Citation: 2008TCC69
Date:20080131
Docket: 2007-1790(IT)I
BETWEEN:
MARY ANNE SAVORY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
McArthur J.
Introduction
[1] This appeal is from
assessments by the Minister of National Revenue (the “Minister”), for the
Appellant’s 2002, 2003 and 2004 taxation years. The Minister reassessed the
Appellant’s tax liability for the period under appeal by disallowing child care
expenses and the equivalent-to-spouse credit on the bases that the Appellant
was living in a common law relationship. She was assessed $2,454 for the recovery of the overpayment of
the Canada Child Tax Benefit (“CCTB”) and $522 for the alleged overpayment of
the Goods and Services Tax/ Harmonized Sales Tax Credit (“GSTC”).
[2] The issues include:
(i) whether the Appellant
was in a common-law relationship with Philip Lamy during the period under
appeal;
(ii) whether
the Appellant was entitled to claim child care expenses for the 2002, 2003, and
2004 taxation years; and
(iii) whether
the Appellant ceased to reside with the Children as of April 2005.
FACTS
[3] The
determination of this appeal is largely dependent on the facts. To decide
whether the Appellant was in a common-law relationship, it is necessary to
examine certain aspects of the Appellant’s personal past. Neither of the
parties required the Appellant’s former partner, Mr. Philip Lamy, to
testify at trial. The Appellant had obtained a restraining order and both
parties sought to avoid a possibly difficult and perhaps explosive confrontation.
While this made findings of fact more difficult, the parties’ reasoning was reasonable
and I draw no negative inference.
[4] The Appellant
testified that she started to have a relationship with Mr. Philip Lamy
in the 1990s. They have two children together; Chloe-Mae born on August 9, 1996
and Anthony born on October 11, 1998.
[5] She described their
association as “sort of an on again, off again” relationship and
further stated that he never was a consistent member of her household. She
concedes that they had lived together from September 1998 to December 1998 when
he left. Not knowing his whereabouts, she would forward mail to his mother.
[6] In August 2001,
the Appellant moved into a different apartment located at 2836 Connolly Street in Halifax. She stated that shortly thereafter, Mr. Lamy moved
into the same apartment building but a different apartment unit; she in
apartment B and he in apartment A. She was the only person named on the lease
agreement and she paid all of the rent and utilities. She lived there until
September 2004 and during this period of time (August 2001 to September 2004) he
lived at different addresses. He was “sort of an in and out sort of person”. The Respondent understandably
questions the veracity of the evidence presented by the Appellant with regards
to the apartment unit number and concludes that she and Mr. Lamy lived in the
same apartment unit. I conclude that they did live together at the same address
for at least sometime during the period from August 2001 to September 2004.
[7] It is not
disputed that from September 2004 to February 2005 they lived together in the
same apartment. On September 25, 2004, they moved into a different apartment
located on Rowe Avenue in Halifax. At the end of February, 2005, he moved out due to a
breakdown in their relationship.
[8] The Appellant was
the one taking care of the children during the period under appeal. He took
little part in household and family responsibilities. She was the main income
earner and provided for the children’s needs. He did not make any significant
monetary contribution to help with the children’s daily needs. I believe she
was and is a cook in a residential institution. When they separated in February
2005, the two children were living between the two addresses until June of the
same year. Commencing in June 2005, the children lived solely with their
father. It was only a year later that the she was granted custody of both
children.
[9] Throughout the
years under appeal, her net income was greater than his. She claimed child care
expenses in the amount of $1,630.00; $3,036.00 and $3,389.00 and an
equivalent-to-spouse credit of $6,482.00; $6,586.00 and $6,803.00 for each of
the 2002, 2003 and 2004 taxation years.
[10] The Minister seeks
to recover $2,454 from the Appellant for alleged overpayment of the CCTB during
the period from July 2003 to August 2005 inclusive. This amount is comprised of
the computation of the following three amounts:
Base taxation year 2002: $ 108.71
Base taxation year 2003: $1,427.76
Base taxation year 2004: $ 918.04
[11] Further, the
Minister assessed a total of $522.33 for the recovery of the alleged overpayment
of the GSTC that the Appellant received during the period from July 2004 to
July 2005, inclusive, as follows:
Base taxation year 2003: $ 435.58
Base taxation year 2004: $ 86.75
POSITION
OF THE APPELLANT
[12] The Appellant argues
that she was not in a common-law relationship with Mr. Lamy and that they did
not live in the same apartment unit. She adds that during the taxation years at
issue, they never were in a steady relationship and that they only lived
together as a couple for a period of less than four months. In addition, she
testified that she was mainly the one taking care of the children, both
financially and emotionally. Finally, she claims that he was never a consistent
member of her household and he never supported her economically or in any other
form. It is on those grounds that she submits she was not cohabiting in a conjugal
relationship with Mr. Lamy and that he was not her common-law partner.
POSITION
OF THE RESPONDENT
[13] The Appellant
resided with Philip Lamy in a conjugal relationship during the period under
appeal and she falls under the definition of “common-law partner” within
the meaning of the Income Tax Act (“Act”).
The Respondent states that Philip Lamy’s income has to be taken into
account in the calculation of the Appellant’s entitlement to GSTC and CCTB. Additionally
this determination also invalidates the Appellant’s claim for the
equivalent-to-spouse credit pursuant to paragraph 118(1)(b) of the Act.
[14] Secondly, the
Respondent states that since the Appellant is in a common-law relationship and given
that her income exceeded the income of her common-law partner, for all the
taxation years under appeal, she is not entitled to claim child care expenses
pursuant to subsection 63(2) of the Act.
[15] Finally, the
Respondent adds that the Appellant lost custody of her two children for a year,
starting April 2005 and therefore the Appellant did not reside with a “qualified
dependent” as defined in sections 122.5 and 122.6 of the Act.
Consequently, this determination further affects the Appellant’s entitlement to
GSTC and CCTB, for at least part of the years under appeal.
ANALYSIS
[16] The first issue
is whether the Appellant was in a common-law relationship with Philip Lamy
during the period under appeal. While this is largely a question of fact, the Act
is of assistance in the determination of the terms “common-law partner” and
understanding the tax implications evolving around this rather elusive concept.
[17] The statutory
provisions providing the GSTC and the CCTB require that the spouse’s or the
common-law partner’s income be taken into account and the equivalent-to-spouse
credit is not applicable if the taxpayer is living with a spouse or a
common-law partner. To that effect, subsection 248(1) of the Act
provides for the following definition for the words “common-law partner”:
"common-law partner" , with respect to a taxpayer at any time, means a
person who cohabits at that time in a conjugal relationship with the taxpayer
and
(a) has so cohabited with the
taxpayer for a continuous period of at least one year, or
(b) would be the parent of a
child of whom the taxpayer is a parent, if this Act were read without reference
to paragraphs 252(1)(c) and (e) and subparagraph 252(2)(a)(iii),
and for the purposes of this
definition, where at any time the taxpayer and the person cohabit in a conjugal
relationship, they are, at any particular time after that time, deemed to be
cohabiting in a conjugal relationship unless they were not cohabiting at the
particular time for a period of at least 90 days that includes the particular
time because of a breakdown of their conjugal relationship;
[18] The “cohabiting
spouse or common-law partner” is defined for matter pertaining to the equivalent-to-spouse
credit, the GSTC and the CCTB under section 122.6 of the Act as follows:
"cohabiting spouse or
common-law partner" of an
individual at any time means the person who at that time is the individual’s
spouse or common-law partner and who is not at that time living separate and
apart from the individual and, for the purpose of this definition, a person
shall not be considered to be living separate and apart from an individual at
any time unless they were living separate and apart at that time, because of a
breakdown of their marriage or common-law partnership, for a period of at least
90 days that includes that time;
[19] The notion of “cohabiting
in a conjugal relationship” is not specifically defined in the Act. “Conjugal
relationship” relates most specifically to family law and its meaning has
been discussed extensively by provincial Courts. The wording used in the Income
Tax Act is similar to the definitions of the words “spouse” and “cohabit”
given under the Ontario Family Law Act.
[20] This Court has often
examined the meaning of “cohabiting in a conjugal relationship”. A
helpful judgment is Milot v. R.
In that case, Justice Lamarre Proulx adopted the following factors:
1. Shelter
2. Sexual and Personal Behaviour
3. Services
4. Social
5. Societal
6. Support (economic)
7. Children
[21] In M v. H, the Supreme Court of Canada stated:
Obviously the
weight to be accorded the various elements or factors to be considered in
determining whether an opposite‑sex couple is in a conjugal relationship
will vary widely and almost infinitely. Courts have wisely determined that the
approach to determining whether a relationship is conjugal must be
flexible. This must be so, for the relationships of all couples will vary
widely.
[emphasis
added]
[22] With this in
mind, I will attempt to apply these tests to the facts of this case.
Shelter
[23] Did the Appellant
and Mr. Lamy live in the same apartment unit, during the period under appeal? This is very much at issue. As stated, she testified
that while they lived in the same apartment building they each had their own
apartment unit until September 2004. To that effect, she submitted copy of
lease agreements, utility bills and other such documentation that only showed her
name on it. She also provided a copy of Mr. Lamy’s record of employment and a
copy of a monthly employment insurance statement issued by the government of
Canada, which show Mr. Lamy’s address as 2836 Connolly Street unit A. The
Respondent submits that the documents showing Mr. Lamy’s address as being unit
A have been altered and submitted evidence indicating the contrary, which seems
to indicate that Mr. Lamy’s address was the same as the address of the
Appellant, namely 2836 Connolly street apartment B. While denying that Mr. Lamy lived with
her, she did concede that he slept over from time to time. Shelter is only one
factor among others. Clearly, it is possible for spouses to live under the same
roof and not qualify as cohabiting in a conjugal relationship.
[24] Presently, it is
not disputed that the Appellant and Mr. Lamy lived in the same apartment
building for at least part of the period under appeal. However, whether or not
they lived in the same apartment unit remains uncertain, but shy of any
compelling evidence, I conclude that they lived at the same place for at least
part of the period under appeal. While this finding weighs against the
Appellant, as stated, this is only one part of the entire analysis, and other factors
play an important role.
[25] The
second factor takes into account the claimant’s sexual and personal behaviours.
During examination, counsel for the Respondent asked the Appellant about her
relationship with Mr. Lamy. She testified that when he was living in the same
apartment building, they did have sleep-overs and they had sexual relations as
well. She added that during that time she did not see anyone else on a consistent
basis. She further testified that they were committed to each other. On the
other hand, it does not appear that he assisted her in moments of needs, such
as helping her and the children when they were ill. When she was sick, she looked
after the children. He did not help her with any chores and they never exchanged
gifts on special occasions. They did not eat their meals together as a family
and daily communication did not seem to be an essential part of their
relationship. The second factor leans towards a rather functional relationship
lacking key elements of a conjugal relationship. Their personal relationship
falls short of an ideal love story. Overall, I find that the sexual and
personal behaviours test favours the Appellant. I now turn to the third element
of the analysis, which deals with the services conducted by the parties.
Services:
[26] This
branch of the test requires a look at the conduct and habits of the parties in
relation to the services they rendered within their household. This would
typically include tasks such as the preparation of meals, washing and mending
clothes, shopping, household maintenance and any other domestic services. During
her oral submission, counsel for the Respondent accepted that this factor
doesn’t indicate a conjugal relationship and favours the Appellant’s case; I
agree.
I believe the Appellant’s testimony and have no doubt
that she was the one taking primary responsibility of the children and the
household tasks. The third factor clearly points against a conjugal
relationship and favours the Appellant’s case.
Social:
[27] The fourth criterion to consider is how the
Appellant and Mr. Lamy viewed and portrayed themselves in a social context. In
that regard, the Appellant testified that she did participate in social
activities together with Mr. Lamy. Additionally, the Appellant had contact with
Mr. Lamy’s family and spoke to Mr. Lamy’s mother on a regular basis. She agreed
that they appeared to be a couple in the eyes of their family and friends. This
factor points towards a conjugal relationship.
Societal
[28] Little
information is available on this issue, but in light of the former point, I
would tend to conclude that they were treated as a couple.
Economic Support
[29] This point can be dealt with very quickly
since counsel for the Respondent conceded that there is no evidence that Mr.
Lamy made any contribution towards necessities of life, such as food, clothing,
shelter and so on. This factor does not draw the slightest indication of a
conjugal relationship.
Children
[30] As I have
already pointed out, the Appellant testified that for the years under appeal she
was the one largely responsible for the two children. However, there is no
doubt that Mr. Lamy was also, even if minimally, involved with them. He was
living, for at least some period of time, in the same apartment building as the
children, which could indicate that he wanted to be close by, in order to be
part of his children’s lives. After their break-up in February 2005, the
Appellant and Mr. Lamy unofficially agreed to split the custody of their
children. This arrangement fell apart and from about June 2005 through June
2006, both children were solely with their father. During that time the
children had no contact with the Appellant. Obviously he must have had some
interaction and contact with the children before they lived with him, and perhaps
even before he moved in with the Appellant. However, the Appellant regained
custody of the children in June of 2006. Again, I believe her when she says
that during the period under appeal she was the one mainly responsible for the
needs of the two children. After all, from a strictly financial point of view,
she was the main income earner. She further testified that Mr. Lamy’s
contribution towards the children’s needs was insignificant. However, in its
entirety, this last element seems to indicate that Mr. Lamy was, at least,
somewhat involved with his children and this factor is inconclusive.
[31] Taken in its entirety, the functional test
shows mixed results, but it indicates that at certain times the Appellant
appeared to cohabit in a conjugal relationship with Mr. Lamy. There are,
however, many elements that point away from a conjugal relationship. I agree
with the following statement of Justice Lamarre Proulx in Sigouin c. R.:
The tests for a conjugal relationship are normally
cohabitation and conjugal conduct. That conduct may be determined through
sexual relations, emotional and intellectual exchange, financial support and
common knowledge.
It is my view that, in appeals such as this one, it
must also be taken into account that the provisions involved are intended to
financially assist people who have limited means or low incomes. This Court's
decision can have an impact on all the monetary assistance that a person has
received, and these provisions which were intended to be of assistance may
rather become extremely costly for that person where he or she is required to
repay the assistance over several years. To dismiss the appeal, I must be thoroughly
convinced that the appellant was cohabiting in a conjugal relationship.
[32] I have no doubt
that the Appellant did not cohabit in a conjugal relationship for at least part
of the period under appeal. It is clear however that starting from September 25,
2004 they cohabited in a conjugal relationship. It is reasonable to conclude
that they were in a conjugal relationship prior to the actual moving date. It
is evident that the Appellant consciously decided to try again to live with Mr.
Lamy and that such a decision had to be motivated by their immediate past
relationship. The moving date ought not to be the determining factor.
[33] On a balance of
probabilities, I find that during 2004, the Appellant had a common-law partner
within the meaning of subsection 248(1) of the Act. Further, for the
remaining period under appeal, namely for the 2002 and 2003 taxation years, she
did not cohabit in a conjugal relationship. The calculation of the
equivalent-to-spouse credit, the GSTC and the CCTB, for the taxation years
under appeal, is to be made such as to comply with these findings.
[34] The second issue is whether the Appellant was entitled
to claim child care expenses for the 2002, 2003, and 2004 taxation years by
application of subsection 63(1) of the Act. Subsection 63(2) of Act provides
that where two taxpayers are supporting a child, only the taxpayer with the
lower net income shall be entitled to claim the child care expenses. I
concluded that the Appellant cohabited in a conjugal relationship with Mr. Lamy
for the 2004 taxation year and since the Appellant’s net income was greater
than that of Mr. Lamy she cannot claim child care expenses for the 2004
taxation year. She is entitled to claim such expenses for the 2002 and 2003
taxation years.
[35] The third and last issue of this appeal is whether the Appellant
ceased to reside with the Children as of April 2005. This determination will further
influence the Appellant’s GSTC and CCTB amounts.
[36] With regard to the
GSTC, section 122.5(1) of the Act defines the words “qualified
dependant” as follows:
"qualified dependant" of an
individual, in relation to a month specified for a
taxation year, means a person who at
the beginning of the specified month
(a) is the individual’s
child or is dependent for support on the individual or on the individual’s
cohabiting spouse or common-law partner;
(b) resides with the
individual;
(c) is under the age of
19 years;
(d) is not an eligible
individual in relation to the specified month; and
(e) is not a qualified
relation of any individual in relation to the specified month.
[37] Furthermore, section
122.5(4) of the Act explains “months specified” as follows:
(4) For the purposes of this section, the months
specified for a taxation year are July and October of the immediately following
taxation year and January and April of the second immediately following
taxation year.
[38] The structure is similar for the CCTB.
[39] The residence of the children
becomes relevant in the calculation of the GSTC and CCTB. At the end of February 2005, Mr. Lamy moved
out of the Appellant’s apartment and from that time until June 2005, the
children were living between the two parents. After June 2005, until
approximately one year later, the children were under the sole custody of Mr.
Lamy. She has since regained legal custody of both children. The only period
that is in question is from March to June, 2005. During that time the
children were living between both parent’s addresses. Based on the fact that
the Appellant seemed to be the one mainly responsible for the children, to the
exception of one year, I conclude that the children were living with the
Appellant until June 1, 2005.
[40] The appeal is allowed, without costs, and the
assessments are referred back to the Minister for reconsideration and
reassessment according to the findings in these reasons.
Signed at Ottawa, Canada, this 31st day of January, 2008.
“C.H. McArthur”
CITATION: 2008TCC69
COURT FILE NO.: 2007-1790(IT)I
STYLE OF CAUSE: Mary Anne Savory v. The Queen
PLACE OF HEARING: Halifax,
Nova Scotia
DATE OF HEARING: September 26, 2007
REASONS FOR
JUDGEMENT BY: The Honourable Justice C.H. McArthur
DATE OF JUDGMENT: January 31, 2008
APPEARANCES:
|
For the Appellant:
|
The Appellant herself
|
|
Counsel for the Respondent:
|
Lindsay D. Holland
|
COUNSEL OF RECORD:
For the Appellant:
Name: N/A
Firm: N/A
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa, Canada
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