Date: 20000627
Dockets: 98-982-IT-I, 98-2803-IT-I
BETWEEN:
LAURENT DUGUAY, NEIL FISHER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Lamarre Proulx, J.T.C.C.
[1]
These two appeals were heard on common evidence under the
informal procedure.
[2]
The first issue is whether the payments received as compensation
by the appellants in their respective capacities as president and
treasurer of their union for the time they spent on union
business are to be included, in computing their income, as income
from an office or employment under subsection 5(1) of the
Income Tax Act (the "Act"). The Minister
of National Revenue (the "Minister") assessed the
appellants as employees of the Syndicat National des
Employés de l'hôpital Hôtel-Dieu de
Montréal (the "Union").
[3]
The second issue is whether the appellants are liable to the
penalties imposed under subsection 163(2) of the
Act.
[4]
The Amended Notices of Appeal are more or less identical except
with regard to the appellants' duties. Mr. Duguay was
president, and Mr. Fisher was treasurer. I cite paragraphs 3, 4
and 5 of Mr. Fisher's Amended Notice:
[TRANSLATION]
3.
During the 1994 and 1995 taxation years, I worked, without pay,
as treasurer for the Syndicat national des employés
généraux de l'Hôtel-Dieu de
Montréal (see Annex—Constitution).
4.a) At
the objection stage, I provided, in writing and verbally, the
agreement entered into in November 1996 between the Union and
Hôtel-Dieu de Montréal (see Annex), which explains
what was expected as regards the regularizing of union leave. At
no time did we acknowledge that the amounts paid by the Union
were taxable.
4.b) At the
objection stage, I also sent a copy of the agreement entered into
between the Union and Hôtel-Dieu de Montréal, signed
on March 28, 1995 (see Annex), concerning the payment
by Hôtel-Dieu de Montréal for union leave and
Hôtel-Dieu did not conclude that such payment was
taxable.
5.
Furthermore, during a previous term of office, Laurent Duguay,
acting as union president, contacted Revenue Canada in 1981 and
again in 1990 to inform them that income received from the Union
was not taxable by virtue of section 149 and 149K [sic] of
the Act. He received no notification from Revenue Canada to the
effect that such income was taxable.
[5]
The facts relied on by the Minister in assessing the appellant
Laurent Duguay are set out in paragraphs 6, 7, 8, 9 and
10 of the Reply to the Notice of Appeal (the "Reply")
as follows:
[TRANSLATION]
6.
In his income tax returns, the appellant reported as income from
employment the amounts of $6,487.82 for the 1994 taxation year,
$7,367.62 for the 1995 taxation year and $9,609.23 for the 1996
taxation year, in accordance with the T4 slips issued by the
Hôtel-Dieu de Montréal.
7.
By notices of reassessment dated November 18, 1997, for each of
the 1994 and 1995 taxation years and November 24, 1997, for the
1996 taxation year, the Minister of National Revenue (hereinafter
the "Minister") included in the income reported by the
appellant the amounts of $16,372 for the 1994 taxation year,
$19,882 for the 1995 taxation year and $17,622 for the 1996
taxation year, which were received in the course of his
employment with the Syndicat des employés
généraux de l'Hôtel-Dieu de
Montréal.
8.
In reassessing the appellant for the 1994 and 1995 taxation years
on November 18, 1997, and for the 1996 taxation year on November
24, 1997, the Minister assumed the following facts, inter
alia:
(a)
during the 1994, 1995 and 1996 taxation years, the appellant was
employed by the Hôtel-Dieu de Montréal hospital;
(b)
during the taxation years in question, the appellant looked after
union business for the Syndicat des employés
généraux de l'Hôtel-Dieu de
Montréal (hereinafter the "Union");
(c)
during the 1994, 1995 and 1996 taxation years, the Union paid the
appellant, as wages, the amounts of $16,372 for the 1994 taxation
year, $19,882 for the 1995 taxation year and $17,622 for the 1996
taxation year;
(d)
the amounts for Laurent Duguay referred to above in subparagraph
(c) were not reported for the 1994, 1995 and 1996 taxation
years;
(e)
accordingly, the Minister included in the appellant's income
the amounts paid by the Union of $16,372 for the 1994 taxation
year, $19,882 for the 1995 taxation year and $17,622 for the 1996
taxation year;
(f)
in addition to the payment of the amounts referred to in (c)
above, expenses were reimbursed to the appellant for the taxation
years in issue;
(g)
the reimbursements of the appellant's expenses by the Union
were not included in the appellant's income for the taxation
years in question;
(h)
consequently, the Minister did not allow any expenses claimed by
the appellant in relation to his income for the 1994, 1995 and
1996 taxation years;
(i)
furthermore, by failing to report income of $16,372 for the 1994
taxation year and $19,882 for the 1995 taxation year, the
appellant knowingly, or under circumstances amounting to gross
negligence, made or participated in, assented to or acquiesced in
the making of a false statement or omission in the returns filed
in respect of the 1994 and 1995 taxation years, with the result
that the tax payable by the appellant according to the
information provided in the tax returns filed in respect of those
years was less than the amount of tax actually payable in respect
of those years;
(j)
therefore, as a result of the appellant's failure to report
all of his income, penalties of the greater of $100 and 50% of
the total difference in tax, i.e., $1,130,08 for the 1994
taxation year and $1,415.53 for the 1995 taxation year, were
imposed on the appellant under subsection 163(2) of the Income
Tax Act (hereinafter the "Act").
9.
At the objection stage, the Minister obtained a copy of the
minutes of the Union general meeting, held on April 19, 1993, and
attended by Pierre Demers, Lise Fréchette, Charles Demers,
Pierre Chalifoux, France Morin, Pierre Daoust, Patrick
Barette and Richard Larocque. At this meeting, a motion for
the regularization of the method of payment for union leave as of
July 1, 1993, was adopted.
10.
The Minister also obtained the following information:
(a)
during the years in question, the appellant was chairman of the
Union executive committee;
(b)
during the years in question, at general meetings of the Union
and at meetings of its executive committee, which were attended
by the appellant, [TRANSLATION] "payment for union leave and
regularization" were matters that were always on the agenda
and resolutions had been adopted in that regard.
[6]
As regards the appellant Neil Fisher, the facts are set out
in paragraphs 6, 7, 13 (a) to (e), and (j) of the Reply.
Paragraphs 14 and 15 thereof are identical to
paragraphs 9 and 10 of the preceding Reply, except that Mr.
Fisher was the secretary-treasurer of the Union.
[TRANSLATION]
6.
In his income tax returns, the appellant reported as income from
employment the amounts of $17,265.01 for the 1994 taxation
year and $23,301.46 for the 1995 taxation year, in accordance
with the T4 slips issued by the Hôtel-Dieu de
Montréal.
7.
By notice of reassessment dated October 22, 1996, for each of the
1994 and 1995 taxation years, the Minister of National Revenue
(hereinafter the "Minister") included in the income
reported by the appellant the amounts of $12,930 for the 1994
taxation year and $10,370 for the 1995 taxation year, which were
received in the course of his employment with the Syndicat des
employés généraux de l'Hôtel-Dieu
de Montréal.
. . .
13.
In reassessing the appellant for the 1994 and 1995 taxation years
on October 22, 1996, the Minister assumed the following
facts, inter alia:
(a)
during the 1994 and 1995 taxation years, the appellant was
employed by the Hôtel-Dieu de Montréal hospital;
(b)
during the taxation years in question, the appellant looked after
union business for the Syndicat des employés
généraux de l'Hôtel-Dieu de
Montréal (hereinafter the "Union");
(c)
during the 1994 and 1995 taxation years, the Union paid the
appellant, as wages, the amounts of $12,930 for the 1994 taxation
year and $10,370 for the 1995 taxation year;
(d)
the amounts for Neil Fisher referred to above in subparagraph (c)
were not reported for the 1994 and 1995 taxation years;
(e)
accordingly, the Minister included in the appellant's income
the amounts paid by the Union of $12,930 for the 1994 taxation
year and $10,370 for the 1995 taxation year;
. . .
(j)
therefore, as a result of the appellant's failure to report
all of his income, penalties of the greater of $100 and 50% of
the total difference in tax, i.e., $949.82 for the 1994
taxation year and $762.62 for the 1995 taxation year, were
imposed on the appellant under subsection 163(2) of the Income
Tax Act (hereinafter the "Act").
[7]
The witnesses at the hearing included the two appellants and
Marie-France Perreault, who testified for the
appellants. Guy Lanneville, Johanne Blais,
Alain Lacoste and Marcel Martin testified for the
respondent.
[8]
As Exhibit A-1, Mr. Duguay tendered the Constitution
of the Syndicat National des Employés de
l'hôpital Hôtel-Dieu de Montréal
(the "Constitution"). He referred to Article 26 of the
Constitution, which reads as follows:
[TRANSLATION]
Article 26: Leave of absence for union business and
remuneration.
26.01: The Union executive shall
have a policy for reimbursing expenses incurred by Union officers
and stewards in their union activities, as defined in the
Minutes.
26.02: In preparing the annual
budget, the executive shall take these principles into
account.
[9]
Under Article 26.01, the Union reimburses an employee for the
amount of gross wages lost through time away from the
Hôtel-Dieu de Montréal hospital
("Hôtel-Dieu") on union business.
Mr. Duguay explained that the Union would rather that union
leave were taken at the employer's expense, but where the
employer refuses to grant an employee paid leave, the Union will
reimburse the union member.
[10] With
regard to the circumstances of union leave, Mr. Duguay referred
to excerpts from the collective agreement between the
employers' bargaining committee in the health and social
services sector, the employers' bargaining subcommittee for
public hospital centres and the Fédération des
affaires sociales inc. (the CSN) (the "collective
agreement"), in force from December 25, 1995, to June 30,
1998. Excerpts from Article 9, entitled [TRANSLATION] "Union
freedom of action" were tendered as Exhibit I-3.
Paragraphs 9.03, 9.06, 9.07 and 9.08 read as follows:
[TRANSLATION]
9.03 Stewards
designated by the union may, on written request by the union made
ten calendar days in advance, take unpaid leave from their work
for union business.
. . .
9.06 On
request to the personnel director or his representative, who
shall not refuse without valid reason, an external union
representative may meet in the establishment during working
hours, in a place reserved for that purpose, with any person
covered by the certification, and that person shall not lose any
wages.
9.07 Union
representatives may meet by appointment with the authorities of
the establishment. On request to the personnel director or his
representative, who shall not refuse without valid reason, they
may also meet during working hours with the establishment's
employees regarding grievances to be discussed or investigations
into working conditions. The union representatives and the
employees concerned shall not be subject to any loss of wages in
such cases.
9.08 For the
purposes of this agreement, the employer shall grant part-time
leave without loss of wages to one or more employees designated
by all the unions within the same establishment that are
affiliated with the Confédération des syndicats
nationaux.
The number of days of leave to be allowed is as follows:
1.
from 50 to 99 employees affiliated with the
Confédération des syndicats nationaux: one-half
(1/2) day per week;
2.
from 100 to 299 employees affiliated with the
Confédération des syndicats nationaux: one (1) day
per week;
3.
from 300 to 749 employees affiliated with the
Confédération des syndicats nationaux: two (2) days
per week;
4.
750 or more employees affiliated with the
Confédération des syndicats nationaux: three (3)
days per week.
[11] As can be
seen from the above, union leave under Article 9.03 is not
paid by the employer. Leave under Articles 9.06, 9.07 or 9.08 is
paid by the employer. The union members generally requested union
leave under the latter three paragraphs. Such leave was
occasionally granted. At other times, it was refused, which led
to the filing of a grievance.
[12] In either
case—both where wages were paid by the employer and where
wages were not paid by the employer—the employee submitted
to the Union an absence sheet listing leave taken for union
business and claiming, if appropriate, reimbursement for that
leave and whatever expenses he may have incurred. Several such
sheets were filed as Exhibit I-12. As indicated above,
when no wages were paid by the employer for the leave, the union
member received the gross amount of the lost wages from the
Union.
[13] It
sometimes happened that an employee submitted a sheet indicating
Article 9.08 as the basis for his union leave; this was the
article under which his wages would be paid by the employer.
However, the employer could refuse to accept this and classify
the leave as coming under Article 9.03. This would result in
the employee's not being paid by the employer and receiving
compensation from the Union. When the employer made such a
decision, it usually led to the filing of a grievance. A number
of grievances filed by the appellants for the years in question
in the instant case were introduced in evidence as
Exhibits A-5 and A-6. Exhibit A-12
concerns a witness for the respondent, Marcel Martin.
[14] The union
members were reimbursed for their gross wages. However, they lost
the fringe benefits of their employment with
Hôtel-Dieu. Mr. Fisher explained, for example, that
he lost almost two years on his retirement plan. There was no
evidence that the Union paid any fringe benefits for work
performed for the Union by union members.
[15]
Exhibit A-3 contains minutes of executive committee
meetings, primarily the meeting of January 17, 1994. It reveals
that the issue of regularizing union leave was on the agenda. The
executive agreed to reconsider the proposal put forward by
Neil Fisher at the meeting of January 4, 1994. Among the
motions, there is one that I find interesting although it was not
commented on at the hearing. It was a [TRANSLATION] "Notice
of motion to reconsider the proposal that sick days be paid when
an employee is granted leave." That motion was rejected. The
Union did not pay for sick leave. Exhibits I-7 and I-8, tendered
on cross-examination, also contain excerpts from minutes of
meetings. Exhibit I-8 concerns a meeting of the executive on
February 14, 1995. The agenda contains an item on payment for
union leave. Exhibit I-7 concerns a general meeting held on May
13, 1996. It contains a motion [TRANSLATION] "That the
situation be regularized beginning on July 1, 1996," which
was adopted. Exhibit I-6 concerns a general meeting on April 19,
1993. It contains a motion [TRANSLATION] "That the method of
payment for union leave be regularized beginning on July 1,
1993." This motion was adopted.
[16] The
appellants filed as Exhibit A-2 an agreement entered into in
October 1996 between Hôtel-Dieu and the Union. According to
the appellants, this was the agreement sought by union members
when they spoke of regularizing payment by the Union for union
business. The purpose of the agreement was to have the employer
pay for all union leave. The Union would reimburse the employer
for any such leave without pay granted under Article 9.03. I
quote from Article 1 of the agreement:
[TRANSLATION]
1.
The employer shall continue to pay the wages and fringe benefits
of the person on leave of absence without pay for union business
under Article 9 of the collective agreement provided that the
union reimburse the employer for those wages, fringe benefits,
the employer's share of the fringe benefit plans and the
administrative costs.
[17] The
appellants tendered as Exhibit A-4 a letter from the CSN's
legal services department. The letter was introduced to show that
legal services lawyers used the term "office" not
"employment" and that they thought that even this
position could be challenged. In the appellants' view, the
letter indicates that there was no consensus within the Union as
to whether the amounts in question were taxable, and if they
were, on what basis. I reproduce the first part of that letter,
which is the part relevant to this discussion:
[TRANSLATION]
. . .
. . . Indeed, we might note that the courts have found in all
cases that these amounts are taxable income from an office.
However, we believe it would be prudent to explore this
avenue.
[18] Exhibit
A-8 is a report on the cost of union leave for the period from
October 1994 to September 1996 and is addressed to the CSN. The
report was prepared by the appellant, Neil Fisher, in his
capacity as treasurer, with a view to having the union local
reimbursed by the CSN.
[19] Exhibit
A-11 was filed by Marie-France Perreault. It is an agreement
entered into on March 28, 1995, between Hôtel-Dieu de
Montréal and the Union. On page 6, paragraph (l), the
employer undertakes to pay $11,000 to the Union as reimbursement
for union leave. Ms. Perreault explained that this settled the
dispute regarding union leave in respect of which grievances had
been filed with the employer. It was the Union that received the
payment since it had already reimbursed the employees under
Article 26.01 of the Constitution and in accordance with the
established procedure relating to the absence sheets referred to
in paragraphs 11 and 12 of these Reasons.
[20] Exhibits
I-9, I-10 and I-11 are the income tax returns of the appellant
Laurent Duguay for the 1994 to 1996 taxation years. They
were filed by the respondent to show that this appellant did not
file his tax returns in time. The return for 1994 is dated August
4, 1997. It should be noted that for 1994, however, this
appellant claimed a refund of $524.09. The returns for 1995 and
1996 were filed on June 20, 1997, according to the Revenue Canada
stamp. The appellant Laurent Duguay claimed refunds of
$527.20 for 1995 and $672.25 for 1996.
[21] Exhibit
I-14 is an excerpt from the income and expenditures book kept by
the treasurer.
[22] Johanne
Blais, one of the Minister's auditors, tendered as
Exhibit I-17 a summary of the amounts received by the
appellants in the case at bar for union business for which they
were paid by the Union in respect of the years in question. The
documents indicate the dates, cheque numbers and amounts received
in one year by one union member as payment for union leave. This
information was taken from the book kept by the treasurer. The
accuracy of the amounts received is not disputed by the
appellants.
[23] Alain
Lacoste, appeals officer, explained that the appellants had
received remuneration for their work, and that this was income
from employment. Since this income had not been reported and the
appellants knew it should be reported, they were subject to
penalties under paragraph 163(2) of the Act. On
cross-examination, he confirmed that one of the Minister's
auditors had met with the Union in 1995, but he did not have that
auditor's report with him.
[24] Exhibit
I-2 is the Notice of Objection filed by the appellant
Neil Fisher. The notice does not dispute the assessment of
the tax, but does object to the penalty assessed under subsection
163(2) of the Act. This document appears to have been
prepared by a Union member for members so assessed. It reads as
follows:
[TRANSLATION]
. . .
The purpose of this letter is to object to the fact that I am
obliged to pay a penalty on taxes owed in 1994 and 1995.
I work at the Hôtel-Dieu de Montréal and was a
union representative in 1994, 1995 and 1996. Since that time, the
Syndicat national des employés généraux has
had to "regularize itself" so that union
representatives would be able to be assessed taxes like all
workers. Motions to that effect were proposed and adopted at
several general meetings (Nov.1992, Sept. 1993, August 1995 and
May 1996), which means that the union executive had been given
legal authority to go forward with it. It was not done. It should
also be noted that the "parent" of the Syndicat
national des employés généraux de
l'Hôtel-Dieu, the CSN, also had the authority to ensure
that all its unions were regularized. The CSN also failed to do
this.
I am thus faced with a dispute which has dragged on for a long
time and which should have been settled as a matter of priority.
Unfortunately, the union executive of the Hôtel-Dieu de
Montréal and the CSN have not done their duty and I am
left to suffer the consequences.
This letter therefore means that the fine which I have to pay
should be imposed on those really responsible, the Syndicat
national des employés généraux and the
CSN.
Please note that I am prepared to pay my tax assessments for
these years. However, I dispute the penalty which has been
unfairly imposed on me. I therefore feel I have been unfairly
treated in all that I am undergoing and unfortunately it is once
again the victim who has to pay . . . .
[25] Mr.
Fisher explained that his position has always been that it was up
to the employer to pay the union members and this was the
regularization that was sought. He referred in this regard to
Exhibit A-2, the agreement that regularized the
employees' situation.
[26]
Guy Lanneville, who was with the employer's human
resources department at the time in question, corroborated the
testimony regarding the union leave process.
[27]
Marcel Martin was one of the appellants in the judgment of
this Court in Denis Comptois et al. v. Her Majesty the
Queen,[1998] T.C.J. No. 232. He explained that union members
wanted to have union leave regularized because employees who did
not receive it considered it unfair that those who did get it
received their gross wages untaxed. Moreover, in their opinion,
those amounts should be subject to tax just as their income from
employment was. This is the reason for the repeated calls to
regularize the payment of union leave.
Respondent's position and submissions
[28] Counsel
for the respondent argued that what was involved was employment
income or, if not, income from an office. With regard to
employment income, he referred to the 1986 decision of this Court
in London Professional Fire Fighters Assn. v. M.N.R.,
[1986] T.C.J. No. 733, which decision was based on paragraph
12(a) of the Unemployment Insurance Regulations
(the "Regulations"). The identical provision is
now paragraph 6(a) of the Employment Insurance
Regulations. I quote paragraph 12(a):
12.
Employment in any of the following employments, unless it is
excepted employment under subsection 3(2) of the Act or excepted
from insurable employment by any other provision of these
Regulations, is included in insurable employment:
(a)
employment of a union member by his union in conducting union
business, other than picketing in a labour dispute.
[29] In that
case, members of the union executive paid unemployment insurance
premiums as firefighters in the city of London. The Minister also
imposed premiums on the money they received for their duties on
the union executive. It was held that the firefighters who were
members of the executive were employees of their union.
[30] In the
instant case, counsel for the respondent saw that the standard
terms and conditions identifying a contract of employment had not
been proved. He then fell back on the concept of income from an
office. According to section 248 of the Act,
"office"
means the position of an individual entitling the individual
to a fixed or ascertainable stipend or remuneration and includes
a judicial office, the office of a minister of the Crown, the
office of a member of the Senate or House of Commons of Canada, a
member of a legislative assembly or a member of a legislative or
executive council and any other office, the incumbent of which is
elected by popular vote or is elected or appointed in a
representative capacity and also includes the position of a
corporation director, and "officer" means a person
holding such an office.
[31] Counsel
for the respondent submitted that this very aptly describes the
duties performed by the appellants as president and treasurer of
the Union. The fact that the stipend or remuneration was
determined on the basis of their position with
Hôtel-Dieu and not in terms of their office does not,
in his opinion, prevent that stipend or remuneration from being
"ascertainable", which is the term used in the
above-cited definition. The income would therefore be
taxable under subsection 5(1) of the Act, which reads
as follows:
5(1) Income
from office or employment — Subject to this Part, a
taxpayer's income for a taxation year from an office or
employment is the salary, wages and other remuneration, including
gratuities, received by the taxpayer in the year.
[32] With
respect to the penalties, counsel for the respondent referred to
the judgment of this Court in Comptois et al.
(supra). In that case, the appellants did not dispute the
fact that they knew that it was wrong not to include the amounts
received from the union in their income. He referred in
particular to paragraphs 53, 54 and 55 of that decision:
[53] In so far
as all the persons concerned knew that the union's procedure
was incorrect and that the situation had to be regularized, since
they had realized that the money paid for "union leave"
was income, it is hard to see how they could have been in good
faith when they deliberately refrained from reporting the money
received on the ground that T-4s had not been issued. Knowing
that the union had never issued any and that this situation was
irregular does not mean it can still be argued that they thought
it was the issuing of the T-4s rather than the receipt of the
money that was determinative.
[54] In light
of the facts that no one took any action or even sought
information from persons unrelated to the union, and that all the
appellants acted in the same way, whether out of solidarity or
for other reasons, we are certainly entitled to ask whether they
were not collectively hoping they could in this way avoid
assessments as long as the union did not perform its own
obligations relating to source deductions and to the reporting of
income by issuing T-4 information slips.
[55] There is
no need to refer to a list of precedents on the concept of gross
negligence and extenuating circumstances that should be
considered for the purposes of s. 163(2) of the Act when the
evidence shows that a taxpayer deliberately failed to report
money received that he or she knew to be taxable. The fact that
the failure results from being too trusting or from a
manifestation of union solidarity does not reduce the individual
responsibility imposed on every taxpayer. In the circumstances,
to fail to act, to wait or to close one's eyes is to commit
[a] deliberate act. That is precisely what the word
"knowingly" used in s. 163(2) of the Act means when the
conditions for imposing a penalty are set out as follows:
"Every person who, knowingly . . . has made
or has participated in, assented to or acquiesced in the making
of, a false statement or omission in a return
. . . is liable to a penalty.
. . ."
Appellants' position and submissions
[33] Unlike
the appellants in Comptois et al. (supra), the appellants
disputed the validity of the assessments themselves. At the
outset, they argued that what they had received were advances
that they had to reimburse when the grievances were settled. The
evidence revealed that the various amounts of money paid by the
employer in respect of the refused union leave were paid to the
Union. The money was not subsequently paid to the employees, and
the Union did not ask union members for reimbursement. The
appellants then submitted that they were not employees of the
Union. They held an office, but did not receive any remuneration
for that office. The only thing that was paid to them by the
Union was a reimbursement for expenses incurred in their union
activities, as required under Article 26.01 of the Constitution,
quoted in paragraph 8 of these Reasons. This was
compensation or reimbursement for a lost day of work and not
remuneration or a stipend. The remuneration mentioned in the
definition of "office" is the remuneration that is
associated with the office and is a function thereof. In the
instant case, there was no remuneration associated with the
office.
[34] The
appellants said that they had asked Revenue Canada officers who
met with them a few years prior to Revenue Canada's audit
(from which stemmed the assessments herein) about the tax
treatment of the payments in question. There was really no
evidence regarding this aspect of their search for information;
there were just assertions. Mr. Duguay said that he spoke to one
of the Minister's auditors in 1995, but that auditor did not
testify, and the content of his report was not submitted in
evidence. Mr. Duguay also stated that, in the beginning, he had
checked into whether the payments received in compensation were
taxable, and the answer had been negative.
Conclusion
[35] The
decision inLondon Professional Fire Fighters Assn.
(supra), to which counsel for the respondent referred, was
decided under paragraph 12(a) of the Regulations.
This provision was brought in under paragraph 4(1)(c) of
the Unemployment Insurance Act, which provides that
regulations may be made with respect to people who, because of
their contract, are not in an employment situation although they
are in actual fact employees. Paragraph 4(1)c) reads as
follows:
4(1) The
Commission may, with the approval of the Governor in Council,
make regulations for including in insurable employment
. . .
(c)
any employment that is not employment under a contract of service
if it appears to the Commission that the terms and conditions of
service of and the nature of the work performed by persons
employed in that employment are similar to the terms and
conditions of service of and the nature of the work performed by
persons employed under a contract of service.
[36] I have to
think that the judge who rendered the decision determined that
the work of the members of the executive was analogous to the
work of employees. In my view, therefore, that decision is not
useful in the instant case since there was no evidence here
concerning the presence of the standard terms and conditions of a
contract of employment. Since no such evidence was presented, I
must conclude that the appellants were not in an employment
situation.
[37] There is,
however, no doubt that, as president and treasurer, the
appellants performed the duties of an office. The only unusual
aspect of this case lies in the method of paying the stipend or
remuneration for the office held. The appellants were reimbursed
for their lost working days. The effect of the compensatory
payments was thus that the treasurer was reimbursed for a greater
amount than the president. Should these compensatory payments be
considered as a fixed or ascertainable stipend or remuneration?
There does not seem to be any case law on all fours with the
circumstances of this case. However, the case law is clear in
establishing that the meaning to be given to the terms
"stipend" and "remuneration" is very broad,
and any payment received by reason of an office or employment
must be included within that meaning. I refer in particular to
the decisions of the Supreme Court of Canada in Goldman v.
M.N.R., [1953] C.T.C. 95 and The Queen v. Savage,
[1983] 2 S.C.R. 428. The appropriate test for whether a
payment is remuneration or a stipend is to determine whether the
person received the payment for his activities in the performance
of his office or whether he received it simply as an individual.
The answer in this case is obvious. What is involved here is not
reimbursement for expenses incurred by the appellants.
Reimbursement of those expenses did not confer an economic
benefit on the appellants and was not to be included in computing
their income. Nor did the Minister include it, as appears from
the Reply. See, in this regard, Ransom v. M.N.R., [1968] 1
Ex. C.R. 293, Canada v. Huffman, [1990] F.C.J.
No. 529 and Canada v. Hoefele, [1995] F.C.J.
No. 1340. In conclusion, the fact that the stipend was paid
on the basis of the remuneration lost for a day of work does not
preclude that stipend from being a fixed or ascertainable stipend
paid by reason of the office and accordingly taxable under
subsection 5(1) of the Act.
[38] What
about the penalties imposed under subsection 163(2) of the
Act. The evidence before me differed from that before the
judge who decided the appeals in Comptois et al.
(supra). The evidence before that judge was that the
taxpayers knew that the payments were taxable. Such is not the
case here. The appellants were uncertain. They apparently tried
to find out but did not obtain a satisfactory response. The
evidence with respect to the information they possessed is
somewhat vague, but it was up to the respondent to make that
evidence certain since, under subsection 163(2) of the
Act, the burden of proof is on the Minister.
[39] In any
event, it is my opinion that the reasons why the payments in
question are taxable were not so clear at the outset that failure
to report those payments amounted to gross negligence. The
Minister assessed on the basis that they were income from
employment. However, in the Reply, he did not argue the existence
of a relationship of subordination or of other usual conditions
associated with the legal status of employment. Nor was any
evidence regarding such conditions presented at the hearing. With
respect to income from an office, it was also not all that
obvious that the payments received in compensation were in the
nature of a stipend or remuneration. There were no cases
specifically on point. The respondent made much of the fact that
the employees asked for the situation to be regularized. That
regularization was what was ultimately obtained from the
employer, that is, everything would be paid by the employer who
would then be reimbursed by the Union. The quest for
regularization should rather be viewed as a factor in their
favour in a legal situation that was not particularly clear. In
conclusion, the penalties assessed under subsection 163(2)
of the Act are not justified.
[40] The
appeals are allowed with regard to the penalties. Otherwise, in
computing the appellants' income, the payments received from
the Union must be included as income from an office under
subsection 5(1) of the Act.
Signed at Ottawa, Canada, this 27th day of June 2000.
"Louise Lamarre Proulx"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
[OFFICIAL ENGLISH TRANSLATION]
98-982(IT)I
BETWEEN:
LAURENT DUGUAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the
appeals of Neil Fisher (98-2803(IT)I) on
March 30 and April 28, 2000, at Montréal, Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Michel Lamarre
JUDGMENT
The
appeals from the assessments made under the Income Tax Act
for the 1994, 1995 and 1996 taxation years are allowed, without
costs, and the assessments are referred back to the Minister of
National Revenue for reconsideration and reassessment on the
basis that the penalties are to be cancelled, in accordance with
the attached Reasons for Judgment.
The
appellant is not entitled to any other relief.
Signed at Ottawa, Canada, this 27th day of June 2000.
J.T.C.C.
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