Garon
J.T.C.C.:—
This
is
an
appeal
from
an
income
tax
reassessment
dated
November
10,
1993,
made
by
the
Minister
of
National
Revenue
(the
"Minister")
in
respect
to
the
1991
taxation
year.
By
his
reassessment,
the
Minister
included
in
the
appellant’s
income
the
amount
of
$36,356
received
by
the
appellant
as
a
result
of
a
court
action
in
relation
to
a
breach
of
contract
and
in
tort.
In
the
same
reassessment,
the
Minister
did
not
take
into
account
in
computing
the
appellant’s
income
deductions
claimed
by
the
appellant
in
respect
of
an
amount
of
$1,575.26
concerning
medical
expenses
and
a
further
amount
of
$2,098.87
in
respect
of
legal
fees.
In
the
course
of
argument,
counsel
for
the
respondent
informed
the
Court
that
the
respondent
was
no
longer
disputing
the
deductibility
of
the
amount
of
$1,575.26
and
$2,098.87
in
respect
of
medical
expenses
and
legal
fees
respectively.
He
expressly
admitted
that
these
two
amounts
were
deductible
in
computing
the
appellant’s
income
for
the
1991
taxation
year.
The
appellant’s
appeal
must
therefore
be
allowed
to
that
extent.
The
only
remaining
question
in
issue
is
whether
the
amount
of
$36,356
was
properly
included
by
the
Minister
in
the
appellant’s
income
for
the
1991
taxation
year.
The
appellant’s
position
is
that
this
amount
should
not
have
been
included
in
her
income
for
the
1991
taxation
year
since
the
cheque
in
the
amount
of
$27,456.14
($36,356
minus
deductions
made
by
the
association)
was
cashed
only
on
January
2,
1992,
by
virtue
of
an
arrangement
made
with
the
solicitors
from
the
association.
There
was
no
dispute
about
the
facts.
The
appellant
instituted
proceedings
in
1988
in
what
was
then
known
as
the
Supreme
Court
of
Ontario,
against
Canadian
Importers
Association
Inc.
and
two
senior
officers
of
this
association,
inter
alia,
for
breach
of
contract
of
employment
and
in
tort.
In
these
reasons,
the
defendants
to
this
action
will
be
referred
to
collectively
as
"the
association”.
This
action
was
settled
out
of
court
upon
the
association
agreeing
to
pay
to
the
appellant
a
sum
of
$36,356.
Deductions
were
made
at
source
by
the
association
and
two
cheques
were
issued
in
the
amounts
of
$27,456.14
and
$650
were
issued
by
the
latter
association.
In
furtherance
of
this
settlement,
the
cheque
in
the
amount
of
$27,456.14,
dated
December
4,
1991,
was
issued
and
the
subject
cheque
came
into
the
appellant’s
possession
on
or
about
December
14,
1991,
1.e.,
sometime
in
December
1991.
For
the
purpose
of
this
appeal,
it
becomes
important
to
scrutinize
the
pieces
of
correspondence
exchanged
between
the
solicitors
of
both
parties
in
order
to
ascertain
the
precise
nature
of
the
arrangements
respecting
the
payment
of
the
sum
of
$36,356.
In
this
connection,
reference
must
be
made
to
the
following
pieces
of
correspondence.
First,
there
is
a
letter
dated
December
5,
1991,
from
the
solicitors
for
the
association
to
Mr.
Frank
Fred
Hubscher,
the
appellant’s
solicitor
and
the
appellant’s
spouse.
This
letter
reads
in
part
as
follows:
Dear
Mr.
Hubscher:
Re:
Canadian
importers
Association
ats
Hubscher
In
respect
of
the
completion
of
the
settlement
in
this
matter,
I
am
enclosing
for
you
the
following:
1.
Calculation
of
amount
owing
to
Krystyna
Hubscher;
2.
Photocopy
of
two
cheques,
one
in
the
amount
of
$27,456.14
payable
to
Krystyna
Hubscher,
and
the
second
in
the
amount
of
$650
payable
to
you
with
respect
to
costs;
3.
Letter
to
whom
it
may
concern
with
respect
to
the
performance
of
Krystyna
Hubscher
at
the
association;
4.
Release
in
quadruplicate
(I
want
three
executed
copies
back);
5.
Consent
to
dismissal
in
duplicate
(I
want
one
consent
as
executed
back).
In
the
second
place,
a
letter
of
December
9,
1991,
from
Frank
Fred
Hubscher
was
forwarded
to
the
solicitors
for
the
association.
The
body
of
this
letter
is
couched
in
the
following
terms:
Dear
Mr.
Griffin:
Re:
Hubscher
(Krystyna)
-and-
Canadian
Importers
Ass’n
Your
letter
dated
December
5,
1991
with
enclosures
are
acknowledged
and
the
contents
thereof
duly
noted.
For
tax
reasons,
the
payout
will
take
place
on
January
1,
1992.
Accordingly,
enclosed
please
find
the
release
in
triplicate
dated
January
1,
1992;
and
same
are
being
placed
with
you
in
trust.
The
cheque
in
the
amount
of
$27,456.14
payable
to
Krystyna
Hubscher
shall
be
deposited
for
payment
on
January
1,
1992;
and
the
same
shall
also
apply
to
the
cheque
in
the
sum
of
$650,
payable
to
the
undersigned.
Kindly
forward
said
cheques
by
courier
or
for
the
undersigned
to
arrange
for
pickup
at
earliest
date;
the
whole
along
with
the
original
reference-letter.
Enclosed
please
find
duly
completed
consent
to
dismissal,
and
same
is
being
placed
in
trust
with
you
until
such
time
as
payment
is
effected
on
presentation
by
the
Canadian
Importers
Association
on
January
1,
1992.
Thirdly,
a
letter
of
December
12,
1991,
from
the
solicitors
for
the
association
was
sent
to
Mr.
Frank
Fred
Hubscher,
which
in
part
reads
thus:
Dear
Mr.
Hubscher:
Re;
Canadian
Importers
Association
ats
Hubscher
Further
to
yours
of
December
9,
we
enclose
the
following:
1.
Original
cheque
payable
to
you
in
the
sum
of
$650;
2.
Original
cheque
payable
to
Krystyna
Hubscher
in
the
sum
of
$27,456.14;
3.
Original
letter
of
reference.
We
shall
take
out
a
dismissal
order
and
provide
you
with
a
copy
of
same
as
issued
and
entered
as
soon
as
it
is
received.
Counsel
for
the
appellant
relied,
inter
alia,
on
the
decision
of
the
Federal
Court
of
Appeal
in
the
case
of
Piché
v.
Canada,
[1993]
2
C.T.C.
166,
93
D.T.C.
5295
(F.C.A.),
and
referred
in
particular
to
an
excerpt
from
a
decision
of
Mr.
Justice
Thurlow
of
the
Exchequer
Court
of
Canada,
as
he
then
was,
in
the
case
of
Moody
v.
M.N.R.,
[1957]
C.T.C.
110,
57
D.T.C.
1050;
this
excerpt
reads
thus
at
page
168
(D.T.C.
5297):
In
the
absence
of
some
special
circumstance
indicating
a
contrary
conclusion
such
as,
for
example,
postdating
or
an
arrangement
that
the
cheque
is
not
to
be
used
for
a
specified
time,
a
payment
made
by
cheque
although
conditional
in
some
respects,
is
nevertheless
presumably
made
when
the
cheque
is
delivered
and,
in
the
absence
of
such
special
circumstance,
there
is,
in
my
opinion,
no
ground
for
treating
such
a
payment
other
than
as
payment
of
cash
made
at
the
time
the
cheque
was
received
by
the
payee.
Counsel
for
the
appellant
submitted
that
in
the
present
case
there
were
special
circumstances
and
in
particular
a
special
arrangement
that
the
cheque
was
not
to
be
used
for
a
specific
time,
that
is,
not
before
January
2,
1992.
It
is
argued
that
the
letter
dated
December
9,
1991,
referred
to
in
the
letter
from
the
association
dated
December
12,
1991,
evidenced
an
agreement
to
the
effect
that
the
cheque
was
not
to
be
used
until
1992.
This
submission
was
challenged
by
counsel
for
the
respondent
who,
relying
also
on
the
decision
of
the
Federal
Court
of
Appeal
in
the
case
of
Piché
v.
Canada,
[1993]
2
C.T.C.
166,
93
D.T.C.
5295,
Moody
v.
M.N.R.,
[1957]
C.T.C.
110,
57
D.T.C.
1050
(Ex.
Ct.)
and
on
Kowalczyk
v.
M.N.R.,
[1986]
2
C.T.C.
2092,
86
D.T.C.
1552
(T.C.C.)
argued
that
the
subject
cheque
which
was
received
on
or
about
December
14,
1991,
was
not
postdated.
Furthermore,
there
were
no
special
arrangements
which
would
justify
postponing
receipt
of
the
cheque.
Respondent
counsel’s
position
was
that
the
arrangement
in
the
case
at
bar
was
purely
unilateral.
The
cheque,
in
his
view,
could
have
been
cashed
at
any
time
by
the
appellant
after
its
receipt.
The
association
did
not
care
when
the
payout
took
place.
In
my
view,
the
question
in
issue
could
be
narrowed
down
to
the
inference
that
should
be
made
by
the
Court
(a)
from
the
statement
made
in
the
letter
of
December
9,
1991,
from
the
appellant’s
solicitor
to
the
solicitors
for
the
association,
which
passage
I
reproduce
again
for
sake
of
convenience:
For
tax
reasons,
the
payout
will
take
place
on
January
1,
1992.
Accordingly,
enclosed
please
find
the
release
in
triplicate
dated
January
1,
1992;
and
same
are
being
placed
with
you
in
trust.
and
(b)
the
reply,
dated
December
12,
1991,
from
the
solicitors
for
the
association
to
Mr.
Frank
Fred
Hubscher.
In
the
latter
letter,
the
original
cheque
in
the
amount
of
$27,456.14
is
enclosed
and
there
are
no
comments
made
by
the
solicitors
for
the
association
on
the
aforementioned
passage
of
the
appellant
solicitor’s
letter
of
December
9,
1991
respecting
the
timing
of
the
payout.
From
the
correspondence,
I
simply
infer
that
the
association
had
no
objection
to
the
appellant
cashing
the
cheque
on
January
2,
1992.
In
my
view,
it
cannot
be
inferred
that
the
cheque
in
question
would
not
have
been
honoured
if
presented
for
payment
before
January
2,
1992.
It
would
require
some
clear
evidence
showing
that
the
association’s
understanding
of
the
arrangements
was
to
the
effect
that
funds
in
payment
of
the
cheque
will
not
be
available
before
January
1992.
This
would
be
the
situation
if
the
association’s
cheque
would
have
been
postdated
to
January
2,
1992,
or
alternatively,
if
any
restrictions
would
have
appeared
on
the
cheque
or
in
the
accompanying
document
indicating,
for
example,
that
the
cheque
is
not
to
be
cashed
before
a
certain
date.
In
my
opinion,
if
the
appellant
herein
had
had
a
change
of
heart
and
would
have
cashed
the
cheque
before
the
expiration
of
the
1991
taxation
year,
she
would
have
been
entitled
to
do
so.
In
other
words,
there
is
no
evidence
that
an
amendment
to
the
existing
settlement
arrangements
had
been
agreed
upon
between
the
appellant
and
the
association
whereby
the
appellant
could
not,
under
any
circumstances,
avail
herself
of
the
right
to
cash
the
cheque
before
January
2,
1992.
It
was
incumbent
upon
the
appellant
to
adduce
evidence
to
this
effect,
and
in
my
view,
this
has
not
been
done.
Another
way
of
looking
at
the
matter
is
that
the
appellant
made
a
unilateral
decision
which
she
was
entitled
to
do
not
to
cash
the
cheque
before
January
2,
1992,
and
informed
the
association
of
her
decision.
The
association
did
not
react
positively
or
negatively
to
the
appellant’s
decision
that
she
will
cash
the
cheque
only
on
January
2,
1992.
The
silence
on
the
part
of
the
association,
in
the
above
circumstances,
could
not
amount
to
or
constitute
a
consent
on
the
part
of
the
association
to
a
modification
of
the
agreement
evidenced
by
the
exchange
of
correspondence
between
the
solicitors
for
both
parties.
The
possible
application
of
section
76
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
has
not
been
raised
in
the
pleadings
or
in
the
course
of
this
hearing.
My
preliminary
view
is
that
this
section
may
apply
to
the
subject
cheque
in
the
present
matter.
If
I
am
right
in
my
conclusion
that
a
’’cheque"
comes
within
the
purview
of
the
words
used
in
subsection
76(1)
"a
security
or
other
right
or
a
certificate
of
indebtedness
or
other
evidence
of
indebtedness"
it
would
also
follow
that
the
amount
of
$36,356
should
be
included
in
the
appellant’s
income
for
the
1991
taxation
year.
In
fact,
B.J.
Arnold
in
Canadian
Tax
Paper
No.
71
"Timing
and
Income
Taxation:
The
Principles
of
Income
Measurement
for
Tax
Purposes"
states
that
section
76
applies
to
a
broad
range
of
debt
instruments
including
cheques.
He
refers
to
No.
480
v.
M.N.R.
(1958),
18
Tax
A.B.C.
277,
58
D.T.C.
35,
where
Chairman
Fabio
Monet
of
the
Income
Tax
Appeal
Board
held
that
section
76,
formerly
section
24,
applied
to
a
cheque
received
by
a
plumber
on
behalf
of
his
employer
in
respect
of
remuneration.
Arnold
also
states
that
section
76
does
not
apply
to
instruments
accepted
merely
as
evidence
of
a
debt
or
as
security
for
payment.
The
cheque
must
be
given
as
payment
in
satisfaction
of
a
debt.
For
these
reasons,
the
appeal
is
allowed
only
to
the
extent
that
it
relates
to
the
deduction
of
the
amounts
of
$1,575.26
and
$2,019.87.
In
other
respects,
the
appeal
is
dismissed.
Appeal
allowed
in
part.