Shah v. M.N.R., docket 1999-4661-EI

Date: 20010409

Docket: 1999-4661-EI

BETWEEN:

JAY SHAH,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Porter, D.J.T.C.C.

Introduction

[1]            This appeal was heard on the 6^th day of December 2000, at Edmonton, Alberta.

[2]            It is another chapter in the long saga of litigation in which the Appellant has been engaged in order to obtain certain long-term disability benefits following his permanently disabling heart attack on the 13^th of March 1983 whilst in the employ of the Government of Alberta as Director of Research Management Division in the Department of Environment. Following an "award of damages" in his favour in the Court of Queen's Bench of Alberta, the Minister of National Revenue (the "Minister") decided by letter dated the 12^th of August, 1999 as follows:

"This letter concerns the appeal of the Government of the Province of Alberta of the ruling dated May 18, 1999 on the insurability for employment insurance purposes, of Long Term Disability Insurance benefits paid to you by the Government of the Province of Alberta on December 21, 1998.

It has been decided that these benefits were insurable as you were engaged under a continuing contract of service by the Government of the Province of Alberta and therefore you were their employee."

[3]            The decision was issued pursuant to section 93 of the Employment Insurance Act (the "EI Act") and was based on paragraph 3(1)(a) of the Unemployment Insurance Act and paragraph 5(1)(a) of the EI Act.

The Facts

[4]            The Appellant had been hired in the capacity of Director of Research Management on September 17, 1981. The Government of Alberta purported to terminate his employment on the 18^th of February 1983 which termination was to be effective March 31, 1983. The Appellant, however, negotiated a new contract extending his employment on somewhat different terms from March 31, 1983 to September 30, 1983. However, that contract was never signed.

[5]            As a result of his heart attack on March 13, 1983, which incapacitated him permanently, he never returned to work. The Government of Alberta paid to him some short-term disability benefits and some long-term benefits until October 1983 when they ceased further payment. He sued for damages in the Court of Queen's Bench. Judgment was delivered in his favour on November 22, 1993 by the Honourable Mr. Justice J.A. Agrios who held, inter alia:

(a)            that the Appellant was still on probation as an employee, both at the time of the purported termination and at the time of the heart attack;

(b)            that the dismissal process followed by the Government of Alberta was lawful;

(c)            that an Agreement in fact bad been reached between the Government of Alberta and the Appellant whereby his employment was terminated effective March 31, 1983 and he was to be hired for an additional 6 months in accordance with the draft contract;

(d)            coverage for the long-term disability, it was established, remained the same whether the employee was probationary or permanent;

(e)            that the Appellant was covered under the long-term insurance plan for disability benefits as he remained an employee at the time of his heart attack and had been so for the previous 3 months. His disability arose before the terms of the new contract came into operation.

[6]            After these findings, the learned Judge reserved the question of quantum of damages to be spoken to by counsel at a later time.

[7]            The matter came on for hearing before the Alberta Court of Appeal on January 5, 1995. The Court of Appeal agreed that there was nothing in the new agreement between Dr. Shah and the Government of Alberta which precluded a finding that the former continued to be employed until March 31^st, but that the terms of his original contract ceased on March 31^st and that the new contract governed after April 1^st. Clearly, on the basis of this finding, there was no contract of employment extending past September 30, 1983. The Court of Appeal, for reasons different from those expressed by the learned trial Judge, went on to hold that the employee had earned a permanent benefit which was not terminated under section 6(c) of the Plan.

[8]            The Court of Appeal did not deal with the question of damages or what amounts were due to the Appellant. They dismissed the appeal effectively affirming the decision issued by the trial Judge that Dr. Shah was entitled to a long-term disability pension.

[9]            The quantum of damages were next spoken to in the Court of Queen's Bench before the Honourable Mr. Justice Girgulis on the 14^th of January 1997 and the 1^st of April 1997. The judgment was finally entered on the 23^rd of November 1998; part of the delay was attributable to arguments over interest, the learned Justice delivered his judgment in this respect on the 5^th of June 1998. The final term of the award was for "General Damages" in the amount of $256,308.67. The Judgment refers to the assessment of damages being determined by making certain adjustments to "the Plaintiff's original entitlement under the Long Term Disability Income Plan Regulation.".

[10]          The very wording of the Judgment, it seems to me, makes it clear that there were damages awarded to the Appellant and not his original benefits. That would be quite logical for two reasons. First, this was a contract of insurance as identified by the trial Judge and Government of Alberta was found to be in breach of the same. Secondly, whilst normally benefits would flow on a long-term basis to an employee who would technically retain an employee, in the peculiar facts of this case, it was clear from the Judgments of both the trial Judge and the Court of Appeal that the Appellant did not remain an employee after September 30, 1983.

[11]          This interpretation was the initial opinion of M. Feakes of Revenue Canada, who wrote to the Appellant on June 12, 1997:

"In addition, since the payment is a result of a court settlement in compensation for a loss, the payment would be considered "damages", and as such cannot be considered insurable earnings."

[12]          The Government of Alberta took a corresponding position in its letter to the Minister dated July 22, 1999:

"This letter serves as formal objection to your ruling on payments made to Dr. Jay Shah as Satisfaction of Judgment for damages regarding long term disability benefits issued by the Court of Queen's Bench of Alberta on December 21, 1998.

Specifically, we object to your finding that Dr. Shah was an employee of the Government of Alberta after October 31, 1983 and that payments made to Dr. Shah under the judgement consisted, in part, of payments of long term disability benefits."

[13]          The Minister issued a ruling through his Chief of Appeals in Edmonton, on the 12^th of August 1999 as outlined above.

[14]          In the Reply to the Notice of Appeal, the agent for the Minister says in the name of the Deputy Attorney General of Canada, that:

"...the benefits were insurable as the Appellant was engaged under a continuing contract of service..."

That is the basis of the ruling by the Minister.

[15]          Counsel for the Minister has sought to present his arguments somewhat differently at the hearing of this appeal. He stated the issues in his written brief as follows:

"a)            Whether the Payment to the Appellant was merely "damages" or in fact represented benefits that the Appellant was entitled to under the long-term disability insurance plan; and

(b)            If the Payment to the Appellant did represent long-term disability insurance benefits, whether those benefits were paid under a contract of services such that the Appellant was in insurable employment and the Payment constituted insurable earnings within the meaning of the Employment Insurance Act and applicable Regulations."

[16]          Counsel presented ingenious arguments that the "general damages" awarded are in fact "long-term disability benefits". However, the Court awarded damages rather than specifically directing payment of any benefits. Both learned Justices dealt with damages and it is not for this Court to re-interpret the award. Clearly, damages are damages and are not something else. That really disposes of this appeal and confirms the original opinion of M. Feakes at Revenue Canada.

[17]          However, I will deal also with the second submission of counsel on behalf of the Minister. Even if the payment represented long-term disability benefits as opposed to damages, counsel concedes that they would not be insurable under the EI Act unless they met the requirements of the Act. He relied particularly on Regulation 2(1) of the Insurable Earnings and Collection of Premiums Regulations made and the EI Act which reads as follows:

"2.(1) For the purposes of the definition "insurable earnings" in subsection 2(1) of the Act and for the purposes of these Regulations, the total amount of earnings that an insured person has from insurable employment is the total of all amounts, whether wholly or partly pecuniary, received or enjoyed by the person that are paid to the person by the person's employer in respect of such employment."

[18]          Counsel cites the Supreme Court of Canada decision Nowegijick v. R. [1983] C.T.C. 20 at paragraph 30 [S.C.C.]:

"The words "in respect of" are, in my opinion, words of the widest possible scope. They import such means 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."

[19]          The difficulty facing the Minister, in my view, with the greatest respect to counsel, is the fact that both the learned trial judge and the Court of Appeal were of the view that the contract of employment was terminated as of the 30^th of September 1983. The very underpinning of counsel's submission to this Court is that "the Appellant remained under a continuing contract of service with the Government of Alberta even after he ceased performing services ...". That, however, is not what the Courts have held. In normal circumstances, it is clear that an employee remains an employee whilst receiving long-term disability payments until such time as they cease, for whatever reason. This case however, was far from normal and it is clear that the employment was permanently terminated at the end of September 1983. Thus, there was an award of damages, rather than a direction to pay the benefits. For the period over which the payments would have been made, there was no contract of employment, no employer and no employee. In such circumstances, Regulation 2, in my opinion, has no relevance. This was a totally different situation from that which existed in Desender v. Canada (Minister of National Revenue-M.N.R.), [1999] T.C.J. No. 901, a decision of my brother Judge Beaubier in this Court, which is clearly distinguishable.

Conclusion

[20]          In summary, I hold that the payments made to the Appellant were damages, not long-term disability benefits, and were thus not insurable under the EI Act. They were not payments made by an employer to an employee with respect to his employment. There was no contract of employment in existence after the 30^th of September 1983. The payment of damages was accordingly not insurable under the EI Act.

[21]          The appeal is accordingly allowed and the decision of the Minister varied. One would hope that this will be the final chapter in this rather long and sad saga.

Signed at Calgary, Alberta, this 9th day of April 2001.

"Michael H. Porter"

D.J.T.C.C.

COURT FILE NO.:                                                 1999-4661(EI)

STYLE OF CAUSE:                                               Jay Shah and M.N.R.

PLACE OF HEARING:                                         Edmonton, Alberta

DATE OF HEARING:                                           December 6, 2000

REASONS FOR JUDGMENT BY:                      Honourable Deputy Judge Michael H. Porter

DATE OF JUDGMENT:                                       April 9, 2001

APPEARANCES:

                For the Appellant:                                 The Appellant himself

                Counsel for the Respondent:              Michael Taylor

COUNSEL OF RECORD:

                For the Appellant:                

                                                                                Name:     

                                                                                Firm:                       

                For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                Ottawa, Canada

1999-4461(EI)

BETWEEN:

JAY SHAH,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on December 6, 2000 at Edmonton, Alberta, by

the Honourable Deputy Judge Michael H. Porter

Appearances

For the Appellant:                                The Appellant himself

Counsel for the Respondent:                Michael Taylor

JUDGMENT

          The appeal is allowed and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.

Signed at Calgary, Alberta, this 9th day of April 2001.

"Michael H. Porter"

D.J.T.C.C.