Callwood v. Canada

Callwood v. Canada Court (s) Database Federal Court of Appeal Decisions Date 2008-04-03 Neutral citation 2008 FCA 120 File numbers A-209-07 Decision Content Date: 20080403 Docket: A-209-07 Citation: 2008 FCA 120 CORAM: SEXTON J.A. SHARLOW J.A. PELLETIER J.A. BETWEEN: TRACEY CALLWOOD Appellant and HER MAJESTY THE QUEEN Respondent and ESTATE OF JOHN G. CRAWFORD Respondent Heard at Toronto, Ontario, on April 2, 2008. Judgment delivered at Toronto, Ontario, on April 3, 2008. REASONS FOR JUDGMENT BY: SHARLOW J.A. CONCURRED IN BY: SEXTON J.A. PELLETIER J.A. Date: 20080403 Docket: A-209-07 Citation: 2008 FCA 120 CORAM: SEXTON J.A. SHARLOW J.A. PELLETIER J.A. BETWEEN: TRACEY CALLWOOD Appellant and HER MAJESTY THE QUEEN Respondent and ESTATE OF JOHN G. CRAWFORD Respondent REASONS FOR JUDGMENT SHARLOW J.A. [1] Ms. Tracey Callwood is appealing the judgment of Justice Bowie of the Tax Court of Canada (2007 TCC 232). That judgment determined certain questions under section 174 of the Income Tax Act, R.S.C. 1985 c. 1 (5th Supp.), dismissed Ms. Callwood’s income tax appeal for 2000, and allowed her income tax appeal for 2001 but only to the extent of requiring her income to be reduced by $533 rather than $20,533, which was the amount of the reduction she had claimed. [2] This issue arises because of the 1997 amendments to section 56.1 of the Income Tax Act, which provide that certain child support payments made after May 1, 1997 are not taxable. [3] Prior to the 1997 amendments, an amount paid by one parent of a child to another after their separation or divorce, as an allowance payable on a periodic basis, was deductible by the payer and taxable to the recipient if the payment was made pursuant to a court order or written agreement and certain other statutory conditions (not relevant to this case) were met. [4] Under the 1997 amendments, if a written agreement or court order is varied after April 1997 to change a “child support amount” payable to the recipient, a “commencement day” is established on the day on which the first payment of the varied “child support amount” is required to be made, and a “child support amount” paid after the “commencement day” is not deductible by the payer or taxable to the recipient. The terms “child support amount” and “commencement day” are defined in subsection 56.1(4) as amended in 1997. [5] It is not necessary to recount the relevant facts and litigation history of this appeal. It is enough to say that all but one of the issues raised in Ms. Callwood’s income tax appeals for 2000 and 2001 were determined against her in a previous decision of this Court (2006 FCA 188). That one remaining issue was to be determined at a new hearing of the Tax Court of Canada. The new hearing resulted in the judgment that is now under appeal. [6] The only issue on the reconsideration was whether a particular child support obligation of Ms. Callwood’s former spouse, Mr. Crawford, was an obligation to pay an “allowance” within the meaning of that term as established by Gagnon v. Canada, [1986] 1 S.C.R. 264 and Rosenberg v. Canada, 2003 FCA 363. Ms. Callwood’s income tax appeals for 2000 and 2001 would succeed if, but only if, that obligation was an obligation to pay an allowance. [7] The obligation in issue, referred to as the “Shared Expense Obligation”, arises from the following words in a separation agreement made by the parties in January of 1997: It is also understood that the Husband [Mr. Crawford] will share the burden of expenses for clothing, medical insurance and other necessary expenses of said children. [8] The January 1997 separation agreement also required Mr. Crawford to pay child support to Ms. Callwood in the amount of $133 per week for each of their three children. [9] In October 2000, Ms. Callwood and Mr. Crawford entered into an agreement that amended the January 1997 separation agreement. The 2000 amending agreement did not alter the provisions of the original agreement requiring Mr. Crawford to pay $133 per week per child. However, it deleted the Shared Expense Obligation. [10] As indicated above, the issue before Justice Bowie was whether the Shared Expense Obligation was an “allowance”. If it was not an allowance, then it did not come within the statutory definition of “child support amount”. It would follow that the 2000 amending agreement terminating the Shared Expense Obligation did not vary an obligation to pay a “child support amount” and therefore did not establish a “commencement day”. As a result, the weekly child support payments received by Ms. Callwood in 2000 and 2001 were not subject to the provisions of 56.1 as amended in 1997 and were properly taxable to Ms. Callwood (except, for reasons that are not now relevant, $533 received after December 14, 2001). [11] Justice Bowie concluded that the Shared Expense Obligation was not an allowance. It is argued for Ms. Callwood that this conclusion is wrong in law and in fact. [12] According to Gagnon and Rosenberg (cited above), an amount is an allowance only if the following conditions are met: (a) The amount is limited and predetermined by an agreement specifying the amount or an agreement as to how the amount is to be ascertained. (b) The amount is paid to enable the recipient to discharge a certain type of expense (in this case a child care expense). (c) The recipient is able to dispose of the amount completely. [13] Justice Bowie held that the first condition was not met because the amount of the Shared Expense Obligation was not limited and predetermined. On that basis, he found that the Shared Expense Obligation was not an allowance. [14] It is undisputed that the 1997 separation agreement does not stipulate the amount of the Shared Expense Obligation. However, Justice Bowie accepted that in principle, an amount is predetermined if the parties have agreed on how it is to be ascertained. [15] In the Tax Court, Ms. Callwood submitted evidence that Mr. Crawford had paid certain expenses of the children in years prior to 2000. It was argued for Ms. Callwood that this evidence established that the parties had agreed on how the amount of the Shared Expense Obligation would be ascertained. Justice Bowie did not accept that argument. He found no evidence that Ms. Callwood and Mr. Crawford had directed their mind to the question of how the amount of the Shared Expense Obligation would be ascertained. That conclusion must stand absent an error of law or a palpable and overriding error of fact. In my view, no such error is disclosed by the record before this Court. [16] In submissions made on behalf of Ms. Callwood in this appeal, it was explained that the Shared Expense Obligation was deliberately drafted in general terms so that Mr. Crawford would be obliged to contribute to the children’s expenses even though it was not possible to determine in advance what those expenses would be. In my respectful view, that submission supports the conclusion of Justice Bowie that the parties did not agree in advance as to how the amount of the Shared Expense Obligation would be ascertained. [17] It was also argued for Ms. Callwood that Justice Bowie was misled by perjured testimony given by Mr. Crawford’s witness. The same argument was made in the previous appeal in this Court, and was rejected as unsubstantiated. It is unsubstantiated in this case as well. In any event, it would not have helped Ms. Callwood if Justice Bowie had rejected the evidence of that witness, because the record would still be incapable of establishing the existence of an agreement as to how the amount of the Shared Expense Obligation would be ascertained. [18] It was suggested that Justice Bowie did not approach this case with an open mind. That is an unsubstantiated allegation of bias and must be rejected. [19] I would dismiss this appeal with costs. “K. Sharlow” J.A. “I agree J. Edgar Sexton J.A.” “I agree J.D. Denis Pelletier J.A.” FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-209-07 STYLE OF CAUSE: TRACEY CALLWOOD v. HER MAJESTY THE QUEEN v. ESTATE OF JOHN G. CRAWFORD PLACE OF HEARING: TORONTO, ONTARIO DATE OF HEARING: APRIL 2, 2008 REASONS FOR JUDGMENT BY: SHARLOW J.A. CONCURRED IN BY: SEXTON J.A. PELLETIER J.A. DATED: APRIL 3, 2008 APPEARANCES: Tracey Callwood SELF REPRESENTED Aleksandrs Zemdegs Margaret J. Nott FOR THE RESPONDENT SOLICITORS OF RECORD: Tracey Callwood Courtice, Ontario SELF REPRESENTED John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario FOR THE RESPONDENT