Janet A. McGillivray v. Minister of National Revenue, [1986] 2 CTC 2422, 86 DTC 1819

Brulé, T.C.J.:—These appeals stem from reassessments of the appellant's 1977, 1978, 1979, 1980 and 1981 taxation years. Those for 1977 and 1979 involve taxable capital gains and were heard on common evidence while the appeals for 1978, 1980 nd 1981 involving child tax credits were consequential and depended on the appeals for 1977 and 1979.

Facts

The appellant and her husband (McGillivray) separated in 1975 and in 1976 she commenced an action seeking an order that she was entitled to a settlement from the assets which had been acquired during her marriage.

Prior to the action going to trial the parties entered into minutes of settlement dated January 21, 1977, wherein it was acknowledged that the appellant had at all times been beneficially entitled to certain properties registered in the name of McGillivray. In consideration of the withdrawal of a lis pendens registered by the appellant it was agreed that McGillivray would convey title to certain properties “of which she has always been the beneficial owner” and McGillivray would cause his solicitor to pay the appellant the sum of $49,647 plus interest which amount was held in trust and which represented partial proceeds from the sale of one of the properties involved.

This settlement proceeded to the Court and a judgment was signed on February 8, 1977, basically carrying out the provisions in the settlement agreement.

Appellant’s Position

In the notice of appeal the appellant stated that any gains on the disposition of the properties involved were attributable to and taxable in the hands of McGillivray on a certain basis as set out in paragraph 10 therein as follows:

she acquired her interest in the property after 1971 by way of a transfer from McGillivray;

at the time she acquired her interest in the property and at the time the property was disposed of she was legally married to McGillivray and they were both residents of Canada for the purposes of the Act;

the property was originally acquired from funds provided solely by McGillivray;

subsection 73(1) of the Act operated to deem that no disposition occurred on the transfer of the property from McGillivray to the Appellant; and

subsection 74(2) of the Act operated to attribute capital gains on the dispositions to McGillivray and the amounts assessed are taxable in his hands and not in the hands of the Appellant.

It was further pleaded for the 1977 appeal that if the attribution rules did not apply the disposition of one part of the property occurred in 1976 and should have been taxed then.

At the hearing counsel for the appellant suggested that there were ambiguities in the Court order and as a result this Court was entitled to hear evidence as to the differences and determine exactly what happened between the parties and what were their rights under provincial law.

Minister's Position

It was the Minister’s opinion that he could assess based on the documented relationship between the parties and further that no transfer of property from McGillivray to the appellant took place until after the Court order. It was allowed that in applying the Income Tax Act it may be necessary to look to provincial law such as the Married Woman's Property Act to ascertain the legal relationships between parties and the legal consequences of transactions. Even so counsel asserted that if resort had to be made to provincial law there had been no transfer of the property involved as the appellant could not collect any proceeds from the 1976 sale until 1977 and that the other property was not transferable, both until after the Court order in 1977.

Analysis

The appellant and McGillivray were at odds over their matrimonial rights to property and as a result a law suit was commenced by the appellant.

Unlike the cases put forth by counsel for the appellant:

Winnifred M. Hillis and Irvin Hillis v. The Queen, [1983] C.T.C. 348; 83 D.T.C. 5365,

George A. Murphy v. The Queen, [1980] C.T.C. 386; 80 D.T.C. 6314,

Tapani Nestor Valitalo and Jose Murillo v. M.N.R., [1979] C.T.C. 2320; 79 D.T.C. 327,

Jacques Beique v. The Queen, [1981] C.T.C. 75; 81 D.T.C. 5050

which all involved non-contentious matters with the parties concerned, the case at bar is quite different.

In the cases cited, the parties took certin actions and certain rights which had already been established such as in the Hillis and Murphy cases. There were voluntary transfers of property. In the Valitalo and Béique cases there were attributions because of ownership.

In this case nothing was transferred voluntarily. McGillivray acknowledged that his wife had an interest and indeed in the minutes of settlement said she had at all times been beneficially entitled to certain properties. Also these minutes were signed after consultation with his solicitor.

It was obvious that in law the appellant was entitled to something, but until she started her action against her husband and culminating with the judgment of the Court nothing was absolutely defined. Until ordered to pay moneys and make a transfer of property the appellant was not certain what she would actually receive.

The proceeds from the property sold in 1976 were placed in trust which was necessary because of a lis pendens registered on March 16, 1976. The property was not sold until April of 1976. The sale could not be stopped because of an option given to the purchaser, but the proceeds could be and were held in trust until the settlement of the action between the spouses.

This settlement took place in the judgment given in 1977. The judgment provided with respect to any provincial laws on page 4 as follows:

AND IT IS FURTHER ORDERED AND ADJUDGED that any and all claims at law that the plaintiff and/or the Defendant may have against the other with respect to the property of the other of whatever nature or kind and however arising including, without restricting the generality of the foregoing, those arising under the provisions of the Partnership Act R.S.S. 1965 Chapter 380 or the Married Women’s Property Act, R.S.S. 1965 340 as amended by S.S. 1975 Chapter 29; are hereby fully satisfied and extinguished.

Counsel for the appellant said there were ambiguities in this judgment and that this Court could then look further. I believe the parties were satisfied with the judgment as it followed the minutes of settlement signed and argued upon by both of them. If there was any problem with the Court order there were remedies available to the parties in law to have such corrected. It is not proper to come along some eight years later and say that the judgment was not clear even though accepted and carried out by the parties.

I do not intend to review the authorities cited by the respondent. Suffice it to say that the governing document here was the judgment of February 8, 1977. It gave the appellant the quantum of her rights even though she and her husband may have agreed ahead of this time that the appellant had a beneficial interest in the property owned by the husband.

As a result of the order interest on the money held in trust was paid to her as well as the capital. Before that time she could not include either in her 1976 tax return.

Similarly on disposition of the other property in 1979 she had ownership of her portion and realized a capital gain when it was sold.

The net result is that the appellant was properly reassessed in 1977 and 1979 and as a result the appeals for 1978, 1980 and 1981 are unfounded.

The appeals are hereby dismissed.

Appeals dismissed.