Citation: 2007TCC733
Date: 20071214
Docket: 2007-2461(IT)I
BETWEEN:
CARL MELNYK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1] The issue in this
case is whether the Appellant is entitled to claim a deduction in computing his
income for 2005 for legal fees that he incurred in relation to child support
payments.
[2] The Appellant
married Kaila Melnyk on December 23, 2000 and they had one son together, Graeme
Neil Melnyk, born on September 21, 2000. The Appellant and Kaila Melnyk
separated on June 21, 2003. Following the separation the Appellant and Kaila
Melnyk shared custody of Graeme Melnyk. In the Affidavit of the Appellant that
was prepared for a proceeding in the Supreme Court of British Columbia and
sworn on August 31, 2005, the Appellant stated that the approximate amount of
time that Graeme spent with him was 41.5% of the time and the approximate
amount of time that Graeme spent with his mother was approximately 58.5% of the
time.
[3] The Appellant
incurred legal fees in relation to the Court proceedings in 2005. The Court
proceedings related to the amount of child support that was to be paid. The
culmination of those proceedings was an Order of the Supreme Court of British
Columbia which provided, in part, as follows:
THIS COURT ORDERS that
1. Subject to Section 12 of the Divorce
Act, (Canada), the Plaintiff, CARL NICHOLAS NEIL MELNYK, and the Defendant,
KAILA DEANNA MYLNYK, who were married at Victoria, British Columbia, on the
23rd day of December, 2000, are divorced from each other, the divorce to take
effect on the 31st day after the date of this order.
2. AND UPON the Plaintiff having
been found to have a guideline income of $69,000.00 and the Defendant having
been found to have a guideline income of $45,000.00;
3. AND UPON the one child of the
marriage; namely, Graeme Carl Melnyk, born September 21, 2000 (hereafter
referred to as “Graeme”) having been found to spend 40% or more of the time
with the Plaintiff;
4. The Plaintiff shall pay to the
Defendant 60% of his guideline child maintenance obligation which is currently
the sum of $336.60 per month for Graeme’s support payable on the first day of
each and every month, commencing retroactively the first day of February, 2005.
[4] The position of the
Appellant is that this child support amount is only the net amount payable. His
position is that because Kaila Melnyk was also employed (although at a lower
salary than the Appellant), she was obligated to pay to him an amount of child
support which was set off against his obligation to pay child support to her
(based on 100% of the Guideline amount) and this amount payable by him is the
net result of this set off. Hence it is the position of the Appellant that he
did incur legal fees to earn income, i.e., the amount of child support that the
Appellant claims was payable to him by Kaila Melnyk. I am unable to agree with
this position.
[5] Paragraphs 8 and 9
of the Federal Child Support Guidelines provide as follows:
Split custody
8. Where each spouse has custody
of one or more children, the amount of a child support order is the difference
between the amount that each spouse would otherwise pay if a child support
order were sought against each of the spouses.
Shared custody
9. Where a spouse exercises a
right of access to, or has physical custody of, a child for not less than 40
per cent of the time over the course of a year, the amount of the child support
order must be determined by taking into account
(a) the amounts set out in the
applicable tables for each of the spouses;
(b) the increased costs of
shared custody arrangements; and
(c) the conditions, means,
needs and other circumstances of each spouse and of any child for whom support
is sought.
[6] The Supreme Court
of Canada in Contino v.
Leonelli-Contino, [2005] S.C.J. No. 65 dealt with the
interpretation of section 9 of the Federal Child Support Guidelines. The majority of the
Supreme Court of Canada stated as follows:
…
2. Analysis
2.1 Interpretation of Section 9 of the Guidelines
19 In
order to determine the correct interpretation to be given to s. 9 of the
Guidelines, it is necessary to examine the words of the provision in their
entire context and in their grammatical and ordinary sense harmoniously with
the scheme of the Guidelines, the object of the Guidelines, and the intention
of Parliament (see, e.g., Rizzo & Rizzo Shoes Ltd. (Re),[1998] 1 S.C.R. 27 at para. 21; Francis v. Baker, at para. 34; Chartier v.
Chartier, [1999] 1 S.C.R. 242).
20 Before turning
to the heart of this case, it is important to point out what is in essence an
issue of semantics. Parties and courts across the country have inconsistently
referred to the parents under s. 9 as the "custodial" parent,
"non-custodial" parent, "payor" parent and
"recipient" parent. There is no perfect terminology. However, it is
clear that in a shared physical custody arrangement, given the nature of child
support, one cannot ignore that a transfer of money from one parent to the
other will almost always occur.
Thus, for sake of clarity, I will use the concepts of "payor" parent
and "recipient" parent.
…
32 The underlying principle of the Guidelines is that
"spouses have a joint financial obligation to maintain the children of the
marriage in accordance with their relative abilities to contribute to the
performance of that obligation" (Divorce Act, s. 26.1(2) (see
Appendix)). The Guidelines reflect this principle through these stated
objectives (Guidelines, s. 1):
(a) to
establish a fair standard of support for children that ensures that they continue
to benefit from the financial means of both spouses after separation;
(b) to
reduce conflict and tension between spouses by making the calculation of child
support orders more objective;
(c) to
improve the efficiency of the legal process by giving courts and spouses
guidance in setting the levels of child support orders and encouraging
settlement; and
(d) to
ensure consistent treatment of spouses and children who are in similar circumstances.
…
36 …
I agree with the father that the formula used to establish the standard Table
amounts assumed that all of the expenditures for the children are met by the recipient
parent and no account for any child-related expenditures is incurred by the
payor parent at any level of access (see Canada, Department of Justice, Formula
for the Table of Amounts Contained in the Federal Child Support Guidelines: A
Technical Report (1997), at p. 2; Wensley, at pp. 83-85; G. C. Colman,
"Contino v. Leonelli-Contino -- A Critical Analysis of the Ontario
Court of Appeal Interpretation of Section 9 of the Child Support Guidelines" (2004), 22 C.F.L.Q. 63, at pp.
71-74; P. Millar and A. H. Gauthier, "What Were They Thinking? The
Development of Child Support Guidelines in Canada"
(2002), 17 C.J.L.S. 139, at pp. 149 and 155-56).
2.2 Factors Under Section 9
37 The
framework of s. 9 requires a two-part determination: first, establishing that
the 40 percent threshold has been met; and second, where it has been met,
determining the appropriate amount of support.
[7] In my opinion in
determining the amount of support payable under paragraph 9 of the Federal
Child Support Guidelines, the factors set out in section 9 of these Guidelines
are to be analyzed to determine the amount of child support that will be
payable by one parent to the other. While it is recognized that in situations
where both spouses are earning income that each will contribute to the support
of the child, the contributions are not made from one parent to the other.
While Graeme was with Kaila Melnyk the amount that she would be paying for his
food, clothing, shelter and other items that would be purchased for him would
not be made by payments made from Kaila to the Appellant, but rather would be
paid directly by Kaila to the provider of these goods and services. Kaila had an
obligation to contribute towards the support of Graeme but not by making
payments to the Appellant, but by making payments directly to the persons who
were providing the goods and services to Graeme while Graeme was with her. Her
contributions to the support of Graeme would not be income to the Appellant.
[8] This is also
confirmed in the Affidavit executed by the Appellant on August 31, 2005. In
this Affidavit, which was completed in relation to the proceedings in the
Supreme Court of British Columbia related to the child support, the Appellant
stated as follows:
9. I have completed and attached to this my
Affidavit the following:
Supplementary Child Support Fact Sheet B
and
the amount of child
support set out in the proposed order is $143.00, payable by the
Plaintiff/Defendant.
[9] In the body of the
Affidavit itself, it is not clear whether the Appellant (who was the Plaintiff
in that matter) would be the person paying the child support or whether Kaila
Melnyk (who was the Defendant in that proceeding) would be the person paying
the child support amount. However, in the Supplementary Child Support Fact Sheet B which was
attached to his Affidavit, this matter is clarified. At the bottom of this page,
it is stated as follows:
Child support as set out in the proposed order is $143.00 /
month payable by the Plaintiff.
[10] Therefore, the
Affidavit of the Appellant which was filed with the Supreme Court of British
Columbia confirmed that only one amount was contemplated as a child support amount,
which is the amount payable by the Appellant to Kaila Melnyk. There is no
mention of any obligation of Kaila Melnyk to pay any child support amount to
the Appellant. The Order that was issued, which was referred to above,
confirmed that only one amount was payable and that is the amount that is
payable by the Appellant to Kaila.
[11] In the case of Rabb
v. Her Majesty the Queen, [2006] 3 C.T.C. 2266; 2006 D.T.C. 2674 the issue
was the deductibility of legal fees in a split custody situation and not a
joint custody situation. Therefore, the issue in that case related to section
8 of the Federal Child Support Guidelines, not section 9 of the Federal
Child Support Guidelines which is
the applicable provision in this case.
[12] Therefore, since the
legal fees incurred by the Appellant in 2005 are related to his obligation to
pay child support amounts to Kaila Melnyk, they were not incurred for the
purpose of earning income and hence were not deductible as a result of the
provisions of paragraph 18(1)(a) of the Income Tax Act. As noted by the
Federal Court of Appeal in Nadeau v. Minister of National Revenue, 2003
FCA 400; 2003 D.T.C. 5735; [2004] 1 C.T.C. 293:
18 Conversely,
the expenses incurred by the payer of support (either to prevent it from being
established or increased, or to decrease or terminate it) cannot be considered
to have been incurred for the purpose of earning income, and the courts have
never recognized any right to the deduction of these expenditures (see, for
example, Bayer, supra).
[13] From the time that
the Appellant and Kaila Melnyk were separated through to the Order granted in
2005 the Appellant was always in the position of being the payer of child
support amounts. Hence the expenses that he incurred in relation to his
obligation to pay child support are not deductible.
[14] The Appellant also
raised the issue of the application of The Canadian Charter of
Rights and Freedoms (“Charter”). In the Notice of Constitutional
Question that was circulated to the Attorney General the Appellant stated in part
as follows:
… CRA
discriminates on prohibited grounds by applying third party circumstances when
the constitutional right involved is not only independent but it came into
existence in legal definition as an independent right. CRA violates this right
by making it conditional on the income level of a third party, and that is the
basis for them disallowing the child equal benefit of the law, equal protection
under the law, equal access to the law and equal treatment to others in similar
circumstances. CRA’s reasoning in this way promotes prejudice against the
appellant’s child in the face of equality as other individuals, notwithstanding
income discrimination, mutatis mutandis, are allowed this deduction. …
[15] In this particular
case, it is the Appellant who is seeking the deduction, not the Appellant’s
child, and therefore there is no basis for any claim by the Appellant’s child
under the Charter. In this case, the Appellant also raised the argument
that the basis for his claim for discrimination under the Charter was
that the reason that he was denied the deduction for his legal fees was because
he was the higher income earner and therefore was the person who was required
to make the payment to his former spouse. In the case of Stanwick v. Her
Majesty the Queen, [1999] 1 C.T.C. 143 the Federal Court of Appeal stated
that:
… Level of
income is not a personal characteristic enumerated in section 15, nor is it a
characteristic analogous to those which are enumerated.
[16] As a result, the
Appellant cannot succeed on this basis. Since no other personal characteristics enumerated in section 15 of
the Charter or analogous to those which are enumerated in section 15 of
the Charter were identified by the Appellant in relation to the basis for his claim
of discrimination under section 15 of the Charter, the Appellant cannot
succeed on this ground.
[17] As a result, the appeal
is dismissed, without costs.
Signed at Ottawa, Ontario, this 14th day of December 2007.
“Wyman W. Webb”
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