Citation: 2014 TCC 48
Date: 20140213
Docket: 2013-1430(IT)I
BETWEEN:
WALTER YOURKIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Masse D.J.
[1]
This is an Appeal from
the Minister of National Revenue’s (the "Minister") assessment of the
Appellant’s 2011 taxation year. The issue is whether the Appellant is entitled
to deduct the sum of $13,587 as spousal support payments purportedly made to
his former spouse, Phyllis Yourkin. These payments were made directly to the
Appellant’s former spouse from the Appellant’s pension plan.
Factual Context
[2]
The Appellant and his
former spouse, Phyllis Yourkin, were married in 1959. The marriage broke down
and the couple finally separated in August 1994.
[3]
On April 18,
1995 the Honourable Mr.
Justice O’Connell of the then Ontario Court (General Division) ordered the
Appellant to make interim spousal support payments in the amount of $1,500 per
month. By operation of this Order, this sum of money was deducted from the
Appellant’s pay by his employer, Lever Brothers Limited, and remitted to the
Family Support Plan.
[4]
The
litigation between the spouses pursued its course and on January 13, 1997 the Honourable Mr.
Justice Walsh of the Ontario Court (General Division) rendered a Judgment (see
Ex. R-1, Tab 4) whereby he effected an equalization of the net family property.
According to paragraph 4 of this Judgment, the Appellant’s interest in the
Unilever Canada Pension Plan (the "Pension Plan") was split with the
Appellant’s former spouse receiving 42.5% of all retirement benefits payable to
the Appellant. It was ordered that the Appellant was to sever the pension into
two parts, one for himself and the other for his former spouse. The
administrator of the Pension Plan was then to pay to the former spouse her
share of the retirement benefits in monthly payments. The former spouse was to
indemnify and save harmless the Appellant from any tax liability attributable
to her share of the Pension Plan. The effect of this Judgment was that Phyllis
Yourkin was to receive her share of the pension in periodic payments directly
from the Pension Plan and both she and the Appellant would be taxed on their
respective amounts. The Judgment also put an end to the Appellant’s obligation
to pay spousal support effective January 1, 1997. In rendering his Judgment,
Justice Walsh relied on Minutes of Settlement purportedly executed by the Parties
(see Ex. R-1, Tab 5). Phyllis Yourkin signed these Minutes of Settlement on her
own behalf and counsel for the Appellant at the time, Lang Michener LLP.,
signed on behalf of the Appellant.
[5]
In the 2011 taxation
year, the Appellant received pension income from the Pension Plan in the amount
of $19,786. In computing his income for that taxation year, the Appellant
claimed a deduction of $13,587 for spousal support payments. It is undisputed
that the Appellant did not receive any monies from the Pension Plan on behalf
of his former spouse, he did not pay her any monies during the taxation year,
and he also did not pay any taxes at all on the amount of $13,587 which he is
claiming as a deduction for spousal support. In fact, his former spouse was
responsible for paying any taxes attributable to any monies she received from
the Pension Plan.
[6]
In refusing the
deduction the Minister was of the view that the $13,587 claimed as a deduction
was not for spousal support pursuant to a decree, order, judgment of a
competent tribunal, or a written agreement. The monies represented the
equalization of net family assets, specifically the Appellant’s Pension Plan.
Therefore the Appellant was not entitled to a deduction for support under
paragraph 60(b) of the Income Tax Act, R.S.C., 1995, c. 1 (5th Supp.) (the "Act"). Hence, the Appeal to this Court.
Theory of the Appellant
[7]
The Appellant takes
the position that the Judgment of Walsh, J., dated January 13, 1997 is not
binding on him because he did not sign the underlying Minutes of Settlement
which is the foundation of the Judgment; nor did he authorize his counsel at
the time to sign the Minutes on his behalf. He is of the view that the Order of
O’Connell J., dated April 18, 1995 governs in the circumstances and any monies
that were paid to his former spouse during the taxation year represents spousal
support payments for which he is entitled to claim a deduction from income.
Theory of the Respondent
[8]
The
Respondent submits that the monies paid out to Phyllis Yourkin by the Pension
Plan were on account of the equalization of net family assets. They were not
paid to her under the guise of spousal support pursuant to a decree, order, judgment of a competent
tribunal, or a written agreement. The Judgment of Walsh J. is a valid and binding Order that
has not been appealed, set aside or otherwise varied. The Judgment of Walsh J.
expressly terminated the Appellant’s obligation to pay spousal support and it
partitioned the net family assets including the Appellant’s Pension Plan. The
Appellant has not paid any monies to his former spouse during the taxation year
and he has not paid any taxes on the money which she has received from the
Pension Plan. The Appellant was not entitled to claim the monies received by
his former spouse from the Pension Plan as a deduction for spousal support.
Legislative Provisions
[9]
The
relevant provisions of the Act are as follows:
56.1(4) The definitions in this subsection apply in this
section and section 56.
“child
support amount” means any support amount that is not
identified in the agreement or order under which it is receivable as being
solely for the support of a recipient who is a spouse or common-law partner or
former spouse or common-law partner of the payer or who is a parent of a child
of whom the payer is a legal parent.
“commencement day” at any time of an agreement or order
means
(a) where the agreement or order is made after April 1997, the
day it is made; and
(b) where the agreement or order is made before
May 1997, the day, if any, that is after April 1997 and is the earliest of
(i) the
day specified as the commencement day of the agreement or order by the payer
and recipient under the agreement or order in a joint election filed with the Minister
in prescribed form and manner,
(ii) where
the agreement or order is varied after April 1997 to change the child support
amounts payable to the recipient, the day on which the first payment of the
varied amount is required to be made,
(iii) where
a subsequent agreement or order is made after April 1997, the effect of which
is to change the total child support amounts payable to the recipient by the
payer, the commencement day of the first such subsequent agreement or order,
and
(iv) the day specified in the agreement or order,
or any variation thereof, as the commencement day of the agreement or order for
the purposes of this Act.
“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) the
payer is a legal parent of a child of the recipient and the amount is
receivable under an order made by a competent tribunal in accordance with the
laws of a province.
60. There may be deducted in computing a
taxpayer’s income for a taxation year such of the following amounts as are
applicable
…
(b) the total of all amounts each of which is an amount determined
by the formula
A
- (B + C)
where
A
is
the total of all amounts each of which is a support amount paid after 1996 and
before the end of the year by the taxpayer to a particular person, where the
taxpayer and the particular person were living separate and apart at the time
the amount was paid,
B
is
the total of all amounts each of which is a child support amount that became
payable by the taxpayer to the particular person under an agreement or order on
or after its commencement day and before the end of the year in respect of a
period that began on or after its commencement day, and
C
is
the total of all amounts each of which is a support amount paid by the taxpayer
to the particular person after 1996 and deductible in computing the taxpayer’s
income for a preceding taxation year;
60.1(4) The
definitions in subsection 56.1(4)
apply in this section and section 60.
Analysis
a) The validity of the
Walsh Judgment
[10]
I am of the view that
the Judgment of Walsh J. dated January 13, 1997 is valid and binding on the
Appellant. It is clear that Phyllis Yourkin, the ex-spouse, did sign the
Minutes of Settlement and the Appellant’s solicitors, Lang Michener LLP, who
were acting on his behalf at the time, signed the Minutes for him. Even though
the Appellant claims that he did not authorize his counsel to sign the Minutes
of Settlement on his behalf, he has not bothered to appeal the Judgment nor has
he brought an application to a court of competent jurisdiction to have it set
aside or varied.
[11]
It is trite law that a
court order is valid and binding so long as it has not been reversed or set
aside. As observed by the Supreme Court of Canada in R. v. Wilson, [1983]
2 S.C.R. 594 (S.C.C.):
It has long been a fundamental rule that a court order,
made by a court having jurisdiction to make it, stands and is binding and
conclusive unless it is set aside on appeal or lawfully quashed.
And
again in Wilson, supra:
It
is also well established in the authorities that such an order may not be
attacked collaterally and a collateral attack may be described as an attack in
proceedings other than those whose specific object is the reversal, variation,
or nullification of the order or judgment.
That is exactly what the Appellant has sought to do in the present
proceedings; he is trying to mount a collateral attack on the validity of the
Judgment of Walsh J. This he cannot do.
[12]
Consequently, the
Judgment of Walsh J. is a valid and subsisting one and it is binding. I have no
jurisdiction to treat it otherwise than as binding.
[13]
The Appellant argues
that at no time did he authorize his solicitors at the time, Lang Michener LLP,
to sign the Minutes of Settlement or to otherwise negotiate a settlement of the
litigation between himself and his former spouse. He argues, therefore, that he
cannot be bound by the Minutes of Settlement or the Judgment of Walsh J. That
argument must also fail.
[14]
It is trite law that a
solicitor, as agent for his/her client, has the authority to negotiate and settle
litigation in which the client is involved and such a negotiated settlement is
binding on the client. In Scherer v. Paletta [1966] 2 O.R. 524-527,
Justice Evans of the Ontario Court of Appeal stated:
The
authority of a solicitor arises from his retainer and as far as his client is
concerned it is confined to transacting the business to which the retainer
extends and is subject to the restrictions set out in the retainer. The same
situation, however, does not exist with respect to others with whom the
solicitor may deal. The authority of a solicitor to compromise may be implied
from a retainer to conduct litigation unless a limitation of authority is
communicated to the opposite party. A client having retained a solicitor in a
particular matter, holds that solicitor out as his agent to conduct the matter
in which the solicitor is retained. In general, the solicitor is the client’s
authorized agent in all matters that may reasonably be expected to arise for
decision in the particular proceedings for which he has been retained. Where a
principal gives an agent general authority to conduct any business on his
behalf, he is bound as regards third persons by every act done by the agent
which is incidental to the ordinary course of such business or which falls
within the apparent scope of the agent’s authority. As between principal and
agent, the authority may be limited by agreement or special instructions but as
regards third parties the authority which the agent has is that which is
reasonable to be gathered from the nature of his employment and duties. …
A
solicitor whose retainer is established in the particular proceedings may bind
his client by a compromise of these proceedings unless his client has limited
his authority and the opposing side has knowledge of the limitation, subject
always to the discretionary power of the Court, if its intervention by the
making of an order is required, to enquire into the circumstances and grant or
withhold its intervention if it sees fit; and, subject also to the disability
of the client. …. If, however, the parties are of full age and capacity, the
Court, in practice, where there is no dispute as to the fact that a retainer
exists, and no dispute as to the terms agreed upon between the solicitors, does
not embark upon any inquiry as to the limitation of authority imposed by the
client upon the solicitor.
[15]
In Sourani v.
Canada, [2001] F.C.J. No. 904, Justice Malone of the Federal Court of
Appeal observed at paragraph 4:
… A
lawyer is a client’s authorized agent in all matters that may reasonably be
expected to arise for decision in the particular proceeding for which he has
been retained. Mr. Sourani authorized the filling of a Notice of Appeal and the
lawyer that did so must be taken to have had the authority to make agreements
and compromises in the litigation that followed from the filing of the Notice
of Appeal. As between Mr. Sourani and his lawyer, there may have been a
limitation on the lawyer’s authority, but that was not binding on the Tax Court
Judge or counsel for the Minister who had no knowledge of any such limitation (Scherer
v. Paletta, [1966] 2 O.R. 524, at 526-527(C.A.)).
And at paragraph 6:
Mr.
Sourani’s counsel had the ostensible authority to sign the agreements dated
April 28, 1995 and May 25, 1995. Mr. Sourani is accordingly bound by those
agreements and the authority of his lawyer to enter them is not an issue for
redetermination by the Tax Court. I make no comment on whether Mr. Sourani may
have recourse against his counsel in any other forum.
[16]
Therefore, even though
the Appellant did not sign the Minutes of Settlement and even though he claims
that he did not authorize his solicitors to sign the Minutes of Settlement on
his behalf, the Judgment of Walsh J. is binding against him vis-à-vis all third
parties such as his former spouse.
(b)
Res judicata and issue estoppel
[17]
The Respondent invokes the principles of res
judicata and argues that the Appellant is estopped from relitigating the
same issue again. This is not the first time Mr. Yourkin has been before this
Court on this very same issue. He unsuccessfully challenged his assessments for
his 2001, 2002, 2003, 2005, 2006 and 2009 taxation years. In all of these prior
appeals, the parties were the same, the issue was exactly the same, and the
facts relied upon were the same except for the taxation years and perhaps the
amount in dispute. The Appellant advanced the same argument in all of these
appeals. In all of these appeals, the Appellant argued that the Judgment of
Justice Walsh was not binding on him for the reasons already discussed. This
issue has been decided adversely to the Appellant by Justice McArthur in Yourkin
v. R., [2004] 2 C.T.C. 2166 (T.C.C.); by Justice Paris in Yourkin
v. R., [2006] 3 C.T.C. 2559 (T.C.C.); by Justice Margeson in Yourkin
v. R., (2008) TCC 686; and by Justice Sheridan in Yourkin v. H.M.Q.,
(2011) TCC 557.
[18]
Whether one looks at
this situation through the lens of res judicata or issue estoppel, the
result is the same. The parties were the same, the facts in issue were the
same, the legal issue was the same and so the result must necessarily be the
same. The matter has been finally decided. The prior decisions have not been
appealed and so these prior judgments are final and are binding on me. Even if
I were of the view that I am not bound by the decisions of Justices
McArthur, Paris Margeson and Sheridan, then I would simply say that I agree
with them.
(c)
Costs
[19]
Counsel for
the Respondent is seeking an order for costs. It is very unusual for costs to
be awarded by the Tax Court of Canada where an Appellant proceeds by way of the
Informal Procedure. Yet the Tax Court of Canada Rules (Informal Procedure), SOR/90-688 as amended, do provide for an award of costs in the
discretion of the Court (see Rule 10 and Rule 11).
[20]
Rule 10
provides:
10.(1) The Court may determine the amount of
the costs of all parties involved in any proceeding, the allocation of those
costs and the persons required to pay them.
(2) The Court may award costs to the
respondent, in an amount not exceeding the amounts listed in section 11, only
if the actions of the appellant unduly delayed the prompt and effective
resolutions of the appeal.
(3) The Court may direct the payment of
costs in a fixed sum, in lieu of any taxed costs.
[21]
Rule 11 provides:
11. On the taxation of party and party costs the following fees
may be allowed for the services of counsel
…
(b) for preparing for a hearing $250:
(c) for the conduct of a hearing, $375 for each half day or
part of a half day;
(d) …
[22]
The Federal Court of
Appeal provides some guidance regarding the use that can be made of a costs
award in its decision of Fournier c. R., 2005 G.T.C. 1398 where Justice
Létourneau stated clearly that the Tax Court of Canada has the inherent
jurisdiction to prevent and control an abuse of its process: see also Yacyshyn
v. R., F.C.J. No. 196 (Fed. C.A.). The awarding of costs is one mechanism
for preventing or remedying abusive delays or procedures: see Blencoe v. British Columbia (Human Rights Commission), [2001] 2 S.C.R. 307 (S.C.C.). Costs can
certainly be used to deter litigants from bringing proceedings that are
patently unmeritorious and have no hope of succeeding.
[23]
In Graham v. H.M.Q.,
2013 TCC 294,
Justice Boyle of this Court, in dismissing an appeal assessed costs against the
unsuccessful Appellant. In doing so, Justice Boyle held that the Appellant had
advanced arguments that he knew were vacuous and devoid of merit and this
constituted an entirely unnecessary proceeding thus delaying the prompt and
effective resolution of his tax appeal by way of dismissal. Justice Boyle
assessed Rule 10 costs in the amount of $375 which is the amount set by Rule
11(c) for the conduct of a hearing of a half-day or less in length.
[24]
In R. v. Yourkin
(June 2 2010; 2010-382(IT)I), Justice Hogan in very brief oral reasons
dismissed Mr. Yourkin’s appeal but refused to order any costs on the grounds
that he was not satisfied that he had the ability to pay. It is clear, however,
that Mr. Yourkin has not in the slightest been deterred in bringing
unmeritorious appeals. He knows that his arguments are “vacuous and devoid of
merit”, to borrow the words of Justice Boyle in Graham. The present Appeal
is an entirely unnecessary proceeding
that was doomed to fail. For Mr. Yourkin to bring an Appeal before this Court
arguing an issue that has been decided against him many times in the past and
that he knows will be decided against him again, constitutes an abuse of the
process of this Court. Pursuant to Rule 10 and Rule 11(b) and (c), I award
costs against him in the amount of $250 for preparing for a hearing and costs
of $375 for a half-day hearing, for a total of $625.
Conclusion
[25]
It is clear from the
terms of the Minutes of Settlement and the Judgment rendered by Walsh J., that
the issue of spousal support and the division of pension benefits were treated
separately; the pension benefits formed part of the equalization of property
settlement, not part of a spousal support regime. In fact, according to the
Minutes of Settlement and the Judgment, the Appellant was no longer required to
pay any spousal support. The effect of the Walsh J. Judgment was to sever the
pension so that when payable, the proportionate share of each spouse would be
paid directly to the Appellant and his former spouse respectively. Each
received it as income in his or her own hands. Each was responsible for paying
the taxes on the amount he or she received. In 2011, Phyllis Yourkin did not
receive any spousal support from the Appellant since he was not obligated to
pay her any. All she received was monthly payments representing her share of
the Pension Plan, which was a family asset. Furthermore, the Appellant has not
paid any taxes on the amount which was paid to Phyllis Yourkin from his Pension
Plan. He never paid any amount to Phyllis Yourkin at all so it is illogical
that he should claim a deduction for any amount that he never paid. The payment
by the Pension Plan of a portion of the pension cannot be found to be a payment
by the Appellant to his former spouse.
[26]
In conclusion, the
Appellant did not pay any support to his former spouse during the taxation year
pursuant to an Order of a competent tribunal and thus he cannot claim any
deduction from income as spousal support.
[27]
The Appeal is
therefore dismissed.
[28]
The Appellant must pay
the Respondent’s costs fixed at $625.
Signed at Toronto, Ontario, this 13th day of February 2014.
"Rommel G. Masse"
Email this Content