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Citation: 2004TCC524
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Date: 20040713
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Docket: 2003-1795(IT)I
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BETWEEN:
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WARREN COUGHLIN,
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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
Bell, J.
ISSUE
[1] The issue, with respect to the
Appellant's 2001 taxation year is whether a Confirmation
Order from The Queen's Bench (Family Division) Brandon Centre
in May 2000 has the effect of creating a "commencement
day" within the meaning of subsection 56.1(4) of the
Income Tax Act ("Act") thereby
determining that under paragraph 60(b) of the Act
the Appellant would not be entitled to deduct monthly payments of
$225, thereby totalling $2,700 in that year.
FACTS
[2] The parties agreed to the facts
set forth in the written submission of the Appellant. They are
reported, verbatim, as follows:
1. Married
parents signed a (Pre-Child Support Guideline) Separation
Agreement resolving all parenting, support, and property issues
between them.
2. Three years
later, still pre-guidelines, a Manitoba Justice pronounced a
Divorce Judgment pursuant to the Divorce Act but no corollary
relief Judgment or Final Order was sought or obtained.
3. The Payor
parent "paid impeccably for several years", pursuant to
the contract, which had been registered for the
benefit/protection of both parents with the Manitoba Maintenance
Enforcement Program.
4. The payee
parent relocated to British Columbia and eventually qualified for
and obtained Provincial Social Assistance in that Province.
5. Some eight
years later, now Post-Child Support Guidelines (May 1, 1997), the
Minister, under the B.C. Benefits (Income Assistance) Act, as a
statutory assignee of the "current" child support being
paid by the payor pursuant to the contract and/or entitlement
under the Divorce Act, obtained an ex parte Provisional Variation
Order from a Provincial Court Judge in British Columbia ordering
child support in the "guideline" amount.
6. When the
Minister responsible for Income Security in British Columbia
retained the Manitoba Department of Justice to have the
"Provisional" order confirmed in Manitoba, a negotiated
settlement was reached.
[3] The "Married parents"
referred to in the Appellant's written submission were the
Appellant, and Donna Marie Coughlin ("Donna"). The
Separation Agreement shown as being made on December 9, 1988
provided with respect to their children, namely:
SHANNON MARIE COUGHLIN, born on May 25, 1973,
STEVEN JAMES COUGHLIN, born on August 27, 1975 and
SHARON LYNN COUGHLIN, born on February 16, 1985.
that the Appellant would pay to Donna for the maintenance of
the children the sum of $225 each month per child on the 1st day
of each and every month commencing on November 1, 1988 and
continuing for each child until one of the following occurs:
(a) the child ceases
to be in full time attendance at a school, university or college,
unless the child continues to be a dependent by reason of any
mental or physical disability;
(b) the child ceases
to reside with the wife, provided that the child is not in full
time attendance at a school, college or university, or dependent
by reason of any mental or physical disability;
(c) the child
becomes 18 years old, unless the child continues to be dependent
by reason of any mental or physical disability;
(d) the child
marries;
(e) the child
dies.
[4] The pertinent portions of the
above referred to Confirmation Order read as follows:
This matter having proceeded at the Court House, 1104 Princess
Avenue, Brandon, Manitoba R7A 0L9, at the request of The Minister
under the B.C. Benefits (Income Assistance) Act on behalf of
Donna Marie Coughlin;
This matter being a request for confirmation of the
Provisional Variation Order pronounced May 16, 2000 by the
Honourable Judge Gill of the Provincial Court of British
Columbia, which provisionally varies a Separation Agreement dated
December 9, 1988;
Warren Merle Coughlin and Donna Marie Coughlin, by her lawful
assignee, having no objection to the content of all paragraphs of
this Order;
THIS COURT ORDERS pursuant to The Reciprocal Enforcement of
Maintenance Orders Act that:
1. The
Provisional Order of The Honourable Judge G.S. Gill pronounced
May 16, 2000 of the Provincial Court of British Columbia is
confirmed with variation and, accordingly:
a) Child
Support pursuant to the Separation Agreement dated December 9,
1988 is not varied;
b) The Annual
Income of Warren Merle Coughlin is $52,852;
c) Warren
Merle Coughlin pay Donna Marie Coughlin support for Sharon Lynn
Coughlin, born February 16, 1985 the sum of $200.00 per month on
the 1st day of each month commencing January 1, 2001 so long as
Sharon Lynn Coughlin is a "child" pursuant to The
Family Relations Act of British Columbia;
d) Special
Provisions in the Separation Agreement dated December 9, 1988
providing for child support of $225.00 per month directly benefit
the child and are not varied by this order, therefore application
of the applicable guidelines would result in an amount of child
support that is inequitable given those special provisions;
e) The Amount
of Child Support ordered is different from the amount that would
be determined in accordance with the applicable guidelines and
the reasons for having done so are hereby recorded as above set
forth;
f) The
amount payable in paragraph 1(c) of this Order shall change to
$425.00 per month and child support pursuant to the Separation
Agreement shall terminate effective upon notice to Warren Merle
Coughlin and the Maintenance Enforcement Program that Donna Marie
Coughlin has terminated her assignment of maintenance rights to
the Minister under the British Columbia Benefits Act;
g) The
periodic payments of support ordered be made by cash or by cheque
or by money order payable to Donna Marie Coughlin and be sent to
the Designated Officer, Maintenance Enforcement Program, 1104
Princess Avenue, Brandon, Manitoba R7A 6C2 pursuant to Part V of
The Family Maintenance Act.
APPELLANT'S SUBMISSIONS
[5] A portion of the written
submission of Appellant's counsel is reproduced here as
follows:
Issues to be Decided
1. Does a
Child Support "Top Up" Order of a Court, taint the
deductibility of periodic contractual payments of child support
settled by the parents pre-guidelines?
2. Should the
Federal Income Tax Act trump the Federal Child Support Guidelines
Objectives?
Taxpayer/Appellant's Position
1. The Income
Tax Act s. 60(1) provisions are ambiguous and therefore in
interpreting them, the Court is entitled to examine the purpose
of the legislation.
Larsson 09 July 96 O'Connor J.T.C.C.
2. The stated
objectives of the Federal Child Support Guidelines are not
(respectfully) to generate tax revenue (Government
"tax-grab") but are to establish a fair standard, to
reduce parental conflict and tension through objectivity,
encourage settlement through predictability, and ensure
consistency.
F.C.S.G. Objectives s. 1
3. The B.C.
Provincial Judge's Order was "provisional" only and
therefore could not affect the "commencement date" of
the payments.
4. The
Manitoba High Court Judge's Order confirmed the
"commencement date" and all other terms of the
Separation Agreement.
5. Child
Support paid under a pre-May 1, 1997 agreement continue to be
subject to the inclusion/deduction regime for income tax
purposes, unless the agreement is changed on or after May 1, 1997
to increase or decrease child support.
6. The case at
bar is distinguishable, with respect, from the caselaw attached,
in that here we have:
a) an unvaried
pre-guideline agreement
b) a top-up or
free standing order, not radically changing or superseding
the agreement but (admittedly) changing the total amount payable
(not determinative).
[6] Appellant's counsel, in
essence, argued that the Agreement was not varied to change the
child support amounts and that the Order did not "change the
commencement date". He submitted that the Confirmation Order
confirmed the provisional Order of the Provincial Court of
British Columbia, that it specifically provided that child
support pursuant to the Separation Agreement dated December 9,
1998 was not varied and that the $2,700 (being $225 a month for
2001) was paid pursuant to the aforesaid Separation Agreement and
was not varied within subparagraph 56.1(4)(b)(ii) of the
definition of "commencement day". His basis for that
submission was that the Agreement was not varied after April 1997
to change the child support amounts payable to the recipient.
[7] Counsel sought to buttress that
argument by adding that the monthly payment had to be
"topped up" by $200 because of the Federal Support
Guidelines which were not in existence in 1988.
ANALYSIS AND CONCLUSION
[8] While I have sympathy with the
Appellant's argument respecting the superimposition of
federal guidelines and new tax legislation, I conclude that the
Appellant cannot succeed. The definition of "commencement
day" reads as follows:
"commencement day" at any time of an
agreement or order means
(a) where the
agreement or order is made after April 1997, the day it is made;
and
(b) where the
agreement or order is made before May 1997, the day, if any, that
is after April 1997 and is the earliest of
(i) the day
specified as the commencement day of the agreement or order by
the payer and recipient under the agreement or order in a joint
election filed with the Minister in prescribed form and
manner,
(ii) where the
agreement or order is varied after April 1997 to change the child
support amounts payable to the recipient, the day on which the
first payment of the varied amount is required to be made,
(iii) where a subsequent
agreement or order is made after April 1997, the effect of which
is to change the total child support amounts payable to the
recipient by the payer, the commencement day of the first such
subsequent agreement or order, and
(iv) the day specified in
the agreement or order, or any variation thereof, as the
commencement day of the agreement or order for the purposes of
this Act.
Subparagraph (iii) cannot be read to assist the Appellant. In
other words, the opening portion of the definition of
"commencement day" speaks of "an agreement or
order". Subparagraph (i) refers to "a subsequent
agreement or order...made after April 1997." One could
argue that the term "a subsequent agreement or order"
would require an agreement subsequent to a previous agreement or
an order subsequent to a previous order and would not include an
order subsequent to a prior agreement. Such interpretation would
assist the Appellant. Obviously, this legislative language is
poorly drafted, and therefore resulting in dis-ease of
interpretation. However, the intent of the legislation,
regardless of its philosophical acceptability, appears to be that
any change of an arrangement, either mutually agreed to or
created by Court order is meant to create a commencement day.
[9] Even though the Confirmation Order
states that child support pursuant to the Separation Agreement is
not varied, the Appellant's circumstances fall within the
ambit of subparagraph (iii) because the effect of the
Confirmation Order, made after April 1997:
is to change the total child support amounts payable to
Donna by the Appellant. The total amount so payable before
this Order was made was $225 per month. The total amount after
this Order was made is $425 per month, albeit $225 of that sum is
payable pursuant to the Separation Agreement.
[10] Accordingly, and regrettably, the
appeal is dismissed.
Signed at Ottawa, Canada this 13th day of August, 2004.
Bell, J.
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