A-53-78
Jacqueline J. Loeb (Appellant) (Plaintiff)
v.
The Queen (Respondent) (Defendant)
Court of Appeal, Jackett C.J., Heald and Urie
JJ.—Ottawa, June 8, 1978.
Income tax — Income calculation — Teachers on strike
entered contract of employment with union to maintain eligi
bility to contribute to pension plan and other statutory benefits
on amounts otherwise received as strike pay — Whether
amounts received were strike payments and not taxable —
Appeal dismissed — Income Tax Act, S.C. 1970-71-72, c. 63,
s. 3.
INCOME tax appeal.
COUNSEL:
Bernard Shinder for appellant (plaintiff).
E. A. Bowie for respondent (defendant).
SOLICITORS:
Goldberg, Shinder, Shmelzer, Gardner &
Kronick,. Ottawa, for appellant (plaintiff).
Deputy Attorney General of Canada for
respondent (defendant).
The following are the reasons for judgment
delivered orally in English by
JACKETT C.J.: This is an appeal from a judg
ment of the Trial Division [[1978] 2 F.C. 737]
dismissing an action appealing against the assess
ment of the appellant under Part I of the Income
Tax Act, S.C. 1970-71-72, c. 63, for the 1975
taxation year.
I am in agreement with the reasons given by the
learned Trial Judge for dismissing the appeal
against the assessment.
However, having regard to the fact that the
matter is obviously a test case, I propose to state
briefly in my own words, why, in my view, the
appellant cannot succeed.
The situation is that
(a) the appellant is one of a group of teachers
who went on strike for a period in the 1975
taxation year,
(b) each of the strikers were, prior to the strike
period, contributors under a provincial statutory
pension plan under which either teachers or
officers of the union involved could be
contributors,
(c) so as to avoid ceasing to be contributors
under the pension plan during the strike period,
each of the strikers entered into contracts of
employment as officers of the union and paid
contributions under the pension plan and other
statutory contributions on the amounts that
would otherwise have been received as strike pay
on the basis that such amounts were received
under such contracts of employment.
The appellant's argument is, in effect, that her
contract of employment with the union was a mere
"technical form" to permit payment of contribu
tions under the pension plan during the strike
period, that there was no contract of employment
in fact and that the amounts received from the
union were "strike payments" and, as such, not
taxable.'
In so far as the appellant's argument was based
on lack of consideration for the employment con
tract, I am not sure that, on the pleadings, it is
open to her. In any event, in my view, it is not
supported by the facts. As it seems to me, the
appellant cannot succeed unless the employment
contract was a sham.
On the facts as found by the learned Trial
Judge, the contract of employment was not a
"sham", 2 and it is admitted that, if there was, in
reality, such a contract, the amounts paid by the
union to the appellant were paid pursuant to that
contract. If that is so, it follows, in my view, that
the contract of employment created an employ
' It is not necessary, on this appeal, to consider whether
amounts paid as "strike pay" may, as such, be income receipts
for income tax purposes.
2 Compare Snook v. London & West Riding Investments,
Ltd. [1967] 1 All E.R. 518 and M.N.R. v. Cameron [1974]
S.C.R. 1062.
ment relationship and that the amounts paid there-
under are income from employment. This is not a
case where a contract can be a valid contract
without being a source of profit for tax purposes
such as a purchase and sale outside a trader's
business, as such. 3 I know of no basis in law or in
fact for a contract of employment creating the
relationship of employer and employee for pension
purposes but not for income tax purposes. Similar
ly, I know of no basis for holding that payments
are salary for the purpose of pension contributions
but are not income from employment for income
tax purposes. If there is a contract of employment,
by definition, remuneration thereunder is income
for purposes of Part I of the Income Tax Act. 4
* * *
HEALD J. concurred.
* * *
URIE J. concurred.
3 Compare. Griffiths (Inspector of Taxes) v. J. P. Harrison
(Watford), Ltd. [1962] 1 All E.R. 909, Bishop (Inspector of
Taxes) v. Finsbury Securities, Ltd. [1966] 3 All E.R. 105, and
FA & AB Ltd. v. Lupton (Inspector of Taxes) [1971] 3 All
E.R. 948.
° See section 3 of the Income Tax Act.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.