Date: 19980610
Docket: 97-2753-IT-I
BETWEEN:
MADELEYNE ST-LAURENT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] This is an appeal brought under the informal procedure in respect of the 1993 taxation year.
[2] The point at issue is whether legal fees amounting to $3,488.18, which the appellant incurred when she made a motion to vary corollary relief in respect of support payments she was receiving from her former spouse, are deductible pursuant to s. 18(1)(a) of the Income Tax Act ("the Act").
[3] In a divorce decree dated March 28, 1991 the Superior Court of Quebec approved the agreement on corollary relief by which the appellant and her former spouse agreed inter alia to assume joint custody of their two minor children. Under that agreement the appellant's former spouse was also to pay support in respect of the children as follows:
[TRANSLATION]
3. The defendant shall pay the plaintiff support in respect of the minor children, WESLEY and LYDIA, in accordance with the following terms:
(a) for one year from the sale of the marital residence, support payments of $1,000 a month;
(b) after that year, support payments in respect of the minor children are set at $800 a month for one year;
(c) after that year, support payments in respect of the minor children are set at $600 a month for one year;
(d) the parties agree to discuss the children's needs again and determine the appropriate support payments at the end of the three aforesaid years;
3. (a) The parties undertake to submit their federal and provincial tax returns on or about April 30 of each year;
The said support payments shall be indexed in accordance with the provisions of art. 638 C.C.Q. . . . .
[4] According to the appellant's testimony the two children came to live with her permanently in 1993. The appellant's former spouse told her, also during 1993, that he wished to reduce the amount of the support payments.
[5] On May 1, 1993 the appellant accordingly made a motion to the Superior Court of Quebec (Family Division) to vary the corollary relief. In her motion she requested a variation regarding custody of the children and an increase in the support payable by her former spouse.
[6] In her motion the appellant admitted that her former spouse had made the agreed support payments without indexing. The former spouse contested the motion on the ground that the support payments should not be varied.
[7] In a judgment dated June 8, 1993 (see Exhibit A-2) the Superior Court of Quebec (Family Division) revised the support payments upward retroactive to May 1, 1993. The Court accordingly directed the former spouse to pay the appellant $1,400 a month for their minor children, and this support amount was to be reduced to $1,250 for the months in which the children were alternating between their parents' homes.
[8] The respondent contends that the legal fees incurred by the appellant in respect of her motion to vary the corollary relief are not expenses incurred for the purpose of gaining or producing income from property within the meaning of s. 18(1)(a) of the Act. The respondent argues that these expenses are a capital expenditure to bring the right into being, not an expenditure incurred to enforce payment of income from a right in being (The Queen v. Burgess, 81 DTC 5192 (F.C.T.D.)). Relying on the decisions in Rita Corbeil-Labelle v. M.N.R., 78 DTC 1893 (T.R.B.), and Hélène Filteau v. M.N.R., 91 DTC 509 (T.C.C.), the respondent considers that the motion to increase the support payments had the effect of replacing property with new property and so established a new right to alimony. In the respondent's submission, therefore, the legal fees were not incurred in order to create income from property.
[9] The Federal Court of Appeal held in The Queen v. Norma McCready Sembinelli, 94 DTC 6636, that the legal fees incurred by Ms. Sembinelli in successfully defending a challenge by her former husband to a support order made pursuant to the Divorce Act at the time of her divorce were deductible. In that case the Federal Court of Appeal upheld the decision of Judge Lamarre Proulx, who concluded as follows:
I conclude that the legal expenses incurred by the Appellant "to prevent the right to receive that income being destroyed" (supra), were incurred for the purpose of gaining income from an existing income producing right and not for the purpose of acquiring an asset of an enduring nature nor to defend an item of fixed capital.
(Norma McCready Sembinelli v. The Queen, [1993] T.C.J. No. 236, paragraph 14.)
[10] Even though in Sembinelli the judgment of the Quebec Superior Court (Family Division) merely dismissed the spouse's motion and Ms. Sembinelli's rights were upheld pursuant to the existing support order, and so were not varied, I consider that the decision does apply in the instant case. In my view, no asset was created or defended by the judgment obtained as a consequence of the motion to vary corollary relief. As Judge Lamarre Proulx said in Sembinelli, at paragraph 12:
A right to an alimony is a personal right. The obligation is attached exclusively to the person of the payor and the right to the alimentary support, to the person of the payee. It is an obligation intuitu personae.1 It is a right that may vary with the financial circumstances of the payor and the payee and also depends on the life of each person. It is a right to income that is not of a capital nature.
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1 Pineau, J. La Famille, Presses de l’Université de Montréal, 1983, aux pages 271 et 272.
[11] I therefore conclude that the motion in respect of which the legal fees were incurred was itself a claim for income to which the appellant was entitled and that those fees were legitimately incurred in order to obtain payment of that income (see Evans v. MNR, 60 DTC 1047 (S.C.C.)).
[12] The appeal is accordingly allowed and the assessment referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the legal fees of $3,488.18 incurred by the appellant are deductible in calculating her income for the 1993 taxation year.
Signed at Ottawa, Canada, June 10, 1998.
"Lucie Lamarre"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 16th day of November 1998.
Stephen Balogh, revisor