http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/97934/index.do 
Grenon v. The Queen (October 3, 2014 – 2014 TCC 265) is likely to be an early chapter in litigation that will clearly find its way to the Federal Court of Appeal and, perhaps, the Supreme Court of Canada.
[1] James Grenon separated from his former spouse in 1998. There are two children of the marriage, both of whom were minors at the time of the separation. In 1999, Ms. Grenon commenced family law proceedings in the Court of Queen’s Bench of Alberta concerning custody, child support, spousal support and the division of property. Mr. Grenon retained counsel to represent him in the family law proceedings and incurred legal fees to pay such counsel. The family law proceedings were ultimately resolved in 2001 in a manner that, among other things, resulted in Mr. Grenon paying child support payments to his former spouse.
[2] In 2001, Mr. Grenon asked the Minister of National Revenue to adjust his 1999 income tax return to allow a deduction of $11,816.21 in legal expenses with respect to the family law proceedings. The Minister issued a notice of reassessment denying Mr. Grenon’s request. When Mr. Grenon filed his 2000 income tax return, he deducted $165,187.70 for legal expenses incurred with respect to the family law proceedings. The Minister also denied that deduction. Mr. Grenon has appealed the denial of his deductions and, as part of that appeal, is challenging the denial of the deductions under section 15 of the Canadian Charter of Rights and Freedoms.
Mr. Grenon clearly knew that the Federal Court of Appeal’s decision in Nadeau v. The Queen, 2003 FCA 400, had already decided this issue against taxpayer’s seeking such deductions although the Charter argument was rejected because of the lack of an underlying evidentiary foundation, not on its merits:
[8] Mr. Grenon is the payor of child support, not the recipient. The leading case on the deductibility of legal fees relating to child support payments is the Federal Court of Appeal decision in Nadeau v. The Queen. The Court made it clear at paragraph 18 of that decision that “expenses incurred by the payor of support (either to prevent it from being established or increased, or to decrease or terminate it) cannot be considered to have been incurred for the purpose of earning income, and the courts have never recognized any right to the deduction of these expenditures”.
[9] Mr. Grenon submits that, despite the general prohibition in Nadeau on the deduction of legal fees by the payors of support, he is still entitled to deduct the Fees because they were incurred for the purpose of gaining or producing income from property. As part of the settlement of the family law proceedings between Mr. Grenon and Ms. Grenon, Ms. Grenon agreed that she would reimburse Mr. Grenon when he spent money for the benefit of the children that she was otherwise required to spend under the terms of their agreement. Mr. Grenon submitted that this right to reimbursement was “property” within the meaning of section 248(1) of the Act. I accept that this right is property but I struggle to see how it would give rise to income. At best it could be characterized as giving rise to a reimbursement.
[10] Based on all of the foregoing, I find that Mr. Grenon was not entitled to deduct the Fees when computing his income in his 1999 and 2000 tax years.
[Footnote omitted]
The court rejected Mr. Grenon’s Charter argument on the basis that he had not established an analogous head of discrimination:
[17] Having or not having a source of property income is certainly not an enumerated ground under section 15 nor could it be said to be an analogous ground. An analogous ground is one based on “a personal characteristic that is immutable or changeable only at unacceptable cost to personal identity”. It is difficult to see how whether one is earning income from property, or not, could be considered to be such a ground. Accordingly, Mr. Grenon’s Charter challenge fails to pass the first part of the Withler test. Having reached that conclusion, it is not necessary for me to consider the second part of the test.
[18] In reaching this conclusion, I am mindful of an argument raised by Mr. Grenon. His counsel characterized Nadeau as standing for the proposition that child support payments are income from property, not because of any current logical basis for reaching that conclusion, but rather because the system has treated them as being income from property for so long that it is no longer feasible to treat them in any other manner. I am sympathetic to this characterization of Nadeau. It appears to me that what has happened over the course of many years is that the tax system has effectively read in to section 60 of the Act a paragraph that permits recipients of child support to deduct their legal fees irrespective of whether those fees are actually laid out to earn income from property. That said, I am bound by the reasoning in Nadeau. Mr. Grenon will no doubt appeal my decision. He may be able to convince the Federal Court of Appeal to revisit Nadeau or that recipients of child support payments are currently permitted a deduction, not because they expend legal fees to earn income from property, but rather simply on the basis that they are recipients of child support payments. Since the vast majority of recipients of child support payments are women and the vast majority of payors are men, Mr. Grenon may then be in a better position to pursue his belief that allowing recipients a deduction but denying the deduction to payors effectively discriminates on the basis of sex.
[Footnote omitted]
What makes the case extremely interesting is that Mr. Grenon’s counsel called two experts in an attempt to establish evidence of Charter discrimination.
[23] In his report, Professor Millar concludes that there is a historical and ongoing bias in the Canadian court system in favour of awarding custody to women. It appears to me that the facts that Professor Millar relies upon in coming to this conclusion are open to alternative interpretations. Professor Millar did little to convince me that he had valid reasons for considering and discarding those alternatives. For example, Professor Millar finds that gender is not a good indicator of parenting ability. He also finds that courts award custody to women substantially all of the time. My understanding is that from this information he concludes that the courts must be biased against fathers. I struggle with the leap of logic that he appears to have made. I am not satisfied that he has given adequate or even any consideration to other variables such as whether the selection of cases that actually go to trial are representative of the population of parents as a whole and whether the father was even actively seeking custody in the cases that went to trial or was simply seeking a determination of the amount of support. When I combine this concern with my overall concern about Professor Millar’s bias, I am unable to give weight to his finding that the court system is biased against men.
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[26] Professor Douglas W. Allen is the Burnaby Mountain Professor of Economics at Simon Fraser University. He has a doctorate in economics and specializes in the area of law and economics. The economics of the family is one of his areas of research. He has published four papers on the Federal Child Support Guidelines. I accept Professor Allen as an expert in these areas. Professor Allen’s expert report was filed with the Court.
[27] I found Professor Allen’s report and testimony to be essentially free from bias. While it is clear that he has a strong opinion on the issues upon which he was opining, I do not feel that he slipped into the role of advocating for Mr. Grenon. The only concern that I had with Professor Allen’s report is that he relies to an extent on the work of Professor Christopher Sarlo. In a pre-trial conference the Respondent objected to the introduction of a previous version of Professor Allen’s report on a number of different grounds. One of those grounds was that it relied too heavily on the work of Professor Sarlo. Mr. Grenon was permitted to file an amended version of the expert report on the condition that, to the extent the report continued to rely on Professor Sarlo’s work, Professor Sarlo would be made available for cross-examination at the trial. I have not read the previous report so I do not know exactly to what extent it relied upon Professor Sarlo’s work. There are three remaining references to Professor Sarlo’s work in Professor Allen’s report. Professor Sarlo was not made available for cross‑examination at trial. Accordingly, I must exclude paragraphs 38 and 51 of the report and any conclusions that rely on those paragraphs from evidence along with the reference to Professor Sarlo’s work in footnote 1 of the report.
The Crown on the other hand did not call any evidence in an attempt to mount a section 1 defense of the rule. Someone on the Crown’s side seems to have got cold feet and moved at the conclusion of argument to re-open its case to adduce such evidence. The court denied this motion:
[29] I am not willing to grant such leave. The Respondent appears to have expected to win this Appeal on the first part of the Withler test based on the fact that I would be bound by the decision in Nadeau and thus does not appear to have been concerned about introducing evidence to deal with the second part of the test or to deal with a section 1 defence. This Appeal has been going on for more than a decade. The Respondent knew that Mr. Grenon was not just a taxpayer with a chip on his shoulder and a belief that the Charter gave him a general right to be treated “fairly”. He was represented by counsel, had a clear idea of the basis upon which he believed discrimination was occurring and obviously intended to introduce the factual evidence that he believed he needed to support a section 15 challenge. Given the history of this appeal, it should have been obvious to the Respondent that, if Mr. Grenon lost, he would almost certainly appeal to the Federal Court of Appeal. Even though the Respondent knew that I would most likely find myself to be bound by Nadeau, the Federal Court of Appeal would clearly not have been so bound. Thus the Respondent should have known that it needed to lay the evidentiary groundwork at trial to defend a section 15 challenge on appeal. Mr. Grenon was also no doubt aware that I would most likely find myself to be bound by Nadeau yet he introduced the expert evidence that he needed to pursue his appeal to the Federal Court of Appeal.
[30] Based on the foregoing, the Respondent’s request to re-open its case to introduce additional evidence is denied.
[Footnote omitted]
Accordingly the case was dismissed with costs to the Crown. At the conclusion of the reasons however the court set out some detailed thoughts as to why the current system requires review by Parliament:
[35] Regardless of whether the recipient has income from property or not, I struggle to see how, in the foregoing examples, it is acceptable from a public policy point of view to allow the recipient to deduct his or her legal fees while denying that deduction to the payor. Both parties are in court fighting about the exact same issues. What policy objective could possibly justify this outcome? The objective cannot be to give a financial break to the party with the greater financial need because in Example “A” the parent with the higher income receives the deduction. The objective cannot be to ensure the financial security of the children because the children in each example would benefit more from having both parents receive the deduction. The objective cannot be to reward the party who is successful in court because in Example “C” both parents have succeeded in increasing their custodial access from the 25% offered by the other parent to the 50% they received in court yet the mother is not permitted to deduct her legal fees. The objective cannot be to ensure access to justice because the subsidy is given to one parent and denied to the other regardless of their individual financial resources (e.g. in Example “C” above, the father receives the subsidy whether his income is $4,000, $49,000 or $499,000 and the mother is denied it whether her income is $5,000, $50,000 or $500,000).
[36] In my view, the problem with the current system arises, to a large extent, because there is an unfortunate tendency to examine this issue using the classic “deadbeat dad” stereotype. If that stereotype is used, then there does not appear to be a problem with the system. The stereotypical “deadbeat dad” is considerably financially better off than the mother, wants little or no custodial access and is seeking to keep his child support payments as low as possible. In this situation, it is easy to argue that giving the deduction to the mother achieves the above policy goals: the mother is the party with the greater need; the children are better off if the mother is subsidized in her fight to establish a high level of child support and the father is not subsidized in his fight to keep his child support payments low; the mother is the successful party in court; and, without the deduction, the mother may not be able to afford access to justice.
[37] However, tax policy should not be driven by stereotypes. The modern reality is that more and more parents fall into Example “C”. The tax system should, in my view, do a better job of reflecting that reality.
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… I feel that payors of child support should not have to wait for a patchwork of relief to emerge from this Court one decision at a time. Taxpayers would be far better served by a well thought out global system that balances the various fiscal and social issues and addresses both the needs of the parents in my examples and the needs of the parents in the “deadbeat dad” scenario. This Court cannot possibly achieve such a global system on a case by case basis. It is my hope that Parliament will give serious consideration to establishing such a system.
[Footnote omitted]
It will be interesting to see what the Federal Court of Appeal (and, perhaps, the Supreme Court of Canada) makes of this decision.