Citation: 2009 TCC 110
Date: 20090218
Docket: 2008-728(IT)I
BETWEEN:
JUANITA L. MURPHY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1] The appellant, Juanita Murphy, brings this appeal in
respect of determinations that affected her entitlement under the Income Tax
Act to the child tax benefit and the goods and services tax credit.
[2] The periods at issue are the 2004 and 2005 base
taxation years for the child tax benefit, and the 2004 and 2005 taxation years
for the goods and services tax credit.
[3] The determinations were made in February and March of
2007 and required Ms. Murphy to pay back the monthly benefits that she had
received since April 2006.
[4] In making the determinations, the Minister concluded
that Ms. Murphy’s daughter was not a “qualified dependant” beginning April 2006
because a special allowance was paid in respect of the daughter under the Children’s
Special Allowances Act. The payments were made because the daughter went
into foster care in March 2006.
[5] The relevant statutory provisions of Income Tax Act
provide that a child is not a qualified dependant if a special allowance is
payable in respect of the child for a relevant month pursuant to the Children’s
Special Allowances Act.
Appellant’s position
[6] Ms. Murphy acknowledges that her daughter lived in a
foster home during the relevant period. However, she asks that the Court
consider the entire situation.
[7] Ms. Murphy states that she continued to care for her
daughter after she went into foster care, both financially and otherwise. Also,
the daughter came home on a regular basis.
[8] Another factor that Ms. Murphy asks to be considered
is that she continued to receive the child tax benefit for about 11 months
after the daughter went into a foster home. The benefit was used, at least in
part, to care for the daughter. According to Ms. Murphy, no one told her that
receiving these benefits may have been illegal, or that she had an obligation
to report the changed circumstances to the Canada Revenue Agency.
[9] Further, Ms. Murphy notes that the benefits have been
paid back in their entirety, and that this has been a significant hardship on
her, and on her son whose child tax benefits were used at least in part to
repay the benefits in relation to the daughter.
[10] Ms. Murphy suggests that, taking all these
circumstances into account, it is not fair for the government to recoup 11
months worth of benefits on a retroactive basis.
Respondent’s position
[11] The original position of the respondent, as reflected
in the reply, is that Ms. Murphy is not entitled to benefits for periods
in which the federal government paid allowances under the Children’s Special
Allowances Act.
[12] This position changed at the hearing, apparently as a
result of a recent decision of Bowie J., Jahnke v. The Queen, 2008 TCC 544,
2008 DTC 4939.
[13] In Jahnke, it is noted that it is not the
payment of special allowances that triggers the disentitlement to the child tax
benefit. Rather it is whether the special allowances are payable. As Justice
Bowie notes, the two are not synonymous.
[14] The relevant statutory provisions are set out in
paragraphs 10 and 12 of Jahnke as follows.
[10] […]
Subsection 3(1) of the CSA Act governs
the payment of allowances, and it reads as follows:
(1) Subject to this Act,
there shall be paid out of the Consolidated Revenue Fund, for each month, a
special allowance in the amount determined for that month by or pursuant to
section 8 in respect of each child who
(a) is maintained
(i) by a
department or agency of the government of Canada or a
province, or
(ii) by an agency
appointed by a province, including an authority established under the laws of a
province, or by an agency appointed by such an authority, for the purpose of
administering any law of the province for the protection and care of children,
and who resides in the private home of
foster parents, a group foster home or an institution; or
(b) is
maintained by an institution licensed or otherwise authorized under the law of
the province to have the custody or care of children.
[12] The term “maintained” is defined for
purposes of the CSA Act, by section 9 of the Children’s Special
Allowance Regulations. It reads:
MAINTENANCE OF CHILD
9. For
the purposes of the Act, a child is considered to be maintained by an
applicant in a month if the child, at the end of the month, is dependant on the
applicant for the child's care, maintenance, education, training and
advancement to a greater extent than on any other department, agency or
institution or on any person.
[15] The respondent submits that the statutory requirements
set out above are satisfied in this case.
[16] In addition, counsel for the respondent raised a
further new argument. He submits that the appellant did not qualify for
benefits after her daughter went into foster care because the daughter did not
reside with Ms. Murphy after this time. This argument was not mentioned in the
reply and there were no factual assumptions mentioned in the reply that deal
with residence.
Analysis
[17] In this appeal, the respondent’s position is markedly
different from that stated in the reply. As a result, a serious question of
procedural fairness arises.
[18] Counsel for the respondent was very open at the
hearing about the deficiency with the reply. He submits, though, that in an
appeal under the informal procedure the Court should consider all arguments
whether they are in the pleadings or not.
[19] I cannot agree that this is the standard that should
apply. In regard to pleadings, procedural fairness should always be considered:
Burton v. The Queen,
2006 FCA 67, 2006 DTC 6133.
[20] In support of the respondent’s position, counsel
referred me to the decision of Miller J. in Stevens v. The Queen, 2008
TCC 47, 2008 DTC 2565.
[21] The circumstances of the Stevens case are quite
different from those in the present case.
[22] Stevens
involved a claim for an interest deduction under s. 20(1)(c) of the Income
Tax Act. At the hearing, the Minister sought to raise a new argument
as to why s. 20(1)(c) did not apply and Justice C. Miller
permitted the new argument to be made.
[23] The Stevens decision highlights a particular
problem for informal procedure appeals which have no provision for discoveries.
In many circumstances, the Minister should be given latitude to respond to the
facts presented by the appellant at the hearing.
[24] It does not follow, however, that pleadings are irrelevant
in the informal procedure for either party. Each case must depend on its
particular facts.
[25] This case
involves the disentitlement to the child
tax benefit as a result of provisions of the Children’s Special Allowances
Act. It is a very different situation from that in Stevens, where
the taxpayer claimed a deduction in a return based on information known only to
the taxpayer.
[26] In this
case, Ms. Murphy was at a significant
disadvantage by the failure of the reply to properly deal with the relevant
factual and legal issues.
[27] To his credit, counsel for the respondent tried to
salvage the situation by sending Ms. Murphy a letter shortly before the trial
in which he outlined the respondent’s position and included the relevant
statutory provisions.
[28] Unfortunately for the respondent, I find that the
letter provided too little information and it was sent too late, having been
received by Ms. Murphy just one day before the hearing.
[29] I would also make a brief comment about an issue that
was not mentioned at the hearing.
[30] It
appears that the special allowance in
respect of Ms. Murphy’s daughter was not actually “payable” during the
period at issue because the provincial agency had not properly applied for the
allowance. It only became payable in 2007 after the application was made.
[31] There was no argument before me as to whether the
lateness of the application would affect Ms. Murphy’s entitlement to benefits
under the Act. It may not affect the outcome. Nevertheless, I mention it because this information, known only to the Minister, was
not in the reply. It highlights the importance that a reply has in setting out
the relevant facts and issues.
[32] I would also mention that, in an appeal where the
appellant is not represented by experienced counsel, a judge often has an added
role in terms of ensuring that the proper issues are brought to the fore. This
role can be severely compromised if the reply is deficient.
[33] In some cases where the pleadings of either party are
deficient, it may be appropriate to adjourn the hearing.
[34] An adjournment would have presented significant
problems in this case. It likely would have been difficult for Ms. Murphy who
suffers from severe disabilities, it would have been inconvenient for the many
witnesses who attended the hearing, and the appeal had already been adjourned
once because the court docket was full.
[35] In these circumstances, I conclude that the interests
of justice are best served by allowing the appeal.
[36] Although
that is the basis for my conclusion, I
would also briefly comment on the substance of the case.
[37] All the witnesses at the hearing were forthright and
credible. It was clear that care was provided by both the foster mother and Ms.
Murphy. Also both women received funding from the government for the 11 months
at issue and they both considered that the funding should be used to support
the child.
[38] There could have been better documentary evidence
regarding custody. The custody agreement that was entered into evidence expired
by its terms after three months, and it was only in effect for a short time
during the period in question.
[39] If I were
to decide on the merits, I would likely
conclude that Ms. Murphy was disentitled to the benefits on the basis that the
provincial agency maintained the daughter, within the meaning of section 9 of
the Children’s Special Allowance Regulations. This conclusion would be
based on the limited evidence that was presented at the hearing.
[40] Finally, I would comment that Ms. Murphy asked the
Court to tell her who had the obligation to inform her of the potential loss of
the child tax benefit when she agreed to place her child in foster care, as she
did.
[41] An official from Children’s Services admitted in her
testimony that there may have been an administrative error in this case in not
properly informing Ms. Murphy of the effects of foster care on the child
tax benefit.
[42] This circumstance is unfortunate, but it is not grounds
for allowing the appeal. It is a useful reminder, however, of the hardship that
can arise when repayment of benefits is required several months after they have
been received.
[43] For the reasons stated above, I conclude that the
appeal should be allowed and that the determinations should be referred back to
the Minister for redetermination on the basis that Ms. Murphy was an eligible
individual and her daughter was a qualified dependant.
[44] There will be no
order as to costs.
Signed at Ottawa, Canada this 18th
day of February 2009.
“J. Woods”
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