Tremblay,
T.C.J.:—This
appeal
was
heard
on
November
24,
1986
in
the
City
of
Vancouver,
British
Columbia.
1.
The
Point
At
Issue
Pursuant
to
the
notice
of
appeal
and
the
reply
to
notice
of
appeal,
the
point
at
issue
is
whether
the
appellant,
a
former
employee
of
Vancouver
Shipyards,
is
correct
in
the
computation
of
his
income
for
the
1984
taxation
year
not
to
include
as
income
the
amount
of
$41,667,
received
from
his
former
employer.
The
appellant
considers
this
amount
as
indemnity
for
breach
of
contract
following
a
settlement
that
occurred
before
the
trial
could
be
heard
by
the
Court
in
January
1984.
The
legal
action
was
initiated
in
April
1983.
The
appellant
contends
among
others
that
the
said
amount
is
not
a
compensation
in
respect
of
loss
of
employment
but
rather
damages
for
breach
of
a
pre-employment
contract
separate
and
distinct
from
the
collective
agreement.
It
is
not
a
“retiring
allowance"
—
the
whole
amount
is
exempt
from
taxation.
In
a
first
alternative,
the
appellant
contends
that
at
least
the
amount
received
in
respect
of
mental
distress
or
punitive
damages
cannot
be
considered
as
income.
In
a
second
alternative,
if
an
amount
is
included
in
the
income,
it
should
be
spread
over
1983,
1984
and
1985
because
the
last
income
relates
to
those
three
years.
In
a
third
alternative,
the
appellant
contends
that
the
legal
fees
of
$2,720.09
should
be
deducted,
if
a
portion
of
the
award
is
taxable.
The
respondent
contends
that
the
entire
$41,667
is
a
retiring
allowance
which
must
be
included
in
the
appellant's
income
for
the
1984
taxation
year
without
deduction
for
the
legal
fees.
2.
The
Burden
of
Proof
2.01
The
burden
of
proof
is
on
the
appellant
to
show
that
the
respondent's
reassessment
is
incorrect.
This
burden
of
proof
results
particularly
from
several
judicial
decisions,
including
the
judgment
rendered
by
the
Supreme
Court
of
Canada
in
Johnston
v.
M.N.R.,
[1948]
S.C.R.
486;
[1948]
C.T.C.
195;
3
D.T.C.
1182.
2.02
In
the
same
judgment,
the
Court
decided
that
the
assumed
facts
on
which
the
respondent
based
his
reassessment
are
also
deemed
to
be
correct.
In
the
present
case,
the
assumed
facts
are
described
in
paragraph
3
of
the
reply
to
notice
of
appeal.
3.
In
reassessing
the
Appellant
for
the
1984
taxation
year,
the
Respondent
assumed
that
sum
of
$41,667
was
properly
included
in
the
Appellant's
income
as
an
amount
received
by
him
in
the
year
as,
on
account,
or
in
lieu
of
payment
of,
or
in
satisfaction
of,
a
retiring
allowance.
3.
The
Facts
3.01
At
the
beginning
of
the
trial,
counsel
for
the
parties
filed
an
agreed
statement
of
facts
and
issues.
It
reads
as
follows:
Statement
of
Facts
and
Issues
(Agreed)
I.
FACTS
1.
Mr.
Richardson
is
a
loftsman.
He
is
a
British
citizen
and
resided
in
England
until
June
1982
when
he
came
to
Vancouver
for
employment.
2.
In
November
1981,
a
representative
of
Vancouver
Shipyards
Co.
Ltd.
("Vancouver
Shipyards"),
Mr.
Sam
Whalen,
promised
Mr.
Richardson
that
he
would
have
several
years
of
full
employment
with
Vancouver
Shipyards.
On
the
faith
of
this
promise,
Mr.
Richardson
and
his
family
moved
to
Vancouver
on
June
2,
1982,
and
Mr.
Richardson
commenced
employment
with
Vancouver
Shipyards
on
June
7,
1982.
3.
On
assuming
employment
with
Vancouver
Shipyards,
Mr.
Richardson
became
a
member
of
the
Marine
and
Shipbuilders
Union,
Local
506,
certified
bargaining
agent
for
the
employees
at
Vancouver
Shipyards.
Mr.
Richardson's
employment
was
governed
by
the
terms
of
the
collective
agreement
then
in
force.
4.
Mr.
Richardson
was
employed
with
Vancouver
Shipyards
from
June
7,
1982
until
February,
1983
when
he
was
laid
off.
His
lay-off
was
in
accordance
with
the
seniority
provisions
of
the
collective
agreement.
5.
In
April
1983,
Mr.
Richardson
and
others,
commenced
an
action
against
Vancouver
Shipyards
under
Supreme
Court
of
British
Columbia
Action
No.
C832079,
Vancouver
Registry,
claiming
damages
for
breach
of
contract.
In
their
Statement
of
Claim,
the
various
plaintiffs,
including
Mr.
Richardson
alleged
that
Vancouver
Shipyards
was
in
breach
of
its
contract
with
Mr.
Richardson
to
provide
several
years
full
employment.
The
plaintiffs
also
claimed
damages
for
mental
distress
and
punitive
damages.
6.
Immediately
prior
to
the
trial
of
the
action
which
was
scheduled
to
commence
on
January
8,
1984,
the
plaintiffs’
claim
against
Vancouver
Shipyards
was
settled.
The
amount
which
Mr.
Richardson
received
in
respect
of
the
settlement
was
Forty-One
Thousand,
Six
Hundred
and
Sixty-Seven
($41,667.00)
Dollars.
In
consideration
of
the
settlement,
the
plaintiffs,
including
Mr.
Richardson,
signed
a
Release
extending
to
all
matters
raised
in
the
action.
7.
The
Minister
assessed
the
entire
sum
received
by
Mr.
Richardson
in
respect
of
the
settlement
as
income
for
1984.
8.
Mr.
Richardson's
work
history
from
February,
1983
when
he
was
laid
off
by
Vancouver
Shipyards
is
as
follows:
|
February
1983
|
—
Mr.
Richardson
was
unemployed
and
received
|
|
to
December
1983
|
unemployment
insurance
benefits.
|
|
December
1983
|
—
Mr.
Richardson
was
employed
with
Vancouver
|
|
to
Janury
7,
1984
|
Shipyards
for
a
period
of
five
weeks.
|
|
January
7,
1984
|
—
Unemployed,
received
unemployment
insurance
|
|
to
February
21,
1984
|
benefits.
|
|
February
21,
1984
|
—
Employed
by
Belair
Shipyard,
Vancouver.
|
|
to
July
13,
1984
|
|
|
Mid
July,
1984
|
—
Unemployed,
received
unemployment
insurance
|
|
to
Mid
August,
1984
|
benefits.
|
|
Mid
August
1984
|
—
Employed
by
Vancouver
Shipyards
for
a
period
of
|
|
to
late
September,
|
five
weeks.
|
|
1984.
|
|
|
September,
1984
|
—
Unemployed,
received
unemployment
insurance
|
|
to
May
27,
1985
|
benefits.
|
|
Late
May,
1985
|
—
Employed
on
contract
in
St.
Johns
[sic],
New
|
|
to
October,
1985
|
Brunswick.
|
|
October
29,
1985
|
—
Unemployed,
receiving
unemployment
insurance
|
|
to
May
1986
|
benefits.
|
9.
Mr.
Richardson's
legal
fees
with
respect
to
the
Supreme
Court
action
and
settlement
were
Two
Thousand,
Seven
Hundred
and
Twenty
Dollars
and
Nine
Cents
($2,720.09).
Documents
Admitted
1.
Vancouver
Shipyards
1980-1982
Agreement.
2.
Vancouver
Shipyards
1982-1984
Agreement.
3.
Amended
Trial
Brief
in
Supreme
Court
Action
No.
C832079.
4.
Release
relating
to
Supreme
Court
Action
No.
C832079.
5.
Laxton,
Pidgeon
&
Company
Account
January
11,
1984.
6.
Laxton,
Pidgeon
&
Company
letter
of
February
6,
1985.
7.
1984
Income
Tax
Return
of
Barrie
Richardson.
8.
Revenue
Canada
Taxation
letter
June
6,
1985.
9.
Notification
of
Confirmation
by
the
Minister,
March
5,1986.
II.
Issues
1.
Is
the
entire
settlement
of
Forty-One
Thousand,
Six
Hundred
and
Sixty-Seven
($41,667.00)
Dollars
taxable
as
a
retiring
allowance
under
Section
56(1)(a)(ii)
and
248(1)
of
the
Income
Tax
Act
.
2.
In
the
alternative,
is
a
portion
of
the
settlement
taxable
as
a
retiring
allowance
under
Section
56(1)(a)(ii)
and
248(1)
of
the
Income
Tax
Act
3.
In
the
further
alternative,
if
all
or
any
part
of
the
settlement
is
taxable
as
income,
should
it
be
assessed
in
its
entirety
in
the
1984
taxation
year?
4.
In
the
further
alternative,
if
all
or
any
part
of
the
settlement
is
taxable
as
income,
should
Mr.
Richardson's
legal
fees
in
the
amount
of
Two
Thousand,
Seven
Hundred
and
Twenty
Dollars
and
Nine
Cents
($2,720.09)
be
deducted
from
the
taxable
portion?
3.02
The
appellant
testified
that:
(a)
He
was
45
years
of
age,
had
been
married
for
24
years
and
had
two
children
aged
19
and
17.
(b)
He
was
a
1/10th
scale
loftsman
by
trade.
This
trade
“involves
the
ferrying
of
the
ship's
line
and
the
drawings,
10
scale
drawings
for
all
the
various
part
in
the
ship”
(TS,
p.
5).
(c)
The
apprenticeship
of
this
trade
took
five
years
at
Cockrane
Shipyards
in
Selby,
Yorkshire,
U.K.
(d)
He
practised
his
trade
in
the
U.K.
and
Europe
25
years
before
coming
to
Vancouver.
(e)
In
1981,
he
saw
an
advertisement
in
a
British
newspaper
offering
several
years
full
employment
at
Genstar
Shipyards
in
Vancouver.
The
advertisement
reads:
"Come
to
beautiful
British
Columbia
for
a
better
future.”
He
had
an
interview
in
Newcastle,
U.K.,
with
a
Mr.
Sam
Whalen,
the
personnel
manager
of
the
Vancouver
Shipyards.
Mr.
Whalen
told
him
"that
they
had
so
much
work
that
they
couldn't
find
people
in
Canada
to
fill
the
positions.
And
with
that
much
work
they
were
talking
about
building
another
shipyard
further
down
the
coast,
and
at
the
time
I
[sic]
just
trying
to
get
some
idea
of
the
volume
of
work
and
I
told
him
that
I
had
applied
for
a
job
in
America
the
year
prior
to
this
and
that
that
was
only
a
year's
work
and
I
wasn't
interested
because
of
the
age
of
my
children.
I
think
they
asked
the
age
of
my
boys
and
he
said,
oh,
well,
you'll
have
no
problem
getting
them
out
from
school,
there's
a
full
work
load
and
we
are
working
overtime
in
the
yard.
There
was
another
gentleman
who
sat
in
at
the
interview,
and
also
my
wife,
and
he
joined
into
the
conversation
at
this
time.
He
said,
well,
I
have
been
in
Canada
now
working
for
this
company
for
17
years,
and
he
said,
I've
got
my
children
through
school.
He
said,
you
know,
it’s
a
great
company
to
work
for"
(TS,
p.
7).
(f)
He
then
verbally
offered
employment
with
Vancouver
Shipyards
and
later
he
got
the
official
offer
of
employment.
(g)
He
had
some
difficulty
with
the
Immigration
Department
(TS,
p.
8).
"I
believe
it
was
at
the
time
that
I
got
the
official
confirmation
of
the
job,
I
also
got
immigration
papers.
And
on
these,
they
got
my
job
position
wrong,
they
had
got
me
down
as
a
plater
and
I
am
a
1/10th
scale
loftsman
by
trade.
And
also,
it
was
an
application
for
a
year's
work
permit.
So,
I
phoned
them
that
evening
and
asked
them
what
was
the
year's
work
permit
for.
And
they
said,
oh
well,
it’s
a
very
slow
process
if
you
apply
for
a
London
immigrancy
it
will
take
a
long
time
and
we
won't
get
here
now.
But
they
said,
don't
worry
about
it,
if
you
come
on
a
year's
permit,
then
you
will
be
able
to
apply
while
in
Canada
and
you
will
get
your
citizenship,
your
landed
immigrants
while
you're
there.
I
wasn't
too
happy
with
this.
And
then
I
don't
know
just
how
long
after
I
heard
from
them
that
they
was
[sic]
going
to
give
me
landed
immigrancy
immediately
and
to
tear
that
paper
up
and
I
would
be
getting
another
set
of
papers.
You
know,
because
this
was
long
term
work
we
were
talking
about
and
not
a
year's,
as
the
first
certificate
was
referring
to"
(TS,
p.
8).
(h)
He
arrived
in
Vancouver
on
June
2,
1982
and
started
to
work
on
June
7.
He
was
laid
off
in
February
1983.
(i)
He
said
that
he
had
had
significant
unemployment
since
February
1983
and
explained
the
impact
on
him
and
his
family
(TS,
pp.
14-15).
“It
just
shattered
us.
We
haven't
known
what
to
do.
I
wanted
to
go
back
to
England
but
I
have
both
my
children
here
now
that
don't
want
to
go
back
to
England.
I
have
a
brother-in-law
back
in
England
that
brought
me
up
as
a
child
that
just
died
recently,
and
by
the
time
I
booked
a
flight
to
go
back,
then
when
I
looked
at
what
money
I've
got,
I
just
had
to
cancel
the
flight.
I
have
a
brother
in
England
that
is
dying
of
leukemia
that
I
can
not
go
back
to
see.
And
both
myself
and
my
wife
have
been
to
the
doctor
all
the
time.
The
doctor
keeps
telling
me
that
it's
just
nerves
and
not
to
worry.
But,
how
can
you
not
worry?
And
my
days
just
consist
of
reading
through
the
papers,
applying
for
jobs
and
I
am
getting
no
response
at
all.
There
is
just
no
work
out
there
and
I
can't
see,
you
know,
where
I
am
going
to
get
any
work
at
all
from.
I
have
no
medical
plan.
We
came
out
of
the
dentist
the
other
day
with
my
youngest
son
and
he
happened
to
say
to
me
that
he
was
having
problems
with
his
teeth.
And
he
said,
well,
why
didn't
you
mention
it
before
and
he
said
because
I
know
that
you
have
no
money.
So
I
took
him
straight
back
into
the
dentist
and
apparently
it
is
a
cap
or
something
that
he
wants
on
his
tooth.
I
asked
the
dentist
if
he
could
give
us
some
idea
of
how
much
it
would
cost
me
and
it
cost
me
$43
just
for
him
to
take
an
impression
of
his
mouth.
You
know,
even
the
children
are
not
confiding
in
us
because
they
know
the
situation
that
we
are
in.
My
oldest
son
I
wanted
to
go
to
college.
He
has
taken
a
job
as
a
furniture
mover.
I
keep
asking
him
to
go
to
night
classes
and
things
and
he
said,
well,
we
just
can’t
afford
for
me
to
go
to
night
classes"
(TS,
pp.
14-15).
(j)
The
appellant
became
a
Canadian
citizen
in
June
1985.
3.03
In
cross-examination,
the
appellant
testified
as
follows:
(a)
The
advertisement
that
he
read
in
1981
was
in
the
Daily
Express.
In
it
was
written
"Several
Years
Full
Employment".
A
photocopy
of
the
said
advertisement
was
filed
as
Exhibit
R-1.
(b)
During
the
appellant's
interview
with
Mr.
Whalen,
the
latter
indicated
to
him
that
he
would
be
working
in
Vancouver
"for
life,
as
long
as
I
could
do
the
job”
(TS,
p.
20).
(c)
He
received
a
letter
dated
January
12,
1982,
from
Genstar
Shipyards
confirming
the
employment.
It
was
filed
as
Exhibit
R-2.
It
reads
as
follows:
This
letter
will
confirm
your
employment
commencing
upon
arrival
at
Vancouver
Shipyards
Co.
Ltd.
As
discussed,
the
following
are
general
terms
of
your
employment:
1.
Your
starting
salary
will
be
$14.87
per
hour.
Your
employment
status
will
be
in
effect
after
satisfactory
completion
of
a
three
month
[sic]
probationary
period.
2.
A
maximum
of
$5,000
will
be
allowed
to
you
and
your
family
for
relocation
expenses.
This
$5,000
will
include
air
fare,
moving
expenses,
as
well
as
accommodation
and
meals
for
a
period
of
three
weeks.
In
return
you
will
be
expected
to
remain
with
Vancouver
Shipyards
Co.
Ltd.
for
a
period
of
one
year,
after
which
time
any
funds
expended
by
us
on
your
behalf
will
be
forgiven.
If
you
leave
our
employ
prior
to
one
year,
you
could
be
held
responsible
for
a
prorated
portion
of
those
expenses.
Any
reimbursement
to
you
will
be
paid
only
on
submission
of
receipts.
3.
You
will
be
assisted
in
locating
accommodation
during
the
first
three
weeks
in
Vancouver.
We
are
enclosing
information
on
North
Vancouver
and
area,
which
we
hope
you
will
find
useful.
Welcome
to
Vancouver
Shipyards
and
we
look
forward
to
a
long
and
rewarding
relationship.
(d)
After
the
problem
he
had
with
the
Immigration
Department,
he
called
Vancouver
and
received
a
letter
dated
January
27,
1982,
filed
as
Exhibit
R-3.
This
letter
reads
as
follows:
As
discussed,
I
am
confirming
in
writing
our
telephone
conversation
of
Monday,
January
25
and
yesterday,
January
26,
1982.
Your
position
with
Vancouver
Shipyards
Co.
Ltd.
will
be
that
of
a
mom
scale
Loftsman.
The
salary
is
$14.87
per
hour
plus
cost
of
living
allowance.
Vancouver
Shipyards
will
pay
for
your
medical
coverage
to
duplicate
that
provided
by
the
government
health
care,
compulsory
for
permanent
British
Columbia
residents,
for
a
period
of
three
months.
After
three
months,
you
will
be
expected
to
arrange
for
coverage
on
your
own.
Vacation
pay
is
4%
of
gross
wages
for
the
first
52
weeks,
6%
for
the
next
eight
years.
From
the
day
you
start
work
with
Vancouver
Shipyards,
the
Company
pays
50¢
per
hour
into
a
pension
plan
on
your
behalf.
The
vesting
period
is
five
years.
Sick
benefits,
once
you
are
on
the
Union
medical
plan,
are
$210
per
week
to
a
maximum
of
104
weeks.
I
am
enclosing
a
brochure
provided
by
the
Union,
for
your
further
information.
(e)
He
gave
the
reason
why
he
went
to
see
a
lawyer
after
he
was
laid
off.
Q
And
why
did
you
go
and
see
a
lawyer?
A
Because
I
just
felt
that,
you
know,
what
I
had
been
promised
in
England
had
been
broken.
And
to
me,
they
were
guaranteeing
me
a
life
here
and
after
nine
months
saying
there
was
no
work,
I
just
couldn't
believe
what
was
happening.
Q
I
don't
want
to
put
words
in
your
mouth.
Are
you
saying
what
was
broken
was
the
promise
of
work?
A
Yes,
as
a
life
for
me.
You
know,
all
my
dreams
virtually
were
shattered
when
they
came
and
said
well,
we're
sorry
but
you're
laid
off
(TS,
pp.
25-26).
In
paragraph
17,
the
plaintiffs
of
the
legal
action
brought
against
Vancouver
Shipyards
Co.
Ltd.
were
eight
persons,
all
British
or
German
citizens
(the
appellant
being
one
of
them),
who,
following
the
advertisement
in
newspapers
in
Britain
and
in
Continental
Europe
in
1981,
were
interviewed
by
Mr.
Sam
Whalen
and
employed
by
Vancouver
Shipyards
Co.
Ltd.
Paragraphs
17,
19,
28,
29,
30
and
31
of
the
legal
action
read
as
follows:
17.
The
Plaintiff,
Barry
Richardson,
was
interviewed
by
Sam
Whalen
in
November,
1981,
in
Newcastle,
England.
Mr.
Whalen
said
that
the
Plaintiff
was
assured
of
several
years
work
and
that
there
was
a
chance
that
the
Defendant
would
be
building
a
new
shipyard.
The
Plaintiff
was
particularly
concerned
that
the
job
be
a
stable
and
secure
one.
The
Plaintiff
advised
Mr.
Whalen
that
he
was
only
interested
in
a
permanent
and
secure
job
with
the
Defendant
because
of
his
concern
for
the
education
of
his
two
sons,
now
age
13
and
16.
He
made
it
very
clear
that
he
did
not
wish
to
disrupt
their
education
further.
In
response
to
the
Plaintiff's
concerns,
Mr.
Whalen
assured
him
that
he
was
offering
a
permanent
position
with
the
Defendant
that
would
keep
the
Plaintiff
fully
employed
until
his
sons
had
graduated.
19.
The
Plaintiffs
accepted
the
Defendant's
offer
of
employment
as
set
out
in
the
Defendant's
advertisement
and
represented
to
the
Plaintiffs
by
the
Defendant's
representative,
Sam
Whalen,
and
made
the
necessary
arrangements
to
move
themselves
and
their
families
to
Vancouver.
28.
In
laying
off
the
Plaintiffs,
the
Defendant
is
in
breach
of
its
contract
with
the
Plaintiffs,
in
particular,
their
commitment
to
the
Plaintiffs
to
provide
several
years
full
employment.
29.
As
a
result
of
the
Defendant's
breach
of
contract,
the
Plaintiffs
have
each
suffered
loss
of
income
of
at
least
$50,000
per
year
plus
benefits
valued
at
an
additional
$10,000
per
year.
The
Plaintiffs’
claim
is
for
a
minimum
of
three
years
lost
wages
and
benefits.
30.
As
a
result
of
the
Defendant's
breach
of
contract,
the
Plaintiffs
have
suffered
severe
mental
distress
and
upset.
On
the
basis
of
the
agreement
with
the
Defendant
and
the
Defendant's
assurances,
the
Plaintiffs
left
secure
employment,
uprooted
their
families
and
moved
to
a
new
country.
With
the
loss
of
their
employment
so
soon
after
their
arrival
in
Canada,
the
Plaintiffs
find
themselves
in
purgatory:
families
divided,
husbands
in
Canada,
wives
in
Europe;
children
just
started
in
a
new
school
facing
the
prospect
of
uprooting
again
to
return
to
their
homeland;
and
the
Plaintiffs
themselves
with
no
job
and
no
income
to
provide
for
themselves
and
their
families
and
to
meet
newly-made
financial
commitments.
31.
After
the
contracts
were
made
to
employ
the
Plaintiffs
fora
minimum
of
three
years,
but
before
the
Plaintiffs
left
their
home
countries
and
commenced
employment
with
the
Defendant,
the
Defendant
knew
that
the
prospects
for
work
were
no
longer
as
good
as
had
been
represented
to
the
Plaintiffs.
The
Defendant
did
nothing
to
alert
the
Plaintiffs
to
the
changing
circumstances
and
declined
to
do
so
for
their
own
selfish
short-run
economic
interests.
The
Defendant
acted
highhandedly
and
in
complete
disregard
for
the
legal
rights
and
interests
of
the
Plaintiffs
and
their
families.
(f)
He
explained
as
follows
how
it
was
that
the
figure
of
$41,667.00,
that
he
received
as
a
settlement
was
arrived
at,
and
why
he
received
more
than
the
others.
They
arrived
at
that
figure
"through
a
lot
of
arguments
in
the
lawyer's
office.
Because
obviously
everyone
felt
that
they,
you
know,
wanted
the
same
amount
of
money"
(TS,
p.
27).
Why
did
he
receive
more
than
the
others?
Well,
some
of
the
others
hadn't
given
so
much
up.
You
know,
like
we
had
the
house
to
sell
in
England
and
the
cars
and
things
like
this.
You
know,
we
lost
a
lot
of
money
that
way.
Plus,
we
had
two
teenagers
and
we
had
committed
ourselves
to
a
mortgage
here
(TS,
p.
28).
He
said
he
did
not
think
that
the
amount
received
was
based
on
the
money
he
would
have
earned,
if
he
had
continued
to
work:
"I
would
have
earned
a
lot
more
money
if
I
would
have
been
working"
(TS,
p.
29).
For
him,
the
$41,667
.
.
.
"this
was
the
money
I
was
going
to
receive
and
that's
what
I
was
going
to
try
and
plan
my
life
on
for
the
future”
(TS,
p.
30).
Then,
in
his
opinion,
there
was
no
question
of
paying
tax
on
that
amount.
(g)
The
1984
income
tax
return
was
filed
as
Exhibit
R-4.
4.
Law
-
Precedents
-
Analysis
4.01
Law
The
main
provisions
of
the
Income
Tax
Act
(the
"Act")
involved
in
this
appeal
were
subparagraph
56(1)(a)(ii)
and
the
definition
of
“retiring
allowance"
in
subsection
248(1).
They
read
as
follows:
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,
248.
(1)
In
this
Act,
“retiring
allowance”
means
an
amount
(other
than
a
superannuation
or
pension
benefit
or
an
amount
received
as
a
consequence
of
the
death
of
an
employee)
received
(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
his
death,
by
a
dependant
or
a
relation
of
the
taxpayer
or
by
the
legal
representative
of
the
taxpayer;
4.02
Precedents
Counsel
for
the
parties
referred
the
Court
to
the
following
precedents:
1.
Ashford
v.
M.N.R.,
[1986]
1
C.T.C.
2044;
86
D.T.C.
1079
(T.C.C.);
2.
McGavin
Toastmaster
Ltd.
v.
Ainscough
et
al,
[1976]
1
S.C.R.
718;
54
D.L.R.
(3d)
1;
3.
St.
Anne
Nackawic
Pulp
&
Paper
Co.
Ltd.
v.
Canadian
Paper
Workers
Union,
Local
219,
[1986]
1
S.C.R.
704;
4.
Norman
Wainwright,
James
Faulds,
Charles
Morris,
Leonard
Hachez
and
Dufie
Joseph
-and-
Vancouver
Shipyards
Co.
Ltd.
-and-
Marine
and
Shipbuilders
Local
506,
U.B.C.J.A.,
[1987]
B.C.W.L.D.
826;
5.
Campbell
v.
MacMillan
Bloedel
Limited,
[1978]
2
W.W.R.
686
(B.C.S.C.);
6.
Maruscak
v.
M.N.R.,
[1985]
2
C.T.C.
2048;
85
D.T.C.
426
(T.C.C.);
7.
Viau
v.
M.N.R.,
[1986]
1
C.T.C.
2570;
86
D.T.C.
1437
(T.C.C.);
8.
Young
v.
M.N.R.,
[1986]
2
C.T.C.
2111;
86
D.T.C.
1567
(T.C.C.);
9,
Quance
v.
The
Queen,
[1974]
C.T.C.
225;
74
D.T.C.
6210
(F.C.T.D.);
10.
Curran
v.
M.N.R.,
[1959]
C.T.C.
416;
59
D.T.C.
1247
(S.C.C.).
4.03
Analysis
A.
Appellant's
submission
4.03.1
The
first
argument
of
the
appellant
is
that
the
sum
of
$41,667
that
he
received
does
not
meet
the
requirements
of
the
definition
of
“retiring
allowance”
quoted
above
(par.
4.01).
According
to
the
appellant,
indeed,
the
said
sum
was
not
received
“in
respect
of
a
loss
of
an
office
or
employment"
but
by
virtue
of
a
pre-hiring
contract.
It
is
a
guarantee
contract
separate
and
apart
from
the
employment
contract.
The
appellant
mainly
bases
his
conclusion
on
a
decision
of
the
Supreme
Court
of
British
Columbia,
the
Wainwright
et
al.
case
(par.
4.02(4))
rendered
on
November
19,
1986.
The
five
plaintiffs
in
that
case
are
employees
of
Vancouver
Shipyards
Co.
Ltd.
They
sued
the
latter
after
they
were
laid
off
in
February
1983,
the
legal
action
being
based
on
the
pre-hiring
contract.
They
were
in
fact
in
the
same
position
as
the
appellant
in
the
present
case.
Being,
in
the
words
of
counsel
for
the
appellant,
the
“sister”
case
of
the
present
one,
it
is
appropriate
to
quote
at
length
the
decision
of
Meredith,
J.
at
page
2
of
his
reasons
for
judgment
dated
November
19,1986:
In
the
main
action,
the
plaintiffs
each
claim
for
monies
owing
to
them
under
an
alleged
contract
with
the
defendant.
If
they
are
successful
on
the
contract
claim,
both
parties
agree
that
they
are
entitled
each
to
the
sum
of
$40,000.00.
In
September
1981,
the
defendant
was
desperate
to
attract,
amongst
others,
journeymen
platers
and
journeymen
welders.
The
defendant
had
a
number
of
contracts
to
be
completed.
The
most
important
of
these
was
an
obligation
to
build
an
icebreaker.
That
vessel
was
to
be
completed
by
the
end
of
1983,
according,
at
least,
to
the
evidence
of
Mr.
Swint.
The
defendant
stood
to
be
penalized
the
sum
of
$50,000.00
a
day
if
completion
was
not
achieved
by
the
date
agreed.
Thus
it
was
that
the
defendant
advertised
in
the
most
glowing
terms
to
attract
the
labour
essential
to
the
fulfillment
of
that
and
its
other
contracts.
After
extolling
the
virtues
of
life
in
Vancouver,
the
ad
said:
We
are
a
people-oriented
company
committed
to
innovative
ideas
and
continuous
growth
and
are
currently
seeking
100
persons
in
the
following
areas
—
journeyman
rate
$14.80/hr.
effective
September
1,
1981
several
years
full
employment
financial
assistant
is
available
if
required
for
transportation
of
family.
In
response
to
that
advertisement
and
after
interviewing
one
or
other
of
the
representatives
of
the
company
responsible
for
recruiting,
each
of
the
plaintiffs
moved
their
families
and
themselves
to
Vancouver
to
take
up
employment.
Prior
to
their
commencement
of
employment,
each
of
the
plaintiffs
joined
the
union
as
required
and
successfully
completed
the
probationary
period.
As
each
was
fully
qualified,
there
was
no
question
either
on
their
side
or
that
of
the
company
of
the
defendant
that
they
would
be
able
to
qualify.
But,
although
the
defendant
was
committed
to
“continuous
growth"
and
although
it
seemed
that
the
defendant
bid
on
a
great
many
contracts,
it
was
not
able
to
get
the
work
it
needed
to
keep
all
the
union
members
on
its
payroll.
Thus
layoffs
occurred,
as
contemplated
by
the
collective
agreement,
in
reverse
order
of
seniority.
And
by
the
spring
of
1983,
the
major
part
of
the
fabricating
of
the
icebreaker
having
been
completed,
the
plaintiffs
were
laid
off.
They
sue
because
they
were
not
the
recipients
of
"several
years'
full
employment"
provided
for
in
the
advertisement.
I
conclude
that
the
advertisement
constitutes
an
offer
by
the
defendant
to
each
of
the
plaintiffs.
That
offer
was
accepted
by
the
defendants
by
their
move
to
the
West
Coast.
The
offer
constituted
a
guarantee
by
the
defendant
that
if
the
move
took
place
the
plaintiffs
would
receive
the
benefits
at
least
of
full
employment
for
several
years
promised.
They
did
not
do
so.
I
hold
that
the
defendant
is
liable
for
the
shortfall.
The
dictionary
definitions
of
the
word
"several"
vary.
But
they
are
unanimous
in
that
"several"
means
more
than
two.
The
plaintiffs’
claim
in
the
terms
of
the
advertisement
they
are
entitled
to
at
least
what
they
would
have
earned
over
three
years.
This
sum
is
agreed
upon
at
$40,000.00
each.
I
hold
each
of
the
plaintiffs
entitled
to
at
least
what
they
would
have
earned
over
three
years.
This
sum
is
agreed
upon
at
$40,000.00
each.
I
hold
each
of
the
plaintiffs
entitled
to
that
amount.
The
defendant
argues
that
if
a
contract
were
created
as
I
have
indicated
it
was,
the
contract
was
one
of
employment.
Therefore
the
provisions
of
the
collective
agreement
would
supersede
the
contract
and
in
any
event
the
provisons
of
the
Labour
Code
would
apply.
But
this
is
not
an
employment
contract.
If
for
instance
the
defendant
had
agreed
to
employ
the
plaintiffs
full-time
for
three
years,
that
might
well
have
been
the
case.
But
the
effect
of
the
invitation
is
that
the
plaintiffs
will
not
be
laid
off
for
three
years.
They
were
laid
off
pursuant
to
the
provisions
of
the
collective
agreement.
Thus,
in
my
view,
the
defendant
must
make
good
on
its
guarantee
of
full
employment.
The
defendant
argues
furthermore
that
each
of
the
plaintiffs
came
to
separate
arrangements
with
the
several
representatives
of
the
defendant
relating
to
the
minimum
term
of
employment.
In
each
case
they
were
given
to
understand,
in
effect,
that
the
words
"several"
meant
at
least
three,
and
in
most
cases
considerably
more.
Perhaps
among
the
defendants
there
are
those
who,
because
of
later
discussions,
are
entitled
to
more
than
they
now
claim.
But
in
any
event,
I
hold
each
are
entitled
to
the
three
years
claimed
and
that
the
defendant
is
liable
on
its
guarantee
that
there
will
be
no
lay-offs
over
that
period.
The
plaintiffs
are
therefore
entitled
to
judgment
each
in
the
sum
of
$40,000.00
and
costs.
The
plaintiffs
are
entitled
to
interest
on
the
award
at
the
pre-judgment
interest
on
the
award
at
the
Registrar's
rate
from
March
of
1984.
Thank
you.
4.03.2
Moreover,
to
confirm
his
position,
the
appellant
referred
to
the
McGavin
case
(par.
4.02(2))
and
St.
Anne
Nackawic
case
(par.
4.02(3))
contending
that
as
a
matter
of
law
there
can
be
no
contract
of
employment
separate
and
apart
from
the
collective
agreement.
Those
two
cases
were
heard
and
decided
by
the
Supreme
Court
of
Canada.
In
the
St.
Anne
Nackawic
case
at
pages
715-16,
there
is
a
reference
to
the
McGavin
case.
This
quotation
is
the
basis
of
both
decisions:
Recent
cases,
of
which
Campbell
v.
East-West
Packers
(1969)
Ltd.
(1982),
142
D.L.R.
(3d)
90
(Man.
C.A.),
is
an
example,
have
tended
to
view
restrictively
the
availability
of
recourse
to
the
courts
despite
the
fact
that
the
claim
could
conceivably
be
characterized
as
depending
on
common
law
principles,
as
opposed
to
arising
solely
under
the
collective
agreement.
In
that
case,
the
majority
of
the
court,
per
Hall,
J.A.,
dismissed
an
employee's
claim
to
damages
for
wrongful
dismissal
where
the
collective
agreement
expressly
addressed,
as
most
such
agreements
do,
the
question
of
dismissal.
Hall
J.A.
noted
at
p.
97
that
the
employee
was
seeking
at
common
law
a
broader
remedy
than
would
have
been
available
to
him
through
the
grievance
procedure,
and
wrote
(at
p.
95)
that:
A
plain
reading
of
this
legislation
reveals
a
clear
legislative
intention
that
all
collective
agreements
shall
contain
a
provision
for
final
settlement
of
all
disputes
or
differences
between
the
parties,
including
employees,
concerning
its
meaning,
application
or
violation.
The
collective
agreement
in
question
does
contain
such
a
provision
and
it
expressly
provides
that
dismissal
of
an
employee
is
confined
to
the
process
of
grievance
and,
if
necessary,
arbitration.
Nothing
in
that
agreement
preserves
or
confers
the
remedy
of
litigation.
Similarly,
in
Lawn
v.
Algonquin
College
of
Applied
Arts
and
Technology
(1982),
39
O.R.
(2d)
377
(H.C.),
the
court
denied
its
jurisdiction
to
hear
the
plaintiff's
claim
for
damages
for
wrongful
dismissal:
see
also
Hooper
v.
Wellington
County
Board
of
Education
(1984),
46
O.R.
(2d)
680
(Div.
Ct.),
Bourne
v.
Otis
Elevator
Co.
(1984),
45
O.R.
(2d)
321
(H.C.),
Caines
v.
Cape
Breton
Development
Corp.
(1973),
39
D.L.R.
(3d)
606
(N.S.S.C.),
Downey
v.
Scotia
Square
Hotel
Ltd.
(1974),
55
D.L.R.
(3d)
300
(N.S.S.C.).
The
court
in
Lawn,
supra,
relied
on
Laskin
C.J.'s
statements
in
McGavin
Toastmaster,
supra,
about
the
nature
of
the
relationship
between
individual
contracts
of
employment
and
collective
agreements.
In
the
latter
case,
one
of
the
arguments
made
by
the
defendant
employer
was
that
the
common
law
doctrine
of
fundamental
breach
applied
in
the
circumstances,
so
that
the
employees,
by
their
illegal
strike,
had
forfeited
any
right
to
the
benefits
required
to
be
provided
by
the
employer.
This
argument
was
soundly
rejected.
Laskin
C.J.
wrote
(at
pp.
724-27):
I
do
not
think
that
in
the
face
of
labour
relations
legislation
such
as
existed
at
the
material
time
in
British
Columbia,
in
the
face
of
the
certification
of
the
union,
of
which
the
plaintiffs
were
members,
as
bargaining
agent
of
a
specified
unit
of
employees
of
the
company
and
in
the
face
of
the
collective
agreement
in
force
between
the
union
and
the
appellant
company,
it
is
possible
to
speak
of
individual
contracts
of
employment
and
to
treat
the
collective
agreement
as
a
mere
appendage
of
individual
relationships.
The
majority
of
this
Court,
speaking
through
Judson
J.
in
Syndicat
catholique
des
employés
de
magasins
de
québec
Inc.
v.
Compagnie
Paquet
Ltée
([1959]
S.C.R.
206),
at
p.
212,
said
this
ina
situation
where
a
union
was
certified
for
collective
bargaining
under
Quebec
labour
relations
legislation:
There
is
no
room
left
for
private
negotiation
between
employer
and
employee.
Certainly
to
the
extent
of
the
matters
covered
by
the
collective
agreement,
freedom
of
contract
between
master
and
individual
servant
is
abrogated.
The
collective
agreement
tells
the
employer
on
what
terms
he
must
in
the
future
conduct
his
master
and
servant
relations.
4.03.3
The
second
argument
of
counsel
for
the
appellant
is
that
the
contract
of
the
taxing
provision
contemplating
a
payment
"in
respect
of
a
loss
of
an
office
or
employment
of
a
taxpayer"
does
not
apply
in
this
case
because
the
appellant
did
not
lose
his
employment.
Indeed,
he
had
further
rights
under
his
contract
of
employment.
The
latter
is
the
collective
agreement
between
Vancouver
Shipyards
and
the
Union
that
represents
the
appellant
and
the
other
employees.
The
appellant
continues
to
have
the
right
to
be
recalled
by
virtue
of
his
seniority,
and
he
was,
in
fact,
recalled
(see
par.
3.01.8
of
the
agreed
statement
of
facts
and
issues).
This
right
is
based
on
article
11.01
of
the
collective
agreement,
which
reads
as
follows:
11.01
When
the
Company
increases
or
decreases
the
working
force,
and
when
in
the
opinion
of
the
Company
and
the
Union,
the
skill
and
ability
of
the
men
concerned
is
equal,
length
of
service
with
the
Company,
in
their
classification,
as
defined
in
the
following
clauses
shall
be
the
determining
factor
in
deciding
the
order
of
lay
off
or
re-hire
as
the
case
may
be.
4.03.4
Following
those
two
arguments,
counsel
for
the
appellant
concluded
that
the
$41,667
is
outside
of
the
ambit
of
the
taxing
legislation.
B.
Respondent's
submission
4.03.5
At
the
beginning
of
his
submission,
counsel
for
the
respondent
admitted
that
the
collective
agreement
did
not
supersede
the
personal
agreement
of
the
appellant
made
in
England
with
Vancouver
Shipyards
Co.
Ltd.
Counsel
for
the
respondent
said:
My
friend
refers
to
the
relations
between
Mr.
Richardson
and
Genstar
or
Vancouver
Shipyards
as
a
pre-employment
contract.
Now,
it
is
my
submission
that
when
we
look
at
the
advertisement,
which
is
R-1,
promising
several
years
employment
together
with
Exhibit
R-2
where
it
says,
“This
letter
will
confirm
your
employment
commencing
upon
arrival
at
Vancouver
Shipyards
Company
Limited.”
And
I
submit
that
there
was
an
undertaking
or
a
contract,
or
an
agreement
by
the
company
that
it
would
employ
Mr.
Richardson
upon
his
arrival
in
Vancouver.
That
is
the
source
of
his
employment,
that
agreement.
It
is
quite
true
that
the
terms
of
his
employment
after
he
arrived
in
Vancouver
were
subject
to
the
collective
agreement.
But,
that
doesn't
mean
that
it
superseded
this
contract
that
was
made
in
England.
And
the
contract
that
was
made
in
England
was
that
Mr.
Richardson
would
be
employed
in
Canada
for
several
years.
(TS,
pp.
50-51)
4.03.6
However,
counsel
for
the
respondent
submitted
that,
as
the
definition
of
retiring
allowance
includes
damages
("amount
.
.
.
whether
or
not
received
as,
an
amount
or
in
lieu
of
payment
of,
damages
or
pursuant
to
an
order
or
judgment
of
a
competent
tribunal
.
.
."),
and
as
the
amount
of
$41,667
is
damages,
it
must
be
included
in
the
income.
The
last
amendments
to
subsection
56(1)
of
the
Act
and
to
the
definition
of
"retiring
allowance”
were
enacted
on
November
13,
1981.
They
are
the
provisions
that
apply
in
the
present
case.
He
contends
that
under
the
new
amendment
the
damages
paid
for
loss
of
employment
are
by
definition
a
retiring
allowance
and
therefore,
an
income.
4.03.7
Referring
to
paragraphs
17,
19,
28
and
29
of
the
legal
action
instituted
by
the
appellant
and
his
non-Canadian
co-workers
and
quoted
in
paragraph
3.03(e),
counsel
for
the
respondent
submits
that:
.
.
.
What
is
being
claimed
.
.
.
is
wages
and
income.
And
this
income
was
lost
because
the
plaintiffs
lost
their
employment
with
the
shipyard.
It
is
my
submission
that
the
Union
contract
is
irrelevant
to
that
consideration.
Now
then,
my
learned
friend
said
that,
well
you
can
not
have
a
loss
of
employment
if
you
are
called
back.
Well,
first
of
all,
if
that
is
the
case,
you
know,
what
is
the
law
suit
all
about
if
you
didn't
lose
your
employment.
And
secondly,
of
course,
that
is
it's
too
technical
a
reading.
If
my
learned
friend
is
right,
then
if
somebody
loses
his
employment,
then
a
year
later
comes
back
for
a
day,
then
magically
everything
has
become
tax
free.
That
can
not
be
the
law.
The
employment
was
lost
when
the
taxpayer
was
laid
off.
He
regained
that
employment
again
when
he
was
hired
back
for
five
weeks,
and
then
he
lost
the
employment
again.
But,
I
would
submit
that
on
the
evidence
and,
especially
since
the
taxpayer,
immediately
after
he
was
laid
off,
went
to
see
the
lawyer,
lost
his
employment
when
he
was
laid
off
in,
I
believe,
February
1983.
And
to
say
that
he
never
lost
his
employment
because
he
is
subject
to
recall,
is
not
the
ordinary
meaning
that
should
be
given
to
the
words,
“loss
of
employment"
(TS,
p.
53).
4.03.8
Concerning
the
legal
expenses,
counsel
for
the
respondent
referred
to
the
Maruscak
case
(par.
4.02(6))
given
by
the
Associate
Chief
Judge
Christie
of
this
Court.
The
facts
and
the
decision
in
that
case
are
summarized
as
follows
in
Dominion
Tax
Cases:
The
taxpayer's
employment
at
Black
and
Decker
was
terminated
in
1982.
The
taxpayer
began
a
legal
action
for
wrongful
dismissal
which
resulted
in
an
out
of
court
settlement.
The
Minister
disallowed
the
deduction
of
the
taxpayer's
legal
expenses
incurred
to
bring
the
action
and
the
taxpayer
appealed
to
the
Tax
Court
of
Canada.
Held:
The
taxpayer's
appeal
was
dismissed.
The
Court
found
that
the
legal
expenses
were
incurred
to
collect
a
retiring
allowance
from
his
former
employer.
The
Court
refused
to
extend
the
provision
which
permitted
the
deduction
of
legal
fees
incurred
to
collect
salary
or
wages
from
a
former
employer
to
include
the
collection
of
a
retiring
allowance.
The
legal
provision
involved
in
that
case
is
found
in
paragraph
8(1)(b).
It
reads
as
follows:
8.
(1)
In
computing
a
taxpayer's
income
for
a
taxation
year
from
an
office
or
employment,
there
may
be
deducted
such
of
the
following
amounts
as
are
wholly
applicable
to
that
source
or
such
part
of
the
following
amounts
as
may
reasonably
be
regarded
as
applicable
thereto:
(b)
amounts
paid
by
the
taxpayer
in
the
year
as
or
on
account
of
legal
expenses
incurred
by
him
in
collecting
salary
or
wages
owed
to
him
by
his
employer
or
former
employer.
This
provision
applies
only
for
legal
expenses
incurred
in
collecting
back
wages,
according
to
counsel
for
the
respondent.
He
continues
by
saying
that
this
provision
is
silent
on
a
deduction
for
legal
expenses
incurred
in
obtaining
a
sum
under
section
56.
4.03.9
Counsel
for
the
respondent
also
referred
to
the
Young
case
(para.
4.02(8))
rendered
by
Taylor,
T.C.J.
of
this
Court.
The
facts
and
the
decisions
are
summarized
as
follows
in
Dominion
Tax
Cases:
After
being
dismissed
from
his
employment,
the
taxpayer
successfully
sued
his
former
employer
for
wrongful
dismissal.
In
addition
to
damages
for
wrongful
dismissal,
the
court
awarded
the
taxpayer
damages
for
mental
distress
and
exemplary
damages.
The
Minister
treated
the
entire
damage
award
as
a
retiring
allowance
and
the
taxpayer
appealed
to
the
Tax
Court
of
Canada,
contending
that
the
damages
for
mental
distress
and
the
exemplary
damages
were
damages
in
tort
rather
than
damages
for
breach
of
the
contract
of
employment.
Held:
The
taxpayer's
appeal
was
dismissed.
The
Court
found
that
the
entire
damage
award
was
“In
respect
of
a
loss
of
an
office
or
employment"
and
that
it
therefore
fell
within
the
definition
of
“retiring
allowance".
In
the
said
case,
the
exemplary
damages
were
$12,500,
and
the
mental
distress
damages
were
$12,500.
Counsel
for
the
respondent
underlined
that
in
the
present
case,
no
evidence
was
adduced
as
to
what
amount
should
be
allocated
to
mental
distress
damages.
4.03.10
Concerning
the
Wainwright
et
al.
decision
rendered
by
Mr.
Justice
Meredith
and
quoted
above
in
paragraph
4.03.1,
it
was
decided
that
the
offer
constituted
a
guarantee
by
Vancouver
Shipyards
that
the
plaintiffs
would
receive
the
benefits
at
least
of
full
employment
for
the
several
years
promised.
Counsel
for
the
respondent
contends
that
the
$40,000
paid
to
each
of
the
five
plaintiffs
was
a
guarantee
of
income.
“It
does
not
really
matter
whether
it’s
according
to
a
guarantee
or
a
contract
of
employment",
he
said.
To
confirm
his
position,
he
referred
to
the
Quance
case
(para.
4.02(9))
in
which
the
point
was
the
reasonable
notice
to
which
the
taxpayer
is
entitled.
At
page
229
(D.T.C.
6213),
Mr.
Justice
Cattanach
said:
As
I
have
pointed
out
above
the
damages
that
the
plaintiff
would
receive
for
dismissal
without
notice
are
to
replace
the
income
he
was
deprived
of
by
not
being
given
reasonable
notice.
That
is
the
reason
for
awarding
that
item
of
damages
for
breach
of
a
contract
of
employment.
Accordingly
such
an
award
is
imbued
with
the
quality
of
income.
[Appeal
dismissed]
I
fail
to
follow
the
logic
of
the
contention
that
an
obligation
arising
out
of
a
contract
of
employment
which
is
deemed
to
be
income
by
the
Income
Tax
Act
is
metamorphosed
into
a
capital
receipt
because
that
obligation
was
the
subject
of
a
successful
law
suit
resulting
in
a
judgment
for
the
amount
of
the
obligation
involved.
In
my
view
the
nature
and
quality
of
the
receipt
remains
unchanged
but
the
simple
and
complete
answer
to
this
contention
on
behalf
of
the
plaintiff
is
that
the
plaintiff
did
not
sue.
For
the
foregoing
reasons
the
appeal
is
dismissed
with
costs.
Counsel
for
the
respondent
referred
also
to
the
Curran
case
(par.
4.02(10)).
In
this
decision
of
the
Supreme
Court
of
Canada,
it
was
decided
that
the
amount
of
$250,000
received
as
an
inducement
to
work
for
a
new
employer
was
considered
as
income
for
services
to
be
rendered
and
therefore
taxable
under
section
3
of
the
Act
in
the
year
he
received
the
said
sum.
In
the
present
case,
the
appellant
received
$41,667
in
1984.
If
it
is
taxable,
he
would
prefer
that
the
amount
he
considered
to
have
been
received
over
a
three-year
period
because
he
would
have
earned
this
money
over
three
years.
Being
an
employee,
the
taxpayer
must
have
his
income
computed
pursuant
to
the
cash
basis
system.
Therefore,
counsel
for
the
respondent
concluded
that
the
$41,667
must
be
included
in
the
1984
taxation
year.
C.
Appellant’s
reply
4.03.11
Concerning
the
collective
agreement,
counsel
for
the
appellant
contends
that
there
is
no
termination
of
the
employment
relationship
because
of
the
recall
rights.
It
is
true
that
since
November
1981,
damages
arising
from
a
breach
of
contract
of
employment
are
considered
as
retiring
allowance
and
therefore
as
income,
however,
the
damages
must
originate
from
the
breach
of
a
contract
of
employment.
And
Mr.
Justice
Meredith
finds
that
the
contract
passed
in
England
with
Vancouver
Shipyards
is
not
a
contract
of
employment.
Therefore,
the
wording
of
subsection
56(1)
is
not
met,
there
is
no
income.
D.
Court's
decision
4.03.12
In
final
analysis,
the
crux
of
the
matter
is
whether
or
not
the
contract
passed
in
England
between
the
appellant
and
Vancouver
Shipyards
is
a
contract
of
employment.
The
main
argument
of
the
appellant
in
this
respect
is
the
decision
of
Mr.
Justice
Meredith.
I
quote
again
the
key
paragraphs
of
the
decision:
I
conclude
that
the
advertisement
constitutes
an
offer
by
the
defendant
to
each
of
the
plaintiffs.
That
offer
was
accepted
by
the
defendants
by
their
move
to
the
West
Coast.
The
offer
constituted
a
guarantee
by
the
defendant
that
if
the
move
took
place
the
plaintiffs
would
receive
the
benefits
at
least
of
full
employment
for
the
several
years
promised.
They
did
not
do
so.
The
defendant
argues
that
if
a
contract
were
created
as
I
have
indicated
it
was,
the
contract
was
one
of
employment.
Therefore
the
provisions
of
the
collective
agreement
would
supersede
the
contract
and
in
any
event
the
provisions
of
the
Labour
Code
would
apply.
But
this
is
not
an
employment
contract.
If
for
instance
the
defendant
had
agreed
to
employ
the
plaintiffs
full-time
for
three
years,
that
might
well
have
been
the
case.
But
the
effect
of
the
invitation
is
that
the
plaintiffs
will
not
be
laid
off
for
three
years.
They
were
laid
off
pursuant
to
the
provisions
of
the
collective
agreement.
Thus,
in
my
view,
the
defendant
must
make
good
on
its
guarantee
of
full
employment.
Despite
the
fact
that
I
am
inclined
to
think
that
the
contract
passed
in
England
is
in
the
nature
of
an
employment
contract,
this
point
is
one
of
civil
law
and
as
the
Supreme
Court
of
British
Columbia
has
decided
that
it
is
not
a
contract
of
employment,
I
think
I
am
bound
by
this
decision.
Moreover,
taking
into
consideration
the
decisions
of
the
Supreme
Court
of
Canada
(par.
4.03.2)
which
say
that
there
is
no
contract
of
employment
separate
and
apart
from
the
collective
agreement,
I
consider
that
the
appeal
must
be
allowed.
5.
Conclusion
For
these
reasons,
the
appeal
is
allowed
with
costs
and
the
matter
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment.
Appeal
allowed.
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