The Chairman (orally):—This is an appeal by J A Claude Belanger against reassessments of the Minister of National Revenue for the 1970 and 1971 taxation years. The point at issue is whether or not amounts paid by the appellant pursuant to a separation out of the Superior Court of Quebec, District of Montreal are deductible as alimony or maintenance payments within the meaning of paragraph 11(1) (I) of the Income Tax Act as it then was.
The courts and the Tax Appeal Board have long interpreted the section in question on a very narrow basis. Paragraph 11 (1)(l) provides that the taxpayer must make such payments: in the year; pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written separation agreement; and to his spouse to whom he was required to make the payments; and the payments must be made on a periodic basis, before they are allowable as deductions in computing his income.
I agree with the general maxim that “all taxing statutes must be strictly construed”, but I add, “in the light of the changing social circumstances of the day”, If one looks at the cases over the past years, one finds instances where moneys that have been paid for the furtherance of the education of the children have not been allowed as deductions because they were not paid to the spouse. However, in the decision of the Board in R E Hastie v MNR, [1972] CTC 2383; 72 DTC 1335, subsequently appealed by the Minister of National Revenue to the Federal Court of Canada, and in the decision of Mr Justice Walsh ([1974] CTC 131; 74 DTC 6114), paragraph 11(1)(l) has, in my view, been interpreted in the manner that I feel certain the drafters of the legislation intended it to be interpreted, and has been interpreted in the way that it should be in our modern-day society.
lt is true that in the Hastie case the husband, under a Quebec separation, was required to pay to his wife an alimentary allowance and was also required to pay an additional amount to her for mortgage payments, taxes and upkeep in respect of the matrimonial home. With the consent of the wife, the husband made the mortgage payments directly to the mortgagee. These were disallowed by the Minister but, on appeal, the Board allowed them as deductions and was upheld in the Federal Court. The learned trial judge held that he was of the opinion that the interpretation given by the Minister to paragraph 11(1)(la) did not represent the legislators’ intention, and I am in complete accord with his approach to the subject.
He considered both of the submissions put forward by the Minister as plaintiff before the Federal Court. The first part of the twofold argument was that the payments made to the mortgagee were not payments made to his spouse to whom he was required to make the payments. The second argument was that they were payments which the taxpayer was contractually obligated to make in any event, and from which he was going to benefit in part, since a portion of those payments would increase his own capital interest in the matrimonial home. Walsh, J, in arriving at his decision, considered paragraph 11(1)(la), subsections 16(1) and (2), and paragraph 6(1)(da), and I do not propose to deal with them in this judgment other than to say that I adopt his reasoning completely. It seems to me that the learned trial judge has not taken a wide or irresponsible view of payments made which, as he says, might incidentally create some benefit to the husband himself but, rather, has treated the matter on the basis that the payments were really made for the benefit of the wife and children, which, in my view, is what paragraph 11 (1)(l) is all about. The question s: does the case before me fall within the ambit of the Hastie case?
Learned counsel for the respondent says that it does not, because, as I have said, in the Hastie case there was a direction for two separate types of payment and the subsequent consent of the wife for the mortgage payments to be made directly. He says that in this case the wife had no control over the payments in question and had nothing to give up, nor did she give anything up, by any contractual act. With this contention I must disagree. The mere fact that a separation was entered into before a prothonotary of the Superior Court of the Province of Quebec indicates the consent of both parties to the contents thereof, which provide, inter alia, and I quote:
Plaintiff to pay Defendant an alimentary allowance of ninety dollars ($90) by cash, every two weeks at the domicile, plus pay all other charges pertaining to the common domicile which Plaintiff presently pays; should Defendant move to Trenton, Ontario, Plaintiff shall pay Defendant the sum of three hundred and fifty dollars ($350) per month; . . .
It seems perfectly clear to me that the alternative given to the wife of staying in the house with normal charges paid or moving to Trenton and receiving $350 per month, gave her a right in the matrimonial domicile that was valued at $350 per month. Therefore, by the separation agreement, the position arrived at in the Hastie case in two steps was really, by the passive acquiescence of the wife, taken in one step in the agreement entered into between this appellant and his former wife.
It is perfectly clear that the payments that he made for the mortgage, the alimony or maintenance payments, heat, light, telephone and insurance were all items in which the wife had an interest and which necessarily had to be paid in order for the wife to be able to remain in the matrimonial home. She had the option, even after entering into the agreement, of leaving the matrimonial home and having her allowance increased by what obviously was deemed to be the difference between $90 every two weeks and that $90 plus the regular commitments for running the matrimonial home.
In my view, as I have said, this is exactly the sort of thing that the legislators must have intended to enact as a protection for the children of the marriage, and I cannot conceive of an interpretation that would insist on all payments being made to the wife, a step which, in the event of the failure of the wife to live up to her obligations, might result in the non-payment of liabilities essential to the retention of the matrimonial home and deprive the children of the necessities of life and manner of living to which they had been accustomed. Surely ensuring the payment of these necessities of life for the children is exactly what was contemplated by the legislators when enacting this section.
I adopt completely the reasoning of Mr Justice Walsh in the Hastie case and I find no difficulty whatsoever in finding that the wife in this case, by consenting to the separation agreement, directed the payment of the sums necessary to take care of the items that I have mentioned above just as legalistically and firmly as was done in the Hastie case.
I would therefore allow the appeal and refer the matter back to the Minister for reassessment accordingly, allowing the appellant to deduct all sums paid pursuant to the said separation agreement.
Appeal allowed.