http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/110238/index.do
Naraine v. The Queen (April 28, 2015 – 2015 TCC, 104, Campbell J.).
Précis: Mr. Naraine was terminated by Ford in 1985. He spent 21 years pursuing a claim against Ford and was finally awarded a total of $369,422.82 consisting of general damages, special damages and pre- and post- judgment interest on both. The Crown conceded that the general damages and pre- and post- judgment interest were not taxable. The Crown also agreed to the deduction of $16,700.00 in proven legal fees to obtain the award.
Apart from the amount conceded by the Crown the Court found that the balance, $277,494.31, was taxable as a retiring allowance. Thus the Court found Mr. Naraine taxable on $285,647.19 (which included rental income of $5,708.00 and a small pension of $2,444.88.
The appeal was allowed, but only to permit the Crown’s consessions; costs were awarded to the Crown.
Decision: Apart from the concessions made by the Crown, the only issue was whether the net amount of $277,494.31 was taxable as a retiring allowance and interest. The Court made short work of the issue:
[9] The first question is whether the special damages award of $90,559 was a retiring allowance as defined in subsection 248(1) of the Income Tax Act (the “Act”). The relevant portions of that definition, as far as this appeal is concerned, states that an amount received by a taxpayer will be a retiring allowance if it is received “… in respect of a loss of an office or employment … 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, …” (emphasis added).
[10] I quote from paragraphs 20 and 21 of Dunphy v The Queen, 2009 TCC 619, 2010 DTC 1028, where Justice Sheridan stated the following in respect to the appropriate test to be applied:
[20] The jurisprudence is clear that the use of the words “in respect of” in the definition of “retiring allowance” is very broad in scope.
[21] To determine whether there is a sufficient nexus between the loss of employment and the payment received, the courts have held that the appropriate test is “but for the loss of employment would the amount have been received?” To paraphrase former Chief Justice Bowman in Stolte v. R., the trick is to figure out what payment was for; the answer will depend on the facts in each case.
[11] It is apparent from the Tribunal’s decision in this appeal and the evidence before me that the award of $90,559 was to compensate the Appellant for lost employment income and benefits. At paragraph 50 of that decision, the Tribunal ordered, among other things, that Ford was “… to pay Mr. Naraine special damages to compensate for the income and benefits he would have been entitled to for the period from his discharge at Ford in August 1985 to his hiring at General Motors in the spring of 1987”. The other monetary amounts of $20,000 and $10,000 were awarded as general damages to compensate for mental anguish and those amounts have not been included in income. Since this amount is clearly a compensatory amount for the Appellant’s lost income and related benefits for the period of his termination at Ford until his hiring at General Motors, the amount was correctly included in the Appellant’s income in the 2006 taxation year pursuant to subparagraph 56(1)(a)(ii) of the Act.
[12] With respect to the amounts awarded for pre-judgment and post-judgment interest on the award of $90,559, these amounts are also properly included in the Appellant’s income as interest income pursuant to paragraph 12(1)(c) of the Act.
While Mr. Naraine claimed that he had additional legal fees above the $16,700.00 conceded by the Crown the Court found there was no credible evidence of such fees.
The appeal was allowed but only to permit the concessions made by the Crown; costs were awarded to the Crown.