Date: 20010515
Docket: A-453-99
Coram: DÉCARY J.A.
Between:
FRANÇOIS J. SUERMONDT
Applicant
AND
HER MAJESTY THE QUEEN
and
ATTORNEY GENERAL OF CANADA
Respondents
Hearing held at Montréal, Quebec, on Tuesday, May 15, 2001
Judgment delivered from the bench at Montréal, Quebec, on Tuesday, May 15, 2001
REASONS FOR JUDGMENT OF THE COURT BY: NOËL J.A.
Date: 20010515
Docket: A-453-99
Neutral citation: 2001 FCA 155
Coram: DÉCARY J.A.
LÉTOURNEAU J.A.
NOËL J.A.
Between:
FRANÇOIS J. SUERMONDT
Applicant
AND
HER MAJESTY THE QUEEN
and
ATTORNEY GENERAL OF CANADA
Respondents
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec,
on Tuesday, May 15, 2001)
[1] This is an application for judicial review of a decision of the Tax Court of Canada dismissing Mr. Suermondt's appeal of an assessment made in respect of his 1991 taxation year. That judgment is reported at [1999] T.C.J. No. 353 (TCC) (QL).
[2] This case arises from a final settlement of a wrongful dismissal action brought by Mr. Suermondt against his former employer, Datapoint Canada Inc. Mr. Suermondt's understanding was that the amount that his employer agreed to pay him was about
$111,540, from which the income tax and other deductions payable were to be withheld and remitted to the tax authorities. In 1991, Mr. Suermondt therefore received $72,500, which he considered to be net of tax.
[3] A few years later, a company called Interlogic Trace Canada Inc. (which had apparently acquired Datapoint Canada Inc. in the interim) issued a record of income from employment for 1991, stating that the retiring allowance in the amount of $72,500 gross had been paid to Mr. Suermondt. According to that record, nothing had been withheld or remitted to taxation authorities out of that amount.
[4] The trial judge explained in his reasons that after receiving that record of employment the Minister of National Revenue added $72,500 to the applicant's income in an assessment dated August 24, 1994, and deducted the tax payable.
[5] Mr. Suermondt objected to that assessment, arguing unsuccessfully that the agreement negotiated with the employer was for $111,540 and that the balance had been withheld by the employer to pay for taxes and other deductions payable on that amount.
[6] Mr. Suermondt explained to the Tax Court that his former employer no longer had offices in Canada, and that his means of producing evidence were therefore limited. Nevertheless, he managed to produce a letter written on February 4, 1991, by the president of Datapoint to Ms. Beaulieu, the lawyer who represented Datapoint in the matter relating to his dismissal. The letter reads as follows:
Re: François Suermondt vs Datapoint Canada Inc.
Please find enclosed two cheques made payable to Godin, Raymond, Harris, Thomas - In Trust in the amount of $72,500.00 and $500.00, being the amount of settlement with Mr. Suermondt and Mr. Suermondt's legal fees, respectively.
The settlement, I believe, is realistic under the circumstances. We have acknowledged that we owed François outstanding commissions of $36,000 (his claim $44,000), plus alleged outstanding twenty-two days of vacations. If we add into that, his claim for lost interest on commissions due him from August 1989, the six to nine man days of David Cunningham's and my time lost in presenting our case before the courts, and the potential award for wrongful dismissal (Suermondt's total claim of $115,000) the settlement is less painful. I have cleared this settlement with Mr. Philip Freeman, Senior Vice-President and Chief Legal Counsel for Interlogic Trace, Inc.
Along with a full release from Suermondt, would you please ensure that any unemployment insurance, income tax (Quebec and Federal), and other legal/governmental implications of this settlement are taken care of prior to the release of the cheques in order to save harmless Datapoint Canada Inc. and Interlogic Trace Canada Inc. from further liabilities and obligations relative to Mr. Suermondt.
It has been a pleasure dealing with you in this legal matter. Thank you for all your assistance in bringing about this out of court settlement.
[7] The trial judge found Mr. Suermondt's testimony to be trustworthy. He stated in his judgment that he had no hesitation in accepting Mr. Suermondt's testimony that he believed that he had received the amount in question net of income tax and the other applicable deductions (paragraph 12). However, he noted that the agreement was oral and that the employer did not seem to have honoured it (paragraph 13).
[8] On that point, the trial judge concluded:
[16] ... Mr. Suermondt has been deceived by Datapoint, which did not live up to its agreement with him.
He added, however:
That fact cannot rebound to the detriment of the respondent.
[9] We are of the view that this statement by the trial judge was in error. In as much as the trial judge was of the view that the compensation agreed to between Datapoint and the applicant was $111,540, and that only part of that amount was in fact paid, he should have found that the balance was withheld by the employer, who thereby became liable to the tax authorities for the income tax owed by the applicant to the extant of the amount withheld (see paragraph 227(9.4) of the Income Tax Act).
[10] On that point, both the assessment of the applicant's testimony by the trial judge and the letter from the president of Datapoint confirm that the amount negotiated was about $111,540, whereas, as we have seen, the amount paid was $72,500.
[11] In the second paragraph of that letter, the president of Datapoint acknowledged that substantial amounts ($36,000 plus accrued interest) were owed to the applicant for commissions. In addition to that amount there were 22 vacation days owing to the applicant, who had been employed by the company for eight years and, at the time of his departure, was the regional director with an annual income of $115,000. The president acknowledged the possibility of the court awarding an additional amount for wrongful dismissal. A quick calculation suggests that the difference between the amounts that were otherwise owing to the applicant and the $111,540 he was claiming would be about seven months' salary.
[12] Furthermore, as was noted by the trial judge at paragraph 5 of his reasons, why would the employer send its lawyers a cheque for $72,500, payable to the applicant's lawyers, instructing them to take care of all of the tax aspects before releasing the cheque? On that point, the testimony of the employer's lawyer is very enlightening:
Question by the judge:
I don't know quite what he was doing there, I mean it's his obligation... Datapoint's obligation to do something, of course, not yours.
Answer by Ms. Beaulieu:
Well, if I had... I can't tell you from recall because I don't remember, and I'm sorry but I just can't. But if I had received this letter I would probably have called Mr. Oyagi and say: look, I don't understand. Either, if he told me for example that the settlement was seventy-two thousand (72,000) net, I would have told him: fine, I have your cheque, I don't understand your last two paragraphs though, do you... you know. Or if the settlement was seventy-two thousand (72,000) gross, I would have told them: look, I'm returning the cheque, I can't process it because I have... there some monies that have to be taken out of that. So, to me, if Mr. Suermondt, and now again I'm not talking about recall so I'm not breaching any confidentiality for Datapoint, I don't remember. But if Mr. Suermondt did receive this amount of money, I must have spoken to Mr. Oyagi, I mean it's unheard of that I would send the cheque without having a release signed and without having done or at least inform them as to income tax and unemployment law. It's basic.
[13] Even though Ms. Beaulieu clearly said that she was not testifying from memory, she stated unequivocally and categorically that she would not have released the cheque to the applicant's lawyers if the amount in question had been gross, and she would have talked to the president of Datapoint about this before releasing the cheque.
[14] Therefore, the applicant's testimony, which the trial judge believed, was also corroborated by the employer's documentary and testimonial evidence and by
Ms. Beaulieu, its representative at the time. The only piece of contradictory evidence is the record of employment, issued well after the fact by the company that succeeded Datapoint. That evidence can have no probative value in the circumstances, and the trial judge does not in fact seem to have placed any weight on it.
[15] In short, the evidence shows unequivocally that the agreement negotiated was for a retiring allowance of $111,540, and therefore the trial judge had to conclude that the difference between that amount and the amount actually paid to the applicant had been withheld by the employer.
[16] The application for judicial review will be allowed, the decision of the Tax Court of Canada will be set aside, and the matter will be referred back to that Court for
reconsideration on the basis that the taxpayer's appeal must be allowed and the assessment referred back to the Minister for reconsideration and reassessment in light of these reasons. The applicant will be entitled to the costs incurred in connection with the application for judicial review.
Marc Noël
J.A.
Montréal, Quebec
May 15, 2001
Certified true translation
Sophie Debbané, LL.B.
Date: 20010515
Docket: A-453-99
MONTRÉAL, QUEBEC, THE 15th DAY OF MAY 2001
Coram: DÉCARY J.A.
LÉTOURNEAU J.A.
NOËL J.A.
Between:
FRANÇOIS J. SUERMONDT
Applicant
AND
HER MAJESTY THE QUEEN
and
ATTORNEY GENERAL OF CANADA
Respondents
JUDGMENT
The application for judicial review is allowed, the decision of the Tax Court of Canada is set aside, and the matter is referred back to that Court for reconsideration on the basis that the taxpayer's appeal must be allowed and the assessment referred back to the Minister for reconsideration and reassessment in light of these reasons. The applicant will be entitled to the costs incurred in connection with the application for judicial review.
Robert Décary
J.A.
Certified true translation
Sophie Debbané, LL.B.
FEDERAL COURT OF APPEAL
Date: 20010515
Docket: A-453-99
Between:
FRANÇOIS J. SUERMONDT
Applicant
AND
HER MAJESTY THE QUEEN
and
ATTORNEY GENERAL OF CANADA
Respondents
REASONS FOR JUDGMENT OF
THE COURT
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO.: A-453-99
CORAM: DÉCARY J.A.
LÉTOURNEAU J.A.
NOËL J.A.
STYLE OF CAUSE: FRANÇOIS J. SUERMONDT
Applicant
AND
HER MAJESTY THE QUEEN
and
ATTORNEY GENERAL OF CANADA
Respondents
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: May 15, 2001
REASONS FOR JUDGMENT OF THE COURT BY:
NOËL J.A.
DATED: May 15, 2001
APPEARANCES:
|
François J. Suermondt Saint-Laurent, Quebec |
FOR THE APPLICANT (representing himself) |
|
Anne-Marie Boutin |
FOR THE RESPONDENTS |
SOLICITORS OF RECORD:
|
Morris Rosenberg Deputy Attorney General of Canada Montréal, Quebec |
FOR THE RESPONDENTS |