Jeannie Kelner v. Her Majesty the Queen, [1996] 1 CTC 2687 (Informal Procedure)

Bowman J.T.C.C.: — This is an appeal from an assessment for the appellant’s 1991 taxation year whereby the Minister of National Revenue denied the appellant’s claim for child care expenses in the amount of $4,000.

Section 63 of the Income Tax Act permits a deduction for child care expenses incurred by a “supporting person”, in respect of an eligible child. At the risk of oversimplification, generally speaking where two parents live together and both are “supporting persons” the parent with the lower income must claim the expenses under section 63. Therefore, if one parent stays home and earns no income the deduction is available only to that parent and not to the income earning parent so that as a practical matter nothing is deductible. This provision has been unsuccessfully attacked under the Charter: Symes v. R., (sub nom. Symes v. Canada) [1993] 4 S.C.R. 695, [1994] 2 C.T.C. 40, 94 D.T.C. 6001; Copeland v. R. (sub nom. Copland v. Canada) [1993] 2 C.T.C. 3046 (T.C.C.); Boland v. Minister of National Revenue, [1994] 1 C.T.C. 2001, 93 D.T.C. 1558.

The object of the rule is to ensure that where one parent is at home and able to take care of the child or children no deduction is available. Essentially the deduction benefits two-income families where both supporting persons work.

There are exceptions to this rule, where one of the parents is in full time attendance at an educational institution, incapable of caring for children by reason of mental or physical infirmity, in prison or 1s:

à person, Who by reason of a breakdown of his marriage or similar domestic relationship, was living separate and apart from the taxpayer at the end the year and for a period of at least 90 days commencing in the year.

In both 1990 and 1991 the appellant was married to David Kelner. She was a legal secretary and the only person in the home earning income. Her husband David was a carpenter. He had injured the index finger of his right hand in 1989 and was unable to hold a hammer. This fact, it seems, made it impossible for him to work and, apparently, he was, as a result, thrown into a state of such profound depression that he was unable to take care of their daughter. Mrs. Kelner appealed the reassessment denying her the child care deduction for 1990 on the basis that her husband was a person described in subclause 63(2)(b)(iv)(B). The matter came on before Judge Teskey of this court and evidently he accepted the testimony, including the medical evidence, because he allowed the appeal, without giving written reasons.

The appeal from the 1991 assessment came on before me. Again the question was the right of Mrs. Kelner to claim $4,000 as a child care deduction under section 63. The basis of her appeal was, however, different. Her appeal was based upon the contention that she and her husband were by reason of their marriage breakdown, living separate and apart within the meaning of subparagraph 63(2)(b)(vi).

Counsel for the respondent stated that she was taken by surprise as she thought the only issue was whether Mr. Kelner was suffering in 1991 from a mental or physical infirmity that rendered him incapable of caring for the child. The point was explicitly raised in the notice of appeal.

The reply to the notice of appeal, in pleading the so-called assumptions, merely repeats the wording of subparagraph 63(2)(b)(iii) to (vi). The original reply stated in part C:

He submits that the Minister correctly disallowed the claim for child care expenses in accordance with subsection 63(2) of the Act.

The amended reply adds the statement:

He submits that the Appellant failed to file with her income tax return for the 1991 taxation year the prescribed form containing the prescribed information regarding the calculation of her child care expenses, as required by subsection 63(1) of the Act.

This was the only specific reason given for the disallowance and at trial it was admitted that she had duly filed the prescribed form. It was not contended that she had not incurred the expenses. However, regardless of the deficiency of the respondent’s pleadings it is of course for the appellant making the claim to establish her entitlement to it.

In light of counsel for the respondent’s surprise at the raising of the issue under subparagraph 63(2)(b)(vi), I gave both parties an opportunity to submit written argument.

As directed the appellant sent written submissions to the court. The factual part of the letter is simply a repetition of Mrs. Kelner’s viva voce evidence at trial.

The letter reads as follows:

I, Jeannie Kelner, should be entitled to deduct the child care expense costs in the amount of $4,000.00 for the tax year 1991 by virtue of the fact that I was separated at the end of 1991 and for a period of four months prior to the year end in accordance with paragraph 63(2)(vi) of the Income Tax Act.

The relevant factors in this case are as follows:

(a) In the summer of 1991 my husband David Kelner informed me that our marriage was over and that he was moving into a self-contained unit in the basement of our house at 112 Mentor Boulevard, North York. This occurred after approximately two years of steadily deteriorating marital relations.

The stress on the marriage was caused by events concerning an injury sustained by my husband in the latter part of 1989 resulting in both emotional and financial problems, stemming from the fact that he was unable to continue work in his trade.

(b) When filing the tax return for 1991, I attempted to clarify my marital status insofar as Revenue Canada was concerned. The Revenue Canada telephone information line advised me that Revenue Canada considered us “married” because we had no separation agreement and continued to live under the same roof. As a result, we both filed as “married”. I hope to explain my unusual circumstances in the event of reassessment directly to a specific person who would be assessing my file.

(c) I state those circumstances in support of my separated status below:

1. we occupied “separate apartments” in the house;

2. we had no sexual relations;

3. we communicated mainly on issues relating to our child who was 2 1/2 years old at the time;

4. my husband performed his own domestic duties, i.e. laundry, cleaning and cooking within the self-contained unit* and he had his own car;

* self-contained unit includes separate laundry facilities, separate entrance, separate kitchen (which included table, chairs, refrigerator and stove), bathroom, bedroom and livingroom (including television);

5. social activities together were limited to some family functions

which were unavoidable due to the fact that we are first cousins.

Case law supports this understanding of separation as evidenced by Dupere v. Dupere (1974), 19 R.F.L. 270, 9 N.B.R. (2d) 554 (S.C.); Cooper v. Cooper (1972), 10 R.F.L. 184 (Ont. H.C.).

I would like to expand somewhat on the financial situation relating to my case.

1. The decision to remain under the same roof was necessitated by the fact

that neither one of us had the means to set up a separate household.

2. Because the issue of child custody appeared to be unresolvable and the lawyers fee quotation was prohibitive, I did not proceed to have a legal separation document drawn up.

3. Because my husband’s ability to earn income was severely affected by his injury, I continued to pay all expenses relating to the household and to our child. I did this both from a moral perspective as well as attempting to ensure that the house itself would not be forfeited due to neglect of financial responsibilities.

I respectfully deliver these submissions for your consideration in support of my claim for child care expenses for the tax year 1991.

The letter did not add any new evidence that was not adduced at trial, but there were a couple of other points that should be mentioned. The self-contained basement apartment into which Mr. Kelner moved had a separate entrance which he used. The husband’s apartment did not have a separate telephone line.

I accept that the marriage was in a more than precarious state. It was, to use a colloquial phrase, on the rocks. If they could have afforded it they would probably have lived in separate homes and would have had a separation agreement. Mrs. Kelner testified that she consulted a lawyer but he quoted her a fee for drawing up a separation agreement that was far beyond her financial means. She also consulted another lawyer because she was concerned that her husband might kidnap the child and take her to Israel.

The respondent advanced three arguments, as follows:

(a) The appellant, having stated in her return that she was “married” is estopped from now claiming that she was living separate and apart. I do not accept this argument. Estoppel involves a representation of fact upon which another person relies to his or her detriment. The principles are well settled. See Goldstein v. R., (sub nom. Goldstein v. Canada) [1995] 2 C.T.C. 2036, 96 D.T.C. 1029; Byrt v. Minister of National Revenue, [1991] 2 C.T.C. 2174, 91 D.T.C. 923 (T.C.C.).

A mistaken designation in a return does not in itself give rise to an estoppel, where the Minister has not acted on it to his detriment. The appellant’s entitlement to the child care deduction is a matter of law. In any event she was married in 1991.

(b) That in any event the assessment is not too high. The basis of this argument is that the appellant in her return claimed a tax credit under paragraph 118( l)(a) as a married person who supported her spouse.

In fact Mrs. Kelner was a married person and she in fact supported her spouse. There is nothing in paragraph 118(l)(a) that requires that, to qualify for the credit, the spouses must not be living separate and apart for the purpose of the child care deduction under section 63. If Mrs. Kelner were making alimony or maintenance payments that she deducted under paragraphs 60(1)(b) or (c) she could not also obtain the credit under paragraph 118(l)(a).

Where one spouse supports the other in the same house, including the payment of household expenses and the cost of the other spouse’s food, it may cast some doubt on whether they are truly “living separate or apart because of a breakdown of the marriage”, but this is a question of fact to be decided on the evidence in a particular case.

(c) The main argument by the respondent is that the spouses were not living separate and apart by reason of a breakdown of the marriage.

I start from the premise that it is possible for spouses, as a matter of law, to live separate and apart even though they are under the same roof.

In Murphy v. Murphy [1962] N.S.W.R. 417, Nield J. said at page 424:

There is the old story of “absence making the heart grow fonder”; but when people have an inability to accommodate themselves to one another, and are forced to occupy the same dwelling, to live under the same roof, with that difference in feeling; then the antagonisms build up and build up, as they see one another day after day; and the possibility of their ever coming together again becomes more and more remote and they tend to be more and more separated, by their hostility to one another, and apart from one another, in that they have nothing in common at all. I can see no reason in logic why one cannot say of people living under the same roof that they are living separate and apart; just as if they were living in different home.

I tend to think that Nield J. may have gone a little further than our courts would have. Courts in Canada have however recognized that parties may live separate and apart even though they are under one roof. Rushton v. Rushton, [1969] 66 W.W.R. 764, 2 D.L.R. (3d) 25 (B.C.S.C.); Tuomi v. Ungarian, [1991] 5 W.W.R. 424, 56 B.C.L.R. (2d) 133 (S.C.), affirmed (1992), 19 B.C.A.C. 18, 34 W.A.C. 18 (C.A.).

In Cooper v. Cooper (1972) 10 R.F.L. 184 (Ont. H.C.) Holland J. said at page 187:

Can it be said that the parties in this case are living separate and apart? Certainly spouses living under the same roof may well in fact be living separate and apart from each other. The problem has often been considered in actions brought under subparagraph 4( 1 )(e)(i) of the Divorce Act and, generally speaking, a finding that the parties were living separate and apart from each other has been made where the following circumstances were present:

(i) Spouses occupying separate bedrooms.

(ii) Absence of sexual relations.

(iii) Little, if any, communication between spouses.

(iv) Wife performing no domestic services for husband.

(v) Eating meals separately.

(vi) No social activities together.

See Rushton v. Rushton (1968), 1 R.F.L. 215, 66 W.W.R. 764, 2 D.L.R. (3d) 25 (B.C.); Smith v. Smith (1971), 2 R.F.L. 214, 74 W.W.R. 462 (B.C.); Mayberry v. Mayberry, [1971] 2 O.R. 378, 3 R.F.L. 395, 18 D.L.R. (3d) 45 (C.A.).

There are many cases on this point. I shall quote only one other, Smith v. Smith (1971) 2 R.F.L. 214, 74 W.W.R. 462 (B.C. S.C.). In that case McDonald LJSC said at pages 215-16 (W.W.R. 463-64):

Rushton v. Rushton (1968), 1 R.F.L. 215, 66 W.W.R. 764, 2 D.L.R. (3d) 25 (B.C.), a decision of McIntyre J., appears to be the first of a series of decisions dealing with the application of the above section of the Divorce Act to spouses living under the same roof. In this case (pages 215-16):

The petitioner lived in one room of the suite, the respondent in another; there was almost no contact between them. The wife performed no domestic services for the husband. She shopped and cooked only for herself. He bought his own food, did his own cooking, his own laundry and received no services from his wife...

The petitioner continued to live in the suite because she and her husband were joint caretakers of the apartment building in which the suite was situate, and to keep the position it was necessary to be, or to appear to be, husband and wife and to reside in the caretaker’s suite.

The learned Judge, in granting a decree, said at page 217:

The words “separate and apart” are distinctive. They mean, in my view, that there must be a withdrawal from the matrimonial obligation with the intent of destroying the matrimonial consortium, as well as physical separation. The two conditions must be met. I hold that they are met here. The mere fact that the parties are under one roof does not mean that they are not living separate and apart within the meaning of the Act.

The Rushton case, supra, was approved of by the Manitoba Court of Appeal in Galbraith v. Galbraith (1969), 1 R.F.L. 77, 69 W.W.R. 390, 5 D.L.R. (3d) 543. Although the actual details of the mode of life led by the parties there were not expressly set out, Smith C.J.M. said at page 83:

I do not consider that geographical separation in the sense of different dwelling places is in all cases essential. Unquestionably, where a couple is living under the same roof, the evidence that they are actually living separate and apart must be clear and convincing, but it is not impossible in law that it can be produced. In fact, circumstances can be thought of quite easily in which, on any reasonable interpretation of the words, persons residing under the same roof obviously should be held to be living separate and apart...

In each case, evidence is required of the particular circumstances, the relations between the parties and their way of life, before a decision can be reached as to whether they are living separate and apart. Personal relations and attitudes toward each other are often as important in this connection as the place of physical residence.

The words “separate and apart” have been used for many years in divorce legislation and in matrimonial litigation and I must give them a meaning that is consonant with that given them in provincial courts dealing with matrimonial matters. They imply not only physical separation but a breakdown of the matrimonial consortium. Those elements are unquestionably present here. There is certainly a breakdown of the marriage. There is clearly both physical and a psychological separation.

There are, however, two or three points that may be inconsistent with a finding that they are living separate and apart:

(a) They have the same telephone. I do not think that this factor by itself is of such importance that it can prevail against all of the other factors.

(b) They attend the same family functions. This is attributable to the fact that they are first cousins and share the same relatives. This is a highly unusual situation but I think that even if they were living in separate houses under a written separation agreement they would still have had to come to family gatherings.

(c) The appellant continued to pay the household expenses and indeed to pay for her husband’s food. This is perhaps the most difficult aspect of the case. It think however that in all the circumstances it does not establish that they are not living separate and apart because of a breakdown of the marriage. Mrs. Kelner appeared to me to be a highly responsible type of person, motivated by a strong moral sense of duty. She is also long-suffering. Many wives would have sent David Kelner packing long ago.

On all of the evidence, I have concluded that in the last half of 1991 Mr. and Mrs. Kelner were living separate and apart because of a breakdown of their marriage.

One final argument should be dealt with. It was contended that for the purposes of the Income Tax Act the expression “separate and apart” should be given a different meaning from that given it under the Divorce Act.

The basis of this submission is that section 63 of the Income Tax Act has as its purpose the allowance of child care expenses to the supporting person with the lower income. The reason for this is that if one supporting person does not work but stays at home and looks after the child there should be no deduction. Essentially section 63 is designed to help two income families. Therefore, if one parent stays in the same house and is capable of looking after the child, even if the parents are living separate and apart for the purposes of matrimonial law, they are, in the respondent’s submission, not living separate and apart for the purposes of the Income Tax Act.

The argument is certainly not without merit and it was advanced very convincingly by Ms. Waters. I do not think however that I can accept it, and for several reasons. In the first place the words “living separate and apart” have a meaning that has been developed in numerous cases in Canada and the Commonwealth and they include a state of affairs in which, under certain conditions, persons living under the same roof are nonetheless living “separate and apart”. It must be presumed that when Parliament uses an expression of such long standing currency in matrimonial law it intends it to be given the meaning attributed to it in matrimonial cases. Second, had Parliament intended it to be given a different meaning it would, in a statute that is remarkable for its specificity, have said so.

Finally, even if this broad overall philosophy as to the purpose of section 63 justified a departure from the accepted meaning of the expression, on the facts in this case I do not see how it can be said that David Kelner was a fit person to take care of their child. He was, after all, a person who allowed an injured finger to keep him off work for years, during which he lived off his wife without trying to find any other form of gainful employment, to throw him into a state of profound depression and to break up his marriage. No responsible mother would allow such a person to babysit her three year old daughter. From the evidence, it is open to question who needed a babysitter more, David or Liat.

The appeal is allowed and the assessment referred back to the Minister of National Revenue for reconsideration and reassessment to allow the appellant the child care expenses claimed under section 63 of the Income Tax Act.

The appellant is entitled to her costs, if any.

Appeal allowed.