Dandurand v. R., [1998] 3 CTC 2022

Lamarre Proulx T.C.J. .

The appellant is appealing from assessments by the Minister of National Revenue (“the Minister”) for the 1987 to 1993 taxation years inclusive.

The issues are whether, first, retirement benefits received from the Royal Canadian Mounted Police, hereinafter referred to as “the R.C.M.P.”, should be included in calculating the appellant’s income under s. 56(1 )(«) of the Income Tax Act (“the Act”) or should be excepted pursuant to s. 81 (1 )(z) of the Act, and second, whether money received from an income insurance plan was payable in consequence of an event occurring before 1974 within the meaning of s. 19(1) of the Income Tax Application Rules (“the 1971 Rules”).

In making his assessments the Minister relied on the facts set out in Paragraph 11 of the Reply to the Notice of Appeal (“the Reply”), which are the following:

[TRANSLATION]

(a) the appellant was employed by the R.C.M.P. from August 9, 1962 to March 1, 1986;

(b) as a result of several absences on account of illness, the appellant was released in 1986 on the basis of recommendations by his employer;

(c) on March 1, 1988 the appellant filed a $930,000 action against his former employer, the R.C.M.P., in the Federal Court;

(d) the appellant’s doctor maintained that he was correct in saying that the occurrence which resulted in his physical and mental problems was the accident that took place in 1969 when he was on duty as an R.C.M.P. officer in Fredericton;

(e) on January 19, 1990 a letter received from Ms. Trosztmer of G.W. indicated she could not confirm whether the event occurred before 1974: on the other hand, she confirmed with the Minister that the appellant became completely disabled on June 6, 1985, that the payments under an income insurance plan began on March 2, 1986 and that his application was approved because he became completely disabled as the result of an illness causing psychological problems;

(f) on September 20, 1994 a letter received from Ghislaine Perras, a Pension Entitlement Examiner, informed the Minister that the retirement benefits paid to the appellant were based on his service in the R.C.M.P.;

(g) a form T-4A was issued by his former employer, the R.C.M.P., for each of the years in question under the categories of lifetime retirement benefit plan in the amounts of $16,623 in 1987, $17,321 in 1988 and $18,031 in 1989, and of retirement benefits or other pensions in the amounts of $15,386 in 1990, $14,544 in 1991, $15,457 in 1992 and $15,807 in 1993;

(h) a form T-4A was issued by G.W. for each of the years in issue under the categories of payments under an income insurance plan in the amounts of $15,450 in 1987, $15,197 in 1988, $11,552 in 1989, $10,962 in 1990, $12,580 in 1991, $12,958 in 1992 and $13,217 in 1993;

(i) the retirement benefits received from the R.C.M.P. in the amounts of $16,623 in 1987, $17,321 in 1988, $18,031 in 1989, $15,386 in 1990, $14,544 in 1991, $15,457 in 1992 and $15,807 in 1993 were correctly included in calculating the appellant’s income and the said benefits are not amounts which should be excluded from his income;

(j) the amounts received from the G.W. long-term income insurance plan in the amounts of $15,450 in 1987, $15,197 in 1988, $11,552 in 1989, $10,962 in 1990, $12,580 in 1991, $12,958 in 1992 and $13,217 in 1993 were correctly included in calculating the appellant’s income and should not be excluded from his income.

Subparagraphs 11(a) to (e), (g) and (h) were admitted.

Hélène Frappier, the appellant’s wife, represented him. She filed a file containing various documents under No. A-1. Among other things, this file contained copies of the appellant’s medical file from the psychiatric wing of the Queen Mary Veterans’ Hospital. It indicates that in June 1975 the appellant was admitted to the hospital on an emergency basis because he was in a state of acute panic. The doctor was Dr. Achong. The appellant was treated at the hospital until 1979, and there were some long-term hospital visits.

Exhibit A-1 contains a letter from Dr. Peter G. Edgell, chief psychiatrist of the Reddy Memorial Hospital, dated March 23, 1992, in which he says:

It appears that my letter of January 9, 1990 was not sufficiently explicit in stating that his original accident in 1969 led in turn to the development of the paranoid illness for which he was treated in 1975 at the Queen Mary Veterans’ Hospital.

It seems to be incontrovertible that he was injured at work in the course of an undercover drug operation, Constable Dandurand was hit on the head and left at the scene unconscious; his life was at risk, the gang wanted to kill him and he has been haunted by the memories of this incident ever since.

On this basis, then, a gradually worsening persecution complex developed in the service which could be described as “acute paranoid reaction” and first came under psychiatric care in 1975 at the Queen Mary Veterans’ Hospital by Dr. Achong.

Mr. Dandurand as part of his illness did not trust his superior officers and so vetoed a medical report from the treating Doctor Achong to the R.C.M.P. Coincidentally Dr. Achong moved to Western Canada and the case was transferred to me August 25, 1978.

In the succeeding years I have got to know Mr. Dandurand quite well and I believe he is a perfectly honest man, honestly reporting an accident years after the event which eventually resulted in long-term disability pension payments.

Dr. Edgell said the same thing to Ms. H. Trosztmer of Great West Life Insurance in a letter dated January 9, 1990, a certified copy of which was then sent to the official of the Minister responsible for the appellant’s assessment file (Exhibit A-1).

In 1991 the same physician completed a physical and mental disability tax credit certificate (Exhibit A-l) and noted the following:

The patient has tried and failed to re-enter the work scene. He lives comfortably in a stable new marriage isolated from stress adhering faithfully to a medication regime and thus free of pressing symptoms. Fear at considering other types of work is quite rational and realistic. He is, I believe permanently disabled. At times he used to fall into the category of paranoid schizophrenia, but now I would say he presents the handicap of a paranoid personality. Among the stresses which precipitated his illness during service in the R.C.M.P. was an accident on duty in 1969.

Lucie Boisvert, Division Chief, Pay, Division C of the R.C.M.P. in Montréal, testified at the request of counsel for the respondent. She explained that the appellant was released from the R.C.M.P. on March 1, 1986. The appellant had 23 years’ service. His pension was calculated at 2 percent per annum on the best six consecutive years of salary. He receives his R.C.M.P. pension under s. 10(2)(b) of the Royal Canadian Mounted Police Superannuation Act (“the R.C.M.P.S.A.”), c. R-11, R.S.C. 1985.

The appellant also made a disability insurance application to Great West Life accompanied by a letter from the attending physician. The application was approved. The insurance covered the difference between the R.C.M.P. pension and income from R.C.M.P. employment up to a maximum of 75 percent. Payment of this insurance benefit will stop when the disability will cease or when the recipient will reach the age of 65. The witness filed as Exhibit 1-1 the attending physician’s statement to Great West Life, signed by Dr. Peter G. Edgell on May 20, 1986. To the question “When did symptoms first appear or accident happen?”, the attending physician answered “August 1978”. It should be noted that to the question “Date of first visit”, he also answered “August 25, 1978”. To the question “Is condition due to injury or sickness arising out of patient’s employment?”, the attending physician answered “Yes”. He gave as the “Names of other treating physicians” Dr. E. Achong, Queen Mary Veterans’ Hospital 1976 and Lt. Col. K. Lilly, N.D.M.C. Ottawa 1978.

Analysis

Subparagraph 56(l)(a)(i) of the Act reads as follows:

(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,

(i) a superannuation or pension benefit including, without limiting the generality of the foregoing,

This provision of the Act requires that retirement pensions be included in calculating income. The only pensions which are exempt from tax are those which Parliament has specifically made exempt, as provided for in s. 81(1) of the Act.

Paragraph 81(1 )(«) of the Act reads as follows:

(1) There shall not be included in computing the income of a taxpayer for a taxation year,

(i) a pension payment or compensation received under section 5, 31 or 45 of the Royal Canadian Mounted Police Pension Continuation Act, chapter R-10 of the Revised Statutes of Canada, 1970, or section 32 or 33 of the Royal Canadian Mounted Police Superannuation Act, in respect of an injury, disability or death;

The agent for the appellant referred to s. 81(l)(z) of the Act and contended that the appellant received his pensions pursuant to ss. 5 and 31 of the Royal Canadian Mounted Police Pension Continuation Act or pursuant to ss. 32 and 33 of the Royal Canadian Mounted Police Superannuation Act. She further relied on para. 14 of Interpretation Bulletin IT-397R, which reads as follows:

RCMP Pension or Compensation

14. Pursuant to paragraph 81(1)(i), pension payments, allowances and other compensation received in respect of an injury, disability or death arising directly out of, or directly connected with, the service of a member in the RCMP under the provisions of the Royal Canadian Mounted Police Pension Continuation Act or the Royal Canadian Mounted Police Superannuation Act, are not to be included in the recipient’s income. This exemption does not extent to long service pensions which are subject to tax under subparagraph 56(l)(a)(i).

She contended that the last part of para. 14, which does state that the exemption provided for in s. 81 (l)(i) of the Act does not extend to long service pensions, does not apply to the appellant’s case and that the annuities in question were not paid to him pursuant to s. 10 of the R.C.M.P.S.A., but entirely pursuant to s. 32 of that Act.

It is quite clear that neither the facts nor the law support this contention by the agent for the appellant. The appellant is receiving a pension pursuant to s. 10(2)(b) of the R.C.M.P.S.A. for his long service and it must be included in calculating his income pursuant to s. 56(1)(a)(1) of the Act.

The Royal Canadian Mounted Police Pension Continuation Act, c. R-10 of the Revised Statutes of Canada, 1970, mentioned in s. 81(1 )(/) of the Act, was not reproduced in the 1985 Revised Statutes because it is not the current act dealing with the pensions of R.C.M.P. members. The reason can be seen from reading its long title: “An Act to provide for the payment of pensions to certain persons appointed as members of the Royal Canadian Mounted Police before the 1st day of March 1949”. The present legislation on R.C.M.P. member pensions is the Royal Canadian Mounted Police Superannuation Act, c. R-ll of the Revised Statutes of Canada, 1985. Sections 32 and 33 of that Act provide that members or former members of the R.C.M.P. may apply for benefits under those sections on account of injury or death in the course of their duties. Such applications are processed in the same way as claims under the Pension Act. I do not know if such a claim was made under those sections. The benefits are completely separate from long service pensions paid pursuant to s. 10(2)(b) of the R.C.M.P.S.A. and it is clear that the pension in question in the instant assessment is not a benefit paid pursuant to ss. 32 or 33 of the R.C.M.P.S.A. but a pension based on the number of years of service pursuant to s. 10(2)(b) of the R.C.M.P.S.A.

Section 19(1) of the Income Tax Application Rules (or “1971 Rules”) reads as follows:

19. Income maintenance payments

(1) Notwithstanding section 9, paragraph 6(1)(f) of the amended Act does not apply in respect of amounts received by a taxpayer in a taxation year that were payable to the taxpayer in respect of the loss, in consequence of an event occurring before 1974, of all or any part of the taxpayer’s income from an office or employment, pursuant to a plan, described in that paragraph, that was established before June 19, 1971.

The agent for the respondent argued with respect to the application of s. 19(1) of the 1971 Rules that, contrary to what the agent for the appellant believed, it is not the time the insurance system was created that is at issue but the date of the event giving rise to the income insurance benefits in the event of disability.

Under s. 6(1 )(/) of the Act money received under the income insurance plan is included in income, unless s. 19(1) of the 1971 Rules applies. The Minister’s officials relied on the report by the attending physician, filed as Exhibit I-1, in deciding that the event which caused the disability was subsequent to 1974.

It is true that in the certificate accompanying the disability insurance benefit claim (Exhibit 1-1), the physician gave August 1978 as the date when the symptoms first appeared or the date when the accident happened. However, it can be seen that this answer was given without thinking very carefully and that the date in question was actually the one on which he saw the appellant for the first time. He mentioned in the same certificate that there were other attending physicians, such as Dr. Achong in 1976. As mentioned above, the same physician several times stated that it was the 1969 event which was the cause of the appellant’s disability. I therefore cannot attach any weight to the statement made in the certificate, since the writer himself several times quite definitely contradicted it and it in any case contains an error on the very face of the certificate (Exhibit I-1). As no other date was submitted by the respondent and a date was submitted by the appellant by means of letters from the attending physician, the weight of the evidence accordingly leads me to conclude that the event which led to the payment of the disability insurance benefits occurred before 1974 and that accordingly pursuant to s. 19(1) of the 1971 Rules those amounts do not have to be included in calculating the appellant’s income.

In conclusion, the retirement benefits received by the appellant were correctly included by the Minister in calculating the appellant’s income. As to the amounts received as disability insurance, they should not have been included in calculating the appellant’s income.

The appeal is allowed without costs and the reassessments referred back to the Minister for reconsideration and reassessment in order to exclude from the appellant’s income benefits received as income insurance.

Appeal allowed in part.