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Docket: 2003-1208(IT)I |
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BETWEEN: |
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JAMES W. CHAMBERS, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
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Appeal heard on July 24, 2003 at Nanaimo, British Columbia
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Before: The Honourable D.W. Rowe, Deputy Judge |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Selena Sit |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2001 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 5th day of February 2004.
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"D.W. Rowe" |
Rowe, D.J.
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Citation: 2004TCC115 |
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Date: 20040205 |
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Docket: 2003-1208(IT)I |
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BETWEEN: |
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JAMES W. CHAMBERS, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Rowe, D.J.
[1] The appellant appeals from an assessment of income tax with respect to the 2001 taxation year. Although allowing some medical expenses, the Minister of National Revenue (the "Minister") disallowed expenses in the sum of $6,662 representing the purchase of herbs, vitamins, preparations and substances from a clinic operated by Dr. Chan - a naturopath - and for other natural substances purchased from an acupuncture and natural health clinic operated by Dr. Elke.
[2] The appellant testified he is retired and resides in Nanaimo, British Columbia. He advised the Court that the sum of $1,142 paid to an acupuncturist was no longer an issue in the within appeal. In 1989, the appellant was suffering angina and was informed by his doctor that he could anticipate undergoing angioplasty and bypass surgery. Instead, the appellant opted for a course of chelation therapy as an integral part of a treatment plan which included adherence to a regimen of vitamins and diet supplements. Later, following the diagnosis of cancer, the appellant was prescribed additional vitamins while undergoing radiation therapy at a cancer clinic. The appellant was obtaining treatment from Dr. Chan, a naturopath practising in Vancouver. The vitamins and supplements prescribed and supplied by Dr. Chan were not otherwise available and - later - were ordered each month - by telephone - from Dr. Chan's office. The appellant stated the Minister allowed - as a medical expense - the sum of $172.53 which represented the fee portion of the treatment session but disallowed the entire cost of the prescribed herbs. The appellant stated he had heard about chelation therapy while holidaying in Arizona and then discovered a clinic in Nanaimo - operated by Dr. Cline - which offered that particular treatment. In 2000, the Minister allowed the cost of 10 chelation treatments but had disallowed the cost of vitamins consumed by the appellant during the course of that therapy. The appellant stated he took the prescription to a dispensary in the same clinic and obtained a receipt for each product purchased. At that time, the products did not have an identification number assigned to them. The appellant filed a letter - Exhibit A-1 - from Greg Candy, a licensed pharmacist who operates a business known as Clinical Nutrition. The appellant photocopied all receipts and forwarded them to Canada Customs and Revenue Agency (CCRA) together with a letter from Dr. Cline and the letter from Greg Candy. The appellant filed - as Exhibit A-2 - a bundle of receipts - signed (mainly) by Ms. Moss - and another person employed at Clinical Nutrition - acknowledging payment for the pre-packaged vitamins that the appellant would purchase on a regular basis. The pharmacist - Greg Candy - was never present in the clinic during these transactions.
[3] In cross-examination, the appellant stated that Dr. Chan had dispensed the herbs directly, some of which were consumed at his Vancouver office. The appellant had been diagnosed with prostate and bladder cancer which were being treated with radiation therapy and by certain herbs, a small portion of which was ingested at Dr. Chan's clinic but the rest were consumed at the appellant's home in Nanaimo.
[4] Gregory Candy testified he resides in Duncan and, as a licensed pharmacist in the province of British Columbia, is employed full time by Shoppers Drug Mart. Through a numbered corporation, he and his wife are the owners of Clinical Nutrition, a business which provides health and mineral supplements, primarily to patients of Dr. Cline. Since that business is not a pharmacy, Candy stated he does not work there although he does attend from time to time. During these visits, he does not hold himself out to be a pharmacist. Candy stated that - in 1997 - Dr. Cline had established a chelation therapy clinic but due to certain regulations was prevented from selling vitamins and supplements directly to his patients. As a result, Candy started a business to dispense the vitamins and supplements prescribed by Dr. Cline. Prior to embarking on the business - Clinical Nutrition - Candy obtained confirmation from the College of Pharmacists of British Columbia (College) that he could instruct an employee to sign the receipts for the products sold within that business. In 2001, Candy stated his signature did not appear on any receipts issued to customers of Clinical Nutrition and the business was operated by May Ross, an individual extremely knowledgeable in that field. Even in Shoppers Drug Mart, Candy stated - by way of example - that if a physician were to prescribe a particular brand of sun screen, the holder of the prescription would usually proceed to the shelf where the product was located, then take it - and the prescription - to a checkout station, pay for it - either as a single product or among several items - and obtain a receipt from the cashier. In 2001, Candy stated Clinical Nutrition maintained a separate file for each client receiving product from that store even though the use of a product identification number was not included on the receipts issued to the purchaser. Today, a receipt issued to a customer will include Candy's name, signature, and the number of his license issued by the College.
[5] At the conclusion of the evidence, I informed the appellant that the Federal Court of Appeal - in the case of Dunn v. The Queen, [2002] F.C.J. No. 1816 (QL) - had decided that a physician was not a pharmacist for purposes of the Income Tax Act (the "Act") and as a consequence, those herbs and other items purchased directly from Dr. Chan could not be considered an allowable medical expense. In addition, there was no evidence which would permit me to affix a value to that portion of the herbs actually consumed in Dr. Chan's office. The appellant advised the Court that this amount was negligible in relation to the overall cost of approximately $3,800 pertaining to the purchase of herbs and other special supplements. I also advised the appellant that the claim for the cost of the eyeglasses could not be allowed because the expenditure was in the wrong year. I informed the appellant that a relevant case of similar nature - Ray. v. Canada, [2002] T.C.J. No. 500 (QL) - was in the course of being appealed to the Federal Court of Appeal and suggested the reasons for judgment issued in that case would provide the answer to the remaining issue in the within appeal, i.e. whether the vitamins and other supplements purchased from Clinical Nutrition could be considered eligible for the medical expense tax credit. The appellant agreed to await the decision of the Federal Court of Appeal.
[6] Counsel for the respondent concurred in that approach.
[7] On January 5, 2004, the Federal Court of Appeal released reasons for judgment in Ray v. Canada, [2004] F.C.J. No. 1, Justice Sharlow, speaking for the Court - at paragraph 2 - and following - of her judgment stated:
[2] Ms. Ray's claim for the medical expense tax credit is based on paragraph 118.2(2)(n) of the Income Tax Act, R.S.C. 1985, c. 1 (5th supp), which reads as follows:
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(2) For the purposes of subsection 118.2(1), a medical expense of an individual is an amount paid |
(2) Pour l'application du paragraphe (1), les frais médicaux d'un particulier sont les frais payés : |
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(n) for drugs, medicaments or other preparations or substances (other than those described in paragraph 118.2(2)(k)) manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder, abnormal physical state, or the symptoms thereof or in restoring, correcting or modifying an organic function, purchased for use by the patient as prescribed by a medical practitioner or dentist and as recorded by a pharmacist ... |
n) pour les médicaments, les produits pharmaceutiques et les autres préparations ou substances -- sauf s'ils sont déjà visés à l'alinéa k) -- qui sont, d'une part, fabriqués, vendus ou offerts pour servir au diagnostic, au traitement ou à la prévention d'une maladie, d'une affection, d'un état physique anormal ou de leurs symptômes ou en vue de rétablir, de corriger ou de modifier une fonction organique et, d'autre part, achetés afin d'être utilisés par le particulier, par son époux ou conjoint de fait ou par une personne à charge visée à l'alinéa a), sur ordonnance d'un médecin ou d'un dentiste, et enregistrés par un pharmacien ... |
[3] The heart of the decision of the Tax Court Judge is found at paragraphs 16, 17, 18 and 22 of his reasons:
[16] In the case at hand, the facts and evidence sufficiently establish that the items in issue, organic foods and bottled water, are "medications" falling under 118.2(2) because without them, the Appellant would be robbed of being a functioning and productive member of society. To quote Judge Teskey [in Frank v. Canada, [2001] T.C.J. No. 416 (QL)], the items are "required to sustain the life of the Appellant".
[17] In any event, the medications in the case at hand, prescribed by a doctor and purchased outside of a pharmacy, cannot possibly be recorded by a pharmacist. This impossibility leads me to conclude that requirement is not necessary for items that have been prescribed by doctors and which truly cure the patient and render him or her capable of living a normal life again.
[18] Going back to Judge Teskey's question in Frank, "Can I ignore 'as recorded by a pharmacist'", I would answer that question with a "yes". I qualify that "yes" with that this can only occur in very special circumstances. ...
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[22] My answer to the question, "Can I ignore 'recorded by a pharmacist'" was "yes" but I qualified that "yes". Specifically, my qualification mirrors that of Judge Miller in [Pagnotta v. Canada, [2001] T.C.J. No. 582 (QL)] at paragraph 30:
I wish to be clear that this is not intended to be an open invitation to taxpayers whose lifestyle includes a regimen of vitamins to rely on paragraph 118.2(2)(n) for obtaining a credit on the basis that such costs constitute medical expenses. This is limited to the rare situation of a taxpayer suffering severe medical problems, attempting to relieve those problems through a variety of treatments recommended by a number of medical practitioners.
[4] The basis of the Crown's application for judicial review is that the Tax Court Judge erred in his interpretation of the phrase "as recorded by a pharmacist" in paragraph 118.2(2)(n). The Crown argues that those words limit the scope of paragraph 118.2(2)(n) to substances dispensed by a pharmacist under the legally mandated procedure for prescription drugs, which requires the keeping of certain records. If the Crown is correct, Ms. Ray is not entitled to the tax relief claimed, because all of the substances in issue were purchased off the shelf.
[8] Justice Sharlow - at paragraph 5 - noted the legal issue had been considered many times by the Tax Court and that in all of the cases except the Ray case, the phrase, "as recorded by a pharmacist" was considered to be an essential part of paragraph 118.2(2)(n) of the Act. At paragraph 6, Justice Sharlow continued as follows:
[6] To similar effect is the following obiter dictum in the decision of Justice Rothstein, speaking for the Court in Dunn v. Canada, [2002] F.C.J. No. 1816 (QL), at paragraph 6:
[6] Although we do not need to decide the point, it would appear that the requirement that medications be recorded by a pharmacist may be to limit the entitlement to payments for medications that are only available upon prescription as opposed to over the counter or other medications. In this case the Tax Court Judge found that the medications provided were not available through regular pharmacies or other medical supply sources and upon our review of the record, it is certainly not obvious that the medications prescribed were prescription drugs.
[9] With respect to the meaning of the words, "recorded by a pharmacist", Justice Sharlow undertook the following analysis at paragraphs 11-16, inclusive of her reasons:
Meaning of the words "recorded by a pharmacist"
[11] In my view, the Tax Court Judge erred in law when he concluded that the words "as recorded by a pharmacist" in paragraph 118.2(2)(n) could be ignored. I understand why he felt that whose words represented an unjustifiable impediment to tax relief for Ms. Ray. Like the Tax Court Judge, I sympathize with Ms. Ray. However, it is not open to this Court, or the Tax Court, to disregard statutory requirements imposed by Parliament, even if they are difficult to rationalize on policy grounds. It is for Parliament alone to determine whether the words "as recorded by a pharmacist" should be removed from paragraph 118.2(2)(n).
[12] In my view, it is reasonable to infer that the recording requirement in paragraph 118.2(2)(n) is intended to ensure that tax relief is not available for the cost of medications purchased off the shelf. There are laws throughout Canada that govern the practice of pharmacy. Although the laws are not identical for each province and territory, they have common features. Generally, they prohibit a pharmacist from dispensing certain medications without a medical prescription, and they describe the records that a pharmacist is required to keep for medications dispensed by prescription, including information that identifies the prescribing person and the patient. There is no evidence that pharmacists anywhere in Canada are required to keep such records for the substances in issue in this case.
[13] I cannot accept the suggestion that, in the case of a medication that is prescribed by a physician but is purchased at a pharmacy off the shelf, a sales slip or invoice from the pharmacist would be a sufficient "recording" to meet the statutory requirement. A record in that form cannot meet the apparent function of the recording requirement. There must be a record kept by the pharmacist in his or her capacity as pharmacist. That necessarily excludes substances, however useful or beneficial, that are purchased off the shelf.
[14] Nor do I think it relevant to the interpretation of paragraph 118.2(2)(n) that a physician may dispense prescription medicines, and even sell them, without breaching any legislation applicable to pharmacists. It appears that a patient who purchases prescription medications from a physician may not be entitled to a medical expense tax credit because there would be no recording by a pharmacist: see Dunn (cited above). Some may consider that to be an unfair or inappropriate result. Perhaps it is, but that cannot justify an interpretation of paragraph 118.2(2)(n) that ignores the words "as recorded by a pharmacist".
[15] Counsel for Ms. Ray has cited Gibson v. Canada, [2001] F.C.J. No. 1758 (QL) (F.C.A.) and Hamilton v. Canada, [2002] F.C.J. No. 422 (QL) (F.C.A.), two decisions of this Court that adopted the "compassionate construction" of the medical expense and disability tax credit provisions of the Income Tax Act. Both of those cases involved statutory provisions that expressly or by necessary implication required a factual determination of the degree to which a person was affected by a particular illness or physical disability. The Tax Court Judge in this case has interpreted paragraph 118.2(2)(n) as though the application of its closing words, "as recorded by a pharmacist", may vary depending on the severity of the patient's condition, so that if the condition is sufficiently severe, the words may disappear altogether. He has, in effect, added an extra-statutory condition to paragraph 118.2(2)(n). Neither Gibson nor Hamilton mandates such an approach.
Conclusion
[16] I conclude that Ms. Ray is not entitled to a tax credit for the $6,555 she paid in 1999 for vitamins, herbs, organic and natural foods, and bottled water. The Crown's application for judicial review should be allowed, the judgment of the Tax Court should be set aside, and this matter should be remitted to the Tax Court for judgment in accordance with these reasons. Despite the success of the Crown's application, Ms. Ray is entitled to her reasonable and proper costs of this application pursuant to section 18.25 of the Tax Court of Canada Act.
[10] Considering the facts in the within appeal, it is apparent none of the products purchased from Clinical Nutrition had involved the intervention of Gregory Candy, acting in his professional capacity as pharmacist. Candy stated clearly in his testimony that, when he did visit the clinic, he did not hold himself out to be a pharmacist. The products which had been prescribed by Dr. Cline, operator of the chelation therapy clinic, were obtained by patients off the shelf in the store - perhaps with the assistance of the clerk - and she signed the receipts for the products sold. Gregory Candy did not sign any of the receipts issued by his employee.
[11] Prior to hearing the within appeal, I had reserved my decision in another appeal - David Selent v. Her Majesty the Queen - (Docket 2002-857(IT)I) pending the issuance of the decision of the Federal Court of Appeal in Ray, supra. I wrote my reasons for judgment in Selent immediately prior to the within reasons and at paragraph 13 and following stated:
From reading the reasons of Justice Sharlow, I conclude it was the intention of the Court to exclude from eligibility - as a medical expense under the specific provision of the Act under consideration - any substance that may be purchased off the shelf and that any record must be kept by the pharmacist "in his or her capacity as a pharmacist" in accordance with the applicable laws governing that profession.
Returning to the within appeal, it is clear the pharmacist - Ms. Gregory - had not dispensed the substances in the course of carrying out her duties as a dispensing pharmacist. Further, none of the items was supplied from a licensed pharmacy but had been obtained from Dr. Pincott's clinic, as revealed by the invoices contained in Exhibits A-4 and A-5. There is nothing in the evidence to suggest the purchase of any of the substances prescribed by Dr. Pincott required the intervention of a pharmacist acting in his or her professional capacity in accordance with British Columbia legislation and/or adherence to a professional code of conduct required by the College of Pharmacists of British Columbia, the governing body of the pharmacy profession.
It is apparent the within appeal cannot succeed as the decision of the Federal Court of Appeal makes it certain the relevant provision of the Act contemplates the dispensing of prescription drugs and medications by a pharmacist within the defined and regulated role as a pharmacist.
Overall, there may be some room for qualification under this paragraph of the Act in the circumstance where a medical practitioner prescribes a drug, medicament, preparation or substance that is otherwise available without a prescription but still requires the intervention of a pharmacist or other qualified person - such as a pharmacy technician, employed under the general supervision of a pharmacist to perform procedures of a technical nature involved with dispensing medicines - because the item is kept in the pharmacist's working area - behind the counter - not accessible to the public. In this instance, the product remains subject to control by a pharmacist who may be required - in accordance with professional ethics - to inquire about the intended use of the product and - in some cases - issue warnings and/or provide specific instructions regarding the manner of use and/or precautions to be taken. Products within this category would include painkillers with codeine, various types of inhalers such as those used to control symptoms caused by asthma, cough syrups with codeine, and similar substances that are not available to the customer directly "off the shelf" in the sense that phrase is commonly understood by anyone who has ever been inside a drug store. However, where a medical practitioner prescribes one of these quasi-restricted products to a patient, the dispensing of that prescribed substance will require the intervention of a pharmacist - acting in that professional capacity - including the creation of the usual record to indicate the prescription had been filled. Under these circumstances, it seems reasonable to expect this type of purchase would be eligible for inclusion as a medical expense for the purpose of calculating the tax credit, provided the pharmacist had issued the usual prescription dispensing label for that item, as though it had been a drug or substance available only upon prescription. In some provinces or territories, there may be certain substances - such as quinine - that can be dispensed only upon prescription while in other jurisdictions this product may be available directly to the consumer subject only to the restriction that it be kept behind the counter and delivered to the purchaser in accordance with the rules in effect in that jurisdiction.
In accordance with the foregoing reasons, the within appeal is hereby dismissed.
[12] Returning to the within appeal, it is apparent it cannot succeed for the reasons stated herein - and in Selent - which I adopt for the purposes of this appeal.
[13] The appeal is hereby dismissed.
Signed at Sidney, British Columbia, this 5th day of February 2004.
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"D.W. Rowe" |
Rowe, D.J.
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CITATION: |
2004TCC115 |
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COURT FILE NO.: |
2003-1208(IT)I |
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STYLE OF CAUSE: |
James W. Chambers and H.M.Q. |
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PLACE OF HEARING: |
Nanaimo, British Columbia |
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DATE OF HEARING: |
July 24, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable D.W. Rowe, Deputy Judge |
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DATE OF JUDGMENT: |
February 5, 2004 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Selena Sit |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |