Larivière v. The Queen, 89 DTC 5176, [1989] 1 CTC 297 (FCA)

Pratte, J. [Translation]:—The appellant is challenging a judgment of the Trial Division (Pinard, J.) which allowed in part only the appeal brought by him against income tax assessments for the 1978 and 1979 taxation years.

The only point at issue is whether paragraph 60(b) of the Income Tax Act [1] authorized the appellant to deduct, in computing his income for 1979, the sum of $10,000 which he had to pay his ex-wife under a decree nisi of divorce rendered on March 13,1979 by the Quebec Superior Court.

It was established that the amount in question was for alimentary purposes. Despite this, the trial judge held that paragraph 60(b) did not authorize such a deduction because, in his opinion, it was neither an “alimony” nor an "other allowance payable on a periodic basis" within the meaning in which paragraph 60(b) uses these expressions.

It seems certain that, as the judge said, the words “pension alimentaire” in the French text of paragraph 60(b) do not have the general meaning given to them by Quebec civil law. They were used to translate the English word “alimony”, which refers only to the pension a married person must pay his spouse during the marriage. As the amount of $10,000 at issue here was paid by the appellant to his ex-wife after their marrriage was dissolved, that is not the payment of "pension alimentaire” in the limited sense in which that phrase is used in paragraph 60(b). The judge was therefore right to refuse to allow it to be deducted as such.

It remains to determine whether he was right to find that this amount was not paid as an “allowance payable on a periodic basis for the maintenance of the recipient thereof", despite the fact that this was clearly an amount of an alimentary nature. In support of this conclusion the judge relied on the judgment in Veliotis v. The Queen, [1974] 1 F.C.3; [1974] C.T.C. 237, in which when I was sitting in the Trial Division I said the following:

Secondly, the sum of $25,000.00 cannot be said to have been paid as an "allowance payable on a periodic basis". In my view, the allowance payable on a periodic basis referred to in section 11(1)(l) is periodic in the same sense as alimony, and alimony is a periodic allowance not only in the sense that the payer must make payments at regular intervals, but also in the sense that at regular intervals the payer must provide a sum adequate to maintain the payee until the next payment. Consequently, a divorce decree which ordered a husband to pay his spouse the sum of $100,000.00 in four monthly instalments of $25,000.00 would not in the normal course be a judgment ordering the payment of a periodic allowance within the meaning of section 11 (1)(l). Moreover, it should be noted that the section refers to a sum paid as an “allowance payable on a periodic basis”. An allowance is a specific sum of money paid to someone. An allowance is payable on a periodic basis when a specific sum of money is payable at regular intervals. A judgment does not create an obligation to pay an allowance on a periodic basis if it does not require the payer to pay the same sum of money at regular intervals. In the case at bar the divorce decree may impose on the plaintiff an obligation to make certain payments on a periodic basis; but it does not require him to make a periodic allowance to his spouse of $25,000.00.

After citing this judgment, the judge concluded that the sum of $10,000 was not paid “as . . . [an] allowance payable on a periodic basis", first because it was not established that this amount was "adequate to maintain" the appellant’s ex-wife during the period for which the amount was paid, and second, because it was paid under a decree requiring him to make unequal periodic payments.

I should like to make two observations regarding the reasons for judgment rendered by me in Veliotis. If I had to write them over again, I would not say that the periodic allowance referred to in paragraph 60(b) must be a sum "adequate to maintain the payee until the next payment": I would instead write that it must be an amount paid to enable the payee to provide for her maintenance, at least in part, until the next payment rather than for the purpose of allowing her to accumulate a capital sum. As regards the statement that a judgment does not create an obligation to pay an allowance on a periodic basis if it does not require the payer to pay the same sum of money at regular intervals, I now feel this is incorrect. I now believe that an allowance payable on a periodic basis can be a variable amount.

Having said this, the question for solution as I understand it is as to whether the decree under which the $10,000 payment was made imposed an obligation to make periodic payments for the purpose of enabling the appellant's ex-wife to maintain herself during the period for which these payments were made, rather than enabling her to establish a capital sum. The answer at first sight seems easy. The Superior Court judge said that, instead of ordering the appellant to pay "an alimentary pension in monthly instalments", he relied on the provisions of subparagraph 11(1)(a)(i) of the Divorce Act [2] to “make an order directing the applicant to pay the respondent the total sum of $20,000, to be paid in instalments as follows, namely: $10,000 payable on April 1 next, followed by two further annual, equal and consecutive payments of $5,000 each payable on April 1, 1980 and 1981 respectively”. One is inclined to think on reading this passage from the judgment that, rather than ordering the appellant to pay an alimentary pension (within the meaning given to that term in Quebec civil law), the judge intended to order him to pay a lump sum.

If, however, the Superior Court judge's reasons for judgment are examined carefully, it becomes clear that despite the language used by him his intention was to order the appellant to pay an annual alimentary pension for a fixed three-year term. The appellant's wife received a provisional alimentary pension from her husband at the time of the divorce of $1,075 a month, plus the cost of her rental. The first payment of the “total sum” was therefore much less than that of the pension hitherto paid by the appellant. Even more important, the judge indicated that he regarded the payment of the "total sum” of $20,000 to the appellant's ex-wife as a temporary provision allowing her to reorganize her life, complete her training and begin a new life. The three payments of $10,000, $5,000 and $5,000 were therefore income rather than capital for the person receiving them: they were payable periodically for her maintenance; they were therefore deductible in computing the appellant's income.

I would allow the appeal with costs and vary the Trial Division judgment to read as follows:

The appeal is allowed with costs and the assessments regarding income tax payable by the appellant in 1978 and 1979 are referred back to the Minister for reconsideration and reassessment on the basis that in computing his income for the years in question, the appellant was entitled to deduct the amounts he claimed to be able to deduct under paragraph 60(b) of the Income Tax Act.

Appeal allowed.