Tax Court of Canada Judgments

Date: 19991025

Docket: 98-2517-IT-I

BETWEEN:

SYLVIE LAVOIE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for judgment

(Delivered orally from the bench at Montréal, Quebec, on September 9, 1999)

P.R. Dussault, J.T.C.C.

[1] The appellant is contesting child tax benefit determinations, the notices of which are dated August 20, 1997, and March 20, 1998. By these determinations the Minister of National Revenue (“the Minister”) revised the appellant's child tax benefits for the 1994, 1995 and 1996 base taxation years to nil.

[2] The reason given by the Minister is that the appellant was cohabiting with Vincent Ross in a conjugal relationship during those years and that the family income of the appellant and Mr. Ross, who was thus considered her spouse, was too high for her to be entitled to such benefits.

[3] The appellant argued that she and Mr. Ross were not cohabiting in a conjugal relationship during the years in question. That is the only issue in this case.

[4] In denying child tax benefits to the appellant, the Minister assumed, inter alia, the facts set out in paragraph 5 of the Reply to the Notice of Appeal. Those facts are as follows:

[TRANSLATION]

(a) in her tax returns for the years at issue, the appellant put herself down as a de facto spouse;

(b) in his tax returns for the 1994, 1995 and 1996 taxation years, Vincent Ross indicated that he was Sylvie Lavoie’s de facto spouse;

(c) the appellant and Vincent Ross are co-owners of a residence located at 291, rue Beaumont Est in Saint-Bruno;

(d) during the years at issue, the appellant, her two children and Vincent Ross lived under the same roof;

(e) the appellant and Vincent Ross both had the same accountant;

(f) the appellant and Vincent Ross invested in the same research and development corporation;

(g) in the Minister’s view, the appellant was cohabiting with Vincent Ross in a conjugal relationship during the years at issue;

(h) during the taxation years at issue, the net income of the appellant and Vincent Ross (family income) was as follows:

1994 1995 1996

appellant 56,432 51,403 58,921

Vincent Ross 40,459 51,800 54,002

$96,891 $103,203 $112,923

(i) the Minister revised the appellant’s child tax benefits for the 1994, 1995 and 1996 base taxation years to nil because the family income was too high.

[5] The appellant did not dispute subparagraphs (a) to (f) above but wanted to explain the real situation. She felt that subparagraph (g) merely expressed an opinion. She admitted that the facts set out in subparagraphs (h) and (i) were true.

[6] The only witness for the appellant was the appellant herself. Sylvie Gratton, a Revenue Canada appeals officer, testified for the respondent.

[7] The appellant began by explaining that, in the course of mediation after separating from her then spouse in 1988, she was advised to contact her said spouse for information on investments to reduce her taxes. She said that he advised her to contact one Pierre Quintal, an accountant and tax expert, and that Mr. Quintal then went about having her invest in research and development projects and took on the task of preparing her tax returns. The appellant herself referred Mr. Ross, a co-worker, to Mr. Quintal. Mr. Ross made investments similar to the appellant’s, and his tax returns were also prepared by Mr. Quintal. According to the appellant, it was Mr. Quintal who told both her and Mr. Ross in 1993 that they had to declare themselves as de facto spouses because they were living at the same address. She said that the same information was then given in their tax returns each year until 1997 or 1998, when she turned to a taxpayers’ association, and specifically the association’s accountant, Ms. Mainville, to, among other things, straighten out the situation as regards her status. The real reasons for the advice that Mr. Quintal allegedly gave remained obscure, having to do with possible problems with the tax authorities unless they described their status as that of de facto spouses, but the appellant said that she trusted him. Mr. Quintal apparently mysteriously dropped out of sight around 1997 or 1998.

[8] The appellant then explained that Mr. Ross moved into her home as a lodger in December 1992 and that he paid $125 a week to cover shelter, food, his personal laundry, electricity and so on, as well as occasional rides to work, since they worked together. The appellant said that she took Mr. Ross in as a lodger because she was living alone with her two children and had been the victim of a theft in 1992. She said that the arrangement made her feel secure and helped her out financially.

[9] The appellant said that Mr. Ross occupied two rooms in the basement of her 11–room home. He had his own bedroom and an office. The appellant’s daughter also had a bedroom in the basement, while the appellant and her son slept upstairs. The residence is a single-family dwelling with just one main entrance.

[10] As I have just noted, the appellant prepared the meals, did the laundry and generally took care of everything having to do with looking after the house. I understand from her testimony that she usually ate her meals in the kitchen with the children and Mr. Ross.

[11] The appellant said that she got along very well with Mr. Ross, whom she described as intelligent, educated and well-spoken. She admitted that she had sexual relations with him during the years at issue, but only two or three times. She stated that she also had sexual relations with other individuals on occasion. As regards her relationship with Mr. Ross, she said that she was careful when it came to the children and never presented him to them as her spouse or life partner. She also admitted that she went out with Mr. Ross occasionally, to see a movie for example, but said that she also went out with other people. She added that she sometimes gave Mr. Ross gifts.

[12] The appellant said that Mr. Ross did not look after the children and that she did so alone, just as she did for the house. In this regard, she stated that Mr. Ross had his own life and her children had theirs and that the children were able to live in that situation without any problems.

[13] According to the appellant, the relationship between her and Mr. Ross changed somewhat in 1995: in the context of her divorce proceedings, which were still pending, a judge gave her a month to decide between selling the residence and purchasing her spouse’s undivided half.

[14] To keep the residence, in view of the age of the children, the appellant and Mr. Ross thereupon decided to borrow money to purchase the undivided half, with each to acquire fifty per cent thereof. The appellant, who already owned an undivided half of the residence, thus became the owner of an undivided three quarters, while Mr. Ross held an undivided quarter. The appellant said that from then on they each looked after their own affairs (including the laundry), although they did at that time open a “shared” bank account, as she herself put it, which was used to make the mortgage payments and to pay the insurance and other expenses. However, the appellant noted that she contributed more for food because of the children.

[15] The appellant also said that her decision to purchase her former spouse’s share with Mr. Ross was influenced by the fact that all of them—she, Mr. Ross and the children—had their own space in the residence, space that had been respected by the others for nearly two and a half years, ever since Mr. Ross had moved in. She did not refer specifically to the shared space, although she did say that the television, which was in the basement and not the living room, was mainly for Mr. Ross and the children. However, she added that each of the children actually had their own televisions in their rooms.

[16] Sylvie Gratton testified for the respondent. Basically, she said that she had tried to find out what the real relationship between the appellant and Mr. Ross was by calling the appellant’s former spouse. She said that in fact she spoke on the telephone only with the new spouse of the appellant’s former spouse, who told Ms. Gratton that she believed the appellant and Mr. Ross were spouses. Ms. Gratton said that the appellant’s former spouse, who was present later on during that conversation, refused to talk to her so as not to take sides.

[17] Without elaborating on this point, I do not feel that I am required to consider that account of a conversation in which an opinion not supported by any relevant facts was expressed.

[18] I note that the person to whom Ms. Gratton spoke was not called as a witness by the respondent. Nor for that matter did the appellant call Mr. Ross or her children.

[19] Subsection 252(4) of the Income Tax Act (“the Act”) specifies what is meant by the term “spouse”. The relevant part of the subsection is paragraph (a), which reads as follows:

(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 . . . .

[20] The Act does not explicitly say what is meant by the term “conjugal relationship”. However, as we know, that term is also used in other contexts and has been looked at by both the courts and some authors, especially in the area of family law. In this regard, I refer to the decision of my colleague Judge Lamarre Proulx in Sylvie Milot (unreported decision rendered on May 10, 1995, file No. 94-2925(IT)I), to which counsel for the respondent referred and which sums up the question, as it were. At pages 4-6 of the decision, Judge Lamarre Proulx, after citing the definition in subsection 252(4), states the following:

This definition leads us to consider the notion of conjugal relationship. When can two persons be considered as living in a conjugal relationship? This notion has often been studied for the purposes of various statutes. In Quebec, for example, this notion was studied in particular for the application of the Automobile Insurance Act, R.S.Q., c. A-25, s. 2, para. 2, and the Act respecting the Québec Pension Plan, R.S.Q., c. R-9, s. 91. See Les personnes et les familles, Knoppers, Bernard et Shelton, Tome 2, Les éditions Adage, the first chapter of which is entitled "Les familles de fait". It states that cohabitation is fundamental in a conjugal relationship and in conjugal conduct. That conduct may be determined through sexual relations, emotional and intellectual exchange, financial support and common knowledge.

In their book, Introduction to Canadian Family Law, Carswell, 1994, the Ontario authors Payne and Payne refer to the judgment by Kurisko J. in Molodowich and Penttinen, 17 R.F.L. (3d) 376. I cite these authors at pages 38 and 39 because it seems to me they provide an excellent synthesis of the elements that must apply in order to determine whether two persons are living in a conjugal relationship:

Not all arrangements whereby a man and a woman live together and en­gage in sexual activity will suffice to trigger statutory support rights and obligations.²⁸ As was observed by Morrison J.A., of the Nova Scotia Court of Appeal:

I think it would be fair to say that to establish a common law relationship there must be some sort of stable relationship which involves not only sexual activity but a commitment between the parties. It would normally ne­cessitate living under the same roof with shared household du­ties and responsibilities as well as financial support.²⁹

More specific judicial guidance as to what constitutes cohabitation or a conjugal or marriage-like relation­ship is found in a judgment of the Ontario³⁰ District Court, wherein Kurisko D.C.J. identified the fol­lowing issues as relevant:

1. Shelter

(a) Did the parties live under the same roof?

(b) What were the sleeping arrangements?

(c) Did anyone else occupy or share the available ac­commodation?

2. Sexual and Personal Behav­iour:

(a) Did the parties have sex­ual relations? If not, why not?

(b) Did they maintain an at­titude of fidelity to each other?

(c) What were their feelings toward each other?

(d) Did they communicate on a personal level?

(e) Did they eat their meals together?

(f) What, if anything, did they do to assist each other with problems or during illness?

(g) Did they buy gifts for each other on special oc­casions?

3. Services:

What was the conduct and habit of the parties in relation to:

(a) preparation of meals;

(b) washing and mending clothes;

(c) shopping;

(d) household maintenance; and

(e) any other domestic serv­ices?

4. Social:

(a) Did they participate to­gether or separately in neighbourhood and com­munity activities?

(b) What was the relationship and conduct of each of them toward members of their respective families and how did such families behave towards the par­ties?

5. Societal:

What was the attitude and conduct of the community to­ward each of them and as a couple?

6. Support (economic):

a) What were the financial arrangements between the parties regarding the pro­vision of or contribution toward the necessities of life (food, clothing, shel­ter, recreation, etc.)?

b) What were the arrange­ments concerning the ac­quisition and ownership of property?

c) Was there any special fi­nancial arrangement be­tween them which both agreed would be determi­nant of their overall rela­tionship?

7. Children:

What was the attitude and conduct of the parties con­cerning the children?

As Kurisko D.C.J. further observed, the extent to which each of the aforementioned seven different com­ponents will be taken into account must vary with the circumstances of each particular case.

__________

²⁸ See Jansen v. Montgomery (1982), 30 R.F.L. (2d) 332 (N.S. Co. Ct.).

²⁹ Soper v. Soper (1985), 67 N.S.R. (2d) 49, at 53 (C.A.).

³⁰ Molodowich v. Penttinen (1980), 17 R.F.L. (3d) 376, at 381-382 (Ont. Dist. Ct.). See also Gostlin v. Kergin (1986), 3 B.C.L.R. (2d) 264, at 267-268 (C.A.).

[21] In the case at bar, the appellant and Mr. Ross indicated that they were de facto spouses in their respective tax returns for a number of years. The appellant’s explanation of this is hardly persuasive. An accountant and tax expert, one Mr. Quintal, who handled their investments, allegedly told them that they had to describe themselves as such to avoid problems with the tax authorities. It is hard to see how the appellant, who seems to be an intelligent, educated individual and who says she is a planning advisor, and Mr. Ross, whom the appellant described as someone who is also intelligent and educated, could have agreed to declare themselves to be de facto spouses if they were not really such without wondering and asking more questions about the consequences of doing so. This is not a complex tax issue, and it is astonishing that the appellant and Mr. Ross could have agreed so easily, without making further inquiries, to present themselves as de facto spouses if they were convinced that they were not.

[22] Coming back now to the various criteria for determining whether there is a conjugal relationship between two individuals, I must begin by noting that, in her testimony, the appellant provided little by way of information or explanation regarding a number of points. With respect to shelter, we know that the appellant and Mr. Ross lived under the same roof, although the appellant stated that Mr. Ross had two separate rooms in the basement of the house, namely a bedroom and an office. The appellant did not really mention Mr. Ross’s use of the other rooms in the house. We know that the house is a single-family dwelling with just one entrance, which means that that entrance must be used for coming and going. Mr. Ross also obviously had access to the kitchen, since the appellant was the one who prepared and served the meals. At one point, the appellant said that the television was in the basement for Mr. Ross and the children, although she added that the children had their own televisions in their bedrooms. The appellant’s daughter’s bedroom was also in the basement. One cannot help but infer from this that the appellant must certainly have had a great deal of confidence in Mr. Ross, greater, in my opinion, than one might have in a co-worker taken in as a lodger. On the question of sexual and personal behaviour, we know that the appellant and Mr. Ross had sexual relations, although the appellant stated that she also had such relations with other people. Based on the appellant’s testimony, it can be said that they communicated extremely well on a personal level, although the true nature and depth of the feelings they may have had toward each other cannot be determined. A certain intimacy or familiarity is also evident from the fact that they ate their meals together with the children, went out together sometimes and travelled to work together. The appellant admitted that they also gave each other gifts occasionally. All of these factors basically tend to show that Mr. Ross was more than a mere lodger or, from 1995 on, a mere co-owner of the residence, as the appellant sought to describe him.

[23] On the matter of services, the appellant said that she did everything herself. She looked after the children and the house. She prepared and served the meals and did the laundry, including Mr. Ross’s. He contributed $125 a week, not only for shelter and food but also for all the services the appellant provided in the way of meal preparation, laundry services and transportation. That arrangement is just as consistent with a relationship as a couple as it is with a relationship involving a mere lodger, if not more so. Mr. Ross contributed his share and did not have to pay for the appellant and her children.

[24] The appellant did not really provide any meaningful information with respect to facts that might be placed under the “Social” and “Societal” headings (headings 4 and 5 in the criteria of Kurisko D.C.J.). On the question of the children, the appellant said that they got along, as it were, that Mr. Ross had nothing to do with looking after the children and that each person respected their own space, if you will. None of this tends to show that Mr. Ross was considered a mere lodger either, although the appellant did say that she never indicated to the children that he was her spouse or life partner.

[25] I come lastly to the question of economic support and the financial arrangements between the parties. Counsel for the respondent put particular emphasis on these points as indicative of a relationship akin to a conjugal relationship. On reflection, I feel that these elements must indeed be given more importance than I was initially inclined to give them. The purchase by the appellant and Mr. Ross in 1995 of the undivided share of the residence owned by the appellant’s former spouse, as well as the opening of a shared or joint bank account, are concrete actions reflecting a relationship that was, in my opinion, at a level beyond one based on being on good terms, having mutual respect or even being friends. The trust, commitment and intention to share that those actions express are such that even persons who are legally married or officially living together often hesitate or refuse to take them. They are generally not spontaneous acts. Rather, they result from careful consideration and usually indicate a very close relationship between two people, especially when those people have already experienced separation and divorce, which is true in the appellant’s case. Despite the special circumstances and the short time the appellant had to purchase her former spouse’s share in the residence, I believe that the decision to make the purchase and to borrow money with Mr. Ross for that purpose is meaningful and tends to indicate a relationship that was at a more significant level than the appellant was willing to admit. The opening of a joint bank account also reflects an intention to pool or share certain financial resources, even though the contributions made by each person may have been unequal. The fact that the appellant paid more than Mr. Ross, inter alia for food, seems quite normal since she also had two dependent children who were not Mr. Ross’s children.

[26] Thus, beyond fine distinctions relating to mutual respect for each person’s own space, which is in any event a need that everyone has, even in the best of families, the fact remains that the financial arrangements between the appellant and Mr. Ross tend rather to indicate a relationship that was more similar to a conjugal relationship than to a relationship one might have with a mere lodger or even a co-owner.

[27] In the circumstances of this case, the appellant bore the burden of showing, on a balance of probabilities, that she did not cohabit with Mr. Ross in a conjugal relationship during the period at issue, namely 1994, 1995 and 1996.

[28] In light of the criteria to be considered, I am of the view that, on the evidence adduced by the appellant, such a conclusion is not possible. On the contrary, I believe that all of the factors discussed above actually indicate that a conjugal relationship did exist between the appellant and Mr. Ross during those years. I would add that the facts adduced in evidence by the appellant are not sufficient to enable me to reach a different conclusion.

[29] As a result of the foregoing, the appeals are dismissed.

Signed at Ottawa, Canada, this 25th day of October 1999.

“P.R. Dussault”

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 3rd day of December 1999.

Erich Klein, Revisor