Date: 20011022
Docket: 2000-1461-IT-G
BETWEEN:
ANTONIJA SIFTAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Beaubier, J.T.C.C.
[1]
This appeal pursuant to the General Procedure was heard at
Windsor, Ontario on October 16, 2001. The Appellant's lawyer
in respect to the civil matters in question, Joseph Comartin,
M.P., testified on behalf of the Appellant. The Respondent called
the lawyer for the Great-West Life Assurance Company,
("G-W") Graham Nattress, who testified respecting the
civil matters on behalf of G-W.
[2]
The appeal is in respect to a reassessment by the Respondent
which found that the Appellant did not report income alleged
received by her from G-W in the amount of $44,495.83 in 1997. A
summary of the facts relating to this is contained in a Partial
Agreed Statement of Facts which reads:
TAX COURT OF CANADA
NOTICE OF APPEAL-GENERAL PROCEDURE
BETWEEN:
ANTONIJA SIFTAR
Appellant
and
HER MAJESTY THE QUEEN
Respondent
PARTIAL AGREED STATEMENT OF FACTS
1.
Antonija Siftar was born on June 12, 1942.
2.
She was employed at Tamco Limited beginning in 1977. She stopped
working in August of 1990 as a result of a physical disability
suffered in a hit and run motor vehicle accident on August 27,
1990.
3.
She has not returned to any employment since the accident on
August 27, 1990.
4.
Mrs. Siftar was a member of the Union and pursuant to that
contract was entitled to both short term and long term disability
benefits. The insurance premiums were paid solely by Tamco
Limited, her employer.
5.
Mrs. Siftar received short term benefits for the first six months
from Great West Life. Her long term benefits were paid by Great
West Life from February 26, 1991 until August 22, 1994.
6.
Mrs. Siftar suffered serious physical injuries resulting in her
inability to work. She applied for Canada Pension and received
notice that her Canada Pension disability benefits were granted
effective December, 1990. She has been collecting a Canada
Pension disability benefit since that date.
7.
Mrs. Siftar's entitlement to long term disability benefits
from Great West Life was $1,100.00 per month. This sum was
reduced by her Canada Pension disability benefit of $504.05 per
month for a total sum paid by Great West Life of $595.00 per
month.
8.
Mrs. Siftar received no-fault benefits from her insurer,
Allstate, from the time of the accident until October 3, 1996
after which Allstate refused to continue to pay her no-fault
benefits.
9.
The motor vehicle accident, the termination of benefits by Great
West Life on August 27, 1994 and the termination of Mrs.
Siftar's no-fault benefits on October 3, 1996 by
Allstate resulted in three legal actions commenced by
Mrs. Siftar. They are as follows:
(a)
In 1994 Mrs. Siftar issued a Claim against Allstate for her
personal injuries suffered in the motor vehicle accident. The
operator of the motor vehicle was unidentified and uninsured.
Pursuant to the insurance provisions and her policy of insurance,
Mrs. Siftar commenced her claim for personal injuries against her
insurer, Allstate. (Tort Claim);
(b)
In 1995 Mrs. Siftar commenced an action against Great West Life
as a result of the termination of her disability benefits.
(Disability Claim);
(c)
In 1997 Mrs. Siftar commenced an action against Allstate as a
result of the termination of her no-fault benefits. (No-fault
Claim).
10.
The lawyer representing Mrs. Siftar in all three claims was
Joseph Comartin of the CAW Legal Services Plan in Windsor.
11.
All three claims were settled pursuant to Releases all dated
October 24, 1997 and three Court Orders dated
October 21, 1997.
12.
The total settlement for all three legal actions was $122,500.00.
This occurred as a result of negotiations between Mrs.
Siftar's solicitor, Joseph Comartin, and the three solicitors
for each of the Defendants in each of the actions. The Defendants
agreed to resolve their share of the total sum as follows:
(a)
Great West Life paid an inclusive sum of $44,495.83 which
included interest, costs plus one third of the disbursements and
GST;
(b)
Allstate Insuance Company, for the tort claim, paid $33,508.33 as
an all inclusive settlement for damages, costs, interest,
disbursements and GST;
(c)
Allstate Insurance Company for the no-fault claim paid $44,495.84
as an all inclusive payment to resolve this claim, inclusive of
all of her benefits pursuant to the no-fault provisions, costs,
interest, disbursements and GST.
13.
Great West Life issued a T4A to Mrs. Siftar for the year 1997 in
the total sum of $44,495.83.
14.
Mrs. Siftar did not include the Great West Life T4A in her 1997
Income Tax Return.
15.
By Notice of Reassessment dated January 6, 1999 the Minister
Reassessed Mrs. Siftar's 1997 taxation by including the
$44,495.83 in her income tax for that year. This resulted in a
Federal and Provincial tax assessment to Mrs. Siftar of
$17,994.94.
ISSUE
Whether the Minister of Revenue properly included the amount of
$44,495.83 received from Great West Life in Antonija Siftar's
income for the 1997 taxation year.
RONALD C. REAUME
CAW LEGAL SERVICES PLAN
2345 CENTRAL AVENUE
WINDSOR, ONTARIO
N8W 4J1
Tel: (519) 944-5222
Fax: (519) 944-5077
[3]
Mr. Comartin testified, as confirmed by Exhibit AR-1, Tab 5, that
his negotiations were with the lawyer for Allstate and that they
settled on a lump sum of $122,500 in full settlement of all
claims by his letter of August 27, 1997 which was accepted by her
letter of September 2, 1997. In the September 2, 1977
letter, Allstate's lawyer outlined the three sources and sums
totalling $122,500. However these sources were not a condition of
the lump settlement which was merely for $122,500 from whatever
sources the three defending actions chose.
[4]
G-W paid $44,495.83 after its form of release was signed by the
Appellant on October 24, 1997. That form was prepared by G-W and
G-W would not have paid the Appellant unless a release
satisfactory to G-W was signed. The release is in Exhibit AR-1,
Tab 6. It reads:
FULL AND FINAL RELEASE
WHEREAS The Great-West Life Assurance Company
("Great-West Life") has issued Group Policy No.
134939GHA (the "Policy") to Tamco Limited;
AND WHEREAS Antonija Siftar as an employee as defined by the
Policy, has filed a claim for long term disability benefits under
the Policy, and has filed a Statement of Claim against
Great-West Life on or about June 9, 1995 in the Ontario
Court (General Division), Windsor, Ontario, bearing Court File
No. 95-GD-32826 (the "Action");
WITNESS:
1.
In consideration of the settlement and dismissal of the Action
and the payment by Great-West Life of the sum of FORTY-FOUR
THOUSAND, FOUR HUNDRED AND NINETY-FIVE DOLLARS AND EIGHTY-THREE
CENTS ($44,495.83), inclusive of interest and taxable fees
and disbursements, the receipt of which is hereby acknowledged,
and for other good and valuable consideration, I Antonija Siftar,
for myself, my heirs, executors, administrators and assigns and
anyone claiming through or under me, do hereby release, remise
and forever discharge Great-West Life, and its officers,
directors, employees, servants, agents, successors and assigns,
of and from any and all manner of action and actions, cause and
causes of action, suits, debts, dues, sums of money, general
damages, special damages, costs, claims and demands of every
nature and kind, at law or in equity or under any statute, which
I or my heirs, executors, administrators, or assigns have or ever
had, can, shall or may have by reason of any matter, cause or
thing whatsoever in respect of or in any way arising out of or
relating to the Policy or the matters in issue in respect of the
Action.
2.
And in further consideration of the payment to me of the
aforesaid sum of money by Great-West Life and other good and
valuable consideration, I, Antonija Siftar, hereby consent to the
dismissal of the said Action without costs to any party.
3.
I, Antonija Siftar further authorize and require that the payment
to us of the aforesaid sum of money be paid to our solicitor, CAW
Legal Services Plan, in trust, and my signatures to this Release
shall be Great-West Life's authority for so doing.
4.
It is understood and agreed that this settlement is the
compromise of a doubtful and disputed claim or claims and that
payment is not to be construed as an admission of liability by
Great-West Life for payment of benefits to me pursuant to the
Policy, and that Great-West Life expressly denies such
liability.
5.
It is further understood and agreed that I, Antonija Siftar, will
not make any claim or take any proceedings against any other
person or entity, who or which might claim contribution or
indemnity under the provisions of any statute or otherwise.
6.
I, Antonija Siftar, represent,, warrant and certify that in
executing this Release, I do so with full knowledge of any and
all rights which I may have with respect to benefits under the
Policy and in respect of this Action, and that at all times
relative thereto, I have had the opportunity to be represented by
legal counsel of my own choosing to advise me concerning this
Release.
7.
The terms of the Release are contractual and not a mere
recital.
IN WITNESS WHEREOF I, Antonija Siftar, have herein set my hand
and seal this 24th day of October,
1997, at the City of_____________ in the
Province of Ontario.
SIGNED, SEALED AND
DELIVERED
)
by Antonija Siftar in the presence
of:
)
)
)
)
)
"signature"
)
Signature
)"signature"
)ANTONIJA SIFTAR
"Joseph J.
Comartin"
)
Name
)
)
"234 Central, Windsor
)
Address
)
)
"Barrister and
Solicitor"
)
Occupation
)
[5]
The Court Order referred to in the Release merely dismissed the
suit by the Appellant against G-W.
[6]
As pointed out by Mr. Nattress in his testimony, and confirmed in
the argument of counsel in this Hearing, G-W could not pay the
Appellant disability payments for the future since the Policy
only permits payments on a monthly basis. The Release provides
that the $44,495.82 was inclusive of interest, taxable fees and
disbursements; the sum of $44,495.82 amounts to more than the sum
of these items. Moreover, Mr. Comartin deducted his fees and
disbursements of $18,225.18 and a Minister of Finance fee of
$75.00 for the dismissal order in a lump sum from the lump sum
settlement of $122,575. G-W paid its sum to Mr. Comartin in
five cheques dated the same day - four in the amount of
$9,000 each and one for the balance (Exhibit AR-1, Tab 5).
[7]
The Appellant was assessed pursuant to paragraph 6(1)(f)
of the Income Tax Act ("Act") and, in
argument, in the alternative, paragraph 6(1)(a) of the
Act. They read:
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
(i)
derived from the contributions of the taxpayer's employer to
or under a registered pension plan, group sickness or accident
insurance plan, private health services plan, supplementary
unemployment benefit plan, deferred profit sharing plan or group
term life insurance policy,
(ii)
under a retirement compensation arrangement, an employee benefit
plan or an employee trust,
(iii)
that was a benefit in respect of the use of an automobile,
(iv)
derived from counselling services in respect of
(A) the
mental or physical health of the taxpayer or an individual
related to the taxpayer, other than a benefit attributable to an
outlay or expense to which paragraph 18(1)(l) applies,
or
(B)
the re-employment or retirement of the taxpayer, or
(v)
under a salary deferral arrangement, except to the extent that
the benefit is included under this paragraph because of
subsection (11);
...
(f)
the aggregate of amounts received by him in the year that were
payable to him on a periodic basis in respect of the loss of all
or any part of his income from an office or employment, pursuant
to
(i)
a sickness or accident insurance plan,
(ii)
a disability insurance plan, or
(iii) an
income maintenance insurance plan to or under which his employer
has made a contribution, not exceeding the amount, if any, by
which
(iv) the
aggregate of all such amounts received by him pursuant to the
plan before the end of the year and
(A)
where there was a preceding taxation year ending after 1971 in
which any such amount was, by virtue of this paragraph, included
in computing his income, after the last such year, and
(B)
in any other case, after 197l,
exceeds
(v)
the aggregate of the contributions made by the taxpayer under the
plan before the end of the year and
(A)
where there was a preceding taxation year described in
subparagraph (iv), after the last such year, and
(B)
in any other case, after 1967;
[8]
In the Informal Appeal Jacqueline Landry v. Her Majesty the
Queen, 98 DTC 1416, Bowman, J. found that a lump sum
payment in settlement of long-term disability benefit was
not to be included in income pursuant to
paragraph 6(1)(a). In that case Mrs. Landry had paid
tax on the premiums as a taxable benefit; that did not happen in
this case. Moreover paragraph 6(1)(f) was not relied on by
the Respondent, but it was in this case.
[9]
In the General Appeal, Catherine Dumas v. Her Majesty the
Queen, 2000 DTC 2603, Mogan, J. was able to calculate
the taxpayer's benefit in the settlement based upon the
disability payments due from the insurer. Mogan, J. found that
the amount in Dumas did not come out of thin air, but was
negotiated by the Appellant and insurer's "sophisticated
lawyers". The benefit was found to be $85,000, and not the
$105,000 assessed. In essence Mogan, J. calculated what he
considered to be one-half of Mrs. Dumas' future disability
benefits to be $20,000, subtracted that from the $105,000 and
arrived at the $85,000 figure.
[10] There are
a number of discrepancies between Landry and Dumas
on the one hand and Mrs. Siftar's case. They include the
following:
1.
Like Dumas, paragraph 6(1)(f) was pleaded.
2.
The Appellant's lawyer launched these separate suits - #1
against G-W for general damages, a declaration that the
insurance contract was valid, and the benefits (AR-1, Tab 6); -
#2 against Allstate Insurance Company ("Allstate") for
the Appellant and her husband for general damages; and #3 by the
Appellant against Allstate for medical expenses, interest, and a
declaration of entitlement to weekly benefits. Mrs. Siftar's
plea for relief in the Statement of Claim against G-W reads as
follows:
CLAIM
1.
THE PLAINTIFF CLAIMS:
(a)
Damages in the sum of $250,000.00;
(b) A
Declaration that the Plaintiff has and continues to be insured
since August 27, 1990, pursuant to a group long term disability
insurance contract between Tamco Limited and the Defendant;
(c) A
Declaration that the policy of group long term disability
insurance between Tamco Limited and the Defendant for and on
behalf of the Plaintiff remains in full force and effect.
(d) A
Declaration that the Plaintiff has been and continues to be
totally disabled since August 27, 1990, pursuant to the
said group long term disability insurance contract between
Tamco Limited and the Defendant;
(e) A
mandatory order directing the Defendant to reinstate the premium
free benefit for the continuance of the Plaintiff's Long Term
Disability benefits pursuant to the contract between
Tamco Limited and the Defendant;
(f)
A mandatory order directing the Defendant to pay to the Plaintiff
all monthly benefits pursuant to the said group long term
disability insurance contract due and owing since
August 22, 1994;
(g)
Pre-judgment interest pursuant to the Courts of Justice Act
R.S.O. 1990, Chapter C.43;
(h)
Post-judgment interest pursuant to the Courts of Justice Act,
R.S.O. 1990, Chapter C.43;
(i)
Her costs of this action;
(j)
Such further and other relief as this Honourable Court deems
just.
3.
The Appellant's lawyer negotiated with one of Allstate's
lawyers for the $122,500 lump sum which was treated as a lump sum
by those two lawyers in respect to each other and the Appellant.
The three defendant lawyers broke the $122,500 down among
themselves.
4.
While the Appellant's lawyer had an actuary estimate
G-W's liability, a proposal to G-W based on that estimate was
rejected by G-W. Thereupon the Appellant's lawyer went to the
lump sum amount and the Court accepts his statement that he did
not care where its components came from - all he was after
was the final figure. This view is obviously that adopted by the
three defending lawyers, since they let one of Allstate's
lawyers carry the negotiations with the Appellant's lawyer.
The defendants simply apportioned it among themselves.
5.
The Release is, as it states in paragraph 8,
"contractual". The Appellant releases G-W from any
claims under both the Policy and her Action (paragraph 1).
In paragraph 4 she agrees that G-W's payment is
not an admission of liability for benefits and that G-W denies
such liability. In paragraph 5 she agrees not to take any further
proceedings.
[11] Thus the
Release's "contract" in essence constitutes a
contract of admission of liability for the Appellant's
lawsuit against G-W, but is not an admission of liability for
benefits under the Policy. It was completed under the direction
of two highly experienced lawyers for the parties. In essence, by
elimination, it concludes the lawsuit by paying the Appellant for
her claims for general damages, as distinct from her other claims
in the lawsuit that the insurance contract was valid, and for the
benefits.
[12] The
Release in these terms was on G-W's form. Mr. Comartin did
not negotiate or renegotiate its form with Mr. Natttress. He
simply had Mrs. Siftar sign it for the total sum of $44,495.83
being a part of the total of $122,500. That sum and the Release
were not negotiated for by Mr. Comartin tax wise or otherwise. He
and the Appellant merely accepted them as part of the $122,500
lump sum. How G-W and the other defendants arrived at their parts
of the $122,500 did not concern the Appellant.
[13] The
$44,495.83 was not payable on a periodic basis, nor did it
represent the aggregate of periodic payment she might have
received over her lifetime until the age of 65. Rather, it
constituted general damages paid by G-W to the Appellant pursuant
to the Appellant's lawsuit against G-W and G-W's form of
Release executed by the Appellant in return for G-W's payment
to her of $44,495.83 as its part of a lump sum settlement of
$122,500.
[14] The
appeal is allowed. This matter is referred to the Minister of
National Revenue for reconsideration and reassessment in
accordance with these Reasons.
[15] The
Appellant is awarded costs.
Signed at Ottawa, Canada, this 22nd day of October,
2001.
"D. W. Beaubier"
J.T.C.C.
COURT FILE
NO.:
2000-1461(IT)G
STYLE OF
CAUSE:
Antonija Siftar v. The Queen
PLACE OF
HEARING:
Windsor, Ontario
DATE OF
HEARING:
October 16, 2001
REASONS FOR JUDGMENT BY: The
Honourable Judge D. W. Beaubier
DATE OF
JUDGMENT:
October 22, 2001
APPEARANCES:
Counsel for the Appellant: Ronald C. Reaume
Counsel for the
Respondent:
Daniel Bourgeois
COUNSEL OF RECORD:
For the
Appellant:
Name:
Ronald C. Reaume
Firm:
CAW Legal Services Plan
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1461(IT)G
BETWEEN:
ANTONIJA SIFTAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on October 16, 2001 at Windsor,
Ontario by
the Honourable Judge D. W. Beaubier
Appearances
Counsel for the
Appellant:
Ronald C. Reaume
Counsel for the
Respondent:
Daniel Bourgeois
JUDGMENT
The
appeal from the reassessment made under the Income Tax Act
for the 1997 taxation year is allowed, with costs, and the
reassessment is referred back to the Minister of National Revenue
for reconsideration and reassessment in accordance with the
attached Reasons for Judgment.
Signed
at Ottawa, Canada, this 22nd day of October, 2001.
J.T.C.C.
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