Bowman
T
.
C.J.:
This
appeal
is
from
an
assessment
for
the
appellant’s
1991
taxation
year.
The
issue
is
whether
the
appellant
must
pay
tax
on
$72,500
which
he
received
pursuant
to
a
settlement
of
a
wrongful
dismissal
action.
Prior
to
1991
the
appellant
was
dismissed
from
his
employment
with
a
company
known
as
Datapoint
Canada
Inc.
He
sued
for
damages
and
a
settlement
was
reached
in
1991.
He
had
lawyers
but
the
final
settlement
was
negotiated
by
him
personally.
He
testified
that
his
understanding
was
that
the
settlement
amount
was
$111,540,
from
which
income
tax
as
well
as
Canada
Pension
Plan
and
Un-
employment
Insurance
premiums
were
to
be
deducted
and
remitted
to
the
Receiver
General
and
that
he
would
receive
a
net
amount
of
$72,500.
That
is
not
what
happened.
On
February
4,
1991,
the
president
of
Datapoint,
Mr.
George
D.
Oyagt,
wrote
to
the
company’s
lawyer,
Ms.
Chantal
C.
Beaulieu
of
Ogilvy
Renault
as
follows:
Re:
Francois
Suermondt
vs
Datapoint
Canada
Inc.
Please
find
enclosed
two
cheques
made
payable
to
Godin,
Raymond,
Harris,
Thomas
—
In
Trust
in
the
amount
of
$72,500.00
and
$500.00,
being
the
amount
of
settlement
with
Mr.
Suermondt
and
Mr.
Suermondt’s
legal
fees,
respectively.
The
settlement,
I
believe,
is
realistic
under
the
circumstances.
We
have
acknowledged
that
we
owed
Francois
outstanding
commissions
of
$36,000
(his
claim
$44,000),
plus
alleged
outstanding
twenty-two
days
of
vacations.
If
we
add
into
that,
his
claim
for
lost
interest
on
commissions
due
him
from
August
1989,
the
six
to
nine
man
days
of
David
Cunningham’s
and
my
time
lost
in
presenting
our
case
before
the
courts,
and
the
potential
award
for
wrongful
dismissal
(Suermondt’s
total
claim
of
$115,000)
the
settlement
is
less
painful.
I
have
cleared
this
settlement
with
Mr.
Philip
Freeman,
Senior
Vice-President
and
Chief
Legal
Counsel
for
Intelogic
Trace,
Inc.
Along
with
a
full
release
from
Suermondt,
would
you
please
ensure
that
any
unemployment
insurance,
income
tax
(Quebec
and
Federal),
and
other
le-
gal/governmental
implications
of
this
settlement
are
taken
care
of
prior
to
the
release
of
the
cheques
in
order
to
save
harmless
Datapoint
Canada
Inc.
and
Intelogic
Trace
Canada
Inc.
from
further
liabilities
and
obligations
relative
to
Mr.
Suermondt.
lt
has
been
a
pleasure
dealing
with
you
in
this
legal
matter.
Thank
you
for
all
your
assistance
in
bringing
about
this
out
of
court
settlement.
The
letter
is
somewhat
strange.
Why
would
he
send
a
cheque
for
$72,500
to
his
lawyers,
payable
to
Mr.
Suermondt’s
lawyers,
and
instruct
them
to
ensure
that
“any
unemployment
insurance,
income
tax
(Quebec
and
Federal),
and
other
legal/governmental
implications
of
this
settlement
are
taken
care
of
prior
to
the
release
of
the
cheques...”?
The
cheque
was
not
payable
to
Ogilvy
Renault
and
so
Ms.
Beaulieu
could
not
have
withheld
any
tax.
Ms.
Beaulieu
testified,
but
given
the
passage
of
eight
years
and
the
unavailability
of
the
files,
she
was
unable
to
shed
any
light
on
the
settlement.
It
does
not
appear
that
the
settlement
was
reduced
to
writing.
The
Department
of
National
Revenue
received
a
T4A
slip
for
1991
from
Intelogic
Trace
Canada
Inc.
(which
had
acquired
Datapoint
Canada
Inc.)
showing
the
payment
to
Mr.
Suermondt
of
$72,500
as
a
retiring
allowance,
with
no
deductions.
The
Department
of
National
Revenue
contacted
the
appellant,
who
had
not
filed
a
return
for
1994.
When
he
did
file
he
did
not
declare
the
amount
of
$72,500.
The
Minister
assessed
him
on
this
amount.
The
appellant’s
principal
contention
is
not
that
the
amount
was
not
a
retiring
allowance
but
rather
that
he
was
supposed,
under
the
terms
of
the
settlement,
to
have
received
it
net
of
tax
and
that
the
responsibility
of
remitting
tax
on
the
amount
of
$111,540
lay
with
Datapoint.
He
sought
to
hold
Datapoint
to
what
he
believed
was
the
settlement
he
made
with
it,
but
found
that
in
the
meantime
it
had
left
Canada.
I
have
no
hesitation
is
believing
Mr.
Suermondt
when
he
says
that
his
understanding
of
the
settlement
was
that
he
was
to
receive
$72,500
net
of
tax
and
other
applicable
deductions.
Unfortunately,
the
settlement
was
not
reduced
to
writing
and
if
that
was
the
deal,
Datapoint
reneged.
Where
an
employer
withholds
tax
from
an
employee’s
wages
or
salary
and
fails
to
remit
it,
it
is
clear
that
the
Minister
cannot
pursue
the
employee
for
the
unremitted
tax.
Once
it
is
withheld
it
is
held
in
trust
for
Her
Majesty.
That
is
not
the
situation
where
there
is
an
oral
understanding
that
the
employee
will
receive
his
or
her
salary
or
wages
(or,
as
in
this
case,
a
taxable
lump
sum)
“net
of
taxes”.
Such
an
understanding
does
not
bind
the
Minister
and
does
not
amount
to
the
type
of
withholding
that
could
create
a
trust
in
favour
of
Her
Majesty
or
a
defence
that
the
employee
can
use
against
a
claim
by
the
Minister
for
tax
on
the
amount
received
by
him.
I
regret
having
to
reach
this
conclusion.
Mr.
Suermondt
has
been
deceived
by
Datapoint,
which
did
not
live
up
to
its
agreement
with
him.
However
that
fact
cannot
redound
to
the
detriment
of
the
respondent.
The
appeal
is
dismissed.
Appeal
dismissed.
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