REASONS
FOR JUDGMENT
Graham J.
[1]
This Appeal was originally heard by Justice Jorré.
By letter dated July 24, 2015, the parties agreed to have the Appeal decided
by me, based on the transcripts and the court record. In addition, at my
request, the parties provided supplemental oral submissions on November 2, 2015.
Background
[2]
Mary Kuchta was married to Mathew Juba. Mr. Juba
passed away in 2007. Ms. Kuchta was the sole designated beneficiary of two
RRSPs held by Mr. Juba at the time of his death. As a result of Mr. Juba’s
death, Ms. Kuchta received $305,657 from those RRSPs. Following the filing of
Mr. Juba’s 2006 tax return, the Minister of National Revenue assessed Mr. Juba
$55,592 in respect of his 2006 taxation year. When Mr. Juba’s estate failed to
pay that amount, the Minister then assessed Ms. Kuchta for the same amount
pursuant to subsection 160(1) of the Income Tax Act. Ms. Kuchta has
appealed that assessment.
[3]
The four tests that must be met for subsection
160(1) to apply were set out by the Federal Court of Appeal in Livingston v.
The Queen:
1) The transferor
must be liable to pay tax under the Act at the time of transfer;
2) There must be
a transfer of property, either directly or indirectly, by means of a trust or
by any other means whatever;
3) The transferee
must either be:
i. The transferor’s spouse or common-law partner at the time of
transfer or a person who has since become the person’s spouse or common-law
partner;
ii. A person who was under 18 years of age at the time of transfer;
or
iii. A person with whom the transferor was not dealing at arm’s
length.
4) The fair
market value of the property transferred must exceed the fair market value of
the consideration given by the transferee.
[4]
Ms. Kuchta accepts that the first, second and
fourth tests have been met. She agrees that Mr. Juba was the transferor, that
he was liable to pay tax under the Act at the time of the transfer, that the
funds she received from the RRSPs were transfers of property within the meaning
of subsection 160(1) and that the fair market value of the funds received
exceeded the consideration provided by her. However, Ms. Kuchta submits that
the third test has not been met.
[5]
For the third test to have been met, Ms. Kuchta
must have been Mr. Juba’s spouse. The parties agree that the transfer of the
RRSPs occurred immediately after Mr. Juba’s death. They also agree that Mr.
Juba’s marriage to Ms. Kuchta ended immediately after his death. In other
words, they agree that, at the time the transfer occurred, Ms. Kuchta was no
longer married to Mr. Juba. Thus, since Ms. Kuchta and Mr. Juba were not
married when the transfer occurred, the parties agree that there are only two
ways in which the requirement that Ms. Kuchta be Mr. Juba’s spouse could
have been satisfied. The first is if the relationship between Ms. Kuchta and
Mr. Juba is determined at a time other than the time that the transfer
occurred. The second is if the word “spouse” in subsection 160(1) is
interpreted to include a person who was, immediately before the tax debtor’s
death, his or her spouse.
Summary of the
Parties’ Positions
[6]
Ms. Kuchta submits that the relationship between
Mr. Juba and herself should be determined as of the time of the transfer and,
since at that time he was no longer married to her, the third Livingston
test has not been met. Ms. Kuchta further submits that the meaning of the word
“spouse” in subsection 160(1) is clear and cannot include a person who was,
immediately before a tax debtor’s death, his or her spouse.
[7]
In arguing that the third test has not been met,
Ms. Kuchta relies on the decision of Justice Lamarre, as she then was, in Kiperchuk
v. The Queen.
Kiperchuk dealt with an almost identical fact situation. Justice Lamarre
found that Ms. Kiperchuk was not liable under subsection 160(1) because the
third test had not been met.
[8]
The Respondent was evidentially not satisfied
with the decision in Kiperchuk. The Respondent raises two arguments, one
of which was addressed by Justice Lamarre and one of which appears to be new.
[9]
Primarily, the Respondent argues that the
relationship between Ms. Kuchta and Mr. Juba should be determined as of the time
when Mr. Juba designated Ms. Kuchta as a beneficiary of the RRSPs. Since
Ms. Kuchta was clearly Mr. Juba’s spouse at that time, the Respondent says
that the third Livingston test has been met.
[10]
In the alternative, the Respondent argues that,
even if the relationship between Ms. Kuchta and Mr. Juba is to be determined as
of the time that the RRSPs were transferred, the word “spouse” in subsection
160(1) includes a person who was, immediately before the tax debtor’s death,
his or her spouse.
Issues
[11]
The issues in this Appeal are:
a)
When should the relationship between Ms. Kuchta
and Mr. Juba be determined?
b)
Does the word “spouse” in subsection 160(1)
include a person who was, immediately before a tax debtor’s death, his or her
spouse?
When is the
relationship determined?
[12]
The Respondent asserts that the relationship
between Ms. Kuchta and Mr. Juba is to be determined as of the date that
Mr. Juba designated Ms. Kuchta as a beneficiary of the RRSPs. Since the designation
occurred years before Mr. Juba’s death, the Respondent submits that the
third Livingston test is satisfied.
[13]
Justice Lamarre specifically addressed this argument
in Kiperchuk and concluded that the relationship was to be determined as
of the date of the transfer, not the designation. I agree with her conclusion.
[14]
The Respondent relies upon a decision of Justice
Angers in Homer v. The Queen
in which he concluded that the relationship between a transferor and transferee
in respect of a transfer under a will was to be made at the time the will was
executed. Justice Lamarre had difficulty adopting Justice Angers’ conclusion
and thus refused to follow it. I agree with her decision.
[15]
The Respondent submits that I should not rely on
Livingston to conclude that the relationship between a transferor and
transferee must be determined at the time the transfer occurs. The Respondent
points out that the phrase “at the time of transfer”
that appears in the third test set out by the Federal Court of Appeal in Livingston
does not actually appear in subsection 160(1). Since the time at which the
determination of the relationship between the transferor and the transferee was
not at issue in Livingston, the Respondent argues that the inclusion of
the phrase “at the time of transfer” in the
third test is obiter. I agree that the inclusion of the phrase in the
third test is obiter.
As a result, I have not treated Livingston as binding in reaching my
conclusion that the time at which the relationship is to be determined is the
time of transfer.
[16]
The Respondent argues that subsection 160(1) is
silent as to when the relationship between a transferor and a transferee is to
be determined. The Respondent wants me to interpret this silence as a licence
for me to broaden the scope of the subsection.
[17]
In my view, subsection 160(1) is not silent as
to when the relationship between a transferor and a transferee is to be
determined. As Justice Lamarre stated:
There is nothing
in the wording of that subsection that relates the relationship between the
transferor and the transferee to any moment other than that of the transfer of
the property (or a moment after the transfer in a case where the transferee has
since become the transferor’s spouse). The subsection refers throughout to the
act of transferring and the time of transfer, without specifying that other
moments in time, previous to the transfer, could be contemplated for the
purpose of its application to the transferee.
[18]
Having determined that the relationship between
Mr. Juba and Ms. Kuchta must be determined when the transfer occurred, I must
now determine whether the word “spouse” in subsection 160(1) is broad enough to
catch Ms. Kuchta.
Does “spouse”
include a person who was, immediately before a tax debtor’s death, his or her
spouse?
[19]
In Kiperchuk, Justice Lamarre concluded
that the transferee was not caught by subsection 160(1) because she ceased to
be the transferor’s spouse when the transferor died. There is no question that,
in legal terms, marriage ends on death.
Both parties agree that this is the case, the law is clear on this point and it
is acknowledged in subsection 248(23). Immediately following Mr. Juba’s death,
Ms. Kuchta was no longer married to him.
[20]
However, the Respondent has raised a new
argument that does not appear to have been raised before Justice Lamarre. The
Respondent asserts that the fact that one’s legal marital status ends on death
does not necessarily mean that the word “spouse” could not, in subsection
160(1), include a person who was, immediately before a tax debtor’s death, his
or her spouse. The Respondent submits that the word “spouse” is sufficiently broad
to include that meaning. In light of this submission, I think it is appropriate
to conduct a textual, contextual and purposive analysis of the word “spouse” in
subsection 160(1).
Textual
Analysis
[21]
The word “spouse” is used extensively throughout
the Act but is not defined.
[22]
Dictionary definitions of the word “spouse” clearly
contemplate a relationship between two living people. Those definitions are in
line with the legal meaning of the word. However, dictionary definitions do not
necessarily reflect the ordinary usage of a word.
[23]
People routinely use the word “spouse” to refer
to the surviving member of a couple. For example, following a tragic plane
accident, one would not be at all surprised if a reputable newspaper reported
that “the spouses and children of the deceased
passengers gathered at the crash site for a private memorial”. A person
reading the article would be unlikely to comment that it would have been
impossible for spouses to attend the memorial because they ceased being spouses
the moment that their wife or husband died.
[24]
The words “wife” and “husband” are simply
gendered versions of the word “spouse” and are similarly routinely used to
refer to the surviving member of a couple. The corresponding words for the
surviving spouse of a deceased person are “widow” and “widower”. Yet, despite
the existence of the words “widow” and “widower”, in certain contexts people
commonly refer to a widow as a given deceased’s “wife” or a widower as a given
deceased’s “husband”. This use of “wife” and “husband” to refer to widows and
widowers occurs not just when discussing the events that occur soon after
death, but also when discussing events in the future or those long in the past.
For example, John, reflecting on the future, may tell his friend that, “When I die, my wife will continue to receive my pension.”
When John ultimately passes away, his obituary will announce that, “John is survived by his loving wife Jane.” Years
later, John’s friends may say, “John’s wife needs to
get out more. Let’s invite her to dinner.” When Jane, as a result of
that dinner, ultimately starts dating and then marries a new man, John’s
friends may comment “John’s wife remarried about four
years after he died.” None of these uses of the word “wife” seems odd or
awkward. In fact, it would actually be unusual today to replace the word “wife”
with “widow” in any of these examples.
[25]
Ms. Kuchta submits that the use of “spouse”,
“wife” and “husband” to refer to the surviving member of a couple has more to
do with politeness or modern sensibilities than a misunderstanding of the legal
status of the relationship. People understand that marriage does not survive
death. When we say “John is survived by his loving wife
Jane” we are not suggesting that John and Jane are still married. I agree.
[26]
In my view, we are doing two things when we
continue to use the words “spouse”, “wife” and “husband” after death. The
first is that we are avoiding acknowledging (either publically or to ourselves)
that the relationship is over. The second is that we are either consciously or
unconsciously avoiding using the terms “widow” and “widower”. Much like
“spinster” and “bachelor”, “widow” and “widower” are words that carry certain
stigmas. The stereotypical images that “widow” and “widower” call to mind are
not necessarily images that we would choose to have imposed on ourselves or to
impose on others.
[27]
Ms. Kuchta submits that if everyone understands
that marriage ends on death, then there can be no ambiguity in the ordinary
meaning of the word “spouse” despite the fact that we regularly use the word in
a way that expands that meaning. By contrast, the Respondent asserts that
ordinary meaning of the word comes from how it is actually used, not from its
legal meaning.
[28]
I understand both of the parties’ positions. However,
at this point in the analysis, it is sufficient to say that there are two
different meanings of the word “spouse”: one legal and one colloquial. My
conclusion as to whether those two conflicting meanings cause any textual
ambiguity is strongly informed by the contextual analysis below. Accordingly, I
will leave my conclusion on the textual analysis until the end of the textual,
contextual and purposive analysis.
Contextual
Analysis
[29]
The word “spouse” is used numerous times throughout
the Act. There is nothing to be gained from analyzing its use in sections of
the Act that deal with events that happen during a taxpayer’s lifetime. Those
sections will not assist in understanding whether Parliament has used the legal
or colloquial meaning of the word. Instead, the focus should be on how the word
is used in the specific provisions of the Act that deal with transfers of
property on death.
[30]
My conclusion is that, rather than clarifying
how the word “spouse” is to be interpreted in subsection 160(1), the usage of
the word in provisions dealing with the transfer of property on death actually
creates ambiguity. It demonstrates that Parliament has, in some instances, used
the word “spouse” as if it includes widows and widowers and, in other
instances, used the word as if it excludes those individuals. A review of the
relevant provisions is set out below.
Subsection
160(1)
[31]
The logical place to begin a contextual analysis
is in subsection 160(1) itself since it is both the subsection in question and
a subsection that deals, among other things, with transfers of property on
death. Unfortunately, the context of subsection 160(1) does not provide any
clarification as to the meaning of the word “spouse”.
[32]
The relevant portion of subsection 160(1) reads:
Where a person
has, on or after May 1, 1951, transferred property, either directly or
indirectly, by means of a trust or by any other means whatever, to
(a) the person's
spouse or common-law partner or a person who has since become the person's
spouse or common-law partner,
(b) a person who was
under 18 years of age, or
(c) a person with whom
the person was not dealing at arm's length,
…
[emphasis
added]
[33]
The word “spouse” appears twice paragraph 160(1)(a).
The second half of that paragraph extends the net of subsection 160(1) to cover
people who became the transferor’s spouse after the date of the transfer. Clearly
Parliament turned its mind to catching people such as fiancées who would not
otherwise be caught by the word “spouse”. One could conclude that since
Parliament considered how to expand the class of people caught and did not
specifically include widows and widowers, Parliament must have meant to exclude
those individuals. That would, however, be circular reasoning. If one believes
that the word “spouse” does not include widows and widowers, then one can look
at paragraph 160(1)(a) and conclude that Parliament chose not to
expand the class of people caught. However, if one believes that the word
“spouse” may include widows and widowers in certain contexts, then one can look
at paragraph 160(1)(a) and conclude that there was no need for
Parliament to say anything more because widows and widowers were already caught
by the word “spouse”. A contextual analysis must be conducted by examining
whether a given context in the Act precludes one of the two meanings. The
context of subsection 160(1) supports either meaning and thus is not helpful in
determining whether Parliament has used the legal or colloquial meaning.
[34]
The use of the term “common-law partner” in
subsection 160(1) does not provide any clarity either. In the same way that
marriage ends on death, common-law partnership ends on death. In the same way
that people use the words “wife” and “husband” to refer to surviving spouses,
people use “common-law partner” to refer to surviving partners. In fact, it is
even more difficult to describe a surviving partner because there are no equivalent
words to “widow” and “widower” for common-law partners in either English or
French. The context of subsection 160(1) supports both the legal or colloquial
meanings of “common-law partner” and thus is not helpful in determining which
meaning Parliament used.
Subsection
146(8.91)
[35]
Subsection 146(8.91) deals with transferring
payments from a matured RRSP after death. This subsection is a strong example
of Parliament using the word “spouse” not just to include widows and widowers,
but to actually mean widow or widower. It reads:
Where, as a consequence of the death of an annuitant after the
maturity of the annuitant's registered retirement savings plan, the annuitant's
legal representative has become entitled to receive amounts out of or under the
plan for the benefit of the spouse or common-law partner of the deceased
and the legal representative and the spouse or common-law partner file with the
Minister a joint election in prescribed form,
(a) the spouse or
common-law partner shall be deemed to have become the annuitant under the plan
as a consequence of the annuitant's death; and
(b) such amounts shall
be deemed to be receivable by the spouse or common-law partner and, when paid,
to be received by the spouse or common-law partner as a benefit under the plan,
and not to be received by any other person.
[emphasis
added]
[36]
The phrase “the spouse
or common-law partner of the deceased” indicates that one still has a
spouse after death. In fact, subsection 146(8.91) would be rendered meaningless
if one did not accept that “spouse” could include a widow or widower. Without
that interpretation, the phrase “the spouse…of the
deceased” could not refer to anyone. Since I should presume that
Parliament intended subsection 146(8.91) to have some meaning and avoid
adopting a meaning that would render a provision meaningless, I must therefore conclude
that Parliament intended the word “spouse” to include “widows” and “widowers”
in that subsection.
[37]
Ms. Kuchta agrees that subsection 146(8.91)
would be meaningless if the word “spouse” does not include widows and widowers.
She is unable to provide a persuasive explanation why Parliament would have
used the colloquial meaning of “spouse” in this subsection.
[38]
Ms. Kuchta pointed out that subsection 146(8.91)
is a deeming provision. I agree. She submitted that deeming provisions can
cause a word or phrase to mean something entirely different than what they would
mean without the provision. I also agree. However, Ms. Kuchta was not able to
demonstrate that the deeming provisions in subsection 146(8.91) did anything to
alter the meaning of the word “spouse”. Those provisions simply deem when a
spouse becomes an annuitant and by whom amounts receivable under the plan, are
receivable. They do not deem widows and widowers to be spouses.
[39]
The French version of subsection 146(8.91) is
consistent with the English version.
Subsections
70(6)
[40]
Subsection 70(6) deals with the disposition and
acquisition of capital property as a result of death. It too is a strong
example of Parliament using the word “spouse” to mean widow or widower.
[41]
The relevant portion of subsection 70(6) reads:
Where any property of a taxpayer who was resident in Canada
immediately before the taxpayer's death that is a property to which subsection
(5) would otherwise apply is, as a consequence of the death, transferred or
distributed to
(a) the taxpayer's
spouse or common-law partner who was resident in Canada immediately before
the taxpayer's death, or
(b) a trust,
created by the taxpayer's will, that was resident in Canada immediately after
the time the property vested indefeasibly in the trust and under which
(i) the taxpayer's
spouse or common-law partner is entitled to receive all of the income of the
trust that arises before the spouse's or common-law partner's death, and
(ii) no person except
the spouse or common-law partner may, before the spouse's or common-law
partner's death, receive or otherwise obtain the use of any of the income or
capital of the trust,
if it can be shown, within the period ending 36 months after the
death of the taxpayer or, where written application therefor has been made to
the Minister by the taxpayer's legal representative within that period, within
such longer period as the Minister considers reasonable in the circumstances,
that the property has become vested indefeasibly in the spouse or common-law
partner or trust, as the case may be, the following rules apply:
…
[emphasis
added]
[42]
Subsection 70(6) describes an acquisition being
made as a consequence of a taxpayer’s death by “the taxpayer’s spouse” or a
trust under which “the taxpayer’s spouse” is entitled to receive all of the
income during his or her life. Thus, subsection 70(6) not only contemplates
that a taxpayer may have a spouse after death, but also that that person’s
status as a spouse would continue for the rest of his or her life. This entire
subsection would be rendered meaningless if one did not accept that the word
“spouse” could include a widow or widower. The entire purpose of the subsection
is to allow a rollover of capital property to a widow or widower or a trust for
the benefit of that person. If the word “spouse” did not include a widow or
widower, there would be no one to whom capital property could be rolled. Again,
since I must assume that Parliament intended subsection 70(6) to have meaning, I
must therefore conclude that Parliament intended the word “spouse” to include
“widows” and “widowers” in that subsection.
[43]
Paragraph 70(6)(a) refers to “the taxpayer’s spouse…who was resident in Canada immediately
before the taxpayer’s death”. In my view, the phrase “immediately before the taxpayer’s death” modifies
when the spouse had to be resident in Canada. It does not require that the
spouse had to have been a spouse immediately before the taxpayer’s death. I
reach this conclusion by reviewing the equivalent provisions for spousal trusts
in paragraph 70(6)(b). That paragraph requires that, for the rollover to
apply to a spousal testamentary trust, the trust must be resident in Canada but
makes no comment on when the spouse had to be a spouse.
[44]
The French version of subsection 70(6) is
consistent with the English version.
[45]
Ms. Kuchta agrees that subsection 70(6) would be
meaningless if the word “spouse” did not include widows and widowers. She is
unable to provide a persuasive explanation why Parliament would have used the
colloquial meaning of “spouse” in this subsection.
[46]
Subsection 252(3) extends the ordinary meaning
of the word “spouse” to include individuals who are parties to a void or
voidable marriage. This extended definition applies only to certain provisions
of the Act that are enumerated in subsection 252(3). Those sections include
subsection 70(6). Ms. Kuchta submits that this extended definition may provide
an explanation for the broader use of the word “spouse” in subsection 70(6) but
she was unable to explain how that would be the case. I see nothing in
subsection 252(3) that would cause the word “spouse” to include widows and
widowers in the provisions enumerated therein. I also note that subsection
146(8.91) discussed above is not one of the provisions enumerated in subsection
252(3).
Subsections
72(2) and 148(8.2)
[47]
Similar uses of the word “spouse” as being inclusive
of widows and widowers are found in subsection 72(2) which deals with the
transfer of rights on death and 148(8.2) which deals with transfers of life
insurance policies on death. Subsection 148(8.2) uses similar language to
subsection 70(6). Subsection 72(2) refers directly to a spouse described in
subsection 70(6).
[48]
The French versions of these subsections are
consistent with the English versions.
Subsection
146(8.8)
[49]
Subsection 146(8.8) deals with the taxation of a
RRSP on the death of the annuitant. It is a strong example of Parliament using
the word “spouse” in a way that excludes widows and widowers.
[50]
The relevant portion of subsection 146(8.8)
reads:
Where the annuitant under a registered retirement savings plan
(other than a plan that had matured before June 30, 1978) dies after June 29,
1978, the annuitant shall be deemed to have received, immediately before the
annuitant's death, an amount as a benefit out of or under a registered
retirement savings plan equal to the amount, if any, by which
(a) the fair market value of all the property of the plan at the time of
death
exceeds
(b) where the annuitant
died after the maturity of the plan, the fair market value at the time of the
death of the portion of the property described in paragraph (a) that, as a
consequence of the death, becomes receivable by a person who was the
annuitant's spouse or common-law partner immediately before the death, or
would become so receivable should that person survive throughout all guaranteed
terms contained in the plan.
[emphasis
added]
[51]
Subsection 146(8.8) specifically refers to the
person in Ms. Kuchta’s position not as “the annuitant’s spouse” but rather as “a person who was the annuitant’s spouse…immediately before
the death”. This phrase clearly shows that, in subsection 146(8.8),
Parliament intended the word “spouse” to exclude widows and widowers. If
Parliament had intended those words to be included in the meaning of “spouse”,
it would have been unnecessary for Parliament to describe the status of spouse
as being something that was in place immediately before death.
[52]
The French version of subsection 146(8.8) is
consistent with the English version.
Subsections
146(1) “refund of premiums”, 146(5.1) and 248(23.1)
[53]
Phrases similar to the phrase in subsection
146(8.8) are found in the definition of “refund of premiums” in subsection
146(1) and in subsections 146(5.1) and 248(23.1). All of these subsections are
strong examples of Parliament using the word “spouse” in a way that excludes
widows and widowers.
[54]
The definition of “refund of premiums” in
subsection 146(1) refers to “an individual who was,
immediately before the death, a spouse…of the annuitant”.
[55]
Subsection 146(5.1) deals with the deduction of
contributions to a spousal RRSP in the year in which the contributor dies. It
refers to “an individual who was the taxpayer’s
spouse…immediately before the death.”
[56]
Subsection 248(23.1) is a deeming provision
relating to property transferred after a taxpayer’s death. It refers to
transfers to “a person who was the taxpayers’ spouse…at
the time of death.”
[57]
The French versions of these subsections are
consistent with the English versions.
Subsection
147.3(7)
[58]
Subsection 147.3(7) deals with transfers of lump
sum registered pension plan benefits on death. Differences between the English
and French versions of the subsection make it unclear how Parliament viewed the
words “spouse” and “époux”. The English version of subsection 147.3(7) reads:
An amount is transferred from a registered pension plan in
accordance with this subsection if the amount
(a) is a single amount
no portion of which relates to an actuarial surplus;
(b) is transferred on
behalf of an individual who is entitled to the amount as a consequence of
the death of a member of the plan and who was a spouse or common-law partner or
former spouse or common-law partner of the member at the date of the member's
death; and
(c) is transferred
directly to
(i) another registered
pension plan for the benefit of the individual,
(ii) a registered
retirement savings plan under which the individual is the annuitant (within the
meaning assigned by subsection 146(1)), or
(iii) a registered
retirement income fund under which the individual is the annuitant (within the
meaning assigned by subsection 146.3(1)).
[emphasis added]
[59]
Where the English version speaks of an
individual who was the spouse at the date of death, the French version
speaks of an individual who is the spouse at the date of death. Thus the
English version suggests that the status of being a spouse ceases on death
while the French version suggests the opposite. As a result of this
inconsistency, subsection 147.3(7) is not helpful to a contextual analysis.
Ms. Kuchta’s
position
[60]
I have outlined Ms. Kuchta’s arguments above. In
summary, Ms. Kuchta agrees with the meaning of the word “spouse” in all of the above
provisions that support her position and disagrees with the meaning in those
that do not. She agrees that the provisions she disagrees with would be
rendered meaningless without the colloquial meaning. She is unable to provide persuasive
explanations of why Parliament would have used that colloquial meaning in those
provisions and the legal meaning in the other provisions.
Respondent’s position
[61]
The Respondent takes a somewhat surprising
position.
Rather than simply agreeing that Parliament has used the word “spouse”
inconsistently and relying on that inconsistency to show that the word is
capable of two different meanings, the Respondent takes the position that
Parliament has used the word consistently in all of the above provisions in a
manner that includes widows and widowers. The Respondent’s argument is the same
for all of the provisions that I have found support the legal meaning of the
word “spouse”. In each case, the Respondent focuses on the inclusion in the
relevant provision of a phrase such as “immediately
before death” that focuses the reader on when the test of being a spouse
is to be met.
[62]
I will address the Respondent’s argument by
examining the definition of “refund of premiums” in subsection 146(1). The
relevant part of that definition reads:
“refund of premiums” means any amount paid out of or under a
registered retirement savings plan (other than a tax-paid amount in respect of
the plan) as [a] consequence of the death of the annuitant under the plan,
(a) to an individual who was, immediately before the death, a spouse or
common-law partner of the annuitant, where the
annuitant died before the maturity of the plan, or
…
[emphasis
added]
[63]
The Respondent submits that, in drafting this
definition, Parliament would have started with the phrase “to an individual who was a spouse or common-law partner of
the annuitant”. The Respondent submits that the word “spouse” in that
phrase would have included widows and widowers. However, the Respondent points
out that such a phrase would also have caught ex-wives and ex-husbands. Thus,
the Respondent argues that Parliament added the phrase “immediately
before the death”, not to ensure that widows and widowers were caught by
the subsection, but rather to ensure that ex-wives and ex-husbands would be
excluded. I disagree.
[64]
The Respondent’s position presupposes that the
drafters of the definition used complex language that then needed to be fixed
to prevent a problem. In my view, the better view is that, if the drafters of
the definition believed that “spouse” included widows and widowers, they would
have used the simple phrase: “to a spouse or common-law
partner of the annuitant”. This simple phrase is consistent with phrases
like “the spouse or common-law partner of the deceased”
used in subsection 146(8.91), a subsection where Parliament appears to have
accepted that “spouse” includes widows and widowers. Furthermore, unlike the
Respondent’s interpretation, that simple phrase would have followed the
statutory convention of drafting in the present tense. It would also have
avoided any purported problem with ex-wives and ex-husbands. In my view, the
only logical reason to expand this simple language and introduce the use of the
past tense by adding the phrase “an individual who was,
immediately before the death” would have been to ensure that widows and
widowers were included in the definition because Parliament believed that they
were not otherwise included.
Conclusion
[65]
Based on all of the foregoing, I am left with
two conflicting uses of the word “spouse” in the Act. One use indicates that, in
certain circumstances involving the transfer of property on death, Parliament
intended that the word “spouse” include a widow or widower. The other use
indicates that Parliament intended the opposite. Thus, the contextual analysis
has highlighted the fact that the ambiguity shown in the textual analysis is
more than simply theoretical. Parliament’s use of the colloquial meaning of
“spouse” in certain provisions dealing with the transfer of property on death
has shown that Parliament may also have intended to use that colloquial meaning
in subsection 160(1).
Purposive
Analysis
[66]
A purposive analysis of subsection 160(1)
strongly points in favour of an interpretation of the word “spouse” in that
subsection that includes a widow or widower. The scheme of subsection 160(1)
indicates that its purpose is to capture all transfers to non-arm’s length
persons and to expand that net to capture transfers to even arm’s length persons
on death. Looking more specifically at RRSPs, the scheme of subsection 160(1) appears
to be designed to capture transfers of RRSPs on death.
[67]
The most common example given of the type of
situation that subsection 160(1) is designed to prevent is a husband who has an
outstanding tax debt, transferring his assets to his wife. Any transfer of
property from Mr. Juba to Ms. Kuchta during his lifetime would have been
caught by subsection 160(1). Why would Parliament have not intended to catch a
transfer of Mr. Juba’s RRSPs on his death? Was the purpose to exempt transfers of
property on death from subsection 160(1)? Was the purpose to exempt transfers of
property to widows or widowers? Was it to exempt transfers of property to
people who were financially dependent or co-dependent on the tax debtor? Was it
to exempt transfers of RRSPs on death? Was the purpose to exempt transfers of
RRSPs on death to people who were financially dependent or co-dependent on the
tax debtor? As set out below, I find that there is no evidence to support any
of these purposes in subsection 160(1).
Transfers on
death:
[68]
There is nothing in the Act that would indicate
that Parliament intended to give relief from subsection 160(1) to transfers of
property on death. In fact, the opposite is true. Paragraph 160(1)(c)
causes subsection 160(1) to apply to transfers to anyone who was dealing at
non-arm’s length with the transferor. Paragraph 251(1)(b) deems an
estate to deal at non-arm’s length with any beneficiary of the estate. The
combined effect of these two paragraphs is that anyone who receives property
under a will is caught by subsection 160(1) whether or not they would otherwise
deal with the deceased at arm’s length. Thus, for example, a charity that
receives a bequest from a tax debtor under a will is caught by subsection 160(1)
despite the fact that that same charity would not be caught had the deceased
made the gift during his or her lifetime.
Transfers on
death to widows or widowers:
[69]
There is nothing in the Act that would indicate
that Parliament intended to give relief from subsection 160(1) to transfers of
property on death to widows or widowers. Had Mr. Juba transferred property to
Ms. Kuchta under his will, the transfer would have been caught even if the
legal meaning of the word “spouse” was used in subsection 160(1). Despite the
fact that Ms. Kuchta was no longer legally Mr. Juba’s spouse, paragraph 251(1)(b)
would have deemed her not to deal with his estate at arm’s length so subsection
160(1) would have applied.
Transfers on
death to people who are financially dependent or co-dependent on a tax debtor:
[70]
There is nothing in the Act that would indicate
that Parliament intended the application of subsection 160(1) to vary depending
on whether the recipient of the property was financially dependent or co-dependent
on the tax debtor. Subsection 160(1) applies to transfers to spouses, children,
grandchildren and minors during a tax debtor’s lifetime regardless of the
financial impact its application may have. It similarly applies to transfers to
widows, widowers, children, grandchildren and minors under a will regardless of
the financial impact its application may have.
Transfers of
RRSPs on death:
[71]
There is nothing in the Act that would indicate
that Parliament intended to give relief from subsection 160(1) to transfers of
RRSPs on death. If Mr. Juba had designated his children as the beneficiaries of
his RRSPs rather than Ms. Kuchta, subsection 160(1) would have caught this
transfer. This is because the children would still be Mr. Juba’s children after
he died, would therefore still be related to him, would therefore be deemed to
deal with him at non-arm’s length under paragraph 251(1)(a) and would
thus be caught under paragraph 160(1)(c). The same would have been true
if Mr. Juba had designated his parents, grandparents, siblings or grandchildren
as beneficiaries as all of those blood relatives retain their status as
relatives after death. It would even be true if Mr. Juba had designated a minor
who was not related to him by blood since, under paragraph 160(1)(b),
transfers to any minor are caught. Furthermore, under section 160.2, a transfer
of an RRSP to any person whomsoever regardless of their relationship with the
tax debtor makes that person liable for taxes arising from the termination of
the RRSP itself.
Transfers of
RRSPs on death to people financially dependent or co-dependent on a tax debtor:
[72]
There is nothing in the Act that would indicate
that Parliament intended to give relief from subsection 160(1) to transfers of
RRSPs to people who are financially dependent or co-dependent on tax debtors. Subsection
160(1) applies to transfers of RRSPs to children, grandchildren and minors regardless
the financial impact its application may have. There is nothing in the Act that
would indicate that Parliament intended to treat financially dependent
children, grandchildren and minors in one way but financially dependent or
co-dependent widows and widowers in a completely different way. Parliament
permits rollovers of RRSPs both to widows and widowers and to financially
dependent children and grandchildren.
When Parliament uses the Act to assist widows and widowers with taxes, it does
so by deferring the taxes payable on a deceased’s death, not by eliminating those
taxes or by forgiving unpaid taxes from prior years. If Parliament’s intention
was to reduce the overall financial burden faced by widows and widowers,
exempting RRSPs from the application of subsection 160(1) would be a very
strange way to do it. It would absurdly provide relief only to those
individuals whose spouses had failed to comply with the tax system during their
lifetimes. Widows and widowers who were in desperate financial straits but
whose deceased husband or wife had dutifully paid his or her taxes over the years
would receive no assistance. This hardly seems like a system that Parliament
would intend to create. Even more irrationally, such a system would only
provide relief if a tax debtor had a RRSP. The widows and widowers of tax
debtors who died with other assets would not receive the same relief. I cannot imagine Parliament
intending such an outcome.
Ms. Kuchta’s
submissions:
[73]
Ms. Kuchta was not able to provide me with
anything that would indicate that Parliament specifically intended to exempt
transfers of RRSPs to spouses from the application of subsection 160(1). She
was also unable to provide an explanation that satisfactorily addressed the
concerns that I have raised above.
[74]
Ms. Kuchta submits that Parliament has a policy
of exempting the transfer of property at the end of a marriage from the application
of subsection 160(1). She argues that subsection 160(4) provides relief from
the application of subsection 160(1) when property is transferred pursuant to a
decree, order or judgment of a competent tribunal or pursuant to a written
separation agreement. She says that Parliament may have chosen to follow a
similar policy when a marriage ends on death and thus intentionally exempted
transfers of RRSPs to widows and widowers. While I agree with Ms. Kuchta’s description
of subsection 160(4), I do not agree with her conclusion. As set out above,
transfers of property to widows and widowers under a will are clearly caught by
subsection 160(1). This indicates that Parliament’s intentions were exactly the
opposite of those that Ms. Kuchta is suggesting. For me to accept Ms. Kuchta’s
argument, I would have to conclude that Parliament had a policy of exempting
the transfer of property at the end of a marriage from the application of
subsection 160(1) but, in the case of marriages ending on death, only chose to
apply that policy to RRSPs.
Analysis
[75]
In summary, there are two different meanings of
the word “spouse”: one legal and one colloquial. A contextual analysis shows
that Parliament has used both the legal and colloquial meanings in provisions
of the Act involving transfers of property on death. This use of the both
meanings demonstrates that there is textual ambiguity in the meaning of the
word “spouse” in subsection 160(1). Given that ambiguity, it is appropriate to
give weight to the purpose of the subsection. The purposive analysis points
strongly in favour of an interpretation of “spouse” in subsection 160(1) that
includes widows and widowers. Accordingly, I find that the word “spouse” in
subsection 160(1) includes a person who was, immediately before the tax
debtor’s death, his or her spouse.
[76]
Ms. Kuchta submits that a contextual analysis
cannot alter the meaning of a word where the words of the statute are clear. I
do not think that is what the contextual analysis has done in this matter. The
contextual analysis has not altered the ordinary meaning of the word “spouse”.
It has simply revealed that Parliament, in the same piece of legislation, in
provisions dealing with the same subject matter, has used the word “spouse” in
two different ways. In other words, the contextual analysis has revealed that
Parliament accepts that the word has two ordinary meanings. The contextual
analysis has informed my understanding of the textual analysis and leads me to
conclude that the text of subsection 160(1) is ambiguous. This process was
aptly described by the Supreme Court of Canada in Canada Trustco Mortgage
Company v. The Queen:
Even where the
meaning of particular provisions may not appear to be ambiguous at first
glance, statutory context and purpose may reveal or resolve latent ambiguities. “After all, language can never
be interpreted independently of its context, and legislative purpose is part of
the context. It would seem to follow that consideration of legislative purpose
may not only resolve patent ambiguity, but may, on occasion, reveal ambiguity
in apparently plain language.” See P.W. Hogg and J.E. Magee, Principles of Canadian Income Tax Law
(4th ed. 2002), at p. 563. In order to reveal and resolve any latent
ambiguities in the meaning of provisions of the Income Tax Act, the courts must
undertake a unified textual, contextual and purposive approach to statutory
interpretation.
[77]
What Ms. Kuchta is essentially asking me to do
is to stop my analysis after performing the textual analysis (based on her
position that there was no ambiguity shown in that analysis). That is not my
understanding of how a textual, contextual and purposive analysis is to be
performed. Such an analysis is not a gated system whereby one only proceeds to
the contextual analysis if one finds ambiguity in the textual analysis and then
only proceeds to the purposive analysis if one finds ambiguity in the
contextual analysis. On the contrary, one is to perform a complete textual,
contextual and purposive analysis and then, looking at all of the results,
apply an appropriate weighting to each aspect of the analysis in the
circumstances in order to reach a conclusion.
[78]
Had Parliament consistently used the legal
meaning of the word “spouse” throughout the Act, then, despite the existence of
the colloquial meaning of the word and the fact that the purposive analysis
strongly supports that meaning, I would not have found that the word “spouse”
in subsection 160(1) includes widows and widowers. The use of additional
language in provisions such as subsection 146(8.8) to specifically include
widows and widowers, would have convinced me that there was no textual
ambiguity to the word “spouse” in subsection 160(1). It is not my role to
interpret otherwise unambiguous text in a piece of tax legislation in a manner
that ensures that Parliament’s goals are achieved. This is particularly true in
a far reaching “draconian” provision such as subsection 160(1). It is only
because the contextual analysis revealed that Parliament has used both meanings
of the word “spouse” in the Act in similar provisions that I am willing to give
the weight that I have to the purposive analysis in order to determine which
meaning Parliament intended in its ambiguous use of the word in subsection
160(1).
Qualification
[79]
I would like to emphasize that the above finding
applies only to the use of the word “spouse” in subsection 160(1). Any person
wishing to apply a similarly broad interpretation of the word in other
provisions of the Act would have to undergo a textual, contextual, and
purposive analysis of the use of the word in that particular provision. The
contextual ambiguity described above may not be present in provisions of the
Act that do not deal with transfers of property on death. Similarly, the
purpose of the provision in question may not so clearly support the colloquial
meaning. Absent that contextual ambiguity and clear purpose, the mere existence
of both legal and colloquial meanings of the word “spouse” may not be
sufficient to result in a broader interpretation of the word in any given provision.
Conclusion
[80]
Based on all of the foregoing, I find that the
transfer from Mr. Juba to Ms. Kuchta meets the third Livingston
test. Accordingly, the Appeal is dismissed with costs.
Signed at Ottawa,
Canada, this 19th day of November, 2015.
“David Graham”
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