Douglas R. Budyk v. Her Majesty the Queen, [1996] 3 CTC 2328 (Informal Procedure)

Christie J.T.C.C.: — These appeals are governed by the informal procedure provided for under section 18 and following sections of the Tax Court of Canada Act. The years under appeal are 1992 and 1993.

The Notice of Appeal reads:

I am hereby filing my appeal to the Tax Court of Canada. I am choosing the Informal Procedure. The reasons for my appeal are as follows:

1. I had an agreement for $500.00 per month with my ex spouse. I have a witness to this fact and they will be summoned to Court.

2. Section 60B of the Act is unfair and subject to abuse.

3. Revenue Canada has violated my rights as a Canadian citizen.

Would you please send me a copy of the Rules and Procedures of the Tax Court of Canada. My Notice of Objection was dealt with by the Taxation Centre on Stapon Road, Winnipeg MB. My S.I.N. is 622-244-739.

Paragraphs 1 to 6 of the Reply to the Notice of Appeal read:

1. He denies all allegations of fact contained in the Notice of Appeal.

2. In computing income for the 1992 and 1993 taxation years the Appellant deducted the amounts of $405.09 and $4,130.00, respectively (the “Amounts”) as alimony or maintenance payments.

3. The Minister of National Revenue (the “Minister”) assessed the Appellant for the 1992 and 1993 taxation years on April 30, 1993 and April 11, 1994 respectively.

4. By Notices of Reassessment dated January 12, 1995 with respect to the Appellant’s 1992 and 1993 taxation years the Minister reduced the Amounts to Nil and $760.00 respectively.

5. The Appellant subsequently filed a valid Notice of Objection for the 1992 and 1993 taxation years and the Minister by Notice of Confirmation dated April 13, 1995 confirmed that the Appellant was not entitled to claim as a deduction the said Amounts.

6. In so reassessing the Appellant, the Minister made the following assumptions of fact:

(a) the Appellant was separated from his former spouse as of September 23, 1992;

(b) an Interim Order was made by the Queen’s Bench (Family Division) on December 16, 1993 between the Appellant and his former spouse. In subparagraph 1 .(e) of the said Interim Order it was stated that:

The Petitioner, DOUGLAS ROBERT BUDYK shall provide the Respondent, WENDY BARBARA BUDYK as child support for the months of November and December 1993 the sum of $1,600.00 less the $760.00 being the credit for payments already made on account of maintenance, in the sum of $840.00 which shall be payable on the first day of January 1994.

(c) the Appellant paid amounts of $405.09 and $2,930.00 to his former spouse in the 1992 and 1993 taxation years respectively;

(d) the amounts of $405.09 and $2,930.00 with respect to the 1992 and 1993 taxation years were not paid under a decree, order or judgment of a competent tribunal or under written agreement;

(e) $760.00 of the amount of $2,930.00 was paid pursuant to the Interim Order of December 16, 1993;

(f) in computing the amount of $4,130.00 deducted by the Appellant in the 1993 taxation year he included $1,200.00 for a payment made in January 1994;

(g) the Appellant and his former spouse were divorced by divorce judgment pronounced on January 18, 1994;

(h) the Divorce Judgment of The Queen’s Bench Family Division dated January 18, 1994 states in subparagraph l.(iii) that:

The petitioner, DOUGLAS ROBERT BUDKY, shall pay to the respondent, WENDY BARBARA BUDYK, the sum of $400.00 for CHAD MATTHEW BUDYK and $400.00 for MELISSA KATHLEEN BUDYK, for a total of $800.00 per month, payable on the 15th day of each and every month, said payments to commence on February 15, 1994.

(i) the amounts of $405.09 and $2,170.00 are not amounts paid by the Appellant as alimony, maintenance or other allowances payable on a periodic basis for the maintenance of the recipient or the children of the recipient or both the recipient and the children;

(j) the amounts of $405.09, $2,170.00 and $1,200.00 are not deductible in

computing the income of the Appellant for the years under appeal.

It is sufficient for the purposes of these appeals to focus on this question: were the amounts in issue claimed by the appellant as deductions in computing his income for 1992 and 1993 and disallowed by the Minister of National Revenue (the “Minister”) paid pursuant to an order of a competent tribunal or pursuant to a written agreement within the meaning of paragraph 60(b) of the Income Tax Act (the “Act”)?

The only agreement in writing between the appellant and his former spouse that is in evidence and that relates in any way to payments of alimony or maintenance is dated October 17, 1992. It was signed by both of them and reads:

We the undersigned agree to the following:

Neither party will make any claim on the other’s pension.

That Douglas Budyk will buy out Wendy Budyk’s portion of the house (32 Valerie Place) at $40,000.00, and Wendy’s financial responsibility for the pool is null and void. That Douglas Budyk’s attorney will supply Wendy Budyk’s attorney with a letter to this effect by Monday, October 19, 1992.

That Douglas Budyk will pay maintenance for Chad and Melissa an amount to be decided by the lawyers or Court, realizing and agreeing that an amount must be decided upon by November 15, 1992.

That Wendy Budyk will have sole custody of the children (Chad & Melissa), and that Douglas Budyk will have unlimited access, including birthdays and holidays.

Both Douglas and Wendy have agreed to divide household effects prior to Wendy’s moving date — November 13, 1992. With division of contested items to be decided by Courts or lawyers.

Both Douglas and Wendy hereby agree that they have been separated in fact since December 31, 1991, as declared on their 1991 Income Tax Forms.

This agreement is subject to Bank Financing and Consultation with respective lawyers.

This agreement does not comply with the requirements of paragraph 60(b) of the Act. I refer, in particular, to paragraph 4 and the last paragraph.

There is in evidence an interim order dated February 11, 1994 issued out of the Queen’s Bench (Family Division) Winnipeg Centre in litigation between the appellant and his former spouse. But with reference to the years under appeal this order pertains only to the $760.00 referred to in paragraphs 4, 6(b) and (e) of the Reply to the Notice of Appeal.

In (Hodson v. Minister of National Revenue) (sub nom. Hodson v. The Queen), (sub nom. Hodson v. R.), [1988] 1 C.T.C. 2, 88 D.T.C. 6001 (F.C.A.) there was, as in the case at hand, no agreement in writing between the appellant and his wife. In reassessing Hodson in respect of 1981 and 1982 the Minister disallowed claimed deductions of $12,000.00 and $12,800.00 respectively paid by the appellant to his wife as separation allowances. An appeal by Hodson to this Court was dismissed: [1985] 2 C.T.C. 2326, 85 D.T.C. 615. An appeal to the Federal Court, Trial Division was also dismissed: [1987] 1 C.T.C. 219, 87 D.T.C. 5113. The further appeal to the Federal Court of Appeal met the same fate. Speaking for the Court of Appeal Mr. Justice Heald said, at pages 4-5 (D.T.C. 6002-03):

The appellant submits that the rationale for the exception provided by paragraph 60(b) which, in effect, allows income splitting between former spouses or separated persons, is to distribute the tax burden between them, thus allowing them greater financial resources than when living together which, in turn, provides partial compensation for the lost economics of maintaining a single household. The appellant then proceeds to quote section 11 of the Interpretation Act which deems every enactment to be remedial and requires “... a fair, large and liberal construction and interpretation as best ensures the attainment of its objects.” Based on the purpose for paragraph 60(b) supra, and relying on section 11 supra, the appellant maintains that the interpretation of the paragraph advanced by the Minister in this case is in definite conflict with the purpose of the legislation. Accordingly, in his view, the Minister’s interpretation should not be allowed to prevail.

I do not think that the approach to interpretation suggested by the appellant accords entirely with the modern approach to statutory construction. While the purpose of the legislation is a factor to be considered, it is only one of several which need to be taken into account. Dr. Driedger in the Second Edition of his work on the Construction of Statutes states the modern principle to be applied, in the following concise terms:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. ... Earlier expressions, though in different form, are to the same effect: Lord Atkinson in Victoria (City) v.

Bishop of Vancouver Island ([1921] A.C. 384 at page 387) put it this way:

In the construction of statutes their words must be interpreted in their ordinary grammatical sense, unless there be something in the context, or in the object of the statute in which they occur, or in the circumstances with reference to which they are used, to show that they were used in a special sense different from their ordinary grammatical sense.

Applying that approach to the paragraph in question, I conclude that the words employed by Parliament in paragraph 60(b) must be interpreted “...in their ordinary grammatical sense.” I am unable to ascertain anything in the context or purpose of the statute or the circumstances of use which would justify an interpretation different from that resulting from a literal interpretation. The language used is clear and unequivocal. In order for the alimony payments to be deductible, there must be either a Court order or written agreement which requires such payment.

This approach to the interpretation of paragraph 60(b)has been followed in a number of decisions of the Tax Review Board and the Tax Court of Canada as well as by the Trial Division of this Court. I am not persuaded that this approach was wrong or should be altered. As pointed out by the Trial Judge, spouses who live together are not allowed to split their income thereby reducing the total tax bill of the family. Paragraph 60(b) provides an exception to that general rule and confers upon separated spouses who come within its terms and conditions certain tax advantages. Parliament has spoken in clear and unmistakable terms. Had Parliament wished to extend the benefit conferred by paragraph 60(b) on separated spouses. who, as in this case, do not have either a Court order or a written agreement, it would have said so. The rationale for not including separated spouses involved in payments made and received pursuant to a verbal understanding is readily apparent. Such a loose and indefinite structure might well open the door to colourable and fraudulent arrangements and schemes for tax avoidance. I hasten to add that there is no suggestion in the case at bar of any such fraudulent or colourable arrangement. The Minister agrees that, in the case at bar, the appellant has made the alimony payments to his spouse in good faith. Nevertheless, such a possible scenario in other cases commends itself to me as the rationale for the carefully worded restrictions set out in the paragraph. If the words used by Parliament create hardships, as suggested by the appellant, it is Parliament, and not the Court, that has the power to redress those hardships.

In notices sent under the requirements of section 57 of the Federal Court Act the appellant gave notice of his intention to raise certain arguments based upon provisions of the Canadian Charter of Rights and Freedoms (the “Charter*'). Only the Departments of Justice of Quebec and Nova Scotia replied. Both indicated they would not participate.

The appellant alleges that he submitted certain documents to Revenue Canada which lost them. This is said to constitute a breach of that portion of section 7 of the Charter which declares that: Everyone has the right to security of the person. Even assuming there was such a loss — about which I am not satisfied - section 7 would have no application.

The second Charter argument is founded on paragraphs 11(b) and (d) thereof. They provide:

11. Any person charged with an offence has the right

...(b) to be tried within a reasonable time;

(d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal;

Neither the Minister’s reassessment of the appellant’s liability to tax respecting 1992 and 1993 nor the administrative matters related thereto involved the appellant being charged with an offence. The same is true of the proceedings before this Court.

Finally, the appellant relies on subsection 15(1) of the Charter. It provides:

15. (1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

This is what the appellant said in the notice sent under section 57 of the Federal Court Act:

Section 60(B) of the Income Tax Act discriminates against children of dissolved marriages. Section 60(B) denies them of the basic necessities of life. I believe this violates Item 15(1) of the Canadian Charter of Rights and Freedoms.

With respect, I find that this submission is devoid of legal substance.

The appeals are dismissed.

Appeals dismissed.