Citation: 2006TCC604
Date: 20061221
Docket: 2006-718(CPP)
BETWEEN:
HOLWYN PETERS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
MacLatchy, D.J.
[1] The appeal was
heard in Toronto, Ontario, on September
26, 2006.
[2] On July 6, 2004,
the Appellant sent a request to the Toronto North Taxation Services Office regarding
three different sources of income (wage replacement payment, lump sum payment
and various payments from the YMCA).
[3] On November 15,
2004, Robert Pinsent, CPP/EI Rulings Officer at the Toronto office, advised the Appellant in
writing that his request was not received within the required time frame.
[4] On April 15, 2005,
a ministerial enquiry to the Director General, Disability Benefits and Appeals,
Income Security Programs, Social Development Canada generated a request to
commence the ruling.
[5] On May 31, 2005,
Robert Pinsent, CPP/EI Rulings Officer at the Scarborough Taxation Service
Office, determined that the earnings received from the Midland Young Men’s
Christian Association (YMCA) during the period of October 14, 1998 to April 13,
1999, were considered as pensionable earnings.
[6] On May 31, 2005, it
was also determined that the Long Term Disability benefits, including the lump
sum payments, received from The Mutual Group during the period of May 1994 to
May 1998 were not considered as pensionable earnings since the plan was insured
through an insurance company and the employer had no control over the plan, as
the insurance carrier was acting as an independent third party.
[7] The Appellant
disagreed with the decision concerning the Long Term Disability payments and
the lump sum payments and filed an appeal on August 23, 2005.
[8] The Appellant
appealed to the Respondent on the basis that the benefits received from The
Mutual Group should be considered as pensionable income and pensionable earnings
within the meaning of the Canada Pension Plan (the "Plan").
[9] By letter dated
January 18, 2006, the Respondent informed the Appellant and The Mutual Group
that it had been determined that the benefits received by the Appellant were
not considered as pensionable income and pensionable earnings and were
therefore not subject to Canada Pension Plan contributions pursuant to section
12 and paragraph 6(1)(a) of the Plan.
[10] The Appellant
disagreed with the Minister’s decision and filed an appeal with the Tax Court
of Canada on March 6, 2006.
[11] The assumptions
relied on by the Minister of National Revenue (the "Minister")
were listed in subparagraphs (a) to (o) of paragraph 13 of the Reply to the
Notice of Appeal, all of which subparagraphs were agreed to be correct by the
Appellant.
[12] The issue is whether
the benefits received from The Mutual Group are to be considered as pensionable
income and pensionable earnings, within the meaning of subsections 6(1) and
12(1) of the Plan.
[13] The relevant subsections
of the Plan referred to above are as follows:
6.(1) Pensionable employment is
(a) employment in Canada that is not excepted employment;
(b) employment in Canada under Her Majesty in right of Canada that is not excepted employment; or
(c) employment included in pensionable employment by a
regulation made under section 7.
12.(1) The amount of the contributory salary and wages of a person
for a year is the person’s income for the year from pensionable employment,
computed in accordance with the Income Tax Act (read without reference
to subsection 7(8) of that Act), plus any deductions for the year made in
computing that income otherwise than under paragraph 8(1)(c) of that
Act, but does not include any such income received by the person. [ … ]
The meaning of employment is described in subsections
2(1) and 5(1) of the Employment Insurance Act as follows:
2.(1) In this Act,
[ … ]
"employment" means the act of employing or the state of
being employed;
[ … ]
5.(1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers, under any
express or implied contract of service or apprenticeship, written or oral,
whether the earnings of the employed person are received from the employer or
some other person and whether the earnings are calculated by time or by the
piece, or partly by time and partly by the piece, or otherwise;
(b) employment in Canada as described in paragraph (a)
by Her Majesty in right of Canada;
(c) service in the Canadian Forces or in a police force;
(d) employment included by regulations made under subsection
(4) or (5); and
(e) employment in Canada of an individual as the sponsor or co-ordinator of an employment
benefits project.
[14] The Appellant was
employed by the Simcoe County Board of Education until he became disabled and
unable to continue working. The School Board and the Secondary School Teachers
Federation had negotiated a benefits package for the teachers on a contributory
basis to provide Long Term Disability coverage for teachers unable to work by
reason of disability. The disability fund would be administered by The Mutual
Group, a third party. The Appellant applied to The Mutual Group for Long Term
Disability payments and ultimately received the benefits provided by the
Agreement. After a period of time The Mutual Group denied the Appellant any
continuation of benefits and gave him notice that his benefits would end. As a
result, the Appellant commenced an action against The Mutual Group seeking
continuation of the benefits. An out-of-court settlement was reached that
provided for a lump sum payment to the Appellant in settlement of the action.
The Appellant believed those monies should be considered as employment income
and thus be pensionable income.
[15] The Appellant, very ably,
argued his position on many grounds but was unable to convince this Court that
the decision of the Minister was incorrect. Employment income must be income
payable by an employer for services performed by the employee under a contract
of service. In this instance, it is clear that the benefits received by
the Appellant were not received as a result of any services performed by
him for The Mutual Group and there was no contract, expressed or implied,
existing between him and The Mutual Group. (See Gagné v. Canada (Minister
of National Revenue – M.N.R.), [1998] F.C.J. No. 1811 (QL) and Guenette
v. Canada, [2004] T.C.J. No. 81 (QL))
[16] The Appellant argued
that he was being discriminated against as that was what the Plan was designed
to remedy, a person to be compensated when disabled. (See Granovsky v. Canada (Minister of
Employment and Immigration), [2000] 1 S.C.R. 703.)
[17] In Université Laval v. Canada (Minister
of National Revenue – M.N.R.), [2002] F.C.J. No. 660 (QL), the Federal Court
of Appeal stated:
18
... By using the words "by a party other
than the employer", this paragraph provides for a distinction between wage
loss indemnity payments made by the employer, which would be included in insurable
earnings, and wage loss indemnity payments made by an insurer, which would be
excluded from insurable earnings, in the same way that a supplement paid by the
employer is excluded under that paragraph.
19
Given that the Regulations themselves
distinguish between wage loss indemnity payments made by the employer and those
made by a person other than the employer, the employer’s criticism in this case
that it would be contrary to the Act to make distinctions between traditional
and modern insurance schemes cannot be accepted. The distinction might be
artificial in some respects but it is made nonetheless, and I do not see any
incongruity in the fact that the Regulations emphasize the existence of an
employer‑employee relationship, irrespective of the performance of any
services, rather than on the performance of services alone. I would note that
it is common ground in this case that the employment relationship between
Université Laval and its insured employees continued to exist during sick leave
periods.
20
In a sense, paragraph 2(3)(d) of the Regulations
codifies the decisions of this Court. [ … ] see Gagné v. M.N.R. (1998), 247
N.R. 189 (F.C.A.) [ … ]
21
The issue is therefore whether the payments in
this case were made by the employer or by the third party insurer.
The payments, in this instance, were made by a third-party
insurer. The School Board had no control whatsoever over the funds that
were paid by The Mutual Group to the Appellant.
[18] For the reasons
above, this Court also finds that the monies received from the out-of-court
settlement were not pensionable as they could not be considered to be
employment income.
[19] The appeal is
dismissed.
Signed at Toronto, Ontario, this 21st day of December 2006.
"W.E. MacLatchy"
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