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Citation: 2004TCC69
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Date: 20040120
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Docket: 2002-901(IT)I
2002-1482(IT)I
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BETWEEN:
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BEVERLEY E. HOWARD,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
and
JAMES DALTON,
Third Party.
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____________________________________________________________________
Counsel for the Appellant: Jennifer S.
McPherson
Counsel for the Respondent: John Shipley
For the Third Party: The Third Party himself
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench on August 28,
2003
at Charlottetown, Prince Edward Island)
Mogan J.
[1] This proceeding began when the
Appellant filed a Notice of Appeal in respect of her 1999
taxation year which is Court File No. 2002-901. She later
filed a separate Notice of Appeal in respect of her taxation
years 1998 and 2000 which is Court File 2002-1482. The
three years, 1998, 1999 and 2000 are before the Court in those
two appeals. In each of those years, she received certain amounts
by way of child support from her former husband. In her Notices
of Appeal, she raised the question whether she was required to
include in computing income the amounts she received as child
support. Those amounts had been included in her income in
assessments issued by Revenue Canada; and Beverley Howard is
appealing from those assessments. She has elected the informal
procedure.
[2] After the appeals were commenced,
the Minister of National Revenue brought an application to the
Court under section 174 of the Income Tax Act asking the
Court to answer the following question. Had the Appellant and her
former husband, James Dalton, signed an Election in Form T1157 to
change the child support payments and had they jointly elected
for the Appellant not to include the child support payments in
computing her income and for James Dalton not to deduct the child
support payments in computing his income? The Minister's
application was granted. As a result, James Dalton was added as a
third party to the appeals of Beverley Howard for the
taxation years 1998, 1999 and 2000. The appeals were called for
hearing today. Both the Appellant and the Respondent were
represented by counsel. James Dalton represented himself. There
was extensive evidence. The Appellant testified on her own
behalf. Her son David testified and Sharon Fortier, an
enforcement officer with the Maintenance and Enforcement Program
in Prince Edward Island, also testified. And finally, James
Dalton testified.
[3] The Appellant and James Dalton
were married in 1977. They adopted two children, David who was
born in August 1980, and Leigh who was born in April 1986.
Each child was adopted as an infant of about 10½ months
old. Some time around 1993, there were domestic problems in the
marriage and a divorce proceeding was commenced in January 1994
in which Mr. Dalton was the Petitioner for divorce. The
divorce was granted and so the Appellant and Mr. Dalton
became former spouses following the granting of the divorce. They
had a prior separation agreement before the divorce. Although we
do not have the separation agreement or the divorce judgment in
Court, it seems to be common ground among all three parties that,
under the separation agreement and divorce judgment, there was a
provision that Mr. Dalton would pay to the Appellant child
support at the rate of $200 per child per month during whatever
period they were dependent at home and perhaps in full-time
attendance at school.
[4] In any event, there was a legal
obligation on Mr. Dalton to pay child support at the rate of $400
per month and that obligation was still in existence in the
calendar year 1998. There were significant changes to the
Income Tax Act taking effect on May 1, 1997 with respect
to child support payments. Prior to that date, child support
payments had been deductible to the payor and included in the
income of the payee. The payor was usually the husband or father
and the payee was usually the wife or mother.
[5] As a result of the change in law,
the old system continued to operate for separations and divorces
which occurred before May 1, 1997 unless a particular event
created a "commencement day" after April 30, 1997. In
the circumstances of these appeals, the old system continued to
operate for the Appellant and Mr. Dalton subject to an event
which may have occurred in June 1998 and which is at the heart of
these appeals. For those separations and divorces which occurred
after April 30, 1997, the new regime took effect. Although
complicated with much fine tuning, the bottom line is that
payments identified as being for child support are not deductible
to the payor and are not to be included in the income of the
payee.
[6] In the circumstances of this case,
the divorce occurred under the old system but the child support
payments continued past the statutory date of May 1, 1997. For
that situation, there is a provision under the definition of
commencement day which permits parties to elect to have the new
system apply but they have to file a joint election. If a husband
and wife were divorced in 1994 and had child support payments
from one spouse to the other, they could file an election after
May 1, 1997 to have the new system apply; and those amounts
identified as child support would not be deductible to the payor
and would not be included in the income of the payee.
[7] The Appellant learned of this
provision because she received a brochure in the mail sometime in
1997. According to her evidence, she decided that she would act
on it. She prepared in her own handwriting a form which has been
entered in evidence as Exhibit A-2. It is a Revenue Canada
Form T1157 entitled Election for Child Support Payments. It has
the name of the recipient who is Beverley Howard Dalton and the
name of the payor who is James Dalton. Each has a telephone
number and social insurance number. There are certain boxes to
fill in which may or may not be relevant here, and then there is
a place at the bottom of the page for each party to sign. The
Appellant must have anticipated having a document like this
signed at some time because, in August 1997, she filled in
certain of the information required in the form in her own
handwriting such as names, her telephone number and social
insurance numbers. She did not write in the telephone number or
social insurance number of her former husband because she did not
know them. She signed the form and dated it August 15, 1997; and
acknowledged in evidence that she in fact signed it on that date.
The document apparently lay idle for many months.
[8] Her evidence is that in the spring
of 1998, her former husband asked if there could be a reduction
in the child support payments. Apparently, he had been a
full-time teacher but was going on some kind of disability
which would have significantly reduced his income. There were
also references in Court to the fact that the older child, David,
was not in school full-time by the summer of 1998; and some
reference to the fact that Leigh may or may not have been living
with her mother at that time. I refer to those only as what I
would call glancing references in Court. They were not the kind
of facts which were probed or established as firmly proven, but
were an indication that in the spring and summer of 1998, Mr.
Dalton might have been seeking to have the child support payments
reduced.
[9] The Appellant told James Dalton
that she would be willing to have the payments reduced if he was
willing to sign the Election form from Revenue Canada which had
been prepared by her. There is no evidence that he agreed to her
condition or that there was any lengthy discussion on this
question. Exhibit A-2 is an important document in this
proceeding because it is the document on which the whole case
stands or falls.
[10] On June 13, 1998, Mr. Dalton came to
the residence of the Appellant in a Bronco vehicle to pick up the
daughter Leigh. Because of the shared custody or visitation
rights of the parties, he was entitled to have visitation with
his daughter and son and, apparently, there was an arrangement
that Leigh would spend that evening with her father. The
Appellant's evidence is that Mr. Dalton was out in the
Bronco. She knew he was there because he had come to pick up
Leigh. She also knew that there had been either discussions or
communications between Mr. Dalton and the Maintenance Enforcement
branch in Charlottetown concerning his desire to reduce the child
support payments. She took the document out to the vehicle where
Mr. Dalton was sitting and asked him if he would sign it. Their
son David had gone out to the vehicle to visit with his father
and he was sitting in the vehicle on the passenger side or else
leaning in the window on the passenger side but, in any event, he
was in conversation with the father. She asked Mr. Dalton to sign
the form and presented him with the document and a pen. She
stated that he signed the document sitting behind the steering
wheel of the Bronco, placing the document on his knee for
stability. She also stated that he filled in his telephone number
and social insurance number because she did not know them. At
that point, before or just after he signed, she filled in the
other two boxes on the form. Box C states "This election
will apply to child support payments starting on (a specific
date)" and she entered January 2, 1998. Box D states
"Enter the annual child support payments to be made under
this agreement" and she filled in $4,800. That, in
substance, is the evidence of the Appellant concerning the
execution of Exhibit A-2 by her and her former husband.
[11] Counsel for the Appellant produced in
Court what she said was the original of Exhibit A-2 but no
party asked to have it marked as an exhibit. I examined it and it
certainly looked like the original of Exhibit A-2. The only
difference between the photocopy (Exhibit A-2) and the
original was different coloured pens used for some of the writing
on the original. That difference tends to corroborate the
Appellant's statement that Mr. Dalton signed the original of
Exhibit A-2 because his telephone number, social insurance
number and signature appear in blue pen writing while boxes C and
D, the date of commencement and the amount, are written in what
appears to be the same blue pen but by a different hand, which
appears to be that of the Appellant.
[12] The Appellant's evidence is
corroborated by David who testified and stated that he recalls
being in the vehicle that evening with his father. He recalls his
mother bringing a document out to ask the father to sign it. His
evidence is that he saw the piece of paper but he did not read
the contents. The parents were talking about that piece of paper
and the mother gave the paper to the father to sign and he signed
it. When David was then asked what happened around that time or
just after, he said the landlord came by and delivered an
eviction notice to his mother. It was significant to David
because they had lived in the same residence for many years since
he and his sister were small children. The Appellant and Mr.
Dalton also remember the landlord coming by and giving the
eviction notice which was entered as Exhibit A-3. That
notice gave the Appellant one month to vacate the premises
because it states that she had to be out by July 13 which is
exactly 30 days after the day when the meeting took place near
the Bronco. Therefore, the arrival of the landlord to deliver the
eviction notice was in the minds of the Appellant, David and Mr.
Dalton; and it seemed to coincide with the three of them being at
that Bronco vehicle at the same time in the early evening of June
13, 1998. In my view, that evidence is important.
[13] Mr. Dalton testified that with respect
to Exhibit A-2, he did not recall signing it. He did recall
that he was seeking to reduce the support payments in the spring
and summer of 1998 and he recalled being there when the eviction
notice was served. He recalls being there to pick up his daughter
Leigh and speaking with David. But he said he did not recall
speaking to the Appellant about the reduction of support payments
at that time. He was cross-examined by counsel for the
Appellant with respect to Exhibit A-2 and she asked him
whether he recalled signing it. He said, "Look, I don't
recall, and that's it. It's a matter of
recollection".
[14] Counsel also put to him a Notice to
Respondent from the divorce proceeding in which he was the
Plaintiff and the Appellant was the Respondent. That notice was
entered as Exhibit A-12. She brought to his attention where
he appeared to be signing it on page 15 on January 20, 1994. He
said, "I can't recall signing that". He did not
deny it was his signature. He just said, "I don't recall
that". She also put to him two letters which he wrote to
Revenue Canada in connection with this proceeding, one dated
September 29, 2002 and the other dated November 22, 2002. He
signed one "James J. Dalton" and the other
"James Dalton". He acknowledged those were his
signatures but they mean nothing except that sometimes he would
sign his name including a middle initial and sometimes he would
sign it with just his first and last names. I do not attach much
significance to that evidence but I would observe, in the absence
of any expert evidence from a handwriting person who might be
able to testify with regard to whether a particular document was
in the handwriting of a designated person, that the signatures of
the Appellant and the signatures of Mr. Dalton appear to be
relatively consistent in all documents. In particular, the
telephone numbers and the social insurance numbers for the
Appellant and James Dalton on Exhibit A-2 are clearly, to
the amateur eye, not written by the same hand.
[15] The critical question is whether James
Dalton signed Exhibit A-2. The evidence strongly supports a
finding that he signed Exhibit A-2. There are three
statements of particular significance. First is the unequivocal
statement of the Appellant that he signed it. She was not
cross-examined as to her being there, as to her presenting
the document to him, and as to her bald statement that she saw
him sign it, bracing the document on his knee. If there were a
case to be made against the truth of those statements, she ought
to have been closely questioned on them. She was not questioned
at all.
[16] Second is the unequivocal evidence of
David with respect to signing. He said that he did not know what
the document was; he had no idea as to its import; but that he
did see his mother come to the driver's side of the car and
hand a document to his father. There were some statements which
passed between them; and he said that he saw his father sign a
document.
[17] And third, Mr. Dalton stated that he
does not recall signing Exhibit A-2. He said that more than
once. There is a big difference in a Court of law between a
witness saying "I do not recall signing that document"
and the same witness saying "I did not sign that document. I
would not sign that document. That is not my signature".
Those latter statements are sometimes heard in Court and any
judge must give great weight to them because they are stronger
than a bland statement of not recalling a signing event. Those
latter statements were absent today. The most that Mr. Dalton
said is "I don't recall signing it". I believe that
he does not recall the signing event on June 13, 1998; but I find
that he signed Exhibit A-2.
[18] Perhaps Mr. Dalton thought that it was
a document that was going to reduce his support payments. Perhaps
he did not appreciate the significance of the document. Perhaps
he was preoccupied with his conversation with David with whom he
apparently had a somewhat difficult relationship. Mr. Dalton
might have been under stress. He was going to lose
full-time employment and go on a disability pension. He was
perhaps, in his mind, being harassed by the Maintenance
Enforcement people. There are many reasons why a person might
look at a document dated five year ago and say "It looks
like my signature, but I don't recall signing it". He
made the same statement about the divorce proceeding but I would
say that he signed the divorce document that initiated his
divorce from the Appellant. He simply stated "That may be my
signature, but I don't recall signing it".
[19] A person like Mr. Dalton may say
"I don't recall signing it" because at the time it
did not ring a big bell with him. It rang a big bell with the
Appellant. That is pretty obvious because she had signed her half
of the document 8 or 10 months before in August 1997. She had
this document waiting to find an opportune time for her former
husband to sign it; and she said that the relationship between
them was not strong. She did not even know his phone number. She
also stated that he called her once when he was under the
influence of alcohol and she said "Don't call me when
you've been drinking". They did not have a good
communication system.
[20] Therefore, if she signed her half in
August 1997, she was going to have to wait for an opportune time
to get him to sign. In all the surrounding circumstances, June
1998 seems to have been an opportune time because there was
correspondence between him and the Maintenance Enforcement
people: those letters entered as Exhibit A-6 from
Maintenance Enforcement and especially the letter of May 11, 1998
to Mr. Dalton kind of prodding him to do something about his
arrears. And there is another letter on June 5 from Ms. Fortier
of CCRA to Mr. Dalton (just eight days before June 13), so he is
feeling pressure. There is another letter dated July 6 from Ms.
Fortier and one dated July 10 from Mr. Dalton promising to make
up the payments. Mr. Dalton did in fact make up the payments in
arrears when he paid $1,600 on August 7, $1,000 on August 28, and
$600 on August 31, for a total of $3,200 which is eight months of
child support at $400 per month. He obviously was feeling the
pressure and, within the month of August, he brought his payments
up to date for 1998.
[21] In my view, the evidence is strong that
Mr. Dalton signed the joint election which is Exhibit A-2.
I will not say overwhelming but it is strong. When a person says,
"I don't recall signing it" but does not deny that
it is his signature, nor deny that he would have signed it under
any circumstance, and when we have the unequivocal,
uncontradicted evidence of the Appellant and David that he did
sign it, I do not have any choice but to find that he signed the
document. I am satisfied that there was an Election (Exhibit A-2)
signed by the Appellant in August 1997, and by James Dalton on
June 13, 1998.
[22] I have, therefore, answered the
question in the reference put to the Court. I do not have to make
any further determinations because certain income tax
consequences will flow from that vis à vis the
Appellant and James Dalton. That concludes my determination of
the question before the Court.
Signed at Ottawa, Canada, this 20th day of January, 2004.
Mogan J.
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