Gordon Edward Penner v. Minister of National Revenue, [1978] CTC 2774, [1978] DTC 1578

Delmer E Taylor:—This is an appeal against an income tax assessment in which the Minister of National Revenue disallowed an amount of $959 claimed as alimony for the year 1974. The respondent relied, inter alia, upon section 3 and paragraph 60(b) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Facts

On the 8th day of December, 1969, a Decree Nisi was issued between Florence Penner and Gordon Edward Penner providing for, among other things, divorce of the parties at the expiration of three months, separation of the spouses, custody of the children, access and maintenance.

By an agreement dated May 24, 1973, confirmed by a Court Order of June 12, 1973, the Decree Nisi was varied to the extent that the further periodic payments for maintenance and support for the daughters of the marriage, namely Wendy and Virginia, were to be paid directly to the daughters, and that the spouse, Florence Penner, gave up all claims for maintenance for herself.

During the year under appeal, the appellant claimed total payments of $2,439 and, in filing his income tax return, detailed the payments as follows:

STATEMENT OF ALIMONY PAID IN 1974

Paid to Florence Penner, Melville, Sask—For the Months of Jan, Feb, Mar, Apl, May, June, July and Aug 1974

8 x 100	$800
4 x 50 for months Sept, Oct, Nov, and Dec 1974	200
Paid directly to daughter Wendy, attending school in Edmonton, Alta
for months of Jan, Feb, Mar, Apl, May, June and July 1974—
7 x 60	420
Feb 24, 1974	190
April 11, 1974	229

May 27, 1974	250
5 x 7/0 in Aug, Sept, Oct, Nov and Dec 1974	350
TOTAL ALIMONY PAID IN 1974	$2.439
Daughter Wendy residing at 10405, 108 Ave, Edmonton

The amounts deleted by the Minister were in connection with payments made to or on behalf of Wendy, and consisted of:

Contentions

The position of the appellant as outlined in the Notice of Appeal was:

Mr Penner considered it, his responsibility to provide maintenance and support for his daughters, Virginia and Wendy and therefore it was the intention of the parties for the agreement to mean more than what it strictly Says, the meaning being that Mr Penner would make his own arrangements as to the maintenance and support directly with his daughters without interference with his wife and that he would take into consideration his responsibility for the maintenance and support.

To summarize on behalf of Mr Penner we would state that the payments that Mr Penner made were made. pursuant to a consent order of the Court of Queen’s Bench and pursuant to the separation agreement and that the payments were made as an allowance for the maintenance of the two children of the marriage Wendy and Virginia. The payments were made periodically in the sense that they were made during the school term and antecedent obligation, and were not paid as a lump sum payment to either of the daughters. If Mr Penner had not made the payments in the amount he has paid he would have been ordered [by a] court of competent jurisdiction to make the payments which he now is requesting be deducted from his income.

It was contended by the respondent that:

—payments made by the appellant to his daughter Wendy in excess of $40 per month were not amounts paid by him 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 the maintenance of the said daughter.

Evidence

Copies of the relevant documents, filed by agreement of counsel, were:

Exhibit A-1—DECREE NISI dated December 1, 1969;

A-2—COURT ORDER amending above dated June 12, 1973;

A-3—AGREEMENT between the parties preliminary to Exhibit

A-2, dated May 24, 1973;

LE A-4—Letter from the appellant to his counsel describing the

payments made.

A-5—AFFIDAVIT related to a further amendment to the Decree

Nisi dated February 14, 1974.

Argument

Counsel for the appellant argued for a liberal interpretation of the relevant sections of the Income Tax Act, by virtue of the responsibility assumed by the appellant under the Divorce Act in providing for his children. Three cases were quoted by counsel as support for his position: MNR v R A Hastie, [1974] CTC 131; 74 DTC 6114; Nathan Joseph Divinsky v MNR, [1975] CTC 2242: 75 DTC 198; and J V R Gagné v MNR, [1976] CTC 2163; 76 DTC 1125. Particularly from Divinsky, counsel quoted from pages 2243 and 199 respectively:

In any event, in following both the Hastie decision and my own decisions in subsequent cases, I am prepared to allow the appellant to deduct what I feel are payments made for the necessities of life for the children and the obligations required under the agreement for the wife: Therefore, I would allow the mortgage and fuel payments in respect of the house and disallow the payments made in respect of piano lessons, books, summer camp and allowances for the children.

Counsel for the respondent pointed out that the Minister had accepted the decision in Hastie (supra) to allow the monthly payments made directly to a third party in the amount of $480 (in this case to the daughter Wendy) but had rejected the excess portion paid each month. He stated that although this was. the policy of Revenue Canada for authorized payments made to third parties, it was limited to the specifics of an individual case and was not of general application. The Minister also disallowed the three specific payments of $190, $229 and $250, since these were apparently for a vacuum cleaner, a sewing machine and dental work respectively. This position was based on the decisions in Her Majesty the Queen v Morton Pascoe, [1975] CTC 656; 75 DTC 5427, and The Attorney General of Canada v James C Weaver and Freda J Weaver, [1975] CTC 646; 75 DTC 5462. It was counsel’s contention that these decisions provided more specific enlightenment on the points raised in Divinsky (supra) and must be regarded as the current test cases.

Findings

Reduced to its essentials, the argument of counsel for the appellant was that the agreement of May 24, 1973 (Exhibit A-3), and the court order of June 12, 1974 (Exhibit A-2) provided the appellant with the latitude to contribute directly or indirectly to the support of the two daughters Virginia and Wendy, limited in amount only by what might be termed reasonable with reference to the Divorce Act, and judgments related to it.

The operative paragraphs for the purpose of this appeal from the documents filed are:

From Exhibit A-1

AND THIS COURT doth further decree and adjudge that the respondent, GORDON EDWARD PENNER, shall pay to the petitioner, FLORENCE PENNER, for and on behalf of each of the issue of the said marriage, the sum of $40 per month so long as such issue attends school.

From Exhibit A-3

And it is further agreed by the party of the first part, that any further payments of maintenance to her two daughters, VIRGINIA FLORENCE PENNER and WENDY KATHERINE PENNER, shall be made by the party of the second part, GORDON EDWARD PENNER, directly to the two daughters so that any further matters which might arise with regard to them, will be dealt with between themselves and their father, GORDON EDWARD PENNER, without any reference to the party of the first part, FLORENCE PENNER.

From Exhibit A-2

That any further payments of maintenance and support for the two daughters Virginia Florence Penner and Wendy Katherine Penner, shall be made by the applicant Gordon Edward Penner directly to his two daughters.

While counsel would like to read into the terminology of the above paragraphs from Exhibits A-3 and A-2 the interpretation upon which his case is based, there is no such latitude contained therein, in my opinion. Deleting the specific reference to an amount of $40 per month (contained in Exhibit A-1) from the related paragraphs in Exhibits A-3 and A-2 does not have the effect desired by counsel. Conversely, it could run the risk of putting outside the parameters of an allowance, as defined in earlier Court decisions on this matter, any amounts paid to the said Virginia and Wendy. The Minister in allowing an amount of $40 per month as a continuing deduction has interpreted the Act to the greatest extent possible when viewed against the current legislative record.

Decision

The appeal is dismissed.

Appeal dismissed.