Donald Norman v. Minister of National Revenue, [1987] 2 CTC 2261, 87 DTC 556

Taylor, T.CJ.:—This an appeal heard in Vancouver, British Columbia, on July 16, 1987, against an income tax assessment for the year 1984, in which the Minister of National Revenue had taxed an amount of $5,000 received by Mr. Norman from his employer. The assessment and the Minister's confirmation of the assessment relied upon subsection 6(3) of the Act, but the pleadings for the trial did include references to other sections, as will be noted later. In his notice of objection (resulting in the confirmation by the Minister, noted above) Mr. Norman had characterized his complaint as "Amount was paid as damages when taxpayer settled out of Court with Burnaby School Board”. The taxpayer's notice of appeal read:

Mr. Norman has been denied his claim that monies received from his current employer, for other than services, are non-taxable, per section 6(3). Mr. Norman received $5,000.00 from his employer (Burnaby School Board), as a settlement representing legal costs if a grievance proceeded to court. Mr. Norman did not agree to do, or not to do anything, which is the requirement of section 6(3) to make the amount received taxable income.

Mr. Norman asks that he be allowed his claim that the $5,000.00 be recognized as non-taxable per section 6(3)(e).

The Minister contended:

at all material times the Appellant was an employee employed by School District No. 41 in Burnaby, in the Province of British Columbia;

in his 1984 taxation year the Appellant received from his employer the sum of $5,000 for which it provided to the Appellant a Revenue Canada T4A form indicating the said amount as ''other income” and which T4A form the Appellant submitted in his 1984 Tax Return.

In assessing, the respondent relied inter alia, upon sections 5, 6(1) and 6(3) of the Income Tax Act, c. 63, S.C. 1970-71-72, as amended. The Minister, in the same reply to notice of appeal, set out three alternatives under which the amount should be assessed to tax:

. . . a benefit. . . received . . . in the course of, or by virtue of his employment. . . in accordance with the provisions of Section 6(1)(a) of the Income Tax Act.

. . . as an allowance for personal expenses . . . in accordance with the provisions of Section 6(1)(b) of the Income Tax Act.

and . . . remuneration from an office or employment . . . in accordance with the provisions of Section 5 and Section 6(3) of the Income Tax Act.

During his testimony and cross-examination, Mr. Norman introduced certain exhibits:

A-1 -MEMORANDUM OF SETTLEMENT

between

BOARD OF SCHOOL TRUSTEES No. 41 (Burnaby)

and

C.U.P.E. LOCAL 379 and DONALD NORMAN

The above-mentioned Parties agree that the following comprises complete settlement regarding a grievance on behalf of Mr. Norman relating to the selection of the Foreman-Grounds position. The settlement is as follows:

1. The settlement is without prejudice and aimed at fostering harmonious labour relations and a good working environment in the interests of all concerned;

2. The settlement shall not be indicative of any wrongdoing by any Party;

3. The monetary payment referred to below is made recognizing the uniqueness of the dispute and the fact that the ongoing contractural [sic] issue has been resolved in collective bargaining. It shall not be considered precedence for future grievance resolutions;

4. The amount of the settlement shall not be disclosed unless all Parties to this Agreement mutually agree;

5. Mr. Don Norman will be enrolled in the next appropriate Supervisory Skills program subject only to operational requirements;

6. Mr. Don Norman may request and would then receive reimbursement for costs associated with the Pesticide Applicator's Certificate;

7. The Burnaby School Board shall pay Mr. Norman the equivalent of $5,000 (an amount approximately the same as legal fees associated with proceeding to arbitration) in a manner directed by Mr. Norman within 30 days of settlement, subject only to the method of payment being approved by the Board's Secretary-Treasurer and Comptroller.

SIGNED this 28th day of August, 1984.

For the School Board		For C.U.P.E. Local 379
(signed)	)	(signed)
(signed)	)	(signed)
	(signed)
	Mr. Donald Norman

A-2 CANADIAN UNION OF PUBLIC EMPLOYEES

GRIEVANCE FORM

	Local No.: 379
Employer	BURNABY SCHOOL BOARD
Employee	D. NORMAN
Department	Maintenance

I the undersigned claim that the collective agreement, Clauses XX 4.(b), II] 1(c) & III d.(b), and III 2. eii & IV, and XII 1. have been violated in the case of the filling of Bulletin 1982-103.

Therefore I request that the senior applicant be awarded the position retroactive to October 25, 1982.

Signature of Employees or Union Office

(signed) D. Norman

DATE: October 29, 1982.

R-1 -

AGREEMENT

BETWEEN

THE BOARD OF SCHOOL TRUSTEES DISTRICT No. 41 (BURNABY)

and

THE CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 379 (The Burnaby School Board Employees)

EFFECTIVE JANUARY 1,1983 TO

DECEMBER 31, 1984

In his testimony, Mr. Norman made the following points:

(1) The position bulletined was at a supervisory level, and had been assigned to a man junior to him.

(2) The “salary” difference would have been about an additional $7,000 per year, in the "supervisory" position.

(3) He believed he had "won" the grievance, since the settlement was made.

(4) As a result of the settlement (Exhibit A-1) he had withdrawn his grievance.

The agent for the appellant noted that in his view, it could not be said that the “for services" phrase from paragraph 6(3)(e) [sic] had been fulfilled, and therefore the amount at issue did not fall under that paragraph for income as such. In addition the amount had some relevance to the "damages" Mr. Norman felt he had suffered — perhaps loss of income, in addition to reduction of future prospects for employment and advancement. The agent made little reference to any prospect that the amount could be either a “benefit”, or "allowance for personal expenses" as noted by the Minister in the reply to notice of appeal.

Counsel for the Minister made no reference to the question of “allowance for personal expenses", and that point will not be examined by the Court. Counsel however, did state that paragraph 6(3)(d) of the Act seemed ideally suited to this situation before the Court, and that the only source to which the amount could be attributed would be "under the contract of employment"—the Collective Agreement. That Collective Agreement provided this appellant with the right to launch a grievance. While there were factual differences to be taken into account, in counsel's view, the case of Peter Moss v. M.N.R., [1963] C.T.C. 535; 63 D.T.C. 1359* [1] provided a basis for this Court to find for the respondent in this matter. Counsel also noted that Mr. Norman had not been placed in the supervisory position (Bulletin 1982-103) which is what he had demanded.

Conclusion

I do not agree that the $5,000 at issue — whatever its origin and characteristics — was received "for services" (paragraph 6(3)(d)) of the Act. That paragraph does not provide the Minister with a proper basis for taxation.

The amount at issue should be regarded as a “benefit”, since it would be covered, as I see it, by the Supreme Court judgment in The Queen v. Elizabeth Joan Savage, [1983] C.T.C. 393; 83 D.T.C. 5409. It is also noted that the phrase “ . . . in respect of . . .” was dealt with in Gene A. Nowegijick v. The Queen et al., [1983] C.T.C. 20; 83 D.T.C. 5041, by Mr. Justice Dickson at page 25 (D.T.C. 5045) as follows:

. . . The phrase "in respect of” is probably the widest of any expression intended to convey some connection between two related subject matters.

It would therefore appear to me that based upon Savage (supra) and Nowegijick (supra) the amount at issue in this appeal — $5,000 — should be considered as a “benefit”, ” . . . in respect of. . . ", the employment of Mr. Norman. I do not see that the facts cited and the allowing of the appeal in Robert Peel v. M.N.R., [1987] 1 C.T.C. 2373; 87 D.T.C. 268 can serve to alter that result for Mr. Norman. In Peel (supra), the clear connection between the award in question there ($90,000) and the employment of Mr. Peel was not established to the satisfaction of the Court, which is different than the instant case.

The appeal is dismissed.

Appeal dismissed.