Barhmed v. R., [1998] 3 CTC 2690

Tremblay T.C.J.:

This appeal was heard at Montréal, Quebec on November 14, 1997.

Point at issue

According to the Notice of Appeal and the Reply to the Notice of Appeal the question is whether the appellant, an engineer, was correct when calculating his income for 1994 and 1995 to deduct the sums of $2,150 and $2,550 respectively as child care expenses. The respondent disallowed the deduction because the appellant had not provided among other things evidence of payments or receipts in due form or the medical certificate indicating the time for which his wife Fadela Bélouar would be physically or mentally disabled.

The appellant has the burden of showing that the respondent’s assessments are incorrect. This burden of proof results from several judicial decisions, including a judgment of the Supreme Court of Canada in Johnston v. Minister of National Revenue. [1]

In the same judgment the Court held that the facts presumed by the respondent in support of the assessments or reassessments are also assumed to be true until the contrary is shown. In the instant case the facts assumed by the respondent are set out in subparagraphs (a) and (b) of paragraph 4 of the Reply to the Notice of Appeal. Those paragraphs read as follows:

[TRANSLATION]

4. In arriving at these reassessments the Minister assumed among other things the following facts:

a. the appellant claimed that during the years at issue he spent respectively $2,150 in 1994 and $2,550 in 1995 on expenses for the care of his children Badis and Zakaria; [admitted]

b. as the appellant was unable to provide at the Minister’s request any proof of payments or receipts in due form or a medical certificate indicating the length of his wife’s physical or mental disability, the amounts claimed as child care expenses in calculating the appellant’s income for the years at issue are not deductible. [to be explained]

Facts in evidence

The gist of the appellant’s testimony was clearly summarized in the following Notice of Appeal (Exhibit A-9):

[TRANSLATION]

Further to a telephone conversation of September 30, 1996 with one of your officers (Diane Goulet), I am hereby bringing my case to your attention. I was quite surprised that you did not take child care expenses into consideration in my 1994 and 1995 tax returns.

The reasons why I deducted child care expenses for the 1994 return were that my wife was ill and frequently hospitalized during the weeks following her second pregnancy. Further, after it she had to again be hospitalized for abdominal pains which called for surgery. Additionally, this diagnosis of illness and weakness was confirmed by another physician, Dr. Charbonneau of the C.L.S.C., who advised that care should be obtained for the children. In view of this situation, I had no choice but to obtain care for them. In any case, I discussed the matter a year ago with one of your officers, who explained to me what had to be done. I acted accordingly. I have already sent you a letter explaining everything and the physician’s letter in support of this deduction. You subsequently sent me a letter telling me that you had made corrections and everything was in order.

The same situation applied for the 1995 tax return as for 1994: my wife was pregnant for the third time (with twins). The attending physician (Dr. Skoll of Ste-Justine) required that she remain in hospital as it was a twin pregnancy which was risky and she was not supposed to make any effort (complete exhaustion, great difficulty moving and lack of sleep). In view of this very difficult situation we had no choice but to obtain care for the two children.

I would draw your attention to the fact that I feel bewildered, disappointed and oppressed by this situation, which is very unpleasant for someone who has no choice but to obtain day care for the children.

The appellant also explained he was the father of four children, Badis, born on March 27, 1993, Zakaria, born on September 14, 1994, and twins (a boy and a girl) born in 1996.

Exhibits filed

To confirm the foregoing the appellant filed the following exhibits: Exhibit A-l - a letter of November 21, 1996 from the obstetrician-gynecologist Amanda Skoll, M.D., of the Centre Foeto-Maternel, Hôpital Ste-Jus- tine:

[TRANSLATION]

Montréal

November 21, 1996

To whom it may concern:

This is to certify that Fadela Belouar had pregnancy complications in 1994 which made it necessary for her to obtain care for her child. She gave birth on September 14, 1994.

Additionally, the complications of a twin pregnancy (birth in March 1996) made it necessary for her to obtain care for her children in 1995.

Yours. truly ...

As Exhibit A-2, a “medical order” from Dr. J.L. Charbonneau of the Plateau Mont-Royal C.L.S.C., dated June 23, 1994, regarding Fadela Belouar, the appellant’s wife:

[TRANSLATION]

This person, the wife of Djamal Barhmed, has attended our clinic with her son Badis-Anis, born on 27-03-93.

She is currently suffering from external otitis due to great fatigue since she is to give birth in September 1994.

She apparently needs help with her family since she is alone here with her husband and child.

Thanking you for your consideration,

J.L. Charbonneau, M.D. 41 200 94/06/23

As Exhibit A-3, a report by Dr. Porlansky of the St-Léonard C.L.S.C. on the appellant’s wife, whom he saw on September 19, 1996. On her request for consultation she had mentioned her severe depression and thoughts of suicide:

[TRANSLATION]

Meeting with A. Brodersen concerning this person; case discussion: Ms. Belouar is in consultation with Dr. A. Brodersen.

The latter found that she was suffering postpartum depression: (1) she began having hallucinations: she sometimes heard the (six-month-old) twins crying though they were sleeping; (2) she sometimes had homicidal thoughts of stifling the children. A neighbour is currently looking after her children: she has promised to be back at the house by 11:00 a.m.

Agreement: we feel it is essential to have an assessment of her mental health; we feel urgent referral to L.-H. Lafontaine is necessary. A. Brodersen will contact emergency; we will ensure that a homemaker goes to look after the children until the husband returns from work (at about 7:00 p.m.).

RE: Care of patient

Confirmation homemaker available. Taxi chits given to patient to get home where she will meet with homemaker and subsequently go to L.-H. Lafontaine.

4 :00 p.m. - Call Sandra Côté, L.-H. Lafontaine emergency T.S.; possibility of close treatment; attempt to contact husband at work as patient refused to give information and wanted to leave. According to information, husband should be home at about 6:30 p.m.; information passed on to F. Guilbault for action this evening.

Date: 96/09/19 Signed:

As Exhibit A-4, three receipts from Urgence Santé regarding three occasions on which Fadela Belouar, while she was grocery shopping or taking a walk, lost consciousness in the street. The ambulance had to be summoned and she was taken to the Maisonneuve-Rosemont hospital.

As Exhibit A-5 a receipt, No. 43990, from Garderie Rêve d’enfance, 6163 Rue Bélanger est, St-Léonard, dated September 3, 1995, for $460 for care for the child Badis Barhmed from September 7 to December 22, 1994. The appellant told the Court that the cost of day care was $20 per child per day.

The appellant explained that she also had to have the children cared for at home by one Andreana Levistay, a South American lady who looked after the two children and also helped the mother, who had to stay in bed, prepared her meals and so on. It did not occur to him to ask this Andreana Levistay, whom he paid in cash each time, for a receipt. However, one Bouassida Nounia stated, in a statement filed as Exhibit A-6, that she saw the said Andreana providing day care on several occasions:

[TRANSLATION]

St-Léonard

August 8, 1997

I the undersigned, Bouassida Nounia, certify that on several occasions I met Ms. Andreana who was providing day care for the children of my friend Fadela Belouar at her home in 1995.

In witness whereof this certificate is issued to serve for all legal purposes, (initials)

Ms. Bouassida-Nounia

6899 Tourraine, St-Léonard

Tel.: 252-0639

One Ms. Lafrance confirmed that when the appellant’s wife was pregnant she could not move. The physician insisted that she stay in hospital.

As Exhibit A-8 the appellant filed a letter to Revenue Canada, Taxation on March 29, 1995 concerning his 1994 claim:

[TRANSLATION]

To whom it may concern:

As agreed at my discussion with an officer of Revenue Canada in Montréal, this is to explain the reasons for my application for a child care expenses deduction.

The reasons for my applying for this deduction were first that my wife was ill and often in hospital following the second pregnancy, and second that after the pregnancy she was hospitalized for abdominal pains. The attending physicians required her to stay in hospital, get a lot of rest, and especially a lot of sleep, and consequently to obtain care for the child.

In cross-examination the respondent filed as Exhibit 1-1 form T778, titled “Calculation of Child Care Expense Deductions for 1994”. In that form the appellant claimed $2,150 for child care expenses for Badis and Zakaria

— Garderie Rêve d’enfance and a person named Kolli Louiza. This Kolli Louiza charged $30 a day to care for the two children, instead of $40. Accordingly, in the amount of $2,150 the sum of $460 was paid to the day care centre for care of Badis for 23 days and the sum of $1,690 for 56 days for the two children Badis and Zakaria at home.

As Exhibit 1-2, a form similar to the preceding one, but for 1995, was filed claiming $2,550, that is, also at the rate of $30 a day instead of $40. The appellant stressed that he rented a room at the Hôpital Ste-Justine for his wife and also one for the social worker.

The respondent also filed as Exhibit 1-3 a letter from the appellant dated February 8, 1997 to J. Laplante of Revenue Canada:

[TRANSLATION]

Re: Child care expenses (medical certificate)

Dear Madam:

Further to our telephone conversation, I enclose the medical certificate which you requested to support the child care expense deduction for the 1994 and 1995 taxation years.

As my wife was ill I had no choice but to obtain day care (Garderie Rêve d’enfance and a woman named Kolli Louiza who came to our house to care for the children). In any case, a year ago I discussed the matter with one of your officers, who explained to me what had to be done. I acted accordingly. I have already sent you a letter explaining everything and the physician’s letter in sup- port of this deduction. You subsequently sent me the statement telling me that you had made corrections and everything was in order.

I provided the same explanations in the past regarding my file and the same questions were again put to me every six months (explanations were provided by letter, by telephone and by a visit to the Revenue Canada office on René- Lévesque - Ms. Goulet, Ms. Beaulieu and others - and they still told me it was all right).

I would draw your attention to the fact that I feel bewildered, disappointed and oppressed by this situation which is very unpleasant for someone who had no choice but to obtain day care for the children.

I trust you will understand the situation.

Yours truly ...

The appellant argued that for the 1996 taxation year he had all the receipts on hand but did not have information for earlier periods. Thus, he had no receipt from the said Andreana Levistay.

The appellant further noted that neither he nor his wife had parents living in Canada. They unsuccessfully tried to obtain a visa for his own sister (Exhibit A-7).

Section 63 of the Income Tax Act (“the Act”) lays down the conditions for a deduction. According to the respondent, the appellant did not meet the condition that an official document be issued certifying a two-week stay in hospital as provided for in s. 63(2)(Z>)(iv):

(iv) a person certified by a medical doctor to be a person who

(A) by reason of mental or physical infirmity and confinement throughout a period of not less than 2 weeks in the year to bed or to a wheelchair or as a patient in a hospital, an asylum or other similar institution, was incapable of caring for children, or

(B) by reason of mental or physical infirmity, was in the year, and is likely to be for a long-continued period of indefinite duration, incapable of caring for children ...

except for the conditions regarding payment contained in s. 63(1):

and the payment of which is proven by filing with the Minister one or more receipts each of which was issued by the payee and contains, where the payee is an individual, that individual’s Social Insurance Number, but not exceeding the amount, if any, by which ...

As to the official document from a physician regarding the illness of Fadela Belouar, the appellant’s wife, it appeared from the evidence as a whole that the illness related to “pregnancy complications”, according to Dr. Amanda Skoll in 1994 (paragraph 6) and in 1995, required that she obtain day care for the children. Dr. Charbonneau wrote to the same effect (paragraph 7). Dr. Porlansky of the St-Léonard C.L.S.C. mentioned her mental deficiencies (paragraph 8). He recommended an urgent psychiatric examination at the L.-H. Lafontaine hospital. He said “We will ensure that a homemaker goes to look after the children until the husband returns from work”, and referred to the possibility of close treatment at the L.-H. Lafontaine hospital. On her application for consultation she mentioned thoughts of suicide. The appellant’s wife fainted three times when she went out and had to be taken to hospital by the Urgence Santé service (paragraph 9). Moreover, the appellant rented a room at Ste-Justine not only for his wife but for the social worker. In my opinion, all these documents show the critical condition of Ms. Belouar’s health following her pregnancies and later on. To establish the need for day care, the physicians spoke much more forcefully of her state of health than of a document certifying that she had spent two weeks in hospital. It seems to me that this is considering the intent of Parliament and the object and spirit of the Act and its real effect, as the Supreme Court of Canada put it in Stubart Investments Ltd. v. R. (1984), 84 D.T.C. 6305 (S.C.C.).

Regarding the absence of receipts with the recipient’s signature and social insurance number, reference should be made to Senger-Hammond v. R., [1997] 1 C.T.C. 2728 (T.C.C.). This decision was rendered by Judge Bowman of this Court on December 6, 1996:

To deny deductibility on the basis of a purely mechanical interpretation would lead to an absurdity (City of Victoria v. Bishop of Vancouver Island, [1921] 2 A.C. 384). One cannot of course ignore the words of section 63 quoted above. They must be given some effect, as Isaac CJ. said in The Queen v. Coopers & Lybrand Limited, 94 DTC 6541 at 6546:

But these principles are not invitations to Courts to ignore other well-accepted rules of construction, such as that which requires Courts to construe statutes so as “to ascribe some meaning to each word used by the legislature,” Atco et al. v. Calgary Power Ltd. et al., [1982] 1 S.C.R. 557 at 569.

Nonetheless, their effect must be interpreted in a manner that is consonant with the object of the legislation. To mechanically treat the filing of receipts with social insurance numbers as an inflexible condition precedent to deductibility defeats the predominant objective of the legislation.

There is much jurisprudence in Canada, the United Kingdom and the United States in which the question whether provisions in a statute are directory or imperative has been considered.

Black’s Law Dictionary defines “directory” as follows:

Directory, adj. A provision in a statute, rule of procedure, or the like, which is a mere direction or instruction of no obligatory force, and involving no invalidating consequence for its disregard, as opposed to an imperative or mandatory provision, which must be followed. The general rule is that the prescriptions of a statute relating to the performance of a public duty are so far directory that, though neglect of them may be punishable, yet it does not affect the validity of the acts done under them, as in the case of a statute requiring an officer to prepare and deliver a document to another officer on or before a certain day.

A “directory” provision in a statute is one, the observance of which is not necessary to the validity of the proceeding to which it relates; one which leaves it optional with the department or officer to which it is addressed to obey or not as he may see fit. Generally, statutory provisions which do not relate to the essence of the thing to be done, and as to which compliance is matter of convenience rather than substance are “directory,” while provisions which relate to essence of thing to be done, that is matters of substance, are “mandatory”. Rodgers v. Meredith, 274 Ala. 179, 146 So.2d 308, 310.

Under a general classification, statutes are either “mandatory” or “directory,” and, if mandatory, they prescribe, in addition to requiring the doing of the things specified, the result that will follow if they are not done, whereas, if directory, their terms are limited to what is required to be done. A statute is mandatory when the provision of the statute is the essence of the thing required to be done; otherwise, when it relates to form and manner, and where an act is incident, or after jurisdiction acquired, it is directory merely.

The first paragraph of the above entry is identical to that in Jowitt’s Dictionary of English Law, (2nd Ed.). I believe that these passages correctly state the law of Canada as well.

Maxwell on Interpretation of Statutes, 12th Edition, discusses the matter at pages 314-315:

The first such question is: when a statute requires that something shall be done, or done in a particular manner or form, without expressly declaring what shall be the consequence of non-compliance, is the requirement to be regarded as imperative (or mandatory) or merely as directory (or permissive)? In some cases, the conditions or forms prescribed by the statute have been regarded as essential to the act or thing regulated by it, and their omission has been held fatal to its validity. In others, such prescriptions have been considered as merely directory, the neglect of them involving nothing more than liability to a penalty, if any were imposed, for breach of the enactment. “An absolute enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially.”^ [2]

It is impossible to lay down any general rule for determining whether a provision is imperative or directory.^ [3] “No universal rule,” said Lord Campbell L.C., “can be laid down for the construction of statutes, as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed ”4 [4] And Lord Penzance said: “I believe, as far as any rule is concerned, you cannot safely go further than that in each case you must look to the subject-matter; consider the importance of the provision that has been disregarded, and the relation of that provision to the general object intended to be secured by the Act; and upon a review of the case in that aspect decide whether the matter is what is called imperative or only directory.”^ [5]

The essence of section 63 is the deduction of child care expenses, not the collection of tax from babysitters. The language of the provision does not support the view that the filing of receipts is mandatory. For one thing, the word “shall” is not used. [6] Rather it describes a method of proof, which is clearly formal, evidentiary and procedural. Indeed, one may usefully compare the words in section 63 with those in subsection 118.1(2) of the Income Tax Act, which reads:

(2) — A gift shall not be included in the total charitable gifts, total Crown gifts or total cultural gifts of an individual unless the making of the gift is proven by filing with the Minister a receipt therefor that contains prescribed information.

The requirement in subsection 118.1(2) is clearly imperative. Had Parliament intended that the same effect be given to the words in section 63 it was quite capable of saying so.

I think that the words in section 63 requiring the filing of receipts with the payee’s social insurance numbers are directory rather than imperative, and that the failure to do so is not fatal to deductibility. This conclusion is consistent with the wording of the Act and its object.

I concur in the view of Judge Bowman. Further, considering the evi- dence that Kolli Louiza charged $30 a day instead of $40, the appellant cannot be blamed for hiring her.

Decision

The appeal is allowed with costs.

Appeal allowed.