Citation: 2007TCC581
Date: 20071001
Docket: 2007-1805(IT)I
BETWEEN:
CAROLE GAGNON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
LIBORIO MORMINA,
Added party.
[official english translation]
REASONS FOR JUDGMENT
Lamarre Proulx J.
[1] Ms. Gagnon appealed the reassessments for
2002 to 2004. Mr. Mormina was bound to these assessments under section 174 of
the Income Tax Act (the “Act”). The issue is whether the amounts paid
to the Appellant by Mr. Mormina, as support for the children, are deductible by
him in the computation of his income under subsection 60(b) of the Act
and must be included by the Appellant in the computation of her revenue under
paragraph 56(1)(b) of the Act.
[2] The Minister of
National Revenue (the “Minister”) added to the Appellant’s income for 2002,
2003 and 2004 the respective amounts of $7,750, $5,613 and $3,812 in
support.
[3] To determine the
reassessments, the Minister relied on the facts described in paragraph 6 of the
Reply to Notice of Appeal as follows:
[TRANSLATION]
(a) The Appellant and Liborio Mormina were married on
November 6, 1982;
(b) Two children were born of their union, François Mormina,
born July 11, 1986, and Marie‑Lise Mormina, born January 23, 1991;
(c) The Appellant and Liborio Mormina were separated on
December 27, 1991;
(d) Paragraph 5 of the agreement signed in 1992 between the
Appellant and her ex-husband set the support payments to be made to the
Appellant at $250 every two weeks;
(e) Paragraph 6 of this agreement provided that this support
be indexed each year;
(f) The divorce judgment of January 13, 2000, confirmed a new
agreement on corollary relief, of which paragraph 5 sets the support at $125
per week.
(g) Paragraph 7 of this agreement indicates that the support
is to be indexed each year;
(h) Mr. Mormina paid support to the Appellant in the amounts
of $7,750 for the 2002 taxation year, $5,613 for the 2003 taxation year
and $3,812 for the 2004 taxation year.
[4] In her testimony,
the Appellant admitted all of these facts. She submitted however that the
payments were made and received as a result of the divorce judgment, dated
January 13, 2000, which confirmed a consent signed by the parties in 1999, and
as a result of the Memorandum of understanding signed by the couple in 1992.
[5] Ms. Gagnon
said in her testimony that her ex-husband hardly ever paid anything under the
agreement of 1992. At the time of the divorce, she wanted to make sure she came
under the Quebec law: an Act to facilitate the Payment of Support.
[6] Paragraphs 5
and 6 of the Memorandum of understanding of 1992 read as follows:
[TRANSLATION]
5. Liborio Mormina will pay Carole Gagnon child support
in the amount of two hundred and fifty dollars ($250.00) every two weeks, on
every second Monday, starting on April 13, 1992. In addition, he will
contribute, based on his ability, to covering the costs of clothing for the
children as well as the costs of their sports and cultural activities.
6. The support will be indexed each year on January 1st, at the
rate determined by the Régie des Rentes du Québec.
[7] The divorce
judgment of January 13, 2000, confirmed the Agreement on corollary relief
signed in July 1999. Paragraphs 5 to 7 of this agreement read as follows:
[TRANSLATION]
SUPPORT
OBLIGATIONS TOWARDS MINOR CHILDREN:
5. The defendant, Liborio Mormina, shall pay, for the benefit
of the minor children, $125.00 per week in support as established in the Child Support Determination Form attached hereto;
6. Said support shall be payable by the defendant in accordance
with the provisions of the Act to facilitate the Payment of Support;
7. Said support shall be indexed on January 1st of each year, in
accordance with article 590 C.C.Q.;
[8] Paragraphs 22
and 25 of this agreement should also be quoted:
ACQUITTANCE
AND RELEASES:
22. The parties fully and reciprocally release each other from any
claim that either one may have against the other for advances, contributions,
loans, lump sums, compensatory allowances, gross sums, or any rights that may
be conferred on him or her or resulting from the marriage and its break-up,
from conjugal life, the family patrimony, the matrimonial regime, the marriage
contract or any other contract agreed to between them;
25. This agreement shall come into force when all parties have
signed it and shall become the sole valid agreement between the parties;
[9] On May 27, 2005, a
consent to judgment was agreed to between the ex-spouses and the Ministère du
revenu du Québec, third party. This was a joint application to amend the
corrolary relief and to determine the support. It should be noted that the
payments are only calculated from January 13, 2000, date of the divorce
judgment.
[10] Mr. Mormina,
submitted in his testimony that the divorce judgment replicated the support
provision from the agreement signed in 1992. According to him, it was an exact
copy.
[11] Counsel for the
Respondent refers to paragraphs 12, 13 and 15 of the Federal Court of
Appeal decision Kennedy v. Canada, [2004] F.C.J. No. 2122 (QL):
12 I cannot accept this interpretation of the
legislation. The obligation to pay the support payments was created by the
Order of the Court in 1991. The obligation to pay the cost of living increases
was created by the Minutes of Settlement which were signed in 1991. The 1997
Judgment did not alter either of those obligations. It may have made collection
procedures simpler for Ms. Kennedy but the obligations themselves existed well
prior to April 1997. Ms. Kennedy did not need to obtain the 1997 Judgment to
enforce payment. She could have obtained relief in the Ontario Court by
bringing an action to enforce the terms of the Minutes of Settlement.
13 It seems to me that, although the statutory
definition of "commencement day" in subsection 56.1(4) might be more
clearly drafted, the intention of the legislation is that orders or agreements
made after April 1997 which actually create new obligations will be subject to
the new regime. Obligations created under the old regime will remain subject to
the old provisions. This intention is borne out by subparagraph (b)(ii) which
specifies that agreements or orders which are varied after April 1997 so as to
change child support amounts payable, will qualify as creating a commencement
day. In such a case, a new obligation will have been created by the variance
after April 1997. The same can be said of subparagraph (b)(iii) which provides
that a subsequent agreement or order made after April 1997 which changes the
total amount of child support payments creates a commencement day.
. . .
15 I conclude then that the 1997 Order does not
create a commencement day so as to free Ms. Kennedy from being taxed on the
payments received from her husband in 1997 and 1998.
[12] She relies on this
decision to argue that the child support amounts being the same in the two agreements
between the spouses, that of 1992 and that of 1999, the date of the agreement
of 1992 is the commencement day within the meaning of the definition of this
expression in subsection 56.1(4) of the Act.
Analysis and conclusion
[13] Immediately, it can
be questioned whether the two agreements are identical. Indeed, the second
agreement did not begin with an amount including the indexation provided for in
the agreement of 1992. It simply kept the same original amount. This has a
certain importance, but is not what I shall base my decision on.
[14] The Kennedy v.
Canada decision, above, has been explained and put in its true legal
perspective by Sharlow J. in Holbrook v. Canada, [2007] F.C.J.
No. 508 (QL), at paragraphs 16 to 18:
16 The
Judge determined that all child support amounts payable to Ms. Holbrook were
subject to the old regime. He reached that conclusion because he considered
himself bound to follow the decision of this Court in Kennedy v. Canada,
2004 FCA 437. He interpreted that case as establishing a principle to the
effect that where the amount of a child support obligation is established in a
pre-May 1997 agreement or order, the new regime can never apply unless there is
an agreement or order that changes the total child support amounts payable.
17 In
my view, Kennedy establishes no such principle. The existence of that
supposed principle is based on subparagraph (iii) of the definition of
“commencement day’ in subsection 56.1(4) (quoted above), which establishes a
commencement day for a “subsequent agreement or order” made after April 1997
that changes total child support amounts payable. In Kennedy, there was
an interim order for child support in 1991, followed by minutes of settlement
entered into in 1991 stipulating the same payments plus a cost of living
adjustment. In September of 1997, a final order was made incorporating the
terms set out in the minutes of settlement. Not only were the amounts
unchanged, the obligation itself continued to be grounded in the 1991 minutes
of settlement. That obligation was confirmed by the court order, not replaced.
18 Kennedy did not consider the situation where a post-April 1997
agreement or order terminates the child support obligation in a pre-May 1997
agreement or order, and replaces it with a new child support obligation. In
that situation, it is not relevant to ask whether there has been a change to
the child support amount payable because the pre-May 1997 agreement or order
has ceased to have effect.
[15] The issue is to
determine which agreement is enforceable or, in other words, under which
agreement the child support payments can be claimed. It is the date of this
enforceable agreement that determines the commencement day within the meaning
of the term in the Act.
[16] There is no doubt
here that the agreement of 1992 became null and void, or ceased to have
effect, at the signing of the agreement of 1999. This agreement in no way
renewed the support obligation of the agreement of 1992. On the contrary, it
clearly specified that the parties gave each other acquittance for any claim
that either one of them may have against the other for any right resulting from
a past contract between them. The agreement of 1999 also clearly specified that
this agreement would be the only valid agreement between the parties.
[17] The legal
circumstances of this matter are therefore completely different from those of Kennedy,
in which the support obligation had been created by the original and the
subsequent judgment relative to the mode of collection had not modified the
enforceability of the first agreement with regard to the support payments.
[18] In this case – and I
am repeating myself – the agreement on corollary relief of July 1999, confirmed
by the divorce judgment of 1992, is a new agreement. It is this agreement that
is enforceable. It completely superseded the Memorandum of understanding of
1992. The agreement on corollary relief signed in July 1999 became the sole
agreement between the parties. This means that there are no more rights arising
from the agreement of 1992.
[19] This new agreement, dated July 1999, was established
after April 1997. Accordingly, the Appellant need not include in the
computation of her revenue the amounts paid to her by Mr. Mormina in child
support. He cannot deduct them in the computation of his income.
Signed at Ottawa,
Canada, this 1st day of October 2007.
“Louise Lamarre Proulx”
Translation
certified true
on this 13th day
of November, 2007
Gibson Boyd,
Translator
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