Callwood v. Canada, 2006 FCA 188

Date: 20060523

Docket: A-398-05

Citation: 2006 FCA 188

CORAM:        NADON J.A.

                        SEXTON J.A.                        

                        EVANS J.A.

BETWEEN:

TRACEY CALLWOOD

Appellant

and

HER MAJESTY THE QUEEN

Respondent

and

JOHN G. CRAWFORD

                                                                                                                                        Respondent                                                                                                                                                                                    

Heard at Toronto, Ontario, on April 26, 2006.

Judgment delivered at Ottawa, Ontario, on May 23, 2006.

REASONS FOR JUDGMENT BY:                                                                               SEXTON J.A.

CONCURRED IN BY:                                                                                                   NADON J.A.

                                                                                                                                        EVANS J.A.

Date: 20060523

Docket: A-398-05

Citation: 2006 FCA 188

CORAM:        NADON J.A.

                        SEXTON J.A.                        

                        EVANS J.A.

BETWEEN:

TRACEY CALLWOOD

Appellant

and

HER MAJESTY THE QUEEN

Respondent

and

JOHN G. CRAWFORD

                                                                                                                                        Respondent                                                                                                                                                                                    

REASONS FOR JUDGMENT

SEXTON J.A.

I.           INTRODUCTION

[1]                This is an appeal from Callwood v. Canada, 2005 TCC 179 ["Callwood"], a Tax Court of Canada ("TCC") reference pursuant to section 174 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the "Act"). In the court below, the appellant, Tracey Callwood, challenged the inclusion of child support payments in her 2000 and 2001 taxable incomes. Such payments are not taxable to the recipient and are not deductible by the payer if they are made after what the Act refers to as a "commencement day." Payments before this date, on the other hand, are governed by the old income tax regime, according to which they are taxable to the recipient and deductible by the payer. In the decision below, the TCC judge pinpointed the commencement day as December 14, 2001. As a result, in his view, almost all of the payments in issue were properly included in the appellant's taxable income.

[2]                In this court, the appellant challenges the decision below on three main grounds. First, she levels allegations of procedural unfairness against the TCC judge. Second, she complains about his findings of fact. Finally, she challenges his conclusion as to the correct commencement day.

II.         THE FACTS AS FOUND BY THE TAX COURT OF CANADA

[3]                The appellant and the joined party in the proceedings below, John G. Crawford (the "joined party"), were married between September 6, 1986 and June 12, 1997. In January 1997, they entered a separation agreement (the "Original Agreement"). Among other things, it required the joined party to pay child support to the appellant for their three children.

[4]                Three months later, on April 16, 1997, the two signed and filed affidavits in respect of their divorce petition (the "Affidavits"). Among other things, their affidavits specified:

3. The Respondent [the joined party] agrees that the child support will be increased annually in each year commencing in January 1998, for so long as child support is payable under the Separation Agreement [the Original Agreement], by an amount equal to the lesser of the annual percentage increase in the Cost of Living of the proceeding year and the annual percentage increase in the Respondents [sic.] salary.

[5]                Eventually, a divorce judgment (the "Divorce Judgment") dated May 12, 1997 ordered the appellant and joined party divorced effective June 12, 1997. The Divorce Judgment did not refer to the change in support provided for by the Affidavits that is described in the previous paragraph of these reasons.

[6]                In October 2000, the Original Agreement was amended by what is hereinafter referred to as the "Amending Agreement." The Amending Agreement altered the Original Agreement by deleting from it the following italicized passages:

VII. CHILD SUPPORT

                Husband hereby agrees to pay Wife as child support, and Wife agrees to accept as child support, according to the following schedule:

1997: $400.00 within three months of the signing of this Agreement by Wife

Alicia Aileen Crawford: 1997-2003

$1599.99 no later than March 31

$1599.99 no later than June 30

$1599.99 no later than September 30

$1599.99 no later than December 31

Bryce Gordon William Crawford: 1997-2008

$1599.99 no later than March 31

$1599.99 no later than June 30

$1599.99 no later than September 30

$1599.99 no later than December 31

AlexandriaBetty Crawford: 1997-2009

$1600.02 no later than March 31

$1600.02 no later than June 30

$1600.02 no later than September 30

$1600.02 no later than December 31

                Husband agrees to render payments on a weekly basis in the form of cashier's check or money order until a wage attachment is granted.

                It is specifically understood and agreed by the parties that if said minor children attend college, then the support payments will continue until graduation or enrollment ceases. It is also understood that the Husband will share the burden of expenses for clothing, medical insurance and any other necessary expenses of said children. Husband and Wife agree that these support payments shall not be modified by any Court during the lifetime of the parties hereto.

[7]                At the end of 2001, the child Alicia Aileen Crawford began to live with the joined party. As a result, a September 2002 order of the Ontario Superior Court of Justice suspended the joined party's obligation to pay support for her, effective December 14, 2001 (the "2002 Order").

[8]                The appellant filed child support receipts, totalling $20,800.00 for 2000 and $20,533.00 for 2001, as income for those taxation years. She was assessed in respect of those years as having received taxable child support payments. The appellant then appealed the assessments that had assessed her as filed.

[9]                On March 2, 2005, the TCC was to consider the proper tax treatment of the child support payments, as well as a disability tax credit issue. At the hearing, the appellant requested an adjournment on the basis that she only received documents that she had requested on January 15, 2005 from the respondent, Her Majesty the Queen, on February 28, 2005. The TCC responded by bifurcating the proceedings, adjourning the appeal with respect to the disability tax credit issue, but continuing with the child support one. It is the TCC's child support determination that is on appeal to this court.

III.        LEGISLATIVE BACKGROUND

[10]            The proceedings below were brought pursuant to section 174 of the Act, which reads in relevant part:

                                                                                                                   

[11]            Broadly speaking, the task of the TCC was to determine whether any of the child support payments received by the appellant in 2000 and 2001 were subject to the old regime for child support payments. Under this regime, child support paid under a written agreement or court order was taxable in the hands of the recipient and deductible by the payer. The Income Tax Act Budget Amendments Act, 1996, S.C. 1997, c. 25, s. 9 changed this regime, so that such payments are no longer either taxable or deductible.

[12]            The 1996 amending legislation provided a number of methods by which parties to a child support agreement or court order in effect under the old regime could become subject to the new regime. They are set out in the definition of "commencement day," the term used in the Act to describe the day after which the new regime will apply to child support payments. Generally, if an agreement or court order has no commencement day, the new regime does not apply to any payments made pursuant to it.

[13]            Subsection 56.1(4) of the Act contains definitions relevant to determining the existence of a commencement day:

[14]            According to section 137 of the Tax Court of Canada Rules (General Procedure), SOR/90-688a:

[15]            Rule 351 of the Rules for Regulating the Practice and Procedure in the Federal Court of Appeal and the Federal Court, SOR/98-106 (the "Federal Courts Rules") states:

IV.        THE FINDINGS OF THE TAX COURT OF CANADA

[16]            To determine the extent to which the appellant was obliged to include the child support payments in her taxable income, the court below considered whether any of a number of events could be said to have triggered a commencement day within the meaning of subsection 56.1(4) of the Act.

[17]            For instance, the TCC turned its attention to the Affidavits. The TCC found that they did not constitute an agreement to vary the Original Agreement and that they were pre-May 1997 variations. Consequently, the court below concluded that they created no commencement day. The TCC judge found that their inflation provision was never given effect. For him, the Affidavits appeared to reflect some without prejudice pre-divorce negotiations that were never given effect. As a result, he concluded that he had to ignore them.

[18]            The court below also examined the Amending Agreement. The TCC judge acknowledged that its deletion of the joined party's obligation to pay child support during the children's college years (the "College Obligation") created the possibility that the total child support paid would be less under the Amending Agreement than it had been under the Original Agreement. However, he also observed that subparagraph (b)(iii) of the definition of "commencement day" addresses variations that actually change the total child support. For the court below, if the effect of changing the total is contingent on an unknown future event, it cannot be a variation creating a commencement day.

[19]            The TCC then addressed the Amending Agreement's deletion of the obligation to share expenses for clothes, medical insurance and other necessities (the "Shared Expense Obligation"). In the mind of the TCC judge, this deletion was also not a variation within the statutory definition of "commencement day." After all, according to the TCC, the Shared Expenses were not payable on a periodic basis, so they were not part of the "child support amounts" in the Original Agreement. Consequently, the court below concluded that their deletion could not be a change to the child support amounts payable.

[20]            Next, the TCC judge considered various letters proffered by the parties to indicate their intended tax treatment of the payments. In this context, he emphasized that in filing their tax returns, the appellant and joined party acted as if the payments were taxable and deductible, respectively. Consequently, he concluded that they never intended the Amending Agreement to cause a change in the tax regime applicable to the child support payments. Though in his mind, intention should not be determinative, if relevant at all, he found it somewhat comforting to note cases where the legal effect of actions coincides with intentions.

[21]            Finally, the TCC judge turned his mind to the 2002 Order. In this context, the TCC judge found as a matter of statutory interpretation that where the total amount of child support is changed, even though the amount per child remains constant, there is a variation within the meaning of subparagraph (b)(ii) of the definition of "commencement day." According to the court below, the 2002 Order resulted in changing the "child support amount" as defined in the Act from $400 per week to $266 per week, thereby creating a commencement day. In this case, said the TCC judge,

that day was December 14, 2001-the day on which the first payment of the varied amount had to be made. Therefore, he concluded that all payments payable and receivable after that date were subject to the new regime. In the end, then, he determined that the child support payments in 2000 ($20,800) and the child support payments less $533 in 2001 ($20,000) were subject to the old regime and consequently properly includable in the appellant's taxable income and deductible by the joined party.

V.         ISSUES

[22]            This appeal raises four broad issues. I will begin by addressing several preliminary matters, such as the appellant's attempt to introduce new evidence on this appeal, her allegations that the TCC judge behaved in a procedurally unfair manner and her challenges to his factual findings. Then, I will consider whether the TCC judge erred in determining that the Original Agreement had not been varied prior to December 14, 2001.

VI.        ANALYSIS

1)       FRESH EVIDENCE

[23]            The appellant seeks to put several documents into evidence that were not before the court below. These include a letter from the Canada Customs and Revenue Agency (the "CCRA"), bank Acknowledgements of Deposits, as well as an undated and unsigned "Amended Debts and Liabilities List," which is apparently of her own creation.

[24]            According to Rule 351 of the Federal Courts Rules:

[25]            In Amchem Products Inc. v. British Columbia (Workers' Compensation Board), [1992] S.C.J. No. 110 at paragraph 6, the Supreme Court of Canada discussed when it may be appropriate to admit new evidence on appeal:

...

In the exercise of this discretion, evidence will generally be rejected if it could have been discovered by the exercise of reasonable diligence prior to the appeal, and further, it is not shown that the evidence is such that if admitted, it will be practically conclusive. See [1964] S.C.R. 122">Dormuth et al. v. Untereiner et al., [1964] S.C.R. 122. In special circumstances the discretion can, however, be exercised to admit evidence that does not meet these criteria: see [1971] S.C.R. 501">Brown v. Gentleman, [1971] S.C.R. 501. In my view, in exercising the discretionary power in respect of an application relating to an appeal from an interlocutory order, these rules should not be applied strictly. Regard must be had for the fact that there is not the same opportunity for putting forward all the material as at trial. The court, on the application for an interlocutory injunction, does not make a final determination as to the facts. Interlocutory orders are subject to be vacated or modified by the court of first instance if the circumstances have materially changed.

[26]            In my view, no special circumstances call for the admission of the appellant's fresh evidence. The appellant argued that such evidence was not discoverable at an earlier time because it was in the possession of the joined party. It is not necessary to opine on this issue, because in my view, the evidence is not practically conclusive and therefore should not be admitted.

2)       PROCEDURAL MATTERS

[27]            In her written submissions, the appellant contended that the TCC judge made several procedural errors in the court below. I discuss these arguments in this section of these reasons, although they were not addressed orally by the parties.

[28]            First, the appellant complained in her memorandum of fact and law about the TCC's refusal of an adjournment on the child support issue. Section 137 of the Tax Court of Canada Rules (General Procedure) vests a TCC judge with a broad discretion to adjourn a hearing "on such terms as are just." In this case, the appellant asserted that the adjournment denial prejudiced her because it precluded her from establishing that it was only as a result of earlier CCRA reassessments that her 2000 and 2001 income tax returns showed the child support payments in issue as taxable.

[29]            Even if it is true that it was only because of earlier CCRA reassessments that the appellant included the payments in 2000 and 2001, she suffered no prejudice from being unable to prove this point. After all, the decision below clearly did not turn on her and the joined party's intended tax treatment of the child support payments. See e.g. Callwood at paragraphs 20 and 26. In short, the appellant has provided me with no reason to interfere with the TCC judge's refusal to adjourn the hearing.

[30]            The appellant also alleged a reasonable apprehension of bias on the part of the TCC judge in her written submissions. I can find no evidence of bias in this case.

[31]            Finally, the appellant claimed in her factum that purported collaboration between the respondent and the joined party "contravened the true purpose and meaning" of section 174 of the Act. Simply put, this submission is without foundation. I see no contravention of section 174 in this instance.

3)       THE TAX COURT OF CANADA'S FINDINGS OF FACT

[32]            The appellant also complains about the TCC's findings of fact. I can only interfere with such findings if they demonstrate a palpable and overriding error on the part of the court below: 2002 SCC 33">Housen v. Nikolaisen, 2002 SCC 33 ["Housen"] at paragraph 10.

[33]            According to the appellant, the TCC misunderstood the child support payment schedule. I am not convinced that the TCC judge made any palpable and overriding errors in this regard.

[34]            In her written submissions, the appellant also leveled allegations of fraud and perjury against the joined party's current wife, who testified in the proceedings below. These accusations were also not addressed in oral argument. They are completely unsubstantiated. Moreover, the TCC judge's comments about the joined party's current wife indicate that the court below did not improperly rely on the impugned evidence. According to Callwood at paragraph 3:

. . . The Joined Party's current wife gave evidence on behalf of the Joined Party who I will refer to simply as "John". John's current wife was also a credible witness but had less personal knowledge of matters relating to the agreements and the child support payments. Accordingly, I do not give her evidence weight except in respect to exhibits she tendered, the authenticity of which was not challenged. [emphasis added]

4)       THE TAX COURT OF CANADA'S COMMENCEMENT DAY CONCLUSIONS

a)       The Affidavits

[35]            The appellant points to the Affidavits as the source of a commencement day in this case. On this point, the TCC judge found in Callwood at paragraph 17:

If these affidavits constitute an agreement to vary the original agreement, they are pre-May, 1997 variations so no commencement day is created by them. The June 1997 divorce judgment makes no reference to them or to their subject matter, so it does not create a commencement day. Further, there is virtually no evidence that the inflation provision seemingly agreed to by sworn affidavit was ever given effect. Indeed the evidence is to the contrary. Based on what I can gather from the evidence, which is lacking on this point, the affidavits seem to reflect some without prejudice pre-divorce negotiations which were never given effect and must therefore be ignored. [See Note 6 below]

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Note 6: In a submission received by the Court on July 26, 2005, Appellant's representative made certain assertions of fact relating to the cost of living provisions in the affidavits. These factual assertions are not evidence. No evidence of such assertions was brought at the hearing. In any event, as stated, even if an agreement existed under the affidavits, it would be a pre-May 1997 agreement and which has no impact on the creation of a commencement day.

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[36]            These comments are of concern to me. It is possible to read them as putting forward the general proposition that pre-May 1997 child support agreements cannot create a commencement day. If this was what was meant by the court below, then I must respectfully disagree with the TCC judge.

[37]            As a result of subparagraph (b)(iv), it is possible for a pre-May 1997 agreement or order, or any variation thereof, to create a commencement day. Again, that provision reads:

In other words, a pre-May 1997 agreement or order, or any variation thereof, that specifies a commencement day for the purposes of the Act that is after April 1997 can create a commencement day within the meaning of the Act.

[38]            This was the case in Dangerfield v. Canada, 2003 FCA 480 ["Dangerfield"], which concerned a judgment of the Manitoba Court of Queen's Bench (the "Manitoba Judgment"). The Manitoba Judgment was pronounced on April 21, 1997. It required, among other things, the payment of monthly child support amounts "commencing May 1, 1997." Under Queen's Bench Rule 1.04.1, the Manitoba Judgment, as a whole, was effective on the day it was pronounced-that is, on April 21, 1997.

[39]            In Dangerfield, this court found that the Manitoba Judgment specified a commencement day within the meaning of the Act. This was the clear intention of the judge who issued it. The documentation also demonstrated that the parties intended to bring themselves under the new regime by specifying a commencement day. Ultimately, this court concluded that the language in

the Manitoba Judgment that required that the monthly amounts be paid "commencing May 1, 1997" specified a commencement day in accordance with subparagraph (b)(iv) of the Act.

[40]            The respondent argues that the case of Kennedy v. Canada, 2004 FCA 437 ["Kennedy"] supports the finding of the TCC judge on this point. I disagree. That case concerned a December 1991 agreement entitled "Minutes of Settlement." It required, among other things, that the father in question pay the same amount as specified in an interim, March 1991 child support order (the "1991 Order"). The Minutes of Settlement also imposed an additional obligation on the payer that was not contained in the 1991 Order, by providing that the amount would be adjusted annually on the basis of a stipulated cost-of-living formula. Six years later, on September 24, 1997, the recipient mother obtained a judgment providing for the payment of child support in the same amounts and on the same terms as set out in the Minutes of Settlement (the "1997 Judgment"). She had sought this judgment to facilitate the enforcement of the cost-of-living provision in the Minutes of Settlement. Although she could have obtained relief by bringing an action to enforce the terms of the Minutes of Settlement herself, if the obligation were set out in a court order, the Family Responsibility Office would enforce it for her. She argued that the 1997 Judgment created a commencement day. The court disagreed.

[41]            The Kennedy case stands for two propositions. First, it established that an agreement or order subsequent to April 1997 (the 1997 Judgment) does not create a commencement day where the effective date for variation is prior to May 1997. Second, a commencement day cannot flow from a pre-May 1997 order or agreement (the 1991 Minutes of Settlement) that creates variations in

an obligation, where those variations come into effect prior to May 1997. To put the matter another way, the content of the Kennedy payer's obligation had remained unchanged since it was first imposed on him in the 1991 Minutes of Settlement. Therefore, in issue in Kennedy was a pre-May 1997 obligation that the legislature intended to be governed by the old, inclusion-deduction regime. See also Holbrook v. Canada, 2005 TCC 671 at paragraph 21.

[42]            Thus, there is no inconsistency between the Dangerfield and Kennedy cases. If an agreement or order made prior to May 1997, as in Dangerfield, is to create a commencement day under the amended legislation, it must create an obligation, which first requires after April 1997 payment of a child support amount or requires after April 1997 a variation in an already-existing child support amount. This is clear in the subparagraph (b)(iv) portion of the definition of "commencement day."

[43]            In this case, the Affidavits specified that the joined party was to begin to increase his child support payments in accordance with the cost-of-living provision "commencing in January 1998." If this obligation appeared in an "agreement or order, or any variation thereof," a court following Dangerfield might find that it specified a commencement day within the meaning of subparagraph (b)(iv). To do so, the court would have to consider whether the Affidavits specified a commencement day "for the purposes of this Act." However, such an analysis is unnecessary in this case because the TCC found that the Affidavits did not constitute an "agreement or order, or any variation thereof." According to Callwood at paragraph 28:

The foregoing dictates the following determinations:

1) The purported indexing of child support payments evidenced by the affidavits made in 1997 did not vary the child support payable and receivable under the original agreement or create a commencement day;

...

[emphasis added]

The TCC judge obviously felt that the Affidavits only reflected some pre-divorce negotiations that were never given effect, rather than a firm agreement. See supra at paragraph 35.

[44]            I can interfere with this finding of mixed fact and law only if it is characterized by a palpable and overriding error. 2002 SCC 33">Housen at paragraph 36. I am not satisfied that the appellant has pointed to any such error by the court below. Indeed, one would have expected that if the Affidavits did represent a finally-concluded agreement, it would have been evidenced in the Divorce Judgment, which followed the Affidavits by about two months.

b)       The Amending Agreement

[45]            According to the appellant, the Amending Agreement also triggers a commencement day. In particular, she highlights two features of it-the deletion of the College Obligation and the striking of the Shared Expense Obligation.

[46]            I am of the view that the termination of the joined party's obligation to pay support until the children graduated from college did not create a commencement day within the meaning of the Act. Subparagraphs (b)(ii) and (b)(iii) of the definition of "commencement day" both demand that there

be a change in "child support amounts payable to the recipient." Contingent liabilities are not amounts "payable." See e.g. Barbican Properties Inc. v. Canada, [1996] T.C.J. No. 362; affirmed [1996] F.C.J. No. 1509 (C.A.); leave to appeal refused [1997] S.C.C.A. No. 36. Therefore, varying a contingent liability cannot result in a commencement day under subparagraphs (b)(ii) or (b)(iii).

[47]            There is no doubt in my mind that the College Obligation was a contingent liability. The nature of a contingent liability was reviewed in Wawang Forest Products Limited and Nerak Contractors Inc. v. The Queen, 2001 DTC 5212 (F.C.A.) at paragraph 16, wherein this court stated:

. . . the correct question to ask, in determining whether a legal obligation is contingent at a particular point in time, is whether the legal obligation has come into existence at that time, or whether no obligation will come into existence until the occurrence of an event that may not occur. . . .

[48]            In this case, the College Obligation did not come into existence until the children actually began to attend college. It was hardly certain at the time of the Amending Agreement that the children would, indeed, do so. Accordingly, the College Obligation was contingent and the amounts in relation to it were not "payable." It follows, then, that the deletion of the College Obligation was not a change in "child support amounts payable to the recipient." Therefore, this alteration does not meet the conditions for the creation of a commencement day set out in subparagraphs (b)(ii) and (b)(iii) of the Act.

[49]            The appellant also challenges the TCC's conclusions regarding the Amending Agreement's termination of the Shared Expense Obligation. The TCC judge essentially found that because the Shared Expenses were not payable or receivable on a periodic basis as required by the definition of

"support amount" in subsection 56.1(4) of the Act, they could not be a "child support amount" within the meaning of subsection 56.1(4). As a result, any variation in them could not create a commencement day under subparagraphs (b)(ii) or (b)(iii). This reasoning is set out in Callwood at paragraph 11:

. . . It is clear that the deletion of the understanding to share expenses for clothes, medical insurance and other necessities is not a variation referred to in subparagraph (b)(ii) of the definition of "commencement day" as the "child support amounts" payable are the fixed amounts referred to in the original agreement and these have not been varied. This is the case as "child support amount" as defined in subsection 56.1(4) of the Act must first be a "support amount" which is defined in that subsection as an allowance payable or receivable on a periodic basis. The necessary expenses referred to in the original agreement were not payable on a periodic basis. Accordingly they were not part of the "child support amounts" provided for in the original agreement. Their deletion then cannot be a change to the "child support amounts" payable which is to say that there is no commencement day under subparagraph (b)(ii) of the definition by virtue of that deletion. [italicized emphasis the TCC's, underlined emphasis mine]

[50]            The TCC judge gave no reasons for his finding that the Shared Expenses were not payable on a periodic basis. However, with all due respect to the TCC judge, I believe that he committed a reviewable error in concluding that the amounts paid pursuant to the Shared Expense Obligation were not receivable on a periodic basis. According to Her Majesty The Queen (Plaintiff) v. Jean Guay (Defendant), 75 DTC 5044 (F.C.T.D.):

. . . in order to constitute periodic payments there is no requirement that the time elapsing between each payment be of equal duration, the time between each payment may well vary and be quite unpredictable, yet, the payments may still be characterized as periodic. Periodic indicates something which recurs from time to time but not necessarily at precise or regular intervals. It is used, in this sense in the section [concerning alimony or other allowance payable on a periodic basis for the maintenance of the recipient], when applied to payments, as opposed to lump sum or final settlement payments. The payment of the medical and pharmaceutical expenses, which occurred from time to time, and the payment of electrical bills and heating bills, which might or might not cover regular periods, qualify as periodic payments under the section.

[51]            An inclusive list of potential indicia of periodic payments was also set out by this court in McKimmon v. Canada(Minister of National Revenue - M.N.R.), [1990] 1 F.C. 600 (C.A.) ["McKimmon"] at paragraphs 11-18 as follows:

¶ 11          1. The length of the periods at which the payments are made. Amounts which are paid weekly or monthly are fairly easily characterized as allowances for maintenance. Where the payments are at longer intervals, the matter becomes less clear. While it is not impossible, it would appear to me to be difficult to envisage payments made at intervals of greater than one year as being allowances for maintenance.

¶ 12          2. The amount of the payments in relation to the income and living standards of both payer and recipient. Where a payment represents a very substantial portion of a taxpayer's income or even exceeds it, it is difficult to view it as being an allowance for maintenance. On the other hand, where the payment is no greater than might be expected to be required to maintain the recipient's standard of living, it is more likely to qualify as such an allowance.

¶ 13          3. Whether the payments are to bear interest prior to their due date. It is more common to associate an obligation to pay interest with a lump sum payable by instalments than it is with a true allowance for maintenance.

¶ 14          4. Whether the amounts envisaged can be paid by anticipation at the option of the payer or can be accelerated as a penalty at the option of the recipient in the event of default. Prepayment and acceleration provisions are commonly associated with obligations to pay capital sums and would not normally be associated with an allowance for maintenance.

¶ 15          5. Whether the payments allow a significant degree of capital accumulation by the recipient. Clearly not every capital payment is excluded from an allowance for maintenance: common experience indicates that such things as life insurance premiums and blended monthly mortgage payments, while they allow an accumulation of capital over time, are a normal expense of living which are paid from income and can properly form part of an allowance for maintenance. On the other hand, an allowance for maintenance should not allow the accumulation, over a short period, of a significant pool of capital.

¶ 16          6. Whether the payments are stipulated to continue for an indefinite period or whether they are for a fixed term. An allowance for maintenance will more commonly provide for its continuance either for an indefinite period or to some event (such as the coming of age of a child) which will cause a material change in the needs of the recipient. Sums payable over a fixed term, on the other hand, may be more readily seen as being of a capital nature.

¶ 17          7. Whether the agreed payments can be assigned and whether the obligation to pay survives the lifetime of either the payer or the recipient. An allowance for maintenance is normally personal to the recipient and is therefore unassignable and terminates at death. A lump or capital sum, on the other hand, will normally form part of the estate of the recipient, is assignable and will survive him.

¶ 18          8. Whether the payments purport to release the payer from any future obligations to pay maintenance. Where there is such a release, it is easier to view the payments as being the commutation or purchase of the capital price of an allowance for maintenance.

[internal citations omitted]

[52]            In this case, the Shared Expenses were paid when the children needed clothing and other necessities. In other words, they were payable when they were necessary. The fact that the amounts were paid irregularly does not prevent them from being payable on a periodic basis. See Rosenberg v. Canada, 2003 FCA 363 ["Rosenberg"] at paragraph 12 (citing Her Majesty the Queen v. Sills, 85 D.T.C. 5096 (F.C.A.) at page 5098).

[53]            Many of the McKimmon considerations also suggest that the Shared Expense Obligation was payable on a periodic basis. First, the nature of the obligation dictates that these payments be made more frequently than on a yearly basis. To take only one example, growing children tend to need new clothes more than once a year. In terms of the third McKimmon consideration, there is no indication of interest owed on the Shared Expenses. With respect to the fourth, there are no prepayment or acceleration provisions in the Amending Agreement. As for the fifth, the recipient could not accumulate the amounts paid, as they were to be used for supplying the children with necessities. In accordance with the sixth McKimmon consideration, the payments were not for a fixed term. Finally, with respect to the eighth McKimmon indicia, there was no release from future obligations associated with the Shared Expense Obligation. In conclusion, the TCC Judge committed a palpable and overriding error in concluding that the shared expense obligation was not

payable on a periodic basis. In my view, the Shared Expense Obligation was indeed payable on a periodic basis.

[54]            The respondent asserts that the TCC's error in finding that the Shared Expense Obligation was not payable on a periodic basis is irrelevant, because even if the Shared Expenses were payable on a periodic basis, they were still not a "support amount" and consequently not a "child support amount." In this context, the respondent points out that the Act defines a "support amount" as an "allowance." It is the respondent's position that the Shared Expenses do not meet the requirements of an "allowance," as laid out in the jurisprudence, and in particular that the amount in issue be "limited and predetermined."

[55]            In Rosenbergat paragraph 6 (citing Gagnon v. Canada, [1986] 1 S.C.R. 264), this court set out the badges of an allowance as including the following:

(a) the amount must be limited and predetermined,

(b) the amount must be paid to enable the recipient to discharge a certain type of expense . . ., and

(c) the recipient must be able to dispose of the amount completely.

[56]            Given the TCC's findings on the non-periodic nature of the obligation, the court below did not make a determination as to whether the Shared Expense amounts met any of these criteria. In light of my conclusion that the Shared Expenses were in fact payable on a periodic basis, it is now necessary to make these findings. The question of whether the Shared Expense amounts constituted an allowance is obviously factually intensive and best answered by a trial court.

[57]            Therefore, the matter should be remitted to a different judge of the TCC to determine whether the Shared Expense amounts were an "allowance," "support amount" and "child support amount" and whether the deletion of the Shared Expense Obligation created a commencement day within the meaning of the Act. In these subsequent proceedings, the parties should be at liberty to lead further and other evidence on these issues.

[58]            In conclusion, the appeal should be allowed with costs fixed at $200.00. The Determination and Judgment of the TCC should be set aside and the matter remitted to a different judge of the TCC to determine whether the Amending Agreement's deletion of the Shared Expense Obligation created a commencement day within the meaning of the Act as a support amount.

"J. Edgar Sexton"

"I agree

      M. Nadon J.A.".

"I agree

     John M. Evans J.A.".

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                                                               A-398-05

(APPEAL FROM A JUDGMENT OF THE HONOURABLE JUSTICE HERSHFIELD OF THE TAX COURT OF CANADA DATED AUGUST 17, 2005)

STYLE OF CAUSE:                                                               TRACEY CALLWOOD v. HER MAJESTY THE QUEEN and JOHN G. CRAWFORD

PLACE OF HEARING:                                                         Toronto, ON

DATE OF HEARING:                                                           April 26, 2006

REASONS FOR JUDGMENT BY:                                      SEXTON J.A.                               

CONCURRED IN BY:                                                          NADON J.A.

                                                                                                EVANS J.A.    

DATED:                                                                                  May 23, 2006

APPEARANCES:

Tracey Callwood Daniel Callwood	For the Appellant
Margaret J. Nott Aleksandrs Zemdegs	For the Respondent, The Queen

SOLICITORS OF RECORD:

Tracey Callwood Courtice, ON	For the Appellant
John H. Sims, Q.C. Deputy Attorney General of Canada	For the Respondent, The Queen