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Docket: 2002-857(IT)I |
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BETWEEN: |
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DAVID H. SELENT, |
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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 January 6, 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: |
Raj Grewal |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2000 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: 2004TCC113 |
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Date: 20040205 |
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Docket: 2002-857(IT)I |
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BETWEEN: |
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DAVID H. SELENT, |
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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 for the 2000 taxation year. The Minister of National Revenue (the "Minister") disallowed expenditures in the sum of $5,135 incurred in respect of certain vitamins, herbs and supplements which had been prescribed to the appellant by a naturopathic physician. The Minister decided those expenditures had not been recorded by a pharmacist licensed by the Province of British Columbia and - therefore - could not be claimed as medical expenses for the purpose of computing the appellant's non-refundable tax credits for the 2000 year pursuant to subsection 118.2(1) and paragraph 118.2(2)(n) of the Income Tax Act (the "Act") and Regulation 5700 thereunder.
[2] The appellant testified he sought treatment from Dr. Ingrid Pincott, a licensed naturopathic physician practising in Campbell River, British Columbia, in respect of a liver condition. He produced a letter - Exhibit A-1 - dated December 6, 2002 - written by Dr. Pincott which provided details of the ailment, the course of treatment and the nutrients and remedies prescribed. Dr. Pincott wrote a letter - dated June 18, 2002 - Exhibit A-2 - to Barry Fong, an official at Canada Customs and Revenue Agency (CCRA) in which she included a table of medical expenditures incurred by the appellant as well as a list of the medicines she had prescribed. The appellant produced a letter - Exhibit A-3 - dated November 29, 2002 - written by Erika Gregory, a duly qualified pharmacist in British Columbia. In said letter addressed - To whom it may concern - Ms. Gregory listed the items David Selent had purchased from Dr. Pincott's N.D. clinic and prepared a table setting forth the date, description, amount and corresponding invoice number issued by Dr. Pincott. In said letter, Ms. Gregory concluded with a disclaimer, the relevant portion of which reads:
I did not prepare, dispense or supply any of the items listed above. None of these items was supplied from a licensed pharmacy. I was not involved at all in the treatment of this individual.
[3] The appellant stated he purchased all of the items from Dr. Pincott's clinic and - subsequently - had attended upon Ms. Gregory and provided her with copies of all the receipts for the products purchased from that clinic. He also showed Ms. Gregory the letter - Exhibit A-2 - written by Dr. Pincott in order to further substantiate his purchase of the listed items as evidenced by the receipts. The appellant filed - as Exhibit A-4 - the documents he had shown to Ms. Gregory. The appellant referred to a compilation of his 2000 medical expenses - filed as Exhibit A-5 - and a sheet - Exhibit A-6 - entitled: Claiming Medical Expenses that he had obtained from CCRA. The appellant stated his medical condition improved as a consequence of having consumed the vitamins and other substances, as prescribed by Dr. Pincott.
[4] In cross-examination by counsel for the respondent, the appellant agreed the bulk of the disallowed medical expenses were in respect of those items prescribed by Dr. Pincott and purchased at her clinic.
[5] The appellant submitted that the items purchased from Dr. Pincott had been prescribed by a licensed physician and were "drugs, medications, preparations or substances" that had been used in the "diagnosis, treatment or prevention of a disease, disorder, abnormal physical state" as required by the specific provision of the Act and that the purchased items had been duly "recorded by a pharmacist" In so submitting, the appellant referred to a portion of reasons for judgment - dated January 18, 2002 - I had written in the case of Dunn v. Canada, [2002] T.C.J. No. 23. The Dunn decision was concerned with whether that appellant's physician could be considered to have fulfilled the role of a pharmacist - as required by the Act - since the legislation governing pharmacists in British Columbia did not prohibit any qualified medical practitioner from dispensing a drug directly to his or her patient. In deciding the case, at paragraph 13, I commented:
As for the requirements of a licensed pharmacist in the Province of British Columbia, sections 14 and 15 of the Pharmacists Act set forth the necessary qualifications and conditions that must be possessed and satisfied prior to an individual becoming registered as a pharmacist and thereafter entitled to use certain designations. The legislation is extensive and provides for the establishment of a College of Pharmacists, registration procedures, the licensing of pharmacy operations, and provisions concerning the conduct of its members, including the right to administer discipline in accordance with procedures established in the legislation. The fact that - pursuant to section 75 of the Pharmacists Act - nothing in the remainder of that legislation is to be construed as preventing a practitioner (as defined) from directly dispensing a drug to the practitioner's patient does not mean the practitioner will - without more - be entitled to attend the annual Pharmacists Ball or to carry out a wider range of professional services within that particular discipline. The relevant provision - paragraph 118.2(2)(n) of the Act - is not concerned with any exemption granted by the Pharmacists Act in relation to the act of directly dispensing a drug to a specific patient by a medical practitioner. However, it does require that substances prescribed by a medical practitioner - defined by the Act - be recorded by a pharmacist. In my opinion, the medical practitioners attending to the care of the appellant in the within appeal were not pharmacists within the ordinary meaning of the word nor as that term was intended to be used in the context of the provision in question. It is not unreasonable for Parliament to have desired to control the extent of allowable medical expenses by requiring that any purchase of qualifying substances be recorded by a pharmacist...
[6] This decision was upheld by the Federal Court of Appeal (Dunn v. Canada, [2002] F.C.J. No. 1816 (QL)) on the basis that none of the taxpayer's medical practitioners was authorized by law to practise as a pharmacist.
[7] Following is obiter dictum - near the middle of paragraph 13 - from my reasons in Dunn:
It will probably be an issue in another appeal but I tend to agree with the approach taken by Judge Teskey in Frank v. Canada, [2001] T.C.J. No. 416 (QL), in that a record made by a licensed pharmacist of medications prescribed to the patient by a medical practitioner - even though not prepared, dispensed or supplied within that licensed pharmacy - would seem to satisfy the requirements of the provision which - in my view - cannot be read disjunctively. The alternative is to recognize - as a medical expense - every drug, medicament, preparation or other qualifying substance prescribed by a medical practitioner to a patient - home-made red wine, perhaps - notwithstanding that its issuance and delivery bypasses the mechanism insisted upon by Parliament, simply that the drugs, medicaments, etc., as prescribed, be recorded by a pharmacist.
[8] The appellant in the within appeal had obviously been encouraged by my comments in Dunn and had produced - in the form of a letter - a record made by a pharmacist of the qualifying substances prescribed by Dr. Pincott and also purchased at her clinic. In the appellant's view, it is reasonable to accept that the prescribed medicaments and substances had been recorded by a pharmacist, particularly since there was no definition of "recorded" within the relevant provision of the Act and a previous decision in Frank, supra, had recognized that "recorded" could consist of the pharmacist's purchase or sales slips. I informed the appellant that the Crown had applied for judicial review - by the Federal Court of Appeal - in respect of a decision by the Tax Court of Canada in the case of Ray v. Canada, [2002] T.C.J. No. 500 (QL), and that I anticipated those reasons for judgment would clarify the point in question in the within appeal because this issue had been the subject of other appeals previously decided by judges of the Tax Court of Canada. In those cases, somewhat different approaches had been taken in order to interpret the intent of the legislation as it specifically related to the prerequisite that the prescribed purchases be "recorded" by a pharmacist, and to reflect upon what action or event could be considered sufficient to satisfy that requirement. In the Ray decision, the Tax Court judge held he could ignore the "recorded by a pharmacist" requirement under the special circumstances of the case before him because it involved a rare situation of a person suffering severe medical problems who had - quite reasonably - attempted to alleviate his condition through a variety of treatments that had been recommended by various medical practitioners.
[9] The appellant and counsel for the respondent agreed I should take the within matter in reserve in order to await the outcome of Ray and counsel acknowledged the sole issue in the within appeal was in respect of whether the vitamins, herbs and supplements obtained by the appellant at Dr. Pincott's clinic had been recorded by a licensed pharmacist registered in British Columbia.
[10] 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.
[11] 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.
[12] 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.
[13] 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.
[14] 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.
[15] 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.
[16] 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.
[17] In accordance with the foregoing reasons, the within 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: |
2004TCC113 |
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COURT FILE NO.: |
2002-857(IT)I |
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STYLE OF CAUSE: |
David H. Selent and H. M.Q. |
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PLACE OF HEARING: |
Nanaimo, British Columbia |
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DATE OF HEARING: |
January 6, 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: |
Raj Grewal |
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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 |