A-130-73
Fred Juster (Appellant)
v.
The Queen (Respondent)
Court of Appeal, Jackett C.J., Pratte J. and
Hyde D.J.—Montreal, September 10 and 22,
1974.
Income tax—'Farming"—Taxpayer engaged in racing
horses with hope of profit—Independent contractors han
dling maintenance and training of horses—Taxpayer "main-
taining horses for racing"—Subject to limitation of losses—
Income Tax Act, ss. 13, 42, 139(1)(p)—Official Languages
Act, R.S.C. 1970, c. 0-2, s. 8(2)(a).
It was common ground that the appellant's chief source of
income was "neither farming nor a combination of farming
and some other source of income" within section 13(1) of
the Income Tax Act. The Minister's assessment for the
years 1965-1968 was made on the basis that the appellant,
engaging as a partner in the business of racing horses in the
hope of profit, was "maintaining horses for racing" within
the definition of "farming" in section 139(1)(p) of the
Income Tax Act, so as to incur limitation of his losses under
section 13(1). The appellant contended that the "maintaining
of horses for racing" was done, not by him, but by the
independent contractors who, on behalf of small operators
like himself, maintained and trained the horses between
races. The Minister's assessment was set aside by the Tax
Review Board and restored by the Trial Division. The
taxpayer appealed.
Held, dismissing the appeal, in view of the definition of
"farming" in the English version of section 139(1)(p), sup
ported by the apparent objects of section 13 (control over
deduction of losses by "gentlemen" farmers) and section 42
(averaging of losses sustained by farmers) the words "main-
taining of horses for racing" were intended to apply not only
to the full operation of a racing stable, but to the less
pretentious operations of racing horses, where the business
man lacks his own stable, pasture and staff, but contracts
out the actual care and training of the horses. Having regard
to both the English and French versions, in obedience to the
Official Languages Act, the words in the definition of
"farming" should be given the larger, rather than the more
restricted sense indicated above.
INCOME tax appeal.
COUNSEL:
Stephen S. Heller for appellant.
Jean Potvin for respondent.
SOLICITORS:
Martineau, Walker, Allison, Beaulieu,
Phelan & Mackell, Montreal, for appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
delivered in English by
JAcKETT C. J.: This is an appeal from the Trial
Division in which the sole question concerning
which there has been, during argument of the
appeal, any real attack on the judgment
appealed from is the meaning of the definition
of the word "farming" in section 139(1) of the
Income Tax Act,' which reads as follows:
(p) "farming" includes tillage of the soil, livestock raising or
exhibiting, maintaining of horses for racing, raising of poult
ry, fur farming, dairy farming, fruit growing and the keeping
of bees, but does not include an office or employment under
a person engaged in the business of farming;
More particularly, recognizing that what is being
described is a business, and, therefore, a profit-
making operation of some kind, the only ques
tion to be decided in this Court is whether the
words "maintaining of horses for racing", in
their context in this definition, refer to
(a) the business of having horses "for rac
ing", which would include, at a minimum,
(i) racing such horses,
(ii) maintaining, including training, the
horses when they are not racing, and
(iii) collecting the fruits of the racing, 2 or
(b) the business of maintaining, for a fee, of
horses that other persons have for racing.
The problem arises because, while the part
nership of which the appellant was a member
and similar small operators, were in the business
of racing horses in the hope of realizing a profit
from such racing, the operation of maintaining
' R.S.C. 1952, c. 148.
2 In the circumstances of the particular case, it would
probably include also the acquisition and disposition for a
consideration of part, if not all, of the horses used for
racing.
and training their horses between races was
carried on, on their behalf, by independent con
tractors for a daily fee per horse; and the appel
lant says that such an independent contractor
did, and the small operator did not, carry on the
business of "maintaining of horses for racing"
so that the independent contractor did, and the
small racing operator did not, carry on the busi
ness of "farming" within the statutory defini
tion. If the appellant is right in this contention,
section 13 of the Income Tax Act did not apply
to him and the appeal succeeds. If the appellant
is wrong in this contention, section 13 applies to
him and the appeal fails.
If one were to look only at the definition of
"farming" in the English version of the statute,
it would be clear in my mind that the words
"maintaining of horses for racing" were intend
ed to apply not only to what is commonly
thought of as the operation of a racing stable
but also to the less pretentious business opera
tions consisting of racing horses in circum
stances where the business man does not have
his own stable and pasture premises and staff of
"boys" and trainers but contracts out the actual
care and training of the horses. This would seem
to follow from the context of the definition
where expressions such as "tillage of the soil",
"raising of poultry" and "the keeping of bees"
are obviously used, in each case, to refer to the
whole gamut of operations constituting the par
ticular class of business succinctly described by
the words commonly used to describe it.
This view of the matter would seem to be
supported by the fact that the apparent objects
of section 13 (control of deduction of losses by
"gentlemen" farmers) and of section 42 (averag-
ing of losses sustained by farmers), the two
sections of the Income Tax Act where the word
"farming" is a key word, would seem to have
special relevance to the business of "racing" but
to have no special relevance to the business of
looking after horses for a fee whether or not
they are horses used only for "racing" or are
used for some other purpose such as riding,
jumping, exhibition, etc.
For the above reasons, I would, therefore,
agree with the judgment delivered by the
learned Trial Judge on the only arguments that
seem to have been presented to him.
In this Court, however, a further argument
was canvassed, namely, that, when the defini
tion of "farming" in the French version of the
statute, which is "equally authentic", is can
vassed, the narrower view of the effect of the
definition must be accepted.
The French version of "farming" reads as
follows:
p) «agriculture» comprend la culture du sol, l'élevage ou
l'exposition d'animaux de ferme, l'entretien de chevaux de
course, l'élevage de la volaille, l'élevage des animaux Ã
fourrure, la production laitière, la fructiculture et l'apicul-
ture, mais ne comprend pas une charge ou un emploi auprès
d'une personne se livrant à une entreprise agricole;
Here it is found that the words used in place
of "maintaining of horses for racing" are l'entre-
tien de chevaux de course which, freely trans
lated into English, means "care of race horses"
and is not susceptible of all the different senses
of the English words, to which can be attributed
the idea of "having or keeping" horses "for
racing" but point rather directly to what is done
in this case by the independent contractor,
namely, taking care of "racing horses" and
maintaining them in proper shape.
Under the Official Languages Act, R.S.C.
1970, c. O-2, what we are directed to do, in
such circumstances, is to have regard to both
versions "so that ... the like effect is given to
the enactment in every part of Canada" (section
8(2)(a), R.S.C. 1970, c. O-2).
Having regard to the overall scheme of the
legislation, I have come to the conclusion, not
without considerable doubt, that the words, in
both the English and French versions, must be
given the larger, rather than the more restricted,
sense, indicated above. What was being done
throughout the definition of "farming" was the
adoption of short "tags" to indicate different
types of operations. Most of the "tags" adopted
were well known expressions indicating specific
types of business operations. For the particular
operation under consideration, there was appar
ently no well known tag sufficiently wide to
embrace everything Parliament had in mind. It
may be that neither the English version nor the
French version adopted in the definition is as
apt as it might be to describe what was, as I
understand it, intended. Recognizing, however,
that what was being attempted was an attempt
at the creation of a tag, and having in mind the
objectives intended by sections 13 and 42,
which we are by section 11 of the Interpretation
Act required to do, it seems to me that the
business of the business man engaged in "rac-
ing" is what Parliament was trying to describe
rather than the more stable operations of the
business man who normally performs service
for a fee. I do not see the same reason in the
latter case for limiting what is deductible for
losses or for permitting "averaging" of incomes
over a period of years.
I also wish to say that I concur with the
reasons of my brother Pratte, which, in my
view, are in no way inconsistent with the views
that I have expressed.
I conclude, therefore, that the appeal must be
dismissed with costs.
HYDE D.J.: I agree.
* * *
The following are the reasons for judgment
delivered in English by
PRATTE J.: This is an appeal from a judgment
of the Trial Division setting aside a decision of
the Tax Review Board and restoring the assess
ments made by the Minister of National Reve
nue of the income tax payable by the appellant
for the taxation years 1965, 1966, 1967 and
1968. Those assessments were made on the
basis that the appellant was precluded by sec
tion 13 of the Income Tax Act from deducting,
in computing his income for the years in ques
tion, the whole of the losses that he had
incurred as a partner in the firm "Fleur de Lys
Stable Reg'd.".
It is common ground that the appellant's chief
source of income was "neither farming nor a
combination of farming and some other source
of income". The sole question raised by this
appeal relates to the characterization of the
business carried on by the partnership "Fleur de
Lys Stable Reg'd.". If that business was "farm-
ing" the assessments were correctly made and
the appeal must fail; if it was not "farming" the
appeal must succeed since, in that case, section
13 did not apply to the appellant.
Section 139(1)(p) contains a definition of the
word "farming":
139. (1) In this Act,
(p) "farming" includes tillage of the soil, livestock raising or
exhibiting, maintaining of horses for racing, raising of poult
ry, fur farming, dairy farming, fruit growing and the keeping
of bees, but does not include an office or employment under
a person engaged in the business of farming;
It is clear from the evidence that, from 1965
to 1968, the partnership "Fleur de Lys Stable
Reg'd." carried on a business which consisted in
the acquisition, the sale and the racing of race
horses. The evidence also discloses that as the
partnership did not have any land or stable, it
entrusted its race horses to an independent con
tractor who, for a daily fee, boarded them and
took care of them.
The Trial Judge found that the partnership
had, as an integral part of its business, main
tained horses for racing and, for that reason, he
held that the business of the partnership fell
within the definition of farming contained in
section 139(1)(p).
At the hearing of the appeal, counsel for the
appellant did not seriously challenge the finding
of the Trial Judge that the horses of the partner
ship had been maintained for the purpose of
racing. His main contention, and the only one
that deserves consideration, was that the Trial
Judge had erred in inferring that the partnership
was engaged in "farming" from the fact that it
owned horses maintained for purposes of
racing. When the Income Tax Act defines the
word "farming", counsel said, it defines a
source of income. It follows, according to him,
that the various activities that are mentioned in
the definition must be envisaged as sources of
income. Counsel argued that if the definition
found in section 139(1)(p) is read in the light of
these considerations it becomes clear that the
expression "maintaining of horses for racing"
does not refer to the activity of the person who
keeps race horses for the purpose of racing but
refers exclusively to the business of the
independent contractor who, for a fee, takes
care of horses that other persons have for
racing, since it is only in the latter case that the
maintenance of the horses may be a source of
income.
Logical as this argument may appear, it loses
all its force, in my view, when consideration is
given to the object of the definition found in
section 139(1)(p) and when the expression
"maintaining of horses for racing" is read in its
context in that definition. It then becomes clear,
in my view, that that expression refers to the
business of having horses for racing and not to
the business of maintaining, for a fee, horses
that other persons have for racing.
The object of the definition of "farming" is to
determine the sphere of application of the sec
tions of the Act which contain rules relating to
farming, namely, section 13 and section 42.
Section 13 limits the amount by which a taxpay
er's income may be reduced by losses suffered
as a result of his carrying on farming operations
as a secondary source of income. It seems
reasonable to apply this provision to the person
who has horses for racing whether or not he
falls in the class of persons sometimes referred
to as a gentleman-farmer; there would not, how
ever, seem to be any reason why that provision
should apply to the person who, as a secondary
source of income operates a separate business
consisting exclusively of looking after horses
for a fee. Under section 42, the taxpayer whose
chief source of income is either farming or
fishing is given the privilege of averaging his
income over 5 year periods instead of paying
tax on an annual basis like other taxpayers. It
seems sensible to extend that privilege to the
person whose chief source of income is the
business of having horses for racing; there
would not seem to be any reason to extend it to
the taxpayer whose chief source of income is
the business of boarding horses for a fee. If the
expression "maintaining of horses for racing"
had the narrow meaning proposed by the appel
lant, sections 13 and 42 would, in my view,
apply to situations that those sections were
obviously not meant to cover, and they would
not apply to other situations that they were
probably intended to regulate.
The fact remains, however, that the expres
sion "maintaining of horses for racing" (as well
as its French counterpart: l'entretien de chevaux
de course) is not as apt as it might be to describe
the business of the person who keeps or has
horses for racing. This anomaly, however, is
easily explained if that expression is read in its
context. The definition of "farming" contains an
enumeration of various expressions designating
business operations. Most of those expressions,
(such as "livestock raising", "raising of poult
ry", "fruit growing", "the keeping of bees"), in
their literal sense, designate activities which are
not sources of income except as part of some
profit-making operation. The use of those
expressions in the definition does not, in most
cases, create any difficulty because most of
these expressions are well known and, in every
day language, are used to designate types of
businesses in the operation of which the activi
ties mentioned play a predominant role. The
business consisting of having race horses, of
maintaining and training them, of racing them
and collecting purses, is perhaps not as common
as that of "livestock raising" and, for that
reason, it may be that the phrase that has been
used is not an expression well known in the
racing world to describe it in the same way as
the expressions used in respect of the other
types of businesses mentioned in the definition
are known in their respective spheres.
For these reasons I would dismiss the appeal
with costs.
* * *
HYDE D.J.: I agree.
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.