Docket: 2004-4619(IT)G
BETWEEN:
MARC
FOREST,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal heard
on September 14, 2006, at Québec, Quebec
Before: The Honourable
Justice Paul Bédard
Appearances:
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For the Appellant:
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The Appellant himself
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|
|
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Counsel for the Respondent:
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Valérie Tardif
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____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
the Income Tax Act for the 2003 taxation year is dismissed, with costs,
in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada,
this 3rd day of April 2007.
"Paul Bédard"
Translation
certified true
on this 19th day
of February 2008.
François Brunet, Revisor
Citation: 2007TCC200
Date: 20070403
Docket: 2004-4619(IT)G
BETWEEN:
MARC FOREST,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] In December 2003, the
Appellant and Ville de Shawinigan ("the City") signed a
settlement and release ("the Settlement Agreement") reproduced in the
attached Appendix A. In consideration of the commitments made by the City under
the Settlement, including a promise to pay the Appellant the sum of $152,968.75
("the Settlement Amount"), the Appellant, among other things, gave
the City his resignation from his position as assistant clerk and dropped a
psychological harassment lawsuit. The Minister of Revenue of Canada ("the Minister")
included the Settlement Amount in computing the Appellant's income for the 2003
taxation year, and considered it a retiring allowance. The Appellant submits
that the Settlement Amount was related to his dropping of the psychological
harassment lawsuit and was unrelated to his resignation; thus, in his
submission, it should not be included in computing his income for the 2003
taxation year.
Facts
[2] Just before the merger
of the municipalities of the Centre‑Mauricie area (which included the
town of Shawinigan-Sud), the Appellant was clerk and director of personnel for the
town of Shawinigan-Sud. On September 5, 2001, the
Government of Quebec issued an Order in Council amalgamating the seven
municipalities of Centre‑Mauricie into a new city known from that point
onward as Ville de Shawinigan. In the Order in Council, the Government of
Quebec appointed five people to a transition committee. The committee posted
vacancy announcements for executive positions in the new City, including city clerk, legal
affairs advisor and human resources director. The Appellant applied for
these three positions but was unsuccessful. At the end of the process, the
transition committee wrote a letter declaring the Appellant a surplus executive,
and the committee assigned him to the position of assistant clerk, which he
held until December 2003. After that, he filed three complaints with the labour
commissioner‑general's office under section 72 of the Cities and
Towns Act, R.S.Q. c. C‑19. Essentially, the Appellant
alleged that he was dismissed by the transition committee. He said that he was penalized
by the application of the plans that were intended to integrate the officials
and employees of the municipalities affected by the merger. He alleged
that the appointment process used by the transition committee was improper and
thus, that the committee's decision not to appoint him to one of the three
positions, and to appoint him as assistant clerk instead, without his having
applied for that position, entitled him to a remedy under section 72 of the Cities and
Towns Act. On May 9, 2002, labour commissioner Claude Gélinas
dismissed the Appellant's three complaints on the basis that he did not have
jurisdiction to hear them. On June 5, 2002, the Appellant brought a
motion before the Quebec Superior Court to
set aside this decision. In his judgment dated November 9, 2002,
Justice Raymond W. Pronovost granted the Appellant's motion. On June 26, 2003, the Quebec Court of
Appeal reversed Justice Pronovost's judgment.
On June 26, 2003, the Supreme Court of Canada dismissed the application for
leave to appeal from the Quebec Court of Appeal's decision, with costs.
[3] On November 11,
2003, the Appellant filed an amended motion to institute proceedings in which he claimed from the City, inter
alia, moral damages ($100,000) and exemplary damages ($100,000) for having
violated his fundamental rights, including his right to honour, respect,
dignity and reputation, by continuously harassing him over a 15‑month
period commencing in January 2002 ("the harassment lawsuit").
[4] In December 2003,
the Appellant and the City signed the Settlement Agreement. In consideration
of the commitments made by the City and stipulated in the Settlement Agreement,
including the payment of the Settlement Amount, the Appellant
i)
resigned
from his position of assistant clerk;
ii)
abandoned
the two actions that were pending on the date of the Settlement, that is to
say, the harassment lawsuit and a conditional workers' compensation claim filed
on or about November 6, 2003; and
iii)
released the City, its
mayor, councillors, employees, officers, agents, directors, assigns and
mandataries, fully and finally, from any past, present or future actions or
causes of action before the courts, quasi-judicial tribunals or administrative
tribunals by reason of his employment with the City or the termination of such
employment.
[5] The Ville de
Shawinigan's position from a taxation standpoint was that it paid the Appellant
a retiring allowance of $152,968.75 in 2003.
[6] The only issue for
determination is whether the amount of $152,968.75 received from the City in
2003 constitutes a retiring allowance or moral damages.
The law
[7] "Retiring
allowance" is defined as follows in subsection 248(1) of the Income Tax Act
("the Act"):
"retiring
allowance" means an amount (other than a superannuation or pension
benefit, an amount received as a consequence of the death of an employee or a
benefit described in subparagraph 6(1)(a)(iv)) received:
(a) on
or after retirement of a taxpayer from an office or employment in recognition
of the taxpayer's 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
or, after the taxpayer's death, by a dependant or a relation of the taxpayer or
by the legal representative of the taxpayer;
[8] Subparagraph 56(1)(a)(ii)
of the Act reads:
56. (1) Without restricting the generality of
section 3, there shall be included in computing the income of a taxpayer for a
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,
Analysis
[9] Firstly, the
purpose of paying the Settlement Amount must be determined based on the
evidence adduced. In this regard, the Court must address the following question:
was the Settlement Amount, or a part thereof, paid to the Appellant in
consideration of his commitment to resign from his position as assistant clerk
or his dropping of the harassment lawsuit? The answer to this question is
important. Indeed, my holding, in the event that the evidence shows that the
Settlement Amount was related to the dropping of the harassment lawsuit
and unrelated to the Appellant's resignation, would be that the Settlement
Amount is not a retiring allowance, and, moreover, that the Settlement Amount should
not be included in the Appellant's income for the 2003 taxation year. By
contrast, should the evidence show that the Settlement Amount was related to
the Appellant's resignation from his position as assistant clerk, I would find
that the Settlement Amount is a retiring allowance within the meaning of
subsection 248(1) of the Act and would therefore have to be included in the
Appellant's income for the 2003 taxation year under subparagraph 56(1)(a)(ii)
of the Act.
[10] I emphasize that the
Settlement Agreement is silent with respect to the payment of the Settlement
Amount. Indeed, the Settlement Agreement makes no connection between the
Settlement Amount and any particular commitment on the Appellant's part. The
amount is actually a comprehensive allowance paid to the Appellant in exchange
for several commitments made by him.
[11] The Appellant
submits that he has shown, on a balance of probabilities, that the entire
Settlement Amount was related to his commitment to drop his harassment lawsuit.
The Appellant believes that he has discharged the burden of persuasion by
providing uncontradicted testimony in this regard. It is true that the
Appellant was not contradicted by other witnesses. However, the Appellant must
understand that his testimony is clearly contrary to the documentary evidence,
that is to say, the Settlement Agreement.
[12] It is plausible that
the City paid the Appellant a part of the Settlement Amount in exchange for his
dropping the harassment lawsuit. However, in my view, it is implausible that the
City paid no portion of the Settlement Amount to the Appellant in consideration
of his resignation as an employee. Why would the parties, who were
represented by counsel, have taken the trouble to stipulate expressly, in
section 5 of the Settlement Agreement, that [TRANSLATION] "in consideration
of the commitments made herein by the City, Forest tenders his resignation
. . ."? Why did the parties see fit to add, in section 8 of
the Settlement Agreement, that [TRANSLATION] "in consideration of the
fulfilment of the commitments made by the City, Forest acknowledges that he
will no longer have an employment relationship with the City . . ."? The language
of the Settlement Agreement leaves no room for interpretation: at least a
part of the Settlement Amount, if not all of it, was paid by the City to the
Appellant in consideration of his resignation from his employment. Since the Appellant
has not persuaded me that the entire Settlement Amount that he was paid
was related solely to his abandonment of the harassment lawsuit, and since the
evidence that he has tendered before me does not enable me to determine clearly
which part of the allowance is related to this commitment, I find that the
entire Settlement Amount is a retiring allowance within the meaning of
subsection 248(1) of the Act and must therefore be included in computing
the Appellant's income for his 2003 taxation year under subparagraph 56(1)(a)(ii)
of the Act.
[13] For these reasons,
the appeal is dismissed with costs.
Signed at Ottawa, Canada, this
3rd day of April 2007.
"Paul Bédard"
Translation certified true
on this 19th day of February 2008.
François Brunet, Revisor
Appendix A
[TRANSLATION]
CANADA
PROVINCE OF QUEBEC
DISTRICT OF
SAINT-MAURICE
No.: 410-17-000175-039
BJ 0534
MARC FOREST
(hereinafter
"FOREST")
AND
VILLE
DE SHAWINIGAN
(hereinafter
"THE CITY")
_________________________
SETTLEMENT AND RELEASE
________________________________________________________
WHEREAS Forest has filed
complaints against the City with the Commission des relations du travail (File
Nos. CQ-1011-5254, CP 1010‑8933, CQ-1010-9905 and CQ-1011-0488) and
instituted judicial review proceedings in Superior Court (410‑05‑001428‑028)
which proceeded up through the Court of Appeal (200‑09‑004295‑025)
and the Supreme Court of Canada (CSC 29710);
WHEREAS Forest commenced
an action in damages against the City in Superior Court (File No.
410-17-000175-039);
WHEREAS Forest filed a conditional
workers' compensation claim with the CSST on or about November 6, 2003;
WHEREAS Forest has just begun working
for another employer;
AND
WHEREAS, by this Agreement, the parties wish to settle all their disputes and
grievances;
NOW THEREFORE, THE PARTIES AGREE
AS FOLLOWS:
1. The preamble is
an integral part of this Agreement.
2. In
consideration of this Agreement, the City shall pay to or for the benefit of
Forest, no later than December 31, 2003, the sum of $165,000 (gross),
in accordance with the terms and conditions set out below:
(a) $12,031.25, including
taxes, directly to his attorneys as judicial costs and extrajudicial fees; and
(b) the remainder, being $152,968.75,
less the requisite statutory source deductions, to the order of Charles‑Grenon
& Dion, Attorneys, In Trust.
3. In
addition, and in consideration of this Agreement, the City and/or its attorneys
shall renounce the claim or collect from Forest of the memoranda of costs due
pursuant to the decisions made by the Court of Appeal and Supreme Court.
4. In
addition, the City shall pay Forest, no later than December 31, 2003,
the vacation allowances and other days owed to him (a total of seven (7)
weeks).
5.
In
consideration of the fulfilment of the commitments made herein by the City, Forest tenders his
resignation, which shall be effective on the date of signing hereof.
6.
In
addition, subject to the fulfilment of the commitments made herein by the City,
Forest personally, and on behalf of his assigns, hereby fully, finally and
definitively releases the City as well as its Mayor, councillors, employees,
officers, agents, directors, assigns and mandataries, from any past, present or
future action or cause of action before any court, quasi-judicial tribunal or
administrative tribunal by reason of his employment with the City, the
termination of his employment with the City, or such other circumstances as are
contemplated in the proceedings referred to herein, and, without restricting
the generality of the foregoing, from any claim for principal, interest and
costs of any salary, vacation pay, severance pay, pay in lieu of notice,
notice, overtime, employment-related expenses, or other amount that could be
owed to him pursuant to any applicable memorandum, contract, agreement or legislation,
as well as any remuneration or benefit arising directly or indirectly from his
employment or the termination thereof and any damage of any nature whatsoever that
could result therefrom.
7.
The
full, final and definitive release referred to in the preceding paragraph is
given by Forest without prejudice to any right that he might have to file a
counterclaim against any action that Louise Panneton might commence
against him.
8.
In
consideration of the fulfilment of the commitments made by the City, Forest
acknowledges that he shall no longer have any employment relationship with the
City, and he renounces any right to reinstatement, and confirms that all proceedings,
complaints and claims referred to in the preamble hereof are completely abandoned,
without costs, and that the parties' respective counsel are mandated to declare
that they are settled out of court. Moreover, Forest acknowledges that all benefits and
perquisites of his employment with the City come to an end upon the signing
hereof.
9. The
amounts to be paid to Forest hereunder are paid without any admission of
liability whatsoever by the City, but rather, in order to terminate the
disputes and prevent any further disputes.
10. The
City fully, finally and definitively releases Forest from, and renounces any
claim against him for, any amount based on any present, past or future cause of
action in relation to the employment relationship that existed between the
parties.
11. It
is understood that in accordance with the usual rules of the City's pension
plan, Forest may, on the date of
signing hereof, transfer the amounts that he has accrued under the plan.
12. Forest
acknowledges that the payments to be made under paragraphs 2 and 4 hereof are
at his express request, and declares that he shall be personally responsible
for any taxation, assessment, objection, or other tax-related decision made by
any competent authority in respect of the said payments, and to be personally
responsible for any request for reimbursement or any claim, complaint, penalty
or assessment by the Minister of Revenue of Quebec, the Attorney General of
Quebec or their agents, or by the Receiver General for Canada,
Human Resources Development Canada or any competent authority, that could
be due or payable as a result of the payment of these amounts, and,
consequently, Forest holds the City harmless against any claim, assessment,
complaint, penalty, objection, or other decision, and from the consequences
thereof, and shall hold the City indemnified against any claim in this regard
and assume all costs associated therewith.
13. The
City and Forest agree not to harm each other's reputation, directly or
indirectly, by means of actions, speech, writings or otherwise, in connection
with the disputes and the employment relationship that existed between the
parties.
14. Except
for the purpose of enforcing this Agreement, and subject to the laws that are
in force, the parties agree, as of the date of signing hereof, to keep the
terms of this Agreement, and the tenor of the discussions that gave rise to
this Agreement, confidential.
15. This
Agreement constitutes a transaction within the meaning of article 2631 of
the Civil Code of Québec.
16. The
parties acknowledge that they have read and understood all the paragraphs and
clauses of this Settlement Agreement and declare that they are satisfied with
them.
17. The
parties acknowledge that they have received all the assistance necessary to
inform themselves of the consequences of signing this Settlement Agreement, and
declare that they understand its meaning and scope clearly.
IN WITNESS WHEREOF, THE PARTIES
HAVE SIGNED:
AT SHAWINIGAN, AT
TROIS-RIVIÈRES,
this 22nd day of December 2003 this
17th day of January 2004
CHANTAL
DOUCÉE MARC
FOREST___________
Duly authorized by the City Marc
Forest
AT TROIS-RIVIÈRES, AT
SHAWINIGAN,
this 17th day of January 2004 this
29th day of December 2003
JOLI-CŒUR,
LACASSE & ASSOCIÉS CHARLES
GRENON__________
Joli-Cœur, Lacasse, Geoffrion, Jetté
St-Pierre LLP CHARLES GRENON &
DION
CITATION: 2007TCC200
COURT FILE NO.: 2004-4619(IT)G
STYLE OF CAUSE: Marc Forest and Her Majesty the Queen
PLACE OF HEARING: Québec, Quebec
DATE OF HEARING: September 24, 2006
REASONS FOR
JUDGMENT BY: The Honourable Justice Paul Bédard
DATE OF JUDGMENT: April 3, 2007
APPEARANCES:
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For the
Appellant:
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The Appellant himself
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|
|
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Counsel for the Respondent:
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Valérie Tardif
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa, Canada
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