Walsh, J:—This action was joined for hearing on common evidence with that bearing No T-5911-79 Paul H Serson v Her Majesty The Queen, the only difference between the two being the amounts involved. Doctor Dauphinee received $5,336.32 in 1976 in relation to six inventions, declared none of this for income, considering it as capital gain so that whatever the outcome of the appeal one-half should in any event have been included in his taxable income. Doctor Serson for his part received the sum of $2,591.83 in 1976 which also resulted from a payment made pursuant to the Public Servants Inventions Act" and regulations thereunder, and included one-half of it in his return as a capital gain but the Minister contends the entire amount Should have been included. Except for the amounts in question the facts are identical and the legal issues to be decided are the same. The aforementioned Public Servants Inventions Act provides in section 3 as follows:
The following inventions, and all rights with respect thereto in Canada or elsewhere, are vested in Her Majesty in right of Canada, namely,
(a) an invention made by a public servant
(i) while acting within the scope of his duties or employment, or
(ii) with facilities, equipment or financial aid provided by or on behalf of Her Majesty, and
(b) an invention made by a public servant that resulted from or is connected with his duties or employment.
Section 9 provides that the administration and control of any invention so vested in Her Majesty is vested in the appropriate Minister who may transfer such administration and control to any other Minister or to any corporate agency of Her Majesty—in this case the Canadian Patents and Development Limited. Section 10 reads as follows:
Subject to the regulations, the appropriate Minister may authorize the payment of an award to a public servant who makes an invention that is vested in Her Majesty by this Act, in such amount as the appropriate Minister and the public servant may agree upon or as the appropriate Minister determines.
Paragraph 12(c) provides:
The Governor in Council may make regulations for carrying out the purposes and provisions of this Act, and without restricting the generality of the foregoing, may make regulations.
(c) prescribing the amount of and the method of calculating and determining the awards to be paid under this Act and the manner and time of payment.
The Public Servants Inventions Regulations, SOR/73-104 February 28, 1973, provides in subsection 13(2) as follows:
(2) Where any money is received by Her Majesty upon the sale, licence or other disposal of an invention vested in Her Majesty by the Act, an award or awards may be paid to the inventor, based on the total amount from time to time so received, but such award or awards shall not in the aggregate exceed fifteen per cent of the amount so received.
It is by virtue of these sections of the Act and Regulations that the payments were made to the plaintiff. The statements of claim set out the allegations on the basis of which it is contended that the amounts received should not be treated as income received. The statement of claim of Doctor Dauphinee, after referring to the amount received by virtue of the Public Servants Inventions Act in 1976, and pointing out that that legislation gives the Minister a discretionary right to make payments to persons for inventions taken by the Crown states in Paragraph 4:
The award related to six general inventions, but especially one which was a liquid conductivity apparatus known as a laboratory salinometer, used for measuring temperature electrical conductivity in the depths of the world’s oceans.
Paragraphs 6 to 10 of the statement of claim read as follows:
6. The taxpayer is director of the Heat and Thermatology Section of the National Research Council. The taxpayer is a research officer for the employer in the sense of carrying out physical measurements, and designing experimental projects for the purpose of answering specific measurement questions posed by the employer. The taxpayer is expected to carry out these measurements using known technology, and is not expected to perform general or theoretical research. The taxpayer also is required to maintain measurement standards for Canada, and to perform general administrative duties.
7. It is not within the scope of the taxpayer’s duties of employment to the employer to “invent”.
8. Once an invention has been made by the taxpayer, taxpayer generally utilizes the facilities and equipment of the employer to test his inventions.
9. Any payment to the taxpayer by Canadian Patents and Development Limited is discretionary. The crown agency acts on instructions from the Minister of the department holding the invention patent, who authorizes the payments to the taxpayer.
10. An invention is recognized in law to be a property right, and any taking, vesting, or other dealing with such property right may be compensated by payments to the inventor, in appropriate circumstances.
In the case of Serson who was employed by the Department of Energy Mines and Resources identical allegations are made. Although the evidence before the Tax Review Board was by agreement made part of the record and portions of the transcript of the evidence of Walter Gordon, Secretary of Canadian Patents and Development Limited, a Crown corporation was referred to, Dr Dauphinee also testified in Court that he is a physicist working for the National Research Council and a principal research officer. He has made about 15 inventions all of which he admits come under the Act. The payment of $5,336.32 received in 1976 related to royalties received in that year by the Canadian Patents and Development Limited for six of his inventions and he concedes that he received similar payments in subsequent years based on 15% of the royalties earned by these inventions which amount was awarded to him pursuant to the Act and Regulations.
He was head of the Heat and Thermometries Section and his expertise is in physical measurements and more recently in connection with oceanography such as measurements of salinity of water at substantial depths. All his inventions related in a general way to this work. He stated that sometimes equipment and design can be based on known technology and on occasion it is necessary to develop new equipment. He conceded that it is part of his job function to put together a system which will work by deciding what equipment to use to solve problems submitted. Inventions do not always arise as the result of a specific inquiry however but have been made in some cases because he became aware of a need and devised something to be used when it occurred. In most cases only he himself and a technician were involved in developing the equipment. He described the process of his inventions as Stating that normally he gets an idea, becomes interested in it and works on it himself, frequently in his spare time. It is only after the idea has come to him, as he stated suddenly, that he brings in his assistants to prove and develop or confirm the idea, which may eventually be abandoned. He stated that it is not part of his duties with the National Research Council to invent and that many scientists there never do so. The fact is that many of his ideas occur to him when at home, perhaps lying in bed, when there is no interruption of his mental process by daily work requirements. He described some of his inventions such as a potentiometer, in which he got the idea that by merely exchanging and rearranging the positions of the second and third dials on a commercial potentiometer readily available he was able to get an instrument which would give readings in five or six figures instead of three. He is now working on barometers, the existing instruments not being stable enough for reliable use on ocean buoys. It occurred to him that by adapting a vapour pressure thermometer operated on low current, since vapour pressure at constant temperature is fixed, he could then relate these readings to barometric pressure. He is now working on an idea to make ocean buoys right themselves, as some of them turn upside down becoming invisible to radar and a danger to navigation. He was aware when he commenced working for the National Research Council in 1945 that any inventions he made during the course of such employment would be vested in the Crown and that he would be likely to get some compensation for them. This was not the motivation of his inventions. He admits that some of his inventions are a spin-off from his work in connection with con- ductivity of sea water. He designed a thermometer using an electrical patent which he already has for use in place of a liquid thermometer. Salinity can be measured since if the pressure and temperature are known conductivity of sea water can be measured electrically. He devised a continuous flow system and his salinometer is now used throughout the world. He conceded that it is extremely difficult to draw a line between practical development and the idea itself. He stated that flashes of insight can occur at any time.
It is of some interest to note what exactly constitutes an invention, although that is not the issue in the present case, since the mere fact that patents were obtained indicates that Doctor Dauphinee’s ideas were inventions. Fox in Canadian Patent Law and Practice, Fourth Edition at page 62 States:
It involves nothing more or less than an individual decision of mind, influenced by the knowledge, experience, training, education, perceptions, emotions and prejudices of the individual who is called upon to decide whether invention does or does not exist.
and Black's Law Dictionary, 4th Edition defines it inter alia as—
the process of contriving and producing something not previously known or existing, by the exercise of independent investigation and experiment.
Mr Gordon in his evidence before the Tax Review Board merely explained the method of calculation. The Ministry is advised by Canadian Patents and Development Limited of the amounts of revenue received during the year and that 15% may be paid to inventors and the Minister authorizes the payment. It is the Minister for whom the inventor works who has to authorize the payment and on occasion the Minister has failed to so authorize. The payment and amount thereof up to 15% is discretionary, the employee making the invention having no right to it. It is paid out of receipts received by Canadian Patents and Development Limited for the use of patents by others. Sections of the Income Tax Act in question are as follows:
5.(1) Subject to this Part, a taxpayers’ income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by him in the year.
6. (1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:
(a) the value of board, lodging and other benefits of any kind whatever (except the benefit he derives from his employer’s contributions to or under a registered fund or plan, group sickness or accident insurance plan, private health services plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy) received or enjoyed by him in the year in respect of, in the course, of or by virtue of an office or employment.
Defendants rely heavily on the case of MNR v Laurent Gagnon, [1965] CTC 423; 65 DTC 5268, in which an employee of the Dominion Bureau of Statistics was awarded a sum for a suggestion that was estimated to save another department of the Government a substantial amount. The award was made by virtue of the Suggestion Award Plan of the Public Service of Canada which provided that no award could be given for a suggestion arising from the day to day duties for which the employee was paid or for a suggestion from an employee whose normal duties included the making of suggestions. It was contended by the appellant however that the suggestion for which the award was not the result of his daily work. Jackett, P, as he then was, pointed out that the Suggestion Award Plan regulations permitted the payments to be made “notwithstanding the Civil Servant Act”. He points out that the character of the award is determined by the terms of the statute by which it is offered and concludes at 425 [5270]:
... In my view also, the creation, and formulation in usable form, of a suggestion for the improvement in business or governmental operations, is a service of the kind that an employer may obtain either from officers of servants or from independent contractors (eg accountants, efficiency experts, etc). It follows that, in my view, a payment for a suggestion is a payment for a service.
While there may be exceptions, I am of opinion that a payment for a service is ordinarily “income’’ from one of the recipient’s “sources’’ within the meaning of those words in section 3 of the Income Tax Act whether the recipient receives the payment as an employee, as a person who operates a business of supplying services or as a person who has performed a service on an isolated occasion. Compare the judgment of Noel, J in Steer v MNR, [65 DTC 5155]. Whether or not that view is too wide, there is no doubt in my mind that awards under the Suggestion Award Plan Regulations are income from an employment and fall within section 5 of the Income Tax Act because they are payable to employees of the Government of Canada for services performed for that Government. It is immaterial, in my view, that the particular services are not performed in the course of the execution of the normal duties of their positions. Parliament has expressly authorized awards as extra reward or compensation to be paid to public servants for services performed in addition to their normal duties. Such awards are, in my view, clearly within the words “other remuneration’’ in the introductory words of subsection (1) of section 5.
Plaintiff contends that this case should be distinguished however as it dealt with a mere suggestion resulting in an award to be paid out of the Financial Administration Act, which it was contended is a quite different payment from a portion of royalties received from sources outside the Government for the use of an invention by a Government employee compulsorily taken from him, in a sense, as a result of his employment by virtue of the provisions of the Public Servants Inventions Act. Plaintiffs rely on the Tax Appeal Board case of Arthur Mansfield v MNR, 28 Tax ABC 404; 62 DTC 134, as being directly in point. The appellant in the employ of the Department of National Defence invented a piece of mine sweeping equipment, largely on his own time, as a result of which an award was made to him for his invention. It had been determined by the Department of National Defence however in that case that his invention did not come within the scope of his duties of employment. It has held that the amount received was a payment to him in respect of the compulsory transfer to the Crown of his rights to his invention and, as such, constituted a non-taxable capital receipt. It was not a gratuity nor could it be considered as coming within the description of “other benefits of any kind whatever ... received ... in the course of his employment as used in what is now subsection 6(1) (supra), as these words have to be read ejusdem generis with the preceding words and form part of the phrase “the value of board, lodging and other benefits of any kind whatever” and merely indicate the receipt of some benefit in a form other than cash. While there is considerable force to this argument it must be pointed out that this judgment was rendered before that of the Exchequer Court in the case of MNR v Laurent Gagnon (supra). Furthermore in subsequent cases, including the Tax Review Board decision in the present case the judgment in the Mansfield case has not been followed, although most of the judgments to which the Court was referred refer to merit awards, which is an entirely different matter. Grant, DJ for example, in Her Majesty The Queen v Elizabeth Joan Savage, [1980] CTC 103; 80 DTC 6066, decided that an amount of $300 awarded to a defendant by her employer in recognition of her success in a Life Office Management Association ex- amination was an award by the employer because she had improved her knowledge and efficiency in her field of employment and that is must be considered as having been received “in respect of, in the course of, or by virtue of, her employment”. It is true that the facts are substantially dissimilar from the present case, in that the amount received by plaintiffs had nothing to do with awards for courses they had taken to improve their knowledge.
It is of some interest to note that in the Tax Review Board case of George W Offley v MNR, [1974] CTC 2139; 74 DTC 1101, a decision rendered after the Gagnon case, although no reference to it is made therein, an award of $1,500 given to a member of the Royal Canadian Mounted Police under the federal Merit Award Programme in recognition of services he had rendered in assisting in the drafting of a revised statute in the Province of Alberta concerning the Livestock Inspection Act was held to be taxable as income. The decision was based on the fact that the award had been won by him while employed as an RCMP officer and, while it had no direct connection with his official duties, his special efforts reflected favourably on the corps to which he belonged and that it fell clearly within the concept of “benefits of any kind whatsoever” found in what was then paragraph 5(1)(a) of the Act which was substantially similar to the present paragraph 6(1)(a) (supra).
In the Gagnon judgment the learned President found that the award came within the words “other remuneration” the introductory words of subsection (1) of section 5 and hence it was not necessary for him to consider the application of paragraph (a) of subsection (1) of section 5 (now 6(1)(a)).
While it might perhaps still be open to argument whether an invention made by an inventor in the employ of a Government department made entirely outside the scope of his employment, and in no way related to it would remain his property and not be subject to vesting in the Crown pursuant to the provisions of the Public Servants Inventions Act, that is not the case here, nor do plaintiffs so contend. In such an event royalties received from it would enter into his taxable income but if he disposed of it to a third party or to the Crown and it was a one time invention not made by him as a professional inventor the proceeds of the sale might well be treated as a capital receipt. That is clearly not the case here however so this question does not have to be dealt with, nor does the fact that plaintiffs had no option but to vest inventions with which we are dealing here in the Crown and had no right to demand any compensation for so doing, which compensation is entirely discretionary, alter the situation. It was simply a condition of their employment of which they were well aware.
It is not even suggested that the inventions in issue in the present cases did not vest in the Crown and eventually in Canadian Patents and Development Limited, and the words of section 3 of the Public Servants Inventions Act (supra) are very broad so that even if they did not come within subparagraph (a) as having been made “within the scope of his duties or employment”, nor “with facilities, equipment or financial aid provided by Her Majesty” since, as Doctor Dauphinee contended the invention or idea came first and the testing and development of it with facilities or equipment of Her Majesty only follows, they clearly come within paragraph (b) as they “resulted from or were connected with his duties or employment”.
Similarly the wording of the sections of the Income Tax Act in question are very comprehensive. Even if the argument is accepted that these payments do not constitute “benefits of any kind whatever” pursuant to paragraph 6(1)(a) of the Act on a strict interpretation of that section by the ejusdem generis rule as “benefits of any kind’’ similar to board or lodging, which may well be a valid argument, it nevertheless appears that they do come within the words “other remuneration’’ in subsection 5(1) as Jackett, P found in the Gagnon case. While there is certainly a distinction between bonus or incentive awards paid out of the Financial Administration Act under the Suggestion Award Plan or federal Merit Award Programme and the partial payment to the inventor of royalties received from a third party arising from inventions compulsorily transferred to Her Majesty by virtue of the Public Servants Inventions Act I do not find that this can affect the taxability of the said amounts as income.
While it may seem unfair to award the inventors by sharing a comparatively small proportion of the royalties received from third parties for the use of these inventions with them only to have the Minister of National Revenue then take back a substantial amount of the payments so made as taxable income, this is a question of policy for Parliament to decide. If it were desired that the amounts so paid should be treated as capital gain by the inventor it would be a simple matter to amend the Income Tax Act to so state, but this has not been done, and it must therefore be deemed that it was intended that the amounts so received would be treated as taxable income in the same manner as regular remuneration received by the inventors in the course of their employment.
For the above reasons the appeal must therefore be dismissed with costs if so demanded by defendant but since the two actions were joined for hearing and the issues raised were identical only one set of costs will be allowed.