Roland
St-Onge
[TRANSLATION]:—The
appeal
of
Mr
Ernest
Abramovici
came
before
me
on
November
8,
1979
at
the
city
of
Montreal,
Quebec.
The
issue
was
whether
a
sum
of
$1,730.94
received
by
the
appellant
from
the
Eastern
Townships
Regional
School
Board
was
remuneration
for
services
rendered
under
his
contract
of
employment,
pursuant
to
the
provisions
of
sections
3,
5
and
subsection
6(3)
of
the
Income
Tax
Act,
in
the
1977
taxation
year.
At
the
outset
of
the
hearing
counsel
stated
that
the
decision
in
the
appeal
of
Mr
Ernest
Abramovici
would
apply
to
the
following
appellants:
John
K
Ward,
Donald
Nixon,
Nicole
MacDonald,
Edwin
Harold
Down,
Lillian
Squire,
Malcolm
D
Learned,
Gloria
E
F
Bellam,
Marilyn
Rose,
Douglas
Mooney,
James
A
Reynolds
and
Léo
Fillion.
The
facts
of
this
appeal
are
set
out
clearly
in
subparagraphs
6(a)
to
(k)
of
the
reply
to
the
notice
of
appeal.
(TRANSLATION)
6.(a)
During
the
1977
taxation
year
the
appellant
was
a
teacher
employed
by
the
Eastern
Townships
Regional
School
Board
and
was
a
member
of
the
Eastern
Townships
Association
of
Teachers;
(b)
The
appellant’s
working
conditions
during
the
taxation
year
mentioned
were
governed
by
the
Agreement
between
the
Quebec
Association
of
Protestant
School
Boards
and
the
Quebec
Department
of
Education
on
the
one
hand
and
the
Provincial
Association
of
Protestant
Teachers
on
the
other
hand;
(c)
Clause
8-4.02
of
that
Agreement,
found
in
the
chapter
entitled
Teachers’
Working
Conditions,
provided
the
following:
8-4.02
“The
following
clause
shall
apply
for
the
1976-1977
school
year
only:
If
the
total
number
of
teachers
obtained
according
to
article
8-2.00
is
not
reached,
the
syndical
unit
may
file
a
grievance.
This
grievance
must
be
fixed
on
the
arbitration
roll
and
must
have
priority
over
any
other
grievance.
The
council
of
arbitration
must
hear
it
and
must
render
a
decision
on
it,
also
before
all
others.
It
shall
be
understood
that
the
decision
of
the
council
of
arbitration
will
not
have
a
retroactive
effect.
However,
if
the
total
number
of
teachers
obtained
according
to
article
8-2.00
is
not
reached,
the
decision
of
the
council
of
arbitration
shall
have
retroactive
effect,
but
only
for
the
difference
between
the
number
of
teachers
obtained
according
to
article
8-2.00
and
the
number
of
teachers
in
the
employ
of
the
school
board.
The
number
of
teachers
making
up
this
difference
shall
be
multiplied
by
1/10
of
the
average
salary
of
the
teachers
in
the
employ
of
the
school
board
(or
of
the
average
salary
of
the
teachers
in
the
school
if
the
teachers
concerned
are
all
in
this
school)
for
each
month
during
which
the
school
board
is
in
default.
By
basing
itself
on
the
remuneration
provided
for
in
clause
8-10.03f),
the
council
of
arbitration
shall
distribute
the
amount
of
money
thus
obtained
to
the
teachers
who
are
entitled
to
it
and
the
school
board
shall
hire
the
number
of
teachers
necessary
in
order
to
respect
article
8-2.00.”
(d)
On
May
30,
1977
the
Eastern
Townships
Association
of
Teachers
filed
a
grievance
against
the
Eastern
Townships
Regional
School
Board
on
the
ground
that
the
latter
had
not
hired
the
required
number
of
teachers
during
the
1976-1977
school
year;
(e)
One
of
the
conclusions
of
the
grievance
in
question
read
as
follows:
“The
Association
therefore
demands
that:
2)
The
School
Board
compensate
the
teachers
presently
employed
for
the
extra
work
load.”
(f)
On
November
2,1977
the
Eastern
Townships
Regional
School
Board
and
the
Eastern
Townships
Association
of
Teachers
settled
this
grievance
out
of
court;
(g)
Under
the
terms
of
this
out-of-court
settlement
the
Eastern
Townships
Regional
School
Board
undertook
to
pay
a
total
amount
of
$381,170.67
to
be
distributed
and
paid
directly
to
the
members
of
the
Eastern
Townships
Association
of
Teachers;
(h)
The
appellant
received
$1,730.94
out
of
this
sum;
(i)
Teachers
who
had
benefited
from
wage
insurance
maternity
leave
or
leave
of
absence
during
the
school
year
received
smaller
amounts
from
the
School
Board
calculated
on
the
basis
of
the
number
of
days
on
which
they
had
actually
worked
during
the
school
year;
(j)
Teachers
who
had
not
worked
during
the
1976-77
school
year
did
not
receive
anything
from
the
Eastern
Townships
Regional
School
Board;
(k)
In
preparing
the
appellant’s
T-4
and
T-4A
forms
for
his
1977
taxation
year
the
employer
included
this
sum
of
$1,730.94
in
computing
the
appellant’s
income.
The
appellant
maintained
that
the
sum
of
$1,730.94
was
received
as
compensation
for
the
breach
of
contract
and
was
therefore
not
taxable.
The
appellant
related
the
following
facts.
He
is
a
mathematics
teacher
and
during
the
1975-1976
and
1976-1977
school
years
he
taught
the
same
number
of
students
and
his
workload
did
not
increase.
He
was
aware
that
a
number
of
teachers
had
had
to
work
harder
because
the
School
Board
had
not
complied
with
clause
8-2.00
of
the
provincial
agreement
(between
the
Association
of
Protestant
School
Boards
and
the
Provincial
Association
of
Protestant
Teachers)
in
that
it
had
not
hired
a
sufficient
number
of
teachers
for
the
1976-1977
school
year.
A
grievance
was
consequently
filed
with
the
Arbitration
Board
under
article
8-4.02
of
the
same
agreement.
An
agreement
was
concluded
on
May
26,
1977
between
the
Union
and
the
Lennoxville
district
School
Board
and
the
appellant
subsequently
received
the
sum
of
$1,730.94,
which
he
reported
in
his
income
return
as
being
non-
taxable.
In
cross-examination
he
admitted
that
he
was
employed
by
the
School
Board
when
he
received
the
amount
in
question.
Mr
Don
Jondreville,
a
teacher
employed
by
the
School
Board
and
president
of
the
Union,
gave
the
following
evidence.
He
filed
the
grievance
because
the
School
Board
had
not
complied
with
clause
8-2.00
of
the
Provincial
Agreement
and
there
was
a
shortage
of
teachers
of
22.26%
in
the
three
school
districts
together.
The
sum
of
$381.170.67
had
not
been
distributed
fairly
since
this
money
was
to
have
been
shared
among
the
teaching
staff,
whereas
all
the
employees
received
a
share.
The
breach
of
contract
had
given
rise
to
all
sorts
of
problems
and
additional
work
for
some
teachers;
that
as
the
president
of
the
Union
he
did
not
teach
and,
together
with
five
other
teachers,
was
in
class
C;
that
there
was
class
B
for
part-time
employees
and
that
clause
8-4.02
had
been
included
in
the
contract
at
the
local
level
at
the
specific
request
of
the
teachers.
Mrs
M
Wehr,
who
took
part
in
the
negotiations
both
at
the
provincial
and
at
the
local
level,
testified
that
clause
8-4.02
had
been
included
in
the
agreement
at
the
request
of
the
teachers
and
that
a
similar
clause
existed
before
1977.
Counsel
for
the
appellant
presented
the
following
arguments.
The
amount
was
not
paid
to
the
appellant
pursuant
to
a
contract
of
employment
but
owing
to
the
failure
to
comply
with
article
8-2.00,
which
constitutes
a
breach
of
contract.
Following
proceedings
brought
by
the
trustee
pursuant
to
article
8-4.02,
an
agreement
was
reached
between
the
Association
of
Teachers
and
the
Lennoxville
district
School
Board,
following
which
a
lump
sum
was
paid.
However,
this
money
was
not
distributed
in
accordance
with
the
provisions
of
article
8-4.02,
with
the
result
that
between
30
and
35
employees
who
were
not
entitled
to
receive
any
money
received
some
while
others
who
should
have
received
compensation
in
proportion
to
the
time
they
had
worked
were
not
paid
accordingly.
This
indicates
that
the
money
was
not
paid
pursuant
to
he
contract
of
employment,
or
as
remuneration
for
services
rendered.
He
concluded
his
arguments
by
stating
that
the
School
Board
had
failed
to
fulfil
its
obligations
by
not
hiring
the
required
number
of
teachers
and
that
article
8-4.00
gave
the
appellant
moratory
damages
to
cover
certain
forms
of
prejudice.
Counsel
for
the
respondent
stated
that
The
Queen
v
R
B
Atkins,
[1975]
CTC
377;
75
DTC
5263,
cited
by
his
colleague,
does
not
apply
since
in
that
case
the
damages
were
awarded
following
a
breach
of
contract
resulting
from
a
wrongful
dismissal
without
notice,
whereas
there
is
nothing
similar
in
the
present
case.
He
then
presented
two
major
arguments,
inter
alia:
(1)
section
5(1)
applies
since
the
amount
received
by
the
appellant
is
a
benefit
under
a
contract
of
employment.
Article
8-4.00
of
the
agreement
provided
that
the
teachers
could
receive
an
additional
amount
if
the
school
Board
did
not
hire
the
number
of
teachers
required
under
article
8-2.00.
(2)
the
amount
was
not
received
for
breach
of
contract
since
there
was
never
any
breach
of
contract
and
there
is
no
evidence
of
damages
resulting
from
a
dismissal.
The
Board
does
not
think
it
necessary
to
analyse
and
comment
on
the
cases
cited
by
counsel.
The
issue
is
very
simple:
whether
the
amount
received
is
income
or
capital.
It
will
be
non-taxable
capital
if
it
has
been
received
as
a
result
of
a
breach
of
contract.
The
evidence
established
that
the
teachers
remained
in
the
employ
of
the
School
Board
throughout
the
year
in
question
and
that
they
were
still
employed
when
they
received
the
remuneration
in
question,
and
there
can
therefore
be
no
question
of
a
breach
of
contract.
The
contract
is
still
in
existence
and
certain
clauses
deal
with
problems
between
the
contracting
parties,
the
procedures
for
settling
them
and
even
the
compensation
where
working
conditions
become
too
onerous
for
the
teachers.
The
fact
that
some
teachers
did
not
receive
enough
money
or
that
others
received
too
much
or
that
certain
individuals
who
were
not
entitled
to
receive
anything
did
receive
some
money
in
no
way
alters
the
nature
of
the
payments,
which
are
still,
to
use
the
wording
of
section
5
of
the
Income
Tax
Act,
“from
an
office
or
employment’’.
There
can
be
no
question
of
moratory
damages
here
since
Mr
Abramovici
did
not
suffer
any
loss;
quite
the
contrary,
he
received
compensation
to
which
he
was
not
entitled.
As
for
the
teachers
who
did
not
receive
enough,
what
they
received
was
for
additional
work
they
performed.
It
is
not
sufficient
to
say
that
a
taxpayer
received
moratory
damages
for
the
amount
to
become
non-taxable.
Firstly,
what
are
moratory
damages?
The
appellant
set
out
the
general
principles
for
the
Board,
and
I
quote
from
the
Traité
Elementaire
de
Droit
Civil
—
Les
Obligations,
by
Jean-Louis
Baudouin,
at
p
301:
[TRANSLATION]
571—
General
principles—Moratory
damages
are
due
to
the
creditor
as
a
result
of
the
debtor’s
mere
delay
in
performing
the
obligation.
They
require
that
a
formal
demand
be
made
to
prove
that
the
creditor
did
not
intend
to
allow
his
debtor
a
period
of
grace
and
are
not
due
until
that
date,
except
where
there
is
a
contrary
legislative
provision.
Where
the
debtor’s
obligation
is
an
obligation
in
kind,
the
rules
governing
the
damages
due
for
the
delay
are
identical
to
those
for
compensatory
damages
and
are
sometimes
confused
with
them.
On
that
assumption
the
tardy
performance
is
usually
equivalent
to
a
pure
and
simple
failure
to
perform
and
the
damages
must
then
be
calculated
on
the
basis
of
the
loss
suffered
and
the
profit
lost
by
the
creditor.
572—
Monetary
obligations—If
the
obligation
is
a
pecuniary
one
(to
pay
a
sum
of
money),
on
the
other
hand,
the
moratory
damages
are
the
interest
on
the
sum,
at
the
rate
fixed
by
law
or
agreed
upon
by
the
parties.
This
interest
is
due
to
the
creditor
automatically;
the
latter
does
not
have
to
adduce
evidence
that
the
delay
in
the
payment
in
fact
caused
him
prejudice.
Since
money
normally
bears
fruit
in
kind,
the
interest
therefore
compensates
for
the
lack
of
yield
during
the
period
of
delay.
There
are
certain
cases,
however,
where
the
moratory
damages
comprise
more
than
simple
interest
on
the
amount
owing.
Finally,
compound
interest
or
capitalization
of
interest
is
legal
only
in
the
case
of
certain
debts
specifically
provided
for
by
law
or
agreement.
Thus
where
there
is
a
pecuniary
obligation,
moratory
damages
are
the
interest
on
the
amount
and
we
all
know
that
such
interest
is
taxable
under
a
section
of
the
Income
Tax
Act.
The
other
damages
must
be
calculated
on
the
basis
of
the
loss
suffered
and
the
profit
lost
by
the
creditor.
We
all
know
that
the
appellant
did
not
suffer
any
loss
or
lose
any
profit.
Moreover,
the
evidence
indicated
that
there
had
always
been
an
employee-employer
relationship
between
the
appellant
and
the
School
Board.
Consequently,
how
can
one
speak
of
a
breach
of
contract
or
maintain
that
the
amount
received
was
the
result
of
a
breach
of
contract
when
this
relationship
never
ceased
to
exist,
and
if
this
was
the
case,
the
amounts
received
by
the
appellant,
whether
minimal,
considerable,
excessive
or
unjustified,
are
still
income
of
a
taxpayer
from
an
office
or
employment,
this
being
the
salary,
wages
and
other
remuneration,
including
gratuities,
received
by
him
in
the
year.
For
these
reasons
the
appeal
is
consequently
dismissed.
Appeal
dismissed.
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