Date: 20011022
Docket: 2000-1461-IT-G
BETWEEN:
ANTONIJA SIFTAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Beaubier, J.T.C.C.
[1] This appeal pursuant to the General Procedure was heard at Windsor, Ontario on October 16, 2001. The Appellant's lawyer in respect to the civil matters in question, Joseph Comartin, M.P., testified on behalf of the Appellant. The Respondent called the lawyer for the Great-West Life Assurance Company, ("G-W") Graham Nattress, who testified respecting the civil matters on behalf of G-W.
[2] The appeal is in respect to a reassessment by the Respondent which found that the Appellant did not report income alleged received by her from G-W in the amount of $44,495.83 in 1997. A summary of the facts relating to this is contained in a Partial Agreed Statement of Facts which reads:
TAX COURT OF CANADA
NOTICE OF APPEAL-GENERAL PROCEDURE
BETWEEN:
ANTONIJA SIFTAR
Appellant
and
HER MAJESTY THE QUEEN
Respondent
PARTIAL AGREED STATEMENT OF FACTS
1. Antonija Siftar was born on June 12, 1942.
2. She was employed at Tamco Limited beginning in 1977. She stopped working in August of 1990 as a result of a physical disability suffered in a hit and run motor vehicle accident on August 27, 1990.
3. She has not returned to any employment since the accident on August 27, 1990.
4. Mrs. Siftar was a member of the Union and pursuant to that contract was entitled to both short term and long term disability benefits. The insurance premiums were paid solely by Tamco Limited, her employer.
5. Mrs. Siftar received short term benefits for the first six months from Great West Life. Her long term benefits were paid by Great West Life from February 26, 1991 until August 22, 1994.
6. Mrs. Siftar suffered serious physical injuries resulting in her inability to work. She applied for Canada Pension and received notice that her Canada Pension disability benefits were granted effective December, 1990. She has been collecting a Canada Pension disability benefit since that date.
7. Mrs. Siftar's entitlement to long term disability benefits from Great West Life was $1,100.00 per month. This sum was reduced by her Canada Pension disability benefit of $504.05 per month for a total sum paid by Great West Life of $595.00 per month.
8. Mrs. Siftar received no-fault benefits from her insurer, Allstate, from the time of the accident until October 3, 1996 after which Allstate refused to continue to pay her no-fault benefits.
9. The motor vehicle accident, the termination of benefits by Great West Life on August 27, 1994 and the termination of Mrs. Siftar's no-fault benefits on October 3, 1996 by Allstate resulted in three legal actions commenced by Mrs. Siftar. They are as follows:
(a) In 1994 Mrs. Siftar issued a Claim against Allstate for her personal injuries suffered in the motor vehicle accident. The operator of the motor vehicle was unidentified and uninsured. Pursuant to the insurance provisions and her policy of insurance, Mrs. Siftar commenced her claim for personal injuries against her insurer, Allstate. (Tort Claim);
(b) In 1995 Mrs. Siftar commenced an action against Great West Life as a result of the termination of her disability benefits. (Disability Claim);
(c) In 1997 Mrs. Siftar commenced an action against Allstate as a result of the termination of her no-fault benefits. (No-fault Claim).
10. The lawyer representing Mrs. Siftar in all three claims was Joseph Comartin of the CAW Legal Services Plan in Windsor.
11. All three claims were settled pursuant to Releases all dated October 24, 1997 and three Court Orders dated October 21, 1997.
12. The total settlement for all three legal actions was $122,500.00. This occurred as a result of negotiations between Mrs. Siftar's solicitor, Joseph Comartin, and the three solicitors for each of the Defendants in each of the actions. The Defendants agreed to resolve their share of the total sum as follows:
(a) Great West Life paid an inclusive sum of $44,495.83 which included interest, costs plus one third of the disbursements and GST;
(b) Allstate Insuance Company, for the tort claim, paid $33,508.33 as an all inclusive settlement for damages, costs, interest, disbursements and GST;
(c) Allstate Insurance Company for the no-fault claim paid $44,495.84 as an all inclusive payment to resolve this claim, inclusive of all of her benefits pursuant to the no-fault provisions, costs, interest, disbursements and GST.
13. Great West Life issued a T4A to Mrs. Siftar for the year 1997 in the total sum of $44,495.83.
14. Mrs. Siftar did not include the Great West Life T4A in her 1997 Income Tax Return.
15. By Notice of Reassessment dated January 6, 1999 the Minister Reassessed Mrs. Siftar's 1997 taxation by including the $44,495.83 in her income tax for that year. This resulted in a Federal and Provincial tax assessment to Mrs. Siftar of $17,994.94.
ISSUE
Whether the Minister of Revenue properly included the amount of $44,495.83 received from Great West Life in Antonija Siftar's income for the 1997 taxation year.
RONALD C. REAUME
CAW LEGAL SERVICES PLAN
2345 CENTRAL AVENUE
WINDSOR, ONTARIO
N8W 4J1
Tel: (519) 944-5222
Fax: (519) 944-5077
[3] Mr. Comartin testified, as confirmed by Exhibit AR-1, Tab 5, that his negotiations were with the lawyer for Allstate and that they settled on a lump sum of $122,500 in full settlement of all claims by his letter of August 27, 1997 which was accepted by her letter of September 2, 1997. In the September 2, 1977 letter, Allstate's lawyer outlined the three sources and sums totalling $122,500. However these sources were not a condition of the lump settlement which was merely for $122,500 from whatever sources the three defending actions chose.
[4] G-W paid $44,495.83 after its form of release was signed by the Appellant on October 24, 1997. That form was prepared by G-W and G-W would not have paid the Appellant unless a release satisfactory to G-W was signed. The release is in Exhibit AR-1, Tab 6. It reads:
FULL AND FINAL RELEASE
WHEREAS The Great-West Life Assurance Company ("Great-West Life") has issued Group Policy No. 134939GHA (the "Policy") to Tamco Limited;
AND WHEREAS Antonija Siftar as an employee as defined by the Policy, has filed a claim for long term disability benefits under the Policy, and has filed a Statement of Claim against Great-West Life on or about June 9, 1995 in the Ontario Court (General Division), Windsor, Ontario, bearing Court File No. 95-GD-32826 (the "Action");
WITNESS:
1. In consideration of the settlement and dismissal of the Action and the payment by Great-West Life of the sum of FORTY-FOUR THOUSAND, FOUR HUNDRED AND NINETY-FIVE DOLLARS AND EIGHTY-THREE CENTS ($44,495.83), inclusive of interest and taxable fees and disbursements, the receipt of which is hereby acknowledged, and for other good and valuable consideration, I Antonija Siftar, for myself, my heirs, executors, administrators and assigns and anyone claiming through or under me, do hereby release, remise and forever discharge Great-West Life, and its officers, directors, employees, servants, agents, successors and assigns, of and from any and all manner of action and actions, cause and causes of action, suits, debts, dues, sums of money, general damages, special damages, costs, claims and demands of every nature and kind, at law or in equity or under any statute, which I or my heirs, executors, administrators, or assigns have or ever had, can, shall or may have by reason of any matter, cause or thing whatsoever in respect of or in any way arising out of or relating to the Policy or the matters in issue in respect of the Action.
2. And in further consideration of the payment to me of the aforesaid sum of money by Great-West Life and other good and valuable consideration, I, Antonija Siftar, hereby consent to the dismissal of the said Action without costs to any party.
3. I, Antonija Siftar further authorize and require that the payment to us of the aforesaid sum of money be paid to our solicitor, CAW Legal Services Plan, in trust, and my signatures to this Release shall be Great-West Life's authority for so doing.
4. It is understood and agreed that this settlement is the compromise of a doubtful and disputed claim or claims and that payment is not to be construed as an admission of liability by Great-West Life for payment of benefits to me pursuant to the Policy, and that Great-West Life expressly denies such liability.
5. It is further understood and agreed that I, Antonija Siftar, will not make any claim or take any proceedings against any other person or entity, who or which might claim contribution or indemnity under the provisions of any statute or otherwise.
6. I, Antonija Siftar, represent,, warrant and certify that in executing this Release, I do so with full knowledge of any and all rights which I may have with respect to benefits under the Policy and in respect of this Action, and that at all times relative thereto, I have had the opportunity to be represented by legal counsel of my own choosing to advise me concerning this Release.
7. The terms of the Release are contractual and not a mere recital.
IN WITNESS WHEREOF I, Antonija Siftar, have herein set my hand and seal this 24th day of October, 1997, at the City of_____________ in the Province of Ontario.
SIGNED, SEALED AND DELIVERED )
by Antonija Siftar in the presence of: )
)
)
)
)
"signature" )
Signature )"signature"
)ANTONIJA SIFTAR
"Joseph J. Comartin" )
Name )
)
"234 Central, Windsor )
Address )
)
"Barrister and Solicitor" )
Occupation )
[5] The Court Order referred to in the Release merely dismissed the suit by the Appellant against G-W.
[6] As pointed out by Mr. Nattress in his testimony, and confirmed in the argument of counsel in this Hearing, G-W could not pay the Appellant disability payments for the future since the Policy only permits payments on a monthly basis. The Release provides that the $44,495.82 was inclusive of interest, taxable fees and disbursements; the sum of $44,495.82 amounts to more than the sum of these items. Moreover, Mr. Comartin deducted his fees and disbursements of $18,225.18 and a Minister of Finance fee of $75.00 for the dismissal order in a lump sum from the lump sum settlement of $122,575. G-W paid its sum to Mr. Comartin in five cheques dated the same day - four in the amount of $9,000 each and one for the balance (Exhibit AR-1, Tab 5).
[7] The Appellant was assessed pursuant to paragraph 6(1)(f) of the Income Tax Act ("Act") and, in argument, in the alternative, paragraph 6(1)(a) of the Act. They read:
6(1) 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) 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) the aggregate of amounts received by him in the year that were payable to him on a periodic basis in respect of the loss of all or any part of his 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 his employer has made a contribution, not exceeding the amount, if any, by which
(iv) the aggregate of all such amounts received by him 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 his income, after the last such year, and
(B) in any other case, after 197l,
exceeds
(v) the aggregate 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 subparagraph (iv), after the last such year, and
(B) in any other case, after 1967;
[8] In the Informal Appeal Jacqueline Landry v. Her Majesty the Queen, 98 DTC 1416, Bowman, J. found that a lump sum payment in settlement of long-term disability benefit was not to be included in income pursuant to paragraph 6(1)(a). In that case Mrs. Landry had paid tax on the premiums as a taxable benefit; that did not happen in this case. Moreover paragraph 6(1)(f) was not relied on by the Respondent, but it was in this case.
[9] In the General Appeal, Catherine Dumas v. Her Majesty the Queen, 2000 DTC 2603, Mogan, J. was able to calculate the taxpayer's benefit in the settlement based upon the disability payments due from the insurer. Mogan, J. found that the amount in Dumas did not come out of thin air, but was negotiated by the Appellant and insurer's "sophisticated lawyers". The benefit was found to be $85,000, and not the $105,000 assessed. In essence Mogan, J. calculated what he considered to be one-half of Mrs. Dumas' future disability benefits to be $20,000, subtracted that from the $105,000 and arrived at the $85,000 figure.
[10] There are a number of discrepancies between Landry and Dumas on the one hand and Mrs. Siftar's case. They include the following:
1. Like Dumas, paragraph 6(1)(f) was pleaded.
2. The Appellant's lawyer launched these separate suits - #1 against G-W for general damages, a declaration that the insurance contract was valid, and the benefits (AR-1, Tab 6); - #2 against Allstate Insurance Company ("Allstate") for the Appellant and her husband for general damages; and #3 by the Appellant against Allstate for medical expenses, interest, and a declaration of entitlement to weekly benefits. Mrs. Siftar's plea for relief in the Statement of Claim against G-W reads as follows:
CLAIM
1. THE PLAINTIFF CLAIMS:
(a) Damages in the sum of $250,000.00;
(b) A Declaration that the Plaintiff has and continues to be insured since August 27, 1990, pursuant to a group long term disability insurance contract between Tamco Limited and the Defendant;
(c) A Declaration that the policy of group long term disability insurance between Tamco Limited and the Defendant for and on behalf of the Plaintiff remains in full force and effect.
(d) A Declaration that the Plaintiff has been and continues to be totally disabled since August 27, 1990, pursuant to the said group long term disability insurance contract between Tamco Limited and the Defendant;
(e) A mandatory order directing the Defendant to reinstate the premium free benefit for the continuance of the Plaintiff's Long Term Disability benefits pursuant to the contract between Tamco Limited and the Defendant;
(f) A mandatory order directing the Defendant to pay to the Plaintiff all monthly benefits pursuant to the said group long term disability insurance contract due and owing since August 22, 1994;
(g) Pre-judgment interest pursuant to the Courts of Justice Act R.S.O. 1990, Chapter C.43;
(h) Post-judgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, Chapter C.43;
(i) Her costs of this action;
(j) Such further and other relief as this Honourable Court deems just.
3. The Appellant's lawyer negotiated with one of Allstate's lawyers for the $122,500 lump sum which was treated as a lump sum by those two lawyers in respect to each other and the Appellant. The three defendant lawyers broke the $122,500 down among themselves.
4. While the Appellant's lawyer had an actuary estimate G-W's liability, a proposal to G-W based on that estimate was rejected by G-W. Thereupon the Appellant's lawyer went to the lump sum amount and the Court accepts his statement that he did not care where its components came from - all he was after was the final figure. This view is obviously that adopted by the three defending lawyers, since they let one of Allstate's lawyers carry the negotiations with the Appellant's lawyer. The defendants simply apportioned it among themselves.
5. The Release is, as it states in paragraph 8, "contractual". The Appellant releases G-W from any claims under both the Policy and her Action (paragraph 1). In paragraph 4 she agrees that G-W's payment is not an admission of liability for benefits and that G-W denies such liability. In paragraph 5 she agrees not to take any further proceedings.
[11] Thus the Release's "contract" in essence constitutes a contract of admission of liability for the Appellant's lawsuit against G-W, but is not an admission of liability for benefits under the Policy. It was completed under the direction of two highly experienced lawyers for the parties. In essence, by elimination, it concludes the lawsuit by paying the Appellant for her claims for general damages, as distinct from her other claims in the lawsuit that the insurance contract was valid, and for the benefits.
[12] The Release in these terms was on G-W's form. Mr. Comartin did not negotiate or renegotiate its form with Mr. Natttress. He simply had Mrs. Siftar sign it for the total sum of $44,495.83 being a part of the total of $122,500. That sum and the Release were not negotiated for by Mr. Comartin tax wise or otherwise. He and the Appellant merely accepted them as part of the $122,500 lump sum. How G-W and the other defendants arrived at their parts of the $122,500 did not concern the Appellant.
[13] The $44,495.83 was not payable on a periodic basis, nor did it represent the aggregate of periodic payment she might have received over her lifetime until the age of 65. Rather, it constituted general damages paid by G-W to the Appellant pursuant to the Appellant's lawsuit against G-W and G-W's form of Release executed by the Appellant in return for G-W's payment to her of $44,495.83 as its part of a lump sum settlement of $122,500.
[14] The appeal is allowed. This matter is referred to the Minister of National Revenue for reconsideration and reassessment in accordance with these Reasons.
[15] The Appellant is awarded costs.
Signed at Ottawa, Canada, this 22nd day of October, 2001.
"D. W. Beaubier"
J.T.C.C.
COURT FILE NO.: 2000-1461(IT)G
STYLE OF CAUSE: Antonija Siftar v. The Queen
PLACE OF HEARING: Windsor, Ontario
DATE OF HEARING: October 16, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge D. W. Beaubier
DATE OF JUDGMENT: October 22, 2001
APPEARANCES:
Counsel for the Appellant: Ronald C. Reaume
Counsel for the Respondent: Daniel Bourgeois
COUNSEL OF RECORD:
For the Appellant:
Name: Ronald C. Reaume
Firm: CAW Legal Services Plan
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1461(IT)G
BETWEEN:
ANTONIJA SIFTAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on October 16, 2001 at Windsor, Ontario by
the Honourable Judge D. W. Beaubier
Appearances
Counsel for the Appellant: Ronald C. Reaume
Counsel for the Respondent: Daniel Bourgeois
JUDGMENT
The appeal from the reassessment made under the Income Tax Act for the 1997 taxation year is allowed, with costs, and the reassessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 22nd day of October, 2001.
|
"D. W. Beaubier" |
J.T.C.C.