Couture,
C.J.T.C.
[Translation]:—This
is
an
appeal
against
an
assessment
issued
by
the
respondent
on
March
18,
1985
for
the
1981
taxation
year.
The
relevant
facts
underlying
the
dispute
are
comparatively
simple.
On
October
17,
1979
the
appellant
began
working
for
the
Compagnie
de
Gestion
Orford
Inc.
(Gestion)
as
its
General
Manager
at
an
annual
salary
of
$40,000.
The
company
operated
a
golf
course
and
a
ski
resort
in
the
Mount
Orford
Provincial
Park.
Prior
to
October
17,1979
the
appellant
had
been
employed
at
the
Centre
Hospitalier
Universitaire
in
Sherbrooke
(the
Centre)
for
several
years,
enjoying
all
the
fringe
benefits
included
in
this
job,
such
as
social
security
and
a
pension
plan.
As
a
result
of
solicitations
by
the
representatives
of
Gestion,
the
appellant
agreed
to
leave
his
position
with
the
Centre
and
accept
the
position
of
General
Manager
that
was
offered
to
him.
On
August
22,
1980,
without
prior
notice
and
apparently
without
valid
reason,
the
appellant
was
dismissed.
On
November
10,
1980
the
appellant
sued
Gestion
in
the
Superior
Court
of
the
Judicial
District
of
St-François,
demanding
$54,620,
including
$40,000
in
damages,
the
equivalent
of
one
year's
salary;
$4,620
for
the
rental
of
a
car
for
one
year;
$5,000
for
injury
to
reputation
and
$5,000
for
inconvenience.
Following
a
negotiated
settlement
between
the
parties,
a
judgment
was
rendered
on
October
21,
1981
by
Jean
Louis
Péloquin,
J.
awarding
the
appellant
$9,446,
$4,000
of
which
was
payable
at
the
date
of
judgment,
$3,446
on
December
8,
1981
and
$2,000
on
January
5,
1982.
Of
the
$9,446,
$446
was
awarded
for
legal
fees.
In
assessing
the
appellant
for
the
1981
taxation
year,
the
respondent
added
$7,000
to
his
income
on
the
ground
that
this
amount
was
a
payment
for
termination
of
an
office
or
employment
in
accordance
with
the
provisions
of
subparagraph
56(1)(a)(viii)
and
subsection
248(1)
of
the
Income
Tax
Act
(the
Act).
The
appellant
claims
that
the
$7,000
represents
a
sum
paid
as
damages
in
the
context
of
a
settlement
of
an
action
and
is
therefore
not
subject
to
tax.
The
appellant's
counsel,
in
her
submissions,
made
two
propositions
in
support
of
his
claims.
First,
she
suggested
that
within
the
definition
of
“termination
payment"
in
subsection
248(1)
of
the
Act,
the
words
"amount
received
in
the
year
in
respect
of
a
termination
of
an
office
or
employment"
are
not
themselves
defined
and
cannot
be
construed
as
including
an
amount
for
damages
resulting
from
breach
of
a
contract
of
employment.
She
submits
that
the
relevant
case
law,
and
in
particular
The
Queen
v.
Atkins,
[1976]
C.T.C.
497;
76
D.T.C.
6258,
a
judgment
of
the
Federal
Court
of
Appeal,
dealt
only
with
the
situation
of
an
employee
who
had
to
his
credit
long
years
of
service
with
his
employer
and
who
had
been
dismissed
without
reasonable
notice.
The
cases
hold
that
a
payment
received
by
an
employee
in
such
circumstances
is
not
subject
to
tax.
She
submits
that
the
addition
of
subparagraph
56(1)(a)(viii)
and
the
definition
of
"termination
payment"
in
subsection
248(1)
to
the
Act
in
1979,
applicable
in
respect
of
amounts
received
in
respect
of
a
termination
after
November
16,
1978
of
an
office
or
employment,
were
intended
exclusively
for
this
kind
of
payment,
and
not
payments
of
the
kind
received
by
the
appellant.
She
adds
in
support
of
this
proposition
that
if
Parliament
had
wished
to
bring
a
payment
in
damages
within
the
ambit
of
the
Act
it
would
have
expressly
spelled
this
out
in
subsection
248(1).
When
Parliament
amended
the
definition
of
“retiring
allowance”
by
S.C.
1980-81-82-83,
c.
140,
subsection
128(10),
applicable
with
respect
to
amounts
received
in
respect
of
any
termination
of
an
office
or
employment
after
November
12,
1981,
it
specifically
included
the
word
"damages"
in
the
definition.
According
to
this
argument,
since
the
appellant
had
been
employed
by
Gestion
for
a
period
of
only
ten
months,
the
$54,620
he
had
claimed
from
his
former
employer
could
not
be
a
payment
in
the
nature
of
compensation
reflecting
long
years
of
service
and
failing
reasonable
notice
by
the
employer.
The
cases
on
which
she
relied
confirm
this
proposition.
Counsel
for
the
respondent
relied
on
the
provisions
of
subparagraph
56(1)(a)(viii)
and
the
definition
of
“termination
payment"
in
subsection
248(1),
saying
they
were
of
sufficiently
broad
compass
to
make
the
payment
received
by
the
appellant
in
1981
subject
to
tax.
He
referred
the
Court
to
the
decision
of
Mahoney,
J.
of
the
Federal
Court,
Trial
Division
in
Mark
Lawson
v.
The
Queen,
[1982]
C.T.C.
368;
82
D.T.C.
6331.
The
relevant
facts
in
this
case
closely
parallel
those
described
in
relation
to
this
appeal.
Lawson
worked
as
manager
of
a
mobile
home
manufacturing
plant
in
Yorkton,
Saskatchewan,
at
an
annual
salary
of
between
$26,000
and
$27,000
a
year.
He
was
married
with
two
children,
aged
10
and
3,
and
had
lived
in
Yorkton
three
years.
Sometime
in
May,
he
was
offered,
and
accepted,
the
position
of
general
manager
of
Weber
Homes,
also
a
mobile
home
manufacturer,
by
its
proprietor.
He
was
to
begin
July
1
with
an
annual
salary
of
$50,000.
He
understood
Weber
intended
to
retire
and
let
him
run
the
operation.
The
plaintiff
gave
notice
terminating
his
employment
effective
June
30.
He
left
it
on
that
date.
After
he
had
given
the
notice,
Weber
had
advised
the
plaintiff
that
matters
were
not
yet
organized
for
him
to
start
and
asked
that
he
defer
starting
until
August
1.
Being
unemployed,
the
plaintiff
asked
for
something
to
see
him
through
July
and,
in
late
June
or
early
July,
Weber
paid
him
$5,000.
The
plaintiff
started
work
August
1.
After
seven
working
days,
on
August
13,
Weber
fired
him,
citing
“internal
problems
bringing
him
on
board”.
The
plaintiff
was
flabbergasted
and
told
Weber
he
would
be
taking
legal
advice,
which
he
did
that
day.
Its
effect
was
that
he
was
entitled
to
some
compensation.
He
saw
Weber
again
on
August
14
and
advised
him
that
unless
offered
a
satisfactory
settlement,
he
would
sue.
He
was
initially
offered
between
$10,000
and
$15,000,
which
he
refused.
In
the
result,
the
settlement,
reached
August
14,
was
a
lump
sum
of
$25,000.
That
included
the
$5,000
paid
earlier
and
also
compensation
for
the
period
he
actually
worked.
At
page
381
(82
D.T.C.
6333),
Mahoney,
J.
says
the
following
with
regard
to
the
application
of
the
legislation
then
in
force:
Subparagraph
56(1)(a)(viii)
and
the
definition
of
"termination
payment"
in
section
248
were
added
to
the
Act
by
amendment
in
1979
(S.C.
1979,
c.
5,
s.
15
and
s.
66)
and
apply
to
amounts
received
in
respect
of
a
termination
after
November
16,
1978.
Together,
they
are
evidently
a
legislative
response
to
The
Queen
v.
Atkins
(76
D.T.C.
6258
(F.C.A.);
75
D.T.C.
5623
(F.C.T.D.).
An
amount
received
in
settlement
of
a
claim
for
dismissal
without
reasonable
notice
is
clearly
within
the
definition:
"an
amount
received
.
.
.
in
respect
of
a
termination
of
an
office
or
employment".
The
$20,000
payment
was
termination
payment
within
the
contemplation
of
the
Act
taxable
in
the
amount
calculated
as
prescribed.
In
view
of
this
decision,
with
which
I
agree
concerning
the
interpretation
of
the
legislation,
and
which
I
am
bound
to
follow,
I
must
dismiss
the
appeal.
Appeal
dismissed.
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