Lamarre
Proulx
T.C.J.:
These
appeals
concern
the
1989,
1990
and
1992
taxation
years.
The
question
at
issue
is
whether
the
legal
and
professional
expenses
incurred
by
the
Appellant,
respecting
legal
disputes
arising
from
a
divorce
procedure,
are
on
income
or
on
capital
account.
The
amounts
claimed
for
each
of
the
taxation
years
are
$44,083,
$172,029
and
$102,504
respectively.
The
Appellant
submitted
that
these
amounts
were
expended
in
relation
to
her
alimony.
The
Respondent
submitted
that
they
were
mainly
made
or
incurred
for
the
purpose
of
litigating
divorce
proceedings,
obtaining
a
compensatory
allowance
or
the
property
of
the
matrimonial
house,
obtaining
a
lump
sum
payment,
increasing
the
alimony,
obtaining
a
refund
for
the
legal
and
expert
expenses
incurred
in
the
divorce
proceedings.
Some
amounts
were
allowed
by
the
Respondent,
$1,600
for
the
year
1989
and
$3,700
for
the
year
1990.
According
to
the
Respondent,
these
were
the
only
legal
costs
relating
to
the
increase
of
the
alimony.
There
was
a
preliminary
motion
made
by
counsel
for
the
Respondent
for
the
purpose
of
amending
the
Reply
to
the
Notice
of
Appeal
to
include
allegations
that
all
legal
expenses
and
expert
expenses
had
been
paid
pursuant
to
the
Court
judgements
in
the
divorce
proceedings
and
that
they
should
have
been
included
as
income
in
the
years
where
the
judgements
were
rendered
or
executed.
This
motion
was
opposed
by
counsel
for
the
Appellant
on
the
grounds
that
it
changed
the
basis
on
which
the
Appellant
was
assessed
and
that
it
was
late.
The
Court
found
that
the
motion
could
not
be
granted
for
these
same
reasons.
If
it
is
a
matter
of
payments
that
were
not
included
in
the
calculation
of
the
Appellant’s
income
for
the
relevant
years,
the
means
to
rectify
this
is
by
the
issuance
of
an
additional
assessment.
See
Millette
c.
R.
(1999),
99
D.T.C.
527
(Fr.)
(T.C.C.)
at
pages
534
to
536,
paragraphs
69
to
79.
Moreover
a
substantial
amendment
should
not
be
asked
on
the
eve
of
the
trial
where
the
facts
had
been
known
by
the
Minister
of
National
Revenue
(the
“Minister”)
for
a
long
time.
The
Minister
had
in
his
possession
all
the
relevant
judgments.
The
motion
was
therefore
dismissed
with
costs
in
favour
of
the
Appellant.
There
were
two
witnesses,
the
Appellant
and
Ms.
Kwee
Chung
for
the
Respondent.
The
testimony
of
the
latter
being
essentially
on
the
assessments
will
not
be
related.
The
Appellant
produced
a
Book
of
Documents,
Exhibit
A-l.
This
exhibit
is
divided
into
26
tabs.
The
first
25
tabs
relate
to
court
proceedings
and
judgments.
Tab
26
is
composed
of
more
than
one
hundred
pages
and
it
pertains
to
the
invoices
of
the
various
lawyers
who
were
involved
in
the
Appellant’s
divorce
proceedings,
as
well
as
the
fees
of
an
accountant.
A
Motion
for
Accessory
Measures,
dated
August
28,
1992,
was
also
produced
as
Exhibit
A-2.
The
Respondent
produced
a
Book
of
Documents
as
Exhibit
R-l.
It
is
divided
into
38
tabs.
The
first
18
tabs
relate
to
the
assessments.
From
tabs
19
to
34,
there
are
court
proceedings
and
judgments.
From
tabs
35
to
38,
there
are
quitclaim
deeds
and
cheques.
On
September
15,
1986,
the
Appellant
and
her
then
husband,
Mr.
Giovanni
Mastromonaco,
signed
a
Consent
to
Judgment
on
Accessory
Measures
to
Apply
to
Provisional
Measures
as
well
as
Final
Separation
Judgment
(Tab
1
of
Exhibit
A-1,
Tab
19
of
Exhibit
R-1).
The
parties
had
agreed
that
Ms.
Vosko
would
receive,
as
alimony,
the
amount
of
$3,340
per
month.
That
alimony
had
been
paid
since
June
1st,
1986.
She
was
also
to
receive,
as
employment
income
from
a
company
owned
and
operated
by
Mr.
Mastromonaco,
a
weekly
salary
of
$375.
The
husband
was
to
continue
to
pay
all
normal
and
usual
car
expenses
incurred
by
Ms.
Vosko,
including
insurance.
The
husband
was
also
to
pay
all
expenses
relevant
to
the
matrimonial
resi-
dence
where
Ms.
Vosko
was
entitled
to
continue
to
reside,
together
with
her
own
two
children.
(Ms.
Vosko
has
three
children
from
a
previous
marriage.
There
was
no
mention
of
the
other
child
in
the
agreement).
He
undertook
to
pay
all
medical
and
dental
bills
for
her
and
her
two
children.
The
last
two
clauses
were
to
the
effect
that
the
Memorandum
of
Agreement
was
not
to
be
construed
as
a
renunciation
to
other
claims
that
Ms.
Vosko
might
have
in
an
eventual
action
for
divorce
and
that
each
party
would
pay
their
own
legal
costs.
On
February
9,
1987,
a
judgment
of
the
Superior
Court
granted
the
separation
from
bed
and
board
and
gave
effect
to
the
agreement
(Tab
20
of
Exhibit
R-1).
An
action
for
divorce
was
taken
by
Mr.
Mastromonaco,
dated
November
2,
1987.
The
corollary
relief
sought
was
in
accordance
with
the
afore-mentioned
agreement
between
the
parties
(Tab
21
of
Exhibit
R-1,
Tab
2
of
Ex-
hibit-A
1).
On
August
22,
1988,
Ms.
Vosko
made
a
Contestation
and
Cross-Demand
in
Divorce
(Tab
22
of
Exhibit
R-1).
It
was
admitted
in
that
procedure
that
the
corollary
relief
stated
in
Mr.
Mastromonaco’s
action
for
divorce
was
the
agreement
reached
between
the
parties
before
the
judgment
for
separation
from
bed
and
board
and
confirmed
by
that
judgment.
In
her
crossdemand,
Ms
Vosko
made
a
few
statements
explaining
the
work
that
she
had
done
in
Mr.
Mastromonaco’s
company.
She
asked
for
a
compensatory
allowance
of
$1,000,000,
based
on
the
fact
that
she
participated
in
her
husband’s
enrichment.
She
asked
for
an
alimony
of
$4,000
per
month
while
living
in
the
matrimonial
house
and
$5,500
per
month
after
she
moved
out
from
this
house.
She
wanted
to
continue
to
live
in
the
matrimonial
home
for
two
more
years.
On
March
21,
1989,
a
Motion
to
Vary
the
amount
of
alimony
payable
was
made
by
Mr.
Mastromonaco
(Tab
3
of
Exhibit
A-1).
The
offer
was
$2,500
per
month
and
that
Ms.
Vosko
be
ordered
to
leave
the
family
residence
within
a
delay
of
four
months.
In
June
1989,
a
seizure
was
made
by
Ms.
Vosko,
on
the
moveable
goods
of
Mr.
Mastromonaco
for
reasons
of
arrears
of
the
alimony
payments
for
the
month
of
June
and
of
unpaid
medical
bills
(Tab
4
of
Exhibit
A-1).
There
was
an
Opposition
to
Seizure
and
Execution
made
by
Mr.
Mastromonaco
(Tab
5
of
Exhibit
A-l).
On
February
22,
1990,
Ms
Vosko
made
an
Amended
Contestation
and
Cross-Demand
in
Divorce
(Tab
23
of
Exhibit
R-1).
At
that
time,
in
addition
to
the
compensatory
allowance
in
the
amount
of
$1,000,000,
she
asked
for
a
lump
sum
payment
in
the
amount
of
$1,000,000.
She
also
asked
for
an
alimony
in
the
amount
of
$9,000
per
month.
She
also
demanded
payment
of
expert
and
legal
costs.
On
June
18,
1990,
another
amendment
to
the
Contestation
and
Cross-Demand
was
made.
This
one
added
the
condition
that
the
judgment
sought
be
executory,
notwithstanding
appeal.
On
June
18,
1990,
Ms.
Vosko
made
a
Re-amended
Contestation
and
Cross-Demand
in
Divorce
adding
some
more
requests
(Tab
24
of
Exhibit
R-1,
Tab
6
of
Exhibit
A-1).
On
October
17,
1990,
a
judgment
of
the
Superior
Court
was
rendered
by
Justice
Herbert
Marx,
(Tab
7
of
Exhibit
A-l,
Tab
25
of
Exhibit
R-1).
The
divorce
was
granted
as
the
parties
had
lived
separate
and
apart
for
more
than
one
year.
The
judgment
also
stated
that
it
was
the
second
marriage
and
the
second
divorce
for
both
parties
who
were
married
in
Montréal
on
October
21,
1971;
that
they
each
had
three
children
from
their
previous
marriages
now
of
the
age
of
majority;
and
that
no
children
were
born
of
their
marriage.
I
quote
the
following
excerpt
from
that
judgment:
The
question
at
issue
revolves
around
Mrs.
Vosko’s
cross-demand
for
corollary
relief.
She
is
seeking
the
following
relief:
an
alimentary
allowance
of
$9,000
per
month,
net
of
taxes;
a
compensatory
allowance
of
$1,000,000;
a
lump
sum
payment
of
$1,000,000
or
the
ownership
of
the
family
residence;
legal
fees
of
$82,790.96
plus
10%
of
any
compensatory
allowance
or
lump
sum
payment,
and
expert
fees
of
$96,974.36.
There
is
also
the
issue
of
two
seizures:
one
by
the
plaintiff
for
his
purported
household
furnishings
at
the
family
residence
in
Hampstead,
and
the
other
by
the
defendant
for
certain
outstanding
bills
not
paid
by
her
husband.
The
judgment
related
that
at
the
time
of
the
judgment,
Ms.
Vosko
was
receiving
an
alimony
of
$3,340
per
month
plus
a
monthly
salary
of
$1,625.
She
continued
to
reside
in
the
family
residence
and
Mr.
Mastromonaco
was
responsible
for
paying
all
her
car
expenses,
all
expenses
on
the
residence
as
well
as
all
her
dental
and
medical
bills.
In
respect
of
the
compensatory
allowance,
Ms.
Vosko
sought
an
amount
of
$1,000,000.
The
judge
found
that
she
did
not
contribute
to
her
husband’s
enrichment
more
than
by
being
a
supportive
wife.
He
also
found
that
Ms.
Vosko
had
been
on
the
husband’s
company
payroll
since
1971.
Her
salary
over
the
years
totalled
about
$275,000
and
she
had
been
paid
for
whatever
services
she
had
rendered
to
the
company.
The
judge
found
that
Ms.
Vosko
contributed
certain
sums
of
money.
At
the
end
of
his
analysis,
the
Court
found
that
Mr.
Mastromonaco
was
enriched
in
the
amount
of
$75,000
and
this
was
the
amount
of
the
compensatory
allowance.
To
this
award
was
ad-
ded
all
the
moveables
garnishing
the
former
conjugal
domicile
plus
an
amount
of
$28,150
for
their
repairs.
With
regards
to
the
lump
sum
payment
of
$1,000,000,
the
Court
noted
that
the
Divorce
Act
provides,
at
subsection
15(2),
for
such
payments
in
a
support
order.
The
Court
deemed
it
necessary
that
Ms.
Vosko
be
awarded
a
substantial
lump
sum
payment
to
permit
her
to
purchase
a
house,
to
provide
for
moving
and
relocation
expenses,
to
permit
her
to
pay
her
debts,
to
provide
for
her
present
and
future
financial
security
and
to
enable
her
to
pay
her
legal
and
expert
fees.
As
well,
this
payment
plus
her
alimony,
will
allow
her
to
maintain
a
lifestyle
comparable
to
that
which
she
had
during
her
marriage.
A
lump
sum
payment
in
the
amount
of
$750,000
was
awarded.
She
was
also
awarded
an
amount
of
$96,974.36
for
the
expert
fees
and
the
amount
of
$82,790.96
for
the
legal
fees.
In
respect
to
the
alimony,
Ms.
Vosko
was
asking
$9,000
per
month,
indexed
and
net
of
taxes.
It
was
fixed
to
$6,500
per
month,
not
net
of
taxes.
On
November
2,
1990,
Mr.
Mastromonaco
appealed
from
Justice
Marx’s
judgment
(Tabs
8
and
9
of
Exhibit
A-l,
Tabs
26
and
27
of
Exhibit
R-1).
Justice
Marx
had
ordered
the
provisional
execution
of
the
elementary
provisions
of
this
judgment
notwithstanding
appeal.
On
November
2,
1990,
Mr.
Mastromonaco
made
a
Motion
to
Suspend
Provisional
Execution,
that
the
payment
of
the
lump
sum
be
suspended
in
its
entirety
and
that
the
alimony
payable
to
Ms.
Vosko
be
suspended
to
the
extent
of
$3,500
per
month
(Tab
10
of
Exhibit
A-l,
Tab
28
of
Exhibit
R-1).
A
judgment
appears
to
have
been
issued
reducing
the
payment
of
the
lump
sum
to
$100,000
(Tab
11
of
Exhibit
A-l).
On
January
25,
1991,
a
Motion
to
Vary
was
made
by
Ms.
Vosko
for
the
purpose
of
obtaining
a
lump
sum
in
the
amount
of
$2,500,000
in
lieu
of
any
further
alimony
payments
(Tab
14
of
Exhibit
A-l)
On
January
30,
1991,
Ms.
Vosko
made
a
seizure
of
the
moveable
effects
of
Mr.
Mastromonaco
(Tab
15
of
Exhibit
A-l).
On
February
1,
1991,
a
Motion
to
Quash
the
Writ
of
Seizure
Before
Judgment
was
made
by
Mr.
Mastromonaco
(Tab
16
of
Exhibit
A-1).
Another
one
was
made
on
February
21,
1991
(Tab
17
of
Exhibit
A-1).
On
March
27,
1991,
another
seizure
was
made
on
the
moveable
effects
of
Mr.
Mastromonaco
(Tab
18
of
Exhibit
A-
1).
On
April
12,
1991,
there
was
a
motion
by
Mr.
Mastromonaco
opposing
the
seizure
(Tab
19
of
Exhibit
A-1).
In
respect
to
the
motion
to
vary
the
judgment
of
Justice
Marx
for
a
lump
sum
payment
of
$2,500,000,
motion
referred
to
at
paragraph
14
of
these
Reasons,
Mr.
Mastromonaco
made
a
verbal
motion
that
the
variation
re-
quested
was
not
admissible.
That
verbal
motion
was
dismissed
by
Justice
Filiatreault
on
May
1,
1991
(Tab
20
of
Exhibit
A-1).
On
May
28,
1991,
a
Motion
to
Vary
the
Alimentary
Support
was
made
by
Mr.
Mastromonaco
(Tab
21
of
Exhibit
A-l).
On
August
7,
1991,
another
seizure
was
made
by
Ms.
Vosko
(Tab
22
of
Exhibit
A-1),
which
was
opposed
by
Mr
Mastromonaco
(Tab
23
of
Exhibit
A-1).
The
judgment,
respecting
the
various
motions
previously
described,
among
others,
the
motion
to
replace
the
alimony
payments
by
a
lump
sum
payment,
motion
made
by
Ms.
Vosko,
or
the
motion
to
reduce
the
amount
of
alimony,
motion
made
by
Mr.
Mastromonaco,
was
rendered
by
Justice
Deslongchamps
of
the
Superior
Court
on
June
18,
1992
(Tab
24
of
Exhibit
A-1,
Tab
33
of
Exhibit
R-1).
The
judgment
first
gave
effect
to
an
agreement
reached
by
the
parties
on
February
3,
1992
respecting
a
lump
sum
payment
and
the
compensatory
allowance.
To
settle
the
lump
sum
payment
(referred
to
at
paragraph
12
of
these
Reasons),
the
Hampstead
house
valued
by
the
parties
at
$750,000
was
transferred
to
Ms.
Vosko
and
there
was
a
payment
of
$79,765.32
in
addition
to
the
amount
of
$100,000
already
paid.
Respecting
the
compensatory
allowance
of
$75,000,
the
moveables
were
given
to
Ms.
Vosko
in
payment
of
that
allowance.
Left
to
be
decided
by
Justice
Deslongchamps
was
the
motion
made
by
Ms.
Vosko
to
replace
the
alimony
payments
by
a
lump
sum
of
$2,500,000.
He
decided
that
the
amount
should
be
established
at
$775,000.
A
Motion
for
Accessory
Measures
was
made
by
the
Appellant
on
August
28,
1992.
It
had
for
purposes
to
vary
the
judgment
of
Justice
Deslongchamps
to
increase
the
amount
of
$775,000
to
an
amount
of
$1,620,278
(Exhibit
A-2).
On
November
24,
1992,
another
judgment
was
rendered
by
the
Superior
Court:
this
time
by
Mr.
Justice
Tellier
(Tab
25
of
Exhibit
A-l
and
Tab
34
of
Exhibit
R-1).
The
Court
granted
Ms.
Vosko
a
sum
of
$28,000
representing
alimony
payments
for
four
months.
Moreover,
the
Court
ordered
Mr.
Mastromonaco
to
pay
an
amount
of
$7,200
per
month,
as
of
December
1,
1992,
if
in
the
meantime
the
plaintiff
has
not
satisfied
the
judgment
of
Justice
Deslongchamps
respecting
the
amount
of
the
lump
sum
to
be
paid
in
lieu
of
alimony,
amount
affirmed
by
Mr.
Justice
Tellier.
On
November
25,
1992,
the
legal
dispute
ended.
Ms.
Vosko
signed
a
Quittance
and
Full
Discharge.
She
declared
that
she
had
received
full
payment
of
the
amount
of
$775,000
(Tab
35
of
Exhibit
R-1).
She
signed
another
Quittance
and
Full
Discharge,
having
received
the
amount
of
$53,000
representing
$28,000
of
alimony
for
a
period
of
four
months
and
a
lump
sum
of
$25,000
for
additional
costs
(Tab
36
of
Exhibit
R-1).
The
cheques
were
issued
on
that
same
day
for
those
amounts.
Argument
Counsel
for
the
Appellant
submitted
that
legal
costs
incurred
to
collect
a
pension,
to
oppose
a
reduction
or
to
ask
for
an
increase
of
pension
or
alimony
are
deductible,
in
accordance
with
subparagraph
18(
1
)(«)
of
the
Income
Tax
Act
(the
“Act”),
which
reads
as
follows:
18(1)
In
computing
the
income
of
a
taxpayer
from
a
business
or
property
no
deduction
shall
be
made
in
respect
of
(a)
an
outlay
or
expense
except
to
the
extent
that
it
was
made
or
incurred
by
the
taxpayer
for
the
purpose
of
gaining
or
producing
income
from
the
business
or
property;
He
referred
to
decisions
of
this
Court
in
Hasbani
c.
R.,
[1994]
1
C.T.C.
2810
(T.C.C.)
and
St-Laurent
c.
R.
(1998),
[1999]
1
C.T.C.
2478
(T.C.C.).
He
suggested
that
legal
costs
are
now
considered
to
be
also
deductible
if
they
are
incurred
to
claim
an
alimony
pursuant
to
a
divorce.
Counsel
for
the
Appellant
referred
in
this
regard
to
the
decisions
of
this
Court
in
Nissim
v.
R.,
[1998]
4
C.T.C.
2496
(T.C.C.)
and
Donald
v.
R.
(1998),
[1999]
I
C.T.C.
2025
(T.C.C.)
and
to
a
decision
of
the
Supreme
Court
of
Canada
in
Evans
v.
Minister
of
National
Revenue
(1960),
60
D.T.C.
1047
(S.C.C.).
Counsel
for
the
Appellant
also
submitted
that
legal
costs
and
expert
fees
may
have
served
at
the
same
time
to
protect
from
a
reduction
of
an
alimony
or
its
annulment
and
other
incidences
in
a
divorce
proceeding
and
there
is
no
reason
why
it
should
affect
the
right
to
deduct
these
costs.
He
did
not
submit
in
an
alternative
manner
that
there
should
be
an
apportionment
of
the
expenses.
Counsel
for
the
Respondent
submitted
that
the
expenses
had
been
incurred
not
for
the
purpose
of
gaining
or
producing
income
from
a
property,
but
were
made
on
account
of
capital
and
were
therefore
not
deductible,
pursuant
to
subparagraph
18(
1
)(£>)
of
the
Act,
which
reads
as
follows:
18(1)
In
computing
the
income
of
a
taxpayer
from
a
business
or
property
no
deduction
shall
be
made
in
respect
of
(b)
an
outlay,
loss
or
replacement
of
capital,
a
payment
on
account
of
capital
or
an
allowance
in
respect
of
depreciation,
obsolescence
or
depletion
except
as
expressly
permitted
by
this
Part;
Counsel
for
the
Respondent
referred
to
the
decision
of
the
Supreme
Court
of
Canada
in
Evans
(supra),
where
it
was
found
that
the
Appellant’s
claim
in
regard
to
which
the
legal
expenses
were
incurred
was
a
claim
to
income
and
therefore
these
legal
expenses
were
properly
deductible
as
having
been
made
on
account
of
income.
Both
counsel
have
referred
to
this
decision.
The
excerpt
quoted
by
counsel
for
the
Appellant
is
at
page
1050
and
the
one
quoted
by
counsel
for
the
Respondent,
at
page
1051.
They
read
as
follows:
(Page
1050)
The
precise
form
in
which
the
matter
was
submitted
to
the
Court
appears
to
me
to
be
of
no
importance;
the
legal
expenses
paid
by
the
appellant
were
expended
by
her
for
the
purpose
of
obtaining
payment
of
income;
they
were
expenses
of
collecting
income
to
which
she
was
entitled
but
the
payment
of
which
she
could
not
otherwise
obtain.
So
viewed,
it
could
scarcely
be
doubted
that
the
expenses
were
properly
deductible,
in
computing
the
appellant’s
taxable
income.
This,
in
my
opinion,
is
the
right
view
of
the
matter
and
is
not
altered
by
the
circumstance
that
it
was
mistakenly
claimed
by
Mrs.
Andersen
that
the
appellant
was
not
entitled
to
any
income
at
all.
(page
1051)
In
my
opinion,
in
the
circumstances
of
this
case
there
are
two
relevant
questions
both
of
which
must,
on
the
admitted
facts,
be
answered
in
the
affirmative;
(i)
was
the
appellant’s
claim
in
regard
to
which
the
expenses
were
incurred
a
claim
to
income
to
which
she
was
entitled?
(ii)
were
the
legal
expenses
properly
incurred
in
order
to
obtain
payment
of
that
income?...
Counsel
for
the
Respondent
referred
to
the
decision
of
the
Federal
Court
of
Appeal
in
Canada
(Attorney
General)
v.
Sembinelli
(1994),
94
D.T.C.
6636
(Fed.
C.A.),
where
it
has
been
found
that
legal
expenses
incurred
in
defending
against
an
attack
brought
by
a
former
husband
to
rescind
a
support
order
which
she
had
previously
obtained
at
the
time
of
her
divorce,
were
incurred
on
account
of
income.
He
also
referred
to
my
decision
in
Sembinelli
v.
R.,
[1993]
2
C.T.C.
2345
(T.C.C.),
and
to
the
following
excerpt
at
page
2348:
I
conclude
that
the
legal
expenses
incurred
by
the
Appellant
“to
prevent
the
right
to
receive
that
income
being
destroyed”
(supra),
were
incurred
for
the
purpose
of
gaining
income
from
an
existing
income
producing
right
and
not
for
the
purpose
of
acquiring
an
asset
of
an
enduring
nature
nor
to
defend
an
item
of
fixed
capital.
Counsel
for
the
Respondent
submitted
that,
contrary
to
the
two
preceding
cases,
the
legal
expenses
incurred
in
the
present
appeal,
have
been
incurred
for
the
purpose
of
acquiring
assets
of
an
enduring
nature.
Counsel
for
the
Respondent
also
referred
to
the
decision
of
the
Federal
Court
Trial
Division
in
R.
v.
Burgess
(1981),
81
D.T.C.
5192
(Fed.
T.D.),
where
it
was
found
that
a
claim
of
alimony
pursuant
to
a
divorce
was
on
account
of
capital
because
the
right
to
this
alimony
has
to
be
established
where
it
did
not
have
to
be
established
pursuant
to
a
separation
from
bed
and
board.
He
also
referred
to
a
decision
of
this
Court
in
Filteau
v.
Minister
of
National
Revenue
(1990),
91
D.T.C.
509
(T.C.C.)
that
followed
the
reasoning
in
Burgess.
Both
counsel
have
referred
to
the
decision
of
this
Court
in
Nissim
(supra).
Although
in
this
case
the
expenses
were
incurred
before
the
dissolution
of
marriage,
Bowman
J.
discusses
the
matter
of
legal
costs
incurred
for
alimony
pursuant
to
a
divorce
as
decided
in
Burgess
(supra).
I
quote
this
decision
extensively
because
it
has
also
the
advantage
of
discussing
the
characteristics
of
payments
made
on
account
of
income
and
of
those
made
on
account
of
capital:
1993,
1994
and
1995
The
issue
in
these
years
is
the
deductibility
of
legal
expenses.
The
amounts
claimed
were
$3,983,
$13,914.26
and
$8,500
respectively.
The
substantial
question
is
whether
the
legal
expenses
were
laid
out
for
the
purpose
of
gaining
or
producing
income
or
were
capital
or,
alternatively,
were
personal
or
living
expenses.
All
of
the
numerous
court
proceedings
and
all
of
her
dealings
with
the
several
lawyers
whose
services
she
retained
had
as
their
predominant
and
overriding
purpose
the
enforcement
of
the
husband’s
obligation
to
pay
support
for
the
children.
I
find
as
a
fact
that
the
husband
failed
to
honour
his
obligation
to
pay
support
ordered
by
the
court.
Ultimately
he
began
paying
and
the
amounts
were
declared
as
income
by
the
appellant
and
deducted
by
the
husband.
The
purpose
in
my
view
of
the
incurring
of
the
legal
expenses
was
to
force
the
husband
to
live
up
to
his
obligation
to
pay
support
for
the
two
children.
Thus,
the
expenses
were
incurred
for
the
purpose
of
earning
income
in
the
form
of
maintenance
payments
which
of
course
are
taxable
in
the
appellant’s
hands
under
paragraph
56(1)(b)
or
(c)
of
the
Income
Tax
Act.
The
legal
expenses
in
this
case
were
incurred
prior
to
the
dissolution
of
the
marriage
and
were
designed
to
force
the
husband
to
honour
his
existing
obligation
to
pay
maintenance.
On
this
basis,
I
think
the
case
is
governed
by
Evans
rather
than
by
Burgess.
Quite
apart
from
that
distinction,
I
would
add
that
1
think,
notwithstanding
the
great
respect
that
I
have
for
the
judgments
of
Cattanach
J.,
that
the
distinction
that
he
drew
in
1981
may
not
accord
with
the
social
and
economic
realities
of
the
world
in
1998.
We
are
all
too
familiar
with
the
phenomenon
of
husbands
who
fail
to
live
up
to
their
obligations
to
their
wives
and
children
to
pay
maintenance.
To
deny
to
wives
the
right
to
deduct
the
cost
of
compelling
husbands
to
pay
their
fair
share
of
the
cost
of
raising
children
and
yet
to
tax
the
wives
on
such
maintenance
as
they
can
get
from
the
husbands
seems
to
me
to
be
contrary
to
both
common
sense
and
ordinary
principles
of
fairness.
Whatever
validity
there
may
be
to
the
distinction
between
the
cost
of
enforcing
an
existing
right
to
income
and
establishing
such
a
right
I
do
not
think
that
the
courts
should
strain
to
find
legalistic
reasons
to
deny
the
deductibility
of
these
very
necessary
expenses.
It
must
be
recognized
that
the
law
relating
to
revenue
and
capital
expenditures
has
developed
since
the
last
century
and
distinctions
that
may
have
carried
weight
in
1898
may
be
less
meaningful
in
1998.
In
M.N.R.
v.
Algoma
Central
Railway,
68
D.T.C.
5096,
the
Supreme
Court
of
Canada
said
at
page
5097:
Parliament
did
not
define
the
expressions
“outlay
...
of
capital”
or
“payment
on
account
of
capital”.
There
being
no
statutory
criterion,
the
application
or
non-application
of
these
expressions
to
any
particular
expenditures
must
depend
upon
the
facts
of
the
particular
case.
We
do
not
think
that
any
single
test
applies
in
making
that
determination
and
agree
with
the
view
expressed,
in
a
recent
decision
of
the
Privy
Council,
B.P.
Australia
Ltd.
v.
Commissioner
of
Taxation
of
the
Commonwealth
of
Australia,
(1966)
A.C.
224,
by
Lord
Pearce.
In
referring
to
the
matter
of
determining
whether
an
expenditure
was
of
a
capital
or
an
income
nature,
he
said,
at
p.
264:
The
solution
to
the
problem
is
not
to
be
found
by
any
rigid
test
or
description.
It
has
to
be
derived
from
many
aspects
of
the
whole
set
of
circumstances
some
of
which
may
point
in
one
direction,
some
in
the
other.
One
consideration
may
point
so
clearly
that
it
dominates
other
and
vaguer
indications
in
the
contrary
direction.
It
is
a
common
sense
appreciation
of
all
the
guiding
atures
whi
ist
provide
the
ultimate
answer.
(Emphasis
added)
Both
counsel
referred
to
the
decision
of
this
Court
in
Donald
(supra),
which
followed
the
decision
rendered
in
Nissim
(supra).
Both
counsel
also
referred
to
the
decision
of
this
Court
in
St-Laurent
(supra),
where
it
was
found
that
legal
fees
amounting
to
$3,488.18,
which
the
appellant
incurred
when
she
made
a
motion
to
vary
the
corollary
relief
in
respect
of
support
payments
she
was
receiving
from
her
former
spouse,
were
deductible
pursuant
to
subsection
18(
1
)(a)
of
the
Act.
Counsel
for
the
Respondent
referred
to
Savard
c.
Ministre
du
Revenu
national
(1989),
90
D.T.C.
1478
(T.C.C.),
and
referred
to
an
excerpt
stating
that
a
compensatory
allowance
is
in
the
nature
of
a
capital
payment,
at
page
1480:
I
feel
that
in
light
of
the
actual
wording
of
article
459
of
Civil
Code
of
Québec,
commentators
and
the
Superior
Court
judgment
I
have
to
conclude
that
the
compensatory
allowance
is
not
a
payment
made
for
the
maintenance
of
an
ex-spouse
but
one
made
to
repay
his
contribution
to
enriching
the
patrimony
of
the
spouse
making
the
payments.
It
is
a
payment
of
a
capital
nature,
and
not
income.
Conclusion
It
appears
to
me
that
both
counsel
agree
on
the
interpretation
of
the
case
law.
Their
disagreement
is
on
the
characterization
of
the
expenses
made
by
Ms.
Vosko:
whether
they
are
on
account
of
income
or
of
capital.
There
was
no
argument
as
to
a
mode
of
apportionment.
The
Minister
allowed
small
amounts
to
be
deducted
respecting
costs
incurred
for
alimony
without
a
real
explanation
as
to
the
basis
for
the
apportionment.
But
the
apportionment
is
not
where
the
dispute
lies.
On
both
parts,
the
legal
argument
was
on
the
determination
of
the
true
purpose
of
the
legal
proceedings
that
went
on.
For
Counsel
for
the
Appellant
it
was
predominantly
on
account
of
income,
for
Counsel
for
the
Respondent,
it
was
the
reverse.
One
consideration
may
point
so
clearly
that
it
dominates
other
and
vaguer
considerations
in
the
contrary
direction.
These
words
of
Lord
Pearce
in
B.P.
Australia
Ltd
(supra),
have
long
been
accepted
as
clearly
expressing
the
progression
to
be
made
in
the
analysis
of
the
facts
to
determine
the
purpose
of
expenses.
Ms.
Vosko
stated
that
the
expenses
were
all
incurred
for
support
purposes.
Support
may
be
granted
by
means
of
capital
payment
or
income
payment
as
can
be
seen
by
the
text
of
subsection
15(2)
of
the
Divorce
Act:
Corollary
Relief
15.(2)
A
court
of
competent
jurisdiction
may,
on
application
by
either
or
both
spouses,
make
an
order
requiring
one
spouse
to
secure
or
pay,
or
to
secure
and
pay,
such
lump
sum
or
periodic
sums,
or
such
lump
sum
and
periodic
sums,
as
the
court
thinks
reasonable
for
the
support
of
(a)
the
other
spouse;
(b)
any
or
all
children
of
the
marriage;
or
(c)
the
other
spouse
and
any
or
all
children
of
the
marriage.
Mesures
Accessoires
15.(2)
Le
tribunal
compétent
peut,
sur
demande
des
époux
ou
de
l’un
d’eux,
rendre
une
ordonnance
enjoignant
à
un
époux
de
garantir
ou
de
verser,
ou
de
garantir
et
de
verser,
la
prestation,
sous
forme
de
capital,
de
pension
ou
des
deux,
gu
il
estime
raisonnable
pour
les
aliments:
a)
de
l’autres
époux;
b)
des
enfants
à
charge
ou
de
l’un
d’eux;
c)
de
l’autre
époux
et
des
enfants
à
charte
ou
de
l’un
deux.
(Emphasis
added)
The
judgment
rendered
by
Justice
Marx,
(referred
to
at
paragraphs
11
and
12
of
these
Reasons),
granted,
at
the
Appellant’s
request,
(referred
to
at
paragraph
10
of
these
Reasons)
a
lump
sum
payment
for
support.
This
support
payment
is
in
the
nature
of
a
capital
payment.
The
Appellant
claimed
$1,000,000
in
compensatory
allowance
as
reported
in
paragraph
7
of
these
Reasons.
This
claim
is
not
a
claim
for
support
but
a
claim
for
the
contribution
of
one
spouse
to
the
enrichment
of
the
patrimony
of
the
other
spouse
as
I
noted
in
my
decision
in
Savard
(supra).
It
is
a
capital
amount.
The
lump
sum
payment
that
the
Appellant
sought
for
in
lieu
of
alimony
(paragraphs
14
and
17
of
these
Reasons)
is
also
of
a
capital
nature.
In
paragraph
6
of
these
Reasons,
it
can
be
seen
that
Mr.
Mastromonaco
had
taken
an
action
in
divorce
and
had
accepted
to
make
all
the
alimony
payments
agreed
between
the
parties
at
the
time
of
separation.
All
these
payments
were
of
an
income
nature.
However,
Ms.
Vosko
was
not
satisfied
with
these
payments
and
she
wanted
capital
payments.
It
was
the
beginning
and
the
object
of
the
ensuing
dispute.
No
one
could
argue
that
she
was
not
entitled
or
that
she
could
be
faulted
in
trying
to
build
up
her
own
patrimony
for
her
and
her
children.
However,
the
Act
makes
a
distinction
between
expenses
made
for
the
purpose
of
earning
income
from
a
property
and
payments
made
on
account
of
capital
and
gives
them
a
different
fiscal
treatment.
My
analysis
of
the
facts
of
this
appeal
is
that
the
expenses
incurred
by
the
Appellant
in
the
years
under
appeal
have
been
incurred
for
the
predominant
purpose
of
acquiring
a
patrimony
of
her
own.
There
were
some
claims
concerning
alimony
payments
but
they
were
secondary
and
were
mostly
caused
by
the
Appellant
seeking
large
amounts
of
capital.
The
expenses
were
therefore
in
the
nature
of
expenses
made
on
account
of
capital
and
not
on
account
of
income.
The
appeals
are
dismissed,
with
costs
in
favour
of
the
Respondent.
Appeal
dismissed.