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Citation: 2004TCC584
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Date: 20040827
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Docket: 2004-835(IT)I
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BETWEEN:
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RONALD J. MORIN,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal pursuant to the
Informal Procedure was heard at Fort McMurray, Alberta, on July
29, 2004. The Appellant testified. The Respondent called his
former wife, Ellen Foster, who testified.
[2] The particulars of the dispute are
set out in paragraphs 3 to 14 of the Amended Reply to the Notice
of Appeal. The addition of paragraph 13.a by the amendment was
allowed on a disputed motion by the Respondent at the opening of
the hearing. Paragraphs 3 to 14 read:
3. The 2000,
2001 and 2002 income tax returns were initially assessed as
follows:
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Tax Year
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Initial Assessment Date
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2000
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March 8, 2001
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2001
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March 11, 2002
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2002
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March 6, 2003
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4. In
computing income for the 2000, 2001 and 2002 Taxation Years, the
Appellant deducted the following amounts as child support
payments (the "Amounts");
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Tax Year
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Amount Deducted
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2000
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$15,000
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2001
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$15,000
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2002
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$5,000
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5. In
reassessing the Appellant for the 2000, 2001 and 2002 Taxation
Years, the Minister of National Revenue (the
"Minister") disallowed the deduction of the Amounts on
the basis that the Appellant's original court order was
changed on or after May 1, 1997 to decrease the child support
payable. The Notices of Reassessment were dated April 17,
2003.
6. The
Appellant filed Notices of Objection to the reassessments,
received June 16, 2003.
7. The
Minister confirmed the reassessments by means of a Notification
of Confirmation dated December 19, 2003.
8. In
confirming the reassessment of tax for the 2000, 2001 and 2002
Taxation Years, the Minister relied on the following facts:
a) Ellen
Loretta Morin (hereinafter "Ellen") is the
Appellant's former spouse;
b) the
Appellant and Ellen have 2 children (the "Children") as
follows:
Brenda Lee Morin
("Brenda")
born October 9, 1982; and
Adam Ronald Morin
("Adam") born October 21,
1984
c) a Consent
Corollary Relief Order dated April 30, 1997 (the "Consent
Order") requires the Appellant to pay Ellen, for the support
and maintenance of the Children:
i) the sum
of $750 per month for each of the Children;
ii) the first
payment to commence on the 30th day of April 1997; and
iii)
continuing until the Children cease to be children of the
marriage as defined by the provisions of the Divorce Act,
(1985);
d) in a
written agreement between the Appellant and Ellen dated December
4, 1998 (the "Written Agreement") Ellen agrees to waive
$250 of the $1500 per month for child support from the Appellant
dating back to April 30, 1998 until Brenda turns to the age of 18
years old on October 9, 2000;
e) the
Appellant claimed the Amounts of $15,000, $15,000 and $5,000
respectively in each of the 2000, 2001 and 2002 Taxation
Years;
f) child
support of $15,000 in 2000, $14,375.00 in 2001 and $4,375 in 2002
was paid by the Appellant to Ellen pursuant to the Written
Agreement;
g) Brenda
turned 18 on October 9, 2000
h) the
Appellant continued to pay $1,250 per month in respect of the
Children after October 9, 2000;
i) the
Appellant and Ellen were living separate and apart at the time
the payments were made by the Appellant; and
j)
Brenda's education ceased in January of 2002 and beginning
February 2002, the Appellant reduced the total child support paid
to $750 per month for child support in respect of Adam.
9. The
assumption of fact outlined in paragraph j above was first made
by the Minister in confirming the reassessment.
Other Material Facts
10. After the Appellant
paid the June 2002 child support payments to Ellen, Adam left the
custody of Ellen and the Appellant ceased paying child support to
Ellen.
B. ISSUES
TO BE DECIDED
11. The issue is whether
the child support payments made by the Appellant are deductible
in computing the Appellant's income in the 2000, 2001 and
2002 Taxation Years.
C.
STATUTORY PROVISIONS RELIED ON
12. He relies on
subsection 56.1(4) and 152(9) and paragraphs 60(b) and 60(c) of
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as
amended (the "Act") as amended for the 2000,
2001 and 2002 Taxation Years.
13. He submits that the
Written Agreement varied the total amount of child support to be
paid by the Appellant and therefore a commencement day under
subparagraph 56.1(4)(b)(ii) of the Act. Child support paid
by the Appellant during the 2000, 2001 and 2002 Taxation Years is
not deductible pursuant to paragraph 60(b) of the Act.
13.a Alternatively, he
submits that the Written Agreement changed the total child
support amount payable to the Recipient and, as such, there was a
commencement day under subparagraph 56.1(4)(b)(iii) of the
Act. Child support paid by the Appellant during the 2000,
2001 and 2002 Taxation Years is not deductible pursuant to
paragraph 60(b) of the Act.
[3] Assumptions 8 a), b), c), e), g),
h), i) and j) were not refuted by the evidence.
[4] Respecting assumption 8 d), the
"Written Agreement" dated December 4, 1998 was filed as
Exhibit (A-2). It reads:
December 4, 1998
TO WHOM IT MAY CONCERN:
I, Ellen Morin agree to waive $250.00 of the $1500.00 per
month for child support from my ex-husband, Ronald J. Morin
dating back to April 30th, 1998 until our daughter, Brenda-Lee
Morin turns to the age of eighteen years Oct. 9th, 2000.
"Ellen Morin"
DATED
"Dec 31/98"
ELLEN MORIN
"Ronald
Morin"
DATED
"Dec 6/98"
RONALD J. MORIN
[5] The "Written Agreement"
is not under seal; it is not a deed. Ellen has a grade 8
education. It was drawn by the Appellant who has a grade 10
education and signed by both parties.
[6] On its face, Exhibit A-2, the
"agreement" does not appear to be enforceable by Mr.
Morin because it is not a deed and there is no consideration.
Moreover, Mr. Morin has always kept his child support payments
current. Exhibit A-2 was drawn and executed because Mr. Morin had
been demoted and his salary reduced. He had discussed the fact
that he could not afford the Court Order of 30 April, 1997
payments of "the sum of $750 per month for each of the said
infant children" (Exhibit A-1, paragraph 2), with his
lawyer. The lawyer advised Mr. Morin that a change in payments by
Court Order would make the money taxable to Mr. Morin, but a
waiver would enable him to deduct the amounts that he paid. Mr.
Morin then contacted Ellen Morin and, eventually, they completed
Exhibit A-2.
[7] Mr. Morin actually reduced his
payments for only one child, Brenda, and commenced doing so April
30, 1998 (pursuant to oral discussions with Ellen) before Exhibit
A-2 was executed in December. He testified that he could not
afford to pay more after his pay was reduced and he could not
afford to go to Court for another order or to hire a lawyer.
Ellen Morin was required to go bankrupt in about the same time
period and that bankruptcy included part of her lawyer's fees
for the divorce, as a result her situation was about the same as
Mr. Morin's. Ms. Foster was paying income tax on the
money she received until H & R Block saw Exhibit R-2 and
advised her not to. The result is this assessment.
[8] In cross-examination, Mr. Morin
stated that he always kept up his payments for the children and
Ms. Foster agreed with this.
[9] Mr. Morin and Ms. Foster cannot
agree to waive or otherwise abrogate the rights of a third party,
namely, a child, for support determined by a court order. Any
change must be made by another court order. This is quite
different from an agreement to a reduction of spousal support.
The different legal character of spousal support and child
support was articulated by Madam Justice Wilson in Richardson
v. Richardson, in the following passage, quoted with approval
by Justice Sopinka writing for the majority of the Supreme Court
of Canada in Willick v. Willick, [1994] 3 S.C.R. 670:
This inter-relationship [between spousal maintenance and child
support] should not, however, lead us to exaggerate its extent or
forget the different legal bases of the support rights. The
legal basis of child maintenance is the parents' mutual
obligation to support their children according to their
need. That obligation should be borne by the parents in
proportion to their respective incomes and ability to pay:
Paras v. Paras, supra.... Child maintenance, like
access, is the right of the child: Re Cartlidge and
Cartlidge, [1973] 3 O.R. 801 (Fam. Ct.). For this
reason, a spouse cannot barter away his or her child's right
to support in a settlement agreement. The court is
always free to intervene and determine the appropriate level of
support for the child.... Further, because it is the
child's right, the fact that child support will indirectly
benefit the spouse cannot decrease the quantum awarded to the
child. [Emphasis added.]
In Pelech v. Pelech, [1987] 1 S.C.R. 801, released
concurrently with Richardson, the following often-quoted
principle was stated:
[T]he Hyman principle that parties cannot by contract oust the
jurisdiction of the court in matters of spousal maintenance is an
established tenet of Canadian law.
Although that case pertained to spousal support rather than
child support, if it is true that parties cannot oust the
court's jurisdiction by way of spousal support agreements, it
follows that the court's jurisdiction with respect to child
support cannot be avoided by agreement. If the rights of a child
cannot be bartered way in a separation agreement, they cannot be
waived by one of the parents in a subsequent
"variation" in the absence of consideration and without
court sanction. The written agreement in this case is invalid for
that reason alone. In some provinces, the written agreement may
be invalid for lack of compliance with formalities. In Alberta,
however, there are no statutory formalities for a spousal support
agreements: Gardner v. Gardner, [2002] A.J. No. 625. The
same appears to be true with respect to separation agreements in
general, including child support. (Domestic Relations Act,
R.S.A. 2000, c. D-14)
[10] Paragraph [9] recites the authority for
the first two reasons that Mr. Morin's appeal should be
allowed:
1. The spousal parties
cannot contract out of a court order; rather, they must obtain a
new court order varying the first order.
2. The spousal parties
cannot waive the rights of a child (a third party) to support
granted under a court order.
[11] The third reason is this: Based upon
the totality of the testimony, the Court finds that there was no
consideration between the parties in return for Ms. Foster
signing Exhibit A-2 on December 31, 1998. The
"agreement", Exhibit A-2 was a gratuitous act by her
upon which Mr. Morin acted without any passing of consideration
such as would exist within the law. Therefore it cannot be
enforced by Mr. Morin and he still owes Ms. Foster the $250 per
month which he did not pay her at that time.
[12] For these reasons, the Court is of the
view that the original Court Order between the Morins dated April
30, 1997 remains in force between the parties and did so at all
material times. Thus the child support payments made by the
Appellant as described in assumption 8(f) are deductible in
computing the Appellant's income in the 2000, 2001 and 2002
taxation years.
[13] This matter is referred to the Minister
for reconsideration and reassessment in accordance with these
Reasons. The Appellant is awarded the sum of $100 on account of
his out-of-pocket disbursements incurred for copying, postage,
et cetera, in prosecuting this appeal.
Signed at Saskatoon, Saskatchewan, this 27th day of August
2004.
Beaubier, J.
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