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Citation: 2003TCC752
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Date: 20031021
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Docket: 2003-397(IT)I
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BETWEEN:
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SERGE CLERMONT,
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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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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre, J.
[1] These are appeals under the informal procedure from assessments made by the Minister of National Revenue ("Minister") pursuant to the Income Tax Act ("Act") for the 1997, 1998, 1999 and 2000 taxation years.
[2] At the outset, the appeals for the 1997, 1998 and 1999 taxation years are dismissed on the ground of nullity under subsection 169(1) of the Act, since the Appellant acknowledges that he did not file a Notice of Objection for every year.
[3] As for the 2000 taxation year, the Appellant claimed a deduction of $18,920 for support payments, which the Minister disallowed.
[4] The facts can be summarized as follows. By a divorce decree dated February 9, 1990, the Superior Court of Québec, Montréal District, confirmed the separation and divorce agreement reached between the Appellant and his ex-wife, Nicole Bourque, on December 5, 1989. Under this agreement, the Appellant undertook to make support payments of $75 a week to his ex-wife and to the three minor children, to be indexed annually (Exhibit I-3).
[5] On November 27, 1998, the Appellant and his ex-wife signed an agreement wherein the Appellant undertook to pay the latter $60 a week as support for the two minor children only (the third having reached the age of majority). The parties also agreed that the support payment would no longer be indexed on an annual basis (Exhibit I-1). No court confirmed this agreement. It also appears that both parties agreed that the support would no longer be taxable for the ex-wife and deductible for the Appellant (see the Notice of Objection dated July 3, 2000, filed by the Appellant for 2000, Exhibit I-4).
[6] During the summer of 1999, the Appellant stopped making support payments to his ex-wife. Therefore, she availed herself under An Act to Facilitate the Payment of Support, R.S.Q. c. P-2.2, so that the Quebec Ministère du Revenu ("MRQ") could collect the support amount from the Appellant directly. The MRQ established that the Appellant was accountable for the support amount under the divorce decree of February 9, 1990 (namely $75 a week, indexed annually), without considering the subsequent agreement made between the parties involving the unindexed, reduced amount of $60 a week. In fact, An Act to Facilitate the Payment of Support only applies to support payable as a pension to a creditor of support under a judgment enforceable in Quebec (see article 1 of that Act).
[7] Therefore, based on the statement of account filed as Exhibit A-1, it was established that the Appellant had to pay $93.56 a week in support beginning July 21, 2000. That amount was subsequently increased to take into account the surety required by the support payer as security for the support amount pursuant to article 30 of An Act to Facilitate the Payment of Support (see also Exhibit I-5).
[8] The Appellant explained that the $18,920 amount, which he claimed as support in his 2000 income tax return, corresponds to the amounts required by the MRQ under An Act to Facilitate the Payment of Support over a three-year period, namely for 1998, 1999 and 2000. He said that he claimed a tax deduction when he realized that the MRQ had not taken into account the agreement of November 27, 1998, subsequent to the divorce decree of February 9, 1990. He therefore argued that if the divorce decree legally serves to establish support amounts, then payable support payments should continue to be deductible under that divorce decree.
[9] The Respondent argued that the Appellant's child support payments were no longer subject to a taxation arrangement following the November 27, 1998 agreement since both parties agreed to reduce the support amount set out in the divorce decree, agreeing that the support would no longer be taxable or deductible.
[10] The Respondent argued that in acting in this way, the parties gave a commencement day to the agreement on the support amount payable, as set out in subsection 56.1(4) of the Act. In the Respondent's view then, the Appellant cannot deduct child support under paragraph 60(b) of the Act.
[11] The Respondent further argued that even if the November 27, 1998 agreement need not be considered, the Appellant did not prove that he had paid his ex-wife $18,920 in the year 2000. Based on the statement of account filed as Exhibit A-1, it appears that it was not until June 2001 that the Appellant began making support payments. In her testimony, Nicole Bourque testified that she had begun to receive the amounts pursuant to An Act to Facilitate the Payment of Support in 2001 only. However, she acknowledged that the Appellant had paid her certain amounts in cash in 2000, though she could not recall the amounts. She signed no receipts because she was under the impression that it was no longer taxable for her and that it was no longer necessary to issue receipts to her ex-husband. The Appellant confirmed that he had given his ex-wife cash payments but did not recall the exact amounts. Both believed that he paid approximately $2,000 in the year 2000.
[12] Relevant legislative provisions read as follows:
SECTION 60: Other deductions.
There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable
. . .
460(b)3
(b) Support - the total of all amounts each of which is an amount determined by the formula
A - (B + C)
where
A is the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person were living separate and apart at the time the amount was paid,
B is the total of all amounts each of which is a child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, and
C is the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer's income for a preceding taxation year;
456.1(4)3
(4) Definitions. The definitions in this subsection apply in this section and section 56.
"child support amount" - "child support amount" means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or common-law partner or former spouse or common-law partner of the payer or who is a parent of a child of whom the payer is a natural parent.
"commencement day" - "commencement day" at any time of an agreement or order means
(a) where the agreement or order is made after April 1997, the day it is made; and
(b) where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of
(i) the day specified as the commencement day of the agreement or order by the payer and recipient under the agreement or order in a joint election filed with the Minister in prescribed form and manner,
(ii) where the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made,
(iii) where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, and
(iv) the day specified in the agreement or order, or any variation thereof, as the commencement day of the agreement or order for the purposes of this Act.
"support amount" - "support amount" means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount, and
(a) the recipient is the spouse or common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership and the amount is receivable under an order of a competent tribunal or under a written agreement; or
(b) the payer is a natural parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province.
[13] In my view, it is clear that the November 27, 1998 agreement resulted in a change of child support amounts payable to Nicole Bourque by the Appellant from the time of signing that agreement. Furthermore, so long as the Appellant made support payments starting on that day, he complied with the terms of that agreement. Ms. Bourque also said that she was no longer issuing receipts because they had agreed that the new support amount would no longer be taxable for her and no longer deductible for him. The definition for "commencement day" in subsection 56.1(4) of the Act indicates that the parties gave a commencement day to their agreement within the meaning of the Act. Therefore, after that date, that is, November 27, 1998, any child support payment was no longer deductible for the Appellant in computing his income under paragraph 60(b) of the Act.
[14] The Appellant feels aggrieved because under An Act to Facilitate the Payment of Support he is now required to not make support payments to which he and his ex-wife agreed under the November 27, 1998 agreement but to make support payments payable under a judgment enforceable in Quebec. However, since the November 27, 1998 agreement was never approved or sanctioned by the Superior Court of Québec, it is not a judgment enforceable in Quebec within the meaning of An Act to Facilitate the Payment of Support. This is why under this Act, it is the divorce decree of February 9, 1990, that prevails for the purposes of establishing amounts payable by the support payer for the benefit of the support creditor.
[15] Can the Appellant now argue that the agreement of November 27, 1998, did not take effect between the parties because he defaulted on payment and that his ex-wife should have relied on An Act to Facilitate the Payment of Support to force him to meet his financial obligations? I think not. In H.L. c. R.M., [1995] J.Q. no 2546 (Q.L.), Benoît Morin J. of the Superior Court of Québec stated that the fact that an agreement was not confirmed by a court in no way prevents it from having its effects between the parties. In stating this, he made reference to other decisions, as noted at paragraphs 11 and 12:
[translation]
¶ 11 The fact that the agreement was not confirmed by the court in no way prevents it from having its effects between the parties. In the decision Droit de la famille No. 153, Jean Marquis J. of the Superior Court ruled on this question as follows:
"When R-3 was signed on May 1, 1961, the parties were able to agree on the amount of support and they were not required to submit that agreement for approval by the courts except to the extent of obtaining judicial recognition, with the consequences which that entails.
However, the agreement's validity is not conditional on its being approved or sanctioned by the court: it is a valid agreement which has its effects between the parties. . . ."
¶ 12 If the agreement binds the parties, the court must take this into account, per the Honourable Judge Wilson of the Supreme Court of Canada, in Pelech v. Pelech, where she stated the following at the end her judgment:
"I believe that the courts must recognize the right of the individual to end a relationship as well as to begin one and should not, when all other aspects of the relationship have long since ceased, treat the financial responsibility as continuing indefinitely into the future. Where parties, instead of resorting to litigation, have acted in a mature and responsible fashion to settle their financial affairs in a final way and their settlement is not vulnerable to attack on any other basis, it should not, in my view, be undermined by courts concluding with the benefit of hindsight that they should have done it differently [[1987] 1 S.C.R. 801]."
[16] Moreover, it seems that it is open to the parties to vary a court order establishing child support, without necessarily having the new agreement approved by the court. It is also what Pierre Dalphond J. ruled while at the Superior Court of Québec, in R.G. v. L.A., [2000] Q.J. No. 1397 (Q.L.) at page 19, at paragraphs 106 to 109:
¶ 106 It is clear that if the Petitioner or the Respondent had filed in 1992 a motion before this Court to vary the accessory measures (sect. 17(1), of the Divorce Act), the said motion would have been granted since both parties were happy with the terms of the final settlement, especially Mrs. R.G. who was putting pressure to get it through, and since it did not show any lesion.
¶ 107 The mere fact that it was not done at the time, does not mean that the agreements are of no effect. On the contrary, by asking the Court to "set aside and declare null and void the two Memoranda of Agreement signed by the Petitioner on March 30th and July 31st, 1992", Mrs. R.G. acknowledges that they are otherwise binding upon the parties.
¶ 108 Once a judgment of separation or divorce has been pronounced and the Court has awarded accessory measures, nothing prevents the parties from settling between themselves the way they want to execute the benefits and obligations derived from the judgment. The parties remain free to negotiate at any time.
¶ 109 Though it is absolutely necessary for a divorce to become effective that it be pronounced by a Court since marriage is a matter going beyond the private interests of the parties involved, there is nothing in the Divorce Act that prevents two parties from making an agreement about their financial obligations towards each other further to a judgment of divorce. There is nothing in the laws of Quebec, Civil Code of Lower Canada or Civil Code of Quebec included, that prevents it either.
[traduction]
¶ 106 De toute évidence, si la requérante ou l'intimé avait, en 1992, déposé devant cette cour une requête en modification des mesures accessoires (par. 17(1) de la Loi sur le divorce), la requête aurait été accueillie, d'une part, parce que les conditions du règlement définitif arrangeaient les deux parties, et particulièrement Mme R.G., qui faisait pression pour que ce règlement se concrétise, d'autre part, parce que le règlement n'était nullement lésionnaire.
¶ 107 Ce n'est pas simplement parce qu'une telle requête n'a pas été présentée à l'époque que les accords sont sans effet. Au contraire, en demandant à la Cour [traduction] « [d']annuler et déclarer non avenus les deux protocoles d'accord signés par la requérante les 30 mars et 31 juillet 1992 » , Mme R.G. reconnaît qu'autrement les parties sont liées par ces accords.
¶ 108 Une fois que la Cour a rendu un jugement de séparation ou de divorce et qu'elle a accordé des mesures accessoires, il n'y a rien qui empêche les parties de régler entre elles-mêmes la façon dont elles veulent exécuter les avantages et les obligations découlant du jugement. Les parties restent libres de négocier en tout temps.
¶ 109 Bien qu'il soit absolument nécessaire, pour qu'un divorce prenne effet, qu'il soit prononcé par un tribunal puisque le mariage déborde les intérêts privés des parties concernées, rien dans la Loi sur le divorce n'empêche deux parties de conclure une entente relative à leurs obligations financières l'une envers l'autre à la suite d'un jugement de divorce. Les lois du Québec, y compris le Code civil du Bas-Canada et le Code civil du Québec, ne le défendent pas non plus.
[17] Therefore, the agreement of November 27, 1998, which was entered into lawfully by mutual agreement between the Appellant and his ex-wife, took effect on the date of its signing and henceforth bound the parties to that agreement. The effect of that agreement was to vary support payments and, consequently, give a commencement day to that agreement within the meaning of subsection 56.1(4) of the Act. As stated by Bowman J. of this Court in Kovarik v. Canada, [2001] T.C.J. No. 181 (Q.L.), at paragraph 15, the clear terms of the definition for "commencement day" cannot be discarded, and in a similar context, he ruled that an agreement subsequent to a divorce decree resulted in the variance of the terms of the divorce decree and therefore give a commencement day to the agreement subsequent to the divorce decree.
[18] In my opinion, this reasoning applies even if An Act to Facilitate the Payment of Support does not recognize private agreements between ex-spouses, for the purposes of enforcing that specific act. To resolve the problem, the Appellant need only have the November 27, 1998 agreement approved by a court (which a court would not hesitate to do if one relies on Pelech v. Pelech, supra) and he would no longer be required to pay the amounts set out in the divorce decree of February 9, 1990. Accordingly, his support debt would henceforth be based on the approved November 27, 1998 agreement.
[19] I conclude from all of this that the Appellant could not deduct a child support amount in computing his income for 2000 after the commencement day, that is, after November 27, 1998.
[20] In light of my conclusion, I need not determine what amount was actually paid by the Appellant as child support in 2000. The amount of $18,920 that he claimed as deduction when computing his income for the 2000 taxation year is simply not deductible.
Decision
[21] The appeals from the assessments made for the 1997, 1998 and 1999 taxation years are dismissed on the ground of nullity under subsection 169(1) of the Act. The appeal from the assessment made for the 2000 taxation year is dismissed.
Signed at Ottawa, Canada, this 21th day of October 2003.
J.T.C.C.
Translation certified true
on this 25th day of March 2004.
Maria Fernandes, Translator
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