Date: 19991108
Docket: 98-1355-IT-G
BETWEEN:
PAVEL BURE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
McArthur J.T.C.C.
[1] In the 1996 taxation year, the Minister of National
Revenue added the sum of $339,375 as a taxable benefit to the
income of Pavel Bure. This amount had been paid by the Vancouver
Hockey Club Ltd. (the Canucks) to an agent,
Ronald Salcer. The issue is whether that amount was a
benefit received or enjoyed by the Appellant pursuant to
paragraph 6(1)(a) of the Income Tax Act. The
question boils down to whether Ronald Salcer was the agent for
the Appellant.
[2] The Appellant came to North America from the Soviet Union
in 1991 to play hockey in the National Hockey League (NHL). He
contacted a family friend, Serge Lavin, and Mr. Lavin's
partner, Ronald Salcer, who were agents for NHL players. Through
these agents, he signed a three-year $600,000 contract with the
Canucks but he was never happy with that contract. The Canucks
held the upper hand because they defended, on the Appellant's
behalf, an action by the Russian Hockey Federation to prevent the
Appellant from playing in the NHL and also because the Appellant
was somewhat of an unknown. The Appellant did not personally pay
anything to Lavin and Salcer for their services. After his first
year, he won the rookie of the year award and was upset that the
Cancuks would not renegotiate his contract. In 1993, he informed
Mr. Salcer and Pat Quinn, the general manager and coach of the
Canucks, that he wished to be traded.
[3] In April 1994, the Appellant read in the local newspaper
that Mr. Griffiths, an owner of the Canucks, stated that
because Mr. Bure was a player who would attract fans to the game,
the Canucks were under pressure to re-sign him and that they
would have to open their cheque book to him. Mr. Salcer called
the Appellant and asked him if he would stay for a five-year
contract worth US$25 million. The Appellant asked Mr. Salcer if
he could get him that figure somewhere else and he was told that
it was unlikely. Therefore, the Appellant agreed to stay in
Vancouver under those terms, but advised Mr. Salcer that the
US$25 million was to be his and his alone.
[4] On June 6, 1994, Pavel Bure and Pat Quinn, acting for the
Canucks, signed the NHL Standard Player's Contract for US$25
million which also consisted of a special addendum negotiated in
favour of the Appellant. A second contract was signed at the same
time by Mr. Quinn and Mr. Salcer, in the presence of Mr. Bure.
This second contract stipulated that the Canucks would pay
US$250,000 per year for five years in agent's fees to Mr.
Salcer on the Appellant's behalf. These fees amount to 5% of
the Appellant's contract. It was submitted at trial that the
average for agent fees for similar services is 1% to 3% of the
player's contract. The Appellant claims that he was not aware
of this second contract until he received his 1996 T4 slip.
According to Mr. Bure, not a word had been mentioned until the
Canucks added the C$339,325 as a taxable benefit in his 1996 T4
slip.
[5] The Appellant had not included the amount paid to Mr.
Salcer by the Canucks in his income tax return. He was not
challenged for the 1994 and 1995 taxation years but, on June 19,
1997, by Notice of Assessment, the Minister included the 1996
amount as a taxable benefit. The Appellant claims that there was
no provision in his contract for the Canucks to pay his agent
fees. Furthermore, paragraph 21 of his contract read in part as
follows:
It is severally and mutually agreed ... that this
agreement contains the entire agreement between the parties and
there are no oral or written inducements, promises or agreements
except as provided herein.
[6] Pat Quinn testified on behalf of the Minister and stated
that he was coaching the Canucks in 1994 and had little to do
with the negotiating of the US$25 million contract. He signed
this contract with the Appellant together with the contract with
Mr. Salcer upon direction from Mr. Griffiths, an owner of the
Canucks. Mr. Quinn, who was an impressive witness, believed Mr.
Salcer to be the Appellant's agent. The demands on behalf of
the Appellant were made by Mr. Salcer. In 1998, the Appellant
left the Canucks and is now playing for the Florida Panthers. It
is unfortunate that Mr. McPhee of the Canucks who apparently
negotiated with Mr. Salcer, as well as Mr. Salcer were not called
to testify.
Submissions of the Appellant
[7] The Appellant submits that he gained no benefit from Mr.
Salcer's efforts and that if Mr. Salcer was an agent for
anyone, he was an agent for the Canucks. He states that the
payment made by the Canucks to Mr. Salcer was not made pursuant
to any term or implied term of the contract of employment between
the Appellant and the Canucks, but rather was made pursuant to a
contract between the Canucks and Ron Salcer, of which the
Appellant was unaware. The Appellant further states that in order
for the amount in issue to be taxed in his hands, that amount
must have been made pursuant to his contract of employment.
Submissions of the Respondent
[8] Obviously, the Canucks viewed Mr. Salcer as the
Appellant's agent when they provided the Appellant with a
1996 T4 which is the subject of this appeal. The contract with
Mr. Salcer[1] reads
as follows:
This letter will acknowledge the Club's agreement in
consideration for consulting and business services currently
rendered in connection with negotiating Pavel Bure's contract
to pay Talent Management Enterprises – Ronald Salcer, the
sum of One Million Two Hundred and Fifty Thousand
(U.S. $1,250,000.00) U.S. dollars (the "Fee")
which is equal to approximately five percent (5%) base salary
payable under Pavel Bure's contract, such amount being paid
on player's behalf. Any amounts paid to Talent Management
Enterprises – Ronald Salcer under this Agreement shall not
be deducted from, or offset against, any amounts due to Pavel
Bure under his contract with the Vancouver Hockey Club Ltd. The
fee shall be payable in five (5) equal instalments of Two Hundred
Fifty Thousand (U.S. $250,000.00) U.S. dollars each on or before
the fifteenth (15th) day of October in each of the years
1994-1998, inclusive and shall be owing, due and payable even in
the event Pavel Bure and/or his contract have been traded or
assigned to another club prior to the full payment of the sums
due Talent Management Enterprises – Ronald Salcer.
Analysis
[9] I have no difficulty concluding that Mr. Salcer was the
agent for the Appellant for the following reasons:
(i) It is common ground that Mr. Salcer was the
Appellant's agent in 1991;
(ii) The Appellant held out Mr. Salcer as his agent giving him
instructions to get him US$25 million together with other
benefits;
(iii) The 1994 contract did not happen in a vacuum. He left
negotiations with the Canucks to Mr. Salcer;
(iv) It is far fetched and against accepted practice to
believe that Mr. Salcer was the agent for the Canucks;
(v) From the evidence of Pat Quinn, he believed Mr. Salcer to
be the Appellant's agent;
(vi) The contract between Mr. Salcer and the Canucks, signed
in the Appellant's presence states: " ... such
amount being paid on player's behalf";
(vii) The fact that a 1996 T4 was issued to the Appellant
supports the position that the Canucks considered that the
Appellant was receiving a benefit from Mr. Salcer's
efforts;
(viii) There were no discussions directly between the
Appellant and the Canucks about his salary; and finally,
(ix) The following excerpts from the Appellant's
cross-examination make it clear that he knew Mr. Salcer was his
agent:
Q. Now, Mr. Salcer, in 1994, when he acted for you in 1994 in
discussing the new contract with the Vancouver hockey club,
you're saying that you have no formal written agreement with
Mr. Salcer; is that right?
A. Yes.
Q. And you're saying that the verbal arrangement that you
had with Mr. Salcer is that he was to be your agent for the
purpose of negotiating the terms of the contract for services
with the Vancouver hockey club; is that correct?
A. Yes.[2]
...
Q. Did you at any time tell Mr. Salcer that you weren't
going to pay him one cent for his services?
A. No.
Q. What instructions did you give to Mr. Salcer concerning the
contract that you wanted for Pavel Bure?
A. I was telling him the way he should talk to management.[3]
...
Q. Mr. Salcer never advised you at any time that he had made
arrangements for his fees to be paid by the Vancouver hockey
club?
A. He did mention.
Q. He did mention. So you were aware at some time before Mr.
Salcer commenced negotiations, or sometime between 1991 and 1993,
that Salcer's fees for negotiating your contract in 1991 had
been paid by the Vancouver hockey club?
A. That's what I had been told.[4]
[10] In addition to being a great hockey player, the Appellant
is an intelligent person. He gave instructions to Mr. Salcer who
had previously represented him in 1991. He knew personal agents
were paid. I find as a fact that the Appellant knew that Mr.
Salcer was his agent and was being paid by the Canucks because he
wanted the US $25 million for himself without any deduction to
pay Mr. Salcer. What he probably did not realize was that
the Canucks would issue a T4 slip and that the Minister would add
the amount to his taxable income. To say that he did not know Mr.
Salcer was negotiating on his behalf is more than I can accept.
The Appellant did admit that he knew that the Canucks were paying
Mr. Salcer's fees prior to his signing the contract. Why
else would both contracts be signed at the same time in the
presence of both the Appellant and Mr. Salcer?
[11] As mentioned above, clause 21 of the Appellant's
contract which states:
It is severally and mutually agreed ... that this
agreement contains the entire agreement between the parties and
there are no oral or written inducements, promises or agreements
except as provided herein.
may create a presumption against the existence of collateral
contracts. This presumption was clearly rebutted. There was a
collateral agreement. The Appellant knew it and was present when
Mr. Salcer and Mr. Quinn signed it. This reality cannot be
ignored.
[12] The Appellant submitted that to include an amount under
paragraph 6(1)(a) of the Act, the amount must be
"other remuneration" pursuant to subsection 5(1) of the
Act. He stated there must be a contract of employment
between the Canucks and himself. Paragraph 6(1)(a) reads
in part as follows:
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 received or enjoyed by the taxpayer in
the year in respect of, in the course of, or by virtue of an
office or employment, except any benefit ...
Emphasis added
The question narrows down to whether the fees paid by the
Canucks to the Appellant's agent, Ron Salcer, are benefits.
It is clear from paragraph 6(1)(a) that "an
amount" shall include the value of "other benefits of
any kind whatsoever". The Appellant did not make the payment
himself, but he received or enjoyed the benefit of the Canucks
having made it for him. Mr. Salcer was not working pro
bono and he was working for the Appellant. The contract
between the Appellant and the Canucks was entered into as a
result of negotiations by Mr. Salcer on the Appellant's
behalf. The Appellant knew Mr. Salcer had to be paid and that is
why he stipulated he wanted US$25 million clear for himself. I
cannot agree with the Appellant that the Minister should have
called Mr. Salcer to give evidence. The Appellant bears the onus
of proof.
[13] The Appellant cited several cases in support of his
position that the payment by the Canucks to Mr. Salcer was not a
benefit to him within the meaning of paragraph 6(1)(a) of
the Act. These cases include: McNeill v.
The Queen,[5] Ransom v. M.N.R.,[6]and Phaneuf Estate v.
M.N.R.[7] The
McNeill and Ransom cases are easily distinguished
from the present facts. In those cases, the Court found that the
taxpayers did not receive a benefit because a payment to them
restored them to the same situation as they were before they were
transferred. In the Phaneuf Estate case, the Court found
that the payment at issue was a testamentary disposition. Had the
Canucks not paid Mr. Salcer, the Appellant would have had to pay
his agent with after-tax dollars. The parties agree that such
payment would not be tax deductible by the Appellant.
[14] The Supreme Court of Canada had the opportunity to
interpret the meaning of "benefit" in The Queen
v. Savage.[8] The Court adopted a very broad interpretation and
Dickson J. on behalf of the majority, stated:
... Our Act contains the stipulation, not found in
the English statutes referred to, "benefits of any kind
whatever ... in respect of, in the course of, or by virtue of an
office or employment". The meaning of "benefit of
whatever kind" is clearly quite broad; ...
Furthermore, Dickson J., along with the majority, adopted the
view of the Court in R v. Poynton,[9] where the Court said :
I do not believe the language to be restricted to benefits
that are related to the office or employment in the sense that
they represent a form of remuneration for services rendered. If
it is a material acquisition which confers an economic benefit on
the taxpayer and does not constitute an exemption, e.g., loan or
gift, then it is within the all-embracing definition of s. 3.
...
While Interpretation Bulletins are not binding on this Court
and must be viewed carefully, Interpretation Bulletin IT-168R3[10] makes the
following persuasive statement:
1. For tax purposes, a player's income from employment
includes any of the following items received in respect of
employment:
...
(j) payments made by a club on a player's behalf that
would otherwise be a non-deductible expense to the player, such
as agents' fees, legal fees, income taxes, fines, etc.,
[15] I cannot accept the submission of counsel for the
Appellant that I must accept the Appellant's uncontradicted
evidence. Firstly, I conclude that Mr. Quinn contradicted
the Appellant's evidence that Mr. Salcer did not represent
him but represented the Canucks. Mr. Quinn stated that he signed
the contract with Mr. Salcer understanding that the Canucks were
paying the fees. Secondly, in Gupta v. The Queen,[11] Strayer J. stated
that the Court was not obliged to accept the evidence of a
witness as long as that witness was cross-examined. The
Court can reject evidence based on the credibility of the
witness.
[16] Having found that the Appellant is required to include
the benefit of his agent's fees in his 1996 income, I will
deal with the question of whether all of the amount is to be
considered a benefit. I do not accept the Appellant's
evidence that he did not know anything about fees being paid to
Mr. Salcer. Given all of the evidence, this defies reality and
common sense. Mr. Quinn stated that the going rate for the
services rendered by an agent in similar circumstances would be
between 2% and 3% of the contract which in the present instance
was US$25 million. He added that a fee of 5% was not unheard
of and he believed that Alan Eagleson received 5% for similar
services. The Appellant stated that for a player of his calibre,
the fee would be closer to 1% and Mr. Salcer could have been
working without compensation because of the publicity value in
negotiating a contract for such a high profile player. There was
no corroboration for this self-serving statement.
[17] The question is was the benefit received something less
than 5%. I think not. Mr. Salcer was the Appellant's agent
and the Appellant knew that his agent would be paid, not by him,
but by the Canucks. He may not have cared how much his agent was
paid. He may have been wilfully blind as to the consequences of
the agency agreement. He was not aware of subsection 6(1) of the
Income Tax Act. His concern was US$25 million in his
pocket and he knew his agent had to be paid. He cannot hide from
the logical conclusion arising from his own actions, and that is
that Mr. Salcer is going to seek payment from the Canucks as he
did in 1991. Surely, he cannot avoid taxes by lack of concern. I
find as a fact that he knew Mr. Salcer was being paid by the
Canucks and he was present when Mr. Quinn and Mr. Salcer
executed the payment contract. It is uncertain that he was aware
of how much Mr. Salcer was being paid although I find on a
balance of probabilities, given all of the circumstances, that he
knew how much Mr. Salcer was being paid for acting on his
behalf.[12]
[18] In any event, not knowing exactly how much his agent was
receiving is no defence. He ought to have known how much was
being paid on his own behalf. Had the Canucks not paid Mr.
Salcer, the Appellant would have been liable to pay him and it is
too late for the Appellant to say that the Canucks paid his agent
too much.
[19] In conclusion, in computing the Appellant's income
for the 1996 taxation year, the Minister properly included the
amount of $339,375 as a benefit received or enjoyed by the
Appellant during that taxation year pursuant to paragraph
6(1)(a) of the Act. The appeal is dismissed, with
costs.
Signed at Ottawa, Canada, this 8th day of November, 1999.
"C.H. McArthur"
J.T.C.C.
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