Cave v. The Queen, docket 98-1168-IT-I (Informal Procedure)

Date: 19991102

Docket: 98-1168-IT-I

BETWEEN:

JAMES CAVE

Appellant,

and

HER MAJESTY THE QUEEN

Respondent.

Reasons for Judgment

Taylor, D.J.T.C.C.

[1]            This is an appeal heard in Toronto, Ontario on October 18, 1999, against an assessment under the Income Tax Act (the "Act") in which the Respondent had assessed to tax for the year 1996 the amount of $6,000.00 received by Mr. Cave as a result of an agreement with a previous employer.

[2]            The Notice of Appeal read:

"April 4, 1996

Revenue Canada

Ottawa, Ontario

K1A 1A3

Dear Sirs:

I am attaching a T4 slip from Foodservice Dynamics Ltd. showing monies paid to me in 1995 and 1996 of $6,000.02. As you can see I have not reported this as income due to the fact that it is a disability amount negotiated with Foodservice because of mishandling of my group insurance when they took over as my employer. Please see the copy of the attached settlement form with them. Had my insurance been in force there would be no tax payable on any benefits as I paid these premiums personally for five years with Confederation Life and Canada Life.

Should you require copies of any further documentation I am sure these can be obtained from the life companies and previous employers."

[3]            The Reply to Notice of Appeal read in part:

       "In so assessing the Appellant, the Minister made the following assumptions of fact:

(a)            the facts hereinbefore admitted;

(b)            FD acquired the business of Scott's Management Services ("Scott's) in 1994 (the "Acquisition");

(c)            the Appellant was an employee of Scott's at the time of the Acquisition;

(d)            the Appellant suffers from a terminal disability (the "Disability") which pre-existed the Acquisition;

(e)            Scott's and FD have different insurance carriers for their employee group sickness or accident insurance plans (the "Plans");

(f)             the Appellant was not eligible for benefits payable under the Plans as a result of his Disability as he was no longer an employee of Scott's, and his Disability pre-existed his employment with FD;

(g)            as a result of his Disability, the Appellant ceased his employment with FD on or about April 1, 1994;

(h)            the Appellant and FD reached an agreement whereby the Appellant, in full settlement of any claims which he may have had relating to his employment with FD and it's termination, accepted certain benefits from FD (the "Agreement");

(i)             under the terms of the Agreement, the Appellant received an amount of $500.00 per month ($6,000.00 per year) until death or age 65;

(j)             the Amount was not derived from the contributions of the Appellant's employer to or under a registered pension plan, group sickness or accident insurance plan, private health services plan, supplementary unemployment benefit plan, deferred profit sharing plan or group life insurance plan;

(k)            the Appellant received the Amount during the 1996 taxation year from FD."

[4]            The "Release and Indemnity" dated October 25, 1994, to which reference is made above, read in part:

"My employment with Foodservice Dynamics Ltd. was terminated at my discretion on April 1, 1994, due to terminal disability, and since I do not qualify for long term disability benefits because of the existence of my pre-condition, I have agreed to accept benefit payments as outlined below in full settlement of all claims which I may have relating to such employment and its termination.

Monthly benefit payment of $500 until death or age 65.

Prescription and medication expense. Cost allowance of $100/month to be accrued.

Death benefit of $3,000 payable to designated beneficiary."

[5]            Mr. Cave was not able to attend the trial, but his friend Mr. Howatson, a witness to the "Release and Indemnity" above gave the Court the background information on the matter to the best of his ability.

[6]            In my view this situation falls squarely under the provisions of paragraph 6(1)(a) of the Act, determined in the Supreme Court of Canada judgment R. v. Savage (1983) C.T.C. 393, which was argued by counsel for the Respondent in support of the assessment at issue.

[7]            The appeal is dismissed.

Signed at Ottawa, Canada, this 2nd day of November 1999.

"D.E. Taylor"

D.J.T.C.C.

COURT FILE NO.:                                                 98-1168(IT)I

STYLE OF CAUSE:                                               James Cave and H.M.Q.

PLACE OF HEARING:                                         Toronto, Ontario

DATE OF HEARING:                                           October 18, 1999

REASONS FOR JUDGMENT BY:      The Honourable Deputy Judge D.E. Taylor

DATE OF JUDGMENT:                                       November 2, 1999

APPEARANCES:

Agent for the Appellant:                     Gordon Howatson

Counsel for the Respondent:              Wendy Houtmeyers

                                                                                Marilyn Vardi

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                OTTAWA, CANADA

98-1168(IT)I

BETWEEN:

JAMES CAVE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on October 18, 1999 at Toronto, Ontario, by

the Honourable Deputy Judge D.E. Taylor

Appearances

Agent for the Appellant:                       Gordon Howatson

Counsel for the Respondent:                Wendy Houtmeyers

                                                          Marilyn Vardi

JUDGMENT

          The appeal from the assessment made under the Income Tax Act for the 1996 taxation year is dismissed.

Signed at Ottawa, Canada, this 2nd day of November 1999.

"D.E. Taylor"

D.J.T.C.C.