T-3037-72
The Queen (Plaintiff)
v.
John Zandstra (Defendant)
Trial Division, Heald J.—Toronto, June 19-21;
Ottawa, July 4, 1974.
Income Tax—Contribution to denominational school in
excess of tuition cost—Not a gift deductible under Income
Tax Act, s. 27.
The defendant and the defendants in eight similar cases,
heard at the same time, were taxpayers seeking deductions
in respect of annual contributions to the Canadian Christian
School at Jarvis, Ontario, established for the education of
their children in accordance with religious principles to
which the taxpayers subscribed. The school was registered
as a charitable organization under the Income Tax Act. The
sum of $200 per year per pupil was set by the Minister as
the actual cost of tuition. The deduction sought was the
amount paid in excess of tuition cost, as a "gift" within
section 27(1Xa) of the Act. The Minister disallowed the
deductions in his assessments for the years 1967 and 1968.
The taxpayer's appeal was allowed by the Tax Review
Board. The Crown appealed.
Held; allowing the appeal, the contribution was not a
"gift" within the meaning of the section, because it was not
made without consideration. The parents making the contri
bution received consideration in the form of the education
of their children at a separate school, in discharge off the
parents' duties as they conceived them.
Commissioner of Taxation of the Commonwealth v.
McPhail (1967-68) 41 A.L.J.R. 346; Gaudin v. M.N.R.
55 DTC 385; No. 688 v. M.N.R. 60 DTC 130; Homa v.
M.N.R. 69 DTC 673; Aspinall v. M.N.R. 70 DTC 1669
and Harris v. M.N.R. 64 DTC 5332, applied. Vineland
Quarries v. M.N.R. 70 DTC 6043; Bronze Memorials
(No. 2] v. M.N.R. 69 DTC 5420 and Consolidated
Building v. M.N.R. 65 DTC 5211, considered. Galway
v. M.N.R. [1974] 1 F.C. 593; [1974] 1 F.C. 600,
distinguished.
INCOME tax appeal.
COUNSEL:
M. J. Bonner and S. Greenbaum for
plaintiff.
W. G. Posthumus for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Meyer, Posthumus & Wassenaar, Willow-
dale, for defendant.
The following are the reasons for judgment
delivered in English by
HEALD J.: This is an appeal by the plaintiff
from the judgment of the Tax Review Board
dated June 26, 1972 wherein the defendant's
appeal was allowed in respect of the assess
ments for income tax made by the Minister of
National Revenue for the 1967 and 1968 taxa
tion years.
The trial of this appeal was heard before me
in conjunction with the plaintiff's appeal in
respect of the following other taxpayers:
William B. Stelpstra file T-3038-72
Arend J. Deweger file T-3039-72
Peter Havercamp file T-3040-72
Jelle Visser file T-3041-72
Arend J. Veldhuis file T-3042-72
Reinder Jonas Jacobi file T-3043-72
Cornelius Stigter file T-3044-72
Nick Anema file T-3045-72
It was agreed by counsel that all of the above
appeals and subject appeal should be tried to
gether on common evidence.
The question at issue in these appeals is
whether certain sums of money paid by each of
the defendants in the taxation years 1967 and
1968 to the Canadian Christian School at Jarvis,
Ontario are deductible from their income under
the provisions of section 27(1)(a)(i) of the
Income Tax Act'.
' 27. (1) For the purpose of computing the taxable
income of a taxpayer for a taxation year, there may be
deducted from the income for the year such of the following
amounts as are applicable:
(a) the aggregate of gifts made by the taxpayer in the year
(and in the immediately preceding year, to the extent of
the amount thereof that was not deductible under this Act
in computing the taxable income of the taxpayer for that
immediately preceding year) to
(i) registered Canadian charitable organizations,
It is admitted by the plaintiff that said Canadi-
an Christian School at Jarvis, Ontario (hereafter
the Jarvis School) is a registered Canadian
charitable organization within the meaning of
said section 27(1)(a)(i).
It is also admitted that during the 1967 taxa
tion year, the defendant paid the Jarvis School
$499.00 and claimed $299.00 thereof as a chari
table deduction under the authority of said sec
tion 27(1)(a)(i). It is also admitted that during
the 1968 taxation year, the defendant paid the
Jarvis School the sum of $590.00, claiming
$390.00 thereof as a charitable donation.
So far as the other above taxpayers are con
cerned, the amounts paid in 1967 and 1968 vary
but the amounts paid and the amounts claimed
as deductions from income are not in dispute. In
all of the cases, the common denominator is that
the first $200.00 paid to the Jarvis School was
not deducted from income as a charitable dona
tion. The balance paid by each taxpayer to the
Jarvis School in each of the years 1967 and
1968 was deducted from income as a charitable
donation.
The defendants, in their statements of
defence, allege that the Jarvis School, with the
advice and consent of the Department of Na
tional Revenue, set tuition fees on a family basis
in the amount of $200.00 for all families having
children in attendance at said school. They fur
ther allege that it was agreed that anything in
excess of $200.00 was to be treated as a dona
tion. The plaintiff, on the other hand, contends
that the sums of $400.00 paid by the defendant
in each of the years 1967 and 1968 to the Jarvis
School were paid as consideration for the edu
cation of his two children attending said School
and were not paid by way of gift with the
consequence that these amounts are not deduct
ible under section 27(1)(a) of the Income Tax
Act.
The other above named defendants were
assessed on the same basis, i.e., that $200.00
per student attending the School was paid as
consideration for the education of that student,
and only the amount paid to the School in
excess of $200.00 per student was a gift and
deductible under section 27(1)(a).
In short, the defendants have treated $200.00
per family as tuition, and the balance given as a
gift. The plaintiff has treated $200.00 per stu
dent attending as tuition, and the balance given
as a gift. Only in the case of families having one
student attending the Jarvis School would the
different approaches taken by the parties pro
duce the same result for assessment purposes.
In the case of all of these defendants, more than
one student per family attended the School so
that in all of these cases, the resultant assess
ment is different.
The Jarvis School was organized by the
Canadian Christian School Society at Jarvis,
(hereafter Jarvis Society). The purpose of the
Society was to establish and maintain a separate
Christian school so as to carry out the principles
of the Society. The basis and principles of the
Society are set out in Article 2 of its Constitu
tion which reads as follows:
The basis of this society is the infallible Word of God as
interpreted by the Belgic Confession, the Heidelberg Cate
chism, the Canons of Dort and the Westminster Confession.
Our fundamental principles are:
That our children are a heritage of the Lord and should be
reared for Him:
That the parents are responsible for the education of their
children in accordance with the Word of God;
That such an education requires a separate Christian
School.
The Jarvis School is a member of the Ontario
Alliance of Christian Schools (hereafter the
Ontario Alliance) which counts some 49 Chris-
tian day schools in Ontario as members. There
are about 8,500 full time day students in these
49 schools. Most of these schools were organ
ized in the 1950's at a time when Dutch immi
grants to Canada decided that they had a unique
contribution to make to Canada in gratitude to
God and in keeping with their belief that they
should serve their neighbours and society as a
whole. The Society membership comes largely
from members of the Christian Reform Church,
a Protestant denomination, although member
ship in the Society is open to anyone who
agrees with its purposes and objectives.
Mr. John Olthuis, Policy and Research Direc
tor of the Ontario Alliance gave evidence. He
said that he was a consultant to the Ontario
Alliance on governmental and legal matters (he
is a member of the Bar of Alberta). He said that
one of his tasks was to attempt to persuade the
Government of Ontario to enact legislation per
mitting parents and supporters of the Alliance's
member schools to allocate tax dollars in sup
port of said schools. He described the Ontario
Alliance as a service organization and as a cen
tral public spokesman for the member schools.
He described the purpose of the school societies
as being in furtherance of the desire of their
members to make a contribution to society by
training Christian students, thus ensuring that
they would become law abiding and morally
upright citizens of Canada. He said that secular
education was not the fundamental aim of these
schools; that secular education was adequately
attended to in the tax-supported public and
separate schools already established; that para
mount priority was given in the Christian
schools to Christian education; and that said
Christian education was available as a service
not only to members but to the community as a
whole.
In December of 1965 and in January of 1966,
negotiations and correspondence took place
between the Hamilton Christian School Society
and the Hamilton District Office of the Income
Tax Department concerning a ruling by the
Department as to what income tax deductions
could be made with respect to contributions
made to the School Society.
A misunderstanding as to what was agreed
upon seems to have arisen subsequently. The
Income Tax Department considered that the
tuition fee should be based on the approximate
cost per student which at that time amounted to
something over $200.00 per student. On the
other hand, the Society had the opinion that the
Income Tax Department had agreed on a tuition
fee, for tax purposes of $200.00 per family. Mr.
Olthuis testified that he was questioned about
this tax problem at the annual meeting in
November of 1967 of the Ontario Alliance. He
said that based on his understanding of the
arrangement reached between the Department
of National Revenue and the Hamilton School,
he advised said annual meeting that all member
schools could proceed on the basis of treating
$200.00 per family as tuition and the balance
received as a donation. Pursuant to that advice,
the member school societies proceeded accord
ingly and those of their members who contribut
ed in excess of $200.00 per annum, claimed
such excesses as donations under section
27(1)(axi). All of these defendants made such
claims for their 1967 and 1968 taxation years.
Four of these defendants (Messrs. Zandstra,
Stelpstra, Deweger and Visser) gave evidence at
the trial. Their testimony was basically the same
in respect of the issues in these actions. They all
had more than one child attending the Jarvis
School during the years in question; they all
subscribed to Article 2 of the Constitution of
the Society (supra) stating that the contents
thereof were in harmony with their personal
faith. Mr. Zandstra said the he viewed the
School as an extension of their home life as set
out in said Article 2. He also said that he saw
the School "... as an instrument for furthering
God's kingdom for own family and for our
country." They all indicated that they felt a
moral obligation to children other than their
own which was reflected in their donations to
the School Society. The financial statements of
the Jarvis School for the subject years were
received in evidence. Included in said state
ments were proposed annual budgets for the
financial years July 1, 1967 to June 30, 1968
and July 1, 1968 to June 30, 1969. In the
1967-1968 proposed annual budget, revenue
was projected as follows:
Revenue Budget
Parents: 1967 /68
Dues $ 10.00
Tuition 200.00
Donations
Honour Pledge 390.00
85 x $600.00 $51,000.00
Other Members:
Dues $ 10.00
Donations 265.00 22,000.00
$73,000.00
The 1968-1969 proposed annual budget was
developed in much the same way excepting that
the number of parents was 87 instead of 85 and
the amount per parent by way of honour pledge
was projected as $450.00 rather than $390.00.
When questioned as to why parents were
treated differently in the budgets than other
Society members, the defendants who gave evi
dence attached no significance to this break
down. They said that they contributed to the
School in accordance with their ability to pay.
Mr. Zandstra related that in the school year
1973-1974, because of changed financial cir
cumstances, he was unable to pay anywhere
near the amount budgeted from parents and that
no one from the Society pressured him to pay
more. Apparently the Society operates on the
basis that the members will pay what they can,
based on their own consciences. All of the
defendants who testified said they considered
the assessment of parents annually to be a
moral rather than a legal or contractual obliga
tion. The difference in the assessment of parent
members as opposed to non-parent members
was explained by some of the witnesses on the
basis that a lesser amount per capita was
expected and in fact received because, in most
cases, they were the younger and older mem
bers of society with lower incomes. I was
favourably impressed with the evidence given
by the defendants. They are conscientious and
devout members of the Jarvis Society. They feel
very strongly that the concept of Christian
schools is a worthy one and I believe them
when they express their belief that these Chris-
tian schools develop and produce fine Christian
citizens of Canada. However, no matter how
praiseworthy I may consider their work with
these Christian schools and no matter how
much in sympathy with their aims and objec
tives I may be, my task here is to determine,
whether on the evidence before me, the monies
paid by these defendants to the Jarvis School
were "gifts" as that term is used in section
27(1)(axi).
"Gift" is defined in Halsbury 2 as follows:
A gift inter vivos may be defined shortly as the transfer of
any property from one person to another gratuitously while
the donor is alive and not in expectation of death ... .
[Underlining mine.]
The in Black's Law Dictionary', "gift" is
defined as:
A voluntary transfer of personal property without
consideration.
and:
A parting by owner with property without pecuniary con
sideration ... .
The Shorter Oxford Dictionary defines "Giving"
as:
... A transfer of property in a thing, voluntarily and without
any valuable consideration ... .
Applying the above dictionary definitions of
"gift" to the facts of these cases, I have con
cluded that the payments made by these parents
to the Jarvis School were not payments made
without consideration and cannot therefore be
considered "gifts" under section 27(1Xa)(i).
2 Halsbury's Laws of England, 3rd edition, vol. 18, 364 at
365.
3 Black's Law Dictionary—rev'd 4th edition-1968, West
Publishing Co. 817 at 818.
These defendants have all expressed their
concurrence with and belief in the fundamental
principles set out in Article 2 of the Constitution
of the Jarvis School Society (supra). Included
therein is a belief that parents "... are respon
sible for the education of their children in
accordance with the Word of God;" and ".. .
that such an education requires a separate
Christian school." It seems to me they received
consideration from the Jarvis School in the form
of education of their children in a separate
Christian school in discharge of their duties as
parents as they conceived them to be.
The meaning to be given to the word "gift",
as the same was used in the "Income Tax
Assessment Act of Australia, was considered by
the High Court of Australia in the case of Com
missioner of Taxation of the Commonwealth v.
McPhail 4 where Owen J. said:
But it is, I think, clear that to constitute a "gift", it must
appear that the property transferred was transferred volun
tarily and not as the result of a contractual obligation to
transfer it and that no advantage of a material character was
received by the transferor by way of return .... If, how
ever, the payment should be regarded as a voluntary pay
ment, the taxpayer made it in the expectation that in return
he would receive, and he did in fact receive, a substantial
concession in the fees charged for the education of his son.
In neither event did he make a "gift" within the meaning of
s.78(1).
The rationale of that case applies equally
here. Even accepting the evidence of the
defendants in these cases that subject payments
were voluntary and not pursuant to a contractu
al obligation, it seems clear that each parent
here received a consideration, i.e., the Christian
education of his children.
It seems clear from the evidence of most of
the witnesses that they considered they had a
primary duty to their own children to provide
them with a Christian education in a separate
Christian school and that obligation has been
discharged by the payments to the Jarvis
School. Such a factual situation clearly, in my
view, removes these payments from the "gift"
category.
4 (1967-68) 41 A.L.J.R. 346 at 348.
I was not referred to nor did I find any
decisions of this Court in a similar situation.
However, I was referred to several decisions of
the Tax Appeal Boards in which the meaning of
"gift" as used in section 27(lxa)(i) was con
sidered in circumstances similar to those here
being considered. In all of those cases, the claim
for gift was disallowed because of the presence
of consideration for the payment.
For the foregoing reasons, I have concluded
that the Minister of National Revenue was cor
rect in deciding that payments made by these
defendants were not gifts to the extent of at
least $200.00 per child attending the School per
year. The figure of $200.00 per child used by
the Department was an arbitrary figure in the
sense that it is lower than the actual cost per
child established by the evidence. The evidence
as to the number of children attending the Jarvis
School during the years under review was not
too satisfactory although the defendant, Stelp-
stra, the School's bookkeeper said it would
average 200, "... give or take 10 students
either way". On this basis, the cost per student
based on the actual operating cost of the School
approximates $236.00 in the 1967-196'S school
year and $250.00 in the 1968-196'9 school year.
Thus, the arbitrary figure of $200.00 selected
by the Minister is on the low side. This is not a
case however where the assessments should be
referred back to the Minister since that course
of action would result in an increase in the
assessments. This would have the effect of
allowing an appeal by the Minister from his own
assessment. On a taxpayer's appeal to the
Court, the matter for determination is basically
whether the assessment is too high 6 . In the case
at bar, the assessor has acted on the correct
Gaudin v. M.N.R. 55 DTC 385; No. 688 v. M.N.R. 60
DTC 130; Homo v. M.N.R. 69 DTC 673; Aspinall v. M.N.R.
70 DTC 1669.
6 For a similar view see: Harris v. M.N.R. 64 DTC 5332 at
5337 per Thurlow J. See also: Vineland Quarries v. M.N.R.,
70 DTC 6043; Bronze Memorials (No. 2] v. M.N.R. 69 DTC
5420; Consolidated Building v. M.N.R. 65 DTC 5211.
principle but his assessments are slightly on the
low side. In these circumstances, it seems clear
that the assessments should be affirmed.
During the course of argument, I directed the
attention of both counsel to the two recent
judgments of the Federal Court of Appeal in the
case of Galway v. M.N.R. 7 and invited their
comments as to the applicability of the rationale
of those decisions to the facts in the cases at
bar. After considering the submissions of coun
sel thereon, I have concluded that the Galway
case (supra) is distinguishable on its facts. In
that case, the Court was being asked to imple
ment a compromise settlement rather than to
implement an agreement between the parties as
to how the assessment should have been made
by application of the law to the true facts. The
Court of Appeal said at page 602:
... in our view, the Minister has a statutory duty to assess
the amount of tax payable on the facts as he finds them in
accordance with the law as he understands it. It follows that
he cannot assess for some amount designed to implement a
compromise settlement and that, when the Trial Division, or
this Court on appeal, refers an assessment back to the
Minister for re-assessment, it must be for re-assessment on
the facts in accordance with the law and not to implement a
compromise settlement.
In the cases at bar, the impugned assessments
are not "compromise" assessments as that term
is used in the Galway case (supra). Subject
assessments were based on the assessor's best
estimate at the time of the actual cost of educat
ing each student at the Jarvis School based on
the information available to him at that time. It
now transpires that said estimates were on the
low side. In my view, such a circumstance
cannot operate to invalidate subject assess
ments. To hold otherwise would be to invalidate
every assessment that was on the low side,
whether it be for arithmetical error or on the
basis of later discovered facts. The Income Tax
Act does not, in my view, require such a result'.
7 [1974] 1 F.C. 593; [1974] 1 F.C. 600.
" See for example: section 152(8) Income Tax Act
1973-74.
Subject assessments are accordingly
affirmed. The plaintiff's appeals are therefore
allowed. Pursuant to section 178(2) of the 1973-
74 Act, I direct that the Minister shall pay to the
solicitor for the defendants the sum of
$5,000.00 as fees and the sum of $150.00 as
disbursements as the defendants' reasonable
and proper costs in connection with all of sub
ject nine actions.
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.