http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/232723/index.do
Lawson v. The Queen (July 6, 2017 – 2017 TCC 131, C. Miller J.).
Précis: In the case of joint custody of children there is a considerable body of case law that a parent making a support payment is not entitled to dependent tax credits unless the other parent makes similar payments. The courts have held that a netting of support obligations resulting in one parent making the net payment to the other does not suffice for these purposes and the payer parent is not entitled to tax credits. In this case Mr. Justice Miller accepted, on the peculiar facts before him, that the intention of the parties was that each would make a support payment and that the net payment made by the husband (which also took into account travel expenses on top of his support obligations) was not central to their bargain. On that basis he was prepared to allow Mr. Lawson the credits claimed for 2013. There was no order as to costs since this was an informal procedure appeal.
Decision: The Tax Court decision was carefully balanced, bearing in mind that it was close to the edge of prior jurisprudence:
[27] But does the testimony of Mr. Lawson and the information received by the CRA from Ms. Lawson that their understanding of their agreement, drawn up by them, was that each had an obligation to pay impact on this interpretation? Are the terms of the contract limited to the four corners of the written agreement? It is well accepted that while parol evidence may rarely be relied upon to alter the terms of a contract, it can be relied upon for purposes of interpreting a contract. Mr. Lawson is in effect suggesting that the wording “represents the difference between child support payments they would otherwise pay to each other” should be interpreted as “representing the difference between child support payments they are required to pay to each other.”
[28] I find this interpretation is not an alteration of the contract, but is indeed a clarification by the very two parties to the contract, who wrote the contract. I further accept Mr. Lawson’s testimony that a strict adherence to the Guidelines would not simply yield $100 difference, but something further was at play, and that was the consequence of Ms. Lawson’s recognition of Mr. Lawson’s travel expenses. Finally, I also accept that the wording in the minutes of settlement, found acceptable by the CRA, does reflect the understanding of the Lawsons from the outset. In summary, where a separated couple rely on CRA commentary suggesting there can be one cheque for convenience sake, where the couple draft their agreement with the intention to create mutual requirements to pay, where the net payment is not based solely on the Guidelines but represents an obligation of one side to make payments towards travel expenses of the other and where a subsequent written agreement is accepted by the CRA while not altering the prior agreed-upon arrangement, I am prepared to interpret the separation agreement as creating two obligations and not simply a means of calculating one support payment. I am prepared, therefore, to allow the Appeal on the basis that there were two requirements to pay pursuant to their written separation agreement, which brings into effect section 118(5.1) of the Act and allows Mr. Lawson to claim the Tax Credits.
[29] As indicated earlier, I have previously expressed concerns about these provisions. There is a fine line between one net support payment requirement versus one cheque of convenience representing two support payment requirements. I recognize this case skates close to that line.
[30] The Appeal is allowed and referred back to the Minister for reconsideration and reassessment on the basis that Mr. Lawson is entitled to the Tax Credits for the 2013 taxation year.
On this basis Mr. Justice Miller was prepared to allow Mr. Lawson the credits claimed for 2013. There was no order as to costs since this was an informal procedure appeal.
Comment: This decision makes a great deal of common sense and tempers the brittleness of the existing case law with a recognition that each case must be examined to determine what, in fact, the parties had intended, i.e., what was their bargain.