Date: 20000721
Docket: 1999-3284-IT-I
BETWEEN:
MICHEL LARABIE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, A.C.J.
[1] The appeal is from an assessment for the appellant's 1997 taxation year. The issue is whether the appellant is entitled to deduct in computing income the sum of $4,800 paid to his daughter Debbie in that year.
[2] In 1994, the appellant and his wife Doreen separated. They had two children, one of whom was Debbie who was born on August 9, 1978. They entered into a separation agreement on 20 December 1996. Paragraph 3 of the recitals reads as follows:
3. The parties previously commenced an Application for resolution of all issues relating to the separation including child support, spousal support, custody and access and the division of property and the equalization of the net family properties of the parties. As a result of interim proceedings and after negotiations, the parties agreed to dismiss the Application and terminate the obligation for payment of spousal and child support by the Husband to the Wife under that proceeding (Court File Number 6983/95) after payment of the support due in December 1996. The parties agree that the separation agreement will now resolve all outstanding issues relating to the separation of the parties and the parties wish to settle all their existing rights and establish all their future rights and obligations in relation to each other.
[3] Paragraphs 3, 4 and 5 of the agreement read as follows:
3. CHILDREN
Custody and Access
The parties agree that the child, Debbie, is currently residing with the Wife and is in her care and custody and all access is arranged directly between the child Debbie and the Husband.
4. CHILD SUPPORT
A. Commencing on the 1st of January, 1997, and on the first day of each subsequent month, to and including the 1st day of September, 1997, the husband shall pay child support for the child Debbie in the total sum of FOUR HUNDRED ($400.00) DOLLARS per month. Such support shall not be deemed to be payable to the Wife but directly to, and for the benefit of, the child, Debbie Larabie. The support shall be payable by way of two equal payments of TWO HUNDRED ($200.00) DOLLARS in each month and it is expressly agreed that the support for this period of time shall be deposited into a trust account in the name of the child Debbie, with the Husband named as Trustee and such support shall remain in the account to the month of September 1997 when the funds held in trust shall be released to Debbie for her use in attending a program of full-time post-secondary education. The amount shall be released to Debbie however in any event.
B. In the event the child Debbie is thereafter enrolled in full-time attendance in an educational institution, the Husband shall continue to pay the sum of FOUR HUNDRED ($400.00) DOLLARS per month directly to the child Debbie for so long as she may continue to be in full-time attendance at an educational institution. At such time as the child Debbie shall no longer be enrolled in full-time attendance at an educational institution, or at such time as she shall attain the age of twenty-one (21) years, whichever shall first occur, the child support shall terminate.
C. In the event the child Debbie is not enrolled in full-time attendance in an educational institution as of September 1997, the child support under this provision shall terminate and there shall be no other obligation to provide child support.
5. SPOUSAL SUPPORT
A. Commencing on the month of January, 1997 and in each subsequent month thereafter, the Husband shall pay to the wife for her support the sum of ONE THOUSAND ($1,000.00) DOLLARS monthly until:
(a) the Wife dies;
(b) there is a material change in circumstances as provided for below.
B. The parties agree that the issue of entitlement to spousal support, and the quantum of spousal support, shall be revisited in five (5) years or earlier in the event of the said material change in circumstances.
C. In the event that the Husband dies and there is any outstanding obligation for spousal support payable to the Wife, the extent of any such obligation, (subject expressly to any variation, change or termination of support on the fifth anniversary or upon a material change in circumstances) shall be a charge upon the Husband's estate. Such a charge shall be the exclusive and only claim of the Wife. As provided for in this agreement the Wife shall have no other claim against the estate of the Husband including any claim under the Succession Law Reform Act or any successor legislation, which is expressly barred.
D. The monthly support shall be payable in two equal payments of FIVE HUNDRED ($500.00) DOLLARS twice monthly and the parties agree that enforcement or collection of the spousal support shall not be done through the Ministry of the Attorney General, Family Support Plan. The Husband shall arrange for automatic deposit of the support to an account to be identified by the Wife which is convenient for the purposes of automatic bank transfer to the Husband. The Wife may elect to a later date, in the event of difficulty in collection, to file this Agreement with the Family Support Plan in which case such arrangements for deposit of child support under this paragraph shall terminate.
[4] Both parties had lawyers. In 1997, the appellant paid $12,000 to his spouse and $4,800 to his daughter Debbie under the agreement and claimed the full amount of $16,800 as a deduction in computing his income. The Minister allowed the $12,000 paid to Doreen and disallowed the $4,800 paid to Debbie.
[5] In 1997, applicable to amounts paid after 1996, paragraph 60(b) of the Income Tax Act was amended to read
(b) the total of all amounts each of which is an amount determined by the formula
A – (B + C)
where
A is the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person were living separate and apart at the time the amount was paid,
B is the total of all amounts each of which is the child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, and
C is the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer's income for a preceding taxation year.
[6] In 1997, section 56.1 was amended, applicable to amounts paid after 1996. Subsection 56.1(4) was added. It included the following definitions:
"support amount" means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount, and
(a) the recipient is the spouse or former spouse of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage and the amount is receivable under an order of a competent tribunal or under a written agreement; or
(b) the payer is a natural parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province.
"child support amount" means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or former spouse of the payer or who is a parent of a child of whom the payer is a natural parent.
[7] The application section relating to these amendments was amended in 1998, but not in any respect that is material to this case. The definitions in subsection 56.1(4) apply to sections 60 and 60.1. The $12,000 paid to the appellant's spouse Doreen is a "support amount" as defined. The $4,800 paid to Debbie is not a support amount as defined. Doreen is not the recipient at all, and she certainly had no discretion as to its use.
[8] Since it is not a support amount it cannot be a child support amount. Subsection 60.1(1) reads as follows:
For the purposes of paragraph 60(b) and subsection 118(5), where an order or agreement, or any variation thereof, provides for the payment of an amount by a taxpayer to a person or for the benefit of the person, children in the person's custody or both the person and those children, the amount or any part thereof
(a) when payable, is deemed to be payable to an receivable by that person, and
(b) when paid, is deemed to have been paid to and received by that person.
[9] Essentially subsection 60.1(1) deems support payments made to third parties for the benefit of the person or the person's children to have been paid to and received by that person provided the court order or agreement so stipulates.
[10] Far from so providing, the separation agreement specifically provides that the amounts paid to Debbie
shall not be deemed to be payable to the Wife but directly to, and for the benefit of, the child, Debbie Larabie.
[11] According to Mr. Larabie the payments were to go directly to Debbie because the spouse was not using what she received for Debbie's benefit.
[12] In light of the wording of the separation agreement I do not think that the decision of this court in Chute v. R., [1999] 2 C.T.C. 2864, which relied upon Hak v. R., [1999] 1 C.T.C. 2633, can be of assistance. The payments to Debbie do not fall within paragraph 60(b). The appeal must therefore be dismissed.
[13] I cannot leave this case without commenting on the conduct of the solicitors for Mr. Larabie, Lanthier & Lehoux. The document which I take to be a notice of appeal, if that is what it can be called, consisted of a letter dated June 28, 1999 addressed to Revenue Canada, Tax Court of Canada, 200 Kent Street, Ottawa, Ontario, K1A 0M1. It states that his client wishes to file "a formal objection" for the 1997 taxation year. It was signed not by David Lanthier but on his behalf by someone with the initial nr. It bears the remarkably insolent notation "Dictated but not read". That sort of arrogance is unacceptable in ordinary correspondence. In a document purporting to originate an action in this or any court or in any communication with a court it borders on contemptuous.
[14] On April 20, 2000 Mr. Lanthier wrote to the Tax Court of Canada asking for a response to his letter of August 20, 1999 and enclosing a copy. That letter is a letter to the Appeals Division of Revenue Canada in Shawinigan-Sud, Quebec. The letter is unsigned but again bears the offensive notation "Dictated but not read". Evidently the official in the Department of National Revenue to whom the letter was addressed, Ms. Chauvette, decided that if Mr. Lanthier did not consider it worth his time to read his letter, neither did she.
[15] What is obvious is that Mr. Lanthier was wholly unaware of the fact that this court has nothing to do with the Department of National Revenue and believed that a letter to the Department is a communication with this court. This confusion occurs occasionally with unrepresented appellants. In the case of a member of the bar it is inexcusable. When a taxpayer retains a member of the bar to prosecute an appeal in this court he or she is entitled to expect a modicum of competence and familiarity with the rules of the court. The letter addressed to Revenue Canada of June 28, 1999 does not state that the taxpayer elects the informal procedure although the registry of the court must have assumed that the informal procedure was requested because the letter enclosed the $100 filing fee. Mr. Lanthier's failure to make the election could have put his client in danger of having costs assessed against him.
[16] The saga continues. On the day of trial Mr. Lanthier did not appear. It seems he had sent the file to a Sudbury law firm, Weaver, Simmons. He did not communicate with the court or take any steps to have himself removed as solicitor of record. On the morning of trial a law student, Mr. Krys, two weeks out of law school, appeared. He had never appeared in any court before and evidently had received no instruction from anyone. He had tried without success to contact Mr. Lanthier. He had no idea what to expect and seems to have been unaware that this was a proceeding in court. I gave him all the assistance I could, as I would have done with any unrepresented appellant. The provisions of the Income Tax Act involved in this appeal are extraordinarily complicated and I feel great sympathy for Mr. Krys who was thrown unprepared into the breach. I do not criticize him in any way. He struggled valiantly to meet the responsibility that had so unfairly been put on his shoulders. I do however criticize his principals who sent him into court. Mr. Lanthier and Weaver, Simmons have in effect abandoned Mr. Larabie. Lawyers who agree to represent a client in court owe a responsibility to the client and to the court. The conduct here was irresponsible and reprehensible. It falls far short of the minimum level of professional responsibility that one can reasonably expect from members of the bar. This court has been treated contemptuously and Mr. Larabie has been thrown to the wolves. I considered summoning Mr. Lanthier to show cause why he should not be held in contempt. It is however more appropriate that the matter be dealt with by the Law Society of Upper Canada. I shall defer referring the matter to the Law Society for two weeks to permit the lawyers to provide an explanation to the court of their conduct and to provide reasons why the matter should not be referred to the Law Society.
Signed at Ottawa, Canada, this 21st day of July 2000.
"D.G.H. Bowman"
A.C.J.