Date: 20010921
Docket: 2001-1539-IT-I
BETWEEN:
JAMES HUNTER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Bowman, A.C.J.
[1] These appeals are from assessments made under the Income Tax Act for the taxation years 1995, 1996 and 1997. The issue is the deductibility of payments made by the appellant to his former common-law spouse for the support of their two children.
[2] The facts are not in dispute. The appellant lived in a common-law relationship with Charlotte Olson. They never formally married. They had two children, Curtis, born April 27, 1989, and Jeremy, born September 4, 1992. They separated in February 1992.
[3] On December 20, 1994 the appellant and Charlotte Olson entered into a written agreement whereby the appellant bound himself to pay Charlotte Olson $375 per month for the support of the two children. The agreement, which was signed by both parties, reads
I James Hunter of Saskatoon Saskatchewan do hereby agree to pay child support payments to Charlotte Olson for the provision of Jeremy and Curtis. The payment of three hundred and seventy five dollars 375.00 will be made before the end of each month and these payments shall continue to be made until mutually agreed otherwise or increased as per mutually agreed.
[4] The appellant made the payments in accordance with the agreement during the years in question and deducted them in computing income. Evidence was also adduced, over the objection of counsel for the respondent, that Charlotte Olson included the amounts in income. I agree that this evidence is irrelevant but in the informal procedure it is inappropriate that technical evidentiary roadblocks be put in front of litigants. The judges of this court are perfectly capable of ignoring irrelevant evidence. It is important that an appellant in an appeal under the informal rules be permitted to put in the case as he or she sees fit without being faced with an array of technical objections about relevancy.
[5] The issue is whether the appellant can rely upon subsection 252(4) of the Income Tax Act, which reads
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) had so cohabited with the taxpayer throughout a 12-month period ending before that time, or
(ii) would be a parent of a child of whom the taxpayer would be a parent, if this Act were read without reference to paragraph (1)(e) and subparagraph 2(a)(iii)
and, for the purposes of this paragraph, were 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.
[6] The deduction claimed is under paragraph 60(b).
[7] All of the conditions of that provision are met except, according to the respondent, that Charlotte Olson was not a "spouse" or "former spouse" of the appellant.
[8] Subsection 252(4) was enacted by S.C. 1994 c. 7 Schedule VIII (1993 c. 24) subsection 140(3). Subsection 140(4) provides that
Subsections (1) and (3) apply after 1992.
[9] Unless "spouse" means someone in a common-law relationship independently of the statutory definition in subsection 252(4) — a point that I need not decide — the question here is whether the extended meaning of spouse in subsection 252(4) can assist the appellant in his claim to deduct the payments to Charlotte Olson. The appellant contends that since the payments were made after 1992 subsection 252(4) has the effect of allowing the deduction. The Crown's position is that since the common-law relationship terminated in 1992 the appellant and Charlotte Olson were not married and were not spouses in 1992 and therefore cannot, in 1995, be "former spouses".
[10] The Crown contends that if I accept the appellant's argument I am ignoring the words in subsection 140(4) of S.C. 1994 c. 7 "apply after 1992" and in effect giving subsection 252(4) a retroactive operation. The appellant contends that acceptance of the Crown's position ignores the words "at any time" in subsection 252(4) or at least seeks to amend that phrase to read "at any time after 1992".
[11] The point is a narrow one and this court is divided on the question.
[12] In Carey v. Canada, [1999] T.C.J. No. 191, payments were made in 1994 and 1995 pursuant to a separation agreement entered into when the parties separated in 1988. Bowie J. applied subsection 252(4) to permit the deduction.
[13] In Bromley v. Canada, [2000] T.C.J. No. 876, Bell J. declined to follow the decision of Bowie J. in Carey and said, in paragraph 7:
Subsection 252(4) applies only to taxation years after 1992. The amendment introducing that subsection cannot, therefore, be said to characterize a relationship as a common law relationship in which each of the Appellant and Custeau could be regarded as a spouse or former spouse, that relationship having existed prior to, and having ended in, 1988.
[14] A substantial portion of the judgment of Bell J. involved a discussion of which of three versions of paragraph 60(b) applied. I do not need to consider this point. Counsel for the respondent argued, rightly in my view, that if Charlotte Olson was a "former spouse" of the appellant and if their relationship was a "marriage" he was entitled to succeed under one or other version of paragraph 60(b).
[15] In Scott v. Canada, [2001] T.C.J. No. 437, the issue was the deductibility of payments made in 1997 under an agreement made in 1992 when the common-law relationship came to an end. Hershfield J., noting the difference between Bell and Bowie JJ., said at paragraph 7 (footnotes omitted):
This subsection was added in 1994 applicable after 1992. That is, under the transitional rule, this expanded meaning of "spouse" is to be read as being part of the Act effective January 1, 1993. Since the Act is being read in this case in respect to the 1997 year (the payment year), the expanded definition of "spouse" unquestionably applies. Since the expanded definition of "spouse" has application, it must be applied in accordance with its terms, which terms require the examination of the subject relationship (to determine if it is a conjugal relationship) at a time (that is "any time" which includes a time before January 1) that the relationship needs to be determined, i.e. the time when the reference to spouse is being examined under the Act. Since the context here is determining a "former" relationship (a former spouse), the time for determining the relationship will almost invariably be before the year in question. For example, a conjugal cohabitation commencing in 1995 ending in 1996 will be recognized in 1997 as giving rise to former spouses. That is, in the context of determining whether a person is a former spouse, the expanded definition has to look back. The expanded definition does not put a limit on how far to look back. To the contrary, it stipulates, in effect, "any time" as the available look back time. The expanded definition does not put a limit o how far to look back. To the contrary, it stipulates, in effect, "any time" as the available look back time. The expanded definition applies at "any time" the relationship needs to be examined including relationships that started, or started and ended, prior to 1993. If the expanded definition were to apply otherwise the express language of the definition would have provided dates before and after which the relationship can be examined or not. If one wants a legislative model exemplifying such temporal applications one only has to look at another definition in subsection 56.1(4), namely, the definition of "commencement day". The introduction of that definition is effective after 1996 but the Act does not then read as if the definition does not depend on other relevant times. One must determine at any time after 1996 whether there is a commencement date but whether or not a commencement date in fact exists depends on events happening before April 1997 or after May 1997 as expressly set out in the definition of "commencement day". If Parliament had intended that common law relationships before 1993 could not be recognized, the cohabitation period referred to in subsection 252(4) could similarly have referenced relevant dates as to when cohabitation had to commence or end. The effective date alone being 1993, does not do that in my view, at least in this case where the express language of the amended provision invites a construction that permits (dictates) examining a relationship "at any time" which, as stated, clearly includes a time before the effective date of the amendment. I see no other interpretative approach in this case.
[16] Hershfield J. allowed the appeal and permitted the deduction.
[17] In Girard v. Canada, [2001] T.C.J. No. 499, Miller J., again noting the difference between Bell and Bowie JJ., allowed the deduction in 1998 under a separation agreement made in 1995 arising out of a common-law relationship that ended in 1991. At paragraphs 9, 10, 11 and 12 he said:
9 Pursuant to this section I have no hesitation in finding the Appellant and Ms. Johnstone were spouses and qualify as such for purposes of determining "support amounts" There is nothing in section 252(4) of the Act that indicates the section is not to apply to relationships before a certain period of time. This was the law in 1998, the year in which the deduction is sought. The Respondent contends I must look at the law at the time the couple separated. I do not accept that argument. She cited the decision of this Court in Bromley v. Regina 2000 CarswellNat 3033, [2001] 1 C.T.C. 2468. In that case Judge Bell found section 252(4) "applies only to taxation years after 1992". I find that the taxation year in question in this case is the Appellant's 1998 taxation year. In 1998 section 252(4) was part of our legislation and it defined "spouse" for all purposes of the Act to include someone who fits Ms. Johnstone's description. Section 140(4) of the Act Amendment Revisions introducing this amendment did not state that the conjugal relationship referred to in section 252(4) must have existed after 1992; it simply stated that the subsection applies after 1992. I contract this to subsection 20(11) of the Amendment Revisions, which differs significantly: it states most exactly that the section refers to a breakdown of marriage after 1992. If the legislators had used such exact language in introducing section 252(4), my conclusion would differ.
10 The interpretation put on the timing of the applicability of section 252(4) is either:
1. For taxation years after 1992 I am to interpret "spouse" in accordance with section 252(4); or
2. I am to interpret "spouse" in accordance with section 252(4) for only those conjugal relationships existing after 1992.
11 I favour the former approach. For the taxation year 1998 I rely on section 252(4) and find the Appellant's relationship with Ms. Johnstone falls within that definition notwithstanding that relationship concluded prior to 1993.
12. In Bromley v. R. Judge Bell recognized that Judge Bowie also came to a different conclusion in Carey v. R., 1999 CarswellNat 562, [1999] 2 C.T.C. 2677, D.T.C. 3502 allowing the deductibility of amounts paid in 1994 and 1995 by a common law husband in connection with a relationship which had ended in 1988. It is cause for some uncertainty in the tax community and public generally when the introduction of amending legislation is open to differing interpretations by a Court. Judge Bell put it as follows in paragraph 10 of his Judgment:
10 ... Lack of precision in the legislation in this regard is extremely unfortunate because faulty legislation, not clearly presenting the intent of Parliament, causes taxpayers concern, time and expense in pursuing objection and appeal procedures.
I agree with those comments.
[18] I entirely agree with Bell and Miller JJ. that it is unfortunate that legislation should lead to such uncertainty and differences of opinion in members of this court. Indeed it is deplorable.
[19] The provisions of the Income Tax Act relating to the fiscal consequences of marital breakdown and spousal and child support affect a large number of taxpayers, many of whom are in straitened financial circumstances and cannot afford expensive professional advisors to assist them in determining the tax consequences of their post-marriage financial arrangements. Yet the provisions of the Act in this area are among the most complex in Canadian legislation. Indeed, even the professionals probably find the provisions of the Act in this area at best ambiguous and at worst incomprehensible. It is surely not too much to expect that our legislative draftspersons express themselves simply, clearly and unambiguously.
[20] I have set out the conflicting interpretations arrived at after careful analysis by experienced and respected judges of this court. No one could be criticized for adopting one as opposed to the other. I think, however, that the preferable interpretation is that subsection 252(4) has the effect, in its application to a payment made in 1995, pursuant to an agreement made in 1994 arising out of a common-law relationship that commenced and ended before 1993, of deeming that relationship to be a marriage and the parties to the relationship to have been spouses and therefore, in 1995, to be former spouses for the purposes of paragraph 60(b).
[21] To say that a new provision "applies after 1992" is not to say that the effect of its application cannot extend to before 1993. Here we have a provision, subsection 252(4), that in effect deems a particular relationship to be a marriage. It prospectively attributes to an event that existed prior to its effective date (the common-law relationship that existed up to February 1992) a legal effect on events that occurred after its effective date (the support payments in 1995, 1996 and 1997 made under the 1994 agreement). This description is in accordance with the analysis made by Mr. Elmer A. Driedger, Q.C., the renowned authority on statutory interpretation. Mr. Driedger wrote extensively on the subject of retrospective legislation.[1]
[22] The presumption against the retroactive operation of statutes is one that is intended to protect a subject from the retroactive removal of accruing or accrued rights.[2]
[23] Before proceeding any further with this analysis we should be clear on two points. The agreement between the appellant and Charlotte Olson was entered into in 1994 and the payments were made after the date, after subsection 252(4) was enacted and after the date on which it was said to apply. It is from that agreement that the parties' rights and obligations derived.[3] Second, any interpretation of a statutory provision that permits a deduction of an amount by a payor and requires the inclusion of the same amount by a payee (such as paragraphs 56(1)(b) and 60(b)) affects beneficially the rights of one to the detriment of the other. I mention this simply as a note of caution against considering, in interpreting such a provision, only the manner in which rights are affected on one side of the equation.
[24] It will be obvious, from examining Mr. Driedger's book on The Construction of Statutes[4] and his essays on the subject, that his thinking on retroactivity and retrospectivity of statutes has been an evolutionary process, resulting in modifications and refinements. One needs only to read his book on The Construction of Statutes, chapter 9, to see the problems that he identified in struggling with the two concepts. By the time he wrote his essay in the Canadian Bar Review in 1978 he was still struggling but the struggles were more focussed and the weapons more sharply honed.
[25] On pages 268-269 of his 1978 essay Mr. Driedger sets out the conclusion he had reached in 1976 supplement to his text as follows.
A retroactive statute is one that operates as of a time prior to its enactment. A retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. A retroactive statute operates backwards. A retrospective statute operates forwards, but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted. A retroactive statute changes the law from what it was; a retrospective statute changes the law from what it otherwise would be with respect to a prior event.
[26] The 1978 essay is an illuminating glimpse into the workings of one of the outstanding legal minds of the 20th century. In his candid admission that his analysis may have been wrong or in any event incomplete the first time around, and that he was still not certain that he was right, Mr. Driedger demonstrated a refreshing degree of intellectual humility that marked his life and work.
[27] At the end of his essay, on page 276, Mr. Driedger summarizes his conclusions:
1. A retroactive statute is one that changes the law as of a time prior to its enactment.
2.(1) A retrospective statute is one that attaches new consequences to an event that occurred prior to its enactment.
(2) A statute is not retrospective by reason only that it adversely affects an antecedently acquired right.
(3) A statute is not retrospective unless the description of the prior event is the fact-situation that brings about the operation of the statute.
3. The presumption does not apply unless the consequences attaching to the prior event are prejudicial ones, namely, a new penalty, disability or duty.
4. The presumption does not apply if the new prejudicial consequences are intended as protection for the public rather than as punishment for a prior event.
[28] Subsection 252(4) changes the consequences of a common-law relationship that existed prior to its enactment, but only insofar as that relationship was a necessary ingredient in a claim to deduct a payment made under an agreement that came into existence after its enactment. It may be retrospective on Mr. Driedger's interpretation in subsection 2.(1) of his above summary, but this is no justification for depriving it of its effect according to its terms. It applies, as required by S.C. 1994, c. 7, subsection 140(3), to deductions claimed after 1992. The refusal to give effect to the words "at any time" in subsection 252(4) essentially writes them out of the Act or amends them to read "at any time after 1992". Neither interpretation can be warranted by any principle of statutory interpretation of which I am aware. The interpretation that I believe is the better one appears to conform more to the scheme of the Act and the purpose of subsection 252(4).
[29] The appeals are allowed with costs and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment to deduct in computing his income for 1995, 1996 and 1997 the monthly payments of $375 made by the appellant to Charlotte Oslon for the support of their two children.
Signed at Toronto, Canada, this 21st day of September 2001.
"D.G.H. Bowman"
A.C.J.
COURT FILE NO.: 2001-1539(IT)I
STYLE OF CAUSE: Between James Hunter and
Her Majesty The Queen
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: August 27, 2001
REASONS FOR JUDGMENT BY: The Honourable D.G.H. Bowman
Associate Chief Judge
DATE OF JUDGMENT: September 21, 2001
APPEARANCES:
Counsel for the Appellant: Ray Wiebe, Esq.
Counsel for the Respondent: Tracey Harwood-Jones
COUNSEL OF RECORD:
For the Appellant:
Name: Ray Wiebe, Esq.
Firm: McDougall Gauley
Saskatoon, Saskatchewan
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-1539(IT)I
BETWEEN:
JAMES HUNTER ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on August 27, 2001, at Saskatoon, Saskatchewan, by
The Honourable D.G.H. Bowman
Associate Chief Judge
Appearances
Counsel for the Appellant: Ray Wiebe, Esq.
Counsel for the Respondent: Tracey Harwood-Jones
JUDGMENT
It is ordered that the appeals from assessments made under the Income Tax Act for the 1995, 1996 and 1997 taxation years be allowed with costs and the assessments be referred back to the Minister of National Revenue for reconsideration and reassessment to permit the appellant to deduct in computing his income for 1995, 1996 and 1997 the monthly payments of $375 made by the appellant to Charlotte Olson for the support of their two children.
Signed at Toronto, Canada, this 21st day of September 2001.
|
"D.G.H. Bowman" |
A.C.J.
[1] The Retrospective Operation of Statutes (Legal essays in Honour of Arthur Moxon); Statutes: Retroactive Retrospective Reflections, [1978] Cdn Bar Review, Vol. LVI, p. 264.
[2] Cf. section 41 of the Interpretation Act.
[3] I do not imply by referring to the date of the agreement that had it been entered into in 1992 the payments under it in 1994 would not necessarily have been deductible. The relevant date is the date of the payments.
[4] Butterworth & Co. (Canada) Ltd., 1974.