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Citation: 2003TCC317
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Date: 20030527
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Docket: 2002-53(IT)I
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BETWEEN:
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WILLIAM FITZPATRICK,
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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
Hershfield, J.
[1] This appeal relates to the
Appellant's 1999 taxation year. The issue is whether he may
deduct certain maintenance payments made in accordance with a
paternity agreement entered into in 1986. The agreement was made
pursuant to provisions of Part II of the Maintenance and
Recovery Act of Alberta.[1]
[2] The parties to the paternity
agreement are: the Appellant (who admitted to being the father of
a child (the "child"), in respect of whom maintenance
payments were to be made under the agreement); the child's
mother; and, the Director of the Maintenance and Recovery
Department of Social Services and Community Health of Alberta to
whom I will refer to in these Reasons as the Director of Social
Services of Alberta. Under the agreement the Appellant, as the
father, agreed to pay to the Director of Social Services of
Alberta $300.00 per month for the maintenance and education of
the child until the child was 16, or, 18 if the child was
still in school. There is no dispute that the mother is the
beneficial recipient of the maintenance payments.
[3] The Appellant testified at the
hearing and I accept his testimony that he never denied his
responsibility for the pregnancy of the child's mother and
that he readily accepted his responsibility for the child's
maintenance. At no point did the child's mother require court
intervention. He has never been in arrears in payments under the
agreement. The Respondent does not dispute that the maintenance
payments were made under and in accordance with the paternity
agreement which, in respect of the subject year, 1999, totalled
$3,600.00. The Appellant deducted such amount in his 1999 tax
return. The Respondent disallowed it.
[4] The basis for the Respondent's
disallowance of the subject maintenance payments is that it was
not a "support amount" as defined in
subsection 56.1(4) of the Income Tax Act (the
"Act"). There is no question that the deduction
will only be allowed if the subject maintenance payments are a
"support amount" as defined in this subsection. This
requirement is set out in paragraph 60(b) of the
Act.
[5] The definition of "support
amount" in subsection 56.1(4) is as follows:
"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 former spouse of the payer, the
recipient and payer are living separate and apart because of the
breakdown of their marriage 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.
[6] Since the Appellant admitted that
he and the child's mother never married and never lived as
common-law partners, the Appellant can only qualify under
paragraph (b).
[7] It is the Respondent's
position, however, that the requirement in
paragraph (b) of the definition of "support
amount", that the maintenance amount be receivable by the
mother "under an order made by a competent tribunal in
accordance with the laws of a province" has not been met
since the subject payments were made under an
"agreement", not an "order".
[8] The Appellant relies on certain
provisions of the Statutes of Alberta that deem paternity
agreements entered into by the Director of Social Services of
Alberta to be an "order".[2] That being the case, the Appellant
argues that all of the requirements of paragraph (b) of
the definition of "support amount" have been met such
that the deduction of his maintenance payments must be
allowed.
[9] This Court has heard similar
appeals dealing with maintenance payments under paternity
agreements in Alberta in five other cases, the most recent being
William A. Mullen v. The Queen, [2003] T.C.J. No. 182. In
this case Judge Mogan dealt with virtually identical facts
in an identical legislative setting. In his Reasons for Judgment,
Judge Mogan reviews the provisions of the relevant Alberta
legislation as well as the four other cases of this Court on
point. The other cases on point are:
1. Fantini v.
The Queen, [1998] 2 C.T.C. 2256. In this case the mother was
the Appellant. She had received maintenance payments for her
child under a paternity agreement signed by her, the child's
father and the Director of Social Services of Alberta. Judge
Bowman found that the provincial legislation, deeming such an
agreement to be an "order", could not deem it to be an
"order" for the purposes of the Act.
Accordingly, he found that the requirement in the definition of
"support amount" in the Act that the maintenance
payments be made by "order" was not met and that the
maintenance payments received by the mother were thereby not
taxable. The corollary to this would be that the payments would
not be deductible to the father. I think it is fair to say that
the principal reason for Judge Bowman's decision was
that he concluded, at paragraph 15 of his Reasons, that something
that was deemed to be something that it was not for the purposes
of a provincial statute would not thereby have that artificial
meaning apply for the purposes of the Act.
2. Hollands v.
The Queen, [2001] 4 C.T.C. 2755. In this case the father was
the Appellant. Revenue Canada had denied the deduction of
maintenance payments made by him under a paternity agreement to
which the Director of Social Services of Alberta was a party.
Judge Teskey allowed the appeal, finding that the Alberta
legislative deeming provision, deeming a paternity agreement
signed by the Director of Social Services of Alberta to be an
"order", was an "order" satisfying the
requirements of paragraph (b) of the definition of
"support amount". Accordingly, Judge Teskey allowed the
deduction of the maintenance payments in this case.
3. Fraser v. The
Queen, [2002] T.C.J. No. 569.
4. Hewko v. The
Queen, [2002] T.C.J. No. 570. Fraser and
Hewko involved similar facts and were both heard by Judge
Bowie. His decisions with Reasons were delivered together. As in
Hollands and the present appeal, the fathers in these two
cases had been denied the deduction of maintenance payments made
by them under their respective paternity agreements to which the
Director of Social Services of Alberta had been a party. Judge
Bowie considered both the Fantini and
Hollands cases and found against the Appellants. That is,
it was his view that, in context, the Alberta deeming provision
could not be regarded as making a paternity agreement an
"order" for the purposes of the Act. In
examining the express language of the Alberta deeming provision
he found that paternity agreements signed by the Director of
Social Services of Alberta were deemed to be an "order"
for limited purposes. He acknowledged that it was open for
provinces to deem a thing to be that which in reality it is not,
provided it does not intrude upon a legislative power granted to
Parliament. Where it does not so intrude, a province can
legislate a deeming provision that alters the status of a thing
for both provincial and federal purposes provided it intends to
do so. Judge Bowie found no such intention in respect of the
subject Alberta deeming provisions. Accordingly, he found
maintenance payments under Alberta paternity agreements were not
payments pursuant to an "order" for the purposes of the
Act and thereby were not deductible.
[10] In Mullen, Judge Mogan sided
with Judge Teskey on this difficult issue. Judge Mogan found that
it was within the competence of the Alberta Legislature to deem a
paternity agreement to be an "order". At
paragraph 15 he found that it was desirable that a paternity
agreement be conclusively regarded as a maintenance order to
fulfil the purposes of the subject Alberta enactments.
[11] Judge Mogan relied upon principles in
Dale v. The Queen, 97 DTC 5252. Paraphrasing the Reasons
in Dale, Judge Mogan stated at paragraph 16 as
follows:
... If the legislature of a province deems a particular
agreement to be a court order, it is not for the Minister of
National Revenue to undermine the provincial legislation by
refusing to recognize the agreement as an order of a competent
tribunal.
[12] I agree with the outcome in both
Hollands and Mullen. However in doing so I think it
helpful to add a few comments as to why I am not persuaded in
these cases by the analysis of Judges Bowman and Bowie. Their
analyses in focusing on what a province should not be able to do
so as not to intrude on the scope of the Income Tax Act
fails to focus on what Parliament has done in this instance.
Paragraph (b) of the definition of "support
amount" is an express acknowledgement by Parliament of the
provinces' jurisdiction over the question of how maintenance
payments are to be dealt with in paternity matters. Unlike a case
like Dale, the scope of which Judge Bowman sought to
narrow, Parliament has in this case expressly deferred
determination of this question to the provinces it being in their
exclusive legislative domain. Under Alberta legislative
authority, the Director of Social Services of Alberta has been
enabled to perform a function in these cases generally reserved
for the courts. It is a function akin to that of a tribunal
passing judgment on paternity and on terms of maintenance. In
becoming a party to a prescribed form of paternity agreement in
Alberta, the Director of Social Services of Alberta gives a stamp
of approval that results in that agreement being deemed to be an
"order" under Alberta legislation. The Director's
signature is accepted in lieu of a court order and is given by
the deeming provision the status of an "order" to
ensure that it is so treated in Alberta and extra provincially
should reciprocal enforcement be required. This is not simply a
question of making a thing into something that it is not. It
ensures that something is what it was intended to be albeit for
provincial purposes.
[13] Judge Bowie found that this limitation
prevented the "order" from being an "order" for the
purposes of the Act. Such analysis, in the context of the
Act, puts too much emphasis on the legislative intent of
the deeming provision in this case. The question the Act
asks is whether the maintenance payments are under an
"order" of a competent tribunal in accordance with the
laws of the province. Was there an "order" of a
competent tribunal in accordance with the laws of Alberta in
these cases? I think the answer to this question is
"yes" regardless that the Alberta Legislature did not
have in mind that the deeming provision would apply for the
purposes of the Act. The Act asks what the
provincial law respecting paternity orders is, not what the
province intended it to be for tax purposes. The provincial law
respecting maintenance in paternity cases in Alberta is that
paternity agreements signed by the Director of Social Services of
Alberta are "orders" for provincial purposes and that
is all that is required in paragraph (b) of the definition
of "support amount" in the Act. To accept a
narrow purpose of the deeming provision in these circumstances as
a means of shutting out, for tax purposes, the exercise of
provincial legislative authority invited by the Act is to
negate the invitation that Parliament gave to the provinces to
deal with this issue as they see fit.
[14] Accordingly, I allow the appeal in the
case at bar with costs. I note that although I indicated at the
hearing of this matter that I was likely to reserve my decision
pending a judicial review application of the Fraser
decision, I have been encouraged by Judge Mogan's
recent decision in Mullen to express my concurrence with
his views.
Signed at Ottawa, Canada, this 27th day of May 2003.
J.T.C.C.
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