Mambo v. R., [1996] 1 CTC 2388

Beaubier J.T.C.C.:— This matter was heard at Saskatoon, Saskatchewan on August 22, 1995 and at Prince Albert, Saskatchewan on August 25, 1995 pursuant to the General Procedure of this Court. The appellant, his Chartered Accountant Gordon Reid, and his former wife Anna Mambo were the only witnesses.

The appeal concerns the appellant’s 1988, 1989 and 1990 taxation years. One matter in contention is alleged business expenses; the other is whether mortgage payments made by the appellant are an allowance or alimony within paragraphs 60(b) and 60(c) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the “Act”).

The appellant is a pathologist. The Melfort Union Hospital retained him under contract where he was required to attend and work full days at its hospital facilities. He resided in Prince Albert, 130 kilometres away. There, he was the sole shareholder and officer of Prince Albert Medical Labs Inc., which did laboratory work for physicians and patients in and around Prince Albert.

The expenses of “Library” and “Dues,” except for one item of $40.00 U.S. as submitted by the appellant and substantiated with invoices, were agreed by counsel to be allowed for the purposes of the appeal.

“Travel” and “Parking” were testified to by the appellant and Mr. Reid. The “Travel” was claimed for kilometres and other vehicle charges for travelling to Melfort from Prince Albert and back. The appellant was an employee or officer of Prince Albert Medical Clinic Inc. and resided in Prince Albert. He did not personally carry on business there; he carried on business at the Melfort Union Hospital. All of the “Travel” claimed was from his residence to work In Melfort and back. There was no business purpose to it.

The amounts claimed for “Parking” were charges by the Melfort Union Hospital to the appellant for electric power to his parked car in the winter. In that way, his car engine was warm enough to start in order to drive back to his Prince Albert residence in the evening. Thus, this claim was also personal and had no business purpose.

The Appeal is dismissed respecting both “Travel” and “Parking.” The second matter relates to monthly payments of principal, interest and taxes by the appellant on account of a house owned by him and his former wife Anna as tenants in common. It was situated at 801 Cumberland Avenue, Saskatoon and was resided in by Anna, from whom he was divorced, and their two children.

The payments were made pursuant to a Consent Order of the Unified Family Court dated March 14, 1986, which amended an order of the Unified Family Court dated January 13, 1981 in file No. 119 of 1979. The parties to that Order were divorced before March 14, 1986 pursuant to a Decree Nisi dated September 19, 1983 in file No. 489 in 1983 of the Unified Family Court. No mention of the Decree Nisi was made in the Consent Order. However, family law rules of interpretation are generous in such matters, and the Consent Order can be taken as amending the Decree Nisi in substance.

The matter of these mortgage payments was previously dealt with by Judge King of this Court on November 15, 1989 in file No. 88-SOO(IT), when he found for the appellant. The appellant’s counsel argued res judicata, abuse of process and estoppel as the result of Judge King’s decision. These arguments do not apply to different assessments in different years.

The payments by the appellant were made directly to the mortgage company on account of principal, interest and taxes. They were periodic. They were for the benefit of the appellant’s children and his former wife. They were also for his benefit since they paid down his share of the mortgage principal. But the appellant’s spouse did not have discretion as to their use pursuant to subsection 56(12).

The appellant testified that in 1979 he and his former wife agreed in a conversation that the payments would be made directly to the mortgage company. The appellant’s counsel argued that this constituted consent. There is nothing in any order or decree which complies with the requirements that subsections 60.1(2) and 56.1(2) be specifically referred to.

The requirement that there be specific reference to these subsections in writing has two valid purposes. The first is to confirm that both parties know that there are tax consequences to such an order or agreement. The second is to comply with what provincial statutes across Canada now enact: that the parties participating in such a Court Order or signing such agreements each have independent legal advice due to their serious and permanent consequences. An oral agreement or consent by the appellant’s former wife in 1979 does not fulfill the criteria of the Income Tax Act or meet the principles described above.

The appeal is dismissed with respect to the second matter.

Appeal dismissed.