INCOME TAX |
Income Calculation |
Buccini v. Canada
A-611-98
Malone J.A.
20/11/00
12 pp.
Appeal from Tax Court of Canada decision dismissing appeal against reassessment issued by MNR with respect to appellant's 1983 taxation year--Minister including $83,900 in appellant's income under Income Tax Act, s. 7(1)(b) on basis appellant transferred, otherwise disposed of rights under share purchase agreement (Option Agreement)--Appellant employed by Canadian Reserve Oil and Gas Ltd. in March of 1982--Canadian Reserve's majority shareholder deciding to merge Canadian subsidiaries in early 1983 under Amalgamation Agreement--Appellant not consenting to termination of options in accordance with Article 10.03(1) of Amalgamation Agreement--However, appellant, Canadian Reserve executed settlement agreement acknowledging payment of $83,900 in full settlement of all claims arising from employer's unilateral termination of Option Agreement--In filing return for 1983, appellant reported $83,900 release payment as damages for unilateral breach of Option Agreement--Tax Court Judge concluding Minister properly reassessed appellant under Act, s. 7(1)(b)--Minister precluded from raising new argument having effect of creating new basis of reassessment after limitation period expires--Rule of procedural fairness requiring Crown to give taxpayer adequate notice of basis of reassessment, so that taxpayer can fairly appeal, respond--Nothing suggesting taxpayer denied adequate notice, otherwise prejudiced--Minister not precluded from arguing amalgamation did not cancel options--Tax Court Judge erred in failing to apply word "disposition" in s. 7(1)(b) as defined in Reynolds v. The Queen (1976), 77 DTC 5044 (S.C.C.)--Failed to recognize amalgamation of Canadian Reserve constituted unilateral repudiation of appellant's rights under Option Agreement by employer--Employee cannot be found to have later disposed of same rights under s. 7(1)(b)--Unilateral conduct of Canadian Reserve in repudiating Option Agreement fundamental breach of contract terminating contract as of that date, without need for appellant to accept breach--Duty of Court to avoid interpretations resulting in commercial absurdity--Where amalgamation process, approved by shareholders, structured so as ultimately to create wholly owned subsidiary, unrealistic to suggest interpretation of Amalgamation Agreement in which right of specific performance survived repudiation--Interpretation that would include specific performance among rights under Article 10.03 would lead to commercial absurdity--No suggestion release agreement sham--Damages for breach of contract of employment not taxable under Act, s. 6--Payment received by taxpayer not falling within parameters of Act, s. 6(1)--Payment in issue, made to discharge employer from liability for breach of option agreement, could not reasonably be regarded as having been received in return for entering employment contract, as remuneration for services rendered under contract, as consideration for covenant in contract--Appeal allowed--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 6, 7.