Rip T.C.J.:
Gregory Anderson (“appellant”) has appealed his income tax assessment for the 1990 taxation year in which the Minister of National Revenue
(“Minister”) included in his income an amount of $42,345 paid to him by a former employer in settlement of litigation for wrongful dismissal as reimbursement of expenses. The Minister is of the view that money received by the appellant from his former employer is to be included in his income as a retiring allowance within the meaning of subparagraph 56(1 )(#)(ii) (and subsection 248(1)) of the Income Tax Act (“Act”), and that none of the amount he received was reimbursement of expenses. In the alternative, the respondent argues that Mr. Anderson received or enjoyed a benefit in the full amount he received from his former employer by virtue of his employment within the meaning of section 6 of the Act.
Prior to 1987 Mr. Anderson was employed by Ortho Phamarceutical (“Ortho”) which has its offices in the area of the Don Valley Parkway and Lawrence Avenue in the City of Toronto. At the time, Mr. Anderson lived with his family in the City of Scarborough. In 1987 he ceased to be employed by Ortho and commenced employment with Genetech Canada (“Genetech”). Genetech’s offices were in the City of Burlington, Ontario. Mr. Anderson, at the suggestion of Genetech, purchased a home in, and moved to, Etobicoke which is located at the western portion of Metro Toronto. He sold his home in Scarborough for $285,000 and acquired his home in Etobicoke for $350,000. After about a year he and Genetech were not satisfied with their relationship and Mr. Anderson ceased to be employed by Genetech. He rejoined Ortho at a lower salary than that paid to him by Genetech. Mr. Anderson sold his home in Etobicoke for $520,000 and purchased a home in the same neighbourhood in Scarborough where he previously lived for $450,000.
Mr. Anderson sued Genetech for wrongful dismissal. He was unable to produce the statement of claim against Genetech. What was produced was a form of release from liability to Genetech and its related corporations signed by him when he received payment of $93,809 from Genetech in settlement of his action. The release does not refer to any reimbursement of expenses but to “all actions, causes of action, suits, debts, demands and claims, including claims for wages, incentives, compensation, bonuses, termination pay, vacation pay or claims for notice of termination or pay in lieu of notice of termination...”.
Mr. Anderson agrees that of the amount of $93,809, $30,532 was a retiring allowance and ought to be included in his income. Mr. Anderson produced a T-4A form sent to him by Genetech which states that the full amount of $93,809 was a retiring allowance; however the income tax deducted and withheld by Genetech was only $9,159.60, which Mr. Anderson understands to be the tax with respect to the retiring allowance of $30,532. In other words, Mr. Anderson states that he and Genetech had agreed that only $30,532 was a retiring allowance and the balance, $63,277 was reimbursement for moving expenses. The amount of $63,277 was made up, according to Mr. Anderson, of the following amounts:
a) $42,345 as real estate commission on the sale of his house in
Etobicoke, legal fees on the sale of the house and disbursements and actual moving of personal goods from Etobicoke to the Scarborough residence;
b) $10,000 to reimburse him for legal fees paid with respect to the
action against Genetech (This amount was apparently allowed as a deduction by Revenue Canada.); and,
c) $10,932 as an interest expense; (Mr. Anderson stated that during the
period litigation commenced and up to the time it was settled he was paying mortgage interest on the house in Scarborough and he wanted to be reimbursed. In his Notice of Appeal, Mr. Anderson does not dispute the Minister’s inclusion of the amount of $10,932 in his income).
Mr. Anderson has appealed only from the inclusion in his income of the $42,345.
The evidence was that the distance between Mr. Anderson’s residence in Etobicoke and the place of business of Ortho was less than 40 kilometres and therefore Mr. Anderson was not permitted to deduct any of the moving expenses to Scarborough in accordance with subsection 62(1) of the Act. He confirmed that Ortho did not compel him to move from Etobicoke. He explained that his salary at Ortho was less than what he received at Genetech. Also, he said, housing prices were cheaper in Scarborough than in Etobicoke. Thus, he reasoned he could purchase a similar home in Scarborough and pay less on a mortgage than he would have to pay for the mortgage on his Etobicoke house. Accordingly, he sold the Etobicoke house and moved to Scarborough, thus incurring expenses.
In his Notice of Appeal, Mr. Anderson claimed that the amount of $42,345 was paid to him to return him to the same economic position prior to leaving Ortho and he was not put in a better economic position as a result of the payment. He also stated that since the reimbursement is not more than the amount of expenses incurred, he received no benefit.
Mr. Anderson submitted that the reimbursement of expenses does not fall under the Act’s definition of “retiring allowance”.
The relevant provisions of the Act upon which the Minister has assessed are subsections 56(1) and 248(1). Subsection 56(1) provides that:
Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,
(ii) a retiring allowance, other than an amount received out of or under an employee benefit plan, a retirement compensation arrangement or a salary deferral arrangement, ...
Subsection 248(1) defines “retiring allowance” to mean:
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 issue is whether or not all of the amount of $93,809 Mr. Anderson received from Genetech was a retiring allowance or whether it was a retiring allowance and something else.
In Nowegijick v. R. (1983), 83 D.T.C. 5041 (S.C.C.), a decision of the Supreme Court of Canada, Dickson J. (as he then was) considered the words “or is otherwise subject to taxation in respect of any such property” in section 87 of the Indian Act. Speaking for the Court, Dickson J. stated, at page 5045: I
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.
This interpretation was further applied by Dickson J. in R. v. Savage (1983), 83 D.T.C. 5409 (S.C.C.) in regards to paragraph 6(1 )(a) of the Act which states “the value of board, lodging and other benefits of any kind whatever ... received or enjoyed by him in the year in respect of, in course of, or by virtue of an office or employment”. In determining whether the damages received by the appellant were a retiring allowance, the word “in respect of” in paragraph 248(1 )(/?) direct that a broad scope of inclusion be considered as to what constitutes a sufficient connection between the loss of employment and the amounts received.
On the facts before me, there is a sufficient connection between the receipt of the money by Mr. Anderson from Genetech and his loss of employment. The damages received by Mr. Anderson arise from his loss of employment, and the incidental damages related to that loss of employment. This is not a case where damages were received extraneous to the loss of employment, such as where the taxpayer was defamed, as in Bédard v. Minister of National Revenue (1990), 91 D.T.C. 573 (T.C.C.), or for mental and physical injuries suffered during employment, as in Stolte v. R., [1996] 2 C.T.C. 2421 (T.C.C.). The $93,809 paid to Mr. Anderson by Genetech was on account of damages he suffered as a result of losing his job at Genetech and moving back to Scarborough. There is a causal link between the two. Accordingly, Mr. Anderson received an amount of money in respect of a loss of employment with Genetech as damages, and such amount is properly regarded as a “retiring allowance” within the meaning of paragraph 248(1 )(b) of the Act. By virtue of subparagraph 56( 1 )(a)(ii) these damages are to be included in his income for the 1990 taxation year.
The appeal is dismissed with costs.
Appeal dismissed.