Bernard A. Hodson v. Her Majesty the Queen, [1987] 1 CTC 219, 87 DTC 5113

Strayer, J.:—This is an appeal from a judgment of the Tax Court of Canada of September 1, 1985, dimissing the plaintiff’s appeal from assessments of his income tax for the taxation years 1981 and 1982. The appeal is in respect of the amounts of $12,000 and $12,800 paid by the plaintiff to his wife in 1981 and 1982 respectively. The plaintiff says that these amounts were paid as a separation allowance. The Minister relies on paragraph 60(b) of the Income Tax Act. Section 60 sets out amounts that may be deducted from a taxpayer's income for the purpose of computing taxation and paragraph (b) describes the following:

(b) Alimony payments.—an amount paid by the taxpayer in the year, pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year; .. .

In the appeal before me the plaintiff represented himself and called no evidence. From the pleadings and from the remarks of the plaintiff and counsel for the defendant I am able to conclude that it is agreed that the plaintiff and his wife were living apart from each other during 1981 and 1982, and that the respective amounts were paid to her. The plaintiff concedes that there was no court order requiring him to make such payments nor was there any written agreement requiring such payments. He put in no evidence as to the arrangements under which the money was paid and I am unable to make any findings on that question on the basis of the record. The plaintiff instead relies on what are essentially legal arguments: first, he contends that paragraph 60(b) should be interpreted in such a way as to cover the payments made by him to his wife; and secondly, he says that the effect of the paragraph, if construed as it has been construed by the Minister and by the Tax Court, is to discriminate against a certain class of taxpayers in a manner precluded by the Canadian Charter of Rights and Freedoms.

With respect to the first argument, the plaintiff is in effect asserting that notwithstanding the language of the Income Tax Act the Court should construe it in an "equitable" fashion or in a manner in accordance with "fairness" or "natural justice". In support of this argument he submitted a large number of decided cases. Most of these dealt with the doctrine of "fairness" or “natural justice" in the context of the procedural requirements for administrative decision-making or for a “fair hearing". It is true that where officials, boards, or tribunals have the power to make decisions, and no specific procedure is prescribed by statute or regulation for the making of that decision, there is an implied obligation which the courts will enforce requiring such decisions to be made by a fair procedure. That is not the issue in this case. The issue here is whether the Minister of National Revenue has properly interpreted paragraph 60(b) in accordance with the requirements prescribed by Parliament for the recognition of a deduction from a husband’s income of money paid by him to support his wife during a separation. This is a matter of the proper interpretation of the statute. The other cases cited by the plaintiff did involve the interpretation of statutes. Most of these concerned other statutes, with one or two involving the interpretation of this section but with respect to other issues. None of them are directly relevant.

The intention of Parliament as expressed in paragraph 60(b) is quite clear: either there must be a court order requiring such payments or else there must be a "written agreement" requiring them. If Parliament had intended to permit such deductions to be made on the basis of oral agreements or implied agreements or in respect of purely voluntary payments it would have said so. Having used the words “written agreement” it has clearly excluded other less formal arrangements.

Such an interpretation does not lead to an absurdity or manifest injustice. It must be kept in mind that normally spouses who live together cannot split their income so as to reduce total family taxation. Paragraph 60(b) creates an exception to the general rule, giving separated spouses who come within its terms a certain tax advantage. As the Supreme Court of Canada said in Gagnon v. The Queen, [1986] 1 C.T.C. 410 at 412; 86 D.T.C. 6179 at 6181:

The purpose of these provisions, by allowing income splitting between former spouses or separated spouses, is to distribute the tax burden between them. As C. Dawe wrote in an article titled “Section 60(b) of the Income Tax Act: An Analysis and some Proposals for Reform , (1980) 5 Queen’s L.J. 153:

(T)his allows the spouses greater financial resources than when living together, compensating in part for the lost economies of maintaining a single household.

It is no doubt for this reason that the courts have accepted what appears to be the literal meaning of paragraph 60(b), that is that to be deductible from income any such payments must be made under a specific court order or a written agreement. In Horkins v. The Queen, [1976] C.T.C. 52; 76 D.T.C. 6043, Collier, J. of this Court held that payments made voluntarily, in accordance with the Ontario Rules of Practice, in lieu of an order being made for interim alimony, were not made pursuant to court order. No order would be involved unless there was default in such payments. In Hardtman v. The Queen, [1977] C.T.C. 358; 77 D.T.C. 5219, Mahoney, J. of this Court held that payments made by the taxpayer to his wife during their separation, but prior to the date of execution of a separation agreement, could not be deducted. He was confronted there, as I am here, with an argument that the equitable jurisdiction of the Court should enable it to interpret paragraph 60(b) to cover a situation where payments had been made in good faith and in respect of separation, even though no written agreement existed. At 359 (D.T.C. 5220) he stated

I have no doubt that, if given the discretion by Parliament, the Board and this Court could competently distinguish sham and genuine maintenance payments made in the absence of written agreements and thereby arrive at results more equitable to taxpayers such as the Plaintiff; however, the discretion is Parliament’s to give, not the Court’s to take.

Other decisions have equally rejected informal arrangements, unsigned agreements, etc. as the basis for a deduction under this paragraph: see, e.g., Jacoby v. M.N.R., [1981] C.T.C. 2935; 81 D.T.C. 824 (T.R.B.); Chamberland v. M.N.R., [1981] C.T.C. 2302; 81 D.T.C. 288 (T.R.B.); Dlagacz v. M.N.R., [1984] C.T.C. 2653; 84 D.T.C. 1549 (T.C.C.); and the Horkins case supra, at 56-7 (D.T.C. 6046); and Knapp v. M.N.R., [1985] 1 C.T.C. 2046; 85 D.T.C. 424 (T.C.C.). I must therefore conclude that the payments made by the plaintiff in 1981 and 1982 did not come within the requirements prescribed by Parliament in paragraph 60(b) and thus cannot be deducted from his income for those years.

The plaintif’s second contention, although not very well defined, is to the effect that if I should find, as I do, that paragraph 60(b) requires that there be a court order for alimony or a written separation agreement, then the Income Tax Act discriminates against or infringes the freedom of religion of those people who are opposed to such matters on religious grounds. More specifically, he says that his wife is a Roman Catholic who was educated in a Roman Catholic school where she learned that matters such as separation were contrary to the doctrines of the Church. He says that on this ground she refused to sign a separation agreement. It must be emphasized that there was no evidence presented to me on any of these matters. Whether this amounts to a claim for infringement of freedom of religion as protected by section 2 of the Charter, or of discrimination based on religion as prohibited by section 15 of the Charter, it would be necessary to prove that paragraph 60(b) truly interferes with the religious views or practices of Roman Catholics. It is not suggested that paragraph 60(b) has such interference as its purpose and it therefore does not fall on the basis of R. v. Big M Drug Mart Limited, [1985] 1 S.C.R. 295; 18 C.C.C. (3d) 385. In theory it might still be held to infringe the Charter if its deleterious effect is substantial, but such effect must be proved with respect to the particular religion in question: see Edwards Books and Art Limited et al. v. The Queen, [1986] 2 S.C.R. 713 at 766-68, Dickson, C.J.C. It may be that in a proper case judicial notice could be taken of such matters, but I am not prepared to accept, without clear evidence to that effect, the rather unflattering view that the Roman Catholic faith permits separation of spouses and the payment of separation allowances so long as nothing is committed to writing. I therefore reject the arguments based on the Charter.

As a final observation, it may be noted that the plaintiff in his pleadings and in his argument made reference to "bureaucratic" errors of omission and commission to which he attributed the contested assessments. Such generalizations are fashionable. That they are sometimes warranted is no doubt true, although inefficiency, incivility, and a lack of reponsiveness are not unknown in large commercial organizations in the private sector, particularly those which are computer-driven. But in the present case, the plaintiff has made the rather common mistake of blaming the messenger for the contents of the message. The results of the assessments here, while not to the liking of the plaintiff, are in full conformity with the law as adopted by Parliament and as interpreted by the courts. It is the duty of officials and of the courts to obey a law enacted by Parliament, at least unless it can be successfully challenged under the constitution.

The appeal will therefore be dismissed. I am also going to award costs against the plaintiff since he has raised during these proceedings an issue which has been throughly litigated before. Having failed in the Tax Court of Canada he came to this Court with essentially the same arguments. His case has done nothing to add to the clarification of the law.

Appeal dismissed.