Bernard a Hodson v. Minister of National Revenue, [1985] 2 CTC 2326, 85 DTC 615

Couture, CJTC:—This appeal dealt with assessments for the taxation years 1981 and 1982.

In assessing the appellant the Minister disallowed as a deduction in computing his income amounts of $12,000 and $12,800 claimed as a “separation allowance” paid to his wife in 1981 and 1982 respectively from whom he was living apart.

The appellant acted on his own behalf and his evidence disclosed the following facts:

He has been living apart from his wife since the fall of 1979. She was educated in a Roman Catholic school and learned that separation and divorce were contrary to the teachings of her Church, and, therefore refused to sign a separation agreement in spite of attempts made through his lawyer to obtain her signature.

Notwithstanding his wife's refusal to sign such an agreement the appellant has paid her voluntarily the amounts referred to above and claimed them as deductions in computing his income for the said taxation years.

The Minister relying on the provisions of paragraph 60(b) of the Income Tax Act RSC 1952 c 148 (hereinafter referred to as the Act) and as they applied to the 1981 and 1982 taxation years disallowed the said deductions and reassessed him accordingly.

In his presentation the appellant submitted that his arguments were based on the wording of the Act but more importantly on the Canadian law in general and on the Canadian Charter of Rights and Freedoms (hereinafter referred to as the Charter) in particular.

On the application of the provisions of the Act, he relied on the wording of section 60.1 and more specifically on the following italicized phrase of the said section:

Where, after May 6, 1974, a decree, order, judgment or written agreement described in paragraph 60(b), (c) or (c.1), or any variation thereof, has been made providing for the periodic payment of an amount by a taxpayer to or for the benefit of a person who is his spouse . . .

The appellant stated and I quote: "I maintain that the monthly payments made by me, and accepted by my wife, constitute an acceptable variation for the purpose of making a deduction in the meaning of the Act.”

As additional support for his submission that he is entitled to the deductions as claimed notwithstanding the provisions of paragraph 60(b), the appellant contended that the legislator cannot in a statutory provision envisage at the time of its enactment all the legal and factual situations that may arise in the future and consequently it was the role of the judiciary to supplement to this deficiency in interpreting provisions of statutes by considering the relevant circumstances of each case and rendering judgments based on equity rather than on a strict interpretation of the words used by parliament in the legislation.

In my opinion, the appellant is wrong on both counts, that is, his interpretation of the phrase “‘any variation thereof” in section 60.1 and also in his supplementary argument as to the role of the judiciary.

I will deal first with the appellant’s submission regarding the role of the judiciary in interpreting provisions of statutes as this portion of his submission does not present serious difficulty.

The jurisprudence on this issue is abundantly clear and a brief reference to some of the pronouncements enunciated by the courts over the years should suffice to dispose of the appellant’s argument.

In A-G v Carlton Bank, [1899] 2 QB 158, Lord Russell of Killowen, C] said at 164:

The duty of the Court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, namely to give effect to the intention of the Legislature as that intention is to be gathered from the language employed having regard to the context in connection with which it is employed. The Court must no doubt ascertain the subject matter to which the particular tax is by the statute intended to be applied, but when once that is ascertained, it is not open to the Court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like. Courts have to give effect to what the legislature has said.

In Lumsden v Commissioners of Inland Revenue, [1914] AC 877, Lord Parmoor said at 924:

In coming to a conclusion on this point the ordinary principles of construction must be followed. A statute is the expression of the will of the Legislature, and it is the duty of the Courts to give effect to the language in which the will of the Legislature has been expressed. It is not the function of Courts of law to entertain questions of policy, and I am unable to give any weight to arguments based on the consideration whether a particular interpretation is more favourable to the Crown or to the subject.

In Sutters v Briggs, [1922] 1 AC 1, Viscount Birkenhead, LC after dismissing the appeal made the following comments at 8:

The consequences of this view will no doubt be extremely inconvenient to many persons. But it is not a matter proper to influence the House unless in a doubtful case affording foothold for balanced speculations as to the probable intention of the Legislature. Where, as here, the legal issues are not open to serious doubt our duty is to express a decision and leave the remedy (if one be resolved upon) to others.

It is evident that these well articulated pronouncements attest to the fallacy of the submission of the appellant regarding the role and duty of the courts, and additional quotes would merely confirm a doctrine so clearly expressed therein.

In so far as his interpretation of the provisions of section 60.1 is concerned, I am satisfied that the phrase “any variation thereof” in the said section refers strictly to the decree, order, judgment or written agreement as such instruments may have been in force from time to time prior to May 6, 1974 pursuant to which payments to a spouse or former spouse must be effected to be deductible for tax purposes as required by paragraphs 60(b) and 60(c). Section 60.1 merely allows as a deduction in computing the income of a payor a payment made to a third party for the benefit of a spouse, former spouse or an individual within a prescribed class of persons described in the laws of a province, or for the benefit of children in the custody of such a person to the extent that such decree, order, judgment or written agreement was made after May 6, 1974, or one that was in force prior to that date was amended accordingly. I cannot accept the appellant's interpretation that the expression “variation” in the section may be construed as including an arrangement between the parties which was not incorporated in a decree, order, judgment or written agreement referred to in paragraph 60(b).

In a judgment of the Tax Review Board in the appeal of G Quentin Lake v MNR, [1982] CTC 2050; 82 DTC 1080, this is said at 1082 with regard to the meaning of the phrase “any variation thereof”:

The operative term “any variation thereof should be interpreted as having application only to any variation of a "decree, order, judgment or written agreement” prepared prior to May 6, 1974 in my view.

In the light of my comments above, I fully subscribe to this pronouncement. This is, in my opinion, the only interpretation that can be assigned to the phrase “any variation thereof” in section 60.1 and consequently the appellant’s interpretation must be disregarded.

In his second argument the appellant dealt with the application of the provisions of paragraph 60(b) and more specifically with the requirement that an amount to be deductible must be paid pursuant to a written agreement. He stated that since the teachings of the Catholic Church as understood and accepted by his wife forbid her to sign such an agreement and, therefore, render compliance with the provisions of the section impossible, that the legislation encroaches on her rights and freedoms prescribed by the Charter. He did not refer the Court to any specific provisions in the Charter, but presumably had in in mind section 2 which deals with the fundamental freedoms such as freedom of conscience and religion.

Under the terms of the constitution, he said: “‘It is not permitted to enact a law or interpret a law in such a manner as to discriminate against one group of Canadians.”

In so far as he is concerned while [sic] his lawyer advised him to cancel his payments to his wife and thereby force her to sign an agreement, he professed that as a person of integrity and principle he does not believe in forcing something on someone against their will. Neither does he believe in leaving his wife destitute.

When queried by the Court as to what specific canon, dogma or decree of the doctrine of the Catholic Church he was relying on to support his wife's pretensions for her refusal to sign a separation agreement, he admitted that he was not personally cognizant of the alleged teachings of the Catholic Church and furthermore could not refer the Court to any authority emanating from the Catholic Church that would confirm his wife's allegations.

In the absence of a more authoritative source than his wife's alleged understanding of the teachings of the Catholic Church, I cannot accept that the requirements of paragraph 60(b) of the Act are in conflict with any of the teachings of the Catholic Church and thereby could be interpreted as encroaching or infringing in any way on the freedom of conscience and religion to which freedom his wife is guaranteed under the Charter.

Consequently, notwithstanding how altruistic and commendable was his gesture vis-a-vis his wife, the monthly payments effected to her cannot be deducted in computing his income for the taxation years 1981 and 1982 as they were not made pursuant to a written agreement as required by the provisions of paragraph 60(b).

In a recent judgment of this Court rendered by Associate Chief Judge Christie, in the appeal of Carmen E Knapp v MNR, [1985] 2 CTC 2046; 85 DTC 424 he held that the existence of a written separation agreement is essential if an allowance is to be deductible under the provisions of paragraph 60(b). The facts in the Knapp appeal resemble somewhat those in the present appeal.

This is said at 2047 (DTC 425-26):

The essence of the appellant’s position in this regard is stated in these extracts from his notice of appeal which was reiterated here this morning. After listing the receipts previously mentioned, the notice goes on:

“As these receipts show I paid to my ex-wife the above amounts in the months indicated in the year 1981.

During the course of the year 1981 several differences arose during our negotiations for a separation agreement. Although there were these differences an agreement was reached for the amount of money to be paid by me each month to her.

These receipts were provided to me to prove that she had agreed to the amounts indicated and also proof that she had received the money.

It is hoped that the Appeal Court will consider that the cheques written by me, are on my part, a written agreement to pay the amount indicated.

And that the receipts given to me by my ex-wife for the money received is a written agreement on her part.”

I also refer to Exhibit A-1, which is a detailed separation agreement dated August 11, 1981, prepared by the solicitor for the appellant’s then wife. It was signed by Mrs Kanpp, but not by the appellant who disagreed with some of the terms.

The foregoing submissions, together with the separation agreement unsigned by the appellant cannot bring him within the requirements of paragraph 60(b). This, I think, is clear from the judgment of Mr Justice Collier in Horkins v The Queen, [1976] CTC 52; 76 DTC 6043. At 56 (DTC 6046) he said this:

"Counsel urged that the following facts when put all together amounted to a written separation agreement pursuant to which the plaintiff was separated and living apart, and the payments in question were made pursuant to a written agreement:

(a) husband and wife had orally agreed to live separate and apart

(b) written draft separation agreements passed back and forth between their representatives, as well as correspondence on the same matters directly between the parties. Those documents and letters, it is said, confirmed in writing the separation and the living apart.

(c) the acceptance of the alimony cheques by the wife for the months in question, and the general reference to the payments in the letter earlier set out (Exhibit 5 to the Agreed Statement of Facts).”

In my opinion, no matter how hard one strains to find in favour of the plaintiff, those facts cannot be held to be an agreement in writing or a written separation agreement (or both). They do not, as I see it, meet the requirements of 11(1)(1).

The provisions of paragraph 60(b) replaced the provisions of paragraph 11(1)(1) under which the Horkins' appeal was decided but the wording of both sections is basically identical.

The present appeal is therefore dismissed.

The appellant raised a number of other issues in his pleadings implying that the treatment he received from unnamed officials of Revenue Canada amounted to harassment causing him needless embarrassment and frustration.

Again no evidence was adduced to support his allegations and even if they were true it is not within the authority of this Court to admonish or discipline these officials in respect of their behaviour in carrying on their duties.

Also incorporated in his pleadings are two further claims. The appellant has asked the Court that he be awarded costs in the amount of $12,000 for the time he spent in contesting the Minister's assessments together with punitive damages in the amount of $150,000 against the Minister to serve as a deterrent to the abuse of power by the Tax Department to quote his own words.

Admittedly the legislation authorizes this Court to award costs, within certain limits, to an appellant, but the rule provides that such costs may be awarded only if the appellant has substantially succeeded in his appeal. Since the appeal has been dismissed the appellant is not entitled to costs.

In so far as punitive damages are concerned, it should be pointed out that the jurisdiction of this Court as defined in the Tax Court Act and the Income Tax Act does not extend to awarding damages against the respondent and therefore this claim must be rejected.

The appeals for the taxation years 1981 and 1982 are dismissed.

Appeals dismissed.