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Citation: 2004TCC326
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Date: 20040503
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Docket: 2003-4392(IT)I
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BETWEEN:
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GEORGE CATTAN,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bowman, A.C.J.
[1] These appeals are from assessments
made under the Income Tax Act for the appellant's 2000 and
2001 taxation years. They have to do with the appellant's claim
to deduct child support payments paid by him to his
ex-wife, Donna, in the amount of $21,000 and $18,000 in
2000 and 2001 respectively.
[2] The appellant and his spouse
separated and signed a Separation Agreement, dated April 24,
1997. They have two children, Christopher and Lyndsey, born in
1984 and 1986 respectively. Two provisions of the Separation
Agreement are relevant here. Paragraphs 6(a) and 6(b) read:
6. SPOUSAL
SUPPORT
a) The husband shall pay to the
wife for her support the sum of $700.00 per month, commencing
January 1st, 1997. The payments shall continue to and including
December 1st, 1998. It is intended thereafter that the husband
shall have no further obligation to the wife for her support.
However, the parties agree that at the end of this period the
matter will be reviewed between them. It is further agreed that
there will be no extensions or variation to this paragraph,
unless and until the wife has been able to provide satisfactory
evidence to the husband that she has made all reasonable efforts
to become self-sufficient, and is unable to do so.
b) The husband and wife intend
this Agreement to be final as to all claims related to spousal
support, and hereby release all such claims arising out of their
marriage. Both parties are aware and acknowledge that each of
them may suffer or enjoy drastic, radical or catastrophic changes
in their respective income, assets and debts, in the cost of
living or their health, or changes of fortune by reason of
unforseen factors, either related or unrelated to their marriage.
Nevertheless, the husband and wife agree that under no
circumstances will any change, direct or indirect, foreseen or
unforseen, in the circumstances of either of them, give either of
them the right to claim any alteration of the spousal support
terms of this Agreement or any terms of spousal support contained
in a Divorce Judgment between the parties. More particularly,
each party acknowledges that he or she may be called during the
rest of his or her life to use, either wholly or in part, his or
her capital for his or her own support and each agrees to do so
without any recourse to the other at any time. The wife
specifically acknowledges that after December 31st, 1998, this
Agreement shall stand as a barr to any claim she may have to
future spousal support or alimony.
Clause 8 reads:
8. CHILD
SUPPORT
a) The husband shall pay to the
wife for the support of the children the sum of $1,150.00 per
month, per child, commencing January 1st, 1997. The payments
shall continue until one of the following occurs:
i) the
children no longer reside with the wife, provided that resides
with includes being away from the wife's residence to attend an
educational institution, to work for summer employment or to
enjoy a reasonable holiday;
ii) the children attain
the age of 18 and cease to be in full-time attendance at a
recognized educational facility;
iii) the children complete their
post-secondary school education;
iv) the children marry or die.
c) It is intended that the
payments of support shall be included in the income of the wife
for income tax purposes, and deducted by the husband for income
tax purposes.
[3] Notwithstanding the fact that the
obligation to make spousal support payments ended on
December 1, 1998, the appellant continued to make
monthly payments of $200 for spousal support in 1999. Also, he
continued to pay $1,150 per month for each child.
[4] In December 1999, the appellant's
son Christopher moved in with him.
[5] On January 3, 2000, the appellant
and his wife signed, in the presence of witnesses, an Amending
Agreement. It read:
WHEREAS:
The parties entered into a Separation Agreement dated
April 24, 1997 (referred to as the "Separation
Agreement") to settle the ownership and division of their
property and their duties and obligation to one another arising
from their marriage.
The parties now desire to amend the Separation Agreement.
NOW THEREFORE in consideration of the mutual covenants
contained in this Agreement the parties agree as follows:
AMENDMENT
The Separation Agreement is hereby amended as follows:
(a) Paragraph 7 of the Separation
Agreement shall be amended as follows:
7. CUSTODY AND
ACCESS
a) The parties shall have joint
custody of the children, whose primary residence shall be as
follows; Christopher Jacob Adam Cattan shall reside with the
husband, and Lyndsey Jenna Cattan, shall reside with the
wife.
b) Both the husband and wife
shall have generous and liberal access to the children, and will
make those arrangements directly with the children.
(b) Paragraph 8a of the Separation Agreement
shall be amended as follows:
a) The husband shall pay to the wife support
for Lyndsey Jenna Cattan, the sum of $21,000 in the
2000, and $18,000 in the year 2001 and subsequent years.
CONTINUATION OF AGREEMENT
The terms of
the Separation Agreement as amended by this Agreement shall
continue in full force and effect.
LEGAL ADVICE
The parties acknowledge that each:
(i) has
had independent legal advice
(ii) understands the
effect of the amendment of the Separation Agreement; and
(iii) is signing this Agreement
voluntarily.
[6] The Agreement was simply an
adaptation of an Agreement Mr. Cattan was given by a friend.
Mr. Cattan was subsequently advised that he should not have
signed the Agreement and that he should destroy it. Nonetheless,
he gave it to the Canada Customs and Revenue Agency in support of
an equivalent-to-spouse deduction, which he was in fact
allowed.
[7] I cannot ignore the existence of
this Agreement. It was intended to create legal relations between
the appellant and his ex-spouse. Although the spouses did not in
fact have independent legal advice, I have to assume that they
knew what they were signing.
[8] The appellant contends that if I
cannot ignore the Agreement completely, I should at least regard
the $21,000 and $18,000 which he paid in 2000 and 2001 as
consisting of two parts - $1,200 per month for Lyndsey (the
indexed payment provided in the original Separation Agreement)
and $550 per month in 2000 and $300 per month in 2001 - for
spousal support.
[9] That is unfortunately not what the
Amending Agreement says. Arguably, if there had never been an
Amending Agreement at least the amounts payable in respect of
Lyndsey would have been deductible. However, on the face of the
Amended Agreement there is a change in the child support and
payments, and this creates a commencement day after April 1997
and renders all of the payments non-deductible by the
appellant.
[10] I shall not set out the provisions of
subsection 56.1(4) of the Act which define
"commencement day" and other terms. In Kovarick v. The
Queen, [2001] 2 C.T.C. 2503, the new system
relating to the deductibility of child support payments that came
into effect following Thibaudeau v. Canada,
[1995] 2 S.C.R. 627, was analysed. I need not repeat
that analysis here. The Kovarick decision was given to
Mr. Cattan by counsel for the respondent.
[11] I have reached the conclusion
reluctantly that the appeals must be dismissed. The terms of the
Amending Agreement and of the legislation are clear.
[12] The appeals are dismissed.
Signed at Ottawa, Canada, this 3rd day of May 2004.
Bowman, A.C.J.
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