Storey Group Homes Limited v. Minister of National Revenue, [1992] 2 CTC 2052, 92 DTC 1295

Bonner, T.C.C.J.:—The appellant appeals from assessments of income tax for the 1987 and 1988 taxation years. On assessment the respondent disallowed deductions made under subparagraph 110(1)(f)(iii) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") in respect of amounts received by the appellant from various children’s aid societies. The appellant, a body corporate, operates foster and group homes for the purpose of providing care for adolescents referred to it by the various children's aid societies. The homes are staffed by house parents selected, supervised and controlled by the appellant. The house parents sign a service agreement with the appellant which sets forth rules of conduct, financial arrangements and other details of the relationship. Robert Storey, the president of the appellant, testified that the appellant is responsible for all aspects of the care of the children.

The house parents feed and shelter the children, take the children shopping for clothes when they are required, see that medical care and schooling is provided and are responsible for knowing where the children are, all much in the same way as ordinary parents do. In consideration for all of this, the appellant receives payments from the children's aid societies, the bulk of which payments are calculated on a per-child-per-day basis. Some smaller portion of the payments in issue is received, in the case of one home which is operated by the appellant under an agreement calling for payments on a per- bed-per-day basis. The payments received from the children’s aid societies constitute virtually all of the gross revenues of the appellant's business. It was common ground between the parties that the payments received from the CAS were social assistance payments within the meaning of subparagraph 110(1)(f)(iii) of the Act. I am not at all sure that I agree, but that point need not be decided at this time.

Counsel for the appellant argued that the appellant corporation is a person which has control of and responsibility for the children, just as a natural parent would, and that there exists a closeness of contact between the appellant and the children which satisfies the dictionary definition of “ residee” that is to say, lives, abides, sojourns, stays or lodges with. I do not agree at all. The appellant operates group homes in various municipalities of the province. If it can be said to reside with the children housed in home A and to reside with the children housed in home B, then it would follow that the children in homes A and B, which may be 50 miles apart, reside with each other. The construction of the words" reside with” propounded by the appellant’s counsel leads to an illogical result. It is difficult to see how a corporation can ever be said to reside with an individual.

In argument counsel for the appellant emphasized closeness of contact as the basis for his contention that the appellant resided with the children. In my view, although “ residing with” normally involves closeness of contact in daily life, such closeness does not, standing alone, satisfy the “residing with” requirement.

The appellants second point is that the appellant is, and I am quoting from the statutory language, "the individual in respect of which the social assistance was provided" within the meaning of 110(1)(f)(iii). A description of a profitmaking corporation not only as an individual but also as an individual in respect of which social assistance is provided stretches the English language beyond the bounds of its ordinary meaning. The amounts received by the appellant were received by it as the ordinary revenues of its business pursuant to contracts between it and the various children's aid societies. Such amounts were not, in my view, received as social assistance. Thus, although the parties agreed that what was received was social assistance, I cannot find that it was the appellant and not the individual children in respect of whom the children’s aid societies were making the payments.

Finally it was argued that given the object and spirit of the legislation and the fact that the appellant's revenues had been treated by the officials of the respondent as exempt for years, and the further fact that on the strength of that treatment the appellant's shareholders had opted to take dividends and not salaries thus leaving the profits of the appellant higher than they might have been, the amendment to subparagraph 110(1)(f)(iii) effected by S.C. 1988, c. 55, should not be treated as applicable until the appellant became aware of it. The short answer to that contention is that subsection 77(17) of the amending legislation is clear. It states that subsection (7) the section that effected the amendment, is applicable to the 1982 and subsequent taxation years. This Court is obliged to give effect to clear statutory language and I will be doing so by dismissing the appeals.

Appeals dismissed.