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Citation: 2003TCC793
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Date: 20031121
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Docket: 2003-924(IT)I
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BETWEEN:
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ABDELLATIF LAMAADAR,
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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
Sheridan, J.
[1] This is an appeal from an
assessment made under the Income Tax Act (the
"Act") for the 2000 taxation year in which the
Minister of National Revenue (the "Minister") denied
the Appellant's claim for a deduction of the child support
payments he paid in that year.
ISSUE
[2] The issue to be decided is whether
the Appellant can deduct child support of $3,600 paid in the 2000
taxation year.
FACTS
[3] The Appellant testified on his own
behalf. No other witnesses were called. The Appellant and his
former spouse were married in 1976. The marriage suffered a
breakdown during the 1992 taxation year and the Appellant and his
former spouse have lived separate and apart since that time.
There were two children of the marriage.
[4] Pursuant to an Order of the
Ontario Court (General Division) dated July 12, 1993 ("1993
original order"), the Appellant was required to pay Interim Child
Support payments of $800 per month commencing on the date of the
Order.
[5] Pursuant to a subsequent Order of
the Ontario Court (General Division) dated January 9, 1995 ("1995
Order"), the Appellant was required, among other things, to pay
to his former spouse, more child support payments of $700 per
month commencing January 1, 1995.
[6] On December 23, 1997 and January
19, 1998 respectively, the Appellant's former spouse and the
Appellant signed Minutes of Settlement, which were ultimately
incorporated into the Divorce Judgment dated April 23, 1998
("Divorce Judgment"). Under the Divorce Judgment, child support
was set at $300 per month, commencing January 1, 1999 to be paid
regardless of the Appellant's financial situation. The Divorce
Judgment further provided that if the Appellant commenced earning
income prior to January 1, 1999, he would be required to pay
child support in accordance with the federal Child Support
Guidelines starting 60 days after the commencement of
earning income. For the taxation year 2000, the Appellant made
child support payments of $300 per month for a total of
$3,600.
STATUTORY PROVISIONS
[7] The relevant subsections of the
Income Tax Act are set out below:
Subsection 56.1(4):
(4) Definitions. The definitions in this
subsection apply in this section and section 56.
"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.
ANALYSIS
[8] In 1997, the provisions of the
Act governing the deductibility of child support payments
were changed. Bowman, ACJ explained these changes and their
impact in Kovarik v. Canada [2001] T.C.J. No. 181:
[8] Under what I may
describe as the old régime (pre May 1997)
spouses making payments to separated or ex spouses for the
support of children could deduct those payments and the recipient
had to include them in income. Following the decision of the
Supreme Court of Canada in Thibaudeau v. Canada, [1995]
2 S.C.R. 627, the legislation changed. So long as a
pre May 1997 agreement remained unchanged the
deduction/inclusion system under the old régime
prevailed.
[9] If a new
agreement were entered into, or an old agreement was changed in a
particular way, the deduction/inclusion régime ceased and
only payments made up to the "commencement day", as defined, were
deductible by the payor and includible by the payee.
[9] The question is whether in this
case the Divorce Judgment constitutes a "new agreement" or "an
old agreement ... changed in a particular way" so as to bar
the Appellant from the shelter of the "old régime". The
dates of the orders and amounts payable under each are as
follows:
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1993 Original Order
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$ 800/month
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1995 Order
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$ 700/month
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1998 Divorce Judgment
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$ 300/month
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[10] The 1993 Original Order and the 1995
Order were made prior to the legislative changes of May 1, 1997
and therefore came under the old régime. Under the 1995
Order, in effect at the time of the 1997 legislative changes, the
Appellant was obliged to pay total child support payments of $700
per month. In 1998, the Divorce Judgment was issued. It set aside
the 1993 Original Order and fixed the child support at $300 per
month commencing January 1, 1999.
[11] Counsel for the Respondent argued that
these changes triggered the application of a "commencement day"
under paragraph 56.1(4)(b) and accordingly, any child
support paid after January 1, 1999 was non-deductible.
[12] Not so, argued the Appellant. He
directed the Court's attention to his schedule of payments from
the Family Responsibility Office [Exhibit A-8] showing that from
the effective date of the 1995 Order to the coming into effect of
the 1998 Divorce Judgment and beyond, he had consistently
paid the sum of $300 per month. Even though required by
court order to pay child support of $700 per month, the Appellant
had faithfully been in default of his obligations to the tune of
$400 per month. By April 23, 1998, arrears of some $14,000 had
accrued but the Appellant was relieved of his obligation to pay
this amount under the Divorce Judgment issued on that date.
[13] To the Appellant's way of thinking,
this meant that, regardless of the amount he ought to have
paid under the 1995 Order, the combined effect of his prescient
default and the Divorce Judgment's ultimate cancellation of
arrears was to render the pre- and post-1997 child support
payment amounts the same: a seamless $300 per month. No
variation; no change; no triggering of the provisions in
subparagraphs 56.1(4)(b)(ii) or (iii). Accordingly,
paragraph 60(b) did not apply to make the child support
non-deductible.
[14] In considering the Appellant's
argument, the words of Bowman, ACJ in Kovarik
(supra) are instructive. In paragraph 15 of that decision,
the learned judge sets out the approach to be taken in
interpreting subsection 56.1(4):
[15] The cardinal rule in
interpreting statutes is the plain words rule. Numerous aids to
construction have been developed: see Glaxo Wellcome Inc. v.
The Queen, 96 D.T.C. 1159 (aff'd 98 D.T.C. 6638
(F.C.A.), leave to appeal to S.C.C. denied). But these aids to
interpretation are not necessary if the words are clear. The
definition of "commencement day" in subsection 56.1(4)
is not difficult to understand. Whether the February 12, 1998
agreement is a new agreement or simply a variation of the 1990
agreement it clearly changes the child support payments from $900
per month to $450 per month. I do not see how the plain words of
the definition can be avoided, however sophisticated the rules of
statutory interpretation one may choose to use may be.
[15] The same can be said of the present
case. The Appellant admitted that the quantum of the child
support payment amount in the 1995 Order ($300 per month) was
different from the amount in the Divorce Judgment ($700 per
month). Regardless of the amount he actually paid, the fact
remains that the Appellant was not legally relieved from his
obligation to pay an amount less than $700 per month until the
Divorce Judgment of 1998.
[16] The Appellant attempted an alternative
argument that had loosely to do with the cancellation of the
arrears of child support pursuant to the Divorce Judgment and
using "zero" as the starting point before the child support was
finally set at $300 per month. This argument, even on its most
generous interpretation, is equally unhelpful to the Appellant's
position as it still results in a change or variation from the
amount set in 1995.
[17] In either case, the Appellant's
situation comes squarely within the reasoning in Kovarik
(supra) Applying the analysis of the learned Associate
Chief Justice, whether the 1998 Divorce Judgment is a new order
or simply a variation of the 1995 Order, it clearly changes the
child support payments from $700 per month to $300 per month. As
in Kovarik (supra), the plain words of the definition
cannot be avoided. Thus, under either subparagraphs
56.1(4)(b)(ii) or (iii), a "commencement day" has been
triggered making the Appellant's child support payments not
deductible under paragraph 60(b).
[18] The appeal is dismissed.
Signed at Ottawa, Canada, this 21st day of November 2003.
Sheridan, J.
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