Keith Brown-Grant v. Minister of National Revenue, [1983] CTC 2627, [1983] DTC 561

Taylor, TCJ:—These appeals were heard by me in St. John’s, Newfoundland, on July 6, 1983 in my capacity as a member of the Tax Review Board but this judgment is rendered in my capacity as a judge of the Tax Court of Canada. The appeals are against income tax assessments for the years 1978, 1979 and 1980 in which the Minister of National Revenue disallowed certain amounts claimed as alimony payments. While the amounts at issue varied in the different years, the principle involved was common and described in the notices of appeal as follows:

The Appellant, a divorced person, was ordered by the Court to make maintenance payments in the amount of £50 per month, per child of the marriage until the children of the marriage attain the age of twenty one (21) years. The Appellant made the payments and filed for his deduction pursuant to section 60(B) of the Income Tax Act. Upon the oldest child of the marriage attaining the age of nineteen (19) years, the revised age of majority, the Appellant agreed in writing with his wife to increase the maintenance payments to their oldest child as he was continuing his full time education and that in the future the payments would be made directly to the child. The Appellant also deducted these payments pursuant to section 60(B) of the Income Tax Act, but these deductions have been disallowed.

The Appellant submits that Revenue Canada erred in it finding.

The Payments made pursuant to a Court Order dated the 12th day of January, 1977, clearly comply with section 60(B) of the Income Tax Act. They were payments made by a divorced person pursuant to a Court Order and the payments were payable on a periodic basis and were for the maintenance of the children of the marriage.

It is submitted that the subsequent payments comply with section 60(B) as they only differ from the previous payments in that these were made directly to the child of the marriage and were made pursuant to a written agreement and not a court order. The written agreement took the form of letters signed and dated by the Appellant and subsequently signed by his former spouse.

The respondent, in the reply to notice of appeal, amplified the information in this manner:

(a) By a Court Order dated January 12, 1977, the Appellant was ordered to pay to his former spouse the amount of 50 pounds sterling per month child for the financial support of his three children, Frederick, Rosalind, and Angus.

(b) On January 9, 1978, a variation to the Order referred to in paragraph (a) was issued by the Court deleting the child Angus from the Order;

(c) By letter dated September 1, 1978, the Appellant agreed with his former spouse to pay money directly to the child, Angus, as follows:

Date	Amount
on or before Sept. 15, 1978	200 pounds
on or before Jan. 15, 1979	200 pounds
in or before April 15, 1979	200 pounds

(d) By letter dated August 20, 1979, the Appellant agreed with his former Spouse to pay money directly to the child, Angus, as follows:

Date	Amount
before Oct. 1, 1979	310 pounds
before Jan. 1, 1980	300 pounds
before April 1, 1980	300 pounds

(e) By letter dated July 20, 1980, the Appellant agreed with his former spouse to pay money directly to the child Rosalind as follows:

Date	Amount
on or before Sept. 1, 1980	900 pounds
on or before Dec. 31, 1980	900 pounds
on or before April 30, 1981	900 pounds

(f) None of the letters referred to in paragraphs 5(c), (d), and (e) were signed by the Appellant’s former spouse before the payments were made;

(g) The payments referred to in paragraphs 5(c), (d), and (e) were not made pursuant to a decree, order, or judgment of a competent tribunal, or pursuant to a written agreement.

The respondent at the hearing relied, inter alia, upon sections 3, 4, 6(1), 60(b), and 248(1) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Copies of the letters referenced above were filed with the Board. The appellant agreed they had not been signed by his ex-wife during the relevant years — although, according to him, she would gladly have done so had he realized it was important. There was no question that the payments had been made. It was the contention of the Minister that the letters from the appellant to his ex-wife did not constitute a “written agreement” calling for the payments involved, even though there was a divorce decree which had Originally stipulated certain maintenance payments. The Minister had allowed all payments made under both the original court order and the variation order, but had disallowed those based upon the alleged “written agreements” represented by the letters.

Although the Minister pointed out to the Board that the Court Orders of January 12, 1977 and January 8, 1978 which called for the basic payments probably could not have been varied by a simple “written agreement”, the disallowance was not based on that narrow ground — it was because the letters which the appellant contended were written agreements could not be so described since they did not bear the signature of the appellant’s ex-wife at the relevant dates. Counsel for the respondent cited for the Board certain jurisprudence, but counsel for the appellant contended that while that jurisprudence might tend to support the position of the Minister in a dispute related to requirements for a “written separation agreement”, that could not be extended to include a simple “written agreement”. According to counsel, there had been agreement between the parties, all the conditions had been fulfilled, and the payments made. It was, above all, counsel’s assertion that the letters bound the appellant and would have been enforceable against him in the event of default on his part — they were, in short, contracts as binding and legal as any other of like nature.

In my view, there is no essential difference between the terms “written agreement” and “written separation agreement” found in paragraph 60(b), for the purposes of these appeals. The first could be just as well termed “written (payment) agreement”. Case law requiring confirmation of the agreement by writing it down and by having it signed by both parties does apply therefore. In addition to such actions (writing and signing) clearly establishing the parameters of the agreement, there is, in my view, another particular reason why this action is vital for purposes of a deduction under paragraph 60(b) of the Act — the interrelationship of paragraph 56(1 )(b) of the Act with paragraph 60(b). Paragraph 56(1 )(b) requires the inclusion in taxable income by the recipient of amounts arising out of deductions claimed by the payor under paragraph 60(b). Accordingly, there is an implicit acceptance by the recipient of the obligation to pay income tax thereon. In this matter I might be prepared to agree that there was a verbal arrangement between the appellant and his ex-wife, and that he was merely codifying it in the letters, but there is no viable evidence that during the years under appeal she had agreed to the terms or ramifications of such letters. On the general ground that no “written agreement” was in force, the appeals must be dismissed.

However, in the instant case there is also a specific obligation (aside from the income tax implications noted above) which would leave the contention of the appellant open to serious question without the written acceptance from his ex-wife required by the Minister. I quote one sentence from one of the letters:

After deduction of any part of the Government grant paid directly to Angus, the remaining costs will be divided between us.

The appeals are dismissed.

Appeal dismissed.