Susan Bracken v. Minister of National Revenue, [1984] CTC 2922, 84 DTC 1813

Christie, CJTC:—The issue is whether the appellant is entitled to deduct $10,120.03 in moving expenses in respect of her 1981 taxation year.

The answer turns on the proper interpretation of subsection 62(1) of the Income Tax Act, RSC 1952, c. 148. In the course of argument counsel for the respondent cited this passage from the reasons for judgment delivered by Thorson, P Pin WA Sheaffer Pen Co of Canada Ltd v MNR, [1953] CTC 345; 53 DTC 1223 at 348 [1225]:

Here the appellant seeks the benefit of a right of deduction to which it would not be entitled except for section 5(p) the opening words of which refer to the exemptions and deductions to which what would otherwise be taxable income is subject. The manner in which an exempting provision in a taxing statute should be construed has been dealt with in a number of cases. In Lumbers v Minister of National Revenue, [1943] Ex CR 202, which was affirmed by the Supreme Court of Canada, [1944] SCR 167,1 held that it is a well established rule that the exemption provisions of a taxing act must be construed strictly and cited the statement to that effect of Sir WJ Ritchie CJ of the Supreme Court of Canada in Wylie v City of Montreal (1885) 12 Can SCR 384 at 386, where he said:

“I am quite willing to admit that the intention to exempt must* [1] be expressed in clear unambiguous language; that taxation is the rule and exemption the exception, and therefore to be strictly construed;”

Then I put the rule of construction of an exempting provision of the Income War Tax Act as follows:

‘‘Just as receipts of money in the hands of a taxpayer are not taxable income unless the Income War Tax Act has clearly made them such, so also, in respect of what would otherwise be taxable income in his hands a taxpayer cannot succeed in claiming an exemption from income tax unless his claim comes clearly within the provisions of some exempting section of the Income War Tax Act: he must show that every constituent element necessary to the exemption is present in his case and that every condition required by the exempting section has been complied with.”

A similar rule of construction should be applied in the case of a statutory right of deduction such as that conferred by section 5(p) from which it follows that if a taxpayer cannot clearly bring his claim for deduction within the express terms of the provisions conferring the right of deduction he is not entitled to it.

I find no assistance in citations of this kind because, respectfully, I do not regard them as correctly stating the canons of construction applicable to the provisions of the Income Tax Act. This is sustained by subsections 3(1) and 2(1) and section II of the Interpretation Act, RSC 1970, c 1-23, plus two judgments of the Supreme Court of Canada: The King v Robinson (or Robertson) et al, [1951] SCR 522 and Stubart Investments Limited v The Queen, [1984] CTC 294; 84 DTC 6305. The subsections and section cited provide:

3 (1) Every provision of this Act extends and applies, unless a contrary intention appears, to every enactment, whether enacted before or after the commencement of this Act.

2 (1) In this Act

“Act” means an Act of the Parliament of Canada:

“enactment” means an Act or regulation or any portion of an Act or regulation.

11. Every enactment shall be deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

Section 11 is the foundation stone upon which the interpretative approach to the Income Tax Act rests.

In Robinson the respondents had been found to be habitual criminals within the meaning of the then paragraph 575C(l)(a) of the Criminal Code (enacted by Statutes of Canada 1947, c 55, s 18 which provided:

A person shall not be found to be a habitual criminal unless the judge or jury as the case may be, finds on evidence,

(a) that since attaining the age of eighteen years he has at least three times previously to the conviction of the crime charged in the indictment, been convicted of an indictable offence for which he was liable to at least five years’ imprisonment, whether any such previous conviction was before or after the commencement of this Part, and that he is leading persistently a criminal life.

The British Columbia Court of Appeal had set aside the finding on the ground that “at least” meant “not less than” notwithstanding that, at the relevant time, the only offence in the Criminal Code that was punishable by not less than five years in prison was stopping the mail with the intent to commit robbery. The convictions relied on by the Crown to meet the condition precedent to a finding that the respondents were habitual criminals were for offences which made the offender liable to as much as five or more years imprisonment. There were some 180 offences of this kind in the Criminal Code. At the time pertinent to Robinson, the Interpretation Act, RSC 1927, c 1, was in force. Section 15 thereof which is antecedent to the present section 11 provided:

15. Every Act and every provision and enactment thereof, shall be deemed remedial, whether its immediate purport is to direct the doing of any thing which Parliament deems to be for the public good, or to prevent or punish the doing of any thing which it deems contrary to the public good; and shall accordingly receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act and of such provision or enactment, according to its true intent, meaning and spirit.

The Supreme Court of Canada reversed the judgment of the British Columbia Court of Appeal. In delivering the judgment of the majority of the Supreme Court, Fauteux, J (as he then was) said at 529:

As to the application of the narrow construction doctrine, in the construction of penal statutes, this may be said. The matter, in England, is dealt with in Maxwell on Interpretation of Statutes, 9th Edition, 1946, p 267, in the following terms:

“The rule which requires that penal and some other statutes shall be construed strictly was more rigorously applied in former times when the number of capital offences was very large (a), when it was still punishable with death to cut down a cherry-tree in an orchard, or to be seen for a month in the company of gypsies (b), or for a soldier or sailor to beg and wander without a pass. Invoked in the majority of cases in favorem vitae, it has lost much of its force and importance in recent times, and it is now recognized that the paramount duty of the judicial interpreter is to put upon the language of the Legislature, honestly and faithfully, its plain and rational meaning and to promote its object.”

In Canada, section 15 of the Interpretation Act disposes of all discussion in the premises. This section, by force of section 2 extends and applies to the Criminal Code and the following words in section 15 “or to prevent or punish the doing of anything which it deems contrary to the public good” make it clear that its provisions embrace penal as well as civil statutory provisions in any Canadian statute except if there is inconsistency or a declaration of inapplicability. [Emphasis added]

Locke, J, with whom Rand and Kellock, JJ concurred, said at 530:

Since no mention is made of section 15 of the Interpretation Act, RSC 1927, c 1, in the reasons for the judgment appealed from or in the factum of either party, I judge that it was not argued in the Court of Appeal that the rules of statutory construction prescribed by that section were to be applied. Mr Justice O’Halloran refers to the common law rules of construction but, while the result may not be affected, I am of the opinion that it is to the statute we must look. Section 15 reads: [Reproduction follows in the report].

There appears to be no account explaining why section 15 was attenuated to the present wording found in section 11 when the general revision of the Interpretation Act occurred in 1967 (Statutes of Canada, 1967-68, c 7). If the purpose was related in some way to the judgment of the Supreme Court of Canada in Robinson, one would have thought that there would be some indication in the legislative record to that effect by way of an explanatory note or otherwise. There is nothing to indicate to what in particular the change is addressed.

As might be expected, the omission in section 11 of the previous reference in section 15 to “prevent or punish the doing of any thing it deems contrary to the public good” led to the question being raised whether the judgment of the Supreme Court of Canada in Robinson continued to be the guiding principle respecting the proper course to be followed in the interpretation of penal statutes. In Regina v Philips Electronics Ltd (1980), 5 CCC (2d) 312, the accused had been charged with attempting to influence upwards the price of television converters by persons into whose hands they came for resale, contrary to subsection 38(1) of the Combines Investigation Act.When the case was before the Ontario Court of Appeal, counsel for the accused contended for a strict interpretation of the legislation. Jessup, JA dissenting said at 315-16:

The respondent argues for a strict interpretation of those provisions in accordance with common law principles applicable to penal provisions. However, that argument was denied by the Supreme Court of Canada in R v Robinson et al, [1951] SCR 522, 100 CCC 1, 12 CR 101. There Fauteux, J in denying the argument that the Criminal Code, as a penal statute, should receive an interpretation by common law principles said at p 529 SCR, p 8 CCC: “In Canada, section 15 of the Interpretation Act [now s 11] disposes of all discussion in the premises.’’ In Robinson the Court sought out the purpose or intent of the section to be interpreted, as s 11 directs, and gave the language of the section a meaning, of which it was linguistically capable, that would effect the ascertained purpose. In my opinion, the reasons in R v Crabbs, [1934] SCR 523, [1934] 4 DLR 324, a case on a taxing statute, cannot stand with Robinson and must be taken to be overruled in that respect.

I am in full agreement with this statement of the law and if it applies to the penal provisions of the Income Tax Act then a fortiori it applies to the remainder of the Act.

Goodman, JA, with whom Zuber, JA concurred, wrote the majority judgment. After quoting the passage from the reasons for judgment delivered by Fauteux, J in Robinson and sections 15 and 11 of RSC 1952, c 1 and RSC 1970, c 1-23, Mr Justice Goodman said at 322:

The words in s 15 relied upon by Fauteux, J in the passage quoted (ie, to prevent or punish the doing of any thing which it deems contrary to the public good) no longer exist in the present s. 11.

Section 3(3) of the Interpretation Act provides as follows:

“3, (3) Nothing in this Act excludes the application to an enactment of a rule of construction applicable thereto and not inconsistent with this Act.’*

Although there can be no doubt that s 11 applies to the penal provisions of any Canadian statute, I am of the opinion that the application of the common law principle requiring strict interpretation of the provisions of a penal statute to such statute is not inconsistent with the provisions of that section.

I cannot regard the common law rule applicable to the interpretation of penal statutes as being not inconsistent with the directions contained in section 11 of the Interpretation Act. Manifestly the phrases “fair, large and liberal construction’’ and “strict interpretation” are not synonymous.Furthermore the fact that the words previously referred to regarding punishment in section 15 are no longer to be found in section 11 does not, of itself, provide a basis for concluding that there is a difference in legal substance between the two sections. Subsection 37(2) of the Interpretation Act provides:

37. (2) The amendment of an enactment shall not be deemed to be or to involve a declaration that the law under such enactment was or was considered by Parliament or other body or person by whom the enactment was enacted to have been different from the law as it is under the enactment as amended.

In Morch v MNR, [1949] CTC 250; 49 DTC 649, Thorson, P said at 260 [654]:

It does not follow as a matter of course that in every case where parliament has used different words in an amending act from those used in the amended one that a difference in meaning was intended; there are many cases where the amending enactment although couched in different terms from the amended one is, without saying so, merely declaratory of its true meaning.

His lordship then went on to quote section 21.2 of the Interpretation Act, RSC 1927, c 1, which is the same as subsection 37(2).

I am not suggesting that section 11 was intended to be declaratory of the true meaning of section 15, rather I expect that the latter was regarded as tautological by modern standards of draftsmanship and for this reason it was abbreviated in 1967. As Mr Justice Locke observed in Robinson at 530, section 15 had its origin in Statutes of Canada, 1859, c 10, s 5. The wording of the 1859 statute is practically identical with section 15. In the mid-nineteenth century, legislation was often couched in verbosity. It is said at 286 of the twelfth (1969) edition of Maxwell on Interpretation of Statutes that:

Just as the presumption that the same meaning is intended for the same expression in every part of an Act is not of much weight, so the presumption of a change of intention from a change of language — which is of no great weight in the construction of documents — seems entitled to less weight in the construction of a statute than in any other case: for the variation is sometimes to be accounted for by the draftsman’s concern for “the graces of the style’’ and his wish to avoid the repeated use of the same words, sometimes by the circumstance that the Act has been compiled from different sources, and sometimes by the alterations and additions from various hands which Acts undergo in their progress through Parliament.

In Bathurst Paper Limited v Minister of Municipal Affairs of the Province of New Brunswick, [1972] SCR 471, it was argued that the deletion of some words in the definition of “tax concession” in s l(i) of the Assessment Act,Statutes of New Brunswick 1965-66, c 110 by Statutes of New Brunswick 1968, c 15, s 1(b) did not lead to the conclusion that, in the circumstances of the case, an amendment had been effected whereby the appellant’s liability for tax had increased. Section 13 of the Interpretation Act, RSNB 1952, c 114, was relied on. It provided:

The amendment of an Act shall not be deemed to be, or to involve, a declaration that the law under the Act was different from the law as it has become under the Act as amended.

Laskin, J (as he then was) said in delivering the judgment of the Court at 476:

In my opinion, s 13 merely precludes a Court from making the prohibited inference from the fact that an amendment was enacted. it does not exclude reference to the amendment as an item of legislative history bearing on the construction of the amended statute. Such a reference, however, is of itself of no assistance in the present

case. There is nothing in the record to indicate any particular circumstances or situation to which the amendment to s l(i) was directed. [Emphasis added]

His lordship then proceeded down another avenue to resolve the issue before the Court.

While I disagree with the approach to the interpretation of subsection 38(1) of the Combines Investigation Act adopted by the majority of the Ontario Court of Appeal in Philips Electronics Ltd, this is not to say that consequently I am in disagreement with the conclusion arrived at by them. While it might appear paradoxical that different judges or courts may arrive at the same conclusion respecting the interpretation of a statutory provision while apparently employing contradictory approaches, all this really demonstrates, in my view, is that regardless of the disharmonious language employed in their reasoning the central focus of their attention was in fact on the object or purpose of the legislation.

Indeed the decision of the majority of the Ontario Court of Appeal was correct. This is established by the fact that on November 24, 1981, an appeal by the Crown to the Supreme Court of Canada was dismissed from the bench immediately at the close of argument on behalf of the appellant: [1981] 2 SCR 264. This is what was said by Chief Justice Laskin:

We do not need to hear you, Mr Atkinson and Mr Cass. We are all of the opinion that no reason has been shown to differ from the conclusion reached in the majority judgment of the Ontario Court of Appeal. This appeal is accordingly dismissed. [Emphasis added]

Nevertheless, the fact that the Supreme Court of Canada might agree with a conclusion arrived at by a provincial Court of Appeal, is not tantamount to that Court adopting as its own, or affixing its stamp of approval on, the reasons which were assigned by the court below in arriving at that conclusion. The Supreme Court entertains appeals from judgments, not from reasons for judgment. Compare, for example, Cooper v The Queen, [1968] SCR 450, where again the appeal was dismissed at the conclusion of argument on behalf of the appellant. Cartwright, CJC said at 451:

Mr Meinhardt, we do not need to call upon you. We are all in agreement with the reasons of MacKay and McLennan, JJ A in the Court of Appeal and accordingly the appeal is dismissed.

Or the Court might adopt the reasons of the court appealed from with more elaboration. In Dominion News & Gifts (1962) Ltd v The Queen, [1964] SCR 251, Taschereau, CJC, who delivered the judgment of the Court said:

These two appeals, one relating to the December 1962 issue of a magazine called “Escapade” and the other to the September 1962 issue of a magazine called “Dude”, were argued together.

We are all of opinion that the appeals should be allowed. We agree with the reasons given by Freedman JA in the Court of Appeal for Manitoba. We wish to adopt those reasons in their entirety and do not find it necessary to add anything to them.

On the other hand, the adoption of the reasons of a provincial Court of Appeal may be subject to a caveat as in The Queen v Welsford, [1969] SCR 438. Cartwright, CJC, who delivered the judgment of the Court said at 44:

On the merits of the appeal I find myself so fully in agreement with the reasons of McGillivray, JA who delivered the unanimous judgment of the Court of Appeal that I am content to adopt them and do not find it necessary to add anything to what he has said. This does not imply any expression of opinion respecting the case to which he refers in which a typed or stamped signature was held to be valid.

While it is clear that the Supreme Court of Canada is at liberty to depart from its own previous judgments, this is only done for “compelling reasons”: Binus v The Queen, [1967] SCR 594, per Cartwright, J (as he then was) at 601 and A AVG Management Sciences Ltd v Bar well Developments Ltd et al, [1979] 2 SCR 43 per Laskin, CJC at 57. It is to be expected that if the Supreme Court of Canada had intended in Philips Electronics Ltd to set aside or significantly qualify what was said about section 15 by or on behalf of eight of the nine judges who heard Robinson, the Court would have said something to that effect.

To conclude that section 11 of the Interpretation Act is the approach to be followed in construing the Income Tax Act is not to say that the fundamental rules of interpretation are to be thrown to the wind and replaced by interpretive contortionism designed to arrive at a subjective or quasi-subjective notion regarding the object or purpose of provisions of the Income Tax Act and regulations made thereunder. For example, what was said in Geweth v MNR, [1984] CTC 2275; 84 DTC 1257 at 2276 [1258] applies in relation to section 11:

Words, phrases, sentences, etc which appear in legislation cannot be constructed in isolation. They must be viewed in their entire context and their import may well differ depending on the nature of that environment.

Also by way of further example the fundamental principle that prima facie the grammatical and ordinary sense of the words used in a statute is to be adhered to is unaffected. The key word in section 11 is “objects". A search for and giving effect to the object or purpose of an enactment is what the interpretation of statutes is about. That is not always easy and is not necessarily made easier by applying section 11, but I should have thought it indubitable that in construing federal enactments the interpreter shall address his mind to and apply the wording of the formula that Parliament has said is to be applied in the interpretation of the laws which it enacts.

I regard what I have said to be consonant with the reasons for judgment recently delivered by Mr Justice Estey on behalf of a majority of the Supreme Court of Canada in Stubart. In that thoroughly researched and carefully reasoned document, he said at pages 314-16 [6322-3]:

Income tax legislation, such as the federal Act in our country, is no longer a simple device to raise revenue to meet the cost of governing the community. Income taxation is also employed by government to attain selected economic policy objectives. Thus, the statute is a mix of fiscal and economic policy.

In all this, one must keep in mind the rules of statutory interpretation, for many years called a strict interpretation, whereby any ambiguities in the charging provisions of a tax statute were to be resolved in favour of the taxpayer; the taxing statute was classified as a penal statute. See Grover & Iacobucci, Materials on Canadian Income Tax, 5th ed, (1981), pp 62-65.

At one time, the House of Lords, as interpreted by Professor John Willis, had ruled that it was “‘not only legal but moral to dodge the Inland Revenue’’ (51 Canadian Bar Review 1 at p 26), referring to Inland Revenue Commissioners v Levene, [1928] AC 217, at p 227. This was the high water mark reached in the application of Lord Cairns’ pronouncement in Partington v Attorney-General (1869) LR, 4 HL 100 at p 122:

“I am not at all sure that, in a case of this kind — a fiscal case — form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called equitable construction, certainly such a construction is not admissible in a taxing statute where you simply adhere to the words of the statute.”

cited with approval in this Court in The King v Crabbs, [1934] SCR 523 at p 525.

The converse was, of course, also true. Where the taxpayer sought to rely on a specific exemption or deduction provided in the statute, the strict rule required that the taxpayer’s claim fall clearly within the exempting provision, and any doubt would there be resolved in favour of the Crown. See Lumbers v MNR (1943), 2 DTC 631 (Ex.Ct.), affirmed [1944] SCR 167; and WA Sheaffer Pen Co Ltd v MNR, [1953] Ex CR 251. Indeed, the introduction of exemptions and allowances was the beginning of the end of the reign of the strict rule.

Professor Willis, in his article, supra, accurately forecast the demise of the strict interpretation rule for the construction of taxing statutes. Gradually, the role of the tax statute in the community changed, as we have seen, and the application of strict construction to it receded. Courts today apply to this statute the plain meaning rule, but in a substantive sense so that if a taxpayer is within the spirit of the charge, he may be held liable. See Whiteman and Wheatcroft, supra, at p 37.

While not directing his observations exclusively to taxing statutes, the learned author of ‘‘Construction of Statutes”, 2nd ed, (1983) at p 87, E EA Dreidger, put the modern rule succinctly:

‘‘Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”.

Reverting to subsection 62(1) of the Income Tax Act, what is relevant to this appeal in the subsection provides that a taxpayer who moves her place of residence may, in computing her income for the taxation year in which the move took place, deduct amounts paid by her on account of moving expenses under these conditions. The taxpayer ceases to carry on business at a location in Canada at which she ordinarily carried on business and by reason thereof moves from her old residence to a new residence and the distance between her old residence and her new work location is not less than 40 kilometers greater than the distance between her new residence and her new work location.

The appellant is a self-employed auditor who, in 1981, moved from her residence at 3609 Queenston Drive, Mississauga, Ontario, to a new residence at 130 Harlandale Avenue, Willowdale. At all times relevant to this appeal she carried on her business activities at her residence. The distance between 3609 Queenston Drive and 130 Harlandale Avenue by road is about 47.52 kilometers, but it is less than 40 kilometers if the distance is measured in a straight line.

My reading of subsection 62(1) is that it contemplates the existence of four separate elements: old work location, new work location, old residence and new residence, and the comparison of two distances, ie the distance from the old residence to the new work location with the distance from the new residence to the new work location, the former of which must exceed the latter by 40 or more kilometers in order for the moving expenses to be deductible. In this case two of the four elements are each combined with one of the other two resulting in two components.That is to say the old work location was joined with the old residence and the new work location is joined with the new residence thereby leaving only the distance between the two components capable of any conceivably meaningful measurement. In my opinion the subsection is not properly applicable to these circumstances.

Let us assume however, for the purpose of this appeal, that it is permissible to measure the distance between the fused elements and to conclude that if that distance is not less than 40 kilometers the appellant is entitled to the deductions claimed. The appeal must still fail because that distance is less than 40 kilometers if measured in a straight line. Rip, TCJ recently determined that a straight line is the measurement that is required under the subsection: Haines v MNR, [1984] CTC 2422; 84 DTC 1375. He said at page 2424 [1377]:

In subsection 62(1) there is no subjective test and the distances between the old and the new residences and the new work location must be the shortest distance between the closest point of one to the other in a straight line: vide Lake v Butler (1855), 24 Law J Rep (ns) 273) Jewell and Another v Stead (1856), 25 Law J Rep (ns) 294. This distance is a straight measurement, not by road or other method of transportation between the two points but “as the crow flies”.

See also Mouflet v Cole (1872), LR 8 Exch 32, and Ernest's Char Pit Ltd v Demendeiros, [1971] 1 OR 481.

The appeal is dismissed.

Appeal dismissed.