Mogan,
J.T.C.C.
(orally):—
This
is
an
appeal
commenced
under
the
provisions
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
in
respect
of
the
appellant's
1987
taxation
year.
From
1972
to
1984,
the
appellant
was
a
Member
of
Parliament.
In
the
spring
of
1984
the
appellant
was
subject
to
a
serious
illness
and
he
suffered
an
almost
fatal
pulmonary
embolism.
It
was,
therefore,
necessary
for
him
to
seek
some
occupation
which
was
less
stressful
than
serving
as
a
Member
of
Parliament.
At
the
time,
he
sought
a
position
in
the
federal
public
service
which
would
allow
him
to
use
his
talents
but
operate
in
a
way
that
would
not
endanger
his
life.
He
was
offered
a
position
as
a
member
of
the
National
Parole
Board.
After
consulting
with
various
persons
concerning
the
nature
of
the
work,
he
accepted
that
position.
It
is
what
is
commonly
referred
to
as
an
order-in-council
appointment;
that
is
to
say,
it
is
a
special
kind
of
appointment
because
it
comes
from
the
Cabinet.
And
while
it
was
for
a
term
of
ten
years,
it
is
very
difficult
to
take
away
the
benefits
of
an
order-in-council
appointment
once
a
person
has
received
that
kind
of
appointment.
He
thought
that
he
could
serve
on
the
National
Parole
Board
and
it
would
be
reconcilable
with
his
illness
but,
due
to
the
nature
of
the
work,
which
is
mainly
travelling
and
fairly
extensive
travelling,
he
was
hospitalized
far
from
his
home
in
Ottawa.
He
concluded
that
he
could
not
continue
to
perform
his
duties
as
a
member
of
the
National
Parole
Board
because
of
his
health
Therefore,
within
a
year
of
the
appointment,
he
was
required
to
seek
some
kind
of
relief
from
obligations
and
the
burdens
of
his
duties
on
the
National
Parole
Board.
In
1985,
he
retained
a
lawyer
to
try
and
get
some
relief,
or
compensation,
or
whatever
it
might
be
called,
for
giving
up
this
office.
A
letter
which
was
entered
in
evidence
as
Exhibit
A-1,
was
sent
by
the
appellant’s
lawyer
on
August
12,
1985
to
the
Prime
Minister
of
the
day
reviewing
his
health
problem
and
his
inability
to
continue
on
the
Parole
Board,
but
seeking
some
kind
of
monetary
compensation
for
giving
up
the
office
to
which
he
was
appointed
by
order-in-
council.
I
will
not
set
out
the
letter
in
its
entirety,
but
the
following
passage
is
included
in
these
reasons
for
judgment
because
of
its
relevance
and
it
leads
to
what
ultimately
came
as
a
letter
of
reply.
Mr.
McGuire,
the
solicitor
for
Mr.
Blaker,
stated
at
page
3
of
his
letter:
My
client
should
seek
alternative
employment
which
will
not
bring
about
further
serious
physical
deterioration
resulting
from
stress
and
worry.
We
therefore
respectfully
suggest,
without
prejudice
to
his
existing
rights
under
his
present
appointment,
that
he
receive
an
amount
equal
to
two
years
salary,
being
approximately
$134,000.00,
plus
the
return
of
his
National
Parole
Board
pension
contribution
of
approximately
$4,000.00.
In
return,
Mr.
Blaker
would
surrender
his
appointment.
When
one
considers
Mr.
Blaker’s
background
of
public
service,
his
serious
medical
condition
and
his
non-insurability,
we
trust
that
you
will
find
this
request
to
be
reasonable
in
the
circumstances.
That
letter
was
responded
to
in
a
brief
fashion
by
two
government
officials
in
the
period
following
August
1985.
What
really
happened
was
that
in
1987
there
was
an
arrangement
made
under
which
the
appellant
gave
up
the
office
and
received
an
amount
of
$90,000.
I
do
not
want
to
beg
the
question
by
describing
what
it
was
for
but
it
was
all
a
part
of
one
transaction.
The
relevant
document
is
a
letter
dated
March
13,
1987,
signed
by
Jean-Pierre
Kingsley,
Deputy
Secretary
of
Personnel
Policy
Branch
of
the
Treasury
Board
of
Canada,
addressed
to
the
appellant.
The
letter
is
short
and,
therefore,
set
out
in
its
entirety:
Dear
Mr.
Blaker:
I
am
writing
to
confirm
the
arrangements
which
have
been
agreed
upon
between
you
and
the
Government
of
Canada
in
consideration
of
which
you
will
provide
Her
Majesty
the
Queen
in
right
of
Canada
with
a
Release,
the
terms
of
which
are
contained
in
ANNEX
"A".
1.
It
is
agreed
that
you
will
resign
your
Governor-in-council
appointment
as
a
member
of
the
National
Parole
Board
effective
March
27,
1987.
2.
In
consideration
of
said
resignation
and
following
approval
of
these
arrangements
by
the
Treasury
Board,
you
will
be
paid
a
termination
allowance
in
the
amount
of
$90,000.
3.
At
your
direction,
a
part
of
this
allowance,
up
to
the
maximum
amount
allowable
under
the
Income
Tax
Act,
may
be
paid
directly
into
a
registered
retirement
savings
plan
of
your
choice.
The
amount
remaining
will
be
paid
in
two
instalments;
the
first
instalment
payable
in
1987,
and
a
final
payment
to
be
made
no
later
than
January
5,
1988,
in
accordance
with
your
direction.
4.
The
particulars
of
this
settlement
shall
be
held
strictly
confidential
by
the
parties
and
shall
not
be
disclosed
to
any
person.
However,
you
may
make
disclosure
to
your
immediate
family
and
your
professional
and
financial
advisors.
Disclosure
may
also
be
made
by
the
government
to
Treasury
Board
ministers
and
those
public
servants
required
to
finalize
and
implement
the
settlement.
I
would
appreciate
it
if
you
would
confirm
your
agreement
with
the
above
by
signing
below,
and
by
signing
the
release
attached
hereto.
Yours
sincerely,
Jean-Pierre
Kingsley
Below
Mr.
Kingsley’s
signature
there
is
a
line
which
the
appellant
has
signed,
“Roderick
Brian
Blaker".
Attached
to
the
letter
is
Annex
A
entitled
"release";
which
was
worded
as
follows:
I,
Roderick
Brian
Blaker,
upon
the
performance
in
full
by
Her
Majesty
the
Queen
in
right
of
Canada,
of
all
her
obligations
undertaken
in
the
letter
of
agreement
dated
March
13,
1987,
between
Her,
acting
through
Mr.
Jean-Pierre
Kingsley,
Deputy
Secretary,
Personnel
Policy
Branch,
Treasury
Board
and
me,
a
copy
of
which
is
attached
hereto
as
ANNEX
"B",
recognize
that
I
will
have
been
provided
with
full,
final
and
total
compensation
which
I
may
have
been
entitled
to
following
termination
of
my
appointment
as
a
member
of
the
Parole
Board.
Subject
to
the
same
condition,
I
hereby
release
and
forever
discharge
Her
Majesty
the
Queen,
in
right
of
Canada,
from
any
and
all
obligations
which
she
may
have
incurred
towards
me
relating
to
the
termination
of
my
employment.
Mr.
Blaker
signed
this
release
on
March
16,
1987.
The
oral
testimony
of
Mr.
Blaker
is
that
he
did,
in
fact,
receive
all
of
the
$90,000
in
1987.
A
portion
of
it
was
put
into
a
registered
retirement
savings
plan
(“RRSP”).
And
at
some
later
time,
it
is
not
clear
from
the
evidence
whether
it
was
in
1987
or
a
subsequent
year,
that
portion
was
withdrawn.
In
any
event,
the
amount
that
was
put
into
the
RRSP
is
not
relevant
because
the
issue
in
this
appeal
is
whether
the
amount
of
$90,000
has
the
character
of
income
under
the
provisions
of
the
Income
Tax
Act.
In
substance,
it
is
the
appellant's
position
that
the
whole
amount
should
be
free
of
tax
because
an
order-in-council
or
a
Governor-in-council
appointment
is
a
unique
type
of
appointment
in
the
whole
Canadian
scene;
it
is
unlike
any
other
appointment,
employment
or
office
because
the
person
holding
such
an
appointment
has
a
security
of
tenure
different
from
any
other
kind
of
employment.
Mr.
Blaker
argues
that
he
had
what
he
called
a
"basket
full
of
rights";
and
that
he
received
his
$90,000
by
surrendering
this
“basket
full
of
rights".
Therefore,
it
was
a
capital
payment
in
consideration
for
such
surrender,
and
not
taxable.
For
a
taxation
year
prior
to
1981,
the
argument
would
have
had
more
weight
and
there
were
some
judicial
authorities
to
support
it.
But,
as
frequently
happens,
the
Minister
of
National
Revenue
and
the
Minister
of
Finance
can,
through
amendments
to
the
Income
Tax
Act,
reach
out
to
bring
within
the
ambit
of
income
amounts
which
hitherto
might
not
have
been
regarded
as
income.
Counsel
for
the
Minister
of
National
Revenue
in
this
appeal
relies
on
the
definition
of
"retiring
allowance”
as
it
appears
in
section
248
of
the
Income
Tax
Act.
From
that
definition
I
will
quote
only
the
relevant
words.
"retiring
allowance”
means
an
amount.
.
.
received
(a)
upon
or
after
retirement
of
a
taxpayer
from
an
office
or
employment
in
recognition
of
his
long
service,
or
(b)
in
respect
of
a
loss
of
an
office
or
employment
of
a
taxpayer,
whether
or
not
received
as,
on
account
or
in
lieu
of
payment
of,
damages
or
pursuant
to
an
order
or
judgment
of
a
competent
tribunal
by
the
taxpayer.
.
.
.
Counsel
for
the
respondent
argues
that
the
amount
of
$90,000
described
in
the
correspondence
between
the
appellant’s
lawyer
and
the
Treasury
Board
fits
within
the
four
corners
of
"retiring
allowance"
as
defined
in
section
248.
In
support
of
that
argument,
counsel
refers
to
the
definition
of
"employment"
also
in
248
which
reads
as
follows:
"employment"
means
the
position
of
an
individual
in
the
service
of
some
other
person
(including
Her
Majesty
or
a
foreign
state
or
sovereign)
and
"servant"
or
"employee"
means
a
person
holding
such
a
position.
.
.
.
In
my
view,
the
position
taken
by
the
respondent
is
well-founded.
The
amount
here
does,
in
fact,
clearly
fall
within
the
all-embracing
provisions
of
"retiring
allowance".
That
is
to
say,
it
was
an
amount
received
"in
respect
of
a
loss
of
an
office
or
employment".
And
as
can
been
seen
from
the
definition
of
"employment",
it
is
the
position
of
a
person
in
the
service
of
some
other.
I
can
find
nothing
that
would
make
an
appointment
by
the
Governor
in
Council
different
from
an
office
or
employment
in
any
other
sense.
The
letter
of
March
13,
1987
from
the
Treasury
Board
to
the
appellant
really
is
in
the
form
of
an
agreement
because,
in
the
last
three
lines
of
that
letter,
the
writer
states
"I
would
appreciate
it,
if
you
would
confirm
your
agreement
with
the
above
by
signing
below
and
by
signing
the
release
attached
hereto".
He
then
provides
a
line
with
the
appellant’s
name,
Roderick
Brian
Blaker,
typed
under
the
line.
Mr.
Blaker
signed
above
the
line.
By
signing
page
2
of
that
letter,
the
appellant
has
entered
into
an
agreement
with
the
Treasury
Board.
The
substance
of
the
agreement
is
captured
in
the
first
two
numbered
paragraphs
which
I
will
repeat:
1.
It
is
agreed
that
you
will
resign
your
Governor-in-Council
appointment
as
a
member
of
the
National
Parole
Board
effective
March
27,
1987.
2.
In
consideration
of
said
resignation
and
following
approval
of
these
arrangements
by
the
Treasury
Board,
you
will
be
paid
a
termination
allowance
in
the
amount
of
$90,000.
I
cannot
construe
the
terms
of
that
letter
of
March
13,
1987
as
anything
but
an
agreement
for
an
amount
to
be
paid
to
the
appellant
within
paragraph
(b)
of
the
definition
of
"retiring
allowance”,
in
respect
of
a
loss
of
an
office
or
employment.
In
every
way,
the
payment
of
the
$90,000
falls
within
the
four
corners
of
the
definition
of
"retiring
allowance"
in
section
248.
What
brings
it
within
the
ambit
of
income
for
purposes
of
the
Income
Tax
Act
is
the
provision
of
subsection
56(1)
which
states
(reading
only
the
relevant
parts):
56(1)
Without
restricting
the
generality
of
section
3,
there
shall
be
included
in
computing
the
income
of
a
taxpayer
for
taxation
year,
(a)
any
amount
received
by
the
taxpayer
in
the
year
as,
on
account
or
in
lieu
of
payment
of,
or
in
satisfaction
of,
(ii)
a
retiring
allowance,
other
than
an
amount
received
out
of
or
under
an
employee
benefit
plan,
a
retirement
compensation
arrangement
or
a
salary
deferral
arrangement.
.
.
.
This
$90,000
amount
does
not
fall
within
any
of
the
exceptions
in
subparagraph
56(1
)(a)(ii).
It
falls
within
the
definition
of
“retiring
allowance"
in
section
248
and,
therefore,
in
my
view
is
an
amount
that
is
required
to
be
included
in
computing
the
appellant's
income
for
the
1987
taxation
year.
In
closing,
I
should
say
that
the
appellant
referred
me
to
the
decision
of
this
Court
in
Peel
v.
M.N.R.,
[1987]
1
C.T.C.
2373,
87
D.T.C.
268,
a
decision
of
Taylor,
J.
I
find
no
criticism
with
the
decision
of
Taylor,
J.
but,
in
my
opinion,
the
facts
in
Peel
are
quite
different.
Mr.
Peel
had
brought
an
action
following
his
disability.
He
sued
the
insurance
company
which
carried
disability
insurance
with
respect
to
his
employment.
He
won
that
action
against
the
insurance
company,
and
this
Court
found
that
the
amount
recovered
from
the
insurance
company
was
not
taxable.
The
simple
distinction
in
my
view
between
Peel,
supra,
and
the
present
case
is
that
the
amount
paid
to
Peel
was
not
paid
by
his
employer,
nor
was
it
paid
in
what
has
been
called
an
ex
gratia
circumstance
for
the
loss
of
employment.
The
wording
of
“retiring
allowance”
in
section
248
makes
it
perfectly
clear
that
whether
an
amount
is
paid
ex
gratia
or
as
the
result
of
a
legal
action
against
a
former
employer,
that
amount
is
still
going
to
be
caught
within
the
definition
of
“retiring
allowance”
and
will
be
required
to
be
included
in
computing
income
under
subsection
56(1).
For
these
reasons
the
appeal
is
dismissed,
in
the
circumstances,
without
costs.
Appeal
dismissed.
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