Tax Court of Canada Judgments

2004-4426(IT)I

BETWEEN:

GULSHAN A. ALIBHAI,

Appellant,

And

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeals heard on May 3, 2005, at Vancouver, British Columbia,

By: The Honourable Justice E.A. Bowie
Appearances:
Counsel for the Appellant:	Aiyaz Alibhai
Counsel for the Respondent:	Shawna Cruz

____________________________________________________________________

JUDGMENT

The purported appeals from reassessments of tax made under the Income Tax Act for the 1999, 2000, 2001 and 2002 taxation years are quashed.

         

The appeal from the reassessment of tax made under the Act for the 2003 taxation year is dismissed.

Signed at Toronto, Ontario, this 26th day of August, 2005.

"E.A Bowie"

Bowie J.

Citation: 2005TCC574

Date: 20050826

Docket: 2004-4426(IT)I

BETWEEN:

GULSHAN A. ALIBHAI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

BowieJ.

[1]      By appeals from assessments for income tax for the years 1999 to 2003 inclusive the Appellant seeks relief from the operation of section 180.2 of the Income Tax Act[1] (the Act) by which her entitlement to benefits under the Old Age Security Act[2] (the OAS Act) was clawed back. Her attack on the assessments is grounded in theCanadian Charter of Rights and Freedoms, section 15, and alternatively section 7, in the Canadian Bill of Rights, paragraph 1(a).

facts

[2]      The facts of the case are not in dispute. The following account of them is taken entirely from Part I of a Memorandum of Fact and Law provided to me by counsel for the Appellant at the hearing of the appeals.

1.                  The Appellant is currently 67 years old; her date of birth is August 30, 1937.

2.                  The Appellant began working as a Housekeeping Aide at Capilano Care Centre in West Vancouver, British Columbia, in 1976. For this work, the Appellant earned approximately $30,000 per year in her last year at Capilano Care Centre.

3.                  On April 20, 1998, when the Appellant was 60 years of age, and after 22 years of work at Capilano Care Centre, the Appellant was seriously injured in a workplace accident. As a result of the accident, the Appellant suffers from aggravation of pre-existing degenerative conditions in her right shoulder, right knee and lumbar spine. This condition is a permanent disability.

            4.          On April 20, 1998, the same day as the accident, a claim was filed for the Appellant with the WCB [Workers' Compensation Board of British Columbia].

            5.          On August 30, 2002, the Appellant turned 65 years of age. At this time, she became eligible for OAS benefits.

            6.          On April 24, 2003, the Appellant received notification from the WCB that its Disability Awards Department had determined that she suffered from permanent disability due to the accident's aggravation of pre-existing degenerative conditions in her right shoulder, right knee and lumber spine. The WCB had determined that she was entitled to a permanent disability award. This award was calculated as follows: between June 12, 1999 and August 30, 2002, the Appellant was awarded $1,853.91 per month. The award was adjusted on August 30, 2002, to reflect the Appellant's probable retirement at the age of 65. Between August 30, 2002, and April 30, 2003, the Appellant was awarded $790.73 per month. In the result, the Appellant was paid a Retroactive Permanent Disability Entitlement (the "Retroactive Award") for the period from June 12, 1999 to April 30, 2003 in the amount of $80,893.84. The Appellant was also awarded a Disability Payment in the amount of $790.37 per month, commencing May 2003.

            7.          By letters dated September 23, 2004 and October 7, 2004, the WCB provided a breakdown of the amount of the Retroactive Award awarded to the Appellant in respect of each year for which the award compensated. The WCB provided the following list of how much of the total $80,893.84 award was for each of the years 1999-2003:

           

Year	Amount
1999	$12,409.86
2000	22,849.08
2001	23,573.58
2002	18,988.40
2003	3,162.92
TOTAL	$80,983.84

            8.          The WCB provided the Appellant with a 2003 Statement of Benefits (Form T5007) for the Retroactive Award and the Disability Payments she received in 2003. The total amount reflected on Form T5007 was $87,309.68.

            9.          On April 20, 2004, the Appellant's accountant forwarded this information to the CCRA, and requested that the CCRA assess the relevant tax years for the portion of earnings that apply to each year.

            10.        On April 29, 2004, the CCRA stated in the Notice of Assessment that it had included the entire amount of the Retroactive Award in the Appellant's 2003 income. Furthermore, the CCRA stated that the Appellant would have to repay her 2003 OAS benefits, and would be precluded from receiving further OAS benefits until June 2005:

                       

We have adjusted the amount of your workers' compensation benefits to $87,309 to agree with the information we have on file. Based on your 2003 income, we will withhold an Old Age Security repayment from your monthly Old Age Security cheque. From July 2004 to June 2005, the required monthly withholding will be equal to the amount of your Old Age Security cheque. This withholding is required under the "Income Tax Act". You should claim the amount withheld as tax deducted at source on your income tax return. Since your net income is more than $57,879 in the year, you have to pay back $5,497 of the Old Age Security pension benefits you received.

            11.        On May 20, 2004, the Appellant's accountant sent a letter to the CCRA Fairness Committee, appealing the April 29 Notice of Assessment as unfair and punitive. The letter requested that the CCRA allocate the Appellant's Retroactive Award according to the year each portion accrued, thereby reversing the clawback of the Appellant's OAS benefits.

            12.        On May 26, 2004, the CCRA refused to make any adjustment to the April 29 Notice of Assessment.

            13.        On June 7, 2004, the CCRA sent a Statement of Account requiring payment of $5,092.03 by June 27, 2004.

            14.        On June 8, 2004, the Appellant filed a Notice of Objection regarding the amount claimed by the CCRA. On June 24, 2004, the Appellant paid the amount in dispute pending the outcome of her appeal.

            15.        On August 20, 2004, the April 29 Notice of Assessment was confirmed by the Minister of National Revenue. The Notice of Confirmation stated that "the workers' compensation benefits of $87,309.68 you received in 2003 have been correctly included in your income according to paragraph 56(1)(v).

the Appellant's position

[3]      The Appellant's position, as I understand it, is that the effect of paragraph 56(1)(v) of the Act is to deprive her of the OAS benefit to which she would otherwise be entitled by including the entire Workers' Compensation Board (WCB) benefit payment that she received in 2003 in her net income under Part I, Division B of the Act, thereby causing that net income to exceed the level at which tax under section 180.2 equals the full amount of the benefit to which she was entitled in that year under the OAS Act. This, it is argued, contravenes her rights to equality and security of the person guaranteed by sections 15 and 7 of the Charter, and her right to enjoyment of property under paragraph 1(a) of the Canadian Bill of Rights. Her contention is that her rights under the Charter and the Bill of Rights can only be protected if paragraph 56(1)(v) is read in such a way as to sever the lump sum payment of $80,983 that she received in 2003 and apportion it among the taxation years between 1999 and 2003 according to the table in paragraph 2(7) above.

[4]      By way of relief, the Appellant asks for a declaration that paragraph 56(1)(v) infringes her rights under the Charter and the Bill of Rights, and that it be read in such a way as to sever the lump sum and include it in her income for the five years as described above, or alternatively, that the paragraph be declared of no force and effect. She also seeks a mandatory Order that would require the Minister to reassess her accordingly for the years 1998 to 2003.

[5]      The thrust of the Appellant's argument is that she is a member of a group that may be described as persons who have suffered workplace injuries resulting in a permanent disability, and that this group is treated less favourably than the comparator group, which she describes as persons who have suffered workplace injuries that do not result in a permanent disability. She invites me to take judicial notice of the fact that the WCB in British Columbia (and by extension the analogous bodies in the other provinces and the territories) take much longer to assess the claims of the first group than those of the second group. The result that she says flows from this is that members of the first group generally receive no payment for several years, and then a disproportionately large retroactive payment comprised of the benefits for those several years, while the comparator group receive their compensation in a timely way - their benefits are paid in the years to which they are referable. Inevitably, or at least usually, the first group will find several years' benefits included in their net income for the year in which they received the payment, while the comparator group will have a much lesser amount included in each of the years for which they are paid benefits. This will result in a tendency, at least, for the first group to suffer a clawback of OAS benefits under section 180.2, while the comparator group will not. The members of the first group are therefore subject to adverse effect discrimination manifested as the loss of OAS benefits.

the taxation years 1998 to 2002

[6]      The Appellant purports to appeal from her assessments for all these years. However, it was established before me by the affidavit evidence of Dianne Martineau that the Appellant did not serve notices of objection on the Minister in respect of those years. A notice of objection is a necessary prerequisite to an appeal.[3] The appeals for the years other than 2003 will be quashed.

the issue

[7]      The examination of the question raised by this appeal depends upon a proper understanding of the statutory scheme with which it is concerned. It consists of the benefit provisions of the OAS Act and paragraphs 56(1)(v) and 110(1)(f) and section 180.2 of the Act. The OAS Act makes provision for the payment of a monthly benefit to those Canadians over the age of 65 who apply for it. The usual benefit in 2003 was about $458 per month, but for those of very limited income a supplemental benefit was also available. Until 1989, the basic benefit was paid on a universal basis, regardless of need. In 1999, Parliament added Part 1.2,[4] consisting of section 180.2, to the Act to provide for the clawback of the OAS benefit on a graduated basis from recipients whose Part 1 net income exceeds a threshold of $50,000. This threshold has since been increased by indexing, and in 2003 was $57,879. Paragraph 56(1)(v) of the Act provides that the OAS benefit is to be included in the taxpayer's net income; the benefit itself is not taxed however (except for the clawback), as paragraph 110(1)(f) provides that it is deducted in computing taxable income. The combined effect of these provisions, therefore, is that OAS benefits are received tax free by recipients whose net income is below the threshold of section 180.2; those whose net incomes exceed the threshold must repay the benefit at a graduated rate, and those with a net income of $98,793[5] or more must repay the entire benefit in the form of Part 1.2 tax.

[8]      The effect in the case of the Appellant is that the receipt of the retroactive WCB payment of $80,983 in 2003 caused her net income for that year to exceed the point at which there was full recovery of her OAS benefit. If only $3,163 of the retroactive payment were included in the computation of her net income, as the Appellant contends should be the result, then her net income for 2003 would have been only $29,724, which is less than the $57,879 threshold, and she would not have been subject to any clawback of her OAS benefits. The issue in this appeal, therefore, is whether this legislative scheme offends her Charter or Bill of Rights protected rights. For the reasons that follow, I have concluded that it does not.

analysis

[9]      The Appellant does not allege that the statutory scheme draws any formal distinction between her and others on the basis of any personal characteristic. Paragraph 56(1)(v) of the Act draws no distinction at all; every recipient of OAS benefits must bring them into the computation of net income. Section 180.2 is the applicable charging section of the Act. It draws distinctions among taxpayers only on the basis of their net income. The greater the income, the less will be the net OAS benefit retained by the taxpayer. Differentiation among taxpayers on that basis patently does not offend section 15 of the Charter.

[10]     Counsel for the Appellant argues that she is the victim of adverse effect discrimination. She, and other persons whose workplace injuries result in permanent disabilities, are treated less favourably by the Act than all those persons whose workplace injuries do not result in permanent disabilities, because it requires a longer period of time to assess the injuries of the former group, and therefore to begin making payments to them, than is required in the case of the comparator group, resulting in large lump sum retroactive payments for the members of the first group, but not for the comparators. The basis of this discrimination, he says, is physical disability. The unacceptable effect is said to be the failure of the Act to recognize and accommodate the distinction. The appropriate accommodation is said to be to take the retroactive payment into income over all the years for which it is paid, presumably by reassessing all the years between the date of the disabling injury and the date of the retroactive payment, after the retroactive payment has been received.

[11]     In Law v. Canada,[6] the Supreme Court of Canada established guidelines for judges to use in considering the application of section 15 of the Charter to legislation. These are summarized in paragraph 88 of the Reasons for Judgment of Iacobucci J.:

88         Before moving on to apply the principles that I have just discussed to the facts of this case, I believe it would be useful to summarize some of the main guidelines for analysis under s. 15(1) to be derived from the jurisprudence of this Court, as reviewed in these reasons.    As I stated above, these guidelines should not be seen as a strict test, but rather should be understood as points of reference for a court that is called upon to decide whether a claimant's right to equality without discrimination under the Charter has been infringed. Inevitably, the guidelines summarized here will need to be supplemented in practice by the explanation of these guidelines in these reasons and those of previous cases, and by a full appreciation of the context surrounding the specific s. 15(1) claim at issue.    It goes without saying that as our s. 15 jurisprudence evolves it may well be that further elaborations and modifications will emerge.

General Approach

(1)         It is inappropriate to attempt to confine analysis under s. 15(1) of the Charter to a fixed and limited formula.    A purposive and contextual approach to discrimination analysis is to be preferred, in order to permit the realization of the strong remedial purpose of the equality guarantee, and to avoid the pitfalls of a formalistic or mechanical approach.

(2)         The approach adopted and regularly applied by this Court to the interpretation of s. 15(1) focuses upon three central issues:

(A)        whether a law imposes differential treatment between the claimant and others, in purpose or effect;

(B)        whether one or more enumerated or analogous grounds of discrimination are the basis for the differential treatment; and

(C)        whether the law in question has a purpose or effect that is discriminatory within the meaning of the equality guarantee.

The first issue is concerned with the question of whether the law causes differential treatment.    The second and third issues are concerned with whether the differential treatment constitutes discrimination in the substantive sense intended by s. 15(1).

(3)         Accordingly, a court that is called upon to determine a discrimination claim under s. 15(1) should make the following three broad inquiries:

(A)        Does the impugned law (a) draw a formal distinction between the claimant and others on the basis of one or more personal characteristics, or (b) fail to take into account the claimant's already disadvantaged position within Canadian society resulting in substantively differential treatment between the claimant and others on the basis of one or more personal characteristics?-

(B)        Is the claimant subject to differential treatment based on one or more enumerated and analogous grounds?

and

(C)        Does the differential treatment discriminate, by imposing a burden upon or withholding a benefit from the claimant in a manner which reflects the stereotypical application of presumed group or personal characteristics, or which otherwise has the effect of perpetuating or promoting the view that the individual is less capable or worthy of recognition or value as a human being or as a member of Canadian society, equally deserving of concern, respect, and consideration?

Purpose

(4)         In general terms, the purpose of s. 15(1) is to prevent the violation of essential human dignity and freedom through the imposition of disadvantage, stereotyping, or political or social prejudice, and to promote a society in which all persons enjoy equal recognition at law as human beings or as members of Canadian society, equally capable and equally deserving of concern, respect and consideration.

(5)         The existence of a conflict between the purpose or effect of an impugned law and the purpose of s. 15(1) is essential in order to found a discrimination claim. The determination of whether such a conflict exists is to be made through an analysis of the full context surrounding the claim and the claimant.

Comparative Approach

(6)         The equality guarantee is a comparative concept, which ultimately requires a court to establish one or more relevant comparators.    The claimant generally chooses the person, group, or groups with whom he or she wishes to be compared for the purpose of the discrimination inquiry.    However, where the claimant's characterization of the comparison is insufficient, a court may, within the scope of the ground or grounds pleaded, refine the comparison presented by the claimant where warranted.    Locating the relevant comparison group requires an examination of the subject-matter of the legislation and its effects, as well as a full appreciation of context.

Context

(7)         The contextual factors which determine whether legislation has the effect of demeaning a claimant's dignity must be construed and examined from the perspective of the claimant.    The focus of the inquiry is both subjective and objective.    The relevant point of view is that of the reasonable person, in circumstances similar to those of the claimant, who takes into account the contextual factors relevant to the claim.

(8)         There is a variety of factors which may be referred to by a s. 15(1) claimant in order to demonstrate that legislation demeans his or her dignity.    The list of factors is not closed.    Guidance as to these factors may be found in the jurisprudence of this Court, and by analogy to recognized factors.

(9)         Some important contextual factors influencing the determination of whether s. 15(1) has been infringed are, among others:

(A)        Pre-existing disadvantage, stereotyping, prejudice, or vulnerability experienced by the individual or group at issue. The effects of a law as they relate to the important purpose of s. 15(1) in protecting individuals or groups who are vulnerable, disadvantaged, or members of "discrete and insular minorities" should always be a central consideration. Although the claimant's association with a    historically more advantaged or disadvantaged group or groups is not per se determinative of an infringement, the existence of these pre-existing factors will favour a finding that s. 15(1) has been infringed.

(B)        The correspondence, or lack thereof, between the ground or grounds on which the claim is based and the actual need, capacity, or circumstances of the claimant or others. Although the mere fact that the impugned legislation takes into account the claimant's traits or circumstances will not necessarily be sufficient to defeat a s. 15(1) claim, it will generally be more difficult to establish discrimination to the extent that the law takes into account the claimant's actual situation in a manner that respects his or her value as a human being or member of Canadian society, and less difficult to do so where the law fails to take into account the claimant's actual situation.

(C)        The ameliorative purpose or effects of the impugned law upon a more disadvantaged person or group in society.    An ameliorative purpose or effect which accords with the purpose of s. 15(1) of the Charter will likely not violate the human dignity of more advantaged individuals where the exclusion of these more advantaged individuals largely corresponds to the greater need or the different circumstances experienced by the disadvantaged group being targeted by the legislation. This factor is more relevant where the s. 15(1) claim is brought by a more advantaged member of society.

and

(D)        The nature and scope of the interest affected by the impugned law.    The more severe and localized the consequences of the legislation for the affected group, the more likely that the differential treatment responsible for these consequences is discriminatory within the meaning of s. 15(1).

(10)       Although the s. 15(1) claimant bears the onus of establishing an infringement of his or her equality rights in a purposive sense through reference to one or more contextual factors, it is not necessarily the case that the claimant must adduce evidence in order to show a violation of human dignity or freedom. Frequently, where differential treatment is based on one or more enumerated or analogous grounds, this will be sufficient to found an infringement of s. 15(1) in the sense that it will be evident on the basis of judicial notice and logical reasoning that the distinction is discriminatory within the meaning of the provision.

[12]     When these guidelines are applied to the present case it becomes apparent that there are two main reasons the appeal cannot succeed.

[13]     The first is the supposition that Parliament was obliged to foresee that the WCB of BC, and by extension the analogous bodies in nine other provinces and three territories, must necessarily require such an extended period of time to make the first compensation payment to every claimant who suffers a permanent disability, or indeed to any such claimant. I am asked to take judicial notice of this on the basis of three decisions[7] in income tax appeals where such delays in payment are revealed, and the following extract from the website of the Board.

If there is evidence that a work-related injury or disease has permanently disabled you, you will be assessed for permanent disability benefits. The amount will likely be based on the loss of function of your body. If the Board determines that the combination of your occupation and disability is so exceptional that the functional award does not appropriately compensate you, then a loss of earnings award may be paid.

WCB Website, "Permanent Disability and Death Benefits", at

www.worksafebc.com/for_workers/receiving_benefits/permanent_disability/default.asp

[14]     This is not a fact that is either notorious and undisputed, or capable of immediate and accurate demonstration through sources whose accuracy is beyond question.[8] Indeed, as the proposition requires the Appellant to establish not only that years of delay in making the first payment to a disabled claimant is not just commonplace but inevitable, I conclude that it depends not simply on a fact that is not established on the record before me, but one that is incapable of proof. It takes little imagination to recognize that it would not be difficult for the authorities that govern and administer workplace injury compensation in the 13 jurisdictions to devise ways to put compensatory payments in the hands of those claimants whose injuries give rise to permanent disability in a much more timely way than is demonstrated by the facts of this case and a handful of others. I am not prepared to take the leap of judicial notice that would be required to underpin a finding of adverse effect discrimination in this case. I am not unsympathetic to the adverse effect that the very long delayed, and therefore comparatively large, compensation payment has had on the Appellant's right to receive and retain OAS benefits in 2003. This results, however, from delay by the Board in dealing with her claim. Whether there is discrimination contributing to that delay is, of course, a matter that could only be determined in the courts of British Columbia.

[15]     In Canadav. Lesiuk,[9] Létourneau J.A. said for a unanimous Court:

            Without adequate statistical data, it would be speculative to make the type of comparisons the Respondent is asking the Court to make, i.e., that the Respondent's group suffers a substantively differential treatment due to the qualifying hours requirement for employment insurance benefits as compared to the comparator group.[10]

The same may equally be said of this case.

[16]     The other fallacy in the Appellant's Charter argument is the supposition that to deprive her of OAS benefits in a year in which she has received somewhat more than $111,000 net income somehow tends to render her less worthy of recognition or value as a human being or as a member of Canadian society. I should have thought that, if anything, the opposite might be true, but certainly it does not demean the dignity of the Appellant to conclude that she was not in need of the financial assistance provided by this social benefit legislation because her other income in 2003 was more than $90,000, even though much of that income was referable to earlier years.

[17]     The Appellant's reliance on section 7 of the Charter is without merit. There is no suggestion in the present case that the Appellant's well-being was threatened by the tax treatment of her retroactive payment in any way other than financially. It is well-settled that section 7 of the Charter does not protect interests that are purely economic.[11] The argument based on the Bill of Rights is no less forlorn. Paragraph (a) protects

...the right of the individual to ... enjoyment of property and the right not to be deprived thereof except by due process of law ...

To the extent that the Appellant in this case is deprived of any property right it is most certainly by due process of law. Section 180.2 of the Act was enacted by Parliament; she was assessed by a Minister who exercised an authority to do so that was enacted by Parliament; she has exercised a statutory right of appeal to this Court, and further appellate rights are available to her.

[18]     The appeals for the years 1999 to 2002 are quashed. The appeal for the year 2003 is dismissed.

Signed at Ottawa, Canada, this 26th day of August , 2005.

"E.A. Bowie"

Bowie J.

CITATION:

2005TCC574

COURT FILE NOS.:

2004-4426(IT)I

STYLE OF CAUSE:

Gulshan A. Alibhai and Her Majesty the Queen

PLACE OF HEARING:

Vancouver, British Columbia

DATE OF HEARING:

May 3, 2005

REASONS FOR JUDGMENT BY:

The Honourable Justice E.A. Bowie

DATE OF JUDGMENT:

August 26, 2005

APPEARANCES:

Counsel for the Appellant:

Aiyaz Alibhai

Counsel for the Respondent:

Shawna Cruz

COUNSEL OF RECORD:

For the Appellant:

Name:

Aiyaz Alibhai

Firm:

Marusyk Miller & Swain

For the Respondent:

John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada

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