T-132-76
Jacques Beique (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Dubé J.—Montreal, November 16;
Ottawa, December 21, 1977.
Income tax — Tax liability — Married couple replacing
regime of separation of property with community of movables
and acquests — New regime notarized in 1971, but homolo-
gated and registered in 1972 — At what date did the new
regime become effective — If in effect during 1971 fiscal year,
could income tax under community of movables and acquests
be divided between spouses — Quebec Civil Code, articles
1260, 1261, 1264, 1265, 1266b.
This is an appeal from the Tax Review Board's dismissal of
plaintiff's appeal against his income tax assessment for 1971.
Plaintiff and his wife had entered an antenuptial contract
adopting the regime of separation of property, but adopted the
community of movables and acquests by contract notarized in
December 1971, homologated by judgment in March 1972, and
registered in June 1972, but with a clause providing for retroac-
tivity to the date of the marriage. For plaintiff's 1971 fiscal
year, each spouse accepted liability for the tax on one half the
income. The principal issues to be decided are firstly, the date
on which the new matrimonial regime came into effect, and
secondly, if that regime were in effect for the 1971 fiscal year,
whether or not the income tax could be divided between
spouses.
Held, the appeal is dismissed. Since an enactment, unless
otherwise stated, is presumed not to have retroactive effect, the
parties to this contract cannot attribute to their regime a
retroactive effect that the enactment does not provide. The day
the marriage is solemnized is the starting point of the first
regime and is not and cannot become the start of a separate
regime. Retroactivity might be beneficial to the spouses, but it
would tend to prejudice the interests of third parties. The
legislator, therefore, provided that the Act has effect with
respect to third parties only by the registration of a notice in
the central register. Since the Minister is obviously a third
party and appellant's new regime takes effect only on the date
of registration, it follows that appellant's 1971 fiscal year was
governed by the original matrimonial regime, separation of
property.
INCOME tax appeal.
COUNSEL:
Jacques Beique for himself.
Jean Delage for defendant.
SOLICITORS:
Jacques Beique, Montreal, for himself.
Deputy Attorney General of Canada for
defendant.
The following is the English version of the
reasons for judgment rendered by
DUBS J.: This is an appeal from the decision
rendered on September 16, 1975 by the Tax
Review Board, dismissing plaintiffs (appellant's)
appeal against his income tax assessment for 1971.
The facts may be summarized as follows.
Appellant is by profession an attorney and
municipal judge of the city of LaSalle, Quebec. He
married Dame Jacqueline Sicotte on August 31,
1939, after entering into an antenuptial contract
adopting the regime of separation of property. On
December 2, 1971, the two spouses adopted the
regime of community of movables and acquests by
contract notarized on that date, homologated by
judgment handed down on March 31, 1972 and
registered at Montreal on June 5, 1972.
On April 26, 1972 appellant filed an income tax
return by which each of the spouses claimed half
of the income for the fiscal year (from February
28, 1971 to February 27, 1972).
The income, as shown in the summary of the
return, was derived from the City of LaSalle,
employment, rentals and investments.
Appellant alleged that under his new
matrimonial regime the income of the two spouses
belongs to the community and that consequently
each of the spouses is liable for tax on only half of
the income.
Respondent contended that appellant's new
matrimonial regime did not take effect until the
date it was registered, that is on June 5, 1972, and
in no way affects the 1971 fiscal year. Alternative
ly, even if the new regime were in effect during the
fiscal year in question, the decision of the Supreme
Court of Canada in 1961 in Sura v. M.N.R.,' on
appeal, to the effect that in a community of prop
' [I962] S.C.R. 65.
erty the tax cannot be divided between the two
spouses, also applies to the community of movables
and acquests established by Bill 10 in 1970 2 .
First of all, therefore, it must be determined on
what date the new matrimonial regime took effect.
If it took effect during the fiscal year in question,
it will then have to be established whether, in fact,
under the regime of community of movables and
acquests income tax can be divided between the
spouses.
Clause 1 of the contract of December 2, 1971
between the spouses stipulates that the new regime
they are adopting takes effect retroactively to their
marriage:
[TRANSLATION] THE SPOUSES adopt the regime of commu
nity of movables and acquests with effect as of the date of the
solemnization of their marriage, and accordingly agree that all
personal and real property acquired since the solemnization of
their marriage constitutes the property of the community
according to the provisions of Arts 1272 et seq of the Civil
Code of the Province of Quebec.
It is important to examine the scope of the new
articles of the Civil Code relative to marriage
covenants as amended by Bill 10 in 1970, as they
apply not only to spouses but also to third parties.
Article 1265 allows the spouses to modify their
matrimonial regime "provided that ... they do not
prejudice ... the rights of their creditors". Article
1266 provides that any modification of the regime
must be established by notarial deed: "it has effect
only if homologated by the court of their domi
cile". Article 1266b reads as follows:
Art. 1266b. The act entered into in virtue of the provisions of
articles 1264 and 1266 has effect with respect to third persons
only by the registration of a notice in the central register of
matrimonial regimes....
The aforesaid article 1264 applies to changes in
matrimonial covenants before the solemnization of
the marriage and does not concern us here.
On the other hand, appellant states that article
1261 provides that every matrimonial regime takes
effect retroactively to the date of solemnization of
the marriage.
2 S.Q. 1969, c. 77 (in force on July 1, 1970).
Art. 1261. The matrimonial regime, whether it be legal or
conventional, takes effect from the day the marriage is solem
nized; the parties cannot stipulate that it will take effect at any
other period.
In an article published in the Revue générale de
droit, 1970, entitled "Le Bill 10 depuis le premier
juillet 1970", Roger Comtois wrote at page 228:
[TRANSLATION] All the property acquired by the spouses for
valuable consideration during the marriage would fall into the
community or into the partnership of acquests. If the spouses
decided to adopt a new regime, it was because the new one was
better, and it must have been so ever since the marriage. In
principle, the new law has retroactive effect, in so far as the
new law is better than the old one.
Michel Légaré takes the opposite stance in an
article, "De la rétroactivité ou de la non-rétroac-
tivité du changement de regime matrimonial." 3
His conclusion at page 160 may prove to be
prophetic:
[TRANSLATION] We have certainly leaned toward one theory
more than another, but a merely theoretical opinion is not
worth much with regard to the direction a practitioner must
follow when he has to cope with such a problem. Will we have
to wait for a court decision to know how to proceed, or will the
legislator act quickly enough to resolve the problem through
preventive action? We wager that we will have to wait for a
judicial decision!
In an annotation to the above-cited article, [at
page 155] Mr. Comtois changes his mind in the
following terms:
[TRANSLATION] The opinion expressed by the author is con
trary to what we had proposed shortly after Bill 10 was passed.
We are quite prepared to change our mind in view of the
arguments put forth by the author and by the authorities he
cites. A special committee of the Civil Code Revision Office,
responsible for revising the law on matrimonial regimes, is now
proposing a precise text: the modified matrimonial regime takes
effect from the day the deed is made, provided it is homologat-
ed. The question appears to be resolved. It is to be hoped that
this amendment will be adopted as soon as possible.
It is a fundamental principle of law that, unless
otherwise stated, an enactment is presumed not to
have retroactive effect, and the parties to a con
tract like this one cannot claim to attribute to their
regime a retroactive effect that the enactment does
not provide. Article 1261 must also be considered
in context. This article does come after article
1260 and is related to it: in the absence of special
agreements, the spouses are subject to the regime
of partnership of acquests, and whatever the
regime, it takes effect from the day the marriage is
3 La Revue du Notariat (1975-76) Vol. 78, No. 4, 155.
solemnized; "the parties cannot stipulate that it
will take effect at any other period" in the future.
The day the marriage is solemnized is therefore
the starting point of the spouses' first regime. It is
not and cannot become the start of a subsequent
regime.
Furthermore, from a practical standpoint, giving
a new regime acquired later in life retroactive
effect to the date of the marriage would plunge
society into a state of chaos and even ridicule.
Could the numerous real estate transactions in the
course of a lifetime under one regime be rescinded
by a spouse on the setting up of a new regime?
Such retroactivity might be beneficial to the
spouses, but it would tend to prejudice the interests
of third parties. In my view, that is precisely what
the legislator contemplated in article 1266b when
he provided that the Act has effect with respect to
third parties only by the registration of a notice in
the central register. It is only after such notice that
the public is protected.
Other authors have also examined the interpre
tation of these new provisions of the Civil Code
and agree that the new regime is not retroactive to
the marriage, and that with regard to third parties
the deed has effect only by registration 4 . The
following conclusion by Professor Jean-Guy Berg-
eron should be kept in mind':
[TRANSLATION] With respect to third parties, article 1266b
of the Civil Code states that the change in the covenant "has
effect only by the registration of a notice in the central register
of matrimonial regimes". On the basis of this wording, we have
to consider only one date, that of the registration; the wording
does not imply any condition precedent: it is equivalent to the
expression "it has effect only from the date of registration ...".
Since the Minister is obviously a third party and
appellant's new regime takes effect only on the
date of registration, June 9, 1972, it therefore
follows that during the 1971 fiscal year appellant
was governed by the original matrimonial regime,
Caparros, Ernest, "Le problème de la date d'entrée en
vigueur du nouveau régime lors d'une mutabilité convention-
nelle de régime- matrimonial" (1973) 14 C. de D. 335; Berge-
ron, Jean-Guy, "Le praticien et certains aspects du changement
conventionnel ou judiciaire d'un régime matrimonial, pendant
le mariage" (1974) 5 R.D.U.S. 219; Tétreault, Jean-Marie,
"Les changements de régimes matrimoniaux" [1975] C.P. du
N. 205; Pineau, Jean, "La réforme des régimes matrimoniaux,
quelques points d'interrogation", La Revue du Notariat, Vol.
76, Nos 1-2, 3.
5 (1974) 5 R.D.U.S. 219, at 227.
namely separation of property. I therefore do not
have to rule on the effect that the community of
movables and acquests might have on his taxable
income.
The income of a spouse governed by the regime
of separation of property is obviously taxable in his
hands. Appellant is therefore liable for tax on all
the income from his profession, properties and
investments. That income consequently includes all
the sums in question, with the exception of one
which poses special problems.
In his tax return appellant declared under a
"Statement of Investment Income" the sum of
$377.39 from the taxable Canadian corporation
Brault Guy Chaput. In a letter addressed to coun
sel for the respondent, dated August 24, 1977 and
filed at the hearing, appellant claimed that this
sum represented half of his wife's personal invest
ment dividends. Form T5, "Statement of Invest
ment Income", attached to the letter, indicates
that the recipient is "Mrs. Jacqueline S. Beique".
Appellant's wife, described in the heading (when
she was mis -en-cause) as "president, general
manager and domestic arts technician", was not
engaged in gainful employment during the period
in question. She worked at home as a wife and
mother. As evidenced by the copies of cheques
filed in court, her husband gave her two $125
cheques a month and a $100 cheque every week.
She used that money to provide necessaries for the
family. She also saved money which, she says, was
largely income from the properties.
The wife brought into her marriage in 1939 her
trousseau, movables, wedding gifts and some sav
ings. These savings helped appellant acquire a
parcel of land in the town of LaSalle in 1940 at a
cost of $1,000. According to his testimony, this
comprised $700 in gifts and $300 in savings. The
newlyweds received financial assistance from the
wife's father in building their home. In 1940
appellant signed a $6,000 mortgage in favour of
his father-in-law; it was written off in 1956.
According to the wife, the gift from her father was
worth at least $14,000, having regard to the value
of the home which she placed at $20,000.
In 1941, they bought other adjacent lots, this
time in the wife's name, from the same vendor for
the sum of $500. According to the wife's testimo
ny, the $500 to purchase this land was given to her
by appellant. This purchase gave her the right to
vote, and added to the size of the first parcel of
land. Parts of these lots were resold by the wife in
1962 for $15,000, in 1964 for $2,000 and in 1966
for $14,000. It is the money from these transac
tions which enabled appellant to write cheques to
his wife and which he invested in her name in
Brault Guy Chaput.
Counsel for the respondent alleged that under
section 21(1) of the Act 6 , the income in question
should be deemed to be income of the husband as
transferor:
21. (1) Where a person has, on or after August 1, 1917,
transferred property, either directly or indirectly, by means of a
trust or by any other means whatsoever, to his spouse, or to a
person who has since become his spouse, the income for a
taxation year from the property or from property substituted
therefor shall, during the lifetime of the transferor while he is
resident in Canada and the transferee is his spouse, be deemed
to be income of the transferor and not of the transferee.
It is not apparent from the said transactions that
the income from the investment in Brault Guy
Chaput derived from the wife's funds. Unfortu
nately for appellant, the burden of proof rests on
him. He certainly did not establish to the satisfac
tion of the Court that his wife's investments were
made from her own personal funds. According to
her, the $500 used to purchase the lots in question
had been given to her by her husband, and in the
final analysis the investment income in question
derives from that sum.
For all these reasons, the appeal must be
dismissed.
6 Income Tax Act, S.C. 1955, c. 54, s. 3.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.