Joseph Corbet v. Minister of National Revenue, [1978] CTC 2420, [1978] DTC 1320

Guy Tremblay [TRANSLATION]:—This case was heard in Quebec City, Quebec on May 13, 1977.

1. Point at Issue

The Board must decide whether, in respect of the 1974 taxation year, the appellant was entitled to a personal exemption for his daughter Sylvie as a wholly dependent person under paragraph 109(1)(b) of the new Act.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof derives not from one particular section of the Income Tax Act, but from a number of judicial decisions, including the judgment delivered by the Supreme Court of Canada in RWS Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

The undisputed facts are as follows.

3.1. The appellant lived with his wife throughout 1974.

3.2. The appellant did not support his wife, as she earned over $12,000 in 1974 and supported herself.

3.3. The appellant is wholly responsible for all maintenance and educational expenses for his daughter Sylvie, who is under 16 years of age.

3.4. In consequence of the Minister’s refusal to allow the appellant the exemption for Sylvie as a wholly dependent person, an objection was filed on May 15, 1975.

3.5. On August 29, 1975 the respondent notified the party objecting that he was dismissing the notice of objection.

3.6. On November 21, 1975 the appellant appealed the respondent’s decision.

4. Act, Case Law and Comments

4.1. The section involved is 109(1)(b) of the new Act, which reads as follows:

109. (1) . . . (b) Wholly dependent persons.—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 did not support

or live 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) wholly dependant for support upon, and

(B) connected, by blood relationship, marriage or adoption, with the taxpayer, or the taxpayer and such one or more other 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 $300;

4.2. According to the admitted facts, the conditions described above in subparagraph (ii) and clauses (A) and (B) are met.

The specific point under discussion turns on the interpretation of subparagraph (i).

4.3. According to counsel for the appellant, subparagraph (i) contains, among others, three alternative conditions, namely, that the taxpayer was (1) an unmarried person; (2) a married person who did not support his spouse; or (3) a married person who did ‘not live with his spouse. The text of this section itself is cited in support of this interpretation. The word “conjoint” (“spouse”) is followed by the word “ou” (“or”) and not the word “et” (“and”).

4.4. According to counsel for the respondent, however, the word “ou” is synonymous with “et” in this instance, which makes the condition expressed by the words “ne vivant pas. avec lui” (“did not . . . live with his spouse”) conjunctive.

This opinion is based on Clergue v H H Vivian & Company, decided by the Supreme Court of Canada in 1909 (41 SCR 607). In that case, the learned judges (with one dissent) held that in the clause of a contract in dispute the word “or” meant ‘‘and’’, and this confirmed the intent of the parties, proof of which had been submitted. The clause in question read as follows:,

I do hereby accept on behalf of myself or assigns the above offer, and do agree to become the purchaser . . .* [1]

4.5. In the case at bar, did the legislator intend the clause “ne vivant pas avec lui’ to be alternative or conjunctive?

It might be helpful to review the English text of subparagraph (i):

(i) was an unmarried person or a married person who did not support or live with his spouse and was not supported by his spouse, and*

As we see, the English text also clearly uses the word “or” instead of “and”.

However, is the word “or” synonymous with “and” in English and “ou” with “et” in French?

4.6. There would clearly appear to be a mistake in the French text. The Dictionnaire des difficultés de la langue française (Larousse, 20th ed, p 291) states, and I quote:

The use of “or” in other than the affirmative sense is incorrect. The proper word to use is “nor”, as in: I can neither pity nor advise him (and not “I can neither pity or advise him’’).

The legal text in question contains negative statements:

. . . ne subvenant pas aux besoins de son conjoint ou ne vivant pas avec lui . . .

Thus, the word “ou” (“or”) should be replaced by “ni” (“nor”) and the text should read as follows:

. . . ne subvenant pas aux besoins de son conjoint ni ne vivant pas avec lui . . .

However, the authority cited above mentions on page 275 that “et” (“and”) may replace “ni” (“nor”). I quote (TRANSLATION):

“And” may replace “nor” in negative statements: It was not a matter of dresses and coats (Hanse).

The Board notes that the amendment introduced by 1976-77, c 4, subsection 42(1), in effect fro m1975 on, replaced the “ou” (“or”) by “et” (“and”) to give the following statement in the French text:

. . . ne subvenant pas aux besoins de son conjoint et ne vivant pas avec lui . . .

4.7. The Board cannot agree with the opinion of counsel for the respondent that the word “ou” (“or”) is synonymous with the word “et” (“and”). In the text in question that was in effect in 1974, the word “ou” (“or”) leads to confusion, making the text ambiguous. The fact that the legislator, in his subsequent efforts to clarify the text, changed “ou” (“or”) to “et” (“and”), does not imply that the two words were synonymous in the previous text, merely that the legislator sought to correct a mistake. In fact, the word “et” (“and”) in the new text is synonymous with “ni” (“nor”) and not with “ou” (“or”).

4.8. English follows almost the same rules as French on the question of negative and affirmative statements. The word “or” cannot be used to connect two negative statements. The case cited by counsel for the respondent (Clergue v Vivian & Co), where it was held that the word “or” was synonymous with “and”, cannot apply here. As it appears in paragraph 4.4, the statement in that case is affirmative.

The 1976-77 amendment also corrected the English text:

(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

4.9. The Board concludes that the case at bar involves an exempting section.

It is accepted that an ambiguous taxing section is interpreted in the taxpayer’s favour. The imposition by the legislator on the citizen of an obligation (which always restricts his freedom) is considered to be non-existent if it is not clearly expressed.

Once the obligation is clearly expressed, however, the following principle applies: “Taxation is the rule and exemption the exception.”

Any ambiguity in the exempting section unfortunately works against the taxpayer. Needless to say, the word “ou” (“or”) used to connect two negative statements can only lead to ambiguity, an ambiguity that works against the appellant. Hence, the Board must dismiss the appeal on the basis of principles regularly applied to date.

As section 109 is regularly used, the Board feels that it should not be subject to any ambiguity.

4.10. As an obiter dictum, the Board would like to point out two ambiguities still inherent in paragraph 109(1 )(b).

The first is contained in the French text in the words “qui n’était pas à sa charge”, which are found at the end of subparagraph (i). From a grammatical standpoint, we ask ourselves to whom the “qui” (“who”) refers. In the English text this is clear: “. . . and was not supported by his wife.. . .” We conclude from this that the “qui” refers to his spouse. The ambiguity seems to result from the fact that in the same sentence in which three verbs are employed, two are active and the third, which is passive, does not have the same subject as the first two.

In fact, if seems to us that in the new French text (1976-77, c 4, subsection 42(1)), the most general rule should be applied, that is, using “ni” (“nor”) to connect the two negative statements and not “et” (“and”), which rather appears to be a rule of exception. Hence, it seems that the following statement would be clearer:

(i) une personne non mariée ou une personne mariée ne vivant pas avec son conjoint, ni ne subvenant à ses besoins, ni n’étant à sa charge, et

4.11. The second ambiguity arises from the condition imposed by clause 109(1 )(b)(ii)(A), namely, that the person for whom one wishes to claim an exemption, must have been “wholly dependent for support upon . . . the taxpayer”.

How are we, on the one hand, to apply this condition and, on the other, allow paragraph 109(2)(c), which states .. on the part of two or more taxpayers otherwise entitled to a deduction under that paragraph . ..”, namely, 109(1 )(b)?

We can understand that a person can be wholly dependent for support upon two or more taxpayers. It is, however, difficult to understand how, in practice, several taxpayers can individually assume full support for the same person.

4.12. This ambiguity, along with that in subparagraph 109(1 )(b)(i), existing in 1974 (requiring that the exemption be denied to a taxpayer who was married and living with his spouse) and the clarification of the text brought about by the amendment in 1976-77, c 4, subsection 42(1) (also requiring that the exemption be denied to a taxpayer who was married and living with his spouse) favours, among others, persons who live at common law, by considering to be wholly dependent a person connected with either of the common-law partners by blood relationship, marriage or adoption.

4.13. Where there is ambiguity of this nature, the legislator should first decide what exemption he wants to grant and to whom.

Although the Board does not maintain that the drafting of a legal text is an easy task, once again, when it is a matter of an exemption that is likely to be used regularly, the texts should be clear so that the ambiguity does not work against the taxpayers.

4.14. The Board even wonders whether, in cases of ambiguity in the texts of exemptions regularly used, such as personal exemptions, the ambiguity should not favour the taxpayer over the Treasury. Exemptions of this type are so closely related to the taxpayer’s personal and family life that they may be considered rightfully his. If the ambiguity is not interpreted in the taxpayer’s favour, do we not to some extent deprive him of a right and hence increase his obligations?

In writing the last lines, the Board is convinced of the validity of this position and therefore allows the appeal in the case at bar.

5. Conclusion

The appeal is allowed and the matter is referred back to the respondent for reassessment on the basis of the reasons for judgment.

Appeal allowed.