The taxpayer and his wife separated in 2010 and on March 6, 2011, entered into separation agreement without legal counsel. Although the spousal support (set at $3,500 a month) was stipulated to end in December 2014, such support continued to be paid by the taxpayer thereafter and was included by her in her income. The Minister denied the taxpayer’s claimed deduction of $42,000 for the 2018 taxation year on the basis that the payments were made without a written separation agreement being in place. The taxpayer argued that an implied contract continued to exist after 2014, referring (at para. 13) to a statement in Chitty on Contracts that there may “be an implied contract when the parties make an express contract to last for a fixed term, and continue to act as though the contract still bound them after the term has expired and a written agreement.”
In rejecting this submission, MacPhee J stated (at para. 19):
An implied contract … does not meet the requirements of the Act in order to make a deduction of support payments.
In nonetheless allowing the taxpayer’s appeal, MacPhee J stated (at paras. 20-22):
There is no question that the contract the parties relied upon was flawed. Yet it was an agreement in writing, setting out the support payments.
The parties continued through the 2018 taxation year to consider themselves bound by their 2011 separation agreement. …
… I am guided by the plain meaning of the words of the Act … . I have concluded that the payments were made pursuant to the terms of a written agreement.