Addy,
J.
[Translation]:—The
plaintiff
appeals
from
a
decision
of
the
Tax
Court
of
Canada
pertaining
to
the
reassessment
of
his
income
for
the
taxation
year
1978.
The
case
involves
the
application
of
subparagraph
56(1)(a)(viii)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
which
reads
as
follows:
56.
(1)
Without
restricting
the
generality
of
section
3,
there
shall
be
included
in
computing
the
income
of
a
taxpayer
for
a
taxation
year,
(viii)
a
termination
payment;
Subparagraph
(viii)
above
was
enacted
by
S.C.
1979,
c.
5,
subsection
15(1),
but
was
made
retroactive
and
declared
to
apply
to
amounts
received
in
respect
of
a
termination
after
November
16,
1978.
The
plaintiff's
employment
with
St-Romuald
Construction
Ltée
was
terminated
in
1978
and
the
sole
issue
before
me
is
whether
the
termination
took
effect
on
or
before
November
16
or
after
that
date.
The
plaintiff,
a
professional
engineer,
had
been
employed
in
September
1977
as
director
of
operations
of
the
company
under
a
verbal
contract
of
employment
with
no
fixed
term.
He
had
originally
been
offered
a
position
by
the
same
company
as
director
of
one
of
its
projects.
He
refused
that
appointment
as
he
felt
that
he
was
too
well
qualified
and
had
too
much
experience
to
merely
act
as
a
project
engineer.
The
services
performed
by
the
plaintiff
as
director
of
operations
pertained
to
various
contractual
obligations
of
the
company
relating
to
the
James
Bay
project.
For
some
time
previous
to
the
end
of
October
1978,
misunderstandings
began
to
occur
between
the
plaintiff
and
the
president
of
the
company
who
was
increasingly
involving
himself
in
matters
which
the
plaintiff
felt
were
really
within
the
realm
of
his
responsibility
as
a
professional
engineer,
acting
as
director
of
operations.
The
evidence
indicates
that
the
difficulties
were
not
caused
in
any
way
by
any
lack
of
professional
competence
on
the
part
of
the
plaintiff
but
rather
by
reason
of
a
clash
of
personalities
between
him
and
the
president.
The
evidence
also
shows
that
for
financial
reasons,
the
company
also
wished
to
cease
operations
in
any
further
engineering
projects
of
the
type
for
which
the
plaintiff
had
been
employed
as
operations
director.
The
situation
was
discussed
at
a
meeting
on
October
23,
1978,
and
it
was
agreed
between
the
parties
that
it
would
be
to
their
mutual
advantage
if
the
plaintiff's
employment
would
cease
when
the
company's
main
James
Bay
project,
namely
Project
LG-2
was
completed
in
a
month
or
so.
In
view
of
the
fact
that
the
plaintiff
was
so
familiar
with
the
project,
it
was
agreed
that
he
would
assist
in
seeing
that
the
matter
was
brought
to
a
satisfactory
conclusion.
As
there
would
be
an
anticipated
difficulty
of
re-employment
of
the
plaintiff
at
that
time
of
the
year,
and
as
he
had
left
a
former
employment
in
order
to
accept
the
position
offered
by
the
company,
it
was
agreed
that
he
would
be
financially
compensated
for
the
rather
abrupt
termination
of
his
employment.
The
main
project,
namely
project
LG-2,
was
due
to
be
completed
very
shortly.
The
figure
of
$25,000
was
mentioned
as
compensation
for
termination
but
was
not
agreed
upon
and
there
was
also
a
mention
of
the
possibility
of
a
bonus
should
project
LG-2
be
completed
rapidly
and
produce
a
profit
for
the
company.
Itwas
also
decided
that
his
weekly
salary
of
$800
which
he
had
been
receiving
throughout
would
be
paid
until
December
31,
1978.
The
general
terms
of
the
understanding
of
October
23
were
confirmed
by
a
letter
addressed
to
the
plaintiff
dated
October
25,
1978,
which
reads
in
part
as
follows:
[Translation]
St.-Romuald,
October
25,
1978
Mr.
Michel
Paquin
St-Romuald
Construction
Ltée
LG-2
James
Bay
Dear
Sir:
This
is
to
confirm
our
meeting
of
October
23
at
our
offices
in
the
presence
of
Donald
Donovan,
Engineer,
Vice-President.
The
discussions
pertained
to
the
following
matters.
After
having
evaluated
the
state
of
the
actual
market
in
Civil
Engineering
matters,
as
well
as
the
economic
and
political
situation,
we
informed
you
that
it
was
our
intention
to
reduce
to
their
lowest
level
our
Civil
Engineering
works
and
even
to
retire
therefrom
for
a
certain
time.
Please
believe
that
our
decision
was
not
an
easy
one
due
to
the
good
relations
which
have
existed
between
us.
As
previously
expressed,
we
will
be
ceasing
payment
of
your
salary
on
December
31,
1978.
Knowing
that
you
are
a
valuable
and
serious
member
of
your
profession,
we
are
now
assured
that
all
your
knowledge
and
know-how
will
be
put
to
use
in
order
to
completely
finish
the
work
on
the
transformer
station
including
deficiencies,
final
acceptance
of
the
work
and
any
supplementary
work,
demobilization
and
other
matters.
Depending
on
the
result
of
this
until
the
end
of
the
works
and
as
you
have
requested,
the
amount
of
the
bonus
will
play
a
large
role
in
adjusting
matters
and
the
directors
will
be
wise
enough
to
evaluate
it
as
fairly
as
possible.
It
is
regrettable
that
we
have
to
part.
I
had
envisaged
a
greater
future.
In
closing,
I
thank
you
in
the
name
of
the
undertaking
and
of
those
of
our
collaborators
and
my
own
in
particular.
My
very
best
regards
to
your
family
and
I
wish
you
also
a
splendid
future.
The
President,
Vital
Soucy
At
that
time,
although
the
plaintiff
retained
the
formal
title
of
director
of
operations
and
continued
to
draw
his
weekly
salary
of
$800
per
week
throughout
his
employment,
his
duties
as
director
of
operations
clearly
ceased
from
a
practical
standpoint
and
his
employment
was
largely
limited
to
the
LG-2
project
in
a
consultative
position
coupled
with
special
administrative
duties.
The
project
manager
of
LG-2
who
had
originally
been
reporting
to
the
plaintiff
in
the
latter's
capacity
as
director
of
operations,
remained
in
charge
of
LG-2
project
and
reported
henceforth
directly
to
the
president.
The
plaintiff
was
therefore
occupying
on
LG-2
from
that
time
a
position
which
was,
from
a
company
hierarchical
standpoint,
inferior
to
that
of
the
project
manager.
This
arrangement,
however,
was
agreed
to
by
the
plaintiff.
Work
on
the
project
was
completed
at
the
end
of
November
and
the
plaintiff
then
went
home,
returned
to
the
head
office
of
the
company
on
December
5
to
collect
his
personal
effects
and
negotiate
the
final
amount
of
compensation
due
him
in
lieu
of
notice
and
a
bonus
which
it
had
been
agreed
he
would
be
entitled
to
on
satisfactory
completion
of
LG-2.
Upon
attending
at
head
office
on
December
5,
1978,
he
was
presented
with
a
draft
separation
contract
which
he
duly
signed.
The
contract
reads
in
part
as
follows:
[Translation]
Agreement
entered
into
at
St-Romuald
on
the
5th
day
of
December
1978.
Between:
St-Romuald
Construction
Ltée,
a
legally
constituted
corporation
with
Head
Office
at
the
Centre
Industriel
St-Romuald,
at
St-Romuald,
|
(hereinafter
called
S.R.C.)
|
|
And:
|
J.A.
Michel
Paquin,
Engineer,
domiciled
at
425
Suzanne
St.,
at
Ste-
|
|
Dorothée,
Laval.
|
Whereas
for
business
reasons,
S.R.C.
did,
on
October
25,
1978,
advise
Mr.
J.A.
Michel
Paquin
that
it
was
cancelling
the
contract,
without
a
fixed
term,
which
they
had
entered
into:
this
cancellation
to
take
effect
December
31,
1978.
Whereas
it
is
necessary
that
the
parties,
despite
the
cancellation
of
their
contract,
continue
to
collaborate
and
to
bring
to
proper
completion
the
work,
the
execution
of
which
had
been
conferred
by
S.R.C.
to
J.A.
Michel
Paquin;
It
Is
Expressly
Agreed
As
Follows:
1.
Mr.
Paquin
agrees
to
co-operate,
to
the
greatest
possible
extent,
with
S.R.C.,
its
officers
or
employees,
in
order
to
finalize
the
various
works,
the
execution
of
which
had
been
conferred
onto
him;
2.
In
consideration
of
this
undertaking,
S.R.C.
undertakes
to
pay
to
Mr.
J.A.
Michel
Paquin
as
a
bonus
for
services
rendered
and
to
be
rendered,
as
separation
pay
and
as
an
indemnity
for
his
Prior
Notice
of
Discharge,
the
sum
of
$31,700.00;
3.
J.A.
Michel
Paquin
undertakes
to
remain
in
the
service
of
S.R.C.,
on
a
full-time
basis,
until
the
expiry
of
his
Prior
Notice
of
Discharge,
that
being
until
December
31,
1978;
4.
For
its
part,
S.R.C.
shall
continue
to
pay
Mr.
J.A.
Michel
Paquin,
until
December
31,
1978,
the
agreed
salary,
that
is,
the
amount
of
$800.00
per
week.
The
amount
inserted
at
paragraph
2
of
the
draft
agreement
was
originally
$25,000
but,
after
negotiation,
it
was
agreed
that
the
amount
would
be
$31,700.
Both
parties
to
this
present
action
are
also
in
agreement
that
this
last
mentioned
amount
is
to
be
considered
as
consisting
of
$16,700
as
a
bonus
for
proper
completion
of
LG-2
and
$25,000
as
an
indemnity
in
lieu
of
notice
of
termination
of
employment.
The
bonus,
of
course,
would
be
taxable
in
any
event
and
therefore,
the
dispute
regarding
the
application
of
subparagraph
56(1)(a)(viii)
of
the
Income
Tax
Act
only
relates
to
the
sum
of
$25,000.
Counsel
for
the
plaintiff
argued
that
the
termination
of
her
client's
original
contract
of
employment
occurred
on
October
23,
1978,
at
which
time
a
new
contract
was
in
fact
entered
into
which
was
to
continue
until
completion
of
the
work
for
which
he
was
to
be
separately
remunerated.
In
my
view,
however,
the
facts
clearly
militate
against
this
theory.
On
October
23,
it
was
agreed
that
it
would
be
to
the
advantage
of
both
parties
that
the
employment
of
the
plaintiff
be
terminated
when
the
James
Bay
engineering
projects
were
at
end.
The
amount
of
compensation
to
be
paid
on
separation
had
not
been
fixed
although
it
was
agreed
that
as
a
professional
engineer
he
would
certainly
be
entitled
to
compensation
amounting
to
something
around
$25,000
or
so
if
he
undertook
to
be
employed
until
December
31,1978.
The
same
weekly
salary
was
to
continue
until
then
and
the
plaintiff
was
to
continue
to
devote
his
time
to
the
service
of
the
company
as
required.
It
was
only
on
December
5,
1978,
that
the
compensation
for
separation
was
finally
agreed
upon
and
even
at
that
time
it
was
understood,
as
evidenced
by
paragraph
3
of
the
agreement,
that
the
plaintiff
would
remain
a
full-time
employee
of
the
company
until
December
31,
1978.
Additionally,
there
is
a
clear
distinction
to
be
drawn
between
the
date
when
a
notice
of
termination
of
an
employment
is
given
and
the
effective
date
of
the
termination
itself.
Where
notice
of
termination
of
employment
to
take
effect
at
a
future
date
is
given,
the
contract
of
employment
continues
until
the
date
fixed
for
termination.
This
principle
was
clearly
recognized
as
being
the
law
of
the
Province
of
Québec
by
the
Honourable
Mr.
Justice
Marchand
in
the
case
of
Fortier
v.
Crèmerie
Union
Inc.,
[1968]
C.S.
573.
The
learned
judge
relied
on
two
previous
decisions
of
the
Québec
Court
of
Appeal,
namely
Lacasse
v.
Tuckett
Tobacco
Co.
(1924),
36
B.R.
321
and
Radiators
Perfection
Ltd.
v.
Lavoie
(1927),
43
B.R.
33.
Counsel
for
the
plaintiff
also
argued
that
there
was
a
constructive
dismissal
on
or
before
October
23,
1978,
by
reason
of
the
reduction
by
the
employer
of
the
responsibilities
of
the
plaintiff
as
an
engineer.
Although
the
reduction
of
the
areas
of
responsibility
of
the
plaintiff
had
been
and
was
gradually
taking
place
and
might
possibly
have
amounted
to
sufficient
cause
at
that
time
to
create
a
constructive
dismissal,
the
plaintiff
never
in
fact
left
the
company
at
that
time
but,
on
the
contrary,
agreed
to
continue
to
work
until
he
ceased
being
employed
at
a
specific
date.
Insofar
as
the
letter
of
October
25
is
concerned,
the
plaintiff
did
not
contest
the
fact
that
it
constituted
a
fair
representation
of
what
had
taken
place
on
October
23.
The
claim
will
accordingly
be
dismissed
with
costs.
Claim
dismissed.
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