Esther Wertheimer v. Minister of National Revenue, [1984] CTC 2852, 85 DTC 128

Cardin, TCJ:—The appeal of Esther Wertheimer is from assessments of income tax by which the Minister of National Revenue added to her 1977 and 1978 income amounts of $3,553.85 and $5,153.96 respectively as unreported income. The Minister, under subsection 163(2) of the Income Tax Act, RSC 1952, c 148, further assessed federal penalties of $24.96 and $64.92 for each of the years under appeal.

The amounts in issue arose from the Minister’s net worth assessment for the period 1976 to 1979 inclusive (see attachments to reply to notice of appeal). The assessment with regard to the 1976 taxation year, however, was settled at the objection stage and no objection with respect to the 1979 taxation year was made.

The taxation years in issue, therefore, are 1977 and 1978. Further, counsel for the respondent advised the Court that the Minister was abandoning his imposition of penalties for the 1977 and 1978 taxation years.

Counsel agreed that the amount at issue is to be considered as being $8,517 received by the appellant in the 1977 taxation year. There is also agreement that the sole issue is a purely legal one and is whether the amount of $8,517 received by the appellant is taxable income from employment or is liquidated damages for breach of an employment contract and, as such, not taxable.

The basic facts are set out in the appellant’s notice of appeal which read as follows:

A Statement of Facts

1. The Appellant was, at all relevant times, a resident of the City of Montreal in the Province of Quebec.

2. Based upon a net worth assessment prepared by officers of the Respondent, and capital reconciliations made pursuant thereto, the Respondent calculated that the Appellant had not declared income of $3,553.85 in the 1977 taxation year, and that the Appellant had not declared income of $5,153.96 in the 1978 taxation year.

3. In 1974, the Appellant was employed by Loyola College in the City of Montreal as an instructor. During the said year, the Appellant was dismissed from her position without just cause.

4. Subsequently, the Appellant took action against her former employer for breach of employment contract, with a view to receiving liquidated damages as a result of said breach.

5. Pursuant to the action instituted by the Appellant against Loyola College, the Superior Court of Quebec found Loyola College in breach of its employment contract with the Appellant, and consequently awarded to the Appellant damages in the amount of $8,517.00.

6. The Appellant duly filed a Notice of Objection for the taxation years in question and subsequently by notification of confirmation by the Respondent dated December 3, 1981 the Appellant was informed that the damage award of $8,517.00 was treated as remuneration from office or employment in accordance with the provisions of subsections 6(3) and 56(l)(a) of the Income Tax of Canada (hereinafter referred to as the “Act”): and that penalties had been properly levied in the taxation years in question in accordance with the provision of subsection 163(2) of the Act.

The respondent, in his reply, relied on the following facts:

A Statement of Facts

1. He admits paragraphs 1, 2 and 6, except for the words “damage award” on line 4, of the Appellant’s Notice of Appeal;

2. He denies as written paragraphs 3, 4 and 5 of the Notice of Appeal, the alleged contract and judgment between Appellant and Loyola College will speak for themselves;

3. He denies paragraphs 7, 8, 9, 10 and 11 of the Appellant’s Notice of Appeal;

4. In reassessing Appellant for her 1977 and 1978 taxation years, the Minister of National Revenue relied, inter alia, upon the following facts:

(a) During the taxation years in issue, the Appellant was carrying on the profession of artist;

(b) During said years, Appellant did not maintain an adequate accounting system;

(c) The Appellant failed to declare additional revenues of $3,553.85 in 1977 and $5,153.96 in 1978 as appears more fully from a statement of assets and liabilities (schedule A), capital reconciliation (schedule B), and capital cost allowance for automobile (schedule C) which schedules form an integral part of this subparagraph as if recited at length;

(d) Further, in preparing Appellant’s net worth, the Minister included in Appellant’s 1977 revenue a sum of $8,517.00 which she received during said year pursuant to a judgment rendered by the Honourable Justice Harry L Aronovitch of the Superior Court of the Province of Quebec dated February 17, 1977;

(e) The said judgment and declaration of satisfaction of judgment, Appellant’s contract with Loyola College and letter dated May 17, 1974 from the acting Chairman of the Department of Fine Arts of Loyola College are herewith annexed en liasse to form an integral part of this subparagraph as if recited at length;

(f) The said sum of $8,517.00 represented unpaid salary and/or remuneration due to Appellant from Loyola College by virtue of a contract;

(g) During the said taxation years, appellant, in failing to declare her true revenue and paying the appropriate tax, acted knowingly or under circumstances amounting to gross negligence in making or participating, assenting or acquiescing in an omission in her 1977 and 1978 tax returns.

The evidence pertinent to the only remaining issue in this appeal is to be found partly in the documents attached to the reply to notice of appeal which, for convenience, are reproduced herewith, and partly in the judgment of the Honourable Mr Justice Harry L Aronovitch of the Superior Court of Quebec, rendered in a damage suit instituted by the appellant against Loyola College (now Concordia University).

Summary of Facts

The appellant, described as a noted sculptress, had been employed by Loyola College as an instructor in the Department of Fine Arts for a period of four years. During the 1973-74 academic year, the appellant was employed by virtue of a contract with Loyola College dated October 4, 1973, which reads as follows:

COLLEGE LEVEL

LOYOLA College

		Montreal	Canada
I	WERTHEIMER (Mrs) INC		ESTHER
		Surname	Given Names
ADDRESS		4658 Coolbrook Avenue, Montreal 248, ec.		(PGM)

hereby agree: THIS CONTRACT COVERS BOTH DAY AND EVENING (EW)

DIVISION COURSES

(1) to my appointment as of August 1st, 1973/for the time necessary to fulfill her position of:

CO-ORDINATOR in the Department of FINE ARTS

Rank

Faculty of ARTS for a period of ONE YEAR

ending July 31st, 1974.

(2) to render service as a full-time member of academic staff in the courses assigned me by the Dean through the Departmental Chairman;

(3) to set, invigilate and correct in due time as established therefore both the regular and supplemental examinations in the courses assigned to me;

(4) to act on committees and to attend whatever meetings are deemed necessary for the academic administration of the institution;

(5) to the salary of $15,000.00 a year, payable in twelve (12) equal monthly instalments;

AND I UNDERSTAND THAT:

(a) my appointment is subject to the provisions of the Act of Incorporation of Loyola College, and to all statutes, by-laws and regulations from time to time passed by the Board of Trustees, and/or Senate of Loyola College;

(b) the above terms and conditions are exclusive and cannot be varied except by written agreement between the parties hereto;

(c) all previous negotiations and communications, whether oral or written are superseded by this contract.

DATED 4th OF Oct. 1973	(Sgd) E Wertheimer
	PROFESSOR
Accepted on behalf of Loyola College
(Sgd) Patrick G Malone
PRESIDENT

The term of the appellant’s employment was from August 1, 1973 to July 31, 1974. There is agreement that the appellant filed applications with Loyola College to teach sculpture as a full-time instructor for the academic year 1974-1975 on the llth and 26th of February 1974.

On May 17, 1974, the acting Chairman of the Department of Fine Arts advised the appellant by letter that she would not be hired after July 31, 1974. Effectively, she was advised that her contract for 1974 and 1975 with Loyola College had not been renewed:

LOYOLA

of Montreal

DEPARTMENT OF FINE ARTS

May 17, 1974

Registered Mail

Mrs E Wertheimer

4658 Coolbrook Ave,

Montreal H3X 2K6 Quebec

Dear Mrs Wertheimer:

I have been advised by President Malone that you wish to know immediately whether or not you will be rehired as Coordinator of Art in 1974-75. While I would have preferred to await the completion of the business of the hiring Committee so as to be able to notify all personnnel in the Art Section of the Fine Arts Department at one time as to their status, in deference to your wishes you are advised as follows: I have recommended to the Hiring Committee, and they have accepted the decision not to rehire you and to eliminate the post of Coordinator of Art for next year. I am also certain that it would be impracticable and not in the best interests of our evolving department in the new university for you to teach in our program.

You should recall on the two occasions during which we discussed your future at Loyola that I told you I was unwilling to agree on your continuing as Coordinator of Art. Certainly I have never suggested that when your one-year contract as Coordinator of Art lapsed I would recommend its renewal. I did not follow the procedures used for faculty in your case because you have a contract as Coordinator which is not a faculty position.

I trust that my letter has provided a clear and comprehensive response to your inquiry.

Yours truly,

(Sgd)

Gerry Gross

Acting Chairman,

Department of Fine Arts

GG/mw

CC: Very Rev P G Malone, SJ

Rev D R Breen

LOYOLA COLLEGE

7141 Sherbrooke St W

MONTREAL 262

QUEBEC

The appellant was of the opinion that her contract with Loyola College was as a faculty member, governed by Article 3.05 of the Loyola College Faculty Manual which provided that notices of non-renewal of faculty members’ contracts were to be given before the 15th day of December of the previous year, failing which the contract is deemed to be automatically renewed for a period of one year. The appellant instituted an action for damages with the Superior Court of Quebec on the ground that she had not received before December 15, 1973 notice that her contract would not be renewed. She claimed that her existing contract was therefore deemed to have been renewed as of that date and that she was under contract when she received notice on May 17, 1974 that the contract would not be renewed. She concluded that Loyola College had not honoured the commitment it made with respect to Article 3.05 of its Faculty Manual and that she had been wrongfully dismissed.

After hearing the appellant’s case, the Honourable Mr Justice Aronovitch of the Superior Court of Quebec described the nature of the appellant’s case by stating “it is an action in damages for non-renewal of a teaching Contract’’. (The judgment of the Honourable Mr Harry L Aronovitch is attached to these reasons.)

On page 4 of his reasons, the learned Justice states:

The principal point to be determined in this case is whether Plaintiff was illegally dismissed, more precisely, regarding Exhibit P-8, the letter of May 17, 1974, from Gerry Gross: Did he have the authority and power? Was the notice late? Was it contrary to the Manual? Was it contrary to practice? The answers to all these questions are in the affirmative.

Having come to the conclusion that the appellant was a member of the faculty and entitled to the notice required by virtue of Article 3.05 of the Loyola College Manual with respect to the notices of non-renewal of contracts, the Honourable Mr Justice Aronovitch in rendering his decision stated:

She did not abandon her rights to such notice by her letter of February 11, 1974, Exhibit D-2, and by the one of February 26, 1974, Exhibit D-3, regarding her application as a full-time instructor in sculpture. Indeed, these may be interpreted as an effort to mitigate the damages suffered by Plaintiff. As to such damages, the first part of the claim — $15,000 for the academic year 1974-75 cannot be awarded in full because the said sum of $15,000 covered both the administrative and the academic work done by Plaintiff. She is entitled to damages with respect to academic work only. So far as the record shows, that covered three full courses which have been evaluated at $3,000 each course. Plaintiff is therefore entitled to $9,000. As to the rest of Plaintiffs claim “$15,000 resulting from the circumstances of the non-renewal of her contract and its impact on her reputation in the artistic and academic communities”, keeping in mind that Plaintiff had the burden of proof, the Court finds that there has been no proof made of such damage.

Although the learned Justice did not grant any amount for damages to the appellant’s reputation in the artistic and academic communities because of insufficient evidence, he did state clearly that she was “entitled to damages with respect to academic work only’’, which he evaluated at $9,000.

There can be no doubt on the basis of the judgment of the Superior Court of Quebec that: 1) the amount of $8,517 received by the appellant in 1977 was for damages; and 2) this amount was for non-renewal of her contract with Loyola College for the 1974-1975 academic year for not having been given notice of the non-renewal of her contract before December 15, 1973 as required by Article 3.05 of the Manual — a commitment which Loyola College did not honour; 3) that the notice of her contract for the 1974-1975 academic year was too late and, as a result, the appellant was wrongfully and illegally dismissed.

Counsel for the respondent admitted that in not complying with the Manual and failing to give the appellant notice of non-renewal before December 15, 1973 and not having deemed that the appellant’s contract had been renewed as of that date, Loyola College had indeed made a mistake. However, if I understood counsel correctly, he seemed to argue that the existence of a mistake on the part of Loyola College could somehow change the nature of the award to something other than for damages. Indeed, he seemed to suggest that the intention of an employer with respect to his failure to give any notice of dismissal or his failure to give proper and sufficient notice to an employee is a determining factor in deciding whether amounts paid in relation to dismissals are damages for wrongful dismissal or are simply income from employment or payment in lieu thereof.

In my opinion, whether an employer made a mistake or whether he intended or not to wrongfully dismiss an employee by giving him no notice or insufficient notice of dismissal is irrelevant in deciding whether an award of an amount for damages is justified. Although there may be a variety of facts and circumstances surrounding the dismissal of an employee, it is, in my opinion, the sequential effect on the employee who has been dismissed without having received any notice or inadequate notice of dismissal on which the award of damages depends.

In most cases involving dismissals of employees, the difficulty usually lies in deciding whether or not in a particular set of circumstances the employee was illegally or wrongfully dismissed. In the case at bar, I accept the judgment of the Superior Court of Quebec and I consider that the amount of $8,517 received by the appellant in 1977 was clearly paid to the appellant by Loyola College as damages for wrongful dismissal.

Having come to that decision, I would normally conclude that the amount so received is not taxable. Until quite recently, however, jurisprudence on that very point was, in my opinion, somewhat confused. As stated earlier the only issue here is whether the amount received by the apellant in 1977 was taxable or not.

In argument, both counsel referred to several decisions dealing with amounts paid to employees on dismissal from their employment. The principal decision on point of course was that of the Federal Court — Appeal Division, in The Queen v Robert Atkins, ([1976] CTC 497; 76 DTC 6258), which confirmed the decision of the Trial Division of the Federal Court ([1975] CTC 377; 75 DTC 5263).

Atkins, a senior employee and officer of a corporation, was dismissed without notice. As a result of arrangements with this corporation, he in effect received an amount which included $18,000 as severance pay in satisfaction of all claims against the company. In assessing Atkins, the Minister of National Revenue treated the compensation as income from employment or, alternatively, as a retiring allowance. Atkins considered the whole amount as damages for breach of contract and, as such, contended that it was non-taxable.

In upholding the decision of the Trial Division, Chief Justice Jackett of the Appeal Division of the Federal Court of Canada as he then was, in effect, enunciated in his ratio decidendi the principle that amounts that were clearly received as damages for breach of contract were not taxable.

At pages 498 and 6259 of Atkins, (supra), the learned Judge states:

THE CHIEF JUSTICE (concurred in by Pratte, J and MacKay, DJ) (judgment delivered from the Bench):— For the reasons given by the learned trial judge, I am of opinion that the judgment appealed from is correct.

Having regard to the weight placed by the appellant on the decision of the Trial Division in Quance v The Queen, (1974) CTC 225; 74 DTC 6210, I deem it advisable to state in my own words what I regard as the basic fallacy in the appellant’s position.

Once it is conceded, as the appellant does, that the respondent was dismissed “without notice”, moneys paid to him (pursuant to a subsequent agreement) “in lieu of notice of dismissal” cannot be regarded as “salary”, “wages” or “remuneration” or as a benefit “received or enjoyed by him . . . in respect of, in the course of, or by virtue of the office or employment”. Moneys so paid (ie, “in lieu of notice of dismissal”) are paid in respect of the “breach” of the contract of employment and are not paid as a benefit under the contract or in respect of the relationship that existed under the contract before that relationship was wrongfully terminated. The situation is not altered by the fact that such a payment is frequently referred to as so many months’ “salary” in lieu of notice. Damages for breach of contract do not become “salary” because they are measured by reference to the salary that would have been payable if the relationship had not been terminated or because they are colloquially called “salary”. The situation might well be different if an employee was dismissed by a proper notice and paid “salary” for the period of the notice even if the dismissed employee was not required to perform the normal duties of his position during that period. Having regard to what I have said, it is clear, in my view, that the learned trial judge was correct in holding that the payment in question did not fall within section 5 of the Income Tax Act as applicable to the taxation year in question.

In the instant appeal there is no evidence that the amount of $8,517 received by the appellant was deemed to be remuneration for services rendered within the meaning of subsection 6(3) of the Act, nor did the respondent submit any evidence to that effect. The respondent did not contend that the amount was a retirement allowance under subparagraph 56(l)(a)(ii) of the Act. The amount received by the appellant here is clearly for damages for breach of contract and not taxable, according to the Appeal Division of the Federal Court’s decision in Atkins.

However, in Jack Cewe Ltd v Jorgenson ([1980] CTC 314; 80 DTC 6233), the pertinent issue there was whether the appellant company could deduct from its income for tax purposes an amount representing one year’s salary paid to the respondent (an employee of the appellant) as an award for damages for wrongful dismissal. Although the issue in Cewe Ltd, (supra), did not arise as a result of an assessment by the Minister of National Revenue and is not strictly what is usually considered as an income tax case, it does raise some questions with respect to the deductibility of awards for damages for wrongful dismissal.

The Supreme Court, in what appears to have been a unanimous decision rendered by Mr Justice Pigeon, considered at some length the decision of the Federal Court of Appeal, in Atkins, (supra), and, in particular, the statement of Chief Justice Jackett quoted above. At pages 315-316 and 6234-6235 respectively, Mr Justice Pigeon said:

I have grave doubt as to the validity of this reasoning. Damages payable in respect of the breach of a contract of employment are certainly due only by virtue of this contract, I fail to see how they can be said not to be paid as a benefit under the contract. They clearly have no other source. In Livesley v Horst (1924, SCR 605) Duff J said, speaking for the Court (at p 607):

In principle, it is difficult to discover a solid ground for refusing to classify the right to damages for breach of contract with other rights arising under the proper law of the contract, and recognizable and enforceable as such.

The basic principle governing the award of damages for breach of contract is that “the party complaining should, so far as it can be done by money, be placed in the Same position as he would have been in if the contract had been performed”. I fail to see any reason why this would not hold true towards the tax collector as well as towards the parties to the contract. In The Queen v Jennings (1966, SCR 532) where the damages awarded were in tort and mainly for permanent disability, Judson J gave the reasons for declining to follow British Transport Commission v Gourley ((1956) AC 185) where a deduction for income tax had been made. Before coming to that conclusion, he said (at p 544):

Gourley was decided upon an admission of counsel that the damages were a non-taxable capital receipt. This admission was taken to be an accurate reflection of the law and of the practice of the Inland Revenue.

For what it is worth, my opinion is that an award of damages for impairment of earning capacity would not be taxable under the Canadian Income Tax Act. To the extent that an award includes an identifiable sum for loss of earnings up to the date of judgment the result might well be different. But I know of no decisions where these issues have been dealt with and until this has been done in proceedings in which the Minister of National Revenue is a party, any expression of opinion must be insecure. Such litigation would have to go through the Board of Tax Appeals or direct to the Exchequer Court with a final appeal, in appropriate cases, to this Court. . . .

In my view, the present situation with respect to income tax on this award of “an identifiable sum for loss of earnings” must be considered legally insecure. This Court might well disagree with the conclusion reached by the Federal Court of Appeal in Atkins. In this respect, I will note that in that case consideration appears to have been given only to the question whether the damages for wrongful dismissal were income “from an office or employment” within the meaning of ss 5 and 25 of the Income Tax Act (RSC 1952). No consideration appears to have been given to the broader question whether they might not be income from an unspecified source under the general provision of section 3.

The facts and the issue in Cewe were not exactly those in Atkins and the Supreme Court cannot be said to have clearly reversed the decision of the Federal Court of Appeal in Atkins. Although Mr Justice Pigeon’s remarks with respect to the decision in Atkins regarding the deductibility of awards for damages under Canadian law were obiter dicta, they did raise some question as to exactly what the Canadian law was on the point. The purport of Mr Justice Pigeon’s remarks were reflected in the reasons of some subsequent decisions on the deductibility of awards for damages for wrongful dismissal and caused some confusion as to the state of the law on that particular point.

In the case of Bernard N Pollock v The Queen, [1981] CTC 389; 81 DTC 5293, Mr Justice Dubé of the Federal Court — Trial Division, held that an amount of $52,000 received by the appellant after refusing a settlement offer of $42,000 was an award for damages for having been dismissed without notice after 21 years of service. He concluded that the amount so received was not taxable and allowed the appeal, following the decision of the Federal Court of Appeal in Atkins, (supra). In his reasons, Mr Justice Dubé referred to the Atkins case, (supra), whose facts were substantially the same as those of the Pollock case and quoted Chief Justice Jackett’s statements in Atkins, (supra). At pages 391 and 5294 respectively, Mr Justice Dubé states:

Naturally, I feel bound by that decision and presumably the Crown would not have opposed the instant appeal were it not for an obiter dictum uttered by Pigeon J in a recent decision of the Supreme Court of Canada, Jack Cewe Ltd v Gary William Jorgenson (80 DTC 6233). That case was not strictly an income tax case, but dealt with the quantum of damage payable to Jorgenson following his wrongful dismissal.

Mr Justice Dubé then quoted Mr Justice Pigeon’s remarks in Cewe, (supra), and continued:

Counsel for the Crown invites me to consider that obiter dictum as valid ground for ignoring the Federal Court of Appeal decision, and to leap boldly towards the adoption of a new principle governing the taxation of damages for wrongful dismissal. As I informed him from the bench, I was not about to accept that invitation.

The doctrine of stare decisis is well known. As expounded by L P Pigeon in his “Interprétation des Lois", it applies only to the ratio decidendi, not to an obiter dictum. He wrote at p 46:

La ratio decidendi s’oppose à ïobiter dictum. L’obiter dictum, c’est l’opinion qu’un juge exprime en passant. Autrement dit, c’est l’interprétation qu’un juge propose sans statuer. L’obiter dictum n’est pas binding. On considère comme obiter dictum tout ce qui n’est pas impliqué dans la décision.

In his conclusion, the learned Justice stated:

Undoubtedly, the principle expounded by the Federal Court — from both of its divisions — in the Atkins case now lies ‘legally insecure’ in the present state of the jurisprudence. Its shaky position will have to be shored up, or demolished with a final blow. Because of the doctrine of stare decisis, the operation, be it salvage or demolition, will have to be performed from above.

The Minister of National Revenue appealed the decision of the Federal Court — Trial Division in The Queen v Bernard H Pollock, [1984] CTC 353; 84 DTC 6370. In dismissing the Crown’s appeal, Pratte, J, on behalf of the Federal Court of Appeal Division with respect to the issue in the instant appeal stated:

PRATTE, J (Orally for the Court): We do not need to hear you, Mr Gauthier.

The appellant’s first two arguments assumed that the decision rendered by this Court in The Queen v Atkins (76 DTC 6258) was wrong. While we do not doubt that this Court has the power to reconsider and refuse to follow one of its previous decisions, we are of opinion that we should do so only when we are convinced that our previous decision was wrong. Here, in spite of Mr Lefebvre’s able argument, we do not have that conviction.

Mr Lefebvre’s last contention that the amount received by the taxpayer was a taxable capital gain cannot, in our opinion, be considered. That argument was not made in the Trial Division (81 DTC 5293) and was put forward for the first time in appeal. Had it been made earlier, evidence could perhaps have been adduced to show that the taxpayer had incurred costs towards the acquisition or disposition of his right to receive damages. Indeed, it is by no means clear that he did not incur any such costs.

The appeal will therefore be dismissed with costs.

The decision of the Appeal Division of the Federal Court on the nontaxability of awards received for wrongful dismissal on the basis of the respondent’s argument on that point is quite clear and definitive and, of course, binding on this Court. However, Mr Justice Pratte’s remarks in reference to the respondent’s contention that such payments could conceivably be taxable capital gains appear to introduce a further point to be considered before the state of the law on the deductibility of awards received as damages for wrongful dismissal can be finally established.

For purposes of this appeal in which no reference was made by the respondent as to the possible existence of a retiring allowance, severance pay or a capital gain, and where the amount received by the appellant was clearly established to be for damages for wrongful dismissal, the Federal Court’s decision in Atkins, (supra), is applicable “‘a priori” to the facts now before the Court.

The appeal is therefore allowed and the matter referred back to the respondent for reconsideration and reassessment on the basis that the amount of $8,517 received by the appellant in the 1977 taxation year was an award for damages for breach of contract and is non-taxable. The appeal for the 1978 taxation year is quashed.

Appeal allowed.

Appendix

Aronovitch, J:—The Court, having heard the parties and their respective attorneys on the merits of the present case, having examined the proceedings, the exhibits filed, and deliberated, renders the following judgment:

This is an action in damages for non-renewal of a teaching contract.

Plaintiff had been a member of Defendant’s Fine Arts Department for more than four years. More recently she was working in virtue of a contract, Exhibit P-2, dated October 4, 1973, covering the period of one year ending July 31, 1974. Plaintiff did submit an application on February 11, 1974, Exhibit D-2, as full- time instructor to teach sculpture for 1974-75. On May 17, 1974, Gerry Gross, acting chairman of the department of Fine Arts, advised Plaintiff in writing, Exhibit P-8, that she was not being hired for any period after July 31, 1974, that, in effect, the contract P-2 was not being renewed.

Plaintiff takes the position that the contract between the parties, Exhibit P-2, was governed by the terms of the Faculty Manual; that in particular in virtue of Article 3.05, she should have been advised of such non-renewal before December 15 of the previous year, in default of which the contract is deemed to be renewed for a period of one year. In other words, Plaintiff maintains that in virtue of Article 3.05 of Defendant’s Faculty Manual, she should have been advised of such non-renewal before December 15 of the previous year, failing which she was to be re-engaged for another year. In the result, Plaintiff claims her salary of $15,000 for the academic year 1974-75, as well as damages to her reputation in the amount of an additional $15,000.

Defendant contends that Section 3.05 does not apply to Plaintiff who was not a member of Defendant’s faculty.

At the trial, proof was made by Potvin, Director of Evening Division, Loyola, that during the academic year 1973-74, Plaintiff was co-ordinator of the Fine Arts program and she was also teaching during the same period. McEwen, assistant dean of curriculum, corroborated this evidence and added that Plaintiff was a member of the Faculty and that Faculty members are notified well in advance regarding appointment and re-hiring. He finds the notice of May 17, 1974 (Exhibit P-8) to Plaintiff rather unusual.

Gross, acting chairman of the Fine Arts department, admits that the contract P-2 is contradictory, unclear, and goes so far as to say that it was drawn up in error. Of course, there is nothing in the pleadings to this effect. He is forced to admit that paragraph 2 does mean what it says, namely, that the service is that of a full-time member of the academic staff. Notices regarding contracts to full- time academic staff members are normally sent early in the new year. It is noteworthy that Gross chooses to read P-2 as nothing more than contract as Coordinator. Hence, the wording of his letter of May 17, 1974 (P-8):

I have been advised by President Malone that you wish to know immediately whether or not you will be rehired as Coordinator of Art in 1974-75. While I would have preferred to await the completion of the business of the Hiring Committee so as to be able to notify all personnel in the Art Section of the Fine Arts Department at one time as to their status, in deference to your wishes you are advised as follows: I have recommended to the Hiring Committee, and they have accepted the decision not to rehire you and to eliminate the post of Coordinator of Art for next year. I am also certain that it would be impracticable and not in the best interests of our evolving department in the new university for you to teach in our program.

You should recall on the two occasions during which we discussed your future at Loyola that I told you I was unwilling to agree on your continuing as Coordinator of Art. Certainly I have never suggested that when your one-year contract as Coordinator of Art lapsed I would recommend its renewal. I did not follow the procedures used for faculty in your case because you have a contract as Coordinator which is not a faculty position.

The Manual, Exhibit P-13, according to Breen, was for full-time professors only. The Court does not share his opinion. Section 3.02 of the Faculty Manual, under the heading “Faculty” lists the qualifications of Instructor, Lecturer, As- sistant Professor, Associate Professor and Professor. Each of these “is a member of faculty”. For the Instructor, it is specified that he is engaged on a yearly basis, but not for the others.

The principal point to be determined in this case is whether Plaintiff was illegally dismissed; more precisely, regarding Exhibit P-8, the letter of May 17, 1974, from Gerry Gross: Did he have the authority and power? Was the notice late? Was it contrary to the Manual? Was it contrary to practice? The answers to all these questions are in the affirmative. Support for this conclusion may be found by analogy in Red Deer College v Michael et al, ([1976] 2 SCR 324) where, among other things, contentions were raised that the appointed administrator of the college, who discharged the Plaintiffs, was not properly appointed, and hence there never was a discharge of the plaintiffs; alternatively, that the discharge was not effected under the required procedures spelled out in a collective agreement between the college and the faculty association.

The contract, Exhibit P-2, for the year ending July 31, 1974, contrary to Gross’s contention was a mixed contract — unlike Exhibit P-12, which is purely a Coordinator contract. Clearly, Plaintiff, in virtue of P-2 did perform two functions. Academically, as called by clauses 2 and 3 in particular, Plaintiff in effect gave three courses, both day and evening. On the other hand, she did act in the administrative field, as coordinator in the department of Fine Arts.

There remains a further question in issue: whether Plaintiff was a part, or a member, of the Faculty. Again, the answer is in the affirmative. Gross himself recognized this. Thus, on January 24, 1974, he sent a memo (Exhibit P-11) to the Fine Arts Faculty. Plaintiff received this memo, presumably as a member of the Art Section of the Fine Arts Faculty.

Furthermore, Exhibit P-2, which was presumably typed by Defendant, has, under the signature of Plaintiff, the word “Professor”. This, together with the other indications, leads to the conclusion that section 3.05 of the Manual does apply to Plaintiff, because she was a member of the faculty and entitled to the notice laid down by the aforesaid Section.

She did not abandon her rights to such notice by her letter of February 11, 1974, Exhibit D-2, and by the one of February 26, 1974, Exhibit D-3, regarding her application as a full-time instructor in sculpture. Indeed, these may be interpreted as an effort to mitigate the damages suffered by Plaintiff. As to such damages, the first part of the claim, $15,000 for the academic year 1974-75, cannot be awarded in full because the said sum of $15,000 covered both the administrative and the academic work done by Plaintiff She is entitled to damages with respect to academic work only. So far as the record shows, that covered three full courses which have been evaluated at $3,000 each course. Plaintiff is therefore entitled to $9,000. As to the rest of Plaintiffs claim “$15,000 resulting from the circumstances of the non-renewal of her contract and its impact on her reputation in the artistic and academic communities’’, keeping in mind that Plaintiff had the burden of proof, the Court finds that there has been no proof made of such damage.

One final point. The contract, Exhibit P-2, on the face of it, appears to be between the Defendant and Mrs Esther Wertheimer Inc, although it is signed personally by Plaintiff. Defendant, in its plea, raises this issue. Thus, paragraph 5 reads:

. . . that the incorporated company named therein would furnish services and spend the time necessary to fulfil the position of Co-Ordinator in the Department of Fine Arts;

and paragraph 10:

All payments under the said contract were made by Defendant to the incorporated company, and not to the Plaintiff personally . . .

For all practical purposes, the Defendant waived this line of defence. It was not raised in argument. The facts proved conclusively that this was a personal matter in so far as Plaintiff is concerned. Moreover, the Court would be loath to dismiss Plaintiffs action on this narrow ground. The Court is therefore of the opinion that this ground of defence is abandoned by the Defendant which, after all, is a university.

FOR THE FOREGOING REASONS, THE COURT:

DOTH CONDEMN Defendant-in-Continuance-of-Suit to pay Plaintiff the sum of $9,000, with interest from the date of institution of the action, with costs.