Taylor,
T.C.J.:—This
is
an
appeal
heard
in
Ottawa,
Ontario,
on
May
21,
1986,
against
an
income
tax
assessment
for
the
year
1983,
in
which
the
Minister
of
National
Revenue
taxed
an
amount
of
$25,000
under
subsection
248(1),
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63
as
amended.
At
the
commencement
of
the
hearing,
the
following
was
filed:
AGREED
STATEMENT
OF
FACT
The
Appellant
and
the
Respondent
by
their
respective
solicitors
hereby
admit
the
following
facts
as
set
out
in
the
pleadings
without
formal
proof
thereof:
1.
During
the
period
from
1975
to
July
31st,
1982
the
Appellant
was
employed
by
National
Grocers
Co.
Limited.
2.
On
September
16th,
1982
the
Appellant
commenced
proceedings
in
the
Supreme
Court
of
Ontario
against
his
former
employer,
National
Grocers
Co.
Limited,
claiming
inter
alia,
general
damages
for
breach
of
contract,
damages
for
wrongful
dismissal,
damages
for
mental
distress,
exemplary
damages,
interest
and
costs.
3.
On
March
30th,
1983,
as
a
result
of
the
above
action,
the
Appellant
was
awarded
damages
by
Court
Order
in
the
following
amounts:
$10,000.00
For
wrongful
dismissal
$12,500.00
For
exemplary
damages
$12,500.00
For
mental
distress
$
5,000.00
For
costs
4.
In
filing
his
return
for
1983,
the
Appellant
did
not
include
the
$12,500.00
received
as
damages
for
mental
distress
nor
the
$12,500.00
for
exemplary
damages
claiming
that
they
were
not
subject
to
tax.
5.
On
or
about
the
10th
day
of
July,
1984,
the
Respondent
issued
a
Notice
of
Assessment
increasing
the
Appellant's
income,
including
as
income,
the
$12,500.00
received
by
the
Appellant
as
damages
for
mental
distress
and
the
$12,500.00
received
by
the
Appellant
as
exemplary
damages.
6.
On
or
about
the
24th
day
of
July,
1984
the
Appellant
filed
a
Notice
of
Objection
to
the
Respondent's
Notice
of
Assessment
and
on
or
about
the
13th
day
of
November,
1984
the
Respondent
issued
a
Notice
of
Confirmation
of
the
Assessment
claiming
that
the
amounts
received
by
the
Appellant
as
damages
for
mental
distress
and
exemplary
damages
were
considered
by
the
Minister
to
be
a
Retiring
Allowance
as
defined
by
subsection
248(1)
of
the
Income
Tax
Act.
Dated
at
Ottawa
this
20th
day
of
May,
1986.
R.
Tasse,
Q.C.
Deputy
Attorney
General
of
Canada
Solicitor
for
the
Respondent
Signed
Elizabeth
Thomas
Drache,
Rotenberg
Solicitors
for
the
Appellant
Signed
Stephen
P.
Horwitz
Nothing
further
was
introduced,
or
adduced
by
either
party,
and
the
hearing
consisted
entirely
of
the
arguments
presented.
Two
of
the
primary
comments
by
counsel
for
the
appellant
provide
the
thrust
of
that
position:
.
.
.
the
damages
awarded
by
the
court
for
mental
distress
are
not
taxable,
they
are
compensation
for
a
personal
injury
which
is
not
taxable
and
the
fact
that
the
claim
for
damages
was
joined
in
an
action
for
breach
of
an
employment
contract,
i.e.
damages
for
wrongful
dismissal,
should
not
change
the
essential
character
of
the
award
damages,
namely
that
they
are
for
a
personal
injury,
they
are
for
the
mental
distress
and
the
suffering
that
was
sustained.
.
..
the
exemplary
damages
are
damages
in
tort
and
not
in
contract.
They
are
damages
that
are
imposed
by
a
court
in
order
to
deter
the
conduct
of
the
particular
defendant
and
in
order
to
deter
that
conduct
generally
and
as
such
they
are
not
payments
in
respect
of
a
loss
of
employment,
they
are
damages
awarded
by
the
court
for
those
purposes
stated.
Counsel
for
the
respondent,
among
other
comments
noted:
Damages
for
mental
distress
and
punitive
damages
in
this
case
are
clearly
in
connection
with
the
loss
of
the
office
or
employment
of
the
taxpayer.
Those
damages
have
been
awarded
against
the
former
employer
as
a
result
of
the
method
and
manner
of
the
loss
of
employment
or
the
firing
so
that
in
this
case
they
bear
a
direct
relation
to
the
loss.
..
.
the
point
that
he
(counsel
for
the
appellant)
is
making
is
that
damages
for
mental
distress
and
exemplary
damages
are
damages
in
tort
and
that,
of
course,
I
concede
that,
and
the
damages
for
breach
of
contract
are
damages
in
contract.
However,
the
tort
damages
in
this
case
arise
out
of
the
loss
of
employment,
that
is
they
are
related
to
the
method
of
the
loss
of
employment.
I
concede
that
they
are
damages
in
tort.
It
was
pointed
out
by
the
Court
that
there
was
nothing
specific
in
the
above
referenced
“Agreed
Statement
of
Fact”,
upon
which
to
base
the
understanding
as
to
the
origin
of
the
disputed
amounts,
suggested
by
the
respondent.
It
was
also
noted
for
counsel,
by
the
Court,
that
Mr.
Horwitz
in
his
argument
had
neither
acknowledged
nor
denied
that
there
was
any
direct
connection,
chronological
or
otherwise,
between
the
“dismissal”,
and
the
“exemplary
damages”
or
the
amount
for
“mental
distress”.
The
Court
recognized
that
it
might
well
be
a
reasonable
assumption
by
the
Minister
that
the
damage
awards
at
issue
flowed
from
the
dismissal,
but
that
might
well
be
an
essential
part
of
the
point
at
issue
in
the
appeal
itself,
rather
than
to
be
regarded
as
a
“given”.
Subsection
248(1),
as
it
relates
to
this
appeal
reads:
248(1)
In
this
Act
‘Retiring
allowance’,
means
an
amount
.
.
.
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.
Analysis
As
I
see
it,
the
critical
words
to
be
addressed
from
the
above
subsection
are:
“in
respect
of
a
loss
of
an
office
or
employment
.
.
.
”
The
position
of
the
Minister
in
assessing
could
have
been
more
clearly
demonstrated
in
the
agreed
documentation
placed
before
the
Court,
and
to
that
degree
the
Minister
did
place
the
case
in
some
jeopardy.
The
conduct
of
this
case,
also
raises
some
questions
regarding
matters
of
evidence
before
the
Court,
including
the
income
tax
return,
assessment
notice,
notice
of
appeal
and
reply
to
notice
of
appeal,
none
of
which
were
specifically
filed.
It
is
often
the
practice
of
one
party,
or
the
other,
to
file
as
exhibits
some
or
all
of
the
documents
noted
above,
even
as
a
precautionary
measure.
In
this
instance
some
documentation
regarding
the
original
legal
action
commenced
and
the
Court
award
which
started
the
appeal,
might
also
have
been
helpful.
However
I
have
taken
into
account,
only
the
agreed
statement
of
fact
and
the
relevant
section
of
the
Act
itself
in
reaching
this
decision.
The
“Agreed
Statement
of
Fact”
(supra),
does
not
contain
a
specific
assumption
by
the
Minister
with
regard
to
the
origin
of
the
amounts
at
issue.
But
the
words
“were
considered
to
be
a
retiring
allowance
as
defined
by
subsection
248(1)
of
the
Income
Tax
Act’’,
(emphasis
mine)
in
paragraph
6,
of
that
agreed
statement,
I
regard
to
be
clear
enough
to
delineate
the
task
of
the
appellant.
As
I
read
the
Act,
it
would
have
taken
some
direct
evidence
or
testimony
to
fulfill
the
appellant’s
total
obligation
thereunder,
and
the
critical
question
of
the
origin
of
the
amounts
at
issue
was
not
addressed
by
the
appellant.
The
amounts
at
issue
—
$12,500
for
exemplary
damages,
and
$12,500
for
mental
distress,
were
not
shown
to
be
outside
of
the
parameters
of
subsection
248(1)
of
the
Act,
and
therefore
the
Minister
in
assessing
them
as
“termination
payments”,
did
not
act
improperly.
The
appeal
is
dismissed.
Appeal
dismissed.
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