Fontaine v. The Queen

Fontaine v. The Queen Court (s) Database Tax Court of Canada Judgments Date 2003-09-22 Neutral citation 2003 TCC 662 File numbers 2003-133(IT)I Judges and Taxing Officers Cameron Hugh McArthur Subjects Income Tax Act Decision Content Docket: 2003-133(IT)I BETWEEN: PAUL HARVEY FONTAINE, Appellant, and HER MAJESTY THE QUEEN, Respondent. ____________________________________________________________________ Appeals heard on June 13, 2003, at Nanaimo, British Columbia, By: The Honourable Justice C.H. McArthur Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Johanna Russell ____________________________________________________________________ JUDGMENT The appeals from assessments of tax made under the Income Tax Act for the 1998 and 1999 taxation years are dismissed. As conceded to by Respondent, the appeals from assessments of tax made under the Act for the 2000 and 2001 taxation years are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to deductions for support payments made. Signed at Ottawa, Canada, this 22nd day of September, 2003. "C.H. McArthur" Citation: 2003TCC662 Date: 20030922 Docket: 2003-133(IT)I BETWEEN: PAUL HARVEY FONTAINE, Appellant, and HER MAJESTY THE QUEEN, Respondent. REASONS FOR JUDGMENT McArthur J. [1] At the outset of the hearing of these appeals, counsel for the Respondent conceded the issues with respect to the 2000 and 2001 taxation years. The remaining issue is whether the Appellant is entitled to a deduction for support payments paid in the 1998 and 1999 taxation years. The amounts in dispute are as follows: Taxation year Amount deducted by taxpayer Amount reassessed by Minister 1998 $5,322 $1,800 1999 7,310 0 Total: $12,632 $1,800 [2] The Appellant was divorced from his spouse Marilyn by an Order of the Supreme Court of British Columbia dated January 13, 1995. Custody of two of their children was granted to Marilyn and the Appellant was ordered to pay her child support of $200 monthly per child. Protracted litigation followed resulting in the following Court Orders: Ref. no. Author and date Description and summary Order 1 B.C. Supreme Court 13 Jan. 95 Taxpayer divorced: Custody of Collette and Brandon granted to ex-spouse; Custody of Dean granted to taxpayer; Support set at $200/month/child as of 1 Feb. 95 Order 2 B.C. Supreme Court 1 Apr. 96 Order 1 varied: Support set at $250/month/child as of 1 Feb. 97 through Dec. 97, then $300/month as of 1 Jan. 98 Order 3 B.C. Supreme Court 30 Mar. 98 Order 2 varied: Previous support amount deleted and support set at $627/month as of 1 Apr. 98 Order 4 B.C. Supreme Court 6 May 99 Application to vary Order 3 dismissed: Support set at $627/month as of 1 Apr. 99, to be paid in 2 equal instalments on 1st and 15th of each month; Total arrears payable fixed at $4594 as of 31 Dec. 99, reduced by $1000 to $3594, payable $100/month as of 1 Dec. 99; Support set at $382/month as of 1 Jan. 00 Order 5A B.C. Court of Appeal 11 Feb. 00 Orders 3 and 4 set aside on appeal, and Order 2 restored (oral reasons)[1] Doc. 5B B.C.C.A. Registrar 4 Aug. 00 Memorandum to Appeal Justices explaining difficulties in resolving order[2] Doc. 5C B.C. C.A. Registrar 15 Sept. 00 Letter to Fontaines containing Justice Lambert's clarifying comments on the terms of Order 5A[3] Doc. 5D Marilyn Lorenz a.k.a. Fontaine 2 Oct. 00 Draft order by taxpayer's former spouse[4] (rejected by taxpayer) Order 5E B.C. Court of Appeal 6 Dec. 00 Terms of Order 5A settled[5]: Orders 3 and 4 "set aside, without retroactive effect, but effective from the 11th day of February 2000"; Order 2 restored so payments deductible to taxpayer and taxable to ex-spouse; Relief from arrears of $1000 no longer in effect Order 6 B.C. Supreme Court 19 Jan. 01 Order 5 varied: Collette no longer child and eligible for maintenance as of mid-Oct. 99, therefore arrears owing reduced by $600, and fixed at $4322.82 as of 12 Jan. 01 [3] The post-April 1997 child support Orders raise in question the deductibility of the Appellant's child support payments. It boils down to the interpretation of the phrase "set aside, without retroactive effect" contained in the Orders. Was there a commencement day that triggered the post-April 1997 support deduction regime? The answer is dependent on the interpretation of the February 11, 2000 Order. The only time period involved is April 1998 to February 2000. The key is the two paragraphs in Order 5A of February 11, 2000 which were amended on December 6, 2000 to read as follows: [3] THE COURT ORDERS that the orders of Mr. Justice Hutchinson pronounced the 30th day of March, 1998, and the 6th day of May 1999 be set aside, without retroactive effect, but effective from the 11th day of February, 2000. [4] AND THE COURT FURTHER ORDERS that the order of the 1st day of April, 1996 be restored, so that the payments to be made by Mr. Fontaine in the future are deductible in the calculations of his income and are to be included in Mrs. Fontaine's income. [4] The Respondent's position is that the British Columbia Court of Appeal ("BCCA") intended that the 1998 and 1999 Orders be in effect for the period from April 1998 to February 2000. The Appellant's position is that the BCCA intended for the 1996 old regime Order to govern after the years 2000 and 2001. [5] The BCCA Order favours the Respondent's interpretation. If paragraph 3 had ended after the words "be set aside", the Appellant's interpretation would be correct, but the sentence continues. Even if one accepts the words "without retroactive effect" to be merely a clarification or emphasis of the totality of the setting aside, the subsequent words "but effective from the 11th day of February, 2000" strongly supports the Respondent's interpretation. [6] The Respondent's interpretation is further bolstered by the use in paragraph 4 of the future tense. The BCCA considered the tax implications of restoring the April 1996 Order and clearly indicated that the deduction/inclusion status of the support payments was to apply to "future" payments, not "all" or "past" or "from April 1998 through February 2000" payments. [7] There were several incidents that confused the issue. The oral reasons from the first BCCA hearing on February 11, 2000 contain no indication or intention to treat the time period from April 1998 to February 2000 differently from the time periods immediately before and after. In fact, the present tense in paragraph 16 to describe the tax status of the support payments favours the Appellant's interpretation. The oral reasons were not determinative of the question. There was a follow-up memorandum dated August 4, 2000 and a follow-up letter dated September 15, 2000. The letter is capable of supporting both interpretations. It does not serve a positive purpose to review this in any more detail. [8] Of interpretative aid to neither position are the oral reasons from the second BCCA hearing on December 6, 2000, since they set out the terms of the BCCA Order in a perfunctory fashion. Of greatest assistance in determining BCCA's intention in using the phrase "set aside, without retroactive effect" is found in the BCCA Registrar's memo of August 4, 2000. He wrote to the effect that the Order takes effect as of the date of the Court of Appeal Judgment (February 11, 2000) and the maintenance paid before the Court of Appeal Order is not in issue. If this were so, Marilyn stated that she would have to pay back the Appellant a large sum. Clearly, the BCCA did not intend to penalize Marilyn from money already paid and received under the 1998 and 1999 Orders. At the same time, the Court of Appeal recognized that those Orders were erroneous and needed to be set aside. [9] The Appellant's argument that the BCCA does not have jurisdiction to decide tax matters is curious if not amusing. He is correct in law, but he accepts the beneficial effects of the BCCA Orders but not the negative ones. Courts, other than the Tax Court of Canada, cannot rule on tax matters, but they may word their decisions to effect certain tax consequences. This is what the BCCA has done in this instance. [10] The Charter of Rights and Freedoms does not assist the Appellant in any way. He is not discriminated against pursuant to subsection 15(1) or any other section. His Charter argument is frivolous. In Thibaudeau v. The Queen, the Supreme Court of Canada declared that paragraph 56(1)(b) of the Act was constitutionally valid and not inconsistent with the Charter. [11] The Appellant is intelligent and articulate yet, I believe, unduly argumentative. In instances, his pleadings, evidence, submissions and case law served him negatively. At times, the Appellant's credibility was doubtful. Submitted case law did not stand for what he represented it stood for. The documentary evidence shows that he often missed or underpaid support payments, and has litigated his post-matrimonial affairs in an unusually long and contentious manner. He also often reneged on arrears payment agreements - for example, after assuring the BCCA in February 2000 that he would pay his arrears at $100 per month, he did not pay any arrears (and in fact fell further behind his regular payments) by the time he had appeared for a second time before the BCCA in December 2000. [12] There is no evidence to support the Appellant's contention that some of the support payments at issue for the 1998 and 1999 taxation years are deductible as prior payments. The documentary evidence shows, on the contrary, that he did not pay even his then-current regular support payments, let alone the arrear amounts. He was unable to rebut the Minister's assumptions contained in the Reply to the Notice of Appeal and I have accepted the accuracy of those facts. [13] I find that the Respondent's position is correct and the appeals are dismissed. Signed at Ottawa, Canada, this 22nd day of September, 2003. "C.H. McArthur" CITATION: 2003TCC662 COURT FILE NO.: 2003-133(IT)I STYLE OF CAUSE: Paul Harvey Fontaine and Her Majesty the Queen PLACE OF HEARING Nanaimo, British Columbia DATE OF HEARING June 13, 2003 REASONS FOR JUDGMENT BY: The Honourable Justice C.H. McArthur DATE OF JUDGMENT September 22, 2003 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Johanna Russell COUNSEL OF RECORD: For the Appellant: Name: N/A Firm: N/A For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada [1] See Appellant's Appeal Book, Tab 5, page 6 (exhibit "A") or Respondent's Book of Documents, Tab 9. [2] See Appellant's Appeal Book, Tab 5, page 15 (exhibit "B"). [3] See Appellant's Appeal Book, Tab 5, page 17 (exhibit "C") or Respondent's Book of Documents, Tab 10. [4] See Appellant's Appeal Book, Tab 5, page 20 (exhibit "F"). [5] See Appellant's Appeal Book, Tab 6 (reasons and judgment) or Respondent's Book of Documents, Tab 11 (judgment only).