James S. Deitch v. Minister of National Revenue, [1989] 1 CTC 2350

Sarchuk, T.C.J.:— Mr. Deitch appeals with respect to an assessment of tax for his 1984 taxation year. During that year he was employed as a duty counsel by the Law Society of Upper Canada. In the course of this employment he was required to carry on the duties of duty counsel representing accused persons at the criminal law courts. This employment was carried out completely and strictly under the supervision and control of the Legal Aid Society which, if I understand the evidence correctly, is a division or arm of the Law Society.

In the course of his employment he was paid a salary and in addition to the salary certain fees for professional liability insurance in the sum of $825, which are required to enable him to carry on the practice of law, were paid on his behalf to the Law Society of Upper Canada. This amount was prorated and added to his employment cheque on a monthly basis. He was not paid these amounts, but the amounts were shown as a benefit to him.

In the taxation year in issue Mr. Deitch, in filing his income tax return, deducted the sum of $825 on the basis that the amount was paid as a mandatory term of his employment. It was his evidence that he was prohibited from carrying on practice on his own behalf. Notwithstanding the payment of these amounts he received no benefit from the payment of these fees and collaterally he received no benefit from the fact that he was during the period of his employment covered by professional liability insurance.

Two other items were claimed consisting of fees to other organizations, but the taxpayer has abandoned his position on those two issues.

It is agreed by the parties that unless the insurance fee was paid Mr. Deitch would not have been entitled to practice law within the Province of Ontario in 1984 and obviously would not have been able to accept employment with the Legal Aid Society.

The Minister's position is that the payment of the fee by the employer, the Law Society of Upper Canada, was a benefit received by the appellant in that taxation year in the course of or by virtue of his employment by the Law Society of Upper Canada.

The issue is whether the respondent was correct in treating the payment of the fee by the employer as such a benefit. Paragraph 6(1 )(a) is the relevant provision. This section provides:

6.(1) There shall be included in computing the income of a taxation year as income from . . . employment such of the following amounts as are applicable:

(a) the value . . . benefits of any kind whatever received or enjoyed by him in

the year in respect of, in the course of, or by virtue of. .. . employment. . .

In my view, this section cannot be restrictively construed.

In The Queen v. Savage, [1983] C.T.C. 393; 83 D.T.C. 5409, Dickson, J., as he then was, reviewed many of the authorities which considered and discussed the provisions of this section. At page 399 (D.T.C. 5414), in the course of discussing an earlier decision, he stated:

With great respect, however, I do not agree with the latter part of the passage last quoted and in particular the statement that, to be received in the capacity of employee, the payment must partake of the character of remuneration for services. Such was the conclusion in the English cases but based on much narrower language. Our Act contains the stipulation, not found in the English statutes referred to, "benefits of any kind whatever . . . in respect of, in the course of, or by virtue of an office” is clearly quite broad . . .

He went on to say:

Further, our Act speaks of a benefit “in respect of” an office or employment. In Nowegijick v. The Queen, [1983] C.T.C. 20; 83 D.T.C. 5041 this Court said, at 25 [5045], that:

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.

Dickson, J. went on to state:

I agree with what was said by Evans, J.A. in R. v. Poynton, [1972] 3 O.R. 727, at p. 738 . . . speaking of benefits received or enjoyed in respect of, in the course of, or by virtue of an office or employment:

"I do not believe the language to be restricted to benefits that are related to the office or employment in the sense that they represent a form of remuneration for services rendered. If it is a material acquisition which confers an economic benefit on the taxpayer and does not constitute an exemption, e.g., loan or gift, then it is within the all-embracing definition of s. 3.”

There is no question that if a benefit was conferred on the appellant it arose in respect of, in the course of, or by virtue of his employment with the Law Society of Upper Canada.

On the evidence before me, I have also concluded that there was a benefit conferred. Firstly, the payment of the fee by the employer was clearly an economic advantage of the appellant since the appellant would have been required to pay that amount himself, failing which he would not have been employable as a lawyer. Secondly, the provision of professional liability insurance by the employer protected the appellant from any personal liability in respect of any acts of professional negligence. Frankly, that is a benefit which is of substantial economic benefit to the appellant. Thirdly, although more remote, I agree with counsel for the respondent that in certain circumstances the master or employer might be entitled to recover from his servant the amount of damages which it had been required to pay as a result of his negligence. The appellant, by virtue of this insurance is now protected, and that too is a benefit.

I am satisfied that these are benefits which clearly fall within the ambit of the relevant section. It is noteworthy that the word “benefit” in paragraph 6(1)(a) does not stand alone but is qualified by the words "of any kind whatever". I am satisfied that in interpreting this section in the Savage case considered the Supreme Court of Canada considered the theme, the intent, and the policy object of the enactment. That policy object is, to borrow the words of Rouleau, J. in McNeill v. The Queen, [1986] 2 C.T.C. 352; 86 D.T.C. 6477, at page 363 (D.T.C. 6485):

I think it is clear that the purpose of paragraph 6(1)(a) is to include in the taxable income of a taxpayer those economic benefits arising from his employment which render the taxpayer's salary of greater value to him.

I agree with those comments completely.

Mr. Justice Rouleau went on to list in the next paragraph a number of items that might be considered benefits including pensions, death benefits, expense accounts and all sorts of items of immediate advantage to a recipient without putting any limit on its scope. The section in issue appears to have been intended to sweep into it almost everything except the type of receipt which might be considered a gift or a windfall or was a receipt that accrues to the individual personally rather than as a payment arising out of the course of his employment.

As I have stated, there was clearly an economic advantage to the appellant arising out of the payment of the professional liability dues by his employer. The fact that they were required to be paid offers no relief to the appellant, and I note that my colleague Judge Christie had occasion to comment on that situation in Cutmore v. M.N.R., [1986] 1 C.T.C. 2230; 86 D.T.C. 1146 at page 2235 (D.T.C. 1150):

In my view the payments in issue in this appeal are within the applicable limits of paragraph 6(1)(a) described by Chief Justice Dickson. I do not regard the motivation behind the conferring of the benefits or the fact that the acceptance can be considered to have been a requirement of the appellant's employment to render paragraph 6(1)(a) inoperative in respect of them.

On all of the evidence before me, I find that the respondent was correct in assessing as he did and the appeal must be dismissed.

Appeal dismissed.