Merrins v. The Queen, 94 DTC 6669, [1995] 1 CTC 111 (FCTD)

Pinard J.:—This is an appeal by way of trial de novo from the judgment of the Tax Court of Canada rendered April 17, 1991, which upheld the decision of the Minister of National Revenue. The Minister found that a sum of $60,000 which was received by the plaintiff constituted a retiring allowance within the meaning of subsection 248(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the ’’Act”) and therefore must be included in computing the plaintiff’s income for the 1988 taxation year pursuant to subparagraph 56( 1 )(a)(ii). [2]

In May 1985, the plaintiff was laid off from his position as senior contracts manager at Atomic Energy of Canada (AECL). He submitted a grievance through the Society of Professional Engineers and Associates (SPEA) seeking reinstatement as provided in the collective agreement between AECL and SPEA for breach of the seniority provisions. On April 7, 1988, AECL agreed to pay to the plaintiff the sum of $60,000 in order to conclude the arbitration proceedings. On the same day, the arbitrator disposed of the plaintiff’s grievance accordingly:

AWARD

In accordance with the parties’ settlement resolving this arbitration dispute and the parameters that have been defined for awarding the grievor an absolute sum of money less the usual deductions, I order and direct the employer to pay:

$60,000

The proceedings are hereby terminated.

Dated this April 7, 1988.

David H. Kates

Retiring allowance".- means an amount (other than a superannuation or pension benefit or an amount received as a consequence of the death of an employee) received

(a) upon or after retirement of a taxpayer from an office or employment in recognition of his long service, or

(b) in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal

by the taxpayer or, after his death, by a dependant or a relation of the taxpayer or by the legal representative of the taxpayer.

The Minister of National Revenue assessed the plaintiff on the amount of $60,000 under subparagraph 56( 1 )(a)(ii) of the Income Tax Act as income from an office of employment in the year in which it was received. The plaintiff filed a notice of objection which was denied by a notice of confirmation from the Minister of National Revenue. The plaintiff appealed the notice of confirmation and the Tax Court dismissed the appeal in the judgment which is the subject of the present appeal.

The plaintiff argues that the amount of $60,000 was compensation for the extinction of the right to have his grievance arbitrated and therefore the award was the disposition of a chose in action and must accordingly be considered a capital gain. The plaintiff further argues that the arbitrator’s award is invalid because the sole remedy for improper layoff was, pursuant to the collective agreement and the Canada Labour Code, reinstatement. In the alternative, the plaintiff, who was employed in 1988 after having received no employment income for the two preceding years, contends that for equitable reasons, the amount of $60,000 ought to have been computed as income for his 1986 and/or 1987 taxation year(s) when he received no employment income.

Whether or not the validity of the arbitrator’s award could have been successfully challenged before the courts is not relevant here. What is important is the fact that the award was not challenged and that the amount of $60,000 was received and the benefit accepted by the plaintiff. There is no doubt that the amount was received by the plaintiff in respect of the loss of his employment with AECL. Had there been no loss of employment, there would have been no grievance, no settlement, no award and, therefore, no payment of the sum to the plaintiff.

The Supreme Court of Canada, in The Queen v. Savage, [1983] 2 S.C.R. 428, [1983] C.T.C. 393, 83 D.T.C. 5409, concluded that the words "in respect of", in a provision of the Income Tax Act, ought to be given the wildest possible scope. There, at page 440 (C.T.C. 399; D.T.C. 5414), Dickson J., as he then was, cited Nowegijick v. The Queen, [1983] 1 S.C.R. 29, [1983] C.T.C. 20, 83 D.T.C. 5041, where the Court dealt with those words as follows:

The words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with’. The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters.

Here, in my view, the use of those words within the definition of "retiring allowance" as found in subsection 248(1) of the Act surely conveys a connection between the plaintiff’s loss of employment and his subsequent receipt of the amount of $60,000 as paid by his former employer, AECL. This amount, in the circumstances, is caught within the definition of "retiring allowance" and is therefore to be included when computing income under subsection 56(1).

Given the wording in the latter provision:

..there shall be included in the computing the income of a taxpayer for a taxation year,

(a) any amount received by the taxpayer in the year as...

11) a retiring allowance....

[Emphasis added.]

it is clear that the amount of $60,000 received by the plaintiff during his taxation year 1988 must be included in computing his income for that year. The Minister of National Revenue had no jurisdiction to include the amount in computing the income of the plaintiff for any other taxation year.

For all those reasons, the plaintiff’s appeal must be dismissed with costs.

Appeal dismissed.