Brenda Schaff v. Her Majesty the Queen (Informal Procedure), [1993] 2 CTC 2695

Rip, T.C.C.J.:—In appealing an assessment for 1990, the appellant complains that her section 7 and section 15 rights under the Canadian Charter of Rights and Freedoms ("Charter") have been infringed upon because paragraph 56(1)(b) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") requires her to include in the computation of income maintenance payments she received from her former husband for the benefit of her children. First, she complains that she is being discriminated against contrary to section 15 of the Charter because paragraph 56(1)(b) of the Act imposes a tax burden or disadvantage on persons like herself (poor, female, single custodial parent), not imposed upon other members of society. Second, she complains that the inclusion in her income of maintenance payments for the children deprives her and her children of the right to "security of the person”, within the meaning of section 7 of the Charter, which deprivation is not in accordance with the principles of fundamental justice.

The appellant has elected to proceed under the informal procedure provisions of the Tax Court of Canada Act} [1]

The appellant is a divorced woman who has custody of two minor children. In the taxation year in question, she was employed and earned $21,600 in employment income. In addition, the appellant received payments of $300 per month, for a total amount of $3,600 in that year, from her former spouse, Mr. Edward Schaff, as an allowance for the maintenance of their two children of the marriage. They separated in May 1984. The appellant received these payments pursuant to a consent order of the Provincial Court of British Columbia dated October 10, 1984. Moreover, she received these amounts while she was living apart and separated pursuant to a divorce (granted in June 1986) from her former spouse who was required to make the payments. She was unemployed and receiving social assistance payments at the time the consent order was granted. She says that when the amount of child support payments was set, income tax consequences were not discussed or taken into consideration by the Provincial Court.

Issues

The appellant does not dispute that the maintenance payments were properly included in the computation of income and the arrears interest were properly assessed in accordance with the provisions of the Act.

The appellant, however, as stated above, has put forth two Charter arguments. Accordingly, there are two issues to be decided:

1. Whether paragraph 56(1)(b) of the Act violates section 15 of the Charter,

and

2. Whether paragraph 56(1)(b) of the Act violates section 7 of the Charter.

Paragraph 56(1)(b) of the Act provides that:

(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(b) any amount received by the taxpayer in the year, pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if the recipient was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, the spouse or former spouse required to make the payment at the time the payment was received and throughout the remainder of the year;

Sections 7 and 15 of the Charter read as follows:

7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

15. (1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

(2) Subsection 1 does not preclude any law, program or activity that has as its object the amelioration of conditions of disadvantaged individuals or groups including those that are disadvantaged because of race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

ISSUE 1: Section 15

Appellant's argument

The appellant argues that the operation of paragraph 56(1)(b) of the Act infringes her right to equal protection and equal benefit of the law without discrimination as provided in section 15 of the Charter.

Distinction based on personal characteristics of individual or group

Counsel for the appellant, Ms. Jeanne Watchuk, argues that the appellant belongs to a group that is analogous to those listed in section 15. The appellant belongs to a group defined by the following characteristics: poor, female and single custodial parent. Each characteristic forms a discrete and insular minority. In this respect, the characteristics of this group are similar to the group found deserving of protection under section 15 in Thibaudeau v. The Queen, [1992] 2 C.T.C. 2497, 92 D.T.C. 2111 (T.C.C.), a case under appeal to the Federal Court of Appeal. The appellant, however, adds to this group the state or characteristic of being poor. In other words, the appellant belongs to a narrower part of the group found in Thibaudeau, supra.

The appellant relies on the Thibaudeau case, supra, for the proposition that female, single custodial parents form a discrete and insular minority. [2]

The appellant relies on Dartmouth/Halifax (County) Regional Housing Authority v. Sparks, 119 N.S.R. (2d) 91 (C.A.) and Federated Anti-Poverty Groups of British Columbia v. British Columbia (Attorney General) (1991), 70 B.C.L.R. (2d) 325 (S.C.), for the proposition that the state of being poor is a personal characteristic for the purpose of section 15 of the Charter. In the Sparks case, supra, certain provisions of the Residential Tenancies Act, R.S.N.S. 1989, c. 401, were held to infringe upon public housing tenants’ right to equal benefit of the law. Hallet, J.A., found, at page 97:

. . . that the impugned provisions amount to discrimination on the basis of race, sex and income. . . .

And at page 98, he stated:

Low income, in most cases verging on or below poverty, is undeniably a characteristic shared by all residents of public housing; the principal criteria of eligibility for public housing are to have a low income and have a need for better housing. Poverty is, in addition, a condition more frequently experienced by members of the three groups identified by the appellant. The evidence before us supports this.

Single mothers are now known to be the group in society most likely to experience poverty in the extreme. It is by virtue of being a single mother that this poverty is likely to affect the members of this group. This is no less a personal characteristic of such individuals than non-citizenship was in Andrews [Andrews v. Law Society of British Columbia, [1989] 1 S.C.R. 143, 56 D.L.R. (4th) 1, [1989] 2 W.W.R. 289]. To find otherwise would strain the interpretation of "personal characteristic" unduly.

In that case, the respondent did not dispute that low income was a personal characteristic. The respondent in this case does dispute that poverty is a personal characteristic. In Federated Anti-Poverty Groups, supra, Barrett, J. said, at page 344:

Applying the test under section 15 of the Charter, it is clear that persons receiving income assistance constitute a discrete and insular minority within the meaning of section 15. It may be reasonably inferred that because recipients of public assistance generally lack substantial political influence, they comprise "those groups in society to whose needs and wishes elected officials have no apparent interest in attending”.

Dr. Jane Friesen, Professor of economics at Simon Fraser University, testified that in 1991 over 61 per cent of lone parent families headed by women under the age of 65 have income below Statistics Canada's Low Income Cut- Off ("LICO"), the most commonly recognized indicator of poverty. The appellant's income (which consists of employment income, family allowance and maintenance payments) for the 1990 taxation year was above Statistics Canada's LICO for a family of her size living in an urban area with greater than 500,000 people which was $24,389. Despite this fact the appellant argues that the appellant is a member of a group defined by its poverty.

Friesen explained that LICO is based on the assumption that households that spend the same proportion of their income on necessities (food, clothing and shelter) enjoy the same standard of living. In 1986, the portion of household income that was estimated to be spent by the average Canadian household on necessities was 38.5 per cent. To this percentage is added an arbitrary 20 per cent to make it 58.5 per cent for 1990. The estimate of the level of income at which families would be exceeding this proportion of their income on necessities is defined according to family size and the degree of urbanization that the family is located in. In other words, there are separate LICOs for households of different sizes living in different degrees of urbanization. The problem with Statistics Canada's LICO methodology is that there is no specific LICO for a single parent household with two children; LICO for a three person household does not distinguish between single parent and two parent families.

The alternative methodology of defining the poverty line is given by the Canadian Council on Social Development (CCSD). It makes no adjustments for degrees of urbanization. It is a measure of relative poverty and the poverty line for a family of three is measured by CCSD as one half of the median Canadian income. The CCSD measured poverty for a similar household living in 1990 at $25,817. So, in fact, the appellant's family income for 1990 ($25,999.92) exceeded both measures of poverty.

In Friesen's view these measures were deficient for single parent households. They underestimate the income required to provide the same standard of living to single parent households as that enjoyed by two parent households. By focusing only on the income available to these households, these measures ignore the constraints placed on parental time in terms of providing for the necessities of life. There are two resources available for the provision of the necessities of life: income and time. There is less non-working time available within single parent households compared to two parent households. More time means better, cheaper meals and time to help children with their homework. Time is an economic factor. A single parent makes a choice to spend more on fast food in order to conserve on time. Therefore, it takes more income to provide the same level of well-being. The amount of time available determines the level of economic well-being. A dual parent household can achieve a much higher standard of living on lower income because one member of the household was at home cooking, sewing, gardening, etc. Furthermore, Statistics Canada's LICO methodology does not deem childcare to be one of the necessities of life. For example, childcare expenses for single parent families take up a greater percentage than childcare expenses in two parent families. In short, these measures of poverty underestimate the proportion of single parent families who are in straitened circumstances; costs associated with providing necessities of life in single parent families are higher than in those in two parent households. In light of the extensive evidence given as to the arbitrariness and inadequacies of defining a poverty line, Friesen declared that, in her opinion, a family that is above LICO may nevertheless be living in poverty.

Friesen also gave expert evidence on earnings and employment of women in Canada. She states that 98 per cent of those who reported income under paragraph 56(1)(b) of the Act in 1990 were women. In 1991, 20 per cent of all families of children in Canada were headed by a lone parent. 17 per cent of children in Canada, i.e., over 1.5 million, were living in lone parent families. 83 per cent of the 1.5 million children were living in female head households. In 1991, 61.9 per cent of families with children headed by female lone parent had low income as measured by LICO. By comparison, only ten per cent of two parent families were below LICO. Of all families with low income in Canada, 40 per cent of those families were headed by single women.

Women on average earn less than men do. Female lone parents on average have somewhat lower education and income than women in two parent families. In 1991, 52 per cent of lone mothers with children under the age of 16 were employed while 65 per cent of women in two parent families were employed.

Friesen described "work disincentives” that single mothers encounter (at page 160 of transcript):

Faced with the relatively low wage rates that women get and in particular women who have relatively less education and who are constrained in their ability to work shifts, to work overtime, and in a variety of different ways, it is undoubtedly the case that a high proportion of women simply don't find it worthwhile to go to work for these low wages once they net out the cost of their transportation, the cost of their childcare, it just doesn't make any sense for them to go.

Friesen was of the opinion that considering the time factor, transportation costs and childcare expenses, the standard of living enjoyed by the appellant would be no higher than a standard of living enjoyed by a two parent household living at the LICO level. These work disincentives create a" poverty wall”, particularly in the context of single parent households.

Burden and disadvantages

1. First burden or disadvantage

The appellant argues that, as tax consequences often are not taken into account, the funds left for the benefit of the children are significantly less than ordered. The appellant claims that she did not know that child support was taxable until she filed her 1990 tax return. Moreover, when the maintenance was set, the tax consequences to the appellant were neither explained to her nor taken into account. From the time she separated in 1984 to the time she went to work after retraining (office and computer skills), the bulk of her income was from social assistance. Therefore, there were no tax implications for her to worry about until her 1990 taxation year.

She states single parents who are poor are unable to afford competent and experienced lawyers. The quality of legal services to those receiving the benefit of legal aid is less than the quality of legal services for those who can afford their own lawyers.

Susan Bauman, Court Watch Coordinator for the North Vancouver Family Court Watch Program, testified as to the family court system as it operates in the North Vancouver Courthouse. She stated that the practice and usual methods in setting maintenance do not include consideration of tax consequences. Low child support orders are due to the inexperience or incompetence of lawyers receiving legal aid referrals. From approximately 300 cases only three mentioned tax consequences. All three such cases were heard in 1992, the last being the variation application of the appellant. In 1992, when the appellant made an application for variance, she wanted $1,200 a month for the maintenance of her two children. This amount takes into consideration the tax consequences. After tax $800 would be left for the children. Ms. Susan Milliken, an accountant and also director of Society for Children’s Rights to Adequate Parental Support ("SCRAPS"), prepared a“ tax table” for the Family Court showing the effects of taxation on various amounts of maintenance payments.

2. Second burden or disadvantage

The appellant argues that the inclusion in her income of maintenance payments results in a higher tax liability and reduces the disposable income thereby contributing to the impoverishment of poor, female, single custodial parents and their children. Friesen, however, agreed that, by the same token, any section of the Act that reduces their disposable income confers a financial disadvantage on such women.

Milliken’s "tax table” showed that if it were not for the operation of paragraph 56(1)(b) of the Act, the appellant would have received a tax refund of $775 taking into consideration the effects of federal and provincial taxes, federal tax credit, child tax credit and the British Columbia Renter's Tax Reduction. However, with the operation of paragraph 56(1)(b) of the Act, she has to pay $412. Accordingly, that makes for a $1,187 difference in tax increase and reduction of tax credits.

The appellant urged that this analysis of discrimination should be viewed in the context of the social and economic plight of women in today's society. For example, in Moge v. Moge, [1992] 3 S.C.R. 813, 92 D.L.R. (4th) 456, the Supreme Court of Canada stated the following at pages 853-54 (D.T.C. 482):

In Canada, the feminization of poverty is an entrenched social phenomenon. Between 1971 and 1986 the percentage of poor women found among all women in this country more than doubled. During the same period the percentage of poor among men climbed by 24 per cent. The results were such that by 1986, 16 per cent of all women in this country were considered poor: Morley Gunderson, Leon Muszynski and Jennifer Keck, Women and Labour Market Poverty (Ottawa: Canadian Advisory Council on the Status of Women, 1990), at page 8.

Given the multiplicity of economic barriers women face in society, decline into poverty cannot be attributed entirely to the financial burdens arising from the dissolution of marriage: Julien D. Payne, “ The Dichotomy between Family Law and Family Crises on Marriage Breakdown” (1989), 20 R.G.D. 109 at pages 116-17. However, there is no doubt that divorce and its economic effects are playing a role.

Accordingly, an additional tax of $100 per month, for example, on the appellant's family contributes to this feminization of poverty.

Section 1

If an equality right has been denied, the uestion then becomes whether the violation or limit of the right can be saved under section 1 of the Charter. Section 1 of the Charter provides that:

The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.

In R. v. Edwards Books and Art Ltd., [1986] 2 S.C.R. 713, 35 D.L.R. (4th) 1 at page 768 (D.L.R. 41), the Supreme Court explained:

Two requirements must be satisfied to establish that a limit is reasonable and demonstrably justified in a free and democratic society. First, the legislative objective which the limitation is designed to promote must be of sufficient importance to warrant overriding a constitutional right. It must bear on a "pressing and substantial concern". Secondly, the means chosen to attain those objectives must be proportional or appropriate to the ends. The proportionality requirement, in turn, normally has three aspects: the limiting measures must be carefully designed, or rationally connected, to the objective; they must impair the right as little as possible; and their effects must not so severely trench on individual or group rights that the legislative objective, albeit important, is nevertheless outweighed by the abridgement of rights. The Court stated that the nature of the proportionality test would vary depending on the circumstances. Both in articulating the standard of proof and in describing the criteria compromising the proportionality requirement, the Court has been careful to avoid rigid and inflexible standards.

It was suggested that paragraph 56(1)(b) of the Act no longer achieves one of its main policy objectives. It does not provide an overall tax savings to separated or divorced spouses which enables the granting of higher support orders. Factors such as the changing economic and social circumstances of women in Canadian society and the reduction of the number of tax brackets with the Tax Reform of 1987 makes the impugned provision discriminatory or harmful. The appellant, therefore, argues that if the appellant's section 15 right has been violated, then the provision in question cannot be saved under section 1 of the Charter.

Firstly, the policy objective of paragraph 56(1)(b) of the Act is not of sufficient importance to warrant the overriding of the appellant's right under sections 15 and 7. Secondly, the provision fails to meet the proportionality test as it is not carefully designed to meet the objective. The $275,000,000 tax subsidy referred to by witness Potvin, infra, does not reach those in the greatest need, those in poverty. Rather, it is only those in middle to high income tax brackets that receive the benefit of the subsidy.

Respondent's argument

Ms. Barbara Burns, counsel for the respondent, declared that the appellant's case is principally the Thibaudeau case, supra, revisited except for the poverty aspect and section 7 of the Charter. Thibaudeau, supra, though not binding authority, is well reasoned and persuasive. The poverty of the appellant adds nothing to the appellant's section 15 argument.

Unequal treatment

The respondent argues that there has been no breach of equality rights. The appellant is accorded equal treatment, if not better treatment, in comparison with families which have not been divided into two separate households due to the breakdown of marriage or cohabitation. In fact, paragraph 56(1)(b) of the Act is part of a taxing scheme which gives the opportunity for income-splitting not afforded to spouses that stay together. In other words, even if it can be said that there is a differing treatment, the appellant is receiving a benefit. The appellant does not have a greater tax burden than any other parent.

Ms. Lise Potvin is an economist with the Personal Income Tax Division of the Department of Finance. She works mostly in the social policy area of pensions, childcare, education and child support. She testified as to the policy and rationale and the actual workings of the provisions of the Act in respect of alimony and maintenance payments.

(Potvin was also the principal witness for the Crown in the Thibaudeau case, supra, and her evidence in the appeal at bar was similar to that in Thibaudeau.)

She stated that the rationale for taxing child support payments in the hands of the recipients is based on the ability to pay or the horizontal equity principle. One of the policy reasons for the inclusion-deduction system is the incentive for payers—98 per cent being fathers—to pay recipients, 98 per cent of whom are mothers.

She testified that upon the breakdown of marriage, the Act treats the former spouses who have separated or divorced as two separate family units. Moreover, it recognizes that the custodial parent generally has discretion over expenditures on the children. Consequently, the custodial parent receives several benefits. In respect of the children, the custodial parent is entitled to claim the equivalent-to-married credit, the refundable child tax credit, Goods and Services Tax ("GST") credit, the childcare expense deduction and dependant child credit. (It should be noted GST credit did not exist in 1990.)

Potvin acknowledged the potential for income-splitting. A tax advantage may result when the payer is taxed at a higher marginal rate of tax. Incomesplitting in this context works in 53 per cent of the cases. In the remaining 47 per cent, where the payer and recipient is in the same tax bracket, the inclusion-deduction system is neutral. Because of the inclusion-deduction system, the payer is usually able to pay a greater amount for the maintenance of the children and the recipient receives a greater after-tax benefit.

The inclusion-deduction system does not bring in extra tax revenues. Rather, the government indirectly provided in 1990 a $275,000,000 subsidy. However it was obvious the benefit of the subsidy goes to payers in higher tax brackets instead of the usually poorer recipients.

There is a greater tax burden when the recipient is in the income range where the child tax credit or GST credit is reduced. If the recipient's income is lower or beyond the point where the credit applies there is no effect. The GST credit and child tax credit start being reduced where the recipient's income is $24,767 and is exhausted at $47,769.

Other witnesses for the respondent included Mr. Schaff who testified that because he is permitted to deduct the maintenance payments in computing his income, he is able to support his second wife and family, Graham Shard, a Public Affairs Officer with Revenue Canada, who described the publicity program of Revenue Canada in making the public aware of tax consequences of marriage breakdown and the provisions of the Act which may apply to the divorced or separated parties, John Simpson, a lawyer with the Legal Services Society of British Columbia who described the assistance available to the public by the Law Society and Richard Brail, also a lawyer with Legal Services, who testified as to the fees paid to lawyers working for legal aid.

As well, affidavits of Daniel Côté and E.H. Brown were filed with the Court on consent. Côté, a statistician with Revenue Canada, confirmed the statistics used by Potvin. Brown, an economist with Statistics Canada, produced statistics with respect to poverty, according to Statistics Canada's definition of LICO. In his view, based on such statistics, the appellant's total income in 1990 of $25,999.92 would not be considered a low family income for a family of a mother and two children residing in an urban area of more than 500,000 people.

Personal characteristic

Counsel for the respondent denies that poverty is a personal characteristic which forms the basis of a "discrete and insular minority”. She states that poverty is not a relatively immutable characteristic or not immediately changeable by the individual except with great difficulty or cost. In Andrews v. Law Society of British Columbia, [1989] 1 S.C.R. 143, 56 D.L.R. (4th) 1, [1989] 2 W.W.R. 289 at page 195 (D.L.R. 39, W.W.R. 330), La Forest, J. stated:

The characteristic of citizenship is one typically not within the control of the individual and, in this sense, is immutable. Citizenship is, at least temporarily, a characteristic of personhood not alterable by conscious action and in some cases not alterable except on the basis of unacceptable costs.

In Gosselin c. Québec (Procureur Général), [1992] R.J.Q. 1647 (Sup. Ct.) Reeves, J. held that poverty is not a personal characteristic or a characteristic of personhood. At page 1675, he stated:

La pauvreté n'est pas une caractéristique discriminatoire confrant un droit l'égalité. . . .

Burns argues that even if poverty is a personal characteristic, adverse impact cannot be proved if there is no causal nexus between the impugned provision and the harm the appellant complains of: see for example, Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441,18 D.L.R. (4th) 481 at pages 455-56 (D.L.R. 491).

She argued that the logical implication of finding that the taxation of maintenance payments unconstitutional is that taxation of Family Allowance in 1990 could also be held unconstitutional on the same basis.

Section 1

If discrimination is found, paragraph 56(1)(b) of the Act can be saved under section 1 of the Charter.

Counsel for the respondent argued that the inclusion-deduction system for maintenance payments is of significant importance to people in the very group that the appellant is claiming are adversely affected. Furthermore, it also allows payers of maintenance to receive an important deduction without which their second families could not maintain an acceptable standard of living.

The inclusion-deduction system is rationally connected to its objectives. First, it provides payers an incentive to pay. Second, it may support the payer's new family with a tax deduction. And lastly, the principle of horizontal equity is preserved.

There is minimal impairment of the appellant's section 15 right insofar as the benefit of the inclusion-deduction system requires knowledge of the taxpayer of the taxability of alimony payments.

The effects of the limitation of the right concerned does not outweigh the legislative objective. The discriminated group receives benefits not accorded to others. The recipient of maintenance payments is entitled to the following benefits not available to the payer: equivalent-to-married credit; dependant child credit; and the refundable child tax credit.

Analysis

The appellant has the burden of proving two essential elements of discrimination as defined by the Supreme Court of Canada in Andrews, supra. First, she must show that the Act makes a distinction based on grounds relating to personal characteristics of the individual or group. Second, she must show that the Act imposes a burden or disadvantage not imposed on others.

Section 15 of the Charter guarantees four equality rights:

1. equality before the law;

2. equality under the law;

3. equal protection of the law; and

4. equal benefit of the law.

These equality rights ensure equality both in the formulation and application of laws: Andrews, supra, per McIntyre, J. at page 171 (D.L.R. 15, W.W.R. 305) (writing for the majority).

“Discrimination” as defined in Andrews, supra, by McIntyre, J. at page 174 (D.L.R. 18, W.W.R. 308), produces the state of inequality which the Charter protects against:

I would say then that discrimination may be described as a distinction, whether intentional or not but based on grounds relating to personal characteristics of the individual or group, which has the effect of imposing burdens, obligations, or disadvantages on such individual or group not imposed upon others, or which withholds or limits access to opportunities, benefits, and advantages available to other members of society.

And at pages 180-181 (D.L.R. 22-23, W.W.R. 313) McIntyre, J. adds,

The analysis of discrimination in this approach must take place within the context of the enumerated grounds and those analogous to them. The words "without discrimination” require more than a mere finding of distinction between the treatment of groups or individuals. Those words are a form of qualifier built into section 15 itself and limit those distinctions which are forbidden by the section to those which involve prejudice or disadvantage.

Those subject to discrimination on analogous grounds are those belonging to groups which have historically suffered discrimination in the form of social, political or legal disadvantage: see Wilson, J. in Andrews, supra, at page 152 (D.L.R. 32, W.W.R. 323) and in R. v. Turpin, [1989] 1 S.C.R. 1296, N.R. 115,69 C.R.

(3d) 97. These are the "discrete and insular minorities’ the members of which have suffered discrimination on analogous grounds and are worthy of section 15 equality protection.

In Turpin, supra, at pages 1331-32 (N.R. 159, C.R. 126), Wilson, J. observes:

it is only by examining the larger context that a court can determine whether differential treatment results in inequality or whether, contrariwise, it would be identical treatment which would in the particular context result in inequality or foster disadvantage. A finding that there is discrimination will, I think, in most but perhaps not all cases, necessarily entail a search for disadvantage that exists apart from and independent of the particular legal distinction being challenged.

In my opinion, the larger context within which this appeal should be considered is the social, political and legal disadvantage suffered by poor, divorced women and the growing trend in the feminization of poverty.

The appellant, in my opinion, is a part of a“ "discrete and insular minority” worthy of protection under section 15 of the Charter. More specifically, poverty is a personal characteristic that can form the basis of discrimination. The appellant is a member of a narrower analogous group found in Thibaudeau, supra. The appellant's group is only distinguished by its poverty.

Apart from this distinguishing factor of poverty, this appeal is substantially the same as that considered in Thibaudeau, supra. In that case, Garon, T.C.C.J. held that women who are divorced and receive maintenance payments for the exclusive benefit of the children in their custody because they are self- sufficient constitute a discrete and insular minority deserving of the protection of section 15.

Judge Garon, however, found no discrimination in Thibaudeau, supra. He stated at page 2511 (D.T.C. 2122):

The inclusion-deduction system in its true nature having regard to the comprehensive legal context does not have the effect of imposing obligations, disadvantages or burdens on the appellant or other persons who find themselves in a situation similar to that of the appellant with respect to the receipt of alimony made by one parent to the other for the exclusive benefit of the children. The inclusion-deduction system of alimony may raise in its application to a particular case certain difficulties but a statute or a provision therein cannot be considered for this sole reason discriminatory and unconstitutional. If a party feels aggrieved by the application of this system or by provisions of the law underpinning it, the remedy does not lie in invoking section 15 of the Charter dealing with equality rights but rather in showing the erroneous application of the system in a comprehensive legal context before the Courts which are called upon to deal with matters relating to alimony.

Conclusion

In my opinion, the appellant is worthy of protection under section 15 of the Charter insofar as poor, female, single custodial parents have historically suffered social, political and legal disadvantage.

However, paragraph 56(1)(b) of the Act does not infringe upon the fundamental values entrenched in section 15 of the Charter; it does not create a discriminatory effect on the appellant. The inclusion-deduction system provides the potential for substantial benefit obtained through income-splitting to both the payer and recipient. The fact that the appellant did not know of the tax consequences and could not take them into consideration when she obtained her 1984 consent order cannot be the basis for finding constitutional fault with paragraph 56(1)(b) of the Act.

The recipient suffers no prejudice because she must include maintenance payments in her income. There seems to be no reason why the reasoning as expressed in Thibaudeau, supra, should not also apply to this appellant. The appellant's complaint, like Ms. Thibaudeau's complaint, is misdirected. It is for the payer, recipient and Family Law Courts to compute familial responsibilities so as to take into consideration tax consequences (Thibaudeau, supra, at page 2510 (D.T.C. 2120-21)). It is not the inclusion-deduction system for alimony that affects her adversely. The appellant’s poverty, moreover, is not caused by paragraph 56(1 )(b) of the Act. Poverty, as will be discussed in respect of section 7 of the Charter, is a social and economic problem not induced by Parliament.

Issue 2: section 7

Appellant's argument

The appellant argues that paragraph 56(1)(b) of the Act deprives her and her children of the "security of the person" and such deprivation was not in accordance with the principles of fundamental justice.

Ms. Watchuk concedes that section 7 has not been recognized to protect property and economic rights. However, it is her client's position that the right to "security of the person" can have an economic component. In this respect, counsel relies on Re Mia and Medical Services Commission of British Columbia (1985), 17 D.L.R. (4th) 385, 61 B.C.L.R. 273 (S.C.) and Wilson v. Medical Services Commission of British Columbia (1988), 30 B.C.L.R. (2d) 1 (C.A.), for the proposition that the Charter does not preclude the protection of a Charter right with an economic component. In other words, section 7 can be interpreted to guarantee a person not to be deprived of property which would place her below a certain standard of living. Counsel for the respondent, in particular, relies on the following statement of Madam Justice Wilson in Singh v. Minister of Employment and Immigration, [1985] 1 S.C.R. 177,17 D.L.R. (4th) 422,14 C.R.R. 13 at pages 206-07 (D.L.R. 459-60, C.R.R. 48-49):

Like “liberty”, the phrase “ security of the person" is capable of a broad meaning. The phrase "security of the person" is found in section 1(a) of the Canadian Bill of Rights and its interpretation in that context might have assisted us in its proper interpretation under the Charter. Unfortunately no clear meaning of the words emerges from the case law, although the phrase has received some mention in cases such as Morgentaler v. The Queen, [1976] 1 S.C.R. 616, 53 D.L.R. (3d) 161, at pages 628-34 (D.L.R. 170-75) (per Laskin, C.J. dissenting); Curr v. The Queen, [1972] S.C.R. 889, 26 D.L.R. (3d) 603; and R. v. Berrie (1975), 24 C.C.C. (2d) 66, 30 C.R.N.S. 145 at page 70 (C.R.N.S. 149). The Law Reform Commission, in its Working Paper No. 26, Medical Treatment and Criminal Law (1980) suggested at page 6 that:

The right to security of the person means not only protection of one's physical integrity, but the provision of necessaries for its support.

The Commission went on to describe the provision of necessaries in terms of art. 25, para. 1 of the Universal Declaration of Human Rights (1948) which reads:

Every one has the right to a standard of living adequate for the health and wellbeing of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age, or other lack of livelihood in circumstances beyond his control.

Commentators have advocated the adoption of a similarly broad conception of “security of the person” in the interpretation of section 7 of the Charter: see Garant, "Fundamental Freedoms and Natural Justice", in Tarnopolsky and Beaudoin (eds.) The Canadian Charter of Rights and Freedoms (1982), at pages 264-65, 271-74; Manning, Rights, Freedoms and the Courts: A Practical Analysis of the Constitution Act, 1982 (1983), at pages 249-54.

For purposes of the present appeal it is not necessary, in my opinion, to consider whether such an expansive approach to “security of the person" in section 7 of the Charter should be taken. . . .

That is to say, the question of whether the right to“ security of the person" can have an economic component was left open.

It was also argued that “security of the person” means the right not to be deprived of money needed by the family to meet their essential needs and maintain their dignity. In this respect, reference was made to article XXIII of the American Declaration of the Rights and Duties of Man which states as follows:

Every person has a right to own such private property as meets the essential needs of decent living and helps to maintain the dignity of the individual and the home.

The right to retain property is not a purely economic interest where the dignity of the individual is involved. Consequently, deprivation of property below the point of decent living is a violation of the "security of the person”.

The appellant argues that her increased tax liability deprives her and her children of a standard of living above an acceptable and realistic measure of poverty. The loss of part of the maintenance payments to taxation has an adverse effect; the conditions of poverty are exacerbated and the appellant's ability to provide necessaries for herself and her family is impaired. She claims that the children lose approximately a third of their child support due to an increase in tax liability and reduction in tax credits. The appellant testified (page 32 of transcript):

It had a big effect on myself and my children. We sort of struggle day by day to make ends meet and there certainly are a lot of things that my children do without that could be deemed basic necessities. Certainly quality of living could be greatly increased if this tax didn't have to be paid.

Specifically, certainly my children always get fed, but they could certainly have a better quality of food. We've always relied on secondhand clothes, although that's getting increasingly difficult because they're getting increasingly bigger. I guess something they've complained about is that we don't go on holidays and they'd like to be able to do something as a family.

Professor Glen Drover testified in the area of social policy and social security with respect to the adverse consequences to children living in poor families and, in particular, poor, single parent families. Statistics Canada’s LICO, in failing to take into account childcare costs and time, underestimates the extent and degree of poverty amongst single parent families. The effects of poverty in children are the following: higher rates of mortality and morbidity; lower levels of education achieved; deficient nutrition; and less time for nurture by parent. Children in poor families have more psychiatric disorders. More of them end up on the welfare system. In short, poor children are more likely to run into difficulties in life. Consequently, the impugned taxing provision decreases the standard of living of the appellant and her family.

Counsel for the appellant argues that a" manifestly unfair” (see Jones v. The Queen, [1986] 2 S.C.R. 284, 31 D.L.R. (4th) 569, [1986] 6 W.W.R. 577 at page 304 (D.L.R. 598, W.W.R. 607)), legislative provision violates the principles of fundamental justice. She also submits that if the impugned provision is unnecessary or exceeds Parliament's objectives in establishing the legislative provision or structure, then it is manifestly unfair: see R. v. Morgentaler, [1988] 1 S.C.R. 30, 44 D.L.R. (4th) 385, 37 C.C.C. (3d) 449 at page 82 (D.L.R. 421, C.C.C. 485).

The appellant asserts that the actual effect of the impugned provision is often to penalize the custodial spouse and the children in her custody. She relies on Zweibel, Ellen B. and Shillington, Richard, Child Support Policy: Income Tax Treatment and Child Support Guidelines, pages 10-12. In short, the impugned provision's actual effect is to go against the stated objective of an overall tax saving that results in higher maintenance payments for the benefit of the children.

Respondent's argument

The respondent's argument in respect of section 7 rests mainly on Gosselin, supra. In that case, the Quebec Superior Court noted the nature of the section 7 guarantee (at page 1668):

Les notions de vie, liberté et sécurité sont indépendantes mais connexes. Elles prennent ensemble une coloration qui exclut la notion d'intérêts strictement économiques. La raison en est l'absence de mention du droit de propriété dans la disposition.

The Superior Court held that section 7 does not give a right to social assistance. Learned trial judge Reeves stated (at page 1669):

Si le législateur avait voulu inclure dans l'extension de l'article 7 des droits à l'assistance sociale, il l’aurait mentionné expressément. Même une interprétation large et libérale ne saurait inclure une protection de droits économiques tel le droit à des prestations d'assistance sociale.

The respondent, therefore, submits that section 7 does not constitutionally entrench a social safety net in the form of a minimum standard of living.

In respect of the issue of poverty, Reeves, J. explained at page 1676:

L'état peut et doit, dans la mesure de ses moyens, contrôler ces causes mais il n'en est pas le maître absolu. Il est généralement reconnu que l'interventionnisme économique de l'État doit être sélectif et temporaire. La globalisation économique peut en certaines circonstances entraîner un état de pauvreté à matérielle, e.g., récession et chômage. De tels phénomènes ne sauraient être imputés I’ tat et constituer le fondement d'une garantie constitutionnelle de suppression permanente et universelle de la pauvreté en vertu de l'article 7 ou d'une distinction socio-économique entraînant l'obligation de rétablir l'égalité matérielle en vertu de l’article 15 paragraphe 1. Par ailleurs, les ententes fédérale-provinciales concernant les transferts de paiements visent à corriger les disparités économiques régionales.

In other words, poverty is not the basis of a right either in section 7 for the suppression of poverty or in section 15 for the establishing of material equality because the government does not cause or absolutely control poverty.

In Gosselin, supra, the Court noted the limitations of the section 7 guarantee (at page 1670):

Toutefois, aucun de ces articles ne garantit le développement de la vie, une liberté plus grande que celle énoncée aux articles 2 et 6, ou une garantie par l'État de moyens de subsistance. A l'article 7, la vie, la liberté et la sécurité s'entendent au sens existentiel et acquis, et non au sens potentiel ou achevé.

The Court also stated at page 1670:

De façon générale, il appert que le «droit à la sécurité de sa personne» en tant que droit fondamental sous l’article 7 ne peut s'étendre à la subsistance matérielle ou économique, parce que l'État n’a pas de contrôle sur cette forme de sécurité.

Counsel also relied on Flint v. M.N.R., [1991] 1 C.T.C. 2365, 91 D.T.C. 528 where Mogan, T.C.C.J. stated at page 2369 (D.T.C. 531-32):

The issues under section 7 of the Charter are whether the economic benefit of the child tax credit can be brought within the words "security of the person" and assuming that it can, whether an individual who loses the child tax credit with respect to a child in the circumstances of this appeal is deprived of security of the person in accordance with the principles of fundamental justice.

As I read section 7 of the Charter in its entirety, it was never intended to apply to the appellant’s circumstances. Firstly, the economic benefit of the child tax credit cannot, in my view, be included in the words "security of the person". In Irwin Toy Ltd. v. A.-G. Québec, [1989] 1 S.C.R. 927, 58 D.L.R. (4th) 577 at 1003 (D.L.R. 632-33), the majority of the Supreme Court held that economic rights as generally encompassed by the term "property" are not protected by section 7; and the majority declined to pronounce upon whether those economic rights fundamental to human life or survival should be treated like corporate-commercial rights. /f the economic benefit of the child tax credit can be regarded as the economic right of a poor person maintaining a child, I would not regard that economic right as "fundamental to human life or survival" within the spirit of section 7.

[Emphasis idded.]

Ms. Burns also referred to the following statement in Gosselin, supra, (at page 1670):

Les tribunaux ne doivent pas substituer leur jugement en matière sociale et économique au jugement des corps législatifs élus à cette fin.

Accordingly, section 7, as well as section 15, of the Charter cannot be used to override Parliament's constitutionally granted taxing power. Counsel for the respondent argued that if it is found that section 7 provides a guarantee of a standard of living, there must be shown a causal nexus between the taxing provision and the harm of which the appellant complains: see, for example, Edwards Books and Art Ltd., supra, and Operation Dismantle, supra. She submits that there is no causal nexus. She states that the evidence suggests that the harm is not caused by paragraph 56(1)(b) of the Act, but the inadequacies of the Legal Aid system in providing for experienced and competent counsel for Family Law matters, the same cause found in Thibaudeau, supra.

Again, as in respect of section 15, the respondent claims that the impugned taxing provision does not harm the appellant. If properly used, there is a clear benefit to the appellant. She points to the successful variation application of the appellant in 1992 where the tax consequences were taken into account and how both recipient and payer was able to benefit.

The respondent argues that if the impugned taxing provision can be said to have deprived the appellant of her right to security of the person, the deprivation would be in accordance with the principles of fundamental justice. She relies on Finlay v. Canada (Minister of Finance), (1993), H.R. 81. It is not a Charter case. However, the Supreme Court of Canada upheld a provision in the Manitoba Social Allowances Act, R.S.M. 1987, c. $160, section 20(3), which allowed the making of deductions from social assistance payments to permit the recovery of overpayment. At pages 603-04 of the transcript, counsel for the respondent suggested that:

if the fundamental principles of our legal system say that we may not take any government action that deprives a person economically of the power to have the necessaries of life, then the Supreme Court of Canada would not have decided Finlay the way they did, because to say that is to suggest that their decision ignored whatever fundamental principle of justice they were obliged to apply when they decided that the Province of Manitoba could take away money from Mr. Finlay, even though it was very clear that it would bring him below the standard defined as necessary to obtain necessaries of life.

Analysis

Section 7 guarantees against the deprivation of "life, liberty and security of the person" except" in accordance with the principles of fundamental justice”. The right to life, liberty and security of the person is a qualified right and the section 7 guarantee is breached only if the law or governmental action fails to conform to or comply with principles of fundamental justice. A section 7 analysis, therefore, involves a two step process. In R. v. Swain, [1991] 1 S.C.R. 933, 5 C.R. (4th) 253 at page 969 (C.R. 278), Lamer, C.J.C., held:

In order to invoke the protection of section 7, an individual must establish an actual or potential deprivation of life, liberty or security of the person. Once a life, liberty or security of the person interest is established, the question becomes whether the deprivation of liberty or security of the person is or is not in accordance with the principles of fundamental justice.

The right to security of the person has been interpreted to mean physical and mental integrity. For example, in Cosy ns v. Canada (Attorney General) (1992), 7 O.R. (3d) 641, 88 D.L.R. (4th) 507 (Div. Ct.), the Court held that" liberty and security of the person" in section 7 relates to a person's physical and mental integrity and does not guarantee economic interest. The plaintiff had challenged provisions of the Excise Act and the Excise Tax Act on the basis that taxation of tobacco products violated his section 7 guarantee. There has been, however, some room left open for economics rights within the meaning of “security of the person". In Irwin Toy Ltd. v. Quebec (Attorney General), [1989] 1 S.C.R. 927,58 D.L.R. (4th) 577, 25 C.P.R. (3d) 417 at pages 1003-04 (D.L.R. 632-33, C.P.R. 472-73), the Court stated:

What is immediately striking about this section is the inclusion of "security of the person" as opposed to "property". This stands in contrast to the classic liberal formulation, adopted, for example, in the Fifth and Fourteenth Amendments in the American Bill of Rights, which provide that no person shall be deprived "of life, liberty or property, without due process of law”. The intentional exclusion of property from section 7, and the substitution therefor of “ security of the person" has, in our estimation, a dual effect. First, it leads to a general inference that economic rights as generally encompassed by the term" property" are not within the perimeters of the section 7 guarantee. This is not to declare, however, that no right with an economic component can fall within "security of the person/'Lower courts have found that the rubric of" economic rights" embraces a broad spectrum of interests, ranging from such rights, included in various international covenants, as rights to social security, equal pay for equal work, adequate food, clothing and shelter, to traditional property-contract rights. To exclude all of these at this early moment in the history of Charter interpretation seems to us to be precipitous. We do not, at this moment, choose to pronounce upon whether those economic rights fundamental to human life or survival are to be treated as though they are of the same ilk as corporate-commercial economic rights. . . .

[Emphasis added.]

The meaning of fundamental justice has been interpreted to mean substantive as well as procedural justice. The Supreme Court of Canada was unanimous in this interpretation of fundamental justice in Reference re subsection 94(2) of the Motor Vehicle Act (British Columbia), [1985] 2 S.C.R. 486, 24 D.L.R.

(4th) 536, 48 C.R. (3d) 289. At pages 512-13 (D.L.R. 557-58, C.R. 317-18), Lamer, J. (as he then was) stated:

The term principles of fundamental justice" is not a right, but a qualifier of the right not to be deprived of life, liberty and security of the person; its function is to set the parameters of that right. Sections 8 to 14 address specific deprivations of the "right" to life, liberty and security of the person in breach of the principles of fundamental justice, and as such, violations of section 7. They are therefore illustrative of the meaning, in criminal or penal law, of“ "principles of fundamental justice"; they represent principles which have been recognized by the common law, the international conventions and by the very fact of the entrenchment of the Charter, as essential elements of a system for the administration of justice which is founded upon the belief in the dignity and worth of the human person and the rule of law. Consequently, the principles of fundamental justice are to be found in the basic tenets and principles, not only of our judicial process, but also of the other components of our legal system.

Whether any given principle may be said to be a principle of fundamental justice within the meaning of section 7 will rest upon an analysis of the nature, sources, rationale and essential role of that principle within the judicial process and in our legal system, as it evolves.

If a violation of section 7 is found, it is then necessary to proceed to a section 1 analysis.

I do not find that paragraph 56(1)(b) of the Act infringes the right of the appellant to "security of the person". Firstly, it does not impair the appellant's ability to provide for herself and her children the necessaries fundamental to human life orsurvival within the spirit of section 7. Essentially, as evidenced by the appellant's own testimony, what the appellant is complaining about is the quality of life for herself and her children and not about necessaries of life in the sense of food, clothing and shelter.

Secondly, a potential tax advantage is created by the inclusion-deduction system for support payments.

Lastly, there is, in my opinion, no real causal nexus between the impugned provision and the harm the appellant complains of. The appellant's poverty is not caused by the inclusion of maintenance payment in her computation of income.

Even if the right to “security of the person" could be said to have been deprived, I would find that the such deprivation would comply with the principles of fundamental justice; the impugned provision is not manifestly unfair. The Charter does not guarantee Canadians a minimum income or standard of living.

Conclusion

In my opinion, the appellant has failed to establish that the section 7 guarantee of "security of the person" has been violated.

For these reasons, this appeal will be dismissed.

Appeal dismissed.