Date: 20020319
Docket: 2000-3534-IT-I
BETWEEN:
LOUISE NOBERT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Tardif, J.T.C.C.
[1]
This is an appeal concerning the 1997 and 1998 taxation
years.
[2]
The issue is whether in computing the appellant's income for
the two years in question the amounts of $5,082 and $6,318
respectively were duly included as alimony or other allowance
payable on a periodic basis.
[3]
In issuing the notices of reassessment dated December 29,
1999, the Minister of National Revenue (the "Minister")
made the following assumptions of fact:
[TRANSLATION]
(a)
the appellant and Denis Dufresne were married on
December 22, 1989;
(b)
the appellant and Denis Dufresne are the parents of two
children:
(i)
Audray-Anne, born on October 5, 1990;
(ii)
Bruno-Pierre, born on July 9, 1992;
(c)
the marriage of the appellant and Denis Dufresne was dissolved on
November 17, 1995;
(d)
in an agreement on an application for variation of corollary
relief dated March 21, 1997, the parties agreed as
follows:
(i)
Denis Dufresne is required to pay the appellant the sum of $325
for support arrears,
(ii)
Denis Dufresne is required to pay the appellant, for the minor
children Audray-Anne and Bruno-Pierre, the following
weekly amounts depending on the source of his income:
(a)
employment insurance
benefits:
$100,
(b)
salary:
$150,
(c)
no
income:
no amount payable;
(e)
on May 20, 1997, the Honourable Judge Robert Legris of the
Superior Court received, confirmed and rendered enforceable the
agreement between the parties dated March 21, 1997, and
ordered the said parties to comply therewith;
(f)
the Minister established that the amounts received by the
appellant as support were taxable for the 1997 and 1998 taxation
years;
(g)
the Minister based his decision on the fact that the judgment
dated May 20, 1997, had merely confirmed the agreement
between the parties dated March 21, 1997.
[4]
After being sworn, the appellant denied the facts set out in
subparagraphs (f) and (g).
[5]
The appellant explained that she and her spouse had agreed on the
terms and conditions relating to the amounts payable in respect
of support obligations. She explained that both had been
represented at the time by counsel and that both parties had
wanted the content of the agreement to be subject to the new
provisions of the Income Tax Act (the
"Act") respecting the non-taxation of
support payments in the recipient's hands, which came into
force in May 1997.
[6]
The agreement, dated March 21, 1997, reads as follows:
[TRANSLATION]
. . .
AGREEMENT ON APPLICATION
FOR VARIATION OF COROLLARY RELIEF
The parties hereto have entered into the following
agreement:
(1)
TO VARY the judgment of January 22, 1996;
(2)
TO ORDER the applicant to pay the respondent the amount of $325
in respect of support arrears for the period from July 1996 to
the date hereof;
(3)
TO ORDER the applicant to pay the respondent, for the minor
children Audray-Anne and Bruno-Pierre, support of $100 a
week when the applicant is receiving employment insurance
benefits and $150 a week when the applicant is employed; the
applicant is not required to pay the respondent support when he
is receiving no income;
(4)
THE WHOLE with each party paying his or her own costs.
. . .
[7]
The agreement was confirmed by the Honourable
Judge Robert Legris, the whole as appears in the
judgment dated May 20, 1997, which reads as follows:
[TRANSLATION]
. . .
The court has before it an application for variation of corollary
relief.
Whereas the parties have entered in the record an agreement that
should be confirmed;
FOR THESE REASONS, THE COURT:
RECEIVES, CONFIRMS AND RENDERS ENFORCEABLE the agreement entered
into between the parties on March 21, 1997, appended to this
judgement, and ORDERS the parties to comply therewith.
. . .
[8]
The appellant stated that the agreement had been deliberately
held back so that when submitted to the court it would bear a
date subsequent to the coming into force of the provisions of the
Act relating to the non-taxation of support payments
in the recipient's hands.
[9]
In support of her claims, the appellant submitted that the
agreement provided for a significant reduction in the amount that
had till then been payable to her, precisely because the amounts
to be paid were no longer to be taxable in her hands.
[10] She added
that her former spouse subsequently changed his mind, as he had
initially said he would not claim the deduction.
[11] The
respondent, for her part, emphasized the date of the agreement,
which was prior to the coming into effect of the provisions
relating to the non-taxation of support payments in the
recipient's hands.
[12] According
to the Minister, the judgment essentially confirmed the entire
content of the agreement and so the date of the judgment is of no
effect. To reinforce her view of the effect of the agreement, the
respondent argued that the parties had complied with its content
from the date of its signing.
[13] In
support of her claims regarding the effects of a private
agreement, the respondent referred to the judgment of the
Superior Court of Quebec in H.L. c. R.M., a case in which
Morin J. wrote as follows :
[TRANSLATION]
10.
Counsel for Ms. H.L. emphasized to the court that the agreement
of January 22, 1993, does not have the effect of an
out-of-court settlement since it was not confirmed by judgment.
Counsel contended that the court was thus not bound by the
agreement and that it could decide on the basis of what it found
to be fair and appropriate having regard to the circumstances
referred to in section 17 of the Divorce Act. Relying
moreover on Ms. H.L.'s testimony, counsel disputed the
agreement's validity in light of the fact that her client had
not been assisted by independent legal counsel at the time the
agreement was signed.
11.
The fact that the agreement was not confirmed by the court in no
way prevents it from having its effects between the parties. In
the decision Droit de la famille No. 153,
Jean Marquis J. of the Superior Court ruled on this question
as follows:
When R-3 was signed on May 1, 1961, the parties were able
to agree on the amount of support and they were not required to
submit that agreement for approval by the courts except to the
extent of obtaining judicial recognition, with the consequences
which that entails.
However, the agreement's validity is not conditional on
its being approved or sanctioned by the court: it is a valid
agreement which has its effects between the parties.
[14]
Morin J. referred to a passage from the judgment of the
Supreme Court of Canada in Pelech v. Pelech, [1987] S.C.J.
No. 31 (Q.L.). Wilson J. therein stated:
. . . I believe that the courts must recognize the right of
the individual to end a relationship as well as to begin one and
should not, when all other aspects of the relationship have long
since ceased, treat the financial responsibility as continuing
indefinitely into the future. Where parties, instead of resorting
to litigation, have acted in a mature and responsible fashion to
settle their financial affairs in a final way and their
settlement is not vulnerable to attack on any other basis, it
should not, in my view, be undermined by courts concluding with
the benefit of hindsight that they should have done it
differently.
[15] The above
two passages show that judicial confirmation of an agreement is
not essential in order for the agreement to have effect. However,
it is also clearly stated that such confirmation provides what
Morin J. describes as "judicial recognition, with
the consequences which that entails".
[16] Only a
written agreement or a judgment is considered for the analysis of
the tax consequences of support payments. An oral understanding
or agreement has no effect in tax matters. While valid in civil
law, an oral agreement is however vulnerable since it can be
extremely difficult to prove.
[17] The
dispute in the instant case turns essentially on the date to be
considered, and this obviously has significant consequences.
[18] The
respondent contends that the agreement of March 21, 1997,
must be the reference document for determining whether the
agreement met the requirements of the Act.
[19] In
support of her interpretation, the respondent argues that the
parties applied and complied with the content of the agreement
from the moment it was signed on March 21, 1997.
[20] This is a
most unconvincing argument which establishes nothing except that
the parties honoured their signature until they had obtained a
judgment.
[21] An
agreement under private writing creates rights and obligations
for the signatories, who may at any time cancel, vary or confirm
its content either in writing or orally. An oral agreement is
subject to problems of proof; moreover, it must be recognized by
the courts in order to be enforceable.
[22] A
judgment, on the other hand, may be quickly enforced at all
times, and only another judgment may vary its content.
[23] In the
instant case, the judgment of May 20, 1997, constitutes the
confirmation and recognition of the will of the parties expressed
on March 21, 1997.
[24] Although
the judgment adopted the content of the agreement dated
March 21, 1997, it blotted out that agreement for the
future. Any support collection action would thenceforth be based
on the judgment alone as the agreement no longer had any legal
effect.
[25] The
judgment dated May 20, 1997, constituted the culmination of
an agreement and, failing any express stipulation that certain
provisions applied retroactively, the date of the judgment is the
sole applicable reference.
[26] In the
instant case, the parties signed an agreement on March 21,
1997. They could have verbally varied or even cancelled that
written agreement at any time. In actual fact, they verbally
confirmed and ratified its content since they chose to have it
confirmed by the court. Indeed, the appellant explained that
ratification was the firm intent of her former spouse and her
when they submitted their agreement to the court. There is no
evidence to rebut or to justify rejecting the appellant's
credible and plausible explanation.
[27] For these
reasons, the appeal is allowed.
Signed at Ottawa, Canada, this 19th day of March 2002.
"Alain Tardif"
J.T.C.C.
Translation certified true on this 10th day of May
2002
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-3534(IT)I
BETWEEN:
LOUISE NOBERT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on February 25, 2002, at
Bécancour, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the
Appellant:
The Appellant herself
Counsel for the
Respondent:
Marie-Aimée Cantin
JUDGMENT
The
appeal from the assessments made under the Income Tax Act
for the 1997 and 1998 taxation years is allowed in accordance
with the attached reasons for judgment.
Signed at Ottawa, Canada, this 19th day of March 2002.
J.T.C.C.
Translation certified true
on this 10th day of May 2002
Erich Klein, Revisor
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