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Citation: 2004TCC233
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Date: 20040414
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Docket: 2003-1749(IT)I
2003-3373(IT)I
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BETWEEN:
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LINDA HUSKINSON,
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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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____________________________________________________________________
For the Appellant: The Appellant herself
Counsel for the Respondent: Ronald MacPhee
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Belleville, Ontario, on January 28, 2004)
Mogan J.
[1] These appeals are in respect of
the taxation years 1996, 2000, 2001 and 2002. In each of those
years, the Appellant received certain amounts from her former
husband as child support. Because of circumstances which arose in
1999, the Appellant reviewed the history of her separation from
her former husband; and she concluded that the amounts received
from him ought not to be part of her income in the years under
appeal. Canada Customs and Revenue Agency issued assessments to
the Appellant for each of those four years including in her
income the amounts received from her former husband. The
Appellant has appealed from those assessments and has elected the
informal procedure. The issue is whether certain amounts received
by the Appellant as child support in the years under appeal are
required to be included in computing her income.
[2] The Appellant was married in 1975
and there were four children born of the marriage: Ben in 1978;
Emmet in 1980; Katherine in 1982; and Emily in 1984. The
Appellant and her former husband separated in September 1988. In
1990, there were divorce proceedings commenced and a divorce was
granted in 1991. The Appellant had difficulty obtaining financial
support from her husband following the separation in September
1988. There is no doubt that the Appellant went through some very
difficult times because she had custody of the four children. In
what may seem like unusual circumstances, in 1988 she and her
husband purchased a farm east of Peterborough. They were planning
to move to the farm in the fall of 1988. When September came, she
moved to the farm with the children but the husband did not. He
remained in the matrimonial home and the separation, in effect,
took place then. And so the Appellant was left in a new dwelling
on a farm looking after the four children on very limited
financial support.
[3] She made a claim for child support
against her husband. There were some legal proceedings but for
the purposes of these appeals, the relevant proceedings occurred
in the 1993 calendar year. Counsel for the Respondent put to the
Appellant in evidence a binder of five documents which I shall
refer to briefly. The first document (Exhibit R-1, Tab 1) can be
dismissed very quickly because it is only a draft order dated
November 14, 1989. There is no indication it was ever signed. I
would dismiss it out of hand as having no evidentiary value. In
1993, there was an action commenced in the Ontario Court, General
Division in which the former husband was plaintiff and the
Appellant (named in the pleadings as Boomhour being her married
name) was defendant.
[4] Apparently, the matter came on for
trial on June 8, 1993. On that day, Minutes of Settlement
(Exhibit R-1, Tab 2) were prepared. Tab 2 is a hybrid
document because it started out as a memorandum of agreement and
then someone has struck out the typed heading "Memorandum of
Agreement" and handwritten above that "Minutes of
Settlement". On the first two pages which were typed, there
are significant handwritten amendments. Paragraph 5 is struck out
totally and there are some words written into various lines of
paragraph 6. Someone has handwritten new paragraphs 6A and 6B.
Paragraphs 7 and 8 appear in the document as typed without
change. Paragraph 9 (the typed version) is totally struck out and
a new handwritten paragraph 9 has been added. Also, there is
nothing but handwriting in the rest of the document which
includes paragraphs 10, 11, 12, 13, 14(a), 14(b), 15, 16, 17, and
18.
[5] Atthe bottom of the fourth page
someone has printed by hand "Dated at Peterborough this 8th
day of June 1993" and then there is a provision for
signature by three persons. The first line has Linda C. Boomhour
printed under it by hand, and the Appellant identified her
signature on the line above that and also identified the witness,
Diane Mills, as someone who was working at the Courts. Under the
next line is printed the name William Louis Boomhour and above
that line someone seems to have signed with a witness. I will
comment on that below. Under the third line is handwritten Alice
Huskinson and, above that line, there is a signature which the
Appellant identified as that of her mother also witnessed by
Diane Mills.
[6] The Appellant said she could not
recognize her husband's signature on the second line because
in the last syllable of his last name, there appears to be an
"i" when in fact, the last syllable is spelled
H-O-U-R. She said he would never sign that way
but she recognized the first name of the witness as
"Donna" who was her husband's lawyer. The Appellant
may not have been present when her husband signed, but I am going
to make a finding on the evidence that the husband signed Exhibit
R-1, Tab 2 because the Appellant recognized the signature of the
husband's lawyer. I will assume that the husband's lawyer
would not have signed as witness unless the husband had in fact
signed first. Whatever the imperfections are in the husband's
handwriting, I make a finding that the Minutes of Settlement were
signed by three persons being the Appellant, her former husband,
and her mother.
[7] The Appellant said that when the
proceedings were commenced in the Ontario Court, both she and her
former husband owed a significant amount of money to her mother
because her parents had loaned them money to buy this farm.
Apparently, when the marriage came apart, the debt was still
owing to the Appellant's parents which was secured, I gather,
by a mortgage on the farm. The Appellant's father had died in
the interim so that by 1993, the Appellant's mother was a
widow and someone in the Court suggested that the mother should
be made a party to the proceedings because she was a significant
creditor of the Appellant and her divorced husband. As I
understand the Appellant's evidence, it was in that context
that the Appellant's mother signed the Minutes of
Settlement.
[8] Paragraph 17 of the Minutes of
Settlement states that all paragraphs of the Minutes shall be
incorporated into a judgment, save and except paragraphs 6A, 6B,
13 and 16. Paragraph 17 is important because paragraph 6A, which
is handwritten, is the one that provides for child support and it
states: "The husband shall pay to the wife for the support
of each child of the marriage the sum of $500 per month
commencing July 1, 1993. The husband shall supply post-dated
cheques for support on July 1st of each year". That is the
basis on which child support was paid when the husband did pay
it. He defaulted from time to time but, when he paid, it was on
the basis of $500 per month per child even though paragraph 6A
was not incorporated into the Judgment. I will refer to paragraph
6A later in these reasons.
[9] On the same day, the Minutes of
Settlement were taken to the Honourable Mr. Justice Kerr of the
Ontario Court (General Division) and he signed a Judgment
(Exhibit R-1, Tab 3) which gave effect to part of the
Minutes of Settlement. The preamble to the operative paragraphs
of his Judgment states:
THIS ACTION was heard this day, without a jury, at
Peterborough in the presence of counsel for the Plaintiff, the
Defendant appearing in person, and the Official Guardian, having
withdrawn as counsel for the children.
ON READING the pleadings, and hearing the evidence, and on
reading the Minutes of Settlement filed,
The first operative term of the Judgment begins as
follows:
1. THIS COURT
ORDERS AND ADJUDGES that the Defendant shall have custody of the
children of the marriage, ...
and that is followed by other provisions. In the Judgment of
the Court, however, there is no provision for child support, but
it does indicate that the judge who signed it had read the
Minutes of Settlement which had been signed by the parties
earlier on the same day.
[10] There was another proceeding in the
Ontario Court (General Division) in late 1995 in which the former
husband again appears to be the plaintiff and the Appellant is
the defendant. I do not know what the claim was by the former
husband but this proceeding came on before the Honourable
Mr. Justice Ferguson. The preamble to his Judgment (Exhibit
R-1, Tab 4) is as follows:
THESE ACTIONS were heard on the 15th, 16th, and 17th days of
November, 1995 without a jury at the Courthouse, Central East
Region, 440 Kent Street West, Lindsay, Ontario, in the presence
of counsel for the Defendant, William Louis Boomhour, and the
Plaintiff, Alice Huskinson, appearing in person (with the
assistance of her daughter, Linda Boomhour), and the Court
having reserved its decision until this date.
ON READING the motion records dated October 14, 1993 in File
2174/91 (Lindsay) and November 26, 1993 in File 836/89
(Peterborough) and the Order of The Honourable Mr. Justice
Lane dated December 21, 1993, directing a trial of the issues
raised in these motions, and upon hearing the evidence and the
submissions of counsel for William Louis Boomhour and from Alice
Huskinson personally;
Again, the Appellant, her former husband and her mother are
back in Court in the last months of 1995 and the Judge gives his
decision on the January 15, 1996 (Exhibit R-1, Tab 4). The first
operative paragraph states:
1. THIS COURT
ORDERS that the Minutes of Settlement dated June 8, 1993 entered
into between William Louis Boomhour, Linda Boomhour and
Alice Huskinson in file 846/89 are valid and binding and
shall be enforced.
The Judgment contains other terms but there is no provision
for child support. Therefore, the only document which provides
for child support is the Minutes of Settlement (Exhibit
R-1, Tab 2).
[11] The Appellant's position is that
she is not required to bring into income any of the amounts
received from her former husband because of paragraph
56(1)(b) of the Income Tax Act as it applied during
the years this litigation was ongoing from 1993 to 1996. For
a marriage breakdown occurring before 1993,
paragraph 56(1)(b) provided:
56(1) Without restricting the generality of
section 3, there shall be included in computing the income of a
taxpayer for a taxation year,
(a) ...
(b) any
amount received 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 the recipient was living apart from, and was
separated pursuant to a divorce, judicial separation or written
separation agreement from, the spouse or former spouse required
to make the payment at the time the payment was received and
throughout the remainder of the year;
The Appellant's position is that the amounts ought not to
be included in income because of these words of paragraph
(b): "pursuant to a decree, order or judgment of a
competent tribunal or pursuant to a written agreement". The
Appellant maintains that there was no decree, order, or judgment
under which she received these payments and there was no written
agreement. As I review the documents, I conclude that she is
right that there is no decree, order, or judgment of a competent
tribunal which required the child support payments to be made.
But I conclude that the Appellant is in error when she argues
that there was no written agreement.
[12] The Minutes of Settlement were a
written agreement. I do not have any trouble reaching that
conclusion. Indeed, on the basis of all the evidence given by the
Appellant and the documents produced, I cannot reach any
conclusion other than the fact that the Minutes of Settlement
were an agreement in writing. They were signed by the parties who
had most at stake on that day: the Appellant, her former husband,
and her mother who was a very significant creditor of both the
Appellant and the former husband. It appears that part of the
terms of this arrangement was a sorting out of properties. I
think the action by the husband was under the Family Law
Act to try and divide the assets of the marriage because the
ownership of a farm, which the Appellant and her former husband
intended to buy in the winter of 1987-1988 and which they in fact
purchased, was later renegotiated to be owned one-third by
the Appellant and two-thirds by her mother.
[13] It was also determined that, with
respect to the so-called matrimonial home which they had
lived in until September 1988 when the Appellant and the children
moved to the farm, title would be transferred to the husband.
Apparently, there was supposed to be a provision whereby the
amount owing to the Appellant's mother on the mortgage would
be secured by a mortgage on the husband's home which was the
matrimonial dwelling. Whether that was done or not is another
matter and is not relevant to what I have to decide in these
appeals.
[14] What is relevant is that these three
parties who had much at stake came to Court in an action which
was settled by Minutes of Settlement. They went to some pains to
set out the terms on which they would settle, including a
provision in paragraph 17 that the Minutes would be incorporated
in a Judgment excluding certain named items. That was in fact
done. Judge Kerr signed his Judgment on the same day and referred
to the fact that he had read the Minutes of Settlement indicating
he was content to issue his Judgment excluding those provisions
which the parties had agreed to exclude in the Minutes of
Settlement.
[15] There is also a provision on the last
page of the Minutes of Settlement which states: "These
minutes of settlement shall constitute a domestic contract
pursuant to the Family Law Act". The Appellant, in
argument, spent some time going through the provisions of the
Family Law Act and the regulations to that Act to
point out that there were defects in the Minutes of Settlement
which may have and may very well even now prevent the Minutes of
Settlement from being regarded as a domestic contract under the
Family Law Act of Ontario.
[16] I am not in a position to make a
determination on that issue but, as I indicated to the Appellant,
it is not relevant to me whether the Minutes of Settlement
satisfy the conditions to qualify as a domestic contract under
the Ontario Family Law Act. The provisions of the
Family Law Act are totally irrelevant. The only matter
which I have to be concerned with is whether the Minutes of
Settlement can be construed as a written agreement within the
meaning of paragraph 56(1)(b) of the Income Tax
Act.
[17] As everyone knows who is concerned with
paragraph 56(1)(b), it has been the subject of much
litigation since the present Act came into force in 1972;
and the preceding terms which were almost exactly the same in the
prior Act, were in effect from 1952 to 1971. There is a
wealth of litigation in this area and the Courts have given a
relatively liberal interpretation of written agreement. They have
found for example, that correspondence between a lawyer for the
wife and a lawyer for the husband which settles the terms of
child support, even though those letters between the lawyers were
never signed by the husband and wife, certain cases have found
that that correspondence taken together can constitute a written
agreement. It is a common-sense application of the statute, so
that the amounts settled by the parties through their lawyers as
their agents, would be regarded as the support amounts for income
tax purposes.
[18] The Appellant said that nobody can tell
her what she signed with respect to the Minutes of Settlement;
and nobody can tell her that she signed a separation agreement.
She is quite right. I am not telling her what she signed when I
make this finding. The documents, however, tell us what she
signed and the terms are clear. She said she signed under some
duress because the document was drafted (she thinks) by her
husband's lawyer over a lunch hour or something, and she said
that when she and her mother came back to Court, they were told
that if they did not sign, they would lose the farm or some
equally terrible consequence.
[19] There is another forum, another court,
where a person can move to set aside an agreement that was signed
under duress. There is no indication that any steps were taken to
set aside the Minutes of Settlement on the basis that they were
signed under duress. What I am left with in these appeals is
Minutes of Settlement signed by the Appellant and her former
husband which clearly designate child support of $500 per month
per child. I said I would come back to paragraph 6A again, and I
have to do so in reference to the oral testimony of what happened
in 1999.
[20] The oldest child was born in 1978. By
1998-1999, Ben was around 20 years of age and, according to the
Appellant's testimony, he wanted to go on to school. There
was a provision that she and her former husband would contribute
to his post-secondary education but, apparently, when this
proposition was put to the former husband, he rejected it
out-of-hand and cut off support altogether. This caused the
Appellant to apply to the Family Responsibility Office for the
Province of Ontario which is an agency designed to enforce
payments between former spouses where there has been a marriage
break-up and the dependent spouse is in need of support but the
spouse who is supposed to pay support has defaulted.
[21] The Appellant went to the Family
Responsibility Office for assistance with the documents. They
told her that she did not have an Order of the Court to enforce
her written agreement, and she said that they sent her back to do
something else. I do not know what she did but the hard fact is
that sometime, at the end of 1999 or early 2000, the Family
Responsibility Office caught up with the husband and put pressure
on him to pay. Apparently, because he is an employee of General
Motors in Oshawa on a salary, the Family Responsibility Office
has great leverage to have the amounts deducted at source and
remitted. The evidence of the Appellant is that in the year 2000,
she got a back payment of about $7,000 in arrears from her
husband, and in 2001 and 2002, the Family Responsibility Office
did its job very well and enforced the performance by the former
husband of the payments he should be making.
[22] It was brought out in
cross-examination that when the Appellant filed her income
tax returns for 2001 and 2002, she reported $24,000 as support
received in each year, which indicates to me that the Family
Responsibility Office did find something to enforce against the
husband and, even more important, it persuades me that the amount
which the husband was forced to pay conforms with the terms of
the Minutes of Settlement signed in June 1993, because $500 per
child per month for four children comes to $2,000 a month; and in
twelve months that is $24,000 a year. Without any evidence to the
contrary, I conclude that even in the years 2001 and 2002, the
former husband was still required to pay to the Appellant the
amount that had been settled between them on June 8, 1993. There
is no "commencement day" with respect to any events
which occurred after April 1997.
[23] There is no merit to these appeals. The
evidence is overwhelming that the Appellant and her former
husband signed a written agreement (Exhibit R-1, Tab 2). It was
not called a separation agreement. It was not called a written
agreement, but it was a document in writing, four pages long,
which had been laboured over by somebody with all the crossing
out and writing in of provisions. It was signed by the Appellant,
her former husband, and her mother in June 1993. They were the
three people with the most at stake from a property point of view
in settling what their relationship should be financially in the
future.
[24] The evidence is that, ultimately, with
or without further court action, they had to comply with what was
decided in the Minutes of Settlement. Therefore, the Minutes of
Settlement is the written agreement. It is the agreement under
which the child support was in fact paid in the years under
appeal and the amounts are to be included in computing the
Appellant's income in the 1996, 2000, 2001 and 2002 taxation
years. The appeals are dismissed.
Signed at Ottawa, Canada, this 14th day of April, 2004.
Mogan J.
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