Minister of National Revenue (Appellant)
v.
Jay-Kay Publications Limited (Respondent)
Trial Division, Noël A.C.J.—Ottawa, June 26
and 27; August 31, 1972.
Income tax—Advertising in non-Canadian publication—
Whether expense deductible—Whether scholarship principal
function of publication distributed free—Income Tax Act,
section 19.
Respondent company, which was owned by two men with
long associations in the advertising business, published in
Canada under licence from an American publisher a Canadi-
an edition of an American publication "Medical Aspects of
Human Sexuality" which contained scholarly articles on
that subject. The licence agreement was conditional on the
generation of advertising revenue in the Canadian edition
rising from $56,000 in 1971 to $650,000 in 1975. Advertis
ing was the sole source of the publication's revenue in
Canada. The Canadian edition was distributed free to some
22,000 doctors.
Section 19 of the Income Tax Act provides:
"(1) In computing income, no deduction shall be made
in respect of an otherwise deductible outlay or expense of
a taxpayer for advertising space in an issue of a non-
Canadian newspaper or periodical dated after December
31, 1965 for an advertisement directed primarily to a
market in Canada.
(4) Subsection (1) does not apply with respect to an
advertisement in
(b) any publication the principal function of which is the
encouragement, promotion or development of the fine
arts, letters, scholarship or religion."
Held, having regard to the legislative purpose underlying
section 19, viz., to direct Canadian advertising revenues to
Canadian publications, the principal function of respond
ent's publication was not the encouragement, promotion or
development of scholarship but was, at least equally, the
provision of an advertising vehicle.
REFERENCE to Court of question of law
under section 173(1) of the Income Tax Act.
J. A. Scollin, Q.C. and M. J. Bonner for
appellant.
D. G. H. Bowman for respondent.
NOËL A.C.J.—This is a matter that comes for
decision pursuant to subsection (1) of section
173 of the Income Tax Act which now enables
a question of law, fact or mixed law and fact,
arising under the Act, to be determined by this
Court providing the taxpayer and the Minister
of National Revenue agree in writing.
The problem involved in these proceedings is
whether a certain periodical called "Medical
Aspects of Human Sexuality" is a publication,
the principal function of which is the encour
agement, promotion or development of scholar
ship within the meaning of section 19, subsec
tion (4), of the Income Tax Act reproduced
hereunder:
19. (1) In computing income, no deduction shall be made
in respect of an otherwise deductible outlay or expense of a
taxpayer for advertising space in an issue of a non-Canadian
newspaper or periodical dated after December 31, 1965 for
an advertisement directed primarily to a market in Canada.
(4) Subsection (1) does not apply with respect to an
advertisement in
(a) a catalogue, or
(b) any publication the principal function of which is the
encouragement, promotion or development of the fine
arts, letters, scholarship or religion.
The following agreement was reached
between the parties:
1. Jay-Kay Publications Limited is the publisher of the
Canadian edition of "Medical Aspects of Human
Sexuality".
2. Exhibits 1 to 9 are copies of the issues of the Canadian
edition of "Medical Aspects of Human Sexuality", known
as Volume 1 No. 1 to Volume 2 No. 5, published for the
months September 1971 to May 1972 inclusive.
3. The Minister of National Revenue and the party of the
second part are unable to agree whether a deduction in the
computation of income in respect of an outlay or expense
made or incurred by a taxpayer for advertising space in
"Medical Aspects of Human Sexuality" . is prohibited by
section 12A of the Income Tax Act for 1971 or section 19 of
the Income Tax Act as it applies to the 1972 taxation year.
4. By reason of the disagreement, Jay-Kay Publications
Limited is unable to advise advertisers whether they, in
computing their income, are entitled to deduct any outlays
or expenses made or incurred for advertising space in the
publication.
5. "Medical Aspects of Human Sexuality" is a periodical:
(a) the type of which, other than the type for advertise
ments, is set in Canada;
(b) that is printed in Canada;
(c) that is edited in Canada by individuals resident in
Canada;
(d) that is published in Canada; and
(e) that is produced or published under a licence granted
by Hospital Publications Inc., which is a person who
produces or publishes issues of a periodical that are
printed, edited and published outside Canada.
Now THEREFORE the parties hereto agree as follows:
1. The Federal Court of Canada shall determine pursuant
to the provisions of subsection (3) of section 17 of the
Federal Court Act, S.C. 1970, chapter 1 and subsection (1)
of section 173 of the Income Tax Act, the following
question:
Is the Canadian edition of "Medical Aspects of Human
Sexuality" a publication, the principal function of which
is the encouragement, promotion, or development of
scholarship within the meaning of subsection (4) of sec
tions 19 and 12A of the Income Tax Act?
2. The question shall be determined on the facts set forth
in the recitals to this agreement and upon such further
evidence not inconsistent therewith, including expert tes
timony, as the parties may adduce.
As the periodical involved herein is produced
or published under a licence granted by a
person who produces or publishes issues of a
periodical that are printed, edited or published
outside Canada, it falls under clause (E) of
subsection (5)(a)(ii) of section 19 of the Act'
and, therefore, is to be considered as not being
a Canadian issue. Not being a Canadian issue it,
therefore, comes under subsection (1) of sec
tion 19 which states that
In computing income, no deduction shall be made in
respect of an otherwise deductible outlay or expense of a
taxpayer for advertising space in an issue of a non-Canadian
newspaper or periodical dated after December 31, 1965 for
an advertisement directed primarily to a market in Canada.
unless such periodical is under subsection (4)(b)
of section 19 a "publication the principal func
tion of which is the encouragement, promotion
or development of the fine arts, letters, scholar
ship or religion".
The sole question to be determined, there
fore, really is whether "the principal function"
of the periodical "Medical Aspects of Human
Sexuality" is the encouragement, promotion or
development of ... scholarship.
Ten issues, from September 1971 to June
1972, were produced as Exhibit A-1. These
issues comprise a number of articles some of
which were reproduced from the American
counterpart of the periodical and a few by
Canadian authors.
A statement of purpose, published at page 3
in every issue is descriptive of the objective
sought in producing the periodical and will be
helpful in describing the usefulness of the peri
odical to the medical profession. I will refer to
this later. A number of doctors and physicians
testified as to the usefulness in Canada of the
articles published in the periodical for Canadian
doctors.
Dr. J. N. Rushforth, an Ottawa family doctor,
married with five children, testified by quoting
from Sampson Wright's textbook "Applied
Physiology" (9th edition): "The technique,
courtesies and aesthetics of sexual intercourse
are matters of outstanding importance, yet they
are never taught by the physiologist, and rarely
discussed adequately at any stage of the medi
cal curriculum." According to Dr. Rushforth,
the above quotation is in accordance with his
experience and with the experience of the col
leagues whom he has consulted. A doctor, he
said, is "just expected to know" answers to
problems on which he himself has received no
specific instructions.
He stated that the periodicals involved herein
contain articles in every issue which would con
tribute constructively to the ordinary practition
er's body of knowledge. He also stated that he
concurs with what Eric Bern said in his book
"Sex in Human Loving" when referring to the
American version of the Canadian periodical:
"In 1967 began the publication of the monthly
journal `Medical Aspects of Human Sexuality'
the most reasonable, reliable and respectable
periodical of its kind". He pointed out that
some of the medical discipline particularly relat
ed to human sexuality are psychiatry, obstetrics
and gynaecology and urology and that generally
the authorities in these fields are well represent
ed in the authorship of articles in this magazine.
Dr. Walter J. Hannah, a Toronto physician,
graduated in 1953 from Western University. He
is an associate professor of obstetrics and gyna-
ecology at the University of Toronto and a
Fellow of the Royal College of Surgeons
(Canada). Dr. Hannah stated that a certain body
of knowledge exists in any field and the degree
to which that body of knowledge is increased is
reflected in part by the research activity in that
field. New knowledge not only comes from
research and investigation but also may arise as
the result of the accumulation of wisdom that
normally results from years of clinical experi
ence. This, he says, is particularly true in the
case of medicine.
The very nature of the subject-matter,
namely human sexuality, does not lend itself to
a scientific investigation or the kind of carefully
controlled, rigidly matched experimentations
such as, for instance, would the effect of a new
drug on a specific disease process. There is, he
said, a vast literature on the abnormal aspects
of sexuality, including perversions, deviations,
etc., extending back many decades but that it is
only very recently that our fund of knowledge
on this fundamentally important area of our
lives has begun to expand. He pointed out that
the pioneer work of Masters and Johnson in
defining some of the basic physiological
phenomena associated with sexual response,
has led to a gradually more sophisticated
approach to the management of some of the
difficult but not uncommon problems physi
cians are called upon to face. And yet, he
added, much of the knowledge of doctors in this
field is empirical and will, he says, necessarily
remain so since human sexuality cannot, except
in rare circumstances, be studied under the
same carefully controlled conditions demanded
for other forms of scientific investigation. He
pointed out that our knowledge of this topic has
always been fragmentary and that our approach
to it has been distorted by our own prejudices,
the natural products of our own upbringing. He
stated that as we have come to realize how
important a role sexuality plays in human
affairs and how unsatisfactory our attempts
have been to deal with the problems it creates,
it has been recognized for some time that a
medium for the dissemination of knowledge in
this field has been badly needed. He is of the
view that on the basis of its performance to
date, the journal "Medical Aspects of Human
Sexuality" has helped to fill that need. The
material presented therein, he said, promotes
and enlarges the body of knowledge on this
very important topic and does so by publishing
articles on sexuality by recognized authorities
in the field by exchanging viewpoints based on
counselling experiences in various centres and
perhaps most important of all, he added, it has
compelled physicians to re-examine their own
views and values in an attempt to develop a
more precise objectivity in treating patients'
problems in this area. He finally concluded that
all of this gradually increases the fund of
knowledge available to the practising physician.
Dr. Charles A. Roberts graduated in medicine
in 1942 and is now psychiatrist in chief of the
Royal Ottawa Hospital. Concurrently, his aca
demic career has been developing from an ini
tial appointment as an assistant professor at
McGill University to the rank of associate
professor at the University of Toronto and to
professor and chairman of the Department of
Psychiatry, University of Ottawa. In the course
of his practice of psychiatry he has, he says,
become aware of the importance and signifi
cance of sexual behaviour in terms of the adap
tation of human beings to their environment and
to life. He also pointed out that until very
recently, very little information was available
with respect to human sexual behaviour except
perhaps for the theories developed by Sigmund
Freud and his co-workers. With, he said, the
opening up of studies in the United States,
much more information has become available
and more recently a number of people in
Canada have also devoted themselves to studies
in this field. As soon as studies begin, it
becomes necessary to provide media for the
publication and exchange of acquired knowl
edge and information and Dr. Roberts pointed
out that as far as he knew, the only current
publication available in Canada is "Medical
Aspects of Human Sexuality". This publication,
he says, has provided a channel for the publica
tion of information in this field and thereby has
stimulated and encouraged knowledge with
respect to human sexual behaviour. Once
knowledge has been developed, it becomes
necessary to disseminate it and make it avail
able for use by practitioners in further develop
ment of programs to meet the needs of sick
people whose sexual behaviour and adjustment
are of significance in their illness. He stated
that the nature of the articles contained in this
magazine are of use in the health care field.
Dr. R. W. Tooley, a medical doctor, obtained
his licence of medicine and surgery of the
Society of Apothecaries of London in 1952 and
practised medicine in England for a number of
years. He is at present at the Family Planning
Division of the Department of Health and Wel
fare of the Government of Canada. Dr. Tooley
stated that human sexuality, which includes not
only sexual anatomy and physiology and repro
duction, but also the psychology of sexual
behaviour, and the purposes, methods and
behavioural aspects of fertility regulation is
considered part of medical knowledge. He is of
the view that physicians can and should play an
important role in the management and resolu
tion of the clinical psychological and behaviour
al problems that occur in that area. He stated
also that human sexuality is not sufficiently
taught in medical schools to allow physicians to
function as effectively in this area as is desir
able and expressed the view that "Medical
Aspects of Human Sexuality" adds to physi
cians' knowledge of human sexuality and stimu
lates them to read further on the subject by
publishing authoritative articles by well quali
fied writers. He also pointed out that the editor
is advised by a medical advisory board, a
number of whose members hold senior academ
ic appointments.
Dr. Marion H. Powell, of Don Mills, Ontario,
is the medical editor of "Medical Aspects of
Human Sexuality". She is also ortho-professor
of population dynamics, Department of Health
Administration, School of Hygiene, University
of Toronto and associate professor, Department
of Preventive Medicine, Faculty of Medicine,
University of Toronto. She holds a diploma of
public health from the School of Hygiene, Uni
versity of Toronto and has been president of
Planned Parenthood, of Toronto, for two years.
As medical editor of the journal, Dr. Powell has
had occasion to review articles published in it
both before and after their publication. She
stated that the circulation of the journal is limit
ed to the members of the practising medical
profession. She pointed out that physicians who
otherwise have had an inadequate training in
the area of sexuality are being called upon with
greater frequency to deal with problems of their
patients in regard to sex. The community is, she
said, calling upon the medical profession as the
experts in this area to provide knowledge and
skill in this field, both in dealing with sexual
problems of patients and in training sex educa
tors. Sexuality, according to Dr. Powell, has
been a neglected area in medical education, yet
it is demanding more time and expertise on the
part of the physicians in practice, who see more
patients coming in with sexual problems arising
at least in part, from the freer sexual climate in
which we are living at the present time. Dr.
Powell is of the view that the journal has suc
cessfully integrated the sociological, physiologi
cal and psychological aspects of medicine in the
area of sexuality and has, she says, bridged the
gap that has developed between the practising
physician in the main stream of medicine and
the physician who has developed skills in deal
ing with, treating and counselling persons with
sexual problems either physiological or psycho
logical. The journal, she said, imparts knowl
edge in this field of medicine at a professional
level to the physician who is meeting sexual
problems on a day to day basis in his practice.
Dr. Powell stated that human sexuality is
becoming recognized as a specialized branch of
medicine. Physicians, she said, are the profes
sionals best able to work in this specialty
because of their background in physiology and
anatomy and their experience in dealing with
medical problems having their origin in psycho
logical disorders. One in five patients coming to
a gynaecologist's office comes, she said, with
complaints due to, or at least aggravated by
sexual problems. She is of the view that "Medi-
cal Aspects of Human Sexuality" is unique
among medical journals in Canada and that it
provides the practising physician with knowl
edge and understanding of sexual problems to
enable him to deal with patients' complaints
with greater insight and skill and also provokes
further investigation and reading in this area
and the exchange of views and experience with
other physicians. Because of the educational
aspect of this publication, many of those on the
advisory board are associated with universities
or have major academic appointments and
many of these men, she said, have written
editorials, original articles or responded to ques
tions submitted by readers. Dr. Powell said that
as medical officer of health for Scarborough,
she is very much aware of the impact of sexual
problems on the community. Venereal diseases
are encountered with increasing frequency and
the social problems resulting from other types
of sexual complaints are a constant source of
difficulty for physicians who are, by their back
ground and training, not adequately prepared to
deal with problems of this type. The journal, in
her opinion, meets a serious need in the medical
field adding that if she were not convinced of
this, she would not have agreed to go on the
editorial board. The journal, she said, makes
available and disseminates the knowledge and
experience of qualified experts in this branch of
medical science to other members of the profes
sion and it stimulates them to increase their
knowledge. Two medical doctors, husband and
wife, were finally heard. The husband, Dr. Avi-
noam B. Chernick, graduated in medicine from
the University of Western Ontario in 1962.
After a general internship, he pursued post
graduate studies in obstetrics and gynaecology
in London and Hamilton, Ontario, under Dr. R.
A. H. Kinch. He obtained his Fellowship in the
Royal College of Surgeons of Canada in 1968.
He then pursued further studies in Winston-
Salem, North Carolina, under Dr. Clark Vincent
followed by one year of training in marriage
counselling, family life education in the com
munity and teaching of human sexuality to
medical students at the Division of Family
Study of the Department of Psychiatry, Univer
sity of Pennsylvania School of Medicine, in
Philadelphia. Since 1969, he has been in the
private practice of obstetrics and gynaecology
in London, Ontario, and with his wife, Dr. Beryl
Chernick, forms part of a co-therapy team for
the counselling of sexual dysfunction.
He is of the view that the material found in
the journal is of practical value to many physi
cians and is such as to enhance the work of
doctors in that field. Sex and sexuality are now,
he says, recognized as an integral part of family
practice and obstetrics and gynaecology. He
pointed out that within the field of obstetrics
and gynaecology there are now many specialty
journals of which, he said, "Medical Aspects of
Human Sexuality" can be considered one.
His wife, Dr. Beryl A. Chernick, also graduat
ed from the University of Western Ontario, but
in 1963. She then pursued post-graduate studies
at the University of Western Ontario for four
years where she was a Medical Research Coun
cil of Canada Fellow under the supervision of
Drs. C. W. Gowdy, professor and chairman,
Department of Pharmacology, and Robert A. H.
Kinch, professor and chairman, Department of
Obstetrics and Gynaecology, which led to the
degree of Ph.D. in pharmacology in 1967. She
was then invited by the Department of Public
Health of the municipality to organize the city's
family planning clinic and to supervise and
instruct the public health nurses in appropriate
counselling of patients attending this clinic. Dr.
Chernick said that at no time in her undergradu
ate or post-graduate medical education and
training was she given information concerning
human sexual functioning, nor was she referred
to any books or other publications where she
could obtain useful information. With Dr.
Kinch's interest and encouragement, she, there
fore, sought further training in these areas in
the United States, that training being unavail
able in Canada at that point in time. She spent
six months as a post-doctoral Fellow in the
Behavioral Sciences Center of the Bowman
Gray School of Medicine of Wake Forest Uni-
versity in Winston-Salem, North Carolina,
under the tutelage of Dr. Clark Vincent, a
renowned sociologist who was pioneering the
introduction of the teaching of behavioural
science including pertinent aspects of human
sexuality to medical students. A further year of
clinical training in marriage counselling fol
lowed in the Division of Family Study of the
Department of Psychiatry of the University of
Pennsylvania School of Medicine, in Phila-
delphia, under Dr. Harold I. Lief. Since July
1969, she has been in private practice in
London, Ontario, with her practice limited to
marital and sexual counselling forming part in
this practice of a co-therapy team along with
Dr. Avinoam Chernick, her husband. She is an
honorary lecturer in the Division of Family
Medicine of the Department of Community
Medicine at the University of Western Ontario
and is also a member of the American Associa
tion of Marriage and Family Counsellors. In the
last three years, there has been, according to
Dr. Chernick, an overwhelming number of re
ferrals of patients with problems in interperson
al relationships including sexual function, from
physicians, both in London and the surrounding
area and from distant points in Canada. The
referrals are made, she said, because the physi
cians themselves lack the information and ex
pertise for helping their patients in this area. She
added that they have increasing numbers of
requests from physicians for sources of infor
mation and for training to enable them to be
more effective in their own medical practice.
Many of the patients referred to her, she said,
have presented anxieties which could have been
allayed in short order and relatively simply by
their own physicians had they but had the
necessary information to give the patients and
the comfort with which to convey it. She stated
that until recently, there have been few printed
sources of useful information regarding human
sexuality. She became well acquainted with one
monthly periodical called "Medical Aspects of
Human Sexuality" during her year of study at
the University of Pennsylvania which, she said,
was used as source material for reference and
as subject for discussions in seminar groups as
well as in the teaching of undergraduates at that
medical school. She found that this journal pro
vided clinical information on sexual function
and dysfunction as well as pertinent current
data from sociology, psychology and the other
behavioural sciences. It also included, she said,
an exposure to view-points of the most eminent
people in the research and treatment areas of
sexuality. She stated that it was with dismay
that she found this journal so inaccessible to
her when she returned to Canada. She missed
the availability of the current data presented in
the journal and the stimulation of her own study
of this area provided by its writings. She says
she greeted with pleasure the news a year ago
that Jay-Kay Publications were interested in
introducing Medical Aspects of Human Sexual
ity to Canada and willingly accepted the invita
tion of its publisher to participate as a national
consulting editor. She finally stated that the
writings in this journal have encouraged her
further study of this area and have affected her
own clinical practice. The reports of others'
works, she said, have provided comparison for
her own clinical observations and material from
this publication has been incorporated into her
teaching of physicians, an activity which, at
present, occupies an important proportion of
her professional energies.
The statement of purpose to be found at page
3 of the issues, does give a fair background of
the intent of the publishers and, in my view, is
supported by the evidence of the doctors as
well as by the content of the articles contained
in the ten issues published at the time of the
hearing. It therefore, in my view, should be
reproduced hereunder:
CANADIAN EDITION
A STATEMENT OF PURPOSE
Physicians are becoming increasingly aware of the need
for better ways of understanding and managing the sex-
related problems of their patients. As an editorial in JAMA
(Sex and Medicine, JAMA 197:146, July 18, 1966) put it:
To some, sex is the ultimate area of privacy, and hence
not appropriate for study and evaluation. No scientific
criteria can justify such a conclusion. It is no more
reasonable to teach students the anatomy of the repro
ductive organs and ignore the way these organs function
during their ordered activities than it would be to study
the anatomy of the stomach but disdain any knowledge of
motility, secretion, or disease under various kinds of
gastric activity ... Perhaps one reason many physicians
have abdicated their role in providing sexual advice is
recognition that their knowledge is deficient.
Another sign of this need is the almost unanimous reac
tion to a personal interview of one per cent of the physi
cians in Canada, before it was decided to publish a Canadi-
an Edition of MEDICAL ASPECTS OF HUMAN SEXUALITY. Of
the 31,000 physicians in Canada, 317 were interviewed, and
316 reacted favorably. Interviews scheduled for 10 minutes
lasted 50 minutes in 85% of those interviewed. The need,
interest and suggestions for additional information on
human sexuality in Canada were fully expressed. In the
United States no less than 98% of the respondents from
11,500 doctors surveyed expressed similar interest prior to
the first publication of MEDICAL ASPECTS OF HUMAN SEXUAL
ITY in 1967.
MEDICAL ASPECTS OF HUMAN SEXUALITY will provide
authoritative information on sexual problems that affect
many patients. This clinical information will enable the
physician to deal more effectively with a broad array of
such problems and it will be supplemented by pertinent
current data from sociology, psychology, and other behav
ioral sciences.
As a scientific journal, MEDICAL ASPECTS OF HUMAN SEXU
ALITY is not designed to promulgate any particular point of
view. Our distinguished Consulting Editors represent a wide
variety of opinions, but they do share one conviction: that
sex-related problems are the proper concern of every physi
cian, and that the importance of these problems deserves a
responsible and authoritative journal. This is what we
intend to provide.
We welcome your opinion, criticisms, and suggestions.
There is no question that this publication
serves as a means of placing before the medical
profession in Canada the results of research and
learning in the field of human sexuality and this
is new. The field of course is not brand new but
the attempt by doctors to treat it in a scientific
way for the medical profession is new. It has
not, to date, encouraged any considerable
amount of further studies in this field by medi
cal doctors and this is not too surprising having
been in publication for ten months only. As a
matter of fact, this is not the best time to judge
a publication such as the one involved herein.
The best time would be after a couple of years
of publication, at a time when the impact of the
articles produced therein on Canadian doctors
or scientists could be more fully appreciated. In
the meantime, however, the publisher would
have to take a chance and put it out without or
with little advertising and await a considerable
period of time before he could be sure that
advertisers would be able to deduct their adver
tising expenses. This is not something that one
can do unless he is prepared and able to spend a
considerable amount of capital in the meantime
nor could the present publisher do this here
because of the advertising revenue it had to
generate under the licence agreement with the
owner of the American periodical of which I
will say more later. It follows, that the financing
of the publication is a very important item
indeed in the publishing of the periodical. There
is, however, nothing sinister in a publisher seek
ing to make a profit and I do accept that the
scholarly nature of a magazine should not be
tainted by the commerciality of whatever opera
tions are necessary to create it or to keep it
going. As a matter of fact I, for one, would be
more impressed by the financial success of a
scholarly periodical than I would be if it did not
flourish. I do not think that it is sufficient here
to say that because a publisher happens to be a
successful businessman, the publication must
then fail to qualify as "encouraging scholar
ship" and if this were the only matter to consid
er in determining the question involved herein, I
would have little difficulty in deciding that the
publication "Medical Aspects of Human Sexu
ality" contains a number of serious articles
which, having regard to the meaning of "schol-
arship" I accept can be considered as falling
within that category. Scholarship, which in the
French version has been translated by les
sciences (and which, I believe, should have been
translated by le savoir) in my view refers in the
context of subsection (4) to a relatively high
level of learning. It is, I believe, knowledge
which goes somewhat beyond what someone
already trained in a special sphere of human
activity may learn. It is an increase of knowl
edge given to one who already has a back
ground of knowledge. Scholarship, according to
Webster's Dictionary is "the character, qualities
or attainments of a scholar, scholastic achieve
ment, the body of learning especially of
research available in a particular field" and I am
content to accept this as the meaning of schol
arship in the above section. There is no ques
tion that the publication is also a practical one
and this is not too surprising as medical scholar
ship must, by its very nature, have a practical
result in mind. It would be a great misfortune
indeed, if matters of a medical nature which
deal with human functions, resulted only in a
simple exercise in metaphysics or had purely
impractical or academic results. I, therefore,
accept that knowledge acquired by scholarship
should not be excluded merely because it hap
pens also to be practical. If, of course; the
periodical is merely an artificial attempt made
to create an advertising vehicle for drug compa
nies, that is one situation. I would think, how
ever, that if that is all the publisher is trying to
do, the magazine will not last very long because
the doctors will not read it and the advertisers
will realize that they are not reaching their
customers. The answer to the question whether
the principal function 2 of this magazine is the
encouragement, promotion .or development of
scholarship is not easy because it cannot be said
here that the publishers of this magazine have
not, in the ten issues published to date, included
articles of a scholarly nature, useful to doctors
in their every day practice, but also highly
informative from a scholarly point of view as
well and even helpful in instigating further
research and study on the subjects treated
therein. The evidence of the doctors on this
point, as well as the contents of the articles, all
of which I have read, are overwhelming and
uncontradicted. Indeed, if the calibre of the
people who have written these articles, as well
as most of the articles themselves, are consid
ered, this publication must be accepted as a
vehicle for the dissemination of scholarship in a
field which, until recently, was one that had
never been properly treated by doctors.
There is unfortunately, however, a further
matter to be considered and that is whether the
principal function of the magazine (not only its
contents) is the encouragement of scholarship
and here, of course, the whole background of
the publisher or publishers, the manner in which
the publication was initiated, must be consid
ered and although the question of whether a
publisher wants to make money with a publica
tion, should not normally be considered in order
to determine whether the contents of the publi
cation are scholarly, it may well have to be here
in order to answer the question whether "the
principal function" of this publication is the
encouragement of scholarship.
Counsel for the Minister said that the overall
picture here indicates that this publication was
more an advertising vehicle than a really sincere
attempt to disseminate and encourage scholar
ship and because of the manner in which the
publisher became licensed by the American
owner of the American publication and the
requirements of the licence, there may well be
some truth in the above assertions. The object
of the legislation involved herein, section 19,
was not, I am sure, to create a cultural wall or
to deprive Canadian doctors from access to the
best minds in the United States or the world or
to restrict the flow of scientific information of
the type contained in the issues of both the
American and Canadian editions, which, I am
prepared to hold as being valuable not only to
Canadian doctors but also to Canadians in gen
eral with problems of the type dealt with in the
articles. The restrictions contained, however, in
subsection (4) of section 19 may well result in
preventing such articles from reaching the
country if the method adopted is by means of a
Canadian (foreign deemed) publication such as
here.
The underlying policy of section 19 is to
provide to publishers of Canadian publications
the incentive of Canadian advertising and to
prevent the deduction by Canadian advertisers
of their costs of advertising if they choose to
take their advertising space in an issue of a
non-Canadian newspaper or periodical with the
major exception of Time magazine and Reader's
Digest, which are not covered by the qualifica
tion "of a newspaper or periodical dated after
December 31, 1965". If such is the case, we
must hold that the category of publications
comprised in the exception provided by subsec
tion (4) is one with not too strong a commercial
orientation, one which, because of the subjects
involved, art, scholarship, religion and letters,
should not take away much advertising from
Canadian publications. It is, as a matter of fact,
interesting to consider the language of subsec
tion (4) with regard to the prohibition of section
19 and if this is done, one must, I believe,
conclude that the exemption provided 'for must
be restricted to publications which are more
concerned with matters of art, science, letters
and religion where advertising is not a major
concern and where the use of such subjects is
not to attain a profitable market for those
manufacturing goods. If such is the rule in
section 19, whatever exception to it should, I
believe, be one which does not defeat its obvi
ous purpose which, as already mentioned, is to
retain Canadian advertisers for Canadian publi
cations or periodicals.
With this in mind, I will now consider Jay-
Kay Publications, the company that publishes
the journal or the periodical. It has strong
associations with advertising. Mr. Knox, the
principal shareholder, has a strong background
in marketing and selling. Mr. Becker, the
minority shareholder, is an advertising man
from New York and the licensing agreement
sets down the requirements Jay-Kay Publica
tions must meet in order to be able to use its
name and reproduce in the Canadian magazine
the articles published in the American one. Jay-
Kay has indeed to meet performance standards
which bear no relationship to scholarship but
are restricted to generating a progressive sale of
advertising revenue. Starting in 1971 with
$56,000 of advertising revenue, Jay-Kay Publi
cations must, in order to keep the name and
continue this publication, generate advertising
revenue of $250,000 in 1972, $375,000 in 1973,
$510,000 in 1974 and $650,000 in 1975 and
thereafter.
Mr. Knox agreed that the advertising is the
entire source of the company's operations and
the publications cannot exist without it. It
would seem that, to date, 53 people in Canada
out of 22,000 doctors paid $20 for the issues of
this magazine, the balance apparently have
received the issues free of charge. On the basis
of what we may call the business aspects of this
publication, there can be no doubt that at least
one of the objects of the publication is to pro
vide a vehicle to advertisers.
I must, therefore, consider not only the con
tent of the publication which I have already
done, but also the material or business set up of
the publishers, their commitments to the Ameri-
can publishing company and the requirements
of the licence agreement and weigh, if possible,
one against the other. I must, indeed, decide
whether the principal function l'objet principal
of the publication, not only of its contents, is
scholarship although I must also accept that the
publication does comprise its contents. I cannot
say that the unusual amount of advertising con
tent necessary to ensure the life of the publica
tion overrides the article content even if the
latter must be considered of a high scholarly
nature nor that the article content overrides the
former. As a matter of fact, considering that the
magazine has so far a high scholarly content, I
would still, putting it at its highest, have to hold
that it has no more than a co-equal function or
object with providing an advertising vehicle and
this, of course, would not be sufficient to satis
fy the subsection which, as already mentioned,
requires that the principal function must be the
encouragement, development and promotion of
scholarship.
I must, therefore, conclude that a major
object of this publication is to provide an adver
tising vehicle and by distributing it to doctors
across the country, it assures the advertisers of
a good reach among doctors who are going to
read it. This, of course, is a good thing and
would be useful to doctors and their patients
but it does not, unfortunately, allow the princi
pal function of the publication to be a dissemi
nation of scholarship.
The question to be solved here is one mainly
of fact and although the quality of the articles
published in the periodical, as well as the
calibre of the doctors on the editorial board,
must be considered, the financial activities of
the proprietors of the publication and the adver
tising revenue they must reach in order to main
tain their licence with the American company
cannot be ignored and constitutes an important
factor in reaching a decision particularly in the
light of the object of section 19 which, as
already mentioned, is to allow the deduction of
Canadian advertising in foreign periodicals in
exceptional cases only.
Here a most important object of the publica
tion is to serve as an advertising vehicle and the
answer to the questions posed must regrettably
be that the principal object of this publication is
not for the advancement or promotion of
scholarship.
I should not part with this case without
saying that the evidence discloses that the
Canadian publication has been mainly a repeat
in a proportion of sixty per cent of the material
published in the American publication and for
this reason alone, it would not qualify under
clause (F) of section 19(5)(a)(ii) which says that
a Canadian issue does not include an issue of a
periodical
(F) the contents of which, excluding advertisements, are
substantially the same as the contents of an issue of a
periodical, or the contents of one or more issues, of one
or more periodicals that was or were printed, edited or
published outside Canada.
The appeal is, therefore, dismissed with
costs.
I Under section (5)(a) a "Canadian issue" does not
include an issue of a periodical .. .
(E) that is produced or published under a licence granted
by a person who produces or publishes issues of a peri
odical that are printed, edited or published outside
Canada, or .. .
2 The final text in subsection (4) of section 19 of the
French version was changed from fonction principale in the
old Act (section 13) to objet principal in the new Act. I do
not believe that this change makes any difference in the
meaning of this subsection. I believe that the new French
text is merely a better translation of the words "principal
function" in the English version.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.