Lee F. Smith v. Minister of National Revenue, [1989] 2 CTC 2401, 89 DTC 639

Rip, T.C.J.: —Mr. Lee F. Smith appeals from an income tax assessment for 1986 which did not permit him to deduct, in computing his table income, an amount in accordance with paragraph 109(1)(b) of the Income Tax Act ("Act") for support of his former sister-in-law who was dependent on him for support. Mr. Smith invokes section 15 of the Canadian Charter of Rights and Freedoms ("Charter"), claiming that the denial of the deduction by the Minister of National Revenue, the respondent, constitutes discrimination on the basis of marital status for which there is no justification under section 1 of the Charter.

The facts are not in issue and were agreed to by counsel. Mr. Smith was married in 1974. In 1976 his wife's sister came to Canada and resided with him and his wife. Two years later Mr. Smith's wife moved to England and Mr. Smith's sister-in-law continued to reside with him. In 1981 Mr. Smith's wife, who had not returned to Canada, divorced him. Her sister continued to live in the appellant's home and at all relevant times was supported by him. The sister was prevented from working in Canada because of her status in 1986. Thus in 1986 she had no other means of support and was wholly dependent upon the appellant. The appellant did not remarry and therefore in 1986 the appellant had no spouse.

Mr. Smith was permitted a deduction in accordance with paragraph 109(1)(b) for the support of his former wife's sister while he was married; once he was divorced from his wife his former sister-in-law was no longer “connected by. . .marriage" with him and the respondent disallowed the deduction.

During the year in appeal, paragraph 109(1)(b) of the Act read as follows:

For the purpose of computing the taxable income of an individual for a taxation year, there may be deducted such of the following amounts as are applicable:

(b) in the case of an individual not entitled to a deduction under paragraph (a) who, during the year,

(i) was an unmarried person or a married person who neither supported nor lived with his spouse and was not supported by his spouse, and

(ii) whether by himself or jointly with one or more other persons, maintained a self-contained domestic establishment (in which the individual lived) and actually supported therein a person who, during the year, was

(A) except in the case of a child of the individual, resident in Canada,

(B) wholly dependent for support on the taxpayer, or the taxpayer and such person or persons, as the case may be, and

(C) connected, by blood relationship, marriage or adoption, with the taxpayer, or the taxpayer and such person or persons, as the case may be,

an amount equal to the aggregate of

(iii) $1,600 and

(iv) $1,400 less the amount, if any, by which the income for the year of the dependent person exceeds $200.

Mr. Smith's counsel agreed that by virtue of paragraph 109(1)(b) the appellant is not entitled to a deduction in computing his taxable income. However, counsel affirmed, by virtue of section 15 of the Charter, the appellant is entitled to equal benefit of paragraph 109(1)(b) for reason only of his marital status in 1986, that is, he was not married. The qualification of marriage in paragraph 109(1)(b) is found in subclause (C). Marital status, counsel submitted, is a ground of discrimination covered by section 15: Re MacVicar and Superintendent of Family & Child Services et al. (1987), 34 D.L.R. (4th) 488 at pages 497 to 499. The discrimination suffered by the appellant, his counsel added, is not justified in a free and democratic society: section 1 of the Charter.

Sections 1 and 15 of the Charter state that:

1. 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.

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.

Counsel for the appellant argued that MacVicar, supra, stands for the proposition that whether the individual is subject to discrimination, as that word is used in section 15(1), depends upon whether there is a distinction in the statute between the individual and other similarly situated persons. He acknowledged that not every distinction invites judicial review but declared that the mere fact of relationship by marriage is not a valid distinction for a taxing statute.

The appellant's counsel also submitted that since the appellant was entitled to claim his then wife's sister as a dependant under paragraph 109(1)(b) of the Act for the taxation years when he was married he should continue to be permitted to do so when he is no longer married; he still supports the same person, only his marital status changed. It may be one thing to gain a right to a deduction under section 109, he said, it is quite another thing to lose it. Counsel stated all his client must demonstrate is the deleterious effect of the discrimination for subsection 15(1) of the Charter to come into force; his authority for this proposition is MacVicar, supra.

Counsel for the appellant submitted that if I find that paragraph 109(1)(b) denies the appellant's rights guaranteed by section 15 of the Charter and the discrimination is not a reasonable limit as can be demonstrably justified in a free and democratic society there is one of two things I can do.

Firstly, counsel submitted, with respect to the appellant, I can declare subclause 109(1)(b)(ii)(C) inoperative as it applies to him, or secondly, I can strike out the provision. In the first alternative, counsel is asking that subclause (C) be declared inoperative as it applies to his client so that there would be no requirement of connection in paragraph 109(1)(b) by blood, relationship, marriage or adoption with the taxpayer and the dependant. The second alternative, striking out subclause (C), would make available to other taxpayers the deduction available by paragraph 109(1)(b).

The remedies are sought by the appellant pursuant to subsection 24(1) of the Charter, which reads as follows:

Anyone whose rights or freedoms, as guaranteed by this Charter, have been infringed or denied may apply to a court of competent jurisdiction to obtain such remedy as the Court considers appropriate and just in the circumstances.

The Tax Court of Canada Act gives jurisdiction to this Court". . . to hear and determine appeals on matters arising under the Income Tax Act . . .” (section 12).

The appellant's appeal to this Court arises under section 169 of the Act which provides that where a taxpayer has served a notice of objection to an assessment, he may appeal to the Court to have the assessment vacated or varied.

Subsection 171(1) of the Act empowers this Court to dispose “of an appeal by

(a) dismissing it, or

(b) allowing it and

(i) vacating the assessment,

(ii) varying the assessment, or

(iii) referring the assessment back to the Minister for reconsideration and reassessment."

In his reasons for judgment in Keyes v. M.N.R., [1989] 1 C.T.C. 2157; 89 D.T.C. 91 at page 2161 (D.T.C. 94), Bonner, T.C.J. referred to several decisions of the Supreme Court and the Federal Court of Appeal. He wrote at pages 2161-62 (D.T.C. 94):

In R. v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295, 18 C.C.C. Dickson, C.J.C. wrote at 353 (C.C.C. 431):

If a court or tribunal finds any statute to be inconsistent with the Constitution, the overriding effect of the Constitution Act 1982, s. 52(1), is to give the Court not only the power, but the duty, to regard the inconsistent statute, to the extent of the inconsistency, as being no longer "of force or effect".

In Zwarich and Attorney General of Canada, [1987] 3 F.C. 253, Pratte, J. speaking for the Federal Court of Appeal said at page 255:

It is clear that neither a board of referees nor an umpire have the right to pronounce declarations as to the constitutional validity of statutes and regulations. That is a privilege reserved to the superior courts. However, like all tribunals, an umpire and a board of referees must apply the law. They must, therefore, determine what the law is. And this implies that they must not only construe the relevant statutes and regulations but also find whether they have been validly enacted. If they reach the conclusion that a relevant statutory provision violates the Charter, they must decide the case that is before them as if that provision had never been enacted.

The question what is a court of competent jurisdiction within the meaning of subsection 24(1) of the Charter was considered in Mills v. R., [1986] 1 S.C.R. 863; 26 C.C.C. (3d) 481. Although in that case the court was considering the position of preliminary hearing judges, the following passage at page 952 (C.C.C. 491) of the reasons of McIntyre, J. is relevant to the present case:

To begin with, it must be recognized that the jurisdiction of the various courts of Canada is fixed by the Legislatures of the various provinces and by the Parliament of Canada. It is not for the judge to assign jurisdiction in respect of any matters to one court or another. This is wholly beyond the judicial reach. In fact, the jurisdictional boundaries created by Parliament and the Legislatures are for the very purpose of restraining the courts by confining their actions to their allotted spheres. In s. 24(1) of the Charter the right has been given, upon the alleged infringement or denial of a Charter right, to apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances. The Charter has made no attempt to fix or limit the jurisdiction to hear such applications. It merely gives a right to apply in a court which has jurisdiction. It will be seen as well that it prescribes no remedy but leaves it to the court to find what is appropriate and just in the circumstances.

The questions then arise as to which of the courts are courts of competent jurisdiction within the meaning of s. 24(1) of the Charter and what is the nature of the remedy or remedies which may be given. In attacking these problems, that of jurisdiction and that of remedy, the courts are embarking on a novel exercise. There is little, if any, assistance to be found in decided cases. The task of the court will simply be to fit the application into the existing jurisdictional scheme of the courts in an effort to provide a direct remedy, as contemplated in s. 24(1). It is important, in my view, that this be borne in mind. The absence of jurisdictional provisions and directions in the Charter confirms the view that the Charter was not intended to turn the Canadian legal system upside down. What is required rather is that it be fitted into the existing scheme of Canadian legal procedure. There is no need for special procedures and rules to give it full and adequate effect.

I agree with Judge Bonner that in the exercise of its jurisdiction to dispose of an appeal as laid down in section 171 of the Act is entitled and obliged to consider the constitutional validity of relevant statutes including, of course, the Charter. If, in the appeal at bar, I find that subclause 109(1)(b)(ii)(C) is invalid by reason of section 15 of the Charter, one may not necessarily conclude the appellant's appeal might be allowed. To allow an appeal the Court must be satisfied that notwithstanding whether a provision is valid or invalid, the tax assessed was too high. For example, if all of paragraph 109(1)(b) were declared by a court of competent jurisdiction to be inoperative, the deduction allowed by that provision would not be available to any taxpayer; thus the tax assessed the appellant would be correct.

As Thurlow, J. stated in Harris v. M.N.R., [1966] S.C.R. 489; C.T.C. 226; 66 D.T.C. 5189, affirming [1965] 2 Ex. C.R. 653 at page 662; [1964] C.T.C. 562; 64 D.T.C. 5332:

On a taxpayer's appeal to the Court the matter for determination is basically whether the assessment is too high. This may depend on what deductions are allowable in computing income and what are not but as I see it the determination of these questions is involved only for the purpose of reaching a conclusion on the basic question.

Unlike the Federal Court of Canada the Court does not have jurisdiction to grant declaratory relief. This Court is not a superior court. Where a taxpayer's appeal from an assessment is based on the argument that the particular provision of the Act is in conflict with subsection 15(1) or any other provision of the Charter and seeks remedy by declaratory relief, it may be preferable for the appeal to be heard before a superior court, namely the Federal Court of Canada.

As I see it, if I agree with the appellant that subclause 109(1)(b)(ii)(C) is in conflict with section 15 of the Charter, I must decide the case as if that provision or such other provision included in subclause (C) had never been enacted.

If paragraph 109(1)(b) itself had never been enacted, then, of course, no deduction would be available to the appellant and his appeal would have to be dismissed: his assessment would not be too high.

1 Federal Court of Canada Act, R.S.C. 1985, c. F-7, s. 18(1)(a).

If a court may strike only the word “marriage” from subclause (C), and the rest of subclause (C) remains, then again, of course, no deduction would be available to the appellant: the dependant would not be connected by blood relationship or adoption to the appellant. Again, the assessment would not be found to be too high.

The last alternative would be to strike out, or declare inoperative, all of subclause (C). In such a circumstance the appellant would be entitled to a deduction. However, if the court were to consider that subclause (C) had never been enacted, the court in my view would be amending paragraph 109(1)(b). When Parliament enacted this paragraph it contemplated a deduction would be available on certain conditions. One of the conditions was that during the particular taxation year the dependant would be "connected" to the taxpayer. A condition contained in a statutory provision is not to be trifled with since without such condition Parliament may or may not have enacted the provision. It is not for the courts to decide what Parliament may or may not have done in varying circumstances.

The Charter guarantees individuals rights and freedoms. However, in interpreting the rights, the courts, in the words of Dickson, J. (as he then was) in R. v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295; 18 D.L.R. (4th) 321 page 344 (D.L.R. 360), must not

. . .overshoot the actual purpose of the right or freedom in question, but to recall that the Charter was not enacted in a vacuum, and must, therefore, as the Court's decision in Law Society of Upper Canada v. Skapinker, (1984) 1 S.C.R. 357, illustrates, be placed in its proper linguistic, philosophic and historical context.

It is the government's responsibility to govern and in doing so to address the complex social, economic and fiscal problems facing the state.

In enacting legislation Parliament frequently makes distinctions. As Kerans, J.A. wrote in Mahe v. Alta, (Sask.), [1987] 6 W.W.R. 331; 54 Alta. L.R.

(2d) 212 at 244, 42 D.L.R. (4th) 514; 33 C.R.R. 207; 80 A.R. 161 (CR) "most laws are enacted for the specific purpose of offering a benefit or imposing a burden on some persons and not on others". The Courts have had occasion to review whether or not distinctions in legislation having economic or social purposes are discriminatory within the meaning of section 15 of the Charter and if so, what their role is. In P.S.A.C. v. Canada, [1987] 1 S.C.R. 424 at page 442; 75 N.R. 161, Dickson, C.J.C. was of the opinion that:

. . .courts must exercise considerable caution when confronted with difficult questions of economic policy. It is not our judicial role to assess the effectiveness or wisdom of various government strategies for solving pressing economic problems. The question how best to combat inflation has perplexed economists for several generations. It would be highly undesirable for the courts to attempt to pronounce on the relative importance of various suggested causes of inflation, such as the expansion of the money supply, fiscal deficits, foreign inflation, or the built in inflationary expectation of individual economic actors. A high degree of deference ought properly to be accorded to the government's choice of strategy in combating this complex problem. Due deference must be paid as well to the symbolic leadership of government. Many government initiatives, especially in the economic sphere, necessarily involves a large inspirational or psychological component which must not be undervalued. The role of the judiciary in such situations lies primarily in ensuring that the selected legislative strategy is fairly implemented with as little interference as is reasonably possible with the rights and freedoms guaranteed by the Charter.

See also R. v. Whyte, [1988] 2 S.C.R. 3 at page 26, per Dickson, C.J. and R. v. Schwartz, [1989] 1 W.W.R. 289 at pages 324 and 325 (S.C.C.) per McIntyre, J. Courts are not called upon to substitute judicial opinions for legislative ones as to the place in which to draw a precise line.

In Andrews v. Law Society of British Columbia, [1989] 2 W.W.R. 289, McIntyre, J. stated, at page 303:

It is not every distinction or differentiation in treatment at law which transgressed the equality guarantee of s. 15 of the Charter. It is, of course, obvious that legislatures may — and to govern effectively — must treat different individuals and different groups in different ways. Indeed, such distinctions are one of the main preoccupations of legislatures. The classifying of individuals and groups, the making of different provisions respecting such groups, the application of different rules, regulations, requirements and qualifications to apply to different persons is necessary for the governance of modern society.

La Forest, J. was convinced in Andrews, supra, at pages 329 to 330:

. . .that it was never intended in enacting s. 15 that it become a tool for the wholesale subjection to judicial scrutiny of variegated legislative choices in no way infringing on values fundamental to a free and democratic society. Like my colleague, I am not prepared to accept that all legislative classifications must be rationally supportable before the courts. Much economic and social policy- making is simply beyond the institutional competence of the courts: their role is to protect against incursions on fundamental values, not to second-guess policy decisions. . . .it bears repeating that considerations of institutional functions and resources should make courts extremely wary about questioning legislative and governmental choices in such areas.

Wilson, J., at page 325, feared that:

If every distinction between individuals and groups gave rise to a violation of s. 15, then this standard might well be too stringent for application in all cases and might deny the community at large the benefits associated with sound and desirable social and economic legislation.

For this Court to decide this case as if subclause (C) had never been enacted would be tantamount to amending paragraph 109(1)(b) by deleting subclause (C), in my view making a policy decision which is beyond a Canadian court's constitutional authority and competence. In enacting subparagraph 109(1)(b) Parliament required that there be a degree of connection between the dependant and a taxpayer for the taxpayer to be permitted the deduction. To sever the connection is a function of the legislature, not the Court.

The appeal will therefore be dismissed.

Appeal dismissed.