Hendrik Koetsier v. Minister of National Revenue, [1974] CTC 2011

The Chairman (orally: June 15, 1972):—This is an appeal by Hendrik Koetsier from a reassessment by the Minister of National Revenue for the taxation years 1966 and 1967 in which sums of money paid by him to the Calvin Christian School in Hamilton exceeded the sum of $200. The Calvin Christian School is admitted to be, to all intents and purposes and at all material times, a registered charitable organization within the meaning of the Income Tax Act.

By letter dated December 28, 1965 Mr Klupwyk wrote to the Director of Taxation, Department of National Revenue, Taxation Division, Hamilton, Ontario, a Mr Angus, setting out, among other things, the beliefs held by the Calvin Christian School Society. I adopt as part of these reasons the lettered paragraphs on the first page of that letter, which was filed at the hearing as Exhibit A-2.

I think for the purpose of this judgment it suffices to say that these people believe that there is a prime obligation on the parent or parents to see that proper Christian education is made available to their children. With this in mind they instituted, some time in the late fifties, four or five schools, one of which was in the Hamilton area. The evidence indicates that within a very few years this number had grown to some fifty or sixty schools.

The evidence of Mr Ray Klupwyk, who is principal of the Hamilton District Christian High School, indicates that the school is associated with the Ontario Alliance of Christian Schools. There are four other such high schools in Ontario. He has had considerable experience with this community and was a member of the Board of the Calvin Christian Church at the material times. He has advised them particularly on educational matters, but he was also present when the Board was dealing with budgetary matters.

His evidence was that the Board was aware that some figure would have to be fixed by way of tuition in order to qualify the additional amounts for classification as charitable gifts. With this in mind, he wrote to Mr Angus, the Director of the Hamilton District Office of the Department of National Revenue, Taxation Division, setting out a figure of $4 per week for tuition and including, also, a draft receipt which might be acceptable to the Department for taxation purposes. The letter indicated that the parents were to pay $4 per week for the children, and he says that their intention was, and I accept his evidence, that this was to be $208 per year per family for the education of the children of those parents, regardless of the number of children in the family.

The reply of the Director, Mr Angus, to Mr Klupwyk’s letter of December 28, 1965 was dated January 26, 1966 and filed as Exhibit A-1. In the second paragraph of that letter, he stated:

there is no set tuition fee for the individual schools and the tuition fee should be based on the approximate cost per individual student. Payments up to this cost by parents attending the school should be treated as tuition and not allowable for charitable donation purposes. Payments over that cost would qualify as charitable donations.

In the second last or penultimate paragraph of that letter and presumably in reference to the $208 per year, he said:

The $200.00 plus, suggested by the Calvin Christian School Society, would appear reasonable at present and will be accepted. Should, however, the cost of operating these schools increase substantially there would have to be a corresponding increase in tuition fees.

As I said in my comments during the course of argument, the Minister of National Revenue is not bound by the letter of Mr Angus. It is clear to me, in looking at the two letters, that there was really no meeting of minds as between Mr Angus and the Calvin Christian School, because it is not clear to me from Mr Angus’s letter whether he meant $200 per pupil or $200 per family, whereas it is clear that Mr Klupwyk was dealing on a family basis. I am dealing only with the taxation years 1967 and 1968. As has been said so often, there is no equity in taxation law and there must be strict compliance with the terms of the Act.

Two cases were cited by counsel for the respondent: No 688 v MNR, 23 Tax ABC 400; 60 DTC 130, a decision in 1960 by the then Chairman of the Tax Appeal Board; and David M Homa v MNR (1969), Tax ABC 961 ; 69 DTC 673. It is the latter case that gives me some difficulty when I have to deal with paragraph 27(1 )(a) of the Income Tax Act.

The Department of National Revenue chose at the material time to consider this organization as a charitable organization. It now appears that all private schools receive the same consideration. I think it is a well-established fact and a matter of evidence that no school is operated in Ontario today on the basis of tuition fees alone. In the case of universities, they rely on government grants. In the case of public elementary schools and Roman Catholic Separate Schools up to a certain grade, there is reliance on government grants for their existence. Private schools do rely to some degree on donations from, if I may use the term, “old boys” and universities are continually exhorting their alumni to contribute to their needs.

The people involved in this appeal are in a somewhat unusual situation in that they are paying the municipal taxes required of persons with children attending government-supported schools in the particular area, but they have chosen, because of their beliefs, to set up these particular schools. I am satisfied on the evidence that it was a bona fide effort that was made by them to set a tuition fee that was reasonable under all the circumstances, and which the families could pay, in order to carry out the obligations they felt for the education of their children.

As I have said, I think the whole problem in this instance arises out of the failure of the negotiating parties to indicate at the outset, in 1965 and 1966, just what was the intention of the Society and the response of the Department of National Revenue.

I have great difficulty in dealing with paragraph 27(1 )(a) because of its wording. On the other hand, I am satisfied that the Department of National Revenue intended to grant some relief to these persons by way of charitable donation. Without in any way determining what the proper course of action might or should be for the years subsequent to the taxation year 1968, I feel that the taxpayer has, in this instance, satisfied the onus on him, and that the tuition stated to be paid was a tuition per family and was reasonable under all the circumstances.

For these reasons the appeal will be allowed for the taxation years 1967 and 1968 and referred back to the respondent for reassessment on the basis of allowing as charitable donations all sums paid by a family in excess Of $208. This is with respect to the appeal of this taxpayer and the appeals of those taxpayers who it was agreed would abide the outcome of this appeal.

Appeal allowed.