Date: 19990810
Docket: 98-1909-IT-I
BETWEEN:
KAREN FOURNIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
RIP, J.T.C.C.
[1] In computing her income for 1996, Karen Fournier, the appellant, included, inter alia, purported income from the Province of Ontario in the amount of $54,917.79, a retirement allowance from the Province of Ontario in the amount of $4,854.66 and employment benefits from a wage loss plan in the amount of $15,608.76 and claimed an amount of $42,500.05 as a deduction in computing her taxable income.
[2] In assessing Ms. Fournier for 1996, the Minister of National Revenue ("Minister") did not permit the appellant to deduct the amount of $42,500.05 on the basis the amount was a "retiring allowance", as defined by subsection 248(1) of the Income Tax Act ("Act") and is to be included in income by virtue of subparagraph 56(1)(a)(ii) of the Act. The appellant insists the amount was not received as a retiring allowance and therefore appeals the assessment.
[3] Ms. Fournier started work for the Ministry of Transport of Ontario in January 1989 on a short-term contract and became a permanent employee of the Ministry in October 1989. She first worked as a labourer on the province's highways and then as a sign painter, also on the province's highways. She testified she was one of the first women to be so employed.
[4] From March 1989 on, Ms. Fournier testified, she was subject to sexual and physical harassment, including threats of death, by at least three male employees of the Ministry with whom she worked. She worked in a building with 21 men and was told by several of them that she "wasn't wanted and they'd get rid" of her. On one occasion she was pushed in front of a moving vehicle, on another occasion a turkey carcass with a twelve inch butcher knife through the neck of the carcass was thrown on her front lawn scaring her young son and forcing them to move to a secret location.
[5] Ms. Fournier eventually filed a complaint with her employer under the Workplace Discrimination and Harassment Prevention Policy, grievances under the grievance procedure provided in the Collective Agreement between the Ministry and the union representing the employees and complaints under the province's human rights legislation. By letter dated December 10, 1993 the Deputy Minister of Transportation, upon receipt of the investigator's report of Ms. Fournier's complaints, confirmed that many of her allegations were substantiated.
[6] Respondent's counsel acknowledged that Ms. Fournier was subject to harassment. I find that the harassment suffered by Ms. Fournier, only two examples which are described in these reasons, were serious and adversely affected her physical and mental health, as she testified.
[7] Ms. Fournier and the Ministry of Transportation executed Minutes of Settlement with respect to the various grievances and complaints on October 25, 1995. According to the Minutes of Settlement the Ministry "agreed to fund a program designed to reimburse Ms. Fournier for actual costs incurred for retraining, re-education and the possible establishment of a new business". The Ministry agreed to reimburse her for items such as tuition, career training and counselling, child care and the purchase of employment related equipment so she could obtain employment outside the Ontario Public Service, including self-employment.
[8] The maximum amount of the fund for Ms. Fournier was "in the range of $0 to $50,000 gross (with applicable deductions made as required). Reimbursement requests by Ms. Fournier to the fund were to be supported by receipts. No receipts were required for child care expenses which were not to exceed $5,000.
[9] Ms. Fournier agreed that in return for the receipt of up to $50,000 from the Ministry effective October 27, 1995 she would be placed on sick leave for six months until April 26, 1996. During this six-month period, she would apply for long-term disability. As soon as she had applied for long-term disability, she would be deemed to no longer be an employee of the Ministry and the termination of her employment would be recorded in the books of the Ministry as a resignation. She would also withdraw all grievances and complaints against the Ministry.
[10] In making payment to Ms. Fournier, the Ministry made source deductions for the payments, including child care, and issued to Ms. Fournier T4 and T4A slips for 1996 showing her gross income and deductions.
[11] Subsection 248(1) defines "retiring allowance" to mean:
an amount (other than a superannuation or pension benefit, an amount received as a consequence of the death of an employee or a benefit described in subparagraph 6(1)(a)(iv)) received
(a) on or after retirement of a taxpayer from an office or employment in recognition of the taxpayer's long service, or
(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 the taxpayer's death, by a dependant or a relation of the taxpayer or by the legal representative of the taxpayer.
[12] The amounts Ms. Fournier received from the Ministry were not received "in respect of a loss of ... employment ... on account of or in lieu of payment of, damages". The Ministry did not make any payment, nor did Ms. Fournier receive any payment, in respect of a loss of employment. The payments were made due to the fact that employees of the Ministry were harassing the appellant and that the appellant had a valid claim for damages against the Ministry due to the actions of its employees.
[13] Whether the Ministry admitted the appellant's claim is irrelevant to the appeal at bar. In any event, the Deputy Minister of Transportation acknowledged the boorish and dangerous behaviour of several of his Ministry's employees. That was the cause of the appellant's complaints and grievances. That is the reason the Ministry agreed to make the payments to Ms. Fournier. Ms. Fournier was an employee of the Ministry at the time she agreed to execute the Minutes of Settlement. As far as her agreeing to resign is concerned, that is simply a way for the Ministry to get rid of an employee. Ms. Fournier did not receive any payment in consideration of, or on account of, her agreeing to leave the employment of the Ministry, she did not receive these amounts as damages for any stress, medical or other injuries she sustained as result of the termination of her employment.[1]
[14] The amount of $42,500.05 received by Ms. Fournier from the Ontario Government is not income from a source, as alleged in the alternative by the respondent. The ordinary concept of income pertains to recurring receipts and does not extend to a lump sum receipt or payment because a source of income had been taken away or destroyed.[2] Similarly, this concept does not extend to payments received by virtue of damages committed against the person of a taxpayer.
[15] To find the payments received by Ms. Fournier are taxable under the general provisions of subsection 3(a) of the Act would disregard the fact that Parliament has chosen to deal with the taxability of such amounts, in the provisions of the Act relating to retiring allowances.[3]
[16] The amount of $42,500.05 does not fall within the ambit of the "ordinary concept of income" and is what is normally considered a "recurring receipt". The amount is not income from a source.
[17] The appeal is therefore allowed with costs, if any.
Signed at Ottawa, Canada, this 10th day of August 1999.
"Gerald J. Rip"
J.T.C.C.