Pollak v. R., [1999] 2 CTC 2225

Bowman T.C.J.:

This appeal is from a determination made by the Minister of National Revenue that for the purposes of subdivision a.] of Division E of Part I of the Income Tax Act which provides for the Canada Child Tax Benefit, the appellant was not an “eligible individual” under section 122.6 of the Act in respect of his dependent son Shai Pollak.

In 1993, the appellant and his wife separated and they were divorced on June 17, 1994. There was one child of the marriage, Shai, who was born on September 15, 1987. The appellant’s spouse, Jeanette Philosoph-Pollak, had two children from a previous marriage, one of whom had attained his majority. The other, Dina Philosoph, was, at the date of the divorce, 16 years of age.

Section 122.61 of the Act creates a deemed overpayment by an individual entitled to the child tax benefit. This is a somewhat unusual way of legislating a means of making a payment to a taxpayer but it must have appeared to the framers of the legislation that creating a notional overpayment in a situation that has nothing to do with the individual’s tax payable but that obliges the Minister of National Revenue to make a payment to that person was the most expedient way in which the payment of such benefits could fit into the taxing statute.

The only issue that I must decide is whether the appellant was an eligible individual in respect of Shai Pollak in 1995. The child was a qualified dependant within the meaning of the section. The definition of “eligible individual” in section 122.6 reads:

“eligible individual” in respect of a qualified dependant at any time means a person who at that time

(a) resides with the qualified dependant,

(b) is the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of the qualified dependant,

(c) is resident in Canada,

(d) is not described in paragraph 149( 1 )(«) or (b), and

(e) is, or whose cohabiting spouse is, a Canadian citizen or a person who

(i) is a permanent resident (within the meaning assigned by the /mmigration Act),

(ii) is a visitor in Canada or the holder of a permit in Canada (within the meanings assigned by the Immigration Act) who was resident in Canada throughout the 18 month period preceding that time, or

(iii) was determined before that time under the Immigration Act, or regulations made under that Act, to be a Convention refugee,

and for the purposes of this definition,

(f) where the qualified dependant resides with the dependant’s female parent, the parent who primarily fulfils the responsibility for the care and upbringing of the qualified dependant is presumed to be the female parent,

(g) the presumption referred to in paragraph (f) does not apply in prescribed circumstances, and

(h) prescribed factors shall be considered in determining what constitutes care and upbringing.

Sections 6301 and 6302 of Part LXIII of the Regulations made under the Act read as follows in 1995:

6301. — (1) For the purposes of paragraph (g) of the definition “eligible individual” in section 122.6 of the Act, the presumption referred to in paragraph (f) of that definition does not apply in the circumstances where

(a) the female parent of the qualified dependant declares in writing to the Minister of National Health and Welfare that the male parent, with whom she resides, is the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of each of the qualified dependants who reside with both parents;

(b) the female parent is a qualified dependant of an eligible individual and each of them files a notice with the Minister of National Health and Welfare under subsection 122.62(1) of the Act in respect of the same qualified dependant;

(c) there is more than one female parent of the qualified dependant who resides with the qualified dependant and each female parent files a notice with the Minister of National Health and Welfare under subsection 122.62(1) of the Act in respect of the qualified dependant; or

(d) more than one notice is filed with the Minister of National Health and Welfare under subsection 122.62(1) of the Act in respect of the same qualified dependant who resides with each of the persons filing the notices where such persons live at different locations.

(2) For greater certainty, a person who files a notice referred to in paragraph (1)(b), (c) or (d) includes a person who is not required under subsection 122.62(3) of the Act to file such a notice and a person for whom the requirement to file such a notice has been waived by the Minister of National Health and Welfare under subsection 122.62(5) of the Act.

6302. — For the purposes of paragraph (h) of the definition “eligible individual” in section 122.6 of the Act, the following factors are to be considered in determining what constitutes care and upbringing of a qualified dependant:

(a) the supervision of the daily activities and needs of the qualified dependant;

(b) the maintenance of a secure environment in which the qualified dependant resides;

(c) the arrangement of, and transportation to, medical care at regular intervals and as required for the qualified dependant resides;

(d) the arrangement of, participation in, and transportation to, educational, recreational, athletic or similar activities in respect of the qualified dependant;

(e) the attendance to the needs of the qualified dependant when the qualified dependant is ill or otherwise in need of the attendance of another person;

(f) the attendance to the hygienic needs of the qualified dependant on a regular basis;

(g) the provision, generally, of guidance and companionship to the qualified dependant; and

(h) the existence of a court order in respect of the qualified dependant that is valid in the jurisdiction in which the qualified dependant resides.

In 1998, the Department of National Revenue wrote to the appellant and stated:

We are unable to confirm the Notice of Determination for the Child Tax Benefit as previously proposed in our letter February 2, 1998 as the sharing of the benefits is not legislation in the Income Tax Act. The benefits must go to one party or the other. We will be recommending to vary the determination as you are not considered the “eligible individual” for purposes of the Child Tax Benefit.

The sharing of the Child Tax Benefit on a six month rotational basis is acceptable in accordance with a Departmental administrative policy, providing all parties are in agreement. However, if agreement cannot be reached, Section 122.6 of the Income Tax Act defines “eligible individual”. Paragraph (f) of this definition states “where the qualified dependant resides with the dependant’s female parent, the parent who primarily fulfils the responsibility for the care and upbringing of the qualified dependant is presumed to be the female parent,”.

Since you do not agree with the splitting of the Child Tax Benefits between yourself and your former spouse, we will be reducing your benefits to nil in accordance with the previously quoted definition.

Before I consider the merits of the appeal in light of the evidence I think it is appropriate that I deal with the basis upon which the assessment was made. It is apparent that the department as an administrative matter was prepared to allow the appellant and his former spouse to split the benefit on a six month rotational basis.

In À. v. Marshall (1996), 96 D.T.C. 6292 (Fed. C.A.) the Federal Court of Appeal stated at page 6293:

Stone, J.A. (orally for the Court): In our view as it was the female parent who, on the facts as found below, was the person who “primarily fulfils the responsibility for the care and upbringing” of the children of the marriage, only that parent may be properly regarded as the person entitled to child care benefits as provided for in section 122.6 of the Income Tax Act and section 6302 of the Regulations made pursuant to that section of the statute.

This section of the Act contemplates only one parent being an “eligible individual” for the purpose of allowing the benefits. It makes no provision for prorating between two who claim to be eligible parents. Only Parliament can provide for a prorating of benefits but it has not done so.

(footnotes omitted)

In Bouchard c. R. (1997), [1998] 1 C.T.C. 307 (T.C.C.) Lamarre Proulx J. followed the Marshall case and held that the eligibility of the parent claiming the benefit was to be determined “à un moment donné” (at any time). She stated:

[para22] The moment when a parent’s eligibility must be assessed is the month for which the child tax benefit is paid, as provided for in section 122.61 of the Act. The expression used in that section is not child tax benefit, but rather an “overpayment on account of the person’s liability under this Part” and the payment shall be “deemed to have arisen during a month in relation to which the year is the base taxation year”. The expression “base taxation year” is defined in section 122.6 of the Act as follows:

“base taxation year” in relation to a month means

(a) where the month is any of the first 6 months of a calendar year, the taxation year that ended on December 31 of the second preceding calendar year,

and

(b) where the month is any of the last 6 months of a calendar year, the taxation year that ended on December 31 of the preceding calendar year.

[para23] Thus, in the instant case, the base taxation year for the last 6 months of 1993 was 1992 and the base taxation year for the first 6 months of 1994 was also 1992.

[para24] Section 122.61 of the Act is the provision that gives meaning to the words “any time” stated in the definition of “eligible individual”, because the amount payable in that month is based on the eligibility of the individual and the dependant for that month.

This conclusion is entirely consistent with Marshall and with the statute, and it justifies the departmental administrative practice.

This is not, however, the problem with which I am faced in this case. We have here two parents claiming the benefit, and no compromise or administrative concession is possible. We are dealing with an all or nothing proposition and I must determine which parent “is the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of the qualified dependant”.

The error in the approach taken on assessing is twofold. The assessment appears to be based on the premise that paragraph (f) of the definition creates an irrebuttable presumption in favour of the female parent if the child resides with her, even though the child resides also with the father. The presumption in paragraph (f) is nothing more than a presumption and it is clearly rebuttable. “Presumed” generally creates a weaker presumption than “deemed”, which may create a rebuttable or irrebuttable presumption, depending upon the context (for a full discussion of this point see St. Leon Village Consolidated School District No. 1425 v. Ronceray (1960), 23 D.L.R. (2d) 32 (Man. C.A.), at 35-37. In Cabot v. R., [1998] 4 C.T.C. 2893 (T.C.C.) Rip J. considered the specific question whether the presumption in paragraph (f) of the definition was rebuttable or irrebuttable. He concluded that it was rebuttable. I am in respectful agreement with both his reasoning and his conclusion.

The second error lies in treating the presumption in paragraph (f) as applying at all. Where both parents claim the benefit in respect of a qualified dependant who resides with both of them at different locations and both parents have filed notices under subsection 122.62(1), paragraph 6301(d) of the Regulations excludes the presumption in the definition in paragraph 122.6(f). Both parents must have filed the notice under subsection 122.62(1) or they would not even have been considered for the benefit. Therefore I assume they both did.

Who, then, was the parent who in 1995 fulfilled the primary responsibility for the care and upbringing of Shai? I find on the facts that is was the appellant.

Section 6302 of the Regulations requires that certain factors be considered. These factors must be taken into account, but they are not necessarily the only factors.

When the parents separated the appellant’s spouse signed a note which read as follows:

October 23, 1993

To Whom It May Concern,

I, Jeannette Pollak, as of today’s date give to my husband Danny Pollak custody of our Son Shai Pollak.

J. Pollak.

On June 17, 1994, Mr. Justice Laforme rendered judgment divorcing the appellant and his wife. The judgment provided in part as follows (in this judgment “Respondent” refers to the appellant and “Petitioner” refers to Mrs. Pollak):

2. THIS COURT ORDERS AND ADJUDGES that under the Divorce Act, the parties shall have joint custody of the child of the marriage, namely SHAI POLLAK, born September 15, 1987, his primary residence shall be with the Respondent and his secondary residence to be with the Petitioner. The child to reside with the Petitioner as follows:

(a) Each Tuesday and Thursday, from after school until the commencement of school the following morning;

(b) Each Sunday from 10:00 a.m. to Monday morning until the commencement of school;

(c) One consecutive week each summer, the Respondent to be advised of this intended period by May 1st of each year;

(d) One consecutive week of the child’s Christmas school holiday;

(e) An equal sharing of the Jewish Holidays, as agreed between the parties; and,

(f) For several hours on each of the child’s birthday.

3. THIS COURT ORDERS AND ADJUDGES that under the Divorce Act, the Respondent is absolved of any financial obligations in respect to the child, DINA PHILOSOPH, born May Ist, 1978.

4. THIS COURT ORDERS AND ADJUDGES that under the Divorce Act, the Respondent shall assume all financial responsibilities in respect to the child, SHAI POLLAK, born September 15th, 1987.

In 1995, the appellant applied to the Ontario Court (General Division) for an order varying the judgment of Mr. Justice Laforme. He asked for a variance from joint custody to himself, as well as a great many other things that are not relevant to this appeal. The other matters that he sought illustrate the extreme bitterness and acrimony that existed between the spouses.

On November 29, 1995, Madam Justice Klowak dismissed the application, with the exception that parts of paragraph 2 of Justice Laforme’s judgment were varied as follows (“Applicant” refers to the appellant and “Respondent” refers to Mrs. Pollak):

(a) the Applicant and the Respondent shall have joint custody of Shai Pollak;

(b) Shai shall spend every alternate weekend from Saturday morning at 10:00 a.m. until Sunday afternoon at 4:00 p.m. in the home of the Respondent, with Vaughan Neighbourhood Visiting Centre to be the point of transfer. Whenever possible all access transfers are to be done at the Vaughan Neighbourhood Visiting Centre (905)764-9722. The Applicant shall pay, as support, the $200.00 fee for these arrangements;

(c) on the week following the Respondent’s weekend, Shai shall spend time with the Respondent from Wednesday after school until Friday morning, to be picked up from and delivered to school; and, on the week following the Applicant’s weekend, Shai shall spend time with the Respondent from Tuesday after school until Friday morning, to be picked up from and delivered to school.

(d) Shai shall spend all other times at the home of the Applicant.

(e) Shai shall spend half of March break each year with each parent, the first half to be spent with the Respondent and the second half with the Applicant.

(f) Shai shall spend time with the Respondent on the days that she does not work during the Christmas holidays, to include the 25th and 26th of December as well as New Years Eve and January 1. Shai would continue to remain with the Applicant on the other days of the holiday. (g) Shai shall spend half his Passover Holiday with his mother and half with his father.

(h) the Respondent shall have the option to have Shai with her to maximum of four weeks during the summer. She is to provide the Applicant in writing by May 15, her intentions with respect to the amount of summer time access that she can enjoy with Shai, recognizing that, in her current job, she is only able to take one week during the summer.

(i) Shai shall spend Mother’s Day with his mother and Father’s Day with his father, and that the child be returned to that parent at noon of that Sunday, with the drop off to take place at the Vaughan Centre.

(j) these times shall be strictly adhered to and that Shai be made aware of the times that he is to be with his mother and father so that he can feel secure and comfortable that he known who is looking after him at what time.

(k) the Applicant and the Respondent contact the “For Kids’ Sake” Program at the Clark Institute and participate in their program to assist them in focusing on the needs of Shai.

(l) Shai shall continue to be involved in counselling with Jewish Family and Child Services, Ms. Louise Shogilev, in an attempt to assist Shai in pulling out in the middle of this conflict.

An appeal to the Ontario Court of Appeal was dismissed on May 7, 1996.

Both Mr. and Mrs. Pollak testified. It would appear from the evidence that to some extent both parents fulfil the functions set out in paragraphs (a) to (g) of section 6302 of the Regulations, depending on where Shai happened to be. Considering the extreme acrimony between the spouses, as was obvious from the cross-examination of Mrs. Pollak by the appellant, I am inclined to take the evidence of both of them with a grain of salt. However, on balance, I think Mr. Pollak assumed a greater degree of responsibility for Shai, both financially and otherwise than did his former spouse.

Even if the matter were equally balanced I believe the court order directing that the appellant assume all financial responsibilities for Shai and that his primary residence be with the appellant would tip the scales in favour of the appellant. “The existence of a court order, in respect of the qualified dependant” one of the factors contemplated by paragraph (h) of section 6302 of the Regulations implies that this court must consider the contents of the court order. It is clear from both the original court order of Laforme J. and the revised order of Klowak J. that both judges considered that the primary responsibility for Shai was to lie with the appellant, whereas he had none in respect of Dina Philosoph.

The appeal is allowed and the determination is referred back to the Minister of National Revenue for redetermination on the basis that the appellant is entitled to the Child Tax Benefit in respect of the 1995 base year.

Appeal allowed.