Date: 20000406
Docket: 98-9399-IT-I
BETWEEN:
CHARLES GAGNÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] These appeals were heard under the informal procedure. They are appeals from assessments made by the Minister of National Revenue ("Minister") under the Income Tax Act ("Act") for the 1994 and 1995 taxation years. In computing his income for each of those years, the appellant deducted amounts of $9,600 and $10,600 respectively as alimony paid to his former spouse, Francine St-Pierre. In assessing the appellant, the Minister disallowed this deduction, relying on the following facts stated in paragraph 7 of the Reply to the Notice of Appeal:
[TRANSLATION]
(b) the appellant and his former spouse were married on May 30, 1981 and had two children;
(c) the appellant and his former spouse have been living separate and apart since June 18, 1992;
(d) on June 22, 1993, the appellant and his former spouse signed an agreement on provisional measures of the Superior Court of the province of Quebec (the "Court") which stated that the appellant was to pay his former spouse the sum of $800 a month, payable on the first of each month for the months of July and August 1993 and that the amount would be revised for September 1, 1993;
(e) on July 7, 1993, the Court issued an interim judgment ordering the appellant to pay $800 a month, payable on the first day of each month for July and August 1993;
(f) the appellant paid his former spouse a total of $9,600 as support during the 1994 taxation year;
(g) on August 25, 1995, the Court issued a judgment (the "1995 judgment") respecting the aforementioned agreement;
(h) under the mediation agreement of July 19, 1995, the appellant is required to pay $1,050 a month, payable on the first day of each month starting on September 1, 1995;
(i) a judgment of the Court dated August 25, 1995 formalizes the parties' mediation agreement of July 19, 1995, confirms it, makes it enforceable and orders the parties to comply with it;
(j) the appellant paid his former spouse a total of $6,400 for the months from January to August 1995;
(k) the amounts of $9,600 and $6,400 referred to in subparagraphs (f) and (j) above were not paid pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the former spouse; and
(l) the 1995 judgment does not provide that the amounts paid prior to August 25, 1995 and in the preceding year would be considered as paid and received pursuant to the judgment as required by subsection 60.1(3) of the Income Tax Act ("Act").
[2] On June 22, 1993, the appellant and Francine St-Pierre signed an agreement on provisional measures in the context of divorce proceedings instituted by the appellant in the Superior Court of Quebec (Family Division, Divorce Section). That agreement provided inter alia as follows:
[TRANSLATION]
15. The applicant [the appellant] shall pay the respondent [Ms. St-Pierre], for the children, the sum of $800 a month, payable on the first of each month, for the months of July and August 1993;
16. The support amount shall be revised for September 1, 1993, the date of the sale of the family residence;
17. From July 1 to September 1, 1993 (sale of the house), the parties shall contribute to the payment of their common debts as follows:
(a) the applicant shall pay
mortgage $ 422.00
school and municipal taxes $ 133.00
home insurance $ 63.66
½ Laurentian Bank $ 243.00
½ Estate $ 202.85
$1,064.51
(b) the respondent shall pay
mortgage $ 680.00
car insurance (Pontiac 6 000) $ 41.72
½ Laurentian Bank $ 243.00
½ Estate $ 202.85
$1,167.58
[3] On July 7, 1993, Jean R. Dagenais J. of the Superior Court of Quebec, District of Hull, signed a judgment on provisional measures in which he repeated in part the terms of the agreement on provisional measures of June 22, 1993 and, more particularly, ordered the following at page 3 of the judgment:
[TRANSLATION]
. . .
ORDERS the applicant to pay the respondent, for the children, the sum of $800 a month, payable on the first of each month, for the months of July and August 1993;
. . .
FORMALIZES the agreement concluded between the parties on June 22, 1993, which forms an integral part of this judgment, AND ORDERS the parties to comply therewith . . . .
[4] The appellant paid Ms. St-Pierre $800 for each of the months of July and August 1993 and continued to pay that amount until he reached a final mediation agreement with his former spouse on July 19, 1995. With respect to alimony, this mediation agreement provided as follows in paragraphs 12 to 19 and 44:
[TRANSLATION]
MAINTENANCE OF CHILDREN
12. The parents agree that the costs relating to the maintenance of the children amount to a total of ONE THOUSAND NINE HUNDRED AND SEVENTEEN DOLLARS ($1,917.00) a month in accordance with the statement of expenses prepared by them and attached hereto as Appendix A.
13. The husband agrees to pay the wife as support for their children Vincent and Jean-Philippe, the sum of ONE THOUSAND AND FIFTY DOLLARS ($1,050.00) a month, payable in advance on the first day of each month by post-dated cheque, the said support payment being determined on the basis of the information in Appendix B.
14. The said support will be payable until the children reach the age of 18, at which time the husband will continue paying the support for the child or children who continue to attend an educational institution on a full-time basis during the day.
15. The support provided for in paragraph 13 of this agreement will be indexed each year, in accordance with article 590 C.C.Q., on the anniversary date of the judgment to be rendered.
16. The parents have agreed to share equally the expenses involved in the children's "sporting activities" and "equipment"; however, they undertake to consult each other before incurring any expense and to come to an agreement and provide each other with vouchers.
17. As long as the support is to be paid for Vincent and Jean-Philippe, the father undertakes to pay all the costs relating to life insurance, dental insurance and drug insurance coverage available through his employer for the children's benefit.
18. Each year, if a significant change occurs, the spouses agree that, around the anniversary date of the judgment, they will review the support from the standpoint of both the needs of the children and the parties' ability to pay, thus affording themselves the opportunity, without going to court, to adjust the support based on the actual situation as regards to the aforementioned two criteria.
19. The mother will receive the Quebec family allowances and the Canada child tax benefit in respect of Vincent and Jean-Philippe; the mother will also have the benefit of the related tax deductions and credits.
. . .
FINAL RELEASE
44. Subject to the foregoing, the spouses grant each other full and final release from any action for support, compensatory allowance, lump sum or division of property, for any claim which each has or may have against the other for advances, contributions or loans, as well as for any entitlement that might result or arise from the marriage or its breakdown, from their life together, from the matrimonial regime, from a contract signed between them, or from the family assets.
[5] On August 25, 1995, the divorce judgment was rendered by Jean-Pierre Plouffe J. of the Superior Court of Quebec. That judgment reads in part as follows at page 2:
[TRANSLATION]
WHEREAS the applicant has brought an action for divorce against the respondent;
CONSIDERING the respondent's discontinuance of her defence and counterclaim;
THIS case has proceeded by default against the respondent, Francine St-Pierre, who has failed to contest it.
WHEREAS at the hearing, an agreement duly signed by the parties was entered in the record and it was requested that judgment be rendered confirming that agreement;
CONSIDERING the evidence adduced and the exhibits entered in the record;
FOR THESE REASONS, THE COURT:
. . .
FORMALIZES for the parties their agreement dated July 19, 1995, confirms it and renders it enforceable as though each of the clauses thereof was here cited in full and ORDERS the parties to comply with it and, more particularly:
. . .
ORDERS the applicant to pay an amount for the maintenance of the children and as support in accordance with the terms stated in paragraphs 12, 13, 14, 15, 16, 17, 18 and 19 of the said agreement;
ORDERS that the said amount be indexed each year, in accordance with article 590 C.C.Q., on the anniversary date of this judgment.
[6] The Minister disputes the deduction of the support paid by the appellant during all of 1994 and from January to August 1995 on the ground that those amounts were not paid under an order or judgment of a competent tribunal or under a written agreement as required by paragraph 60(b) and subsection 60.1(3) of the Act.
[7] Those statutory provisions read as follows:
SECTION 60: Other deductions.
There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:
60(b)
(b) Alimony payments – an amount paid by the taxpayer in the year as alimony or other allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and the children, if the taxpayer, because of the breakdown of the taxpayer's marriage, was living separate and apart from the spouse or former spouse to whom the taxpayer was required to make the payment at the time the payment was made and throughout the remainder of the year and the amount was paid under a decree, order or judgment of a competent tribunal or under a written agreement;
SECTION 60.1: Maintenance payments.
60.1(3)
(3) Prior payments. For the purposes of this section and section 60, where a decree, order or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount paid before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder, the amount shall be deemed to have been paid thereunder.
[8] Counsel for the appellant contends that the support of $800 a month was paid under the agreement and the judgment on provisional measures of 1993. Counsel maintains that it was clear from the agreement and judgment that the parties had agreed that support of $800 a month was payable up to the date of the sale of the family residence, on which date the support amount would be revised. Counsel noted, however, that the sale did not take place in September 1993 as stated in the 1993 agreement, but only in 1995, and that is why the support amount was not revised in September 1993.
[9] Counsel for the appellant referred to the minutes book of the Superior Court of Quebec in an attempt to show that nothing had happened in the divorce proceedings between July 1993 and the divorce judgment in August 1995. He argued that this was proof that, when they signed the agreement on provisional measures in 1993, the parties had agreed that the appellant would pay support of $800 a month until the family residence was sold.
[10] With respect, I cannot accept this argument. On the one hand, it is false to say that no other proceeding was instituted by the parties between July 1993 (date of the judgment on provisional measures) and August 1995 (date of the divorce judgment). According to the minutes book entered in evidence by counsel for the appellant, Ms. St-Pierre (the respondent in the divorce action) filed a counterclaim on June 2, 1994. It was probably in response to that counterclaim that the appellant provided the Superior Court of Quebec with a statement of revenue and expenditures to September 1994 in which he indicated, inter alia, that he was paying support of $800 a month for the children.
[11] It may be assumed from these various proceedings that there was not necessarily agreement between the parties as to the amount of the support, which was in fact revised upward (to $1,050 a month) by the divorce judgment in August 1995.
[12] Moreover, the judgment on provisional measures clearly orders the appellant to pay Ms. St-Pierre support of $800 a month for July and August 1993 only. It does not state that this support was to be payable until revised upon the sale of the family residence. It merely ordered the parties to comply with the agreement on provisional measures.
[13] The agreement on provisional measures provided that the support was to be revised on September 1, 1993, the date of the sale of the family residence. It did not provide that the appellant was required to pay support of $800 a month until the sale of the family residence. Moreover, paragraph 17 of the agreement clearly states the pecuniary obligations of each of the parties from July 1 to September 1, 1993. The agreement and the judgment confirming it make no provision respecting the obligations of each of the parties with respect to support as of September 1, 1993.
[14] It is false to claim, as counsel for the appellant contends, that it was open to Ms. St-Pierre as of September 1, 1993 to institute a support proceeding against the appellant under the agreement and judgment on provisional measures. In my view, the only recourse she could have had would have been, failing a written agreement, to obtain a new order or judgment fixing the amount of the support as of September 1, 1993 (at $800 or more a month).
[15] The fact that the appellant paid his former spouse $800 a month until 1995 does not establish that that support was paid under the agreement and judgment on provisional measures of 1993. As Judge Brulé of this Court remarked in MacLachlan v. The Queen, [1991] T.C.J. No. 1101 (Q.L.), the parties did not formally agree to extend the agreement.
[16] However, the provisions of paragraph 60(b) of the Act allowing the deduction of alimony payments have always been strictly construed by the courts since the text of this paragraph is clear and requires that the payments be made under either a written agreement or a judgment. I concur in Judge Lamarre Proulx's comments in Morneau v. The Queen, [1997] T.C.J. No. 193 (Q.L.), in paragraph 10:
. . . It must be understood that deduction by one spouse means inclusion by the other. The parties must clearly express their agreement and Parliament requires that this expression be made by means of a private writing between the parties or by a Court order.
[17] The fact that deduction by one of the parties means inclusion by the other explains why it is important to provide for the payment of support in a written agreement between both spouses. In Hodson v. The Queen, 87 DTC 5113, Strayer J. of the Federal Court, Trial Division, as he then was, wrote as follows at page 5114:
The intention of Parliament as expressed in paragraph 60(b) is quite clear: either there must be a court order requiring such payments or else there must be a "written agreement" requiring them. If Parliament had intended to permit such deductions to be made on the basis of oral agreements or implied agreements or in respect of purely voluntary payments it would have said so. Having used the words "written agreement" it has clearly excluded other less formal arrangements.
[18] I therefore find that the agreement and judgment on provisional measures of 1993 did not provide for the payment of support of $800 a month after August 1993. Consequently, the appellant cannot claim that he paid his former spouse support under a judgment or a written agreement from September 1993 to August 25, 1995 (date of the divorce judgment).
[19] Moreover, the agreement and the divorce judgment of 1995 do not provide that the payment of the amounts paid by the appellant prior to the signing of the judgment or the written agreement must, for the purposes of section 60, be considered as having been made and received under that agreement or judgment. In Chabros v. R. (1995), 13 R.F.L. (4th) 177 (F.C.A.), Hugessen J.A. of the Federal Court of Appeal, as he then was, wrote as follows at page 178:
The only provision of the Income Tax Act which allows maintenance paid prior to a separation agreement to be treated as though it were paid pursuant thereto is subs. 60.1(3) . . . .
We are all of the view that the plain meaning of this text requires that the agreement . . . must provide that prior payments shall be considered as having been paid and received pursuant thereto. That is neither a strict nor a liberal interpretation of the Act: it is simply the only meaning the words can bear. . . .
[20] For these reasons, the appellant could not deduct under paragraph 60(b) and subsection 60.1(3) of the Act the amounts of $9,600 and $6,400 which he paid to his former spouse in 1994 and from January to August 1995.
[21] The appeals are dismissed.
Signed at Ottawa, Canada, this 6th day of April 2000.
"Lucie Lamarre"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 28th day of February 2001.
Erich Klein, Revisor