Guy
Tremblay
[TRANSLATION]:—This
case
was
heard
at
Montreal,
Quebec
on
June
14,
1982.
1.
Issue
According
to
the
pleadings
in
this
appeal,
the
issue
is
to
determine
whether
the
appellant
correctly
deducted
the
sums
of
$5,250
and
$4,750
in
computing
his
net
income
for
1977
and
1978
respectively.
These
amounts
were
paid
by
the
appellant
on
a
periodic
basis
as
alimony
to
his
wife
pursuant
to
a
separation
agreement
dated
November
9,
1976
incorporated
in
a
decree
nisi
of
divorce
dated
April
29,
1977.
The
respondent
maintained
that
the
payments
made
did
not
comply
with
the
provisions
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended,
because
they
were
part
of
a
lump
sum
of
$17,000,
as
provided
for
in
the
agreement.
2.
Burden
of
Proof
2.01
The
burden
is
on
the
appellant
to
show
that
the
respondent’s
assessments
were
incorrect.
This
burden
of
proof
derives
not
from
one
particular
section
of
the
Income
Tax
Act
but
from
a
number
of
judicial
decisions,
in-
eluding
the
judgment
of
the
Supreme
Court
of
Canada
in
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
2.02
The
presumptions
of
fact
relied
upon
by
the
respondent
are
set
forth
in
subparagraphs
(a)
to
(c)
of
paragraph
4
of
the
respondent’s
reply
to
the
notice
of
appeal,
which
read
as
follows:
4.
In
assessing
the
appellant
for
the
1977
and
1978
taxation
years,
the
respondent
relied,
inter
alia,
on
the
following
presumptions
of
fact:
(a)
The
appellant
was
divorced
from
Dame
Thérèse
Leclair
by
a
decree
nisi
of
divorce
dated
April
29,
1977;
(b)
The
said
decree
nisi
of
divorce
incorporated
an
agreement
concluded
between
the
appellant
and
Dame
Thérèse
Leclair
on
November
9,
1976
(a
copy
of
the
said
agreement
is
attached
to
this
Reply
to
the
Notice
of
Appeal
as
Annex
1-1
and
forms
an
integral
part
thereof);
(c)
The
appellant
paid
to
Dame
Thérèse
Leclair
sums
of
money
totalling
$5,250
for
1977
and
$4,750
for
1978.
3.
Facts
The
facts
are
not
in
dispute.
3.01
The
appellant
and
his
former
wife
Thérèse
Leclair
had
been
married
since
1946.
3.02
In
connection
with
a
petition
by
the
appellant
for
a
decree
nisi
of
divorce,
the
parties
signed
an
agreement
on
November
9,
1976.
3.03
After
granting
custody
of
the
children
to
the
appellant
(paragraph
1)
and
visiting
rights
to
his
wife
(paragraph
2),
this
agreement
states
the
following
in
paragraphs
3
and
4
under
the
headings
“Alimony”
and
“Marriage
Contract”:
3.
ALIMONY
ORDERS
the
petitioner
to
pay
the
respondent
a
total
sum
of
$17,000.00
to
cover
future
alimony.
This
sum
shall
be
payable
as
follows:
—
$500.00
payable
on
November
12,1976
and
$500
payable
on
January
12,1977.
—
The
balance
of
$16,000.00
shall
be
payable
in
48
equal
consecutive
monthly
payments
of
$333.33
each.
The
first
payment
shall
be
due
on
December
12,
1976
and
the
others
on
the
twelfth
day
of
each
month
until
November
12,
1980
inclusive.
—
Should
the
respondent
predecease
the
petitioner,
the
respondent
shall
renounce
that
amount
that
has
not
been
paid.
—
Notwithstanding
the
preceding
paragraphs
ACKNOWLEDGES
the
mutual
and
reciprocal
waiver
by
the
parties
of
any
other
right
to
alimony.
4.
MARRIAGE
CONTRACT
WITH
RESPECT
TO
THE
MARRIAGE
CONTRACT
MADE
BEFORE
THE
NOTARY
JACQUES
E
BEAUDDIN
on
June
6,
1946,
RECORDED
AS
NUMBER
2411
IN
HIS
MINUTES
—
ORDERS
the
petitioner
to
pay
the
respondent
a
sum
of
$3,000.00
in
consideration
of
the
renunciation
by
the
respondent
of
the
rights
conferred
on
her
by
the
first
clause
of
the
third
paragraph
of
the
said
contract.
This
sum
of
$3,000.00
shall
be
payable
in
48
equal,
consecutive
monthly
instalments
of
$62.50
each.
The
first
instalment
shall
be
due
on
December
12,
1976
and
payments
shall
continue
thus
on
the
twelfth
day
of
each
month
until
November
12,
1980
inclusive.
—
ORDERS
the
petitioner
to
pay
on
his
death
to
the
respondent
a
sum
of
$10,000.00.
This
amount
shall
be
payable
from
the
most
clear
and
apparent
property
of
the
petitioner.
Should
the
respondent
predecease
the
petitioner,
this
obligation
shall
be
extinguished.
—
Notwithstanding
the
preceding
clauses
relating
to
the
marriage
contract
ACKNOWLEDGES
the
mutual
and
reciprocal
waiver
by
the
parties
of
any
other
rights
that
may
arise
from
their
marriage
contract.
3.04
The
said
agreement
is
part
of
the
decree
of
F
Legault,
J
granting
the
appellant
a
divorce
on
April
29,
1977.
3.05
It
was
admitted
that
all
payments
provided
for
in
the
agreement
were
made.
3.06
The
appellant
testified
that:
(a)
six
children
were
born
of
his
marriage
with
his
wife;
(b)
at
the
time
of
the
separation
in
1972
three
(3)
of
the
minor
children
remained
with
him
while
his
wife
kept
an
infant
daughter;
(c)
subsequently
a
court
order
gave
custody
of
this
daughter
to
her
father;
(d)
in
1976
he
petitioned
for
divorce
on
the
ground
that
she
had
left
him
more
than
three
years
previously;
(e)
the
determination
of
the
sum
of
$20,000
($17,000
for
alimony
(paragraph
3
of
the
agreement)
and
$3,000
for
furniture
(paragraph
4
of
the
agreement))
was
the
result
of
discussions
between
the
parties
through
the
agency
of
their
two
lawyers.
At
first
the
appellant
wished
to
settle
for
$10,000
in
alimony.
The
final
settlement
was
for
$17,000.
In
his
testimony
the
appellant
stated:
Then
we
agreed
on
seventeen
thousand
dollars
($17,000),
which
would
be
equivalent
to
alimony
paid
over
four
(4)
years
and
then
she
(his
former
wife)
would
look
for
a
job
and
then
she
could
work.
(TS,
p
28)
3.07
The
wife
lived
separated
and
apart
from
the
appellant
and
his
children.
4.
Act,
Case
Law,
Analysis
4.01
Act
The
principal
provision
of
the
Income
Tax
Act
involved
in
this
case
is
paragraph
60(b).
It
reads
as
follows:
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
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.
4.02
Case
law
The
following
case
law
was
referred
to
by
the
parties:
1.
The
Queen
v
Morton
Pascoe,
[1975]
CTC
656;
75
DTC
5427;
2.
Attorney
General
of
Canada
v
James
C
Weaver
and
Freda
J
Weaver
[1975]
CTC
646;
75
DTC
5462;
3.
Takis
P
Veliotis
v
The
Queen,
[1974]
CTC
237;
74
DTC
6190;
4.
The
Queen
v
Louis
Dorion,
[1981]
CTC
136;
81
DTC
5111;
5.
The
Queen
v
Jean-Paul
Gagnon,
[1981]
CTC
463;
81
DTC
5377;
6.
The
Queen
v
Gordon
A
Bryce,
[1982]
CTC
133;
82
DTC
6126;
7.
MNR
v
William
Albert
Hansen,
[1967]
CTC
440;
67
DTC
5293.
4.03
Analysis
4.03.1
Argument
of
the
appellant
The
evidence
was
to
the
effect
that
the
payments
made
satisfied
the
conditions
laid
down
in
paragraph
60(b)
of
the
Act.
They
were
made:
(a)
pursuant
to
a
written
agreement
and/or
a
judgment;
(b)
as
alimony
or
other
allowance;
(c)
on
a
periodic
basis;
and
(d)
for
the
maintenance
of
the
recipient;
(e)
who
was
living
apart
from
the
appellant.
4.03.2
The
respondent
did
not
dispute
conditions
(a),
(c),
(d)
and
(e),
but
contended
that
the
payments
were
not
made
“as
alimony
or
other
allowance”
but
rather
that
this
was
a
lump
sum
payable
in
accordance
with
certain
conditions.
4.03.3
The
courts
have
already
made
pronouncements
on
similar
points.
In
Morton
Pascoe,
supra,
Pratte,
J,
speaking
for
the
Federal
Court
of
Appeal,
defined
the
word
“allowance”:
An
allowance
is,
in
our
view,
a
limited
predetermined
sum
of
money
paid
to
enable
the
recipient
to
provide
for
certain
kinds
of
expense;
its
amount
is
determined
in
advance
and,
once
paid,
it
is
at
the
complete
disposition
of
the
recipient
who
is
not
required
to
account
for
it.
A
payment
in
satisfaction
of
an
obligation
to
indemnify
or
reimburse
someone
or
to
defray
his
or
her
actual
expenses
is
not
an
allowance;
it
is
not
a
sum
allowed
to
the
recipient
to
be
applied
in
his
or
her
discretion
to
certain
kinds
of
expense.
In
Veliotis,
supra,
Pratte,
J
of
the
Federal
Court,
Trial
Division
stated:
“a
divorce
decree
which
ordered
a
husband
to
pay
his
spouse
the
sum
of
$100,000
in
four
monthly
instalments
of
$25,000
would
not
.
..
be
a
judgment
ordering
the
payment
of
a
periodic
allowance”
within
the
meaning
of
the
Income
Tax
Act
because
alimony
is
a
periodic
allowance
not
only
in
the
sense
that
the
payer
must
make
payments
at
regular
intervals,
but
also
in
the
sense
that
at
regular
intervals
the
payor
must
provide
a
sum
adequate
to
maintain
the
payee
until
the
next
payment.
In
this
case
the
monthly
payments
of
$333.33
seem
to
be
reasonable
amounts
not
likely
to
call
into
play
the
above-mentioned
decision
of
Pratte,
J,
which
dealt
with
periodic
payments
of
$25,000.
4.03.4
On
the
other
hand,
it
has
also
long
been
established
that
it
is
not
necessary
for
alimony
to
continue
throughout
the
life
of
the
recipient
in
order
for
it
to
be
regarded
as
alimony
No
67
v
MNR,
7
Tax
ABC
53;
52
DTC
308;
David
Franklin
v
MNR,
[1981]
CTC
2518;
81
DTC
468.
4.03.5
In
W
A
Hansen,
supra,
a
decision
of
Jackett,
J
of
the
former
Exchequer
Court,
the
parties
had
concluded
a
separation
agreement
on
September
27,
1960
providing
for
certain
matters
including:
(a)
arrangements
for
settling
property
rights;
(b)
arrangements
for
the
support
and
maintenance
of
the
wife;
and
(c)
arrangements
governing
other
rights
and
obligations
derived
from
the
marriage.
Paragraph
7
of
the
agreement
reads
as
follows:
PAYMENT.
In
full
and
final
settlement
of
the
husband’s
obligation
to
support
and
maintain
the
wife
during
their
joint
lives,
the
husband
agrees
to
pay
the
wife
the
sum
of
$20,000
in
lawful
currency
of
Canada,
as
follows:
(1)
the
sum
of
$6,000
in
lawful
Canadian
currency
upon
execution
of
this
agreement;
(2)
the
sum
of
$14,000
by
equal
consecutive
monthly
instalments
of
$100
each,
payable
on
the
first
day
of
each
and
every
month
.
.
.
the
first
of
such
payments
to
become
due
and
be
paid
on
the
first
day
of
November,
1960;
(3)
the
deferred
payments
hereinbefore
referred
to
shall
be
made
payable
to
the
wife
by
deposit
to
her
account
in
the
Royal
Bank
of
Canada
.
.
.;
and
(4)
in
the
event
of
any
other
payments
made
by
the
husband
to
the
wife,
the
balance
due
and
owing
will
be
reduced
proportionately.
Jackett,
J,
held
that
paragraph
7,
construed
in
the
light
of
the
whole
agreement,
was
a
provision
for
the
maintenance
of
the
wife
and
nothing
else.
Finally,
I
reject
the
contention
that
paragraph
7
provides
for
a
“lump
sum
payment”
of
$20,000
and
that
the
monthly
payments
in
question
are
merely
payments
on
account
of
that
lump
sum.
Quite
the
contrary,
in
my
view,
paragraph
7
provides
for
a
number
of
payments
totalling
$20,000
and
the
monthly
payments
in
question
are
some
of
the
payments
so
provided
for.
A
reference
to
the
words
of
the
paragraph
makes
it
quite
clear.
It
says:
“the
husband
agrees
to
pay
the
wife
the
sum
of
$20,000
.
.
.
as
follows”,
and
then
it
sets
out
the
actual
payments
that
are
to
be
made.
The
real
question
is,
of
course,
whether
the
payments
were
made
pursuant
to
a
provision
for
payments
on
a
periodic
basis
and,
in
my
view,
paragraph
7(2),
pursuant
to
which
the
payments
in
question
were
made,
is
precisely
that.
Jackett,
J
based
his
decision
on
the
fact
of
payments
made
on
a
periodic
basis.
he
does
not
appear
to
cast
doubt
on
the
termination
of
the
payments
described
in
clause
7:
the
primary
purpose
was
to
make
an
arrangement
for
the
support
and
maintenance
of
the
wife.
This
is
the
essential
point.
It
seems
at
first
glance
that
the
instant
case
satisfies
the
conditions
laid
down
in
WA
Hansen,
supra,
and
in
paragraph
60(b):
(1)
a
judgment;
(2)
payments
on
a
periodic
basis;
(3)
for
the
maintenance
of
the
spouse;
and
(4)
separation
of
the
parties.
4.03.6
As
was
explained
in
Gilles
St-Arnaud
v
MNR,
a
decision
of
the
Board
dated
June
7,
1982,
the
courts
often
grant
alimony
that
is
limited
in
time,
thus
forcing
the
recipient
to
work
in
order
to
meet
his
or
her
own
needs.
Since
the
parties
also
anticipate
this,
they
conclude
agreements
to
this
effect
that
subsequently
form
part
of
the
decree
that
is
granted.
There
is
a
danger,
however,
that
when
the
obligation
to
pay
alimony
is
drafted,
the
nature
of
the
obligation
is
changed.
Thus,
in
Gilles
St-Arnaud,
supra,
the
parties,
by
providing
for
interest
on
the
sum
of
$12,000
seemed
to
create
an
obligation
other
than
alimony,
an
obligation
that
would
even
be
owed
to
the
heirs
of
the
wife
if
she
died
(or
that
would
even
be
owed
by
the
heirs
of
the
husband
if
he
died).
This
was
not,
therefore,
alimony.
4.03.7
In
the
instant
case
there
is
no
clause
relating
to
interest.
The
absence
of
such
a
clause
may
be
regarded
as
an
argument
in
favour
of
the
contention
that
this
was
therefore
alimony.
However,
the
penultimate
clause
of
paragraph
3
of
the
contract
reproduced
in
paragraph
3.03
above
reads
as
follows:
Should
the
respondent
predecease
the
petitioner,
the
respondent
shall
renounce
that
amount
that
has
not
been
paid.
If
this
is
alimony,
it
is
clear
that
there
is
no
reason
for
this
clause.
Alimony,
by
its
very
nature,
can
exist
only
between
two
living
persons.
Does
not
the
fact
that
the
respondent
renounces,
in
case
of
her
death,
“that
amount
that
has
not
been
paid”
mean
that
this
is
not
alimony
but
a
lump
sum
owing,
the
instalments
of
which
will
be
spread
over
a
number
of
months?
This
construction
seems
normal,
especially
since
it
appears
to
be
confirmed
by
the
words
“total
sum”
used
to
determine
the
quantum.
4.03.8
However,
could
not
the
same
penultimate
clause
of
paragraph
3
be
construed
in
the
sense
that
the
parties,
in
drafting
this
clause,
actually
wished
merely
to
show
that
this
was
really
alimony?
Moreover,
if
this
were
not
really
alimony,
why
was
no
provision
made
for
the
situation
where
the
husband
predeceases
the
wife?
It
seems
to
me
that
that
would
be
as
logical
a
provision
to
make
as
that
for
the
precedease
of
the
wife.
This
penultimate
clause
can
be
construed
both
ways.
Can
the
testimony
help
in
the
construction
of
this
clause?
4.03.9
The
explanation
given
by
the
appellant
for
the
quantum
of
$17,000
(see
paragraph
3.06(e)
of
the
facts)
must
be
interpreted
in
the
sense
that
the
wife
was
to
take
four
(4)
years
to
reestablish
herself
with
a
view
to
becoming
fully
active
in
the
labour
market
and
thus
meeting
her
own
needs.
In
substance,
then,
this
is
alimony.
The
word
“Alimony”
used
as
the
title
of
paragraph
3
of
the
agreement
and
the
words
“Future
alimony”
used
in
the
first
clause
of
paragraph
3
would
thus
be
used
in
their
true
meaning.
The
last
clause
of
paragraph
3
refers
to
“right
to
alimony”.
It
reads
as
follows:
Notwithstanding
the
preceding
clauses
ACKNOWLEDGES
the
mutual
and
reciprocal
waiver
by
the
parties
of
any
other
right
to
alimony.
Here
the
parties
seem
to
have
wished
to
confirm
that
“the
preceding
clauses”
of
paragraph
3
were
provisions
relating
to
“alimony”.
If
this
last
argument
is
considered
as
a
whole,
it
can
be
stated
that
the
preponderance
of
evidence
at
first
glance
indicates
that
this
was
a
normal
periodic
allowance
paid
by
the
appellant
to
his
wife.
For
a
certain
period
so
as
to
enable
her
to
reestablish
herself
and
subsequently
to
provide
for
her
own
needs.
This
would
therefore
be
alimony.
4.03.10
Counsel
for
the
respondent,
however,
made
the
argument
that
it
is
not
possible
to
contradict
a
valid
written
instrument
by
oral
testimony,
as
the
appellant
did.
This
is
laid
down
in
Article
1234
of
the
Civil
Code
of
the
Province
of
Quebec,
which
reads
as
follows:
Art
1234
Testimony
cannot
in
any
case,
be
received
to
contradict
or
vary
the
terms
of
a
valid
written
instrument.
The
purpose
of
this
article
is
to
protect
the
innocent
party.
[Translation]
If
it
were
admitted
that
one
could
at
will
testify
against
the
instrument,
the
stability
of
contractual
relations
would
be
seriously
jeopardized
to
the
prejudice
of
the
party
with
foresight
which
took
the
trouble
to
put
its
agreements
in
writing.
(Traité
de
Droit
Civil
du
Québec,
Vol
9,
A
Nadeau
and
L
Ducharme,
para
487)
The
Department
of
National
Revenue,
which
objected
to
the
oral
testimony,
is,
however,
not
a
party
to
the
agreement
but
a
third
party.
The
authors
quoted
above
explain
the
rights
of
third
parties,
inter
alia,
in
paragraph
504
as
follows:
.
.
a
party
to
a
written
contract
cannot
prove
as
against
a
third
party
that
this
instrument
does
not
contain
the
actual
contract
it
signed
with
the
other
party
thereto”.
It
seems
at
first
glance,
therefore,
that
the
appellant’s
testimony
should
be
ignored
by
the
Board.
However,
since
the
disputed
clause
may
be
construed
in
two
ways,
we
should
admit
the
testimony
in
order
to
determine
the
actual
intent
of
the
parties.
The
Board
is
of
the
view
this
was
in
substance
alimony,
as
explained
in
the
preceding
paragraph.
The
Board
wishes
to
stress
once
again
that
it
is
not
always
easy
or
even
necessary
in
general
for
the
parties
to
explain
the
basis
of
their
agreement
when
they
are
drafting
an
agreement
for
separation
or
divorce.
It
is
clear
in
the
instant
case,
however,
that
the
interpretation
of
the
agreement
for
tax
purposes
would
have
been
easier
if
the
following
had
been
stated:
“Whereas
the
wife
requires
four
(4)
years
to
reestablish
herself
before
entering
the
labour
market
and
meeting
her
own
needs;
whereas
a
particular
monthly
sum
is
reasonable
to
provide
for
her
needs;
the
husband
undertakes
to
pay
.
.
.
and
so
on”.
5.
Conclusion
The
appeal
is
allowed
and
the
matter
is
referred
back
to
the
respondent
for
reassessment
in
accordance
with
the
reasons
for
judgment
above.
Appeal
allowed.
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