M
J
Bonner:—This
is
an
appeal
from
an
assessment
of
income
tax
for
the
appellant’s
1980
taxation
year.
The
issue
is
what
is
the
proper
tax
treatment
of
an
amount
received
by
the
appellant
from
his
former
employer
after
he
was
fired.
Up
to
March
17,
1980,
the
appellant
was
chief
administrative
officer
of
the
City
of
London.
His
employment
was
for
an
indefinite
period.
Early
on
March
17
the
appellant
was
summoned
to
the
Mayor’s
office
and
was
told
that
he
was
fired
as
of
that
day.
Shortly
after
the
meeting
the
appellant
retained
a
lawyer.
Negotiations
between
that
lawyer
and
the
City
solicitor
commenced
later
that
day.
The
appellant,
through
his
counsel,
demanded
damages
for
wrongful
dismissal
equivalent
to
twelve
months’
salary
plus
the
value
of
fringe
benefits
for
the
same
period.
The
evidence
which
was
unchallenged
was
that
had
the
demand
not
been
met
an
action
would
have
been
commenced
by
the
appellant
against
the
City
on
March
18.
After
much
discussion
the
City
capitulated.
The
minutes
of
settlement
of
the
intended
action
were
signed
on
March
17.
The
agreement
was:
(1)
Murray
MacLean
hereby
resigns
his
position
as
Chief
Administrative
Officer
effective
(2)
The
City
of
London
shall
forthwith
pay
to
Murray
MacLean
the
sum
of
$51,541.00,
being
12
months
salary
from
the
effective
date
of
resignation.
(3)
The
City
of
London
shall
pay
to
Murray
MacLean
or
on
his
behalf
the
following
benefits
or
the
cash
equivalent
thereof:
(a)
the
City’s
share
of
OHIP
for
12
months
(b)
the
City’s
share
of
Blue
Cross
Extended
Health
and
Blue
Cross
Dental
Plan
for
12
months
(c)
the
City’s
share
of
long
term
disability
insurance
for
12
months
(d)
the
City’s
share
of
group
life
insurance
for
12
months
(e)
the
City’s
share
of
OMERS
pension
plan
for
12
months.
(4)
The
City
of
London
shall
pay
forthwith
to
Murray
MacLean
the
cash
equivalent
of
unused,
accumulated
sick
leave.
(5)
The
City
of
London
shall
pay
forthwith
to
Murray
MacLean
the
cash
equivalent
of
earned,
unused
vacation
pay.
(6)
The
parties
hereby
release
and
forever
discharge
each
other
from
all
claims,
causes
of
action,
etc
arising
out
of
the
employment
of
Murray
MacLean
by
the
City
of
London.
(7)
The
parties
agree
that
the
resignation
of
Murray
MacLean
as
Chief
Administrative
Officer
arose
as
a
result
of
difference
of
opinion
as
to
the
management
of
the
City’s
affairs.
The
evidence
clearly
established
that
paragraphs
1
and
7
were
misleading.
The
appellant
did
not
resign.
By
the
time
the
agreement
embodied
in
the
Minutes
was
reached
the
appellant
had
no
position
from
which
he
could
resign.
The
Minutes
were
subsequently
approved
by
a
by-law
which
also
authorized
the
Mayor
and
City
Clerk
to
sign
on
behalf
of
the
City.
The
value
of
the
fringe
benefits
was
calculated
and
a
total
figure
of
$78,818.56
representing
that
value
and
an
amount
equal
to
one
year’s
salary
was
paid
to
the
appellant.
In
his
return
of
income
for
the
year
the
appellant
reported
as
income
to
be
included
pursuant
to
subparagraph
56(1
)(a)(viii)
of
the
Income
Tax
Act
the
sum
of
$25,851.37,
being
that
part
of
the
$78,818.56
received
from
the
City
pursuant
to
the
settlement
which
he
regarded
as
a
“termination
payment”
calculated
according
to
the
formula
laid
down
by
subsection
248(1)
of
the
Act.
The
respondent
treated
the
entire
amount
received
as
income
and
pleaded
(inter
alia):
..
.that
the
basic
fact
of
the
assessment
mailed
December
31,
1981
was
that
the
total
amount
of
$78,818.56
received
by
the
Appellant
in
his
1980
taxation
year
from
the
Corporation
of
the
City
of
London
was
income
of
the
appellant.
The
respondent
relied
on
sections
3,
5(1)
and
6
of
the
Income
Tax
Act.
In
argument
the
respondent’s
counsel
did
not
contend
that
the
$78,818.56
was
not
.
.an
amount
received
in
the
year
in
respect
of
a
termination
of
an
office
or
employment.
.
He
contended,
rather,
that
having
regard
to
the
manner
in
which
the
payment
was
calculated
and
to
the
decision
of
the
Federal
Court
in
Her
Majesty
the
Queen
v
Robert
B
Atkins,
[1975]
CTC
377;
75
DTC
5263,
the
$78,818.56
was
to
be
regarded
as
income
from
employment
received
in
the
year
within
the
meaning
of
subsection
5(1)
of
the
Income
Tax
Act
and
therefore
taxable
in
its
entirety.
The
circumstances
of
this
case
demonstrate
that
the
addition
to
the
Income
Tax
Act
in
1979
of
subparagraph
56(1
)(a)(viii)
and
the
definition
of
“termination
payments”
in
subsection
248(1)
did
nothing
to
clear
the
fog
of
uncertainty
surrounding
the
tax
treatment
of
payments
to
employees
on
the
occasion
of
their
discharge.
Subparagraph
(a)(i)
of
the
definition
requires
an
examination
of
the
vexing
question
whether
the
$78,818.56
was
an
amount
required
by
some
provision
other
than
subparagraph
56(1
)(a)(viii)
to
be
included
in
computing
income.
Counsel
for
the
respondent
relied
on
the
fact
that
the
calculations
of
the
amount
received
by
the
appellant
were
based
“to
the
penny”
on
what
the
appellant
would
have
been
entitled
to
receive
over
a
One-year
time
period
had
the
firing
not
occurred.
He
pointed
out
that
the
reasons
for
judgment
of
Collier,
J,
in
Atkins
(supra)
suggest
at
5269
that
where
the
amount
paid
is
“Salary
simpliciter”
it
may
be
taxable
under
section
5
of
the
Act.
He
suggested
that
because
the
Federal
Court
of
Appeal
expressly
approved
the
reasons
given
by
the
Trial
Division
(76
DTC
6258)
everything
which
follows
the
first
sentence
of
the
reasons
which
contains
that
expression
of
approval
is
obiter.
In
my
view
there
is
no
inconsistency
between
the
reasons
of
the
Trial
Division
and
those
of
the
Court
of
Appeal.
That
case,
which
is
an
authority
binding
upon
me,
stands
for
the
proposition
that
the
receipt
by
a
person
who
has
just
been
wrongfully
dismissed
of
an
amount
paid
in
respect
of
the
breach
of
the
contract
of
employment
is
not
a
receipt
of
“salary,
wages
and
other
remuneration”
within
the
meaning
of
subsection
5(1)
of
the
Act
or
of
a
“benefit
of
any
kind
whatever”
within
the
meaning
of
paragraph
6(1)(a)
of
the
Act.
Further,
it
stands
for
the
proposition
that
subsection
6(3)
of
the
Act
does
not
operate
to
deem
an
amount
so
received
to
be
remuneration
for
the
purposes
of
section
5.
There
is
no
material
distinction
between
the
provisions
which
are
now
in
question
and
those
of
the
former
Act
which
were
in
question
in
the
Atkins
case.
It
follows
that
the
$78,818.56
is
not
an
amount
described
in
subparagraph
(a)(i)
of
the
subsection
248(1)
definition
of
“termination
payment”.
For
the
foregoing
reasons
the
appeal
will
be
allowed
and
the
assessment
referred
back
to
the
respondent
for
reconsideration
and
reassessment
on
the
basis
that
of
the
sum
of
$78,818.56
received
by
the
appellant
from
the
City
of
London
only
the
sum
of
$25,851.37
falls
to
be
included
in
the
computation
of
income
Appeal
allowed.
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