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.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, 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.
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
J.T.C.C.
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