Citation: 2007TCC292
Date: 20070515
Docket: 2004-3729(IT)G
BETWEEN:
DAVID HOARE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rip, A.C.J.
[1] David Hoare appeals from an income tax reassessment
for 2002 in which the Minister of National Revenue ("Minister")
denied the appellant’s claim for a medical expense credit for amounts related
to the education of the appellant’s two sons, James and William (aged 13 and 15
in 2002), who suffer from severe learning disabilities. The Minister assessed
on the basis that the amounts are not deductible in computing the appellant's
non-refundable tax credits pursuant to subsection 118.2(2) of the Income
Tax Act ("Act").
[2] In or about
1996, James and William were diagnosed with severe learning disabilities,
including language and motor dyspraxia. In subsequent testing, the boys were
further diagnosed with cerebellar developmental delay and dyslexia. Around this
same time, the appellant and his family moved to Moncton from England and the
boys were enrolled in a local public school for the 1996/1997 school year.
Unfortunately the boys did not thrive in this environment.
[3] For the
1997/1998 school year, the appellant’s spouse tried to "home‑school"
the children. This attempt was also unsuccessful.
[4] Having
determined that there was no existing special needs facility within a
reasonable proximity to home, the appellant and his spouse then decided to send
their sons to a special needs school in England for two years. However, by
2000, they concluded that it was in the best interest of the children that they
live at home in Moncton.
[5] For lack of practical
local alternatives, the appellant established a dedicated facility in his home
for his sons, referred to as the "School" in the notice of appeal.
The School consisted of two dedicated rooms furnished with, among other things,
appropriate furniture and equipment, special computers and software. Mr. Hoare
also hired a qualified arm’s length teacher, Ms. Heather McGrath.
[6] Ms. McGrath had
responded to the advertisement placed by the Hoares in June 1999 for a "FULL
TIME TEACHER". Ms. McGrath holds a Bachelor of Education degree from the University of New
Brunswick, where she specialized in
elementary education and special education. She also has experience working
with children with learning disabilities, behavioural difficulties, autism and
other mental challenges.
[7] The appellant
incurred additional expenses related to the assessment of the boys and the
remediation program at the Dyslexia, Dyspraxia and Attention Treatment ("DDAT")
Centre in Kenilworth, United Kingdom ("Kenilworth Clinic") in 2002.
[8] In filing his
2002 tax return, the appellant claimed $73,945 as medical expenses related to
the special needs schooling of his sons. He says that he is entitled to a
medical expense credit under section 118.2 of the Act for amounts paid
relating to the engagement of Ms. McGrath for the "School". The appellant
argues that the expenses related to the full-time private tutoring of the boys
constituted medical expenses as described in paragraph 118.2(2)(l.91)
or in the alternative, as described in paragraph 118.2(2)(e) of the Act.
He also claims the expenses incurred for his children at the Kenilworth Clinic
as medical expenses pursuant to subparagraph 118.2(2)(a).
[9] In the Minister's
view, the expenses were not amounts paid for tutoring services that are
supplementary to the primary education of the boys as described in paragraph
118.2(2)(l.91) of the Act. Further, the Minister denied the claim
on the basis that the expenses are not eligible medical expenses because the
full-time private tutoring of the boys at home is not an amount paid for care,
or the care and training at a school or institution or other place as described
in paragraph 118.2(2)(e) of the Act. The Minister reassessed the appellant and disallowed $67,601 of expenses.
[10] The parties have
agreed that only the expenses related to the private tutoring salary paid to
Ms. McGrath ($52,840), the employer’s contribution to Canada pension plan
("CPP") and employment insurance ("EI") related to Ms.
McGrath’s salary ($2,874) and the remediation program at the Kenilworth Clinic
($2,209), for a total of $57,923, are now in issue. In the notice of appeal,
the first two expenses are referred to in the appeal as "school-related
expenses" and the other as the "clinic-related expenses".
[11] There are three
issues to consider in this appeal:
(a) Is
the appellant entitled to a medical expense credit under paragraph 118.2(2)(l.91)
for the private tutoring expenses and employer’s contribution to CPP and EI as
related to Ms. McGrath’s salary?
(b) In
the alternative, is the appellant entitled to a medical expense credit under
paragraph 118.2(2)(e) of the Act for the private tutoring
expenses and employer’s contribution to CPP and EI as related to Ms. McGrath’s
salary?
(c) Is
the appellant entitled to a medical expense credit under paragraph 118.2(2)(a)
of the Act for the amounts related to the assessment and remediation
program at the Kenilworth Clinic?
[12] During argument appellant’s
counsel also attempted to raise an issue regarding the accommodations and
travel costs incurred with respect to the Kenilworth Clinic under paragraphs
118.2(2)(g) and (h) of the Act. However, as this submission
was not raised until rebuttal I did not allow counsel to proceed.
Tutoring Services
[13] Paragraph 118.2(2)(l.91) of the Act permits a medical
expense credit for tutoring services as follows:
For the
purposes of subsection (1), a medical expense of an individual is an amount
paid
[…]
(l.91) [tutoring services] -- as remuneration for
tutoring services that are rendered to, and are supplementary to the primary
education of, the patient who
(i)
has a learning disability or a mental impairment, and
(ii) has been certified in writing
by a medical practitioner to be a person who, because of that disability or impairment,
requires those services,
if the
payment is made to a person ordinarily engaged in
the business of providing such services to
individuals who are not related to the payee.
[14] There is no
dispute as to whether the appellant paid the amounts. The respondent agrees
that the children suffer from a learning disability or mental impairment.
Moreover, there does not appear to be any dispute as to whether the amounts
were paid to an unrelated person ordinarily engaged in the business of
providing such services. Thus the only remaining questions are 1) whether
the tutoring services were rendered to and "supplementary to the primary
education" of the children and 2) whether the children’s disability has
been satisfactorily "certified".
[15] Mr. Hoare was not successful in finding any assistance
in the Moncton area. However, he discovered that
the North Island Distance Education School ("NIDES"), part of the British Columbia public school system, offered programs
for his children. The appellant investigated what NIDES had to offer and
registered the boys with NIDES.
[16] Appellant’s
counsel did not clearly identify the primary and supplementary components of
the children’s education but attempted to submit a combination of the following
arguments: Ms. McGrath and the home-school were supplementary to the inadequacy
of the public school system; the primary education was the NIDES which was the
insufficient public school system and then needed to be supplemented by other
programs; and finally, Ms. McGrath supervised and assisted with the self-study
programs.
[17] The respondent
simply argues that Ms. McGrath provided the children’s primary source of
education at the School.
[18] The respondent’s
denial of the medical expense credit focuses on the fact that James and William
were not enrolled as full-time students in any educational institution in
Canada but were instead home-schooled and only enrolled in certain courses
offered by the NIDES. This position focuses on the location of the schooling as
the primary consideration. In my view, in interpreting the phrase "supplementary
to the primary education", the focus should be on the education provided
and the function performed by Ms. McGrath in this particular case.
[19] Therefore, in
order to meet this branch of the statutory test, I must find as a matter of
fact that Ms. McGrath did not provide the primary education for the children
but, instead facilitated and supplemented the various distance learning and special
needs education packages obtained by the Hoares and that she further provided
the supervision required by the children’s disabilities. There is no evidence
to indicate that the distance learning package required the supervision of a
qualified teacher. The appellant's view is that the distance learning program
from the NIDES provided the basic curriculum for the months from September to
December 2002 inclusive.
[20] At the home
school, lessons ran from 8:30am to 4pm with one hour for lunch and 2 hours of
homework each day. While Ms. McGrath decided how much time would be dedicated
to each program, taught her own lessons to the children and provide report
cards of their progress, it was her testimony that she followed the programs
from NIDES and approximately 75 per cent of the time was consumed with the
NIDES distance learning program. Once assignments were completed by the boys
with the assistance of Ms. McGrath, the assignments were submitted to the
teachers at NIDES for evaluation. Moreover, every couple of weeks she would
contact NIDES instructors regarding the assignments.
[21] Other programs
such as the DDAT and SMT System were used in conjunction with the NIDES
curriculum to improve the children’s motor and reading skills.
[22] The children’s
curriculum at the home school was designed by the appellant’s spouse and
approved by the New Brunswick Ministry of Education via the district school
board. Based on her experience and training in psychology, the appellant’s
spouse chose the NIDES program as it offered a credible, well‑structured
independent study program, it delivered distance education and provided for
special needs as part of the public school system in British Columbia.
The children were enrolled in NIDES' Science, Home Economics and Business
courses. Materials were provided by NIDES, assignments were submitted weekly or
biweekly to NIDES instructors and a test was to administer with each module.
Once or twice a week the children had contact with a NIDES teacher by either
email or telephone.
[23] The NIDES teachers would send lessons to Ms. McGrath
for her to teach during the period from September to December 2002. She taught
these lessons as well as lessons she developed on her own and from other self
study courses or products. The other
programs such as the DDAT program and SMT System, which the appellant
purchased, were used in conjunction with the NIDES curriculum, and for the most
part these programs all appear to be self-study courses. While Ms. McGrath
did teach her own lessons to the children, approximately 75 per cent of the
time was consumed by the NIDES distance learning. Finally, it is significant to
note that once assignments were completed by the boys with the assistance of
Ms. McGrath, they were submitted to the teachers at NIDES for evaluation.
[24] In sum, the
evidence indicates that three-quarters of the children’s education was provided
by external sources, most specifically NIDES, and should sufficiently support a
finding that NIDES was the primary education for the children. Any independent
programming offered by Ms. McGrath would therefore have been supplementary to
the NIDES courses and could only have constituted a quarter of the children’s
education for the fall 2002 school term from September to December.
[25] Regarding the second requirement, the certification by a medical practitioner in paragraph
118.2(2)(l.91) is rather onerous: it must be in writing; it must be
written by a medical practitioner; it must identify the disability and
impairment; and it must state that the person requires those services on
account of that disability.
[26] While there is no
case law that deals with this particular provision, the certification
requirement as related to the medical expense credit under paragraphs 118.2(2)(e)
and 118.2(2)(d) of the Act was decided by the Federal Court of
Appeal in The Queen v. Title Estate.
In Title Estate, the taxpayer lived in a nursing home because he
suffered from a heart condition and bad memory, and for that reason often
neglected to take his medication. The taxpayer’s estate sought to claim a
medical expense credit in relation to his nursing home fees. The Tax Court
Judge had allowed the taxpayer’s appeal on the basis of a certificate by an
appropriately qualified person that stated:
This person
requires a supervised setting since January 31, 1995 due to medical illness.
This person requires a 24 hour companion.
In
reversing that decision, the Court of Appeal held that the note above was
insufficient and stated:
In our view, a certificate under paragraph 118.2(2)(e) must at
least specify the mental or physical handicap from which the patient suffers,
and the equipment, facilities or personnel that the patient requires in order
to obtain the care or training needed to deal with that handicap. The
certificates in this case are simply too vague to meet that requirement.
[27] The Court of
Appeal also noted that the certification requirements for the purposes of each
paragraph under subsection 118.2(2) of the Act are not identical. The
Court determined (at paragraph 5 of its reasons) that the note was also not
specific enough for the purposes of paragraph 118.2(2)(d) because it did
not state that the patient lacks normal mental capacity. Moreover, unlike
paragraph 118.2(2)(l.91), paragraph 118.2(2)(e) does not
specify that the certificate need be in writing.
[28] In the case at
bar, the Hoares’ family doctor, Dr. W.G. Chesser provided a signed letter
stating that he had diagnosed both children as dyslexic and summarized the
various medical, psychological, and speech language assessments performed on
the boys. The letter concludes:
This is a
permanent condition and it is recommended that both children receive special
needs education provided either at a specialist school for dyslexics or with an
individual special needs tutor.
[29] Despite the respondent’s
contention that there was no certification stating that the children required
one-on-one private education, the letter written by Dr. Chesser, a
qualified medical practitioner, should be sufficient for the purposes of
paragraph 118.2(2)(l.91) because it stipulates that the children suffer
from a particular disability and recommends (but does not "require")
an individual special needs tutor. This provision should be interpreted
compassionately and in favour of Mr. Hoare. It is probable that Dr. Chesser
wrote the letter without knowledge of the wording of paragraph 118.2(l.91)
of the Act, let alone knowledge of the provision itself. In wording the
letter, Dr. Chesser's intention was to direct the appellant to a course of
action. I believe I can take judicial notice that physicians and other
professionals normally recommend a course of action, even when they believe
such action is required. On the facts before me I find that Dr. Chesser was
informing the appellant and his wife that their sons' conditions required a
special needs education.
Kenilworth Clinic Expenses
[30] Paragraph
118.2(2)(a) of the Act permits a medical expense credit for
medical and dental services as follows:
(2) For
the purposes of subsection (1), a medical expense of an individual is an amount
paid
(a) to a medical practitioner, dentist or
nurse or a public or licensed private hospital in respect of medical or dental
services provided to a person (in this subsection referred to as the
"patient") who is the individual, the individual's spouse or
common-law partner or a dependant of the individual (within the meaning
assigned by subsection 118(6)) in the taxation year in which the expense was
incurred;
[31] "Medical
practitioner" is defined in 118.4(2) of the Act as follows:
For the purposes of sections 63, 118.2, 118.3
and 118.6, a reference to an audiologist, dentist, medical doctor, medical
practitioner, nurse, occupational therapist, optometrist, pharmacist,
physiotherapist, psychologist or speech-language pathologist is a reference to
a person authorized to practise as such, . . .
[32] The appellant did
not make any submissions in respect of the fees paid to the Kenilworth Clinic.
The respondent argues that the expense for the remediation program at the
clinic did not meet the requirements of paragraph 118.2(2)(a) because
fees were not paid to a "medical practitioner" or other enumerated
party as defined in subsection 118.4(2) of the Act. On this issue, the
appeal fails.
[33] The requirements
of paragraph 118.2(2)(l.91) have been satisfied. The appeal is allowed. The appellant shall be entitled to
costs.
Signed at Ottawa, Canada, this 15th day of May 2007.
"Gerald J. Rip"
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