Date: 19990810
Docket: 98-1909-IT-I
BETWEEN:
KAREN FOURNIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
RIP, J.T.C.C.
[1] In computing her income for 1996, Karen Fournier, the
appellant, included, inter alia, purported income from the
Province of Ontario in the amount of $54,917.79, a retirement
allowance from the Province of Ontario in the amount of $4,854.66
and employment benefits from a wage loss plan in the amount of
$15,608.76 and claimed an amount of $42,500.05 as a deduction in
computing her taxable income.
[2] In assessing Ms. Fournier for 1996, the Minister of
National Revenue ("Minister") did not permit the
appellant to deduct the amount of $42,500.05 on the basis the
amount was a "retiring allowance", as defined by
subsection 248(1) of the Income Tax Act
("Act") and is to be included in income by
virtue of subparagraph 56(1)(a)(ii) of the Act. The
appellant insists the amount was not received as a retiring
allowance and therefore appeals the assessment.
[3] Ms. Fournier started work for the Ministry of Transport of
Ontario in January 1989 on a short-term contract and became a
permanent employee of the Ministry in October 1989. She first
worked as a labourer on the province's highways and then as a
sign painter, also on the province's highways. She testified
she was one of the first women to be so employed.
[4] From March 1989 on, Ms. Fournier testified, she was
subject to sexual and physical harassment, including threats of
death, by at least three male employees of the Ministry with whom
she worked. She worked in a building with 21 men and was told by
several of them that she "wasn't wanted and they'd
get rid" of her. On one occasion she was pushed in front of
a moving vehicle, on another occasion a turkey carcass with a
twelve inch butcher knife through the neck of the carcass was
thrown on her front lawn scaring her young son and forcing them
to move to a secret location.
[5] Ms. Fournier eventually filed a complaint with her
employer under the Workplace Discrimination and Harassment
Prevention Policy, grievances under the grievance procedure
provided in the Collective Agreement between the Ministry and the
union representing the employees and complaints under the
province's human rights legislation. By letter dated December
10, 1993 the Deputy Minister of Transportation, upon receipt of
the investigator's report of Ms. Fournier's complaints,
confirmed that many of her allegations were substantiated.
[6] Respondent's counsel acknowledged that Ms. Fournier
was subject to harassment. I find that the harassment suffered by
Ms. Fournier, only two examples which are described in these
reasons, were serious and adversely affected her physical and
mental health, as she testified.
[7] Ms. Fournier and the Ministry of Transportation executed
Minutes of Settlement with respect to the various grievances and
complaints on October 25, 1995. According to the Minutes of
Settlement the Ministry "agreed to fund a program designed
to reimburse Ms. Fournier for actual costs incurred for
retraining, re-education and the possible establishment of a new
business". The Ministry agreed to reimburse her for items
such as tuition, career training and counselling, child care and
the purchase of employment related equipment so she could obtain
employment outside the Ontario Public Service, including
self-employment.
[8] The maximum amount of the fund for Ms. Fournier was
"in the range of $0 to $50,000 gross (with applicable
deductions made as required). Reimbursement requests by Ms.
Fournier to the fund were to be supported by receipts. No
receipts were required for child care expenses which were not to
exceed $5,000.
[9] Ms. Fournier agreed that in return for the receipt of up
to $50,000 from the Ministry effective October 27, 1995 she would
be placed on sick leave for six months until April 26, 1996.
During this six-month period, she would apply for long-term
disability. As soon as she had applied for long-term disability,
she would be deemed to no longer be an employee of the Ministry
and the termination of her employment would be recorded in the
books of the Ministry as a resignation. She would also withdraw
all grievances and complaints against the Ministry.
[10] In making payment to Ms. Fournier, the Ministry made
source deductions for the payments, including child care, and
issued to Ms. Fournier T4 and T4A slips for 1996 showing her
gross income and deductions.
[11] Subsection 248(1) defines "retiring allowance"
to mean:
an amount (other than a superannuation or pension benefit, an
amount received as a consequence of the death of an employee or a
benefit described in subparagraph 6(1)(a)(iv))
received
(a) on or after retirement of a taxpayer from an office
or employment in recognition of the taxpayer's 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 the taxpayer's death, by a
dependant or a relation of the taxpayer or by the legal
representative of the taxpayer.
[12] The amounts Ms. Fournier received from the Ministry were
not received "in respect of a loss of ... employment ... on
account of or in lieu of payment of, damages". The Ministry
did not make any payment, nor did Ms. Fournier receive any
payment, in respect of a loss of employment. The payments were
made due to the fact that employees of the Ministry were
harassing the appellant and that the appellant had a valid claim
for damages against the Ministry due to the actions of its
employees.
[13] Whether the Ministry admitted the appellant's claim
is irrelevant to the appeal at bar. In any event, the Deputy
Minister of Transportation acknowledged the boorish and dangerous
behaviour of several of his Ministry's employees. That was
the cause of the appellant's complaints and grievances. That
is the reason the Ministry agreed to make the payments to Ms.
Fournier. Ms. Fournier was an employee of the Ministry at the
time she agreed to execute the Minutes of Settlement. As far as
her agreeing to resign is concerned, that is simply a way for the
Ministry to get rid of an employee. Ms. Fournier did not receive
any payment in consideration of, or on account of, her agreeing
to leave the employment of the Ministry, she did not receive
these amounts as damages for any stress, medical or other
injuries she sustained as result of the termination of her
employment.[1]
[14] The amount of $42,500.05 received by Ms. Fournier from
the Ontario Government is not income from a source, as alleged in
the alternative by the respondent. The ordinary concept of income
pertains to recurring receipts and does not extend to a lump sum
receipt or payment because a source of income had been taken away
or destroyed.[2]
Similarly, this concept does not extend to payments received by
virtue of damages committed against the person of a taxpayer.
[15] To find the payments received by Ms. Fournier are taxable
under the general provisions of subsection 3(a) of the
Act would disregard the fact that Parliament has chosen to
deal with the taxability of such amounts, in the provisions of
the Act relating to retiring allowances.[3]
[16] The amount of $42,500.05 does not fall within the ambit
of the "ordinary concept of income" and is what is
normally considered a "recurring receipt". The amount
is not income from a source.
[17] The appeal is therefore allowed with costs, if any.
Signed at Ottawa, Canada, this 10th day of August 1999.
"Gerald J. Rip"
J.T.C.C.
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