Date: 19980130
Docket: 97-1768-IT-I
BETWEEN:
JACQUELINE LANDRY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, J.T.C.C.
[1] This is an appeal from an assessment for the 1995 taxation year.
[2] The facts are quite straightforward. Mrs. Landry was employed by the Regional Municipality of Sudbury. She became disabled and stopped working. She was insured under a group long term disability insurance policy with London Life Insurance Company.
[3] The premiums were paid by her employer. However a crucial fact that was not mentioned in the reply to the notice of appeal and appears not to have been before the Minister on assessing was that the premiums paid by the employer were included in Mrs. Landry’s income as taxable benefits from her employment.
[4] London Life refused to pay Mrs. Landry’s long term disability benefits and she sued. London Life accepted a settlement of a lump sum payment to her of $30,000. Her legal fees were $5,000 and London Life issued her a T-4 slip for $25,000, being the settlement net of her legal fees. The Department of National Revenue has included this amount of $25,000 in Mrs. Landry’s income on the basis of paragraph 6(1)(a) of the Income Tax Act.
[5] Counsel for the respondent stated explicitly that the respondent did not rely upon paragraph 6(1)(f).
[6] In Peel v. M.N.R., 87 DTC 268, Judge Taylor held that a lump sum payment of $90,000 received from an insurer as a settlement of an action brought by the taxpayer was not caught by paragraph 6(1)(f) because it was not payable “on a periodic basis”. He also held that paragraph 6(1)(a) was inapplicable.
[7] Paragraphs 6(1)(a) and 6(1)(f) read as follows:
There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:
(a) value of benefits. - the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, except any benefit
(i) derived from the contributions of the taxpayer’s employer to or under a registered pension plan, group sickness or accident insurance plan, private health services plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy,
(ii) under a retirement compensation arrangement, an employee benefit plan or an employee trust,
(iii) that was a benefit in respect of the use of an automobile,
(iv) derived from counselling services in respect of
(A) the mental or physical health of the taxpayer or an individual related to the taxpayer, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, or
(B) the re-employment or retirement of the taxpayer, or
(v) under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection (11);
...
(f) employment insurance benefits. - the total of all amounts received by the taxpayer in the year that were payable to the taxpayer on a periodic basis in respect of the loss of all or any part of the taxpayer’s income from an office or employment, pursuant to
(i) a sickness or accident insurance plan,
(ii) a disability insurance plan, or
(iii) an income maintenance insurance plan
to or under which the taxpayer’s employer has made a contribution, not exceeding the amount, if any, by which
(iv) the total of all such amounts received by the taxpayer pursuant to the plan before the end of the year and
(A) where there was a preceding taxation year ending after 1971 in which any such amount was, by virtue of this paragraph, included in computing the taxpayer’s income, after the last such year, and
(B) in any other case, after 1971,
exceeds
(v) the total of the contributions made by the taxpayer under the plan before the end of the year and
(A) where there was a preceding taxation year described in clause (iv)(A), after the last such year, and
(B) in any other case, after 1967.
[8] In Cook v. The Queen, 95 DTC 853, Judge Taylor, on facts that are virtually indistinguishable from those in the Peel case and in this case, reversed himself and held that paragraph 6(1)(a) applied. He did so on the basis of the decision of the Supreme Court of Canada in The Queen v. Savage, 83 DTC 5409, which he had not considered in Peel. In Savage, the Supreme Court of Canada held that a monetary award paid to the taxpayer by an employer for passing employment related courses was taxable under paragraph 6(1)(a) and stated that the words “in respect of” were words of the widest possible scope.
[9] With respect, I think that Judge Taylor was right in Peel. Neither the Savage case nor paragraph 6(1)(a) has anything to do with this case. Paragraph 6(1)(f), upon which counsel for the respondent expressly declined to rely, deals specifically and in detail with disability benefits payable on a periodic basis. The lump sum payment received by Mrs. Landry was not payable on a periodic basis and there is no allegation or assumption that the $25,000 represented simply the aggregate of periodic payments that she might have received over her lifetime. (cf. Marchand v. M.N.R., 87 DTC 630 (T.C.C.)).
[10] Paragraph 6(1)(a) is a general provision and it is not intended to fill in all the gaps left by paragraph 6(1)(f) - expressio unius est exclusio alterius.
[11] There is a further reason for not including the lump sum in Mrs. Landry’s income. The employer, it is true, paid the premiums in the first instance but they were included in Mrs. Landry’s income as a taxable benefit. In essence and in substance, the payments were being made on her behalf by the employer. It would be a wholly unacceptable result if she were to be taxed again when the benefits are paid. What she received from London Life was received qua insured, not qua employee. The benefit, which was taxed, lay in the employer’s provision of insurance coverage, not in the benefits paid by the insurer.
[12] The appeal is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment to delete the sum of $25,000 from Mrs. Landry’s income for 1995.
[13] The appellant is entitled to her costs, if any.
Signed at Ottawa, Canada, on this 30th day of January 1998.
"D.G.H. Bowman"
J.T.C.C.