Citation: 2009 TCC 439
Date: 20090914
Docket: 2008-1548(IT)I
BETWEEN:
FRANK CIRA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered from the Bench on July 15, 2009, in Toronto,
Ontario
and modified for clarity and accuracy.)
Boyle J.
[1]
These are my reasons
for judgment allowing the informal tax appeal of Mr. Cira heard on Monday
in Toronto.
[2]
This case concerns
Mr. Cira’s claim to deductions of child support for 2005. In his objection
and appeal he initially claimed that he had paid $6,354 of child support in
2005, but he now agrees he only paid $5,932, the difference being a late
payment made in January 2006.
[3]
Mr. Cira and his
wife had one child when they separated and subsequently
divorced. They signed a separation
agreement in 1988 and divorce proceedings commenced the following year.
[4]
In 1988, the separation
agreement provided that Mr. Cira would pay child support of $350 per
month.
[5]
On April 3, 1997,
an Ontario court ordered Mr. Cira to pay child
support of $450 per month commencing on May 1, 1997.
[6]
The Court further
ordered that child support would increase for cost of living increases in accordance
with the family law statutory régime based on Toronto statistics.
[7]
The following day,
April 4, 1997, a support deduction order was also made providing for
payment of the child support through Ontario’s Family
Responsibility Office.
[8]
The Crown accepts that
the amount of $5,932 was paid by Mr. Cira in 2005 pursuant to the
April 3, 1997 order. The only remaining issue in this case then is
whether the April 3, 1997 order has a “commencement day” for purposes
of the Income Tax Act (the “Act”) as defined in subsection 56.1(4)
of the Act. It is Mr. Cira’s position that it does not because the
April 3, 1997 order is before May 1997.
[9]
It is the Crown’s
position that the April 3, 1997 order has a commencement day because
it requires that the first payment of the increased $450 amount commence
May 1, 1997.
[10]
Mr. Cira testified
that his child support payments were always payable on the first of month. This
is confirmed by the 1988 separation agreement.
[11]
He testified that
during the April 1997 hearing, the Ontario judge alerted his ex-wife to the
imminent coming into force of the new régime for child support payments, that
his ex-wife chose to proceed and not wait, and that the judge said that the
status quo would therefore be maintained.
[12]
Mr. Cira explained
that he tried to obtain transcripts but Ontario
does not keep them beyond ten years.
[13]
Mr. Cira said the
increase of child support to $450 in 1997 was to reflect that it had not been
increased from $350 for cost of living since 1988. Mr. Cira’s ex‑wife
is not a party to this proceeding and was not called to testify.
[14]
No evidence was
submitted to show what child support would have been payable based upon
Mr. Cira’s income under the new régime’s child support guidelines had it
been applied or intended to apply.
[15]
The Canada Revenue
Agency’s (“CRA”) rejection of Mr. Cira’s claim was not based upon the
dispute framed in the pleadings to be resolved by the Court, but was because he
originally sent the CRA a copy of correspondence from the Family Responsibility
Office referring to the April 1997 order and not a copy of the order itself.
[16]
He next submitted to the
CRA a copy of the 1989 Petition for Divorce and the April 4, 1997
support deduction order, but still not the April 3, 1997 order.
[17]
In its first letter responding
to the Family Responsibility Office correspondence, the CRA says in part:
Child support payments paid under court order or written agreement dated
May 1, 1997, or later are not deductible.
[Emphasis added.]
[18]
It is clear that the
April 1997 order cannot have a commencement day by virtue of any of
paragraph (a) or subparagraphs (b)(i), (ii) or (iii) of the
definition of commencement day.
[19]
The Crown’s position is
that even though the order is dated early April 1997 and has never been varied
or replaced by another order or by agreement, the order has a commencement day
of May 1 under subparagraph (b)(iv) of the definition because
it provides that the $450 payments commence May 1, 1997.
[20]
Subparagraph (b)(iv)
of the definition of commencement day provides:
“commencement day” at any time of an . .
. order means
. . .
(b) where the . . . order is made before May 1997, the day,
if any, that is after April 1997 and is . . .
(iv) the day specified in the . . . order . . . as the commencement
day of the . . . order for the purposes of this Act.
[21]
For subparagraph (b)(iv)
to apply to Mr. Cira’s April 3, 1997 order, there must be a day
specified in the order as the commencement day of the order and
that the commencement day be specified for purposes of the Act.
[22]
The question in this
case is whether the 1997 order satisfies these two requirements. It is the
Crown’s position that it does because the April 1997 order provides the payments
will commence May 1, 1997.
[23]
The Crown relies upon
the Federal Court of Appeal’s decision in Dangerfield v. The Queen,
2003 FCA 480, 2004 DTC 6025, to support its position. In Dangerfield,
the court order for child support was also made in April 1997 and provided:
There will be an order of child support in the amount of $250 a
month commencing May 1st. . . .
[24]
The order was signed in
May. It provided that the respondent would pay to the petitioner for the
support of the said child the sum of $250 per month payable on the first day of
each and every month commencing May 1, 1997.
[25]
In Dangerfield,
the Federal Court of Appeal noted that it was clear from the record that the family
court judge understood and intended that the child support amounts be under the
new régime.
[26]
It was also clear the
applicant mother, who was the appellant taxpayer, also understood and intended
the new régime to apply. Further, the father was also aware that the mother was
seeking to have the new régime apply.
[27]
The Federal Court of
Appeal in Dangerfield found on those facts that the specified payment commencement
day could constitute the commencement day of the order and that
the order need not expressly say the commencement day was for purposes of the Income
Tax Act.
[28]
The Court wrote in
paragraph 15:
The argument that the provision requires express reference in the
agreement or order to the effect that the commencement day is being specified “for
the purposes of this Act” is without merit. The jurisprudence is clear that
such a technical requirement is unnecessary. The requirement is only that
the commencement day be included in the order for the purposes of the Act; the order need not expressly state that it is
for the purposes of the Act. It is often perfectly
obvious, as it was here, that the date is specified for purposes of the Act,
and, if it is not, evidence may be led to that effect, as was done in
this case.
[Emphasis added.]
[29]
The facts in
Mr. Cira’s case are significantly different. The Crown could not point to
any evidence that the judge making the April 1997 order or the mother or father
intended the new régime to apply. The taxpayer’s evidence is that they were all
aware the new régime would begin May 1 but chose to proceed under the old régime.
[30]
The child support
amount was increased to $450. Had it been intended that the new régime apply,
even though it was not yet May, one might expect the amount to be reduced
instead to reflect that it was not in the deductible to payor and taxable to
payee régime, unless the new support guidelines required an increase. I have
no such
evidence.
[31]
As the Federal Court of
Appeal said at the end of the paragraph I just quoted from, when it is not
obvious from the order or earlier proceedings that there is a commencement day
specified for purposes of the Act, it is open to the Crown in this case
to introduce evidence. It may have done this by calling the mother or
otherwise, perhaps by joining her to the proceedings. It did not.
[32]
The Crown did not
challenge the credibility of the father’s testimony on this or any other point.
It did not describe some of his evidence on this point as hearsay or, given
this is an informal hearing, as not the best evidence nor self-serving.
[33]
In these circumstances,
I am satisfied that based upon the evidence before me, the
April 3, 1997 order does not have a May 1 or later commencement
day for purposes of the Income Tax Act. It does not have a
commencement day at all.
[34]
Mr. Cira’s appeal
is allowed with costs.
Signed at Ottawa, Canada, this 14th day of September 2009.
"Patrick Boyle"
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