Date: 19990215
Dockets: 96-3705-IT-I; 96-4214-IT-I
BETWEEN:
JACQUELINE DRAPEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Archambault, J.T.C.C.
[1] These appeals were heard under the informal procedure.
They constitute a new attempt by a taxpayer to challenge the
inclusion in her income of alimony received from a former spouse
solely for the maintenance of her child. The Supreme Court of
Canada in the famous case of The Queen v. Thibaudeau,
[1995] 1 C.T.C. 382, 95 DTC 5273, and the Federal Court of Appeal
in Serra and Hamer v. The Queen, 98 DTC 6602, both found
that such alimony must be included in the income of the former
spouse who receives it, pursuant to paragraph 56(1)(b) of
the Income Tax Act (Act).
[2] In the case at bar, counsel for Ms. Drapeau has made new
arguments that he says were not considered by those courts. The
first—and the one that seems clearest to me—is that
Ms. Drapeau received the alimony not on her own account but
rather as a trustee under a constructive trust. I infer from this
that it is being suggested that Ms. Drapeau’s appeals
should be allowed because she is not the taxpayer who must
include the alimony in her income; that taxpayer is rather the
alleged trust or the beneficiary under the alleged trust.
[3] The second argument made by counsel for Ms. Drapeau does
not seem as clear to me. If I have understood it properly, Ms.
Drapeau does not have to include the alimony in her income
because she was not the recipient thereof within the meaning of
paragraph 56(1)(b) of the Act.
[4] The Notices of Appeal filed by Ms. Drapeau relate to the
1988, 1989, 1993 and 1994 taxation years.
Facts
[5] Before considering the soundness of these arguments, it
would be helpful to provide a brief summary of the most relevant
facts, which moreover are not in dispute. Ms. Drapeau
married Serge Leclerc on September 2, 1972. They had a child,
Frédéric, born on December 11, 1977. In a decree
nisi of divorce (court decision) issued by Flynn J. of the
Superior Court of Quebec on November 6, 1989, which gave effect
to an agreement (1989 agreement) of the same date between
the spouses, Ms. Drapeau was awarded physical custody of her
minor son. Under the agreement, Mr. Leclerc undertook to pay Ms.
Drapeau $950 a month in alimony solely for
Frédéric. That amount was to be indexed yearly
starting on January 1, 1991. In the 1989 agreement, the spouses
declared that they were financially independent and expressly
waived any alimony for themselves.
[6] The Minister of National Revenue (Minister) added
the following amounts to Ms. Drapeau’s income as
alimony:
|
1988
|
1989
|
1993
|
1994
|
|
$10,620
|
$11,052
|
$12,775
|
$12,954.24
|
Analysis
[7] The relevant provision of the Act is paragraph
56(1)(b), which read as follows during the relevant
period:
56(1) Without restricting the generality of section 3, there
shall be included in computing the income of a taxpayer for a
taxation year,
. . .
(b) any amount received by the taxpayer in the year,
pursuant to a decree, order or judgment of a competent tribunal
or pursuant to a written agreement, as alimony or other allowance
payable on a periodic basis for the maintenance of the recipient
thereof, children of the marriage, or both the recipient and
children of the marriage, if the recipient was living apart from,
and was separated pursuant to a divorce, judicial separation or
written separation agreement from, the spouse or former spouse
required to make the payment at the time the payment was received
and throughout the remainder of the year.
[8] As I noted above, the Supreme Court of Canada has already
found in Thibaudeau that this paragraph applies in
circumstances similar to Ms. Drapeau’s. However, the
only argument made before that court was that paragraph
56(1)(b) of the Act violated section 15 of the
Canadian Charter of Rights and Freedoms
(Charter).
[9] In Serra and Hamer, the Federal Court of
Appeal affirmed a decision by my colleague Judge Dussault
rejecting Ms. Hamer’s argument that alimony paid to her
solely for her child’s benefit could not be income for her
because it did not belong to her and she did not have discretion
as to its use. In paragraph 1 of his reasons, Marceau J.A. of the
Federal Court of Appeal described the issue as follows:
. . . Again the issue was whether the fact that the sums
received were exclusively for the maintenance of the children
deprived the recipient of the discretion that was necessary in
order for these payments to be considered as allowances within
the meaning of subsection 56(12) of the Act, and consequently
should not be included in the custodial former spouse’s
income under paragraphs 56(1)(b), (c) or
(c.1) of the Act.
[Footnotes omitted.]
[10] In Hamer v. R., [1997] CarswellNat 1241, Judge
Dussault explained in paragraphs 14 et seq. why he had concluded
that paragraph 56(1)(b) of the Act applies to
alimony paid to a former spouse solely for her child’s
benefit. He based his conclusion, inter alia, on the
wording of the paragraph, which specifically provides for the
inclusion of such an amount. Judge Dussault wrote the
following:
16. Section 56(1)(b) relates specifically to an
amount received by a spouse or former spouse “as alimony or
other allowance payable on a periodic basis for the
maintenance of the recipient thereof, children of the marriage,
or both the recipient and children of the marriage”
provided the other conditions stated in the paragraph are met.
Paragraphs (c) and (c.1) cover similar
payments in different circumstances. Nothing in these provisions
requires that the spouse or former spouse receiving amounts for
the benefit or maintenance of children in his or her custody be
the owner or be himself or herself the creditor of the
alimony.
[Emphasis added. Footnotes omitted.]
[11] In my opinion, this is a sufficient reason to reject both
of the arguments put forward in the instant case by counsel for
Ms. Drapeau. I will deal with the second argument first. Ms.
Drapeau need not have been the “recipient” of the
allowance in order for her to be required to include it in her
income. Counsel for Ms. Drapeau maintained that, in the
French version of his reasons, Judge Dussault added the word
“ou” (or) between the words
“bénéficiaire” (recipient) and
“des enfants issus du mariage” (children of the
marriage), whereas in the Act there is only a comma.
[12] In making it a condition that the allowance be payable
for “the maintenance of the recipient thereof, children of
the marriage, or both the recipient and children of the
marriage”, Parliament has listed three separate situations.
The allowance may have been paid for the maintenance of (i) the
recipient alone or (ii) children of the marriage or (iii) both
the recipient and the children.
[13] When various elements are listed, it is not necessary to
repeat the word “or” between each element.
Louis-Philippe Pigeon, Q.C., then a professor at
Université Laval and later a Supreme Court of Canada
judge, recommended in his book entitled Rédaction et
interprétation des lois (1965) that the word
“or” be inserted between the second-last and last
items in the list. He stated the following at page 28:
[TRANSLATION]
In any such enumeration, “and” or “or”
should generally be inserted between the second-last and last
items. In Heaven’s name, let us avoid repeating
“or” after every item, as is done elsewhere. This can
become extremely tiresome, especially if the enumeration is
long.
[14] Although the wording of paragraph 56(1)(b) leaves
something to be desired,[1] it is clear here that the word “recipient”
is intended to describe the “taxpayer” referred to at
the beginning of paragraph 56(1)(b) of the Act and
not to require that the person who actually receives the
allowance be the beneficiary thereof. The fact that Ms. Drapeau
was not the direct beneficiary of the alimony is therefore
irrelevant.[2] The
second argument made by counsel for Ms. Drapeau must accordingly
be rejected.
[15] In my opinion, the reasons given by Judge Dussault in
Hamer are just as applicable in rejecting the first
argument of counsel for Ms. Drapeau. Even if we accept his
argument that the 1989 agreement created a constructive
trust—an argument with which I disagree, as I will explain
below—the statutory provision is clear and specific enough
to cover the instant case. Indeed, paragraph 56(1)(b)
of the Act expressly states that the taxpayer (the former
spouse) who receives the alimony is the one who must include it
in his or her income even if it is paid solely for the
maintenance of the children of the marriage.
[16] As stated above, the Act clearly contemplates
three separate situations: if any one of them exists and the
other conditions are met, paragraph 56(1)(b) of the
Act applies. It is very clear that the allowance may have
been paid solely for the maintenance of the children of the
marriage. It is not necessary that it have been paid for the
maintenance of the recipient. In the case at bar, since it is
Ms. Drapeau who received the alimony pursuant to the court
decision, since the alimony was paid for the maintenance of a
child from her marriage to the payer of the alimony and since the
other conditions seem to have been met, it is Ms. Drapeau
who must include it in her income.
[17] Although it is not strictly necessary, I would like to
add a few comments on the constructive trust doctrine referred to
by counsel for Ms. Drapeau. In support of his arguments, he
cited a text published on the Internet on August 29, 1996,
by the World Wide Legal Information Association (http://wwlia.org/ca-trus1.htm).
At the end of the text, constructive trusts are described as
follows:
Constructive trusts are another judicial creation where a
court will “construct” or invent a trust out of a
certain set of facts. Constructive trust is also known as
“unjust enrichment.” Case law (see Pettkus and
Peter in The Big Cases of Canadian Trust Law) has
required three elements before unjust enrichment can be found: an
enrichment by somebody, deprivation by somebody and the absence
of any legal justification for the enrichment.
[18] It should be added that this “judicial
creation” is a creation of the common law courts, and I do
not think that the Quebec courts would make use of it to remedy
an inappropriate use of alimony. Articles 1493 et seq. of the
Civil Code of Québec contain provisions on unjust
enrichment. A constructive trust is a type of trust that does not
exist in Quebec. Lise Morency, the Associate Deputy Minister of
Justice of Quebec, wrote the following at page 7 of “La
fiducie (Trust) une institution de Common Law dans un
contexte de droit civil” in Conférences sur le
nouveau Code civil du Québec (documents connexes)
(Actes des Journées louisianaises), Cowansville,
Éditions Yvon Blais, 1991: [TRANSLATION] “The scope
of the proposed provisions is limited to trusts that are
established explicitly, that is, express trusts, thus excluding
resulting trusts and constructive trusts.”
[19] Thus, for a trust to have been created, the judge would
have had to expressly order its creation or the spouses would
have had to expressly establish it in their agreement. There is
no mention of a trust here in either the court decision or the
1989 agreement.[3]
As well, I would add that there is no evidence of unjust
enrichment on Ms. Drapeau’s part. On the contrary, the
evidence showed that she had to spend more than the amount of the
alimony she received from Mr. Leclerc in order to maintain the
same standard of living that her child had had before the
divorce.
[20] Finally, it is far from clear that a constructive trust
is included in the meaning of “taxpayer” for the
purposes of the Act. See the comments of Catherine Brown
and Cindy L. Rajan in “Constructive and Resulting
Trusts: Challenging Tax Boundaries”, (1997)
45 Canadian Tax Journal 659, at page 682.
[21] For all these reasons, I believe that the amounts paid
pursuant to the court decision are amounts covered by paragraph
56(1)(b) of the Act that Ms. Drapeau must include
in her income.
[22] However, the same cannot be true of the amounts paid
before November 6, 1989. The court decision and the
1989 agreement say nothing about the period prior to that date.
There may have been another written agreement between the parties
or another Superior Court decision. However, no evidence of such
other decision or written agreement was adduced at the hearing.
Moreover, there are in this regard no presumptions of fact in the
Minister’s favour, since the Reply to the Notice of Appeal
is silent on that subject. Accordingly, I cannot confirm the
Minister’s assessments with respect to the alimony paid
before November 6, 1989.
[23] The evidence did not show what amount was paid in 1989
pursuant to the court decision. However, I consider it reasonable
to assume that one twelfth of the amount included in Ms.
Drapeau’s income by the Minister for 1989 is the amount
that may have been so paid.
[24] For these reasons, Ms. Drapeau’s appeals for the
1988 and 1989 taxation years are allowed. The assessments for
those taxation years are referred back to the Minister for
reconsideration and reassessment on the basis that $10,620 for
1988 and $10,138 for 1989 must be excluded from Ms.
Drapeau’s income. The appeals for the 1993 and 1994
taxation years are dismissed, the whole without costs.
Signed at Ottawa, Canada, this 15th day of February 1999.
“Pierre Archambault”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 31st day of October
1999.
Erich Klein, Revisor
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