of food that is so broad is not what the ordinary person understands as food. In my view, this is so regardless of how many dictionaries, nutritionists and other experts might disagree.

A second meaning that is offered reads:

2. Nourishment taken in solid as opposed to liquid form: food and drink. [3]

This definition suggests that food is any ingestible substance of a more or less solid form that nourishes. Would this meaning of “food” exclude all nutritionally worthless or even harmful edible substances? Would junk “food”, for example, be outside the definition?

The point of this exercise was merely to suggest that dictionaries are of limited usefulness in statutory interpretation. One can rarely come up with a satisfactory meaning that does not require more from the Court. Consequently, to arrive at the common understanding of what a word means, one must sometimes resort to the simple gesture of imagining the subject matter in a very ordinary situation. This is what the trial judge meant to do when he employed what Mr. Roman called the “meal test” used by the trial judge and mentioned above:

Against the same test, I conclude that a householder asked to bring home “food” for the evening meal, or any meal, would not bring home the goods in issue.

I can see no error in this. There is no requirement in this test that to be food something could only be eaten as a meal; it was obviously not meant literally, but was merely given as an example of what ordinary people would consider to be food. Despite the possible disagreement of some experts, therefore, our ordinary understanding of “food” simply does not comprehend the appellant’s products. The trial judge was certainly not suggesting that only those substances eaten at meals can be food, and that all others such as snack foods, junk foods and fast foods, cannot. He was merely expressing the idea that, if someone asked for food, it would be odd to be offered a plate of vitamins.

Mr. Roman, for the appellant, suggested that historically the common understanding of food may have excluded the appellant’s products, but that times have changed and the common understanding of what is food has evolved. We have become much more health conscious. Our diets have changed. Hence, items such as vitamins, minerals and fibre, have become a more common part of our ordinary daily diet. The common understanding of food, he argued, has likewise changed accordingly so as to include these things.

Like the trial judge, however, I am not convinced that the definition of food has evolved, even for the younger members of Canadian society, to the extent that it includes vitamins, minerals and fibre. True, first impressions of the meaning of the words should not be embraced without reflection. But some first impressions become lasting impressions. In this case, therefore, the word food, as it is used in the legislation, does not include the appellant’s products.

I might point to some of many factors I have taken into account, which were so colourfully suggested by Dr. Lester for the respondent. The labels on most of the products contain references to “dosages”, not to “helpings”. They are “taken”, not “eaten”. Unlike foods, some of the products have labels which say they are to be taken “as directed by a physician.” Some labels include warnings to “keep out of the reach of children.” Although of no importance, in my view, the labels contain DIN reference numbers. The products are intended for “therapeutic use”, and are not meant to be enjoyed as food is. They do not bear the common attributes usually associated with food. They do not have a pleasing taste. They have no energy value. They do not assuage hunger. They are not served on a plate nor eaten with a utensil. They are manufactured products intended to offset nutritional deficiencies. They are what their labels describe them to be, dietary supplements, not food. If they are to be exempted, it is for Parliament to do so, not this Court.

The legislative history of the Excise Tax Act has been of little help to the Court. It demonstrates merely the changing attitudes toward the taxation of different types of products over the years. Similarly, the decided cases that have been cited to the Court deal with different words, in different versions of the statute, in different contexts than arose here. In the same way, the detailed references to the provincial legislation, which taxes products such as these, offered the Court no succour. Lastly, I see no reason to decide whether these products are “health goods”, nor to resolve any perceived conflict of judicial approaches to the excise tax legislation of an earlier era.

Whether those products of the appellant, mainly fibre wafers, which may be eaten along with food, might be exempted from taxation cannot be decided in this case as no solid evidentiary basis was presented for such a determination, nor was full argument addressed to this particular matter.

I have not been persuaded to disturb the decision of the Trial Judge.

I would dismiss the appeal with costs.

Appeal dismissed with costs.