Docket: A-166-15
Citation:
2016 FCA 65
CORAM:
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GAUTHIER J.A.
RENNIE J.A.
GLEASON J.A.
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BETWEEN:
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DAVID BUTLER
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Appellant
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and
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HER MAJESTY THE
QUEEN
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Respondent
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REASONS
FOR JUDGMENT
GLEASON J.A.
[1]
Mr. Butler appeals from the January 9, 2015 decision
of Justice Valerie Miller of the Tax Court of Canada in which the Tax Court
dismissed Mr. Butler’s appeal and confirmed that Mr. Butler was required to repay
the Old Age Security Pension [OAS] in the amount of $3269.00, which he received
in 2012.
[2]
The OAS repayment resulted from Mr. Butler’s
receipt in 2012 of a lump sum award under the Nova Scotia Workers’
Compensation Act, S.N.S. 1994-95, c. 10 [the WCA]. The Nova Scotia
Workers’ Compensation Board [WCB] issued a T5007 slip to Mr. Butler in the
amount of the award but Mr. Butler did not include this amount in his income.
He believes that the lump sum payment does not constitute income as he asserts
that it is a non-economic loss award that was meant to compensate him for the
pain and suffering associated with his injury. He argues that the award is akin
to tort damages for pain and suffering, which are not characterized as income,
and therefore that the lump sum payment he received from the WCB should not
have been included in his income. In support of this assertion, he relies,
among other things, on a web posting from the Ontario Workplace Safety and
Insurance Board [WSIB] that indicates that the WSIB does not issue T5007 slips
for non-economic loss compensation payments made to Ontario workers.
[3]
The Tax Court found that the lump sum payment
was properly included in Mr. Butler’s income under paragraph 56(1)(v) of
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) [the ITA]. This
paragraph provides:
56. (1) Without
restricting the generality of section 3, there shall be included in computing
the income of a taxpayer for a taxation year,
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56. (1) Sans
préjudice de la portée générale de l’article 3, sont à inclure dans le calcul
du revenu d’un contribuable pour une année d’imposition :
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[...]
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[...]
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(v)
compensation received under an employees’ or workers’ compensation law of
Canada or a province in respect of an injury, a disability or death;
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v) une
indemnité reçue en vertu d’une loi sur les accidents du travail du Canada ou
d’une province à l’égard d’une blessure, d’une invalidité ou d’un décès;
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[4]
The Tax Court held that the term “in respect of an injury” is to be broadly interpreted
to mean all amounts paid in relation to a compensable injury, relying on the
decision of the Supreme Court of Canada in Nowegijick v. The Queen
(1983), 144 D.L.R. (3d) 193 (S.C.C.), [1983] 1 S.C.R. 29 [Nowegijick] in
support of this proposition. Contrary to what Mr. Butler asserts, the date of
issuance of binding authority does not mean it is irrelevant and, given the
issues canvassed in Nowegijick, it can properly be relied on in the
interpretation of paragraph 56(1)(v) of the ITA.
[5]
Mr. Butler argues that the Tax Court erred in determining
that his lump sum constituted income as it failed to appreciate that the lump
sum payment he received was for pain and suffering and erred in finding that all
amounts received in respect of an injury are to be included in income under
paragraph 56(1)(v) of the ITA. He notes that in the Canada
Revenue Agency [CRA] publication, T5007 Guide – Return of Benefits, the CRA
has indicated that several sorts of payments received from the WCB need not be
reported as income, namely, payments or awards from the WCB for:
- medical expenses incurred by or for the employee;
- funeral expenses for the employee;
- legal expenses for the employee;
- job training or counselling for the employee that is not paid
as part of, or in lieu of, wage replacement benefits; or
- the death of the employee, other than periodic payments made
after the death of the employee.
[6]
Mr. Butler submits that the lump sum payment he
received is similar to the foregoing exceptions as it is not directed toward
wage replacement loss and therefore should not have been included in his 2012
income.
[7]
He also argues that some portion of his award
must have been for interest and, according to CRA’s T5007 Guide – Return of
Benefits, ought not have been included in his 2012 income. This argument,
however, was not made in his appeal to the Tax Court and therefore cannot be
raised before this Court.
[8]
Mr. Butler further submits that the Tax Court
erred in giving no weight to a letter he received from the Income Tax Rulings
Directorate that appears to indicate that the lump sum amount Mr. Butler
received need not be included in his 2012 income. However, this letter was not
an advance ruling and the Tax Court was not satisfied that it applied to the
facts before the Court in Mr. Butler’s case. We see no error in not finding the
letter from the Income Tax Rulings Directorate to be determinative; indeed,
determining whether the lump sum payment received by Mr. Butler falls within paragraph
56(1)(v) of the ITA is a matter of law for determination by this
Court and cannot be settled by a letter like that sent to Mr. Butler.
[9]
In terms of deciding whether the amount of the
lump sum payment should have been included in Mr. Butler’s 2012 income, it is
not necessary to decide whether the Tax Court erred in failing to characterize
the lump sum payment received by Mr. Butler as a non–economic loss payment as,
even if the payment was made on account of a non-economic loss, it would nonetheless
constitute income within the meaning of paragraph 56(1)(v) of the ITA.
[10]
In this regard, the policies of the provincial
WSIB or WCBs do not determine whether non-economic loss compensation payments
for pain and suffering constitute income within the meaning of the ITA. Likewise,
the way in which a T5007 form is completed is not determinative. Rather, this
matter is governed by paragraph 56(1)(v) of the ITA. This
provision is sufficiently broad to encompass non-economic loss payments
received by injured workers under provincial workers’ compensation legislation
to compensate them for pain and suffering. Such payments are clearly “compensation” and also are received “in respect of an injury” or “in
respect of a disability”, within the meaning of paragraph 56(1)(v)
of the ITA. As Justice Dickson (as he then was) held in Nowegijick
at page 39:
The words "in respect of” are, in my
opinion, words of the widest possible scope. They import such meanings 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.
[11]
I also note that the result in this case is
consistent with the result reached by the Tax Court in a previous case,
involving payments for non-economic loss made to a worker under the Ontario
workers’ compensation legislation: Larouche v. Canada (Human Resources and
Social Development), 2007 T.C.C. 743, 2007 C.C.I. 743. There, the Tax Court
held at paragraph 20 that:
Both the current legislation and the former Workers’
Compensation Act provide for compensation calculated on the basis of loss
of earnings and non-economic losses. However, with regard to including, in
computing income, compensation received under an employees’ or workers’
compensation law of Canada or a province in respect of an injury, a disability
or death, paragraph 56(1)(v) of the [ITA] does not make any
distinction in terms of the nature of the elements – be it loss of earnings or
non-economic losses – included in computing this compensation. Therefore, the
total amount must be included in the calculation of a taxpayer’s income.
[12]
The payment received in this case therefore is
compensation and was made in respect of a compensable injury or disability. The
payment is unlike those mentioned in CRA’s T5007 Guide – Return of Benefits,
as those payments are not compensatory, but, rather are more akin to repayment
of expenses incurred or, in the case of interest, compensation flowing from
delay in payment as opposed to flowing from an injury or disability.
[13]
Thus, despite Mr. Butler’s able arguments, I
believe this appeal must be dismissed as the Tax Court was correct in holding
that the lump sum payment received by Mr. Butler constituted income. Given Mr.
Butler’s personal circumstances, I would make no award of costs in respect of
this appeal. I would also note that the present Judgment deals only with the
interpretation of the ITA and should in no way be read as diminishing
the nature and severity of the injuries suffered by Mr. Butler.
"Mary J.L. Gleason"
“I agree
Johanne Gauthier J.A."
“I agree
Donald J. Rennie J.A."