Reginald H Coates v. Minister of National Revenue, [1979] CTC 2802, 79 DTC 677

The Assistant Chairman:— Reginald H Coates (the appellant) filed his income tax return for the 1975 taxation year and claimed as maintenance payments the sum of $1,698. The Minister of National Revenue (the respon- dent) disallowed that claim. After following the procedure set forth in the Income Tax Act, the appellant appealed to this Board. In his objection, while he referred to paragraph 60(b) of the Income Tax Act, reference was also made to section 60.1 of the same Act. All references are to that Act after tax reform. The respondent confirmed the assessment with reference to paragraph 60(b) only. No reference was made to section 60.1.

On appeal to this Board the appellant made no reference to paragraph 60(b) as the basis for his claim, and counsel for the respondent did not argue that, if the appellant were not within section 60(b), his appeal should be dismissed. While clearly indicating that she did not accept my decision in the case of Gordon A Bryce v MNR, [1978] CTC 3144; 78 DTC 1833, assuming it were correct, counsel for the respondent’s basis for opposing the appeal was that the appellant could not bring himself within section 60.1.

Literally there was not an agreement as to the facts of the case, but there was no dispute that the decree nisi with respect to the marriage of the appellant with his former wife was granted on March 11, 1974, which contained the clause:

And this Court doth further order and adjudge that the said Respondent pay off, by instalments, the existing mortgage on the residential premises at 185 Montgomery Street, or any renewal of the said mortgage, it being understood that the said Petitioner will co-operate in the arranging of renewals of the mortgage for the full amortized period, if required, until further Order of the Court.

Also, on July 16,1974, there was granted a decree absolute in the same action which contained the following clause:

And this Court doth order and adjudge that the said Respondent pay off, by instalments, the existing mortgage on the residential premises at 185 Montgomery Street, or any renewal of the said mortgage, it being understood that the said Petitioner will co-operate in the arranging of renewals of the mortgage for the full amortized period, if required, until further Order of the Court.

The appellant stated that, immediately following the decree nisi, he made the payments stipulated. Also there was no dispute that in the course of the calendar year 1975 (and I stress the year 1975—not 1974) he paid to CMHC, which held the mortgage insofar as the appellant was concerned, the sum of $1,698. As the respondent established, for that calendar year of the amount of $1,698, $702.36 applied to interest, $487.61 to principal, and $503.03 to taxes (presumably municipal taxes). In effect the appellant stated that he paid the said amounts and, pursuant to section 60.1, he is entitled to the deduction. Those payments were paid after July 1974—they were paid in 1975—and they were made, regardless of how one looks at it, pursuant to an order or judgment of a court or a variation thereof for the benefit of the spouse or former spouse, and so deductible. If one looked at the amount claimed, it is not being claimed for a period prior to July 1974, but only in the calendar year 1975 and consequently after July 1974. He is not asking that the enactment be retroactive. If one is going to turn anything on the date of the enactment, and rule out the decree nisi, then the decree absolute is clearly after that date. After the decree absolute is issued, is there a decree nisi?

Counsel for the respondent did not make any argument with respect of paragraph 60(b) and confined herself to section 60.1 and, even if the mortgage and interest payments were within section 60.1, the payment for taxes was not. Counsel’s position was that the order or variation thereof referred to in section 60.1 had to be made after May 6,1974, because of the enacting provision. This amendment was made by section 31 of An Act to Amend the Income Tax Act, SC 1974-75-76, c 26.

Section 31 in its entirety reads as follows:

31 .(1) The said Act is further amended by adding thereto, immediately after section 60 thereof, the following section:

“60.1 Where, after May 6, 1974, a decree, order, judgment or written agreement described in paragraph 60(b) or (c), or any variation thereof, has been made providing for the periodic payment of an amount by the taxpayer to or for the benefit of his spouse, former spouse or children of the marriage in the custody of the spouse or former spouse, the amount or any part thereof, when paid, shall be deemed to have been paid to and received by the spouse or former apouse if the taxpayer was living apart from the spouse or former spouse at the time the payment was received and throughout the remainder of the year in which the payment was received.”

(2) This section is applicable in respect of amounts paid after May 6, 1974.

Counsel contended that, if section 60.1 referred to payments made after May 6, 1974, regardless of when the order or variation thereof was made, there would have been no need to have subsection (2) of section 31. The effect of subsection (2) is that section 60.1 only applies to payments made after May 6, 1974, with respect to judgments or orders made after the same date.

Counsel continued that the judgment absolute which was issued after May 6, 1974, was not a judgment requiring payment and was also not a “variation” of the judgment nisi so as to bring it within section 60.1. Reference was made to the Divorce Act, RSC 1970, c D-8, especially section 11, subsection 13(1) and section 16, which reads as follows:

11.(1) Upon granting a decree nisi of divorce, the court may, if it thinks it fit and just to do so having regard to the conduct of the parties and the conditions, means and other circumstances of each of them, make one or more of the following orders, namely:

(a) an order requiring the husband to secure or to pay such lump sum or periodic sums as the court thinks reasonable for the maintenance of

(i) the wife,

(ii) the children of the marriage, or

(iii) the wife and the children of the marriage;

(b) an order requiring the wife to secure or to pay such lump sum or periodic sums as the court thinks reasonable for the maintenance of

(i) the husband,

(ii) the children of the marriage, or

(iii) the husband and the children of the marriage; and

(c) an order providing for the custody, care and upbringing of the children of the marriage.

(2) An order made pursuant to this section may be varied from time to time or rescinded by the court that made the order if it thinks it fit and just to do so having regard to the conduct of the parties since the making of the order or any change in the condition, means or other circumstances of either of them. 1967-68, c 24, s 11.

13.(1) Every decree of divorce is in the first instance a decree nisi and no such decree shall be made absolute until three months have elapsed from the granting of the decree and the court is satisfied that every right to appeal from the judgment granting the decree has been exhausted.

16. Where a decree of divorce has been made absolute under this Act, either party to the former marriage may marry again. 1967-68, c 24, s 16.

Counsel contended that the decree nisi of divorce was the decree which ordered payment and the decree absolute did not vary that decree nisi, but rather, pursuant to section 16, proclaims the parties to the decree nisi free to marry. Also, subsection (2) of section 11 already provides that “an order made pursuant to this section (that is a decree nisi of divorce) may be varied from time to time or rescinded . . There is no suggestion that the “time to time” is limited to the period between the issuance of the decree nisi and the decree absolute.

After considering the submissions made by counsel, I am of the view that it is the judgment nisi which orders the payment and that the judgment absolute is only given to make the parties to the divorce action (the husband and wife) free to marry again. It is not a variation of the decree nisi and, were the quantum of the payment to be varied, it would be a variation of the decree nisi. Since the decree nisi was prior to May 6,1974, it was before the amendment and not within the ambit of the amendment and payments made pursuant to it after the date of the amendment are not covered by the amendement.

The result is, judgment will go dismissing the appeal.

Appeal dismissed.