Takis P Veliotis v. Her Majesty the Queen, [1974] CTC 237, 74 DTC 6190

Pratte, J:—This is an appeal from the decision of the Tax Review Board, dismissing the plaintiff’s appeal from his income tax assessment for the year 1969.

This action raises the question of whether the plaintiff was entitled, under paragraph 11(1)(l) of the Income Tax Act, to deduct from his income for 1969 the sum of $25,000 paid by him to his former wife during that year.

Paragraph 11(1)(l) reads as follows:

11. (1) ...the following amounts may be deducted in computing the income of a taxpayer for a taxation year:

(I) an amount paid by the taxpayer in the year, 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 recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;

The plaintiff was formerly married to Mrs Bessie Charkas. The marriage was dissolved by divorce. A decree nisi was granted by the Superior Court of Quebec on July 23, 1969. It is in order to quote certain portions of that decree, in which the plaintiff is described as “petitioner” and his then wife as “respondent”:

WHEREAS ... respondent was justified in seeking a divorce in her favour;

IN VIEW of the conditions agreed on by the parties, regarding custody of the children, in accordance with the agreement concluded on June 16, 1969, and forming part of the record;

WHEREAS by the said agreement the parties determined their rights and financial obligations as a consequence of their marriage;

FOR THESE REASONS:

GRANTS a decree nisi between petitioner and respondent . . .

APPROVES the agreement concluded by the parties on June 16, 1969 regarding custody of the children, subject to any recourse by either party io the Court in a case of necessity;

ORDERS petitioner to pay respondent, in lieu of an alimentary pension and in settlement of claims resulting from the marriage, the sum of $50,000.00, $25,000.00 of which shall be payable within fifteen (15) days of a decree absolute on this petition, and $25,000.00 payable in three equal annual instalments, the first to be payable one year from the date of a decree absolute on this peition . . .

This decree nisi was declared absolute on October 30, 1969. A few days later the plaintiff made the first payment of $25,000, referred to in the decree nisi, to his former wife. It is this amount which he claims to be entitled to deduct from his income for 1969.

The decree nisi refers to an agreement concluded between the plaintiff and his former spouse on June 16, 1969. The purpose of this agreement, made in anticipation of the divorce, was to determine the supplementary orders to be contained in the divorce decree. In the first paragraph the parties agreed that for eleven months of the year the two children of their marriage would be in the custody of the plaintiff. The second paragraph was headed “Other Visits and Communications with the Children”. Finally, the third and fourth paragraphs read as follows:

3. MONETARY MEASURES:

Mr Veliotis shall renounce any and all claims he may have or pretend to have on the property of Le Breton Street, St Foy, which is now registered in Mrs Veliotis (sic) name;

Mr Veliotis shall deposit with a trust company or jointly with both counsels the sum of twenty-five thousand dollars ($25,000.00) or any other negotiable instruments, the latter subject to joint agreement, in order that the said sum of twenty-five thousand dollars ($25,000.00) or the proceeds of any negotiable instruments be paid unto Mrs Veliotis If and when a final ordinance of divorce is rendered in which would be embodied the provisions of the accessory measures. outlined herein; especially those concerning the custody of the children and the respective rights and obligations of the parties, these accessory measures to be considered as an essential part of the agreement;

Over and above the cash amount to be paid to Mrs Veliotis, as above provided for, Mr Veliotis agrees to pay unto Mrs Veliotis an additional amount of twenty-five thousand dollars ($25,000.00) by three yearly instalments of $8,333.33 each, the first becoming due one year after the payment of the initial amount of $25,000.00. The unpaid instalments would bear interest, at the rate of 7% and the amount of the interest will be added to each yearly instalment and be paid at the same time thereas;

Mrs Veliotis expressly renounces her right to any alimony or pension and undertakes to give and execute a final discharge to Mr Veliotis following the payment of the last instalment;

Mrs Veliotis agrees to and does desist from her action for separation as to bed and board and all other accessory and incidental proceedings related thereto, comprising Court action, Petition or Petitions, judgment or judgments rendered thereon;

Should the Court see fit, the parties hereto agree that a final ordinance be rendered immediately notwithstanding the provisions of Article 13, Paragraph 1 but according to Paragraph 2a) of Article 13 of the Divorce Act:

4. LEGAL OR CONTRACTUAL MATRIMONIAL BENEFITS:

Mrs Veliotis specifically renounces all rights to the benefits stipulated In the marriage contract in her favour; in consideration of the settlement above provided for the said marriage contract to be annulled by the Ordinance of Divorce if and when rendered; with the exception of the furniture, which the Petitioner recognizes as the property of the respondent.

Paragraph 11(1)(l) lays down the conditions the payments to which it refers must meet if they are to be deductible from the income of the taxpayer making them. Clearly, the $25,000 payment in question meets several of these conditions. It was paid by plaintiff in 1969 in accordance with the judgment of a competent tribunal; it was paid to plaintiff’s ex-wife; finally, at the time of the payment, and for the remainder of 1969 the plaintiff “was living apart and was separated pursuant to a divorce . . . from his former spouse . . . to whom he was required to make the payment”.

The foregoing is admitted by the defendant, who nevertheless maintains that the sum of $25,000 which the plaintiff claims to deduct was not paid “as alimony or other allowance payable on a periodic basis for the maintenance” of the plaintiff’s former spouse. In support of this contention counsel for the defendant argued that the sum of $25,000 was not paid in settlement of an alimentary obligation, since it was part of a larger sum ($50,000) which the plaintiff had to pay in order to be released from any alimentary obligation towards his former spouse. Counsel also contended that the obligation imposed on the plaintiff to pay the sum of $25,000 was not in the nature of an alimentary obligation, since the right of the plaintiff’s former wife to require this payment was assignable and could be passed on to her heirs. On this point counsel for the defendant referred the Court to the judgment of the Exchequer Court in MNR v D Trottier, [1967] 2 Ex CR 268; [1967] CTC 28; 67 DTC 5029. In this judgment, which was subsequently upheld by the Supreme Court (D Trottier v MNR, [1968] SCR 728; [1968] CTC 324; 68 DTC 5216), Cattanach, J said (at 278 [37, 5034]):

Alimony or maintenance continues through the joint lives of the husband and wife but terminates upon the death of either. If Mrs Trottier had died during the currency of the second mortgage the payments under the second mortgage would continue to be payable to her assignee, if she had assigned it, and otherwise to her heirs, executors or administrators in accordance with a covenant in the indenture to that effect. It follows that the periodic payments cannot be classified as payments for maintenance.

Further maintenance is payable for the support of the wife and as such is not assignable by her and neither do such payments, from their very nature, bear interest. The payments here under consideration are both assignable and Interest bearing under the terms of the second mortgage.

Of course, counsel for the plaintiff argued that the various sums plaintiff was required to pay by the divorce decree did constitute an “allowance payable on a periodic basis for the maintenance of plaintiff’s former spouse”. He pointed to the terms of the judgment and of the agreement of June 16, 1969 in support of his claim that the sum of $25,000 was paid for the maintenance of plaintiff’s former spouse. He also argued, on the basis of various dictionary definitions and a decision of the Tax Appeal Board,* [1] that payments are “periodic” when they are to be made one after another on pre-arranged dates, even if the amounts of the various payments are unequal. Finally, counsel for the plaintiff referred the Court to the judgment delivered by Jackett, P, as he then was, in MNR v W A Hansen, [1967] CTC 440; 67 DTC 5293.

In my opinion, even assuming that the plaintiff paid the sum of $25,000 which he seeks to deduct for the maintenance of his former wife, that sum was still not paid, as required by paragraph 11(1)(l), “as alimony or other allowance payable on a periodic basis . .

First, it seems clear that the sum of $25,000 was not paid “as alimony”. The word “alimony”, which, in the French version of paragraph 11(1 )(l), is translated by the expression pension alimentaire, has a narrower meaning than that expression: it refers only to the periodic allowance which, pursuant to a judgment, one spouse must pay the other during the marriage.t [2]

Secondly, the sum of $25,000 cannot be said to have been paid as an “allowance payable on a periodic basis”. In my view, the allowance payable on a periodic basis referred to in paragraph 11(1)(1) is periodic in the same sense as alimony, and alimony is a periodic allowance not only in the sense that the payer must make payments at regular intervals, but also in the sense that at regular intervals the payer must provide a sum adequate to maintain the payee until the next payment. Consequently, a divorce decree which ordered a husband to pay his spouse the sum of $100,000 in four monthly instalments of $25,000 would not in the normal course be a judgment ordering the payment of a periodic allowance within the meaning of paragraph 11(1)(l). Moreover, it should be noted that the section refers to a sum paid as an “allowance payable on a periodic basis”. An allowance is a specific sum of money paid to someone. An allowance is payable on a periodic basis when a specific sum of money is payable at regular intervals. A judgment does not create an obligation to pay an allowance on a periodic basis if it does not require the payer to pay the same sum of money at regular intervals. In the case at bar the divorce decree may impose on the plaintiff an obligation to make certain payments on a periodic basis; but it does not require him to make a periodic allowance to his spouse of $25,000.

In my view, therefore, plaintiff is not entitled to the deduction he is claiming, and his action should be dismissed.