Carey v. R, [1999] 2 CTC 2677

Bowie 7.C.J.:

The issue in this appeal is the deductibility under the Income Tax Act (the Act) of certain child support payments made by the Appellant in the years 1994 and 1995. The facts are not in dispute.

facts

The Appellant and his former common-law spouse lived together in a conjugal relationship between July 1984 and January 1988. They had one child, born in 1985. When they separated in 1988 they signed a separation agreement whereby the Appellant agreed to pay $400.00 per month for support of the child. The payments fell into arrears, and in July 1993 the Appellant’s former spouse took steps to enforce the agreement by garnishment of his wages. The separation agreement was filed in the Ontario Court (Provincial Division) pursuant to section 35 of the Family Law Act,^ [1] On June 19, 1994, a notice of garnishment was issued by the Clerk of that Court, directed to the Appellant’s employer, the Crown in right of Canada, requiring that the arrears and current payments due under the separation agreement be deducted from the Appellant’s salary and paid to the Director of the Family Support Plan. Pursuant to this notice, the amounts of $6,756.00 in 1994 and $4,940.00 in 1995 were paid to the Director, and ultimately to the former spouse, in satisfaction of the Appellant’s obligation under the separation agreement. The Appellant deducted these amounts in computing his income for the years under appeal. The Minister of National Revenue (the Minister) has reassessed him to disallow the deductions.

Statutory provisions

The provisions of the Act governing the matter [2] read, at the relevant time, as follows:

60(b) an amount paid 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 the children of the marriage, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;

60(c) an amount paid by the taxpayer in the year, pursuant to an order of a

competent tribunal, as an allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the recipient, or both the recipient and children of the recipient if, at the time the payment was made and throughout the remainder of the year, he was living apart from his spouse to whom he was required to make the payment;

252(4) In this Act,

(a) words referring to a spouse at any time of a taxpayer include the person of the opposite sex who cohabits at that time with the taxpayer in a conjugal relationship and

(i) has so cohabited with the taxpayer throughout a 12-month period ending before that time, or

(ii) is a parent of a child of whom the taxpayer is a parent (otherwise than because of the application of subparagraph (2)(^)(iii)

and, for the purposes of this paragraph, where at any time the taxpayer and the person cohabit in a conjugal relationship, they shall, at any particular time after that time, be deemed to be cohabiting in a conjugal relationship unless they were not cohabiting at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship:

(b) references to marriage shall be read as if a conjugal relationship between 2 individuals who are, because of paragraph (a), spouses of each other were a marriage;

(c) provisions that apply to a person who is married apply to a person who is, because of paragraph (a), a spouse of a taxpayer;

and

(d) provisions that apply to a person who is unmarried do not apply to a person who is, because of paragraph (a), a spouse of a taxpayer.

the Appellant’s position

The Appellant’s position is that subsection 252(4) puts him in the same position as if he and his former common-law spouse had been married to each other, so that paragraph 60(c) then has the effect of entitling him to the deduction. Counsel argued, in the alternative, that the combined effect of filing the agreement under the Family Law Act and obtaining a notice of garnishment under that Act was that the amounts, when deducted and paid, were paid pursuant to a court order.

the Respondent’s position

Counsel for the Respondent argued that paragraphs 60(b) and 60(c) as they read at the relevant time, provided for two different situations. Paragraph 60(b) alone applied to the separation of a married couple, and paragraph 60(c) to the separation of an unmarried couple living in a commonlaw relationship. In the former case, payments made under a court order or a separation agreement were deductible. In the latter case, only payments made pursuant to a court order were deductible.

analysis

In Yakubu v. /?. [3] Associate Chief Judge Christie, as he then was, quoted with approval the following passage from the Canadian Tax Reporter^ [4]

For 1993 and subsequent years, paragraph 252(4)(<?) provides that the term ‘spouse’ includes common-law spouses. Therefore a taxpayer’s spouse includes a person of the opposite sex who is cohabiting with the taxpayer in a conjugal relationship provided they have cohabited throughout a twelve-month period ending before that time. He term ‘spouse’ also includes a person who is a parent of a child of whom the taxpayer is also a parent.

In my view, this commentary correctly describes the effect of the paragraph. The result, in the present case, is that the Appellant is entitled to the deduction, by reason of paragraph 60(b). This accords with the plain words of that paragraph, and of paragraph 252(4)(a). Counsel for the Respondent offered no persuasive rationale for rejecting those plain words in favour of the interpretation favoured by the Minister.

The Appellant’s alternative argument appears to be foreclosed by the reasoning of Bowman J. in Fantini v. R.,$ [5] with which I agree, and by the decision of the Federal Court of Appeal in Armstrong v. R.,©° [6] which is binding on me. I say no more about this, in view of the result that I have arrived at above.

The appeals are allowed, and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to the deductions claimed by him of $6,756.00 and $4,940.00, respectively, in the 1994 and 1995 taxation years. He is also entitled to his costs.

Appeals allowed.