Glen Witherspoon v. Her Majesty the Queen, [1991] 2 CTC 228, 91 DTC 5550

Jerome, J. [Orally]:—Thank you, Mr. Witherspoon. I wish I could be more favourable in the judgment. I am afraid I have to dismiss your appeal. Here are my reasons.

This unfortunate dismissal occurred in 1979. First of all, it’s a very disruptive thing, and I am sure it's a while before anyone in that situation recovers their composure or their equilibrium when it happens to you unexpectedly.

You are going along day-to-day after many, many years with the same employer, playing a very important role in their financial affairs, and suddenly you find yourself gone, and it's a shock.

So I am sure there was quite a long period of recovery, and perhaps it never goes away.

It also unfortunately brought about a series of complex tax decisions or tax consequences, and it seems to me that three things occurred that are relevant to the case today.

The first is the continuance of Mr. Witherspoon's salary. The second is the acquisition by the company of a pension scheme or pension plan or an alteration to the existing plan, to provide a pension income. And the third thing is the payment in 1980 of a cash sum of 23,000 some odd dollars.

Each of these, as it turns out, has a different tax consequence, and I am looking at each one of them separately.

The first is the taxpayer's expressed concerns about the treatment by the Minister and by the Minister's officials. It can be heavyhanded. We hear complaints of the Minister's people being inflexible, of officials being harsh and rude, especially when exercising search and seizure authority.

So I am very wary about it. As a matter of fact, several decisions in our Court have altered the law by depriving the Minister of powers to search and seize in circumstances where the Charter of Rights and Freedoms has found them to be objectionable to people's right of privacy.

So this Court is frequently confronted with grievances against the Minister of Revenue. Therefore, I look at each one of these to see whether there was any kind of unwarranted behaviour on behalf of the Minister or the Minister's officials with respect to the $23,000 damage payment.

The dispute was whether that sum was taxable since it was a one-time lump sum damage award, or payment of compensation. It wasn't an award for damages from a tribunal, but it was to compensate for wrongful dismissal.

At the time the law was in a state of change, but the transition provisions during the years in question clearly applied. They are cited and were referred to many times in argument.

That aspect of this case duplicates the Pollock situation [Pollock (B.N.) v. The Queen, [1984] C.T.C. 353; 84 D.T.C. 6370], and I note that the taxpayer and the Minister agreed to await the judgment in the Pollock case before deciding the fate of that $23,000.

As a result of the Pollock judgment, I take it the consent judgement with this taxpayer was executed. I don't see anything extraordinary about that. I think the decision to await the Pollock judgment was quite orderly, quite sensible, and I think the consent judgment was quite appropriate.

The Minister was wrong in attempting to tax that $23,000 as income. The Pollock judgment said so, and an executed consent was translated into judgment in the Tax Court to the same effect. That was a victory for Mr. Witherspoon.

The other two aspects refer to the amount received from Monarch Life. One of the aspects of the settlement to which I referred was the amendment to the company pension plan which provided a pension to Mr. Witherspoon. That was done by way or amendment to the existing pension plan, and the taxpayer indicated today it was paid for entirely by the employer.

That doesn't make any difference. It was pension income. Pension income is clearly caught by the statute. It was paid in 1980, and is therefore income in 1980.

I note, however, that I don't have 1980's affairs before me. The only appeal that's really properly before me is the 1979 dispute.

The final aspect of the 1979 dispute that is before me, then, is the gross-up by the Minister of the income, the salary, which continued throughout 1979 despite the fact that the dismissal had taken place.

I don't see any alternative to that result. Mr. Jenkinson went into the witness stand. He explained his calculation. Section 248 applies to the continuation of the salary to this taxpayer after his dismissal had occurred. I don't think there's any other conclusion that can be reached.

The calculation set out in subsection 248(1)(a) or (b)—(a) does not apply, that’s quite clear; (b) does apply. It is one half of the salary which Mr. Jenkinson took to be a certain sum. Thirty-six eight, reduced it to eighteen four. He found that nothing was deductible in the subsequent paragraphs.

I don't see anything in his calculation that was in error. I don't see any alternative interpretation. To repeat, there are three elements of this dispute between the taxpayer and his employer. The first is the continuation of the salary that is clearly caught as a termination payment by subsection 248 (1), and the calculations done seem to me to be the only ones possible.

The second is the lump sum payment which was received in the following year. That decision awaited the Pollock appeal, and in conformity with the Pollock judgment a consent judgment was executed in favour of the taxpayer.

The third is the $3,154.14, the money received from Monarch, is pension income. All of these determinations, one in favour of the taxpayer, two in the result being contrary to the taxpayer's position, are all quite consistent with the statute.

I also note the plaintiff's complaint about delay. Both parties agreed to await the outcome of that case. That accounts for some of the time.

It was a sensible arrangement. I would have encouraged it if it had been before me in similar circumstances, so that the elapsed time between ‘79 and ‘85, bearing in mind the intervention of the Pollock case, is not extraordinary.

The taxpayer always has the obligation of proving that the Minister's assumptions are wrong. In this case that simply does not prove to be the case.

I really don't see that the Minister could have come to any other assessment in the years in question, and in particular in the 1979 taxation year. So accordingly, the action by way of appeal is dismissed.

Is there any submission to be made on the question of costs? It would be extraordinary if there were costs against the taxpayer.

M. Singer: I have requested costs, but I leave that in your discretion.

His Lordship: Thank you. I don't propose to award any costs, then, against the taxpayer.

So your action here, Mr. Witherspoon, is dismissed. There will be no order against you for costs of the action, and I will make an endorsement today that for the reasons given orally from the Bench this appeal is dismissed with no order as to cost.

Once I have reviewed the transcript, if either party requests that written reasons be filed, I will file brief written reasons consistent with those that the reporter has transcribed.

Appeal dismissed.