Her Majesty the Queen v. Jean G. Curzi, [1994] 2 CTC 220

Noël J.:—This is an appeal from a decision of the Tax Court of Canada which allowed the defendant's appeal from the assessments issued by the Minister of Revenue for his 1987 and 1988 taxation years. The issue involved is the deductibility of the support paid by the defendant to his son Stéphane during 1987 and 1988.

The facts

The parties filed a joint statement of facts in this Court, the essential aspects of which are as follows:

1. The defendant married Maureen Frigon in 1959.

2. During his marriage to Maureen Frigon, the defendant had three children, including Stéphane Curzi.

3. In 1976, Ms. Frigon commenced divorce proceedings, and on October 20, 1976 she obtained a judgment for interim relief ordering the defendant to pay support to Ms. Frigon for herself and her three children. When the decree nisi was pronounced on March 8, 1977, the interim relief became corollary relief.

4. On March 24, 1980, a judgment was obtained varying the corollary relief granted at the time of the divorce and ordering the defendant to pay support of $100 per week for Ms. Frigon and her two sons, Michel and Stéphane.

5. On January 27, 1984, the Superior Court gave judgment on an application by the defendant to reduce the support and an application by Ms. Frigon to increase the support, in which the Court ordered the defendant to pay Ms. Frigon support of $85 per week for her son Stéphane Curzi, starting on March 1, 1984, and at the same time terminated the support payable to Ms. Frigon for herself and her son Michel.

6. Between 1977 and January 27, 1984, the date of the judgment, Stéphane Curzi lived with Ms. Frigon. However, since the judgment of January 27, 1984, Stéphane Curzi has no longer lived with his mother.

7. In March 1984, Stéphane Curzi asked his father, the defendant, to cover his housing expenses during the time he needed to complete his education, but the defendant categorically refused.

8. Stéphane Curzi attained the age of majority on May 26, 1984.

9. On June 12, 1984, Stéphane Curzi filed an application in the Superior Court, Family Division, seeking support from the defendant. On November 15, 1984, Stéphane Curzi and the defendant signed an agreement under which the defendant agreed to pay Stéphane Curzi support of $100 per week, retroactively to June 12, 1984. By judgment dated November 15, 1984, the Court gave effect to the agreement signed by Stéphane Curzi and the defendant.

10. On November 15, 1984, the defendant filed an application to terminate the support payable by the defendant to Ms. Frigon tor the benefit of her son Stéphane under the judgment of January 27, 1984. More specifically, that application sought to terminate the support retroactively starting on June 12, 1984.

11. That same day, November 15, 1984, the defendant and Ms. Frigon signed an agreement under which Ms. Frigon agreed to the complete termination of the support awarded for the benefit of her son Stéphane, retroactively to June 14, 1984.

12. On November 15, 1984, judgment was given on the defendant's application to terminate the support, terminating the support in accordance with the agreement between the defendant and Ms. Frigon.

13. On April 16, 1985, Stéphane Curzi filed an application to increase the support payable to him under the judgment of November 15, 1984. On May 3, 1985, Stéphane Curzi and the defendant entered into an agreement under which the defendant agreed to pay his son support of $112 per week, indexable annually. On May 6, 1985 judgment was issued giving effect to that agreement.

14. During the 1987 and 1988 taxation years, Stéphane Curzi was a full-time college student and lived near the college. He had at that time attained the age of majority and was of sound mind.

15. During 1987 and 1988, the defendant paid the support set out in the judgment of May 6, 1985 directly to Stéphane Curzi, by cheque made out to im. The total thus paid amounted to $6,298 and $6,550 for 1987 and 1988, respectively.

By reassessment made on January 10, 1990, the Minister of Revenue disallowed the deduction of the support paid by the defendant to his son, Stéphane, for the 1987 and 1988 taxation years. After these assessments were confirmed, the defendant appealed and, by judgment dated January 21, 1992, the Tax Court of Canada allowed his appeal. The Minister has appealed that decision to the Federal Court by way of trial de novo.

The issue

The relevant provisions herein are paragraph 60(b) and subsection 60.1(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). At the relevant time, those sections provided:

60. There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:

(b) an amount paid 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 he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;

60.1(1) Where, after May 6, 1974, a decree, order, judgment or written agreement described in paragraph 60(b), (c) or (c.1), or any variation thereof, has been made providing for the periodic payment of an amount by a taxpayer to or for the benefit of a person who is his spouse, former spouse, or, where the amount was paid pursuant to an order made in accordance with the laws of a province, an individual within a prescribed class of persons described in the laws of the province, or for the benefit of children in the custody of such a person, the amount or any part thereof, when paid, shall be deemed, for the purposes of paragraphs 60(b), (c) and (c.1), to have been paid to and received by that person if, at the time the payment was received and throughout the remainder of the year in which the payment was received, the taxpayer was living apart from that person.

The facts establish that the support paid to Stéphane was paid under the order of the Superior Court made upon application by Stéphane to compel his father to fulfil his duty to support Stéphane. At the time when the amounts in issue were paid, Stéphane had voluntarily left his mother's home. He had attained the age of majority and was of sound mind but had no financial resources due to the fact that he was in school.

Paragraph 60(b) permits the deduction of amounts paid to a former spouse for the benefit of the children of the marriage. Under subsection 60.1(1), an amount paid not to the former spouse but for the benefit of a child in that person's custody is nonetheless deemed to have been paid to the spouse, so that it may still be deducted under paragraph 60(b). The question raised by this case is therefore whether, in the circumstances, Stéphane was still in his mother's custody at the time he received the amounts in question.

Decision

This question resulted in a number of inconsistent decisions in the Tax Court of Canada, including the decision which is the subject of this appeal.

Lamarre Proulx J.T.C.C. referred to this debate, and at the same time put an end to it, in my view, in Guardo v. M.N.R., January 8, 1991 (T.C.C.), File No 89-1660 (unreported).

I would like to quote from her judgment in extenso:

The issue is whether support payments made to an adult son, who is of sound mind and mentally competent, is an amount paid for the benefit of a child in the custody of the former spouse of the appellant, within the meaning of subsection 60.1(1) of the Income Tax Act (the "Act").

Under this subsection, support paid to a child by the father may be deducted in the event that such child is in the custody of its mother.

The facts are described in paragraph 5 of the respondent's reply to the notice of appeal, and are as follows:

5. In establishing the new assessments dated April 12, 1989, the respondent assumed the following facts, specifically:

(a) the appellant has been divorced from Claire Leduc since January 19,1973;

(b) from 1973 to April 1983, the appellant paid support to Claire Leduc, his ex-

wife, for the benefit of their son Laurent Guardo, born on June 20, 1964;

(c) from 1983 to 1988, the appellant paid support directly to his son Laurent Guardo in the amount of $100 per week, thereby complying with the judgment of the Superior Court dated April 22, 1983;

(d) in 1986 and 1987, Laurent Guardo was no longer living with the appellant or with his mother, Claire Leduc;

(e) in 1986 and 1987, Laurent Guardo was an adult and was of sound mind, and was not in the custody of either his father or his mother.

Tremblay J. has already given judgment in circumstances similar to those in the present appeal, and allowed the appeal for 1985. I quote the portion of the judgment in which the Court explains the principal reason for its decision:

And then, was Laurent, who was 21 years old in June 1985, still in the custody of his mother? While on the one hand it may often be the case that a 21 year old person is financially independent and is no longer in the custody of his parents, on the other hand, a child of any age is still his parents’ child and they must give him help and assistance, if he needs it. It is rare for a child in university to be financially free of his parents. Until August 1985, Laurent was living with his mother. Because of the inconvenience of travelling back and forth each day from Saint Basile to the university, Laurent found himself an apartment close to the university, which did not prevent him from returning to his mother’s home on weekends and during Christmas

In substance, given that Laurent benefited from the money paid by the taxpayer, I am therefore of the opinion that the appeal by the appellant must be granted.

With all due respect to my colleague, this reasoning confuses two rights: the right of custody and the right to receive support.

The obligation to support relatives in the direct line is set out in Article 633 of the Civil Code of Quebec:

633. Spouses, and relatives in the direct line, owe each other support.

Proceedings for support are instituted by the holder of parental authority in the case of a minor child:

634. Proceedings for the support of a minor child may be instituted by the holder of parental authority, his tutor, or any person who has custody of him, according to the circumstances.

The Court may order the support payable to the person who has custody of the child.

In the case at bar, the adult child himself instituted proceedings against his father. The judgments filed by the appellant, Exhibits A-1 and A-2, are in the nature of support orders, and neither of these judgments indicates that anyone has custody of the child. Under both the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) and the provisions of the Civil Code of Quebec, an adult child may obtain a support order.

The Divorce Act provides that a custody order may be made. No order was filed. We must therefore refer to the provisions of the Civil Code of Quebec and determine whether it may be said that the appellant's ex-wife had custody of his child. It is clear, upon reading the provisions of the Civil Code, that the right to custody of the child is extinguished when the child attains the age of majority, which is fixed at 18 years in Quebec, and that the right to custody can be exercised only with respect to a minor child.

324. Majority is fixed at the complete age of eighteen years. At that age persons are capable of performing all civil acts.

In the case of adult children, there are schemes for the protection of adults, but this is not the situation in this case.

Article 646 of the Civil Code of Quebec reads as follows:

646. A child remains subject to the authority of his father and mother until his majority or emancipation.

Article 650 of the Civil Code of Quebec reads as follows:

650. No unemancipated minor may leave the family home without the consent of the person having parental authority.

An adult child may voluntarily remain in the home of one of his parents, but they cannot exercise any right of custody, because such a child may live where he wishes. However, he retains a right to support if he needs it.

It is clear that under the provisions of the Civil Code the parents’ right of custody is extinguished when their children reach the age of majority. The appellant's ex-wife did not have custody of his son Laurent and accordingly the provisions of subsection 60.1(1) of the Act cannot apply.

[Translation.]

The trial judge chose to distinguish the above cited decision on the ground that, on the facts before him, a custody order had been granted to Stéphane's mother by the decree nisi of divorce granted on May 17,1974. [1] According to the trial judge, this custody order was still in force in 1987 and 1988, the years during which the support in question was received.

At page 8 of his judgment, the trial judge wrote:

The Divorce Act was amended by R.S.C. 1985, c. 3 (2nd Supp.), but section 34 of that Act preserves and retains orders which were made under the authority of the preceding Act. The important section, which governs the duration of custody, reads:

. . .is sixteen years of age or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life.

The order of the Quebec Superior Court dated May 17, 1974 granting custody of Stéphane to his mother was never varied. This order was still in force during years 1987 and 1988. If a person is of the age of majority and is financially independent, he is no longer in the custody of his parents. On the other hand, a child, regardless of his age, is still the child of his parents and they owe him help and assistance when he is in need.

[Translation.]

And at page 9:

In this case the Court finds and holds that during years 1987 and 1988, although he was over the age of sixteen years, Stéphane Curzi was in the charge of his parents and unable to obtain the necessaries of life because he was in school. Accordingly, virtue of the Divorce Act and the judgment of May 17, 1974, he was still in the custody of his mother Maureen Frigon.

[Translation.]

With due respect for the opinion so expressed, I find that it confuses the right of custody set out in the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) with the concept of “child of the marriage” which is also set out therein. First, I note that the section cited by the trial judge as governing the duration of custody in fact relates to the definition of the expression “child of the marriage".

That expression is defined in section 2(1) as follows:

2(1) “child of the marriage” means a child of two spouses or former spouses who, at the material time,

(a) is under the age of 16 years, or

(b) is 16 years of age or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life.

The word “garde” is also defined in the same section, as follows:

"garde" Sont assimilés à la garde le soin, l'éducation et tout autre élément qui s'y rattache.

The English version of the word "gardé' is the word "custody", which is defined as follows:

"custody" includes care, upbringing and any other incident of custody.

Some aspects of the definition of the expression "child of the marriage” set out in the Divorce Act evoke a concept similar to the one contemplated by the support obligation set out in the Civil Code: a child may be considered to be under the charge of his or her parents for so long as he or she cannot provide for his or her own needs, regardless of age.

The concept of "garde" or "custody" evokes quite another thing. In a divorce, either of the former spouses may be granted custody of the children. A custody order confers a right on the parent who is granted custody. It is the parent who has custody of the children who has ultimate responsibility for the upbringing [2] of the children and for exercising parental authority. On the other hand, a custody order carries with it all of the duties attaching to custody.

However, the right of custody is not perpetual and a custody order could not be set up against an emancipated adult child who voluntarily chooses to withdraw from parental authority. The fact that a child may, in such circumstances, still be a child of the marriage because, having left the parental home, he or she cannot provide for his or her own needs does not mean that the child remains in the custody of the parent whom he or she has chosen to leave. It is a prerequisite to the concept of custody that there be parental authority, which cannot be exercised over an emancipated adult child wno chooses to withdraw from that authority. The trial judge could therefore not conclude that Stéphane was still in the custody of his mother solely on the ground that he was in need after leaving his mother's home or that the custody order made in 1977 had not, at the time in question, formally been revoked.

In my view, the purpose of subsection 60.1(1) is to allow the deduction of amounts paid for the benefit of a child as long as the child is still in the custody of the former spouse or the former spouse remains under the duty of care which attaches to custody. When a child is emancipated and leaves the custody of the spouse, the prob em addressed by Parliament in allowing the deduction of amounts paid for the benefit of the child ceases to exist: from that point on, the former spouse no longer has a duty of care deriving from his or her right of custody, and the support can no longer be considered to be owing or paid on account of that duty.

This also explains why Stéphane, after having left his mother's home, looked to his father and obtained that the support payments be made directly to him. The wording of the application he made to the Superior Court shows that it was based on the fact that despite his mother receiving support paid for his benefit, that support was no longer payable since he had reached the age of majority and was no longer living with his mother. After asserting that he nevertheless remained in need, the application sought a support order against his father. The application was granted and, at the same time, the support that the defendant was paying to his wife for the benefit of Stéphane was cancelled.

Since Stéphane had left the custody of his mother at the relevant time, subsection 60.1(1) does not operate to deem the amounts he received from his father to have been received by his mother, with the result that they are not deductible under paragraph 60(b) of the Act.

For these reasons, the appeal is allowed and the reassessments made in respect of the defendant for the 1987 and 1988 taxation years are confirmed.

Appeal allowed.

Jean-Luc Duval, Gaétan Duval, Jean-Luc Duval in his capacity as

(Indexed as: Duval (J.-L.) v. Canada]

Federal Court-Trial Division (Pinard J.), February 10, 1994 (Court File Nos. T-1-85 to T-6-85), on appeal from an unreported decision of the Tax Court of Canada dated September 7, 1984.

Income tax—Federal—Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72,

The appellants were a father and his five sons. In each case, the appellants were assessed for the 1974 to 1978 taxation years pursuant to the net worth method by adding certain amounts of unreported income to their income. In view of the fact that the Minister assumed that the appellants had knowingly failed to report the unreported income, the Minister also imposed penalties under subsection 163(2) against each appellant. With the exception of the 1974 taxation year, all of the assessments were issued within the four-year limitation period set out in su section 152(4). The issue in each case involved the amount of cash each appellant had on hand on December 31, 1973. In the case of the five sons, the sons each. claimed that his father had given him $60,000 cash on his (the son's) sixteenth birthday and that much of the cash was still in his (the son's) personal safe on December 31, 1973. The evidence did not show that the sons kept any track of the amounts of money that was occasionally taken out of or deposited in the safe. The evidence established, on the other hand, that each son had always been extremely reluctant to provide the Department of National Revenue investigators with any information as to the amount of money that was actually in his (the son's) safe on December 31, 1973. In fact, when questioned on this subject at different points of time, the sons consistently gave different answers with respect to the amount of money that was allegedly left in their respective safes on December 31, 1973, each time increasing the amount so that by the end, the amount of money in each case approximated the amount required to avoid the payment of any additional tax pursuant to the Minister’s assessment. In the case of the sons, the Minister established the amount of money in each son's personal safe on December 31,1973 as being the nominal amount of $100. The situation was, however, different in the father's case. Although the issue was still the amount of money the father had on hand on December 31, 1973, in this case, the Minister established this amount as being $3,255.47. When the father filed his notice of objection at the beginning of July 1980, he stated a figure of $31,172.39. In other words, the father did not change his story. Furthermore, unlike the sons, the father did not display any unwillingness to disclose information to the Department ofNational Revenue investigators with respect to the figure in question. The appellants, in separate appeals, appealed to the Tax Court of Canada which dismissed their appeals except for some relatively minor modifications to the net worth assessments. The appellants then appealed by way of trial de novo to the Federal Court-Trial Division.

HELD:

In the case of each of the sons, it was not possible to conclude, with respect to the cash the son had on hand on December 31, 1973, that the son had properly discharged the burden of establishing that the Minister's assessments were incorrect. It was clear that each son simply intended, at the end of the line, to state that on December 31, 1973, he had on hand the exact amount of money that was necessary in order not to have to pay the tax established by the Minister under subsection 152(4). All of the sons’ omissions, their unwillingness to disclose information, their inconsistencies and their manoeuvring led to the conclusion that each son knowingly made a misrepresentation in respect of his income tax returns for the 1974 to 1978 taxation years. Accordingly, the sons' appeals were dismissed (except to permit some modifications to the net worth assessments of some of the sons). However, in the father’s case, although he had also failed to discharge the burden of establishing that the Minister’s assessments were incorrect and although it could be assumed that the father made a misrepresentation by mere neglect or carelessness in respect of his income tax returns for the 1974 to 1978 taxation years, there was insufficient evidence upon which to conclude that the Minister had discharged the burden of establishing the necessary facts to justify imposing a penalty as against the father. Accordingly, the father's appeal was allowed to the extent of vacating the penalties. Appeals dismissed.

The appellants appeared on their own behalfs.

André Leblanc and Richard Généreux for the defendant.

Cases referred to:

Johnston v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182.

Pinard J.:—The plaintiff's action constitutes an appeal from the decision of the Tax Court of Canada dated September 7, 1984, substantially dismissing his appeal from the assessments made by the Minister of National Revenue in determining his taxable income for the 1974, 1975, 1976, 1977 and 1978 taxation years. The defendant has, by counter-claim, appealed the portion of that judgment that removed certain sums from the statement of the plaintiff's net worth.

The plaintiff filed income tax returns for the taxation years in question reporting total annual income as follows:

In assessing the plaintiff for these taxation years, the Minister added the following amounts to the income reported:

The Minister found that the plaintiff had failed to include all the income received in the taxation years in question, that the unreported income amounted to $71,492.22 and that the plaintiff had knowingly failed to report that income, and therefore decided to assess him according to the “net worth" method. Accordingly, the plaintiff's income was determined by adding the additional amounts set out above for each of the years in question, which amounts were established using the net worth statement attached to these reasons. Finally, in view of the circumstances, the Minister also imposed penalties for each of the years in issue, under subsection 163(2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). With the exception of the 1974 taxation year, all of the assessments were issued within the four-year limitation period set out in subsection 152(4) of the Act.

The plaintiff objected to the assessments and the Minister reassessed him for the same taxation years under subsection 165(3) of the Act. The plaintiff appealed from these reassessments to the Tax Court of Canada, and the appeal was allowed in part by judgment dated September 7, 1984, which simply removed the sums of $12,987.73 (for interest income of his wife and children), $409.96 (for interest income of his wife) and $4,055 (for a deposit of his wife’s personal savings) from the statement of the plaintiff’s net worth.

This is a trial de novo and it is important to reproduce the relevant provisions of the Act:

152(4) The Minister may at any time assess tax, interest or penalties under this Part or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the taxation year, and may

(a) at any time, if the taxpayer or person filing the return

(i) has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Act, or

(ii) has filed with the Minister a waiver in prescribed form within four years from the day of mailing of a notice of an original assessment or of a notification that no tax is payable for a taxation year, and

(b) within four years from the day referred to in subparagraph (a)(ii), in any other case,

reassess or make additional assessments, or assess tax, interest or penalties under this Part, as the circumstances require.

163(2) Every person who, knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, has made or has participated in, assented to or acquiesced in the making of, a statement or omission (in this section referred to as a “false statement”) in a return, certificate, statement or answer (in this section referred to as a "return") filed or made in respect of a taxation year as required by or under this Act or a regulation, is liable to a penalty of 25 per cent of the amount, if any, by which

(a) the tax for the year that would be payable by him under this Act if his taxable income for the year were computed by adding to the taxable income reported by him in his return for the year that portion of his understatement of income for the year that is reasonably attributable to the false statement

exceeds

(b) the tax for the year that would have been payable by him under this Act had his tax payable for the year been assessed on the basis of the information provided in his return for the year.

(3) Where, in any appeal under this Act, any penalty assessed by the Minister under this section is in issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.

165(3) Upon receipt of a notice of objection under this section, the Minister shall,

(a) with all due dispatch reconsider the assessment and vacate, confirm or vary the assessment or reassess, or

(b) where the taxpayer indicates in the notice of objection that he wishes to appeal immediately either to the Tax Review Board or to the Federal Court and that he waives reconsideration of the assessment and the Minister consents, file a copy of the notice of objection with the Registrar of the Tax Review Board or in the Registry of the Federal Court, as the case may be,

and he shall thereupon notify the taxpayer of his action by registered mail.

(5) A reassessment made by the Minister pursuant to subsection (3) is not invalid by reason only of not having been made within four years from the day of mailing of a notice of an original assessment or of a notification described in subsection 152(4).

While, on the one hand, subsection 163(3) of the Act clearly provides that the burden of establishing the facts justifying the assessment of a penalty is on the Minister, it has been recognized, on the other hand, since the decision of the Supreme Court in Johnston v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182, that the burden of proving that a net worth assessment made under subsection 152(4) is incorrect, inter alia, rests squarely on the shoulders of the taxpayer.

The evidence in the other files that are connected with this case, nos. T-2-85, T-3-85, T-4-85, T-5-85, T-6-85, was placed in the record in this case on consent, and applies to this case in so far as it is relevant.

The issue essentially involves the amount of cash the plaintiff had on hand on December 31, 1973. The Minister established this amount nominally as being $100. The plaintiff explained that at that time he had cash in his personal safe, where he had earlier, in 1956, deposited $60,000 cash that his father had given him on his sixteenth birthday. The plaintiff then kept no track of the amounts of money that he occasionally took out of or deposited in the safe. He has always been extremely reluctant to provide the Department of National Revenue investigators with any information as to the amount of money that was actually in his safe on December 31, 1973. The weight of the evidence establishes that he was questioned on this subject on August 30, 1979, at which time he first gave a figure of $10,000, with the approval of his wife Judy. A few days later, on September 27, 1979, he simply refused to answer the same uestion. Only when he filed his notices of objection on about April 26, 1980, did the plaintiff state the figure of $52,671. In the circumstances, I cannot conclude, with respect to the cash he had on hand on December 31, 1973, that the plaintiff has properly discharged the burden of establishing that the Minister’s assessments were incorrect. It is clear that the plaintiff simply intended, at the end of the line, to state that on December 31, 1973, he had on hand the exact amount of money that was necessary in order not to have to pay the tax established by the Minister under subsection 152(4) of the Act. All of the plaintiff’s omissions, his unwillingness to disclose information, his inconsistencies and his manoeuvring lead me to conclude, on the balance of probabilities, that he knowingly made a misrepresentation in respect of his income tax returns for the 1974 to 1978 taxation years, inclusive, so that the four- year limitation period set out in subsection 152(4) of the Act does not apply to this case and the defendant is entitled to the penalties imposed under subsection 163(2) of that Act.

With respect to the sums that the Tax Court of Canada removed from the statement of the plaintiff’s net worth, we shall first consider the sums of $409.96 and $12,987.73, on which the plaintiff's uncontradicted evidence appears to me to be sufficient to establish that they were comprised in part of interest on family allowances deposited in his children’s names, and in part of interest on monies that he lent to his wife. In the circumstances, I am of the opinion that it would not be appropriate, in this respect, to apply sections 74 and 75 of the Act. With respect to the sum of $4,055, the plaintiff's wife testified to explain that this was personal savings, which she broke down as follows:

(a) $2,840 received in cash as wedding presents;

(b) $975 for the sale of a coin collection to her brother-in-law Clément Duval on December 1, 1973; and

(c) $240 income from employment in 1969.

The evidence establishes that all of these sums were in term deposits during 1977 only. The plaintiff’s wife could provide no explanation as to the long delay of several years before these sums were invested. It therefore seems unlikely to me that she had not spent or otherwise disposed of his money before 1977. I am therefore not satisfied that these sums should not appear in the statement of the plaintiff's net worth.

Finally, at the beginning of the hearing before me, the defendant's counsel filed Exhibit D-2, a document setting out the following sums of money, which the defendant agreed to have removed from the plaintiff's net worth:

Accordingly, the plaintiff's action is upheld in part, solely so as to permit the sums set out in Exhibit D-2 filed herein and the sums of $409.96 and $12,987.73, which were discussed above, to be removed from the statement of his net worth. The counter-claim is also upheld in part so as not to permit the sum of $4,055 claimed as his wife’s personal savings to be removed from the statement of the plaintiff's net worth. In the circumstances, there will be no order as to costs.

Appeals dismissed.