Citation: 2014 TCC 132
Date: 20140502
Docket: 2011-2196(IT)G
BETWEEN:
HELEN
JULIANNE GOLDHAWK,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR JUDGMENT
D’Auray J.
Question in Issue
[1]
The question in this appeal is whether the
appellant, Ms. Helen Julianne Goldhawk (“Ms. Goldhawk”), is jointly and
severally liable to pay the taxes owed by her spouse,
Mr. Albert Goldhawk (“Mr. Goldhawk”), following the transfer of
Mr. Goldhawk’s share of the matrimonial home to Ms. Goldhawk, pursuant to
section 160 of the Income Tax Act (“the Act”)?
Facts
[2]
Ms. Goldhawk is a social worker and
Mr. Goldhawk is now retired however during the relevant period he worked as
a chartered accountant.
[3]
In 1989, Mr. Goldhawk started a business
with Mr. Quattrini who was also a chartered accountant. The business
operated as a partnership and provided accounting services.
[4]
However, before forming the partnership,
Mr. Quattrini insisted that Mr. Goldhawk enter into a marriage
contract with his wife whereby in the event of a divorce or a separation, Ms.
Goldhawk would not have a right to Mr. Goldhawk’s partnership interest in
D.J. Quattrini, C.A. and Quattrini & Associates Limited (the “partnership”).
[5]
At the time of the appeal, Ms. Goldhawk and
Mr. Goldhawk had been married for 46 years. Prior to 1989, the Goldhawks
did not have a marriage contract. Therefore before signing a marriage contract
whereby she would relinquish her rights to her spousal interest in the
partnership Ms. Goldhawk sought legal advice.
[6]
Ms. Goldhawk’s lawyer advised her against
signing such a marriage contract, however it was a delicate situation for Ms. Goldhawk;
on one hand, she was advised not to sign the marriage contract, on the other
hand by not signing the marriage contract she would deny Mr. Goldhawk the opportunity
to start his accounting practice.
[7]
Ms. Goldhawk and Mr. Goldhawk both
testified that they agreed that Ms. Goldhawk would sign the marriage
contract relinquishing her rights to Mr. Goldhawk’s partnership’s
interests in exchange for the share of Mr. Goldhawk in the matrimonial
home. According to their testimonies, this oral agreement was reached shortly
before Ms. Goldhawk signed the marriage contract on June 5, 1989. Notably,
however, there is no documentation to support the contention that the oral
agreement took place, and there is no witnesses confirming their discussion.
[8]
Once the marriage contract was signed, Mr. Goldhawk
started his accounting practice with Mr. Quattrini. Over the course of the
1990s, Mr. Goldhawk’s relationship with Mr. Quattrini deteriorated.
The tension in their professional relationship culminated in May of 2001 when
Mr. Quattrini physically locked Mr. Goldhawk out of the office.
Ultimately, Mr. Goldhawk was successful in a civil law suit against
Mr. Quattrini.
[9]
Both Ms. Goldhawk and Mr. Goldhawk
testified that in light of the difficulties Mr. Goldhawk was facing with
his business partner in 1999, and fearing that the partnership would soon dissolve,
they took steps to ensure that all their legal affairs were in order.
[10]
On October 21, 1999, Mr. Goldhawk
transferred to Ms. Goldhawk his share in the matrimonial home. At the time
of the transfer of the matrimonial home to Ms. Goldhawk, Mr. Goldhawk
was liable to pay tax under the Act. The fair market value of the matrimonial
home was $225,000.
[11]
In the transfer of the deed of the
matrimonial home, under the heading “Consideration” it is written “Natural Love & Affection & $1.00”. It also reads “Deed given to
place title in wife’s name alone and for no other purpose”.
[12]
Ten years had passed between the time the
Goldhawks purportedly orally transferred the matrimonial home and when the
actual transfer of the title occurred. Ms. Goldhawk explained that there was a ten
year delay in the transfer of the title since both of them were leading busy
lives.
[13]
None of the documents filed in evidence during
the trial made reference to the supposed oral agreement whereby Mr. Goldhawk
purportedly transferred his share of the matrimonial home to Ms. Goldhawk his
spouse in exchange for the 1989 marriage contract.
Position of the Parties
Appellant’s Position
[14]
Ms. Goldhawk submits that she paid
sufficient consideration for the receipt of her husband’s interest in the
residence. She argued that the transfer of the home was in exchange for the
concessions she made in the marriage contract, and thus sufficient and valuable
consideration was paid such that section 160 of the Act should not apply.
Respondent’s Position
[15]
The respondent submits that the fair market
value of the property at the time of the transfer of the deed in 1999 was
$225,000, and the consideration paid by the appellant in return for Mr.
Goldhawk’s interest in their residence was $1. As such, under section 160 of
the Act, Ms. Goldhawk and Mr. Goldhawk are jointly and severally
liable to pay the amount that Mr. Goldhawk was liable to pay under the Act
in respect of the 1999 taxation year or any year preceding, totalling at
$26,341.90. The respondent denies the contention that Ms. Goldhawk and her
husband entered into an oral agreement in 1989.
Analysis
[16]
Ms. Goldhawk could not explain why the oral
agreement between her and her spouse with respect to the transfer of the
matrimonial home was not indicated in any of the documents filed in evidence
with this Court.
[17]
For example, when the respondent asked why there
was no mention of the oral agreement in the marriage contract dated June 5,
1989, Ms. Goldhawk could not explain why this was the case.
[18]
When this same question was put to Mr. Goldhawk,
he stated that the sole purpose of the marriage contract was to satisfy his
partner’s request and concerns. Mr. Goldhawk explained that the marriage
contract did not include any reference to the oral agreement since the transfer
of the matrimonial home was a personal matter between him and his spouse, and
in essence, there was no reason that his partner had to know about his personal
agreement with his wife.
[19]
Ms. Goldhawk could not explain why
the deed that transferred to her Mr. Goldhawk’s share in the matrimonial
home did not mention the oral agreement. Quite the contrary, in fact, the deed
stated the consideration was “Natural Love
& Affection – and the deed was given to place title in wife’s name
alone and for no other purpose. No consideration whatsoever passes
between the parties.”
[20]
Mr. Goldhawk suggested that it was an error
committed by the drafting lawyer. The lawyer acting for the Goldhawks for the
house transfer deed was not called as a witness.
[21]
In Ms. Goldhawk’s Notice of Objection dated July
18, 2005, there is also no mention of an oral agreement transferring Mr.
Goldhawk’s share of the matrimonial home to her. The only ground raised for objecting
to section 160 assessment was:
The amount that you
claim is owed by AE Goldhawk is incorrect in that payments have been made.
[22]
Ms. Goldhawk could not explain why the Notice of
Objection was absent of any reference to the oral agreement. Further, Ms. Goldhawk
could not explain why in the Notice of Appeal filed on her behalf, the oral
agreement transferring the matrimonial home to her was also not raised as an
argument to avoid the application of section 160 of the Act.
[23]
As to the testimony of Mr. Goldhawk, I accept Mr. Goldhawk’s
testimony that the marriage contract dated June 5, 1989, was exclusively to
satisfy his business partner’s concerns. I find it conceivable that this is the
reason why reference was not made to the transfer of the matrimonial home in
the marriage contract.
[24]
However, I am troubled that the transfer of the
deed did not make reference to the oral agreement. Quite the opposite, in fact,
the transfer expressly states that the deed was to be placed in Ms. Goldhawk’s
name for no other purpose and for no consideration. Therefore, the witness
testimony directly contradicts the documentary evidence.
[25]
I am not convinced by the testimony of
Mr. Goldhawk that the absence of reference to the oral agreement in the
transfer of the deed was an error committed by the lawyer. Instead, I am
inclined to believe that the document speaks to the mind of the parties at the
time they transferred the deed. In other words, I believe that the transfer of
the deed was not done in completion of any previous agreement. The transfer of
the deed in 1999 may have been prompted by concerns about Mr. Goldhawk’s
business partner or perhaps the respondent is correct in suggesting that
Mr. Goldhawk was concerned about the sums he owed to the Canada Revenue
Agency. In either or both events, I believe that if Mr. Goldhawk had
transferred the deed according to a previous contractual engagement he made in
1989, this would have been reflected in the documentation, and it would have
been argued in the Notice of Objection and in the Notice of Appeal.
[26]
In my view, the witnesses were given ample
opportunity to explain why there was a significant discrepancy between their
testimony and the documents, and they did not give acceptable or sufficient
responses that could explain why the transfer of the deed did not reflect the
oral agreement. Ms. Goldhawk could not offer a single explanation to this
effect, and Mr. Goldhawk’s testimony was self-serving, when he claimed
that it was an error committed by the drafting lawyer who was not called to
testify. In my opinion, Ms. Goldhawk did not demolish the assumptions of
fact made by the Minister in this regard; therefore I must accept the nature of
the transfer of the deed being as it is presented in the documents, namely, a
transfer of Mr. Goldhawk’s share of the matrimonial home without
consideration.
[27]
In this appeal the conditions of subsection
160(1) of the Act are met:
1.
Mr. Goldhawk was liable to pay tax at the
time of the transfer of his share of the matrimonial home to Ms. Goldhawk;
2.
The transferee, Ms. Goldhawk, was the
spouse of the transferor, Mr. Goldhawk;
3.
The fair market value of the share of Mr. Goldhawk
matrimonial home exceeded the fair market value of the consideration given by Ms. Goldhawk.
[28]
The appeal is dismissed, with costs.
Signed at Montreal, Quebec, this 2nd
day of May 2014.
“Johanne D’Auray”
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