Henri Léveillé v. Her Majesty the Queen (Informal Procedure), [1993] 2 CTC 2190

P.R. Dussault, T.C.C.J.:—This appeal was heard pursuant to the informal procedure. It is an appeal from a reassessment for the appellant's 1989 taxation year by which the Minister of National Revenue (the" Minister") disallowed the deduction of $12,500 claimed for alimony or any other allowance payable on a periodic basis. In making this reassessment, the Minister took into account, inter alia, the facts stated in paragraphs 6(a) to (j) of the reply to the notice of appeal, which reads:

(a) the appellant married Dolora Cyr on November 17, 1984;

(b) there were no children of the marriage of the appellant to Dolora Cyr;

(c) the appellant and Dolora Cyr had been separated since May 1, 1989;

(d) an interim order issued by the Superior Court of the province of Quebec, district of Montréal, on July 4, 1989 set the alimony to be paid to Dolora Cyr by the appellant at $400 a month;

(e) a consent to corollary relief and property sharing was made between the appellant and Dolora Cyr on August 30, 1989 and approved by André Deslongchamps, J. of the Superior Court on June 28, 1990;

(f) the said consent to corollary relief provided for the payment by the appellant to Dolora Cyr of a lump sum of $25,000, broken down as follows:

— $12,500 payable on signature of this agreement, that is, of the consent to corollary relief and property sharing of August 30, 1989;

— $6,250 payable on the date the divorce decree was rendered;

— $6,250 payable within five days of receipt of the divorce certificate;

(g) the payments made by the appellant to Dolora Cyr were made at intervals of more than a year;

(h) the said consent to corollary relief made between the appellant and Dolora Cyr on August 30, 1989 provided that, if the appellant failed to pay the specified amounts on the specified dates, the balance would become payable and bear interest at 12 per cent per annum from the due date;

(i) the said consent to corollary relief made between the appellant and Dolora Cyr on August 30, 1989 further provided that, following payment of the said amount by the appellant, the parties would give each other full and final mutual release from any claim they might make against each other;

(j) the sum of $12,500 paid by the appellant in the 1989 taxation year is not an allowance payable on a periodic basis.

[Translation.]

The agreement between the parties dated August 30, 1989 was approved by the divorce decree which took effect on July 29, 1990. The divorce certificate was issued on August 20, 1990. Paragraphs 5, 6 and 9 of the agreement read as follows:

5. The defendant agrees to pay the plaintiff as a lump sum the amount of $25,000, to be payable as follows:

— $12,500 payable on the date this agreement is signed;

— $6,250 payable on the date the divorce decree is rendered;

— $6,250 payable within five days of receipt of the divorce certificate;

in the event that the defendant fails to make these payments on the dates scheduled, the balance shall become payable and bear interest at 12 per cent per annum from the due date;

6. in consideration hereof and on condition that the sum of $25,000 is paid, the parties give each other full and final mutual release from any claim they might make against each other;

9. as of the date of signature of this consent, the parties waive their right to any alimony, lump sum or compensatory allowance . . . .

[Translation.]

In his testimony, the appellant contended that it was quite clear to him that the amount of $25,000 was awarded to Dolora Cyr, who would become his exspouse, as alimony to enable her to relocate or "settle in until she finds something else” [translation], according to the expression used, without his having to pay her alimony "month after month". According to the appellant, there was no question of property sharing since everything belonged to him, but of giving Mrs. Cyr an amount to provide her with support since otherwise she would have nothing to live on. Mrs. Cyr stated in her testimony that there was no question of alimony and that she was waiving alimony in return for the lump sum of $25,000 on which the parties had agreed. It may be noted that the agreement between the parties which was approved by the divorce decree was negotiated by their respective counsel.

The agreement seems clear to me. The lump sum of $25,000 was paid in return for a waiver "of any alimony and lump sum or compensatory allowance . . . ." This amount was payable in three instalments, the first of $12,500 being payable when the agreement was signed. The other two were payable when specific events occurred, the divorce and the issuance of the divorce certificate, the dates of which were then unknown to the parties. While, as Mrs. Cyr had no financial resources, it may be assumed that a large part of the $25,000 would have been used for her maintenance, it certainly cannot be said that the first payment of $12,500 in 1989 was a sum paid "as alimony or other allowance payable on a periodic basis . . . ." Absolutely no regular schedule was provided for, and moreover nothing more was payable after the divorce certificate had been obtained. Further, both the lump sum of $25,000 and the first payment of $12,500 are large amounts when compared with the appellant's income of $26,014.34 in 1989. As compared with the alimony of $100 a week received by Mrs. Cyr for several months before the agreement was signed, these amounts are clearly much larger. According to the tests suggested inter alia by the Federal Court of Appeal in The Queen v. McKimmon, [1990] 1 C.T.C. 109, 90 D.T.C. 6088, the payment of $12,500 as the first instalment on a lump sum of $25,000 was a way for the appellant to rid himself of his responsibilities to his spouse. As there is nothing periodic about the way in which the payments were made, I consider that it is actually an exchange or purchase of the capital cost of alimony or a maintenance payment which could have been arranged on a periodic basis. In this sense, in the instant case the characteristics of the payment are very different from those recognized in Larivière v. The Queen, [1989] 1 C.T.C. 297, 89 D.T.C. 5176 (F.C.A.), Hanlin v. The Queen, [1985] 1 C.T.C. 54, 85 D.T.C. 5052 (F.C.T.D.), Henson v. M.N.R., [1985] 2 C.T.C. 2165, 85 D.T.C. 505 (T.C.C.) and M.N.R. v. Hansen, [1967] C.T.C. 440, 67 D.T.C. 5293 (Ex. Ch.), so that the $12,500 payment made in 1989 must be treated differently.

For these reasons, the appeal is dismissed.

Appeal dismissed.