Date: 20020103
Docket: 2001-2784-IT-I
BETWEEN:
MARIUS P. PIENAAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowie J.
[1] Dr. Pienaar appeals from an assessment for income tax for the 1998 taxation year. His appeal was heard under the informal procedure. The only issue in the appeal concerns his claim to deduct certain amounts paid by him to his wife for spousal maintenance after their separation. In filing his income tax return he claimed a deduction of $26,610; in assessing him the Minister of National Revenue allowed a deduction of only $19,800. At issue is his right to deduct the other $6,810. The Minister disallowed it on the basis that it was not paid pursuant to either a court order or a written separation agreement; the Appellant, who represented himself in this Court, took the position that certain correspondence which passed between his solicitor and his wife's solicitor between the date of the separation and the first court order which required him to pay interim maintenance fulfills the requirement of the Income Tax Act that there be "a written agreement" in place.
[2] The facts are not in dispute. Dr. Pienaar and his wife separated on March 1, 1998. He immediately began making support payments to her. He paid $500 on March 2, and $510 on March 19. From then until the end of the year he paid her $600 per week. He also paid her an additional $1,000 on November 15, because she was having trouble making ends meet. Both he and his wife were represented by lawyers, and they quickly agreed on the amount of $600 per week as interim maintenance. This was embodied in a consent Order of the Provincial Court of British Columbia made by Her Honour Judge A. K. Krantz on May 15, 1998. The relevant part of that Order reads:
This Court Orders that [Marius Pienaar] pay to [Mari-Etha Pienaar] for "interim interim" spousal support the sum of $2,600.00 per month payable in weekly payments of $600.00 per week on each Sunday commencing with the 17th day of May, 1998 and continuing by such weekly payments for each week thereafter until further order ...
[3] The legislative scheme that provides for the deduction of maintenance payments by the taxpayer who makes them is remarkably convoluted. In the present case its operation is greatly simplified, however, by the facts that the year under appeal is the first year in which any payments were made, and that the payments made were for spousal maintenance only. The question in dispute thus comes down to this - did the payments made fall within the definition of a support amount found in subsection 56.1(4) of the Act. That definition, so far as it is relevant to this appeal, reads:
56.1(4) The definitions in this subsection apply in this section and section 56.
"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 common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership and the amount is receivable under an order of a competent tribunal or under a written agreement; or
(b) ...
I have emphasized the words that are of particular relevance here. The Minister's position in assessing the Appellant may be summarized in this way. The weekly payments made by the Appellant prior to May 17, 1998, which aggregate $5,810, were not made pursuant to either an order of a tribunal or a written agreement, and so they do not satisfy the definition. The additional payment of $1,000, which the Appellant made gratuitously on November 15, 1998, was not a periodic payment, nor was it made pursuant to either the order of a tribunal or a written agreement.
[4] There can be no doubt that the extra amount of $1,000 which Dr. Pienaar paid voluntarily in November 1998 is not deductible, for both the reasons advanced by the Respondent. Nor can there be any doubt that the Appellant is not entitled to deduct the $500 payment that he made on March 2, 1998, as nothing had been written by that time. However, the Appellant argued that he should be entitled to deduct all the periodic amounts paid after March 13, because there was a written agreement in place by that date.
[5] On March 13, 1998, Robert Punnett, the Appellant's solicitor, wrote to Irene Peters, his wife's solicitor. The relevant part of that letter is the first paragraph, which says:
I have spoken to my client and confirm that he will provide $600.00 per week to your client to be used by her for the purchases normally incurred by her such as food and personal expenses.
The other writing that the Appellant relies on is a letter written by Ms. Peters to Mr. Punnett on April 2. It is in reply to a letter of March 31, and the relevant part of it is the second paragraph, in which Ms. Peters outlines certain monetary demands of her client, ending with this sentence:
Further, Ms. Pienaar, from the family asset of the corporate structures, did receive an income of $2,500.00 per month gross; at this point she is only receiving $2,400.00 per month based on the $600.00 per week agreement.
The Appellant did not put the letter of March 31, or any other letter or document, into evidence, because, he said, none were relevant to the issue whether there was a written agreement as to the $600 weekly maintenance payments before the May 15 Order was made. He argued, however, that either the March 13 letter alone, or alternatively, it in combination with the April 2 letter, is sufficient to satisfy the definition's requirement that there be "a written agreement" to render the payments made before May 15 deductible.
[6] In argument, counsel for the Respondent accepted that the law is correctly stated by Bowman A.C.J. in Foley v. The Queen.[1]He held in that case that maintenance payments made pursuant to an agreement consisting of letters exchanged between counsel for the spouses are made "under a written agreement" for purposes of paragraph 60(b) of the Act. Some earlier cases which express a different view were decided at a time when the Act required a written separation agreement, and have no application to cases arising under the current wording, which requires only a written agreement as to the payment of maintenance. I have no doubt that a written agreement consisting of letters exchanged by agents of the parties acting within their authority satisfies the words of the present legislation.
[7] In Grant v. The Queen,[2] Mogan J. found that the requirement for a written agreement was satisfied by a letter, written by the solicitor for the spouse of the taxpayer, which contained the following words,
My client is also, of course, looking for an increase in the child support, especially given that the agreement to receive $1,000 per month was made at a time when only two of the three children were residing at home, the third having come to reside there shortly thereafter
together with the cheques for $1,000 per month signed by the husband and delivered to his spouse. He reasoned that the acknowledgment of the existence of an agreement by the solicitor for a party adverse to the taxpayer in the matrimonial cause, together with his own acknowledgment by the act of writing the cheques, comprised a written agreement. The facts of this case are indistinguishable. Ms. Peters' letter acknowledges the existence of "... the $600.00 per week agreement." The Appellant wrote the cheques and signed them. The definitional requirement has been satisfied, and the appeal should be allowed.
[8] I would not want to leave this case without making the observation that there should never have been a doubt about the Appellant's right to deduct these payments. The Income Tax Act makes specific provision whereby the interim maintenance order may provide that payments made prior to it are deemed to have been made pursuant to it: see subsection 56.1(3). This provision was added to the Act in 1997, applicable to the 1996 and subsequent taxation years. Had his solicitor ensured that the interim Order contained such a provision, the Appellant would not have had to resort to litigation to establish his right to the deduction.
[9] The appeal is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to deduct all payments made by him to his spouse between April 2, 1998 and the end of the year, except for the extra payment of $1,000, which is not deductible.
Signed at Ottawa, Canada, this 3rd day of October, 2002.
|
"E.A. Bowie" |
J.T.C.C.
COURT FILE NO.: 2001-2784(IT)I
STYLE OF CAUSE: Marius P. Pienaar and
Her Majesty the Queen
PLACE OF HEARING: Prince Rupert, British Columbia
DATE OF HEARING: September 23, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge E.A. Bowie
DATE OF JUDGMENT: October 3, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Michael Taylor
COUNSEL OF RECORD:
For the Appellant:
Name: N/A
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-2784(IT)I
BETWEEN:
MARIUS P. PIENAAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on September 23, 2002, at Prince Rupert, British Columbia, by
the Honourable Judge E.A. Bowie
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Michael Taylor
JUDGMENT
The appeal from the assessment of tax made under the Income Tax Act for the 1998 taxation year is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to deduct all payments made by him to his spouse between April 2 and December 31, 1998, except for the extra payment of $1,000 which is not deductible.
Signed at Ottawa, Canada, this 3rd day of October, 2002
|
"E.A. Bowie" |
J.T.C.C.