Citation:
2014 TCC 275
Date: 20140916
Docket: 2012-2530(IT)I
BETWEEN:
Robert Landry,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
The appellant is disputing a reassessment made
by the Minister of National Revenue (Minister), disallowing the deduction of
legal fees ($17,600) that he claimed in computing his income for the 2010
taxation year.
[2]
The appellant was obliged to pay child support,
which was deducted from his income by the Percepteur des pensions alimentaires in
the Province of Quebec.
[3]
He maintains that, in 2010, his two children reached
the age of majority and became financially independent and that he was no
longer obliged to pay support to his former spouse for his children.
[4]
He retired on June 1, 2010, and began receiving
his retirement benefits starting on that date.
[5]
However, in order to receive the entire amount
of his retirement income, he had to apply to the Superior Court of Québec
(Family Division) to obtain a judgment permanently cancelling the support for
the two children.
[6]
He claimed the deduction of the legal fees that he
had incurred during this process, and the Minister disallowed it.
[7]
The Minister argues that the fees were incurred
to terminate the support and that, as such, they are personal or living
expenses, which are not deductible under paragraph 18(1)(h) of the Income
Tax Act.
[8]
The respondent relies on paragraph 21 of
Interpretation Bulletin IT-99R5, which was approved by this Court in Loewig
v. Canada, 2006 TCC 476, [2006] T.C.J. No. 373 (QL).
[9]
In that case, Mr. Loewig had stated that the
purpose of his action was to establish a pre-existing right and to recover
amounts that had wrongly been deducted from his salary. This Court decided that
the costs incurred by Mr. Loewig to recover amounts paid in excess of his
obligations under the separation agreement cannot be said to be the cost of
gaining or producing income.
[10]
Indeed, in Nadeau v. M.N.R., 2003 FCA
400, [2004] 1 F.C.R. 587, [2003] F.C.J. No. 1611 (QL), the Federal Court
of Appeal clearly established, at paragraph 18, that expenses “incurred”
by the payer of support (including in order to terminate it) cannot be
considered to have been “incurred” for the purpose of earning income and stated
that the courts have never recognized any right to the deduction of these
expenses.
[11]
In the case at bar, in his Notice of Appeal, the
appellant referred to the fact that his children, who reached the age of
majority and became financially independent, were no longer entitled, under the
Divorce Act, to support payable to the mother for the benefit of the
children.
[12]
At the hearing, he asked counsel Ginette
Bélisle, who had represented him at the Superior Court (Family Division) and
who invoiced him for the legal fees at issue in this case, to explain the
situation.
[13]
Ms. Bélisle filed transcripts of the
various hearings that had taken place starting on April 29, 2010, before the
Superior Court of Québec (Family Division), at which she had represented the
appellant (Exhibit A-1). From those I gather that the appellant’s former spouse
and one of his children were asked to produce their income tax returns in order
to obtain a detailed statement of the child’s income.
[14]
According to Ms. Bélisle, those documents were
not provided and the former spouse refused to co-operate, which unduly delayed
the process. According to her, the children’s mother was not disputing that her
right to child support had expired when they appeared in court on May 27, 2010.
[15]
I note, however, that on May 27, 2010, the
Superior Court of Québec ordered the appellant to pay [Translation] “interim”
support and set the support amount for one of the children.
[16]
In addition, on June 17, 2010, the Superior
Court of Québec, after considering the interests of both children, denied the
request filed by Ms. Bélisle to [Translation] “convert
the interim order into a final order”. However, the court granted the appellant
the right to make an advance costs application given the mother’s lack of co-operation.
[17]
It was not until November 3, 2011, that the
Superior Court of Québec approved the consent to judgment signed by the parties
on October 8, 2011. That agreement stipulates that the support provided for the
elder child is cancelled as of June 1, 2010, and for the younger child as
of January 1, 2011 (Exhibit A-1).
[18]
According to the appellant, the amounts
collected in excess by the mother have been repaid.
[19]
The invoices at issue in this dispute relate to
an [Translation] “Application to vary support for the [two] children” for the periods
from March 13 to May 31, 2010, and from June 1 to June 30, 2010
(Exhibit I-1).
[20]
In her testimony, Ms. Bélisle maintained that
the support had expired as of June 1, 2010. She explained that her mandate
was to institute the necessary proceedings to obtain a judgment cancelling the
support so that the appellant could receive his full pension starting on June
1, 2010. She explained that the Percepteur des pensions alimentaires cannot, on
his own initiative, stop deducting support. He must first obtain a court
judgment to do so.
[21]
In my view, the procedure to obtain a judgment
cancelling support is not simply a rubber stamp like Ms. Bélisle implied.
[22]
The transcripts indicate that a case must be
made to establish the financial independence of the adult children and, thus,
to cancel the support.
[23]
Since such a case was not made, the various
judges involved in the file did not terminate support by a judgment.
[24]
Therefore, I do not agree that the support had
expired on its own before the judgment was signed.
[25]
Even though the consent to judgment signed on
October 8, 2011, indicated that the support was cancelled starting on June
1, 2010, for the elder child and on January 1, 2011, for the other child,
the appellant could not have been freed of his obligation to pay support since
the judgment approving the consent to judgment had not been signed. Thus, he
had to continue paying it, subject to being repaid the overpayment. I am of the
view that the proceedings instituted by Ms. Bélisle were instituted in order to
terminate the support.
[26]
In addition, I note that the first invoice for
$10,514.08 is dated May 31, 2010, and is for a period prior to June 1,
2010, when support was still payable for both children.
[27]
With regard to the second invoice for $7,075.13
dated July 20, 2010, it is related to the services rendered for the month
of June 2010, when the appellant still had to pay support for one of the
children (in accordance with the consent to judgment).
[28]
This Court’s decision in MacKinnon v. Canada,
2007 TCC 658, [2007] T.C.J. No. 500 (QL), to which the appellant referred,
cannot be of assistance to him. In that case, legal fees were incurred by the
taxpayer in order to confirm her right as the named beneficiary of a registered
retirement savings plan to amounts that had been remitted to her son’s estate
by mistake. The legal fees incurred in order to recover the amounts were
deductible because they had been incurred for the purpose of earning income to
which she had been entitled as the named beneficiary and which, by mistake, had
not been paid to her.
[29]
The situation is different here in that, since
the court had not been satisfied that the support for the children had to be
cancelled, no judgment had been signed to that effect.
[30]
The Percepteur des pensions alimentaires had to
collect the support until a judgment was obtained. Even though amounts were
paid in excess by the appellant, the fact remains that he had incurred the
expenses at issue here in order to terminate the payment of support. The case
law is clear in this regard: these legal fees are personal expenses and
therefore are not deductible.
[31]
The appeal is dismissed.
Signed at Ottawa, Canada, this 16th day of September 2014.
“Lucie Lamarre”
Translation certified true
on this 4th day of November 2014
Margarita Gorbounova, Translator
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