Roland St-Onge [TRANSLATION]:—Following the issuing of an order on August 23, 1977, under section 174 of the Income Tax Act, the taxpayers Roméo Rivet and Ghislaine Guèvremont appeared before the Board on October 6, 1977, and it was decided that the taxpayer Ghislaine Guevremont would be joined to the appeal of Romeo. Rivet in order to determine: (1) whether the amounts Mr Roméo Rivet paid to Mrs Ghislaine Guèvremont are deductible from her [sic] income; and
(2) whether the said amounts must be included in calculation Mrs Ghislaine Guèvremont’s income.
The undisputed facts are as follows:
1. Mr Roméo Rivet married Dame Ghislaine Guèvremont on March 29, 1948 in the city of Montreal;
2. on March 27, 1968, the said marriage was dissolved by Senate resolution;
3. there was no provision for alimony payments in the said resolution;
4. Mr Roméo Rivet paid his ex-wife $45 a week, for a total of $2,340 in taxation year 1969 and $2,307 in taxation year 1970;
5. for the next three years, he paid his ex-wife $100 a week, for a total of $3,220 in taxation year 1971, $5,200 in taxation year 1972 and $5,200 in taxation year 1973;
6. these payments were made after an exchange of correspondence between Mr Roméo Rivet and his ex-wife;
/. Mr Roméo Rivet claimed the deduction for the above-mentioned
amounts in calculating his taxable income for 1969 to 1973 inclusive;
8. by notice of assessment dated February 26, 1975, the Minister of National Revenue disallowed all of the amounts so deducted;
9. by a notice of assessment dated April 13, 1976, the applicant included the amounts of $3,220 for taxation year 1971, $5,200 for taxation year 1972 and $5,200 for taxation year 1973 in calculation Dame Ghislaine Guèvremont’s taxable income;
10. on May 7, 1976, Dame Ghislaine Guèvremont filed a notice of objection against the said assessment;
11. on October 28, 1976, the Minister of National Revenue issued a notification upholding the assessment and dismissing the notice of objection.
At the hearing the appellant submitted a consent to judgment dated February 15, 1970, between himself and Mrs Ghislaine Guevremont, establishing the amount of the alimony he was to pay her at $45 per week.
It would nevertheless appear from the written documents entered in evidence that this consent to judgment was never ratified by the Superior Court.
| Further. | had | authorized |
Further, Mrs Guèvremont testified that she had never authorized her lawyer to sign such a document.
The appellant also submitted two copies of letters, including one written by his ex-wife on September 8, 1971, which reads in part as follows:
! can no Ronger manage on the $45 per week that you give me and now need at least $100 per week. I hope that your cheque for the week of September 13 and subsequent weeks will be for $100.
The appellant, Mr Rivet, testified that he had sent Mrs Guèvremont a registered letter on September 12, 1971 which read as follows:
In reply to your letter of September 8, 1971 in- which you ask me to increase your alimony payment to $100 per week. please find enclosed the amount requested. It is further agreed that the payments will henceforth be $100.
Mrs Guèvremont testified that she had indeed received an envelope that contained a cheque for $100, but that she had never received a letter.
The appellant’s representative argued that all the conditions required by paragraph 60(b) of the new Act and paragraph 11 (1 )(l) of the former Act were met: _.
1. that all the amounts paid during the year by the taxpayer may be deducted. The appellant therefore deducted the amounts paid during the taxation years from 1969 to 1973 inclusive;
2. that the said amounts had been deducted pursuant to a decree, order or judgment handed down by a competent tribunal; the appellant had paid the amounts claimed as a deduction in accordance with a judgment by the Superior Court on February 15, 1970 ordering him to pay Mrs Guèvremont alimony of $45 per week;
3. with respect to the increase from $45 to $100 that occurred on September 12, 1971, this was only an adjustment agreed to in writing between the parties as to the quantum of the alimony that the judgment of February 15, 1970 ordered the appellant to pay.
The payments of $100 were therefore also made pursuant to a decree, order or judgment.
4. Alternatively, even if it is admitted that the $55 per week increase effective September 12, 1971 had not been paid pursuant to a decree, order or judgment, it was paid in accordance with a written agreement between the two parties.
According to the representative for the appellant, there was a written agreement, since the exchange of letters between the parties constituted an offer and an acceptance in writing, for the purposes of paragraph 60(b) of the Income Tax Act.
Counsel for the Minister argued that the consent to judgment dated February 15, 1970 was not a judgment because it had never been ratified by a judge of the Superior Court, nor could it constitute a written agreement since it had not been signed by the parties, and Mrs Guevremont had never authorized her lawyer to sign such a document; and that if the unratified consent to judgment constituted a written agreement, it was late, since the $45 was paid for a number of months prior to February 15, 1970. and was not enforceable, since the resolution of divorce cancelled this agreement.
He further argued that, according to the case law, this exchange of correspondence could not constitute a written separation agreement, nor could it be a written agreement to obtain alimony, since it did not fulfill all the necessary and requisite conditions of paragraph 60(b) of the new Act and paragraph 11 (1)(l) of the former Act in order to constitute a valid agreement.
He referred the Board to the following cases:
William Edward Horkins v Her Majesty the Queen, [1976] CTC 52; 76 DTC 6043; James Beatty v MNR, 13 Tax ABC 285; 55 DIC 444; The Sterling Trusts Corporation, Executor of the Estate of William. Spencer Merry v MNR, 10 Tax ABC 119; 54 DTC 122; Jim Wing Yuen v MNR, 14 Tax ABC 363; 56 DTC 116; Edward Kostiner v MNR, 32 Tax ABC 124; 63 DTC 478; Benedict Vincent Griep v MNR, [1970] Tax ABC 1025; 70 DTC 1671.
Having heard the parties and their representatives, the Board concluded as follows:
1. The Minister of National Revenue could not assess for the 1969 taxation year, since this was prescribed under paragraph 152(4)(b) of the Income Tax Act. Mr Rivet’s appeal for the 1969 taxation year is therefore allowed:
2. The consent to judgment dated February 15, 1966 was never ratified by a judge of the Superior Court and cannot in any way constitute a judgment of a competent tribunal within the meaning of paragraph 60(b) of the Income Tax Act, or paragraph 11(1)(l) of the former Act.
3. The unratified consent to judgment cannot constitute a written alimony agreement, since it was never signed by the parties and Mrs Guèvremont’s lawyers never received authorization from her to sign such a document.
4. The exchange of correspondence cannot constitute a written agreement between the parties for several reasons, namely:
1. because Mr Rivet was unable to submit legal proof that a written acceptance existed;
2. because Mrs Guèvremont denied having received a letter that could constitute a valid written acceptance;
3. because according to the case law in taxation matters it appears that a written agreement, either for the spouses’ separation or to obtain alimony, must be drafted on a legal document stating the terms of the agreement between the parties who actually signed the document, and that the cheques sent by the ex-husband cannot constitute a written agreement.
For all these reasons, the Board entertains a very serious doubt that there was a written agreement concluded between the parties in question to arrange alimony for Mrs Guèvremont and her children.
The sections of the Income Tax Act that the appellant wishes to use are exempting sections, and in order to benefit from them a taxpayer must be able to meet all their conditions.
FOR THESE REASONS:
1. The appeal of Mr Rivet is allowed in respect of the 1969 taxation year and dismissed in respect of the other years, namely 1970, 1971, 1972 and 1973.
2. The amounts that Mrs Guèvremont received from the appellant shall not be included in calculating her income for the 1971, 1972 and 1973 taxation years.
Appeal allowed in part.