Warner v. The Queen, 2009 TCC 151 (Informal Procedure)

CERTIFICATION OF TRANSCRIPT OF

REASONS FOR JUDGMENT

Let the attached certified transcript of my Reasons for Judgment delivered orally from the Bench at Toronto, Ontario on February 25, 2009, be filed.

Campbell J.

Signed in Ottawa, Canada, this 23rd day of March 2009.

  Court File No. 2008-1269(IT)I

  TAX COURT OF CANADA

BETWEEN:

  RON S. WARNER

  Appellant

  - and -

  HER MAJESTY THE QUEEN

  Respondent

- and -

ALICE WARNER

Third Party

ORAL REASONS AND DECISION

RENDERED BY THE HONOURABLE MADAM JUSTICE CAMPBELL

at Courts Administration Service, Room 6B

180 Queen Street West, 6^th Floor,

Toronto, Ontario

on Wednesday, February 25, 2009 at 2:00 p.m.

APPEARANCES

Mr.  Ron S. Warner  on his own behalf

Mr. Edward G. Spong  for Alice Warner

Mr. Thang Trieu  for the Respondent

Also Present:

Ms Roberta Colombo  Court Registrar

Ms Shirley Sereney   Court Reporter

  A.S.A.P. Reporting Services Inc. 8 2009

200 Elgin Street, Suite 1105  130 King Street W., Suite 1800

Ottawa, Ontario K2P 1L5  Toronto, Ontario M5X 1E3

(613) 564-2727  (416) 861-8720

  Toronto, Ontario

--- Upon commencing the Oral Reasons and Decision

  on Wednesday, February 25, 2009.

JUSTICE CAMPBELL: Let the record show that I am delivering oral reasons in the appeal of Ron Warner which I heard earlier today.

This appeal is in respect to Mr. Warner’s 2006 taxation year. He is seeking to deduct from his income a lump sum payment of $5,000 paid to his former spouse, Alice Warner. Ms. Warner did not include this amount in her income.

The parties separated in 2002 and were divorced by Order dated October 4, 2004.  Subsequently on February 13, 2006, Minutes of Settlement were signed by the Appellant, his former spouse, and their respective solicitors. Although the Minutes of Settlement were handwritten, they were endorsed by the Court on February 13, 2006.

One of the terms of the Minutes of Settlement was that Mr. Warner would pay spousal support of $271 per month commencing March 1, 2006 to Alice Warner. Mr. Warner has been permitted the deduction for those payments relating to the monthly $271 amount which he paid in 2006.

What is in dispute is the $5,000 payment. The clause respecting this, as contained in the Minutes of Settlement, states:

“The Respondent shall pay the sum of $5,000 by bank draft or certified cheque to the Applicant within 45 days hereof in full satisfaction of all spousal support claims up to and including February 28, 2006.”

Mr. Warner on a number of occasions throughout the hearing expressed concerns over the manner in which the terms of the Minutes of Settlement were dealt with. I understand his frustration with the process and how it has affected his life. I hear it many times from individuals before me who have gone through family and divorce proceedings. However, although Mr. Warner may be unhappy with the agreement and his participation in negotiating the terms (which he felt he was denied by the process), the Minutes constitute a binding and legally-enforceable document sanctioned by the Court.

The narrow issue before me is simply whether I can permit Mr. Warner to deduct the $5,000 payment. The deduction has been denied by the Minister of National Revenue because it does not comply with the definition requirements of “support amount”, contained in subsection 56.1(4) of the Income Tax Act (the “Act”), as it was not payable on a periodic basis. The relevant portion of the definition states:

“Support amount” means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient...

The Appellant can deduct under subsection 60(b) of the Act only if he meets this definition.

I heard evidence from Mr. Warner, Alice Warner being represented in Court by her solicitor. Much of Mr. Warner’s evidence related to the frustration he has felt over the years in dealing with the process. In respect of the actual issue, he seemed to be saying that the $5,000 figure was, as he put it, a number “pulled out of the air”.

From the time of separation in 2002 until the Minutes of Settlement were signed in 2006, he testified that he did not pay Alice Warner as she was not co-operating with the process and he did not believe she would be eligible for any support from him. He stated that he only agreed to this amount because, if he did not, he was told that his pension could be garnisheed for a much higher amount at a later date.

I have little else upon which to characterize this payment except this evidence from Mr. Warner and the actual provisions in the Minutes of Settlement. Certainly there is nothing in Mr. Warner’s evidence that would indicate that the payment was anything other than a lump sum payment which will not be deductible. He did not relate the payment to any type of periodic payment that he was voluntarily making or paying pursuant to an Order of the Court prior to the Minutes of Settlement in 2006. In fact, he testified to quite the contrary: that in fact he did not believe that Alice Warner was entitled to any support from him prior to 2006.

The eight factors set out in The Queen v. McKimmon, 90 DTC 6088, which, although not exhaustive, are intended to assist the Court in the determination of such a payment as deductible or not.  Briefly, the $5,000 payment is not a weekly or monthly amount; it is a one-time payment which, according to his evidence, represented a sizeable portion of his pension income in 2006 and, according to the evidence, released him from his obligation to pay Alice Warner support prior to 2006. Applying the McKimmon factors would support that it can be nothing else except a lump sum capital payment.

According also to the principles set forth by the Federal Court of Appeal in Peterson v. Canada (appeal by Tossell), [2005] 3 C.T.C. 277, the Minutes of Settlement give no recognition to a pre‑existing obligation to pay support to Alice Warner or of arrears that existed in 2006 as a result of such a prior obligation. Without this connection or link, I am simply bound by the provisions of the Minutes of Settlement and the evidence, and they provide no connection or link between the $5,000 payment and any pre-existing obligation to pay support or between the $5,000 payment and any amount of existing arrears.

It was payment to satisfy amounts he may have owed prior to 2006 for support, but which were not payable prior to 2006 on a periodic basis or any other basis because they were not ascertained.

Since they cannot be characterized as arrears or as a catch-up of amounts otherwise payable on a periodic basis, I must dismiss the appeal without costs, Mr. Warner, because the $5,000 payment is a lump sum payment which, according to the provisions of the Act, simply is not deductible.

That concludes my reasons. Thank you.

--- Whereupon the excerpt concluded.

I HEREBY CERTIFY THAT I have, to the best

of my skill and ability, accurately recorded

by Shorthand and transcribed therefrom,

the foregoing proceeding.

Shirley Sereney, Shorthand Reporter