Citation: 2006TCC541
Date: 20061006
Docket: 2006-577(IT)I
BETWEEN:
CINDY M. MOXSOM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Cindy M. Moxsom[1], is appealing the reassessment of the Minister of
National Revenue in which benefits paid to her under her late father's pension
plan were included in her 2003 income under subparagraph 56(1)(a)(i) of
the Income Tax Act:
56(1) 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,
(i) a superannuation or pension benefit including, without limiting
the generality of the foregoing, …
[2] The Appellant did
not dispute that the cheques she received from, and the T4A issued by, the
pension administrator were in her name but argued that such amounts were not
received by her in her personal capacity.
Facts
[3] The Appellant's father was employed as a longshoreman in Halifax,
Nova Scotia. In April 1997, he began receiving monthly pension benefits
from the Halifax Port International Longshoremen's Association Pension Plan ("ILA
Plan"). In a document entitled "Appointment or Change of Beneficiary
Form" dated April 22, 1997,
her father appointed the Appellant his only beneficiary under the ILA Plan. There is no dispute that the Appellant's appointment was properly made in
accordance with Clause 8.1
of the ILA Plan:
8.1 Beneficiary
Designation
To the extent permitted by law, a Member may, by a signed
declaration in writing filed with the Administrator, appoint a Beneficiary to
received any death benefit not payable to his surviving Spouse, and may alter
or revoke any such appointment. In the absence of any such valid appointment,
the death benefit shall be payable to his estate in a lump sum.
[4] In the spring of
2001, the Appellant's father was hospitalized with lung cancer and began
worrying about getting his affairs in order. He first turned his mind to his
insurance policy; on April 9, 2001, with his family gathered around him in
hospital, he executed a "Beneficiary Designation for C.L.A. Plans"[4] in which he designated his four children as the
beneficiaries under his Canada Life life insurance policy ("CLA Insurance Policy").
Later that same month, again from his hospital bed and surrounded by his
family, the Appellant's father executed another document entitled "Wills
Questionnaire"
which, according to the Appellant, was a validly executed will. On May 12, 2001
he passed away, survived by his four children: the Appellant, Doris, Brenda and
Ronald.
[5] Following his
death, Sun Life Assurance Company of Canada ("Sun Life") began paying the pension
benefits to the Appellant under the ILA Plan.
[6] In 2003, the
Appellant received a total of $15,937.32 which she deposited in a bank account established
for the estate of her late father. During the year, she disbursed the
accumulated benefits, (less a small amount maintained in the account to cover
sundry expenses) in equal shares to herself and her three siblings.
[7] Sun Life issued
a T4A slip in the Appellant's name for the pension benefits paid to her in
2003. Notwithstanding that her name appeared in the T4A, the Appellant reported
the pension benefits in the return she filed for the estate of her late father,
attaching the T4A she had received from Sun Life. The Minister reassessed to
include the pension benefits in the Appellant's personal income.
Analysis
[8] The Appellant's primary submission was that her appointment as the sole
beneficiary under the ILA Plan
was effectively altered when her father signed the "Wills Questionnaire"
naming her and her siblings as equal beneficiaries of his estate.
Alternatively, she took the position that if she ever was the sole beneficiary
under the ILA Plan, she had, by her actions, renounced that status and accordingly,
under the terms of the ILA Plan, the pension benefits were payable to the
Estate. As the duly appointed executrix of the estate under the "Wills
Questionnaire", she had received the pension benefits in that, rather than
her personal, capacity.
[9] Counsel for the Respondent
argued that given the Appellant's admission that the ILA Plan pension benefits
were made payable to her and that the T4A was issued in her name, the Minister
was not only entitled, but obliged, to include the pension benefits in the
Appellant's income. Even if it had been her father's wish that his children
benefit equally under the ILA Plan, he never took the necessary steps to give
effect to that intention. Counsel further submitted that if the pension
benefits were incorrectly paid by Sun Life to the Appellant, that was an issue
to be sorted out between the Appellant and Sun Life and was irrelevant to
the Minister's reassessment.
[10] In my view, the
Respondent's position is the correct one. The fact that the Appellant shared
the pension benefits with her siblings does not alter the fact that the cheques
received were issued by Sun Life in her name, with nothing therein to indicate
that they were payable to her in anything other than her personal capacity. It
is common ground that she did, in fact, disburse the accrued pension benefits
equally among herself, her sisters and her brother, but the evidence supports
the Respondent's argument that doing so was a matter of choice, rather than a
legal requirement.
[11] Clause 8.1 of the ILA Plan governs the appointment of
beneficiaries and sets out how this is to be done: it requires the filing with
the plan administrator of a written declaration signed by a "Member"
as defined in Clause 1.27:
1.27 "Member" means an Employee who is included as a
member in the Plan as provided in ARTICLE II, and who has not severed his
membership in the Plan by:
(a) terminating
in accordance with ARTICLE VII;
(b) becoming a Pensioner, or electing the portability option
under Section 6.1(e); or
(c) death.
[12] The
word "Pensioner" used in Clause 1.27(b) is defined in Clause 1.34 as
"a Former Member who is receiving a Retirement Benefit".
[13] Clause 8.1 also permits a "Member" to "alter
or revoke" his beneficiary appointment but does not specify the method by
which that is to be achieved, other than requiring that it be "[t]o the
extent permitted by law" as set out in the opening preamble.
[14] Counsel
for the Appellant argued that the Appellant's appointment was validly altered
when, just prior to his death in 2001, the Appellant's father signed the "Wills
Questionnaire". I cannot improve upon the eloquent testimony of the
Appellant's brother-in-law, Dennis Beaver, describing the circumstances in
which this document came into being:
A. We went to visit George [the Appellant's father] in the
hospital. He was in for some lung surgery. Everybody, including himself,
assumed that he was going to recover from his surgery. During our visits, and
after the surgery, he wasn't quite so sure. Then he was in a big tizzy, saying
he had no Will and he wanted us to do something to furnish him a Will. At that
time myself and my co‑worker were dealing directly with Ray Adlington [counsel
for the Appellant] at his other firm, Daley Black, and we had both asked Ray
for some Will kits. So we had these Will kits, unbeknownst to me too that it
was a questionnaire. George was really adamant that he wanted to do up a Will.
So I said, "Well, we had these for our own personal use but, okay, George,
I'll bring you over the Will kit and we'll fashion it up for you here in the
hospital if that's what makes you happy." And he wanted us to do that. So
that was how this so-called "Will," which turned out to be a Will
Questionnaire came to be.
...
A. We were in the hospital room with George.
And we all were there. And I was sort of ‑‑ they wanted me to do it
up in my writing. So I just ‑‑ as you can see, this is all my own
handwriting, printing, whatever you want to call it. George was feeling bad. He
still thought he was coming out of the hospital, but he still ‑‑
I'm sorry ‑‑ he still felt he was coming out of the hospital but it
seemed to be giving him some peace of mind to gear this up and write this up
and prepare it for him in case. As it turned out, he just ‑‑ you
know, he developed complications from the surgery and he didn't come out of the
hospital. So this, in effect, was the last document that he was, you know, to
prepare.
[15] I am satisfied
that the "Wills Questionnaire" was duly witnessed and signed by the
Appellant's father. It named his four children as his beneficiaries. His assets
were listed as three bank accounts, his ILA pension and his CLA insurance policy.
It directed that his funeral expenses were to be paid out of the proceeds of
the CLA insurance policy[10]. It concluded with the words "- [n]otwithstanding anything implied or inferred, this
is to be considered my final wishes."[11] The motivation
for the inclusion of this clause was explained by Dennis Beaver as
follows:
I also added
the notwithstanding clause. At the time I was taking a negotiations course with
the union I was representing.
... So we weren't sure at the time if there was anything else other than the
survivor's pension involved. And one of the things I learned in the union
negotiations was if there was anything else in place that we didn't know of,
that if you added a notwithstanding clause, then it sort of supersedes
everything else. So in case there was anything else. That was just to let us
know that if there was anything else, this should take precedence over anything
previous. Whether it is or not, that's for the law to decide, not for me. So
that's why that clause is there.
The
last sentence in the "Wills Questionnaire" states that " – [a]ny
other monies (pensions, insurances, etc.) is to be dispersed equally among my
beneficiaries, after taxes and expenses."[14]
[16] The effect of
this document, according to counsel for the Appellant, was to alter the original
beneficiary appointment to designate the Appellant and her three siblings as
equal beneficiaries under the ILA Plan. The difficulty with that argument is getting around the
fact that when the Appellant's father signed the "Wills Questionnaire" on April 19, 2001, he was no longer a
"Member" within the meaning of Clause 8.1. Pursuant to the ILA Plan
definitions, he severed his membership in the Plan by becoming a "Pensioner"
and "Former Member" when in 1997, he began receiving his "Retirement
Benefit". While Clause 8.1 does not stipulate how a beneficiary
appointment might be altered, its terms are clear that the power to alter is
exclusively reserved to a "Member". Given the clear wording of the
ILA Plan, I am equally unable to accept the submission of counsel for the
Appellant that the Beneficiaries Designation Act could somehow override its
terms to render the "Wills Questionnaire" a valid alteration of
beneficiary.
[17] Counsel for the
Appellant submitted further that even if the Appellant had been the sole
beneficiary under the ILA Plan, she renounced that status by her actions.
Without deciding whether, as a matter of law, the Appellant could validly
renounce her entitlement "by her actions", the evidence does not
support her having done so. From 2001 to 2003 she consistently accepted
delivery of cheques made payable to her name. She then routinely deposited them
in the estate account, but only she had control over that account: she decided
when, in what amounts and to whom disbursements of the accumulated pension
benefits would be made. I have no reason to doubt her testimony that she made
some attempt to have Sun Life pay out the pension benefits in four equal
cheques, but the fact remains she was not successful in her quite limited
efforts to do so: her request to Sun Life was never put in writing; indeed,
despite having discussed the matter with her lawyer, it did not progress beyond
a telephone call with a now-forgotten official.
[18] In finding the
above, I am not without sympathy for the Appellant and her family. While only
the 2003 taxation year was under appeal at this hearing, the Appellant had been
similarly assessed for pension benefits in 2001 and 2002. After discussion with
officials, the matter was resolved in the Appellant's favour but in 2003, the
Minister finally came to the view that the basis for the assessment was
correct. It seems to me, however, that the resources expended on challenging
the Minister's assessments might have been more usefully marshalled in
rectifying the beneficiary designation. Given the number of years of pension
benefit entitlement remaining, the Appellant would be wise to make a serious
effort to sort this matter out with Sun Life directly; if that should prove
fruitless, it may be necessary to seek relief in a Nova Scotia court with the
jurisdiction to order a change in the beneficiary designation and to provide
Sun Life with a legal basis for paying out the pension benefits other than in
accordance with the valid beneficiary appointment filed under Clause 8.1. As
counsel for the Respondent quite rightly pointed out, the Tax Court of Canada
has no such power. Under subsection 171(1) of the Income Tax Act,
the power of the Tax Court is limited to disposing of an appeal by:
(a) dismissing
it; or
(b) allowing
it and
(i) vacating
the assessment,
(ii) varying
the assessment, or
(iii) referring the assessment back to the Minister for
reconsideration and reassessment.
[19] In doing so, the fundamental question before the Court is
the validity of the Minister's assessment. In the present case, the Appellant has failed to meet her evidentiary
burden of proving wrong the assumptions upon which the 2003 assessment was based.
I agree with counsel for the Respondent that the Minister must assess tax
liability on the basis of what is, not what might have been. What is clear from
the evidence is that, in 2003, the Appellant in her personal capacity was in
receipt of pension benefits to which she was legally entitled; accordingly,
that amount must be included in her income under subparagraph 56(1)(a)(i)
of the Act. For all of these reasons, the appeal of the reassessment of
the Minister of National Revenue under the Income Tax Act is dismissed.
Signed at Ottawa, Canada, this 6th day
of October, 2006.
"G. Sheridan"
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