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Please read this complaint letter to CRA from a buddy of mine SISIP Related (LONG ONE)

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Re: Please read this complaint letter to CRA from a buddy of mine SISIP Related (LONG ONE)

Post by Guest on Mon 27 Apr 2015, 12:16

Lord Thumberland Jxxxx, that's a great read there Robbie, lot's of work put into that by your friend.
It is people like your friend who raises eyebrows, and works hard on behalf of many.

Sounds like your friend is well versed in this, and I'm sure he realizes what the response will be, I'm thinking this is only his first step, and will use everything that he has including any responses to pursue this to the end.

In other words taking this to court, am I right ?


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Re: Please read this complaint letter to CRA from a buddy of mine SISIP Related (LONG ONE)

Post by RobbieRoyal on Mon 27 Apr 2015, 11:23

The only thing I have is he awaiting a response from CRA and when he does I will post this, my suggestion treat this like a hot stove collectively lets get the lawyers in here and mash out some real results.
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Please read this complaint letter to CRA from a buddy of mine SISIP Related (LONG ONE)

Post by RobbieRoyal on Mon 27 Apr 2015, 11:19

November 27, 2014

Own Address

Appeals &/or Fairness

Dear sir or Madam,

1. I get Disability Insurance from the federal government that is passed to me through a third party. This creates several problems but the most important one is that no T4A should be issued at all. I base this argument on the following:
a. I ask you to take judicial notice that it is common knowledge that privately purchased (100% employee) Disability Insurance benefit payments are not taxable and a T4A is not issued. For example, legal precedents such as: Ind. Alliance v. Brine; Altman v. Steve’s Music.
b. I ask you to take judicial notice that the DI contract is a peace of mind contract designed to ensure a psychological benefit to the insured. “Such a contribution need not be 100 percent of the premium.” McDonald BCSC.
c. Take judicial notice of Ratych v. Bloomer, [1990] 1 SCR 940:.. sick benefits are compensation in the nature of insurance payments… except that they are organized collectively by the employees through their union, and fairness requires that they be treated in the same manner. The member of the group has paid for his or her insurance coverage just as much as the individual with a private contract of insurance. (emphasis added)
d. Take judicial notice of: Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee, [1994] 1 SCR 359…The insurance exception should apply where disability benefits are obtained not privately but pursuant to a collective agreement. Since the benefits at issue here were bargained for and obtained as a result of a reduction in the hourly rate of pay, they were obtained and paid for by the plaintiff just as much as if he had bought and privately paid for a disability insurance policy.

2. The assessed tax arrears that result from the Disability Insurance T4A’s placed on my file by fraudulent means or by accident:
a. I have a T4A from Manulife when Manulife is not my insurer. The actual insurer is the Chief of Defence Staff. I believe this is a deliberate misrepresentation based on:
1. The Manuge case.
2. The false information on the TBS site.
3. Ignorance of the law is no excuse.
4. Manulife, Sun Life and CRA are large employer’s with legal departments so their due diligence responsibility is high.
5. The Minister of National Revenue took the position in the TTC case that the EI & CPP should be deducted from DI payments made to the TTC employees. CRA, after losing twice at Federal Court, changed the law rather than appealing to the Supreme Court.
3. As this is somewhat long, I will summarize:
a. I want to be treated fairly within the law.
b. I want CRA to follow the common law where statutory law clearly doesn’t overrule it.
c. I want to be assured that my T4A’s are legally correct before I am conscripted into paying taxes on an amount that should not be reported at all.
d. In the event someone convinces me that the T4A’s must be reported on my account, at least be competent enough to get the legal identity right. After all, if someone filed taxes under a false name CRA would deal with the false filer. If a person pretended to be another person to buy a car, for example, I think the police would charge that person with something (Fraud? Identity Theft?). The fake Ottawa soldier on Remberance Day was charged, for example.
e. I think DI in Quebec is non-taxable. Fairness dictates the rest of Canada is treated the same, if this is true.
f. Finally, if the federal government chooses to enter the insurance business, it must play by the centuries old common law rules of the game:
a. Get the legal identity right as this is vital to enforce contracts.
b. As the TBS DI plan is meant to add to income, making it tax free is one way to add to income.
c. Insurance contracts are “utmost good faith” contracts, i.e. a fiduciary duty because the parties are not equal. Insurers have more resources and expertise, making it like a doctor/patient situation.
d. DI is characterized as non-indemnity and benefits are paid under the contingent condition of being disabled.
e. DI is not deducted from damages under the concept that it is not fair to compensate the tortfeasor as you would be rewarding bad behavior.
f. There might well be a Constitutional question here: Can the federal government encroach into the provincial jurisdiction of insurance?

Yours sincerely,


Social security (except for Employment Insurance, which is purely national, and the shared power over pensions) comes under the provinces. However, the national Parliament, in effect, established nation-wide systems of hospital insurance and medical care by making grants to the provinces (or, for Quebec, yielding some of its field of taxes) on condition that their plans reach certain standards.
7.2 Insurance Benefits Programs (IBP)
7.2.1 Responsibilities for the IBP are shared among the Treasury Board, the TBS, IBP administrators or insurers, governing bodies, and deputy heads.
7.2.2 The Treasury Board has overall responsibility for establishing and modifying the IBP and for the development of policy for each program, as well as its management and control; setting terms and conditions relating to eligibility, premiums, contributions, benefits, and the IBP design. Each of the group insurance plans has a principal administrator or insurer.
7.2.3 On behalf of the government and under the direction of the TBS, PWGSC's responsibilities include, but are not limited to, providing information on general questions on enrolment (PSHCP, PSMIP, PDSP and DI); developing and maintaining the Insurance Administration Manual (IAM) and related bulletins; developing and providing training material; and providing the administrator with a monthly tape of all eligible employees (DCP).
7.2.4 Government organizations and participating separate agencies provide the following services:
• counseling to employees on their eligibility for the IBP;
• providing each eligible person with the appropriate booklets and forms;
• responding to requests for further information from the Insurance Section at PWGSC and from the Administrators;
• requesting and controlling blocks of certificate numbers issued by the Insurance Section for the PSHCP;
• verifying and retaining a copy of the identity card for the DCP on the employee's file; and
• processing direct payments of premiums/contributions for members on leave without pay, suspensions, etc.
7.2.5 The IBP administrator or insurer is responsible for adjudicating and paying the benefits on claims in accordance with their respective IBP provisions.
GOV Self-Insurance Guidelines excerpt
4. Principles
The Government of Canada, for the most part, underwrites its own risks and does not purchase insurance in the commercial insurance market. "Underwriting" risk requires the following:
• thorough risk analysis;
• acceptance of risk; and
• identification of all financial options in order to ensure that losses can be funded if they occur.
Underwriting risk is the responsibility of each department, much in the same manner as is practising risk management under the Framework for the Management of Risk. The term "self-insurance" refers to the practice of each department funding its own losses. An important distinction is that "self-insurance" connotes a business approach to loss funding, namely that the Department acts as if it were its own insurer by:
• understanding the nature of the risk;
• making funds readily available in the event of a loss; and
• having controls in place to reduce the financial impact once the loss has occurred.
The Government of Canada may, from time to time, exercise the option to purchase insurance in the commercial insurance market to finance certain risks. Examples of these exceptions to the practice of self-insurance include the following:
• Operations in foreign jurisdictions that face mandatory requirements for insurance coverage, such as the operation of motor vehicles;
• The interests of the Government co-mingled with those of other parties and the purchase of insurance constitutes an economy of scale that effectively protects all parties (e.g., Public Private Partnerships); and
• Insurance coverage provided as part of expertise in service contracts, such as removal (e.g., moving and transfer) services for employees' personal property.

Selected Case quotes

Industrial Alliance Insurance and Financial Services Inc. v. Brine, 2014 NSSC 219 (CanLII)
11. Since being approved for disability benefits in August of 1995, National Life has issued T4 slips to Mr. Brine which characterize his disability benefits as taxable income. In two separate rulings relating to different taxation years, the Tax Court of Canada has determined the disability benefits payable under the policy of insurance to not be taxable income.
Manuge v. Canada, 2012 FC 499 (CanLII)

… the de facto insurer is the CDS and the de facto insureds are CF members.
The common law does not permit an LTD insurer to subrogate against an insured’s non-indemnity entitlements
“the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk
For a contract of insurance – and particularly group insurance – one could well expect to find limiting provisions or exclusions that have no present application to a particular claim or claims.
… the SISIP benefits and all of the other offsets identified in Article 24 are forms of income replacement or income substitution that fit comfortably within the term “monthly income benefits”. This distinction does not detract from the Plaintiff’s interpretation but actually supports it.
[58] The Defendant also invokes the reimbursement agreement signed by Class members which states that CF members’ LTD benefits will be set off by other sources of income including Pension Act benefits. However, I give this document no weight as a guide to interpreting Article 24 of the SISIP Policy. It is an after-the-fact document that does not alter the SISIP Policy and, according to Mr. Bouchard’s affidavit at paragraph 40, CF members are required to sign it as a condition of receiving benefits. I would add that this agreement purports to include sources of income that are nowhere referenced in the SISIP Policy (ie. Workers Compensation, automobile insurance) as appropriate offsets and, therefore, appears to include recoveries that cannot be contractually justified under the SISIP Policy. If anything, this document reflects a profound misunderstanding by the Defendant about what is contractually appropriate to demand from an insured in terms of third-party benefit offsets or recoveries.

The right to subrogate is not recognized where the effect is to leave the insured under-compensated.
Here, the offset Canada has applied represents a substantial limitation to a CF member’s LTD coverage: a limitation that effectively deprives the most seriously disabled CF members from recovering much, if anything, for their income losses
Ratych v. Bloomer, [1990] 1 SCR 940
Per Dickson C.J. and Wilson, Gonthier and Cory JJ. (dissenting): Funds which a plaintiff recovers under an insurance policy and for which he or she has paid the premiums are not deductible. Workmen's compensation and sick benefits are compensation in the nature of insurance payments. Although their purpose is to make up for loss of wages to some extent, they are not themselves wages. They do not differ from benefits paid under a private insurance plan, except that they are organized collectively by the employees through their union, and fairness requires that they be treated in the same manner. The member of the group has paid for his or her insurance coverage just as much as the individual with a private contract of insurance.

The provision of sick leave benefits in a collective agreement is part of the package of wages and benefits arrived at through the give and take of bargaining. An individual member of the collective bargaining group, such as the respondent, is bound to accept the group insurance coverage. There is no alternative.

The group insurance will operate on the same principle as any private insurance scheme.
There is no difference in operating principle between private and collective insurance.
Boarelli adopted a broad non-deductibility approach. Neither welfare payments, moneys from private or public benevolence, unemployment insurance benefits, private insurance moneys, employment insurance benefits pursuant to collective bargaining agreements or private contracts of employment, ex gratis payments nor pensions should be deducted from a plaintiff's damages.
Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee, [1994] 1 SCR 359
Per Sopinka, Cory, Iacobucci and Major JJ.: While the plaintiff in a tort action is not generally entitled to a double recovery for any loss arising from the injury, the disability benefits obtained by the plaintiff in Cunningham v. Wheeler as a result of his collective bargaining agreement are in the nature of a private policy of insurance and so should not be deducted from the claim for lost wages under the private insurance exception introduced in Bradburn. The insurance exception should apply where disability benefits are obtained not privately but pursuant to a collective agreement. Since the benefits at issue here were bargained for and obtained as a result of a reduction in the hourly rate of pay, they were obtained and paid for by the plaintiff just as much as if he had bought and privately paid for a disability insurance policy. In order to show that the benefits are in the nature of insurance, there must be evidence adduced of some type of consideration given up by the employee in return for the benefit. The application of the insurance exception to benefits received under a contract of employment should not be limited to cases where the plaintiff is a member of a union and bargains collectively. Benefits received under the employment contracts of non unionized employees will also be non deductible if proof is provided of payment in some manner by the employee for the benefits. Evidence that the employer takes the cost of benefits into account in determining wages would adequately establish that the employee contributed by way of a trade off against higher wages.

The only exceptions that should be endorsed are charity and cases of non indemnity insurance or pensions.
I think the exemption for the private policy of insurance should be maintained. It has a long history. It is understood and accepted. There has never been any confusion as to when it should be applied. More importantly it is based on fairness. All who insure themselves for disability benefits are displaying wisdom and forethought in making provision for the continuation of some income in case of disabling injury or illness. The acquisition of the policy has social benefits for those insured, their dependants and indeed their community. It represents forbearance and self-denial on the part of the purchaser of the policy to provide for contingencies. The individual may never make a claim on the policy and the premiums paid may be a total loss. Yet the policy provides security.
Union representation and collective bargaining are recognized as a means for working people to protect their interests. The benefits for which employees have bargained in good faith should not be sacrificed simply because the mode of payment for the disability benefit is different from that in private insurance contracts. Where evidence is adduced that an employee-plaintiff has paid in some manner for his or her benefits under a collective agreement or contract of employment, the insurance exception should apply. It would be unjust to deprive employees of the benefits which, through prudence and thrift, they have provided for themselves.
In my view it must be inferred from this evidence that the collective bargaining agreement could only have been reached after a lengthy and difficult bargaining process.
In any event, there is evidence of a direct contribution by the plaintiff to both the long term and the short term benefits in this case. There was a payroll deduction made for the employee's contribution to the long term disability plan.
Socially, these disability payments represented a significant safeguard for her.
In my view, when employees choose to negotiate through their union representatives for benefits in the nature of insurance, and it is proven that they paid for those benefits in some manner, then they have demonstrated the same personal choice as to the expenditure of their funds, the same forbearance, sacrifice, prudence and thrift which is the mark of the purchase of a private policy of insurance and the basis for the Bradburn rule.
However, if the benefits are not "insurance" then the issue of subrogation will be determinative.

Canada v. Tsiaprailis, 2003 FCA 136, [2003] 4 FC 112
[17]This right to receive disability benefits so long as the state of total disability persists is a valuable right, just as the obligation to make the payments so long as the insured is eligible to receive them is a significant liability. The right and the corresponding obligation have a monetary value.
Mutual Life Assurance Company v. Tucker, 1993 CanLII 3154 (NS CA)
The insurer was entitled to subrogation only if the policy under which the weekly benefits were paid was a policy of indemnity. If it was a policy of indemnity, the insurer's rights to subrogation did not arise until the respondent was indemnified in full for his loss. Until he was fully indemnified the respondent was entitled to manage his own claim against third parties without interference by the insurer. If the weekly benefits plus the settlement resulted in more than full indemnification for the insured, he would have become a trustee for the insurer for all monies recovered in excess of the amount required to indemnify him for his loss.

After considering the evidence before him including the respondent's legal expenses, non pecuniary damages, and the one third of his lost wages not covered by the weekly benefit, he found the respondent had not been fully indemnified for lost income.

The following is the appellant's key submission:

"Where an insurance policy provides for automatic payment of fixed benefits which fall due upon proof of the happening of an event such as death, accident or dismemberment, regardless of the actual loss suffered by the insured, the policy is not one of indemnity…

The central question is whether the insurance policy in issue meets the criteria stated above by the appellant. That is, is the respondent's sickness and accident insurance a policy of indemnity? That question is crucial… If the policy is not one of indemnity, there is no right of subrogation.

… the key test for determining if a policy is one of indemnity is whether proof of the amount of the loss is necessary, in addition to proof of the occurrence of the event insured against. … life insurance, and sickness and accident insurance, are frequently cited by text book writers as examples of non indemnity policies which do not give rise to rights of subrogation.
… Subrogation is an equitable principle, and the policy must be judged by what it does, not by what it says.
On page 938 Kelly, J.A., discussed "a policy which provides that, upon the happening of some contingent event, a sum fixed or calculable becomes payable to the insured, regardless of whether the insured suffers any pecuniary loss."
… Porters Law of Insurance, 8th ed., p. 449;
But at present the usual form of an accident policy or contract is to pay a certain fixed sum per week in case of injury, and a certain other fixed sum in case of death. Such policies do not contemplate indemnity, and avoid the necessity of going into the assured's accounts or private affairs.

Thus, on account of impossibility or extreme difficulty of the insured ever proving any pecuniary loss, the contract is intended to provide that the amount payable shall become due on the proof of the happening of the event and shall be payable regardless of whether the insured is able to prove or has actually suffered a pecuniary loss; it would be payable even if the insured has in some way benefitted by the injury.
… The same may be said of a contract providing for the payment of a fixed sum on dismemberment or a fixed weekly or monthly payment during incapacity arising from a personal accident.
I have set the policy provisions out at some length because seen as a whole they leave no doubt that the scheme of the policy is to pay a weekly benefit without proof of actual loss. Nowhere is there mention of a requirement for proof of actual loss. The amount to be paid each individual employee is calculated by a formula related to his or her rate of earned income. The formula is a matter of contract, … The formula and the deductions may leave the insured with a weekly income equal to what he or she had enjoyed prior to the disability, but it is immaterial whether or not they do so. An employee who enjoyed frequent overtime might be left with substantially less than he or she was earning; an employee with an individual disability income policy might enjoy substantially more income during the period of disability. There is nothing to suggest the contract formula was intended to generate a figure equal to lost income, only that the weekly benefit would not be less than unemployment insurance. In the present case the respondent received two thirds of his employment earnings from the appellant during his period of disability. Because the weekly benefit is a creation of a contractual formula, independent of the actual amount of the loss suffered by the insured, the policy cannot be considered one of indemnity: it is not intended to make the insured whole, merely to provide him with a predetermined weekly income during disability. Therefore subrogation does not arise.

… In Gibson v. Sun Life Assurance Co. of Canada (1984), 6 D.L.R. 746 Henry, J. of the Ontario High Court of Justice found a policy to provide a group of federal employees with a fixed percentage of their incomes during long term disability to be a policy of indemnity. There is a distinction between insurance for a fixed percentage of an actual loss of income, and a contract to pay a predetermined amount to be ascertained by a formula applied to the weekly rate of earned income of the insured employee.

Ability to work relates to proof of disability, not loss…

The authors of MacGillivray and Parkington on Insurance Law, Seventh Edition, London, 1981, state in Paragraph 1146;

"If, on a proper construction of the contract of insurance, the insurer has promised to pay a certain sum of money on the happening of a certain event (e.g. on accident or death) regardless of the actual loss suffered by the insured, there is no room for the doctrine of subrogation.”

Even if the policy in question were a policy of indemnity, subrogation would not arise in the present circumstances. The authors of Insurance Law in Canada, Brown and Menezes, Second Edition, Catswell, 1991, state in Paragraph 15:3:1:

"Subject to statute and terms of the policy the insurer's right of
subrogation arises only when the insured has been fully indemnified for his loss, even if the insurer has paid to the full extent of its liability."

A person damaged by the action of another is entitled to be made whole, but to be made whole only once.

If this were a policy of indemnity, the right of subrogation would arise when and if the insured was made whole… It could have been averted if the insurer had provided in the policy for any rights of compensation or subrogation rights it might require, and the insured had agreed to them.

… In short, applying the principles of Glynn, the policy was not a policy of indemnity and no right of subrogation could arise…
McDonald v. Insurance Corporation of British Columbia, 2012 BCSC 283 (CanLII)

[201] The following guidelines of good faith emerge from the court’s instructive analysis in Bullock: (1) an insurer must perform a balanced and reasonable investigation and assessment of the first party claim; (2) it must be prompt in handling and assessing the loss; (3) the insurer must assess the merits of the claim in a balanced and reasonable manner; (4) it must give as much consideration to the interests of the insured as it does to its own interests and is not to do anything to injure the insured’s rights to benefits under the policy; and (5) a want of reasonable care in settling a claim suggests an absence of good faith.
[203] … The court concluded that the insurer’s delay was equivalent to a failure to pay within a reasonable time and thereby constituted a breach of the insurer’s duty to handle the claim in good faith…The court also endorsed the thread of judicial thinking reflected in Bullock, and by implication, in Shea, as well as other authorities, stating at paras. 28-30:
[28] The first part of this duty speaks to the timeliness in which a claim is processed by the insurer…
[29] The duty of good faith also requires an insurer to deal with its insured’s claim fairly…
[30] What constitutes bad faith will depend on the circumstances in each case…
[215] The Supreme Court of Canada affirmed that a disability insurance contract is a peace of mind contract, the object of which is to secure a psychological benefit to the insured.

[223] Thackray J.A. approvingly reviewed principles that had developed from cases involving a variety of different types of insurance policies, including the summation in Shea of the nature and scope of the duties owed by an insurer to an insured. At paras. 70-71, His Lordship made these observations:
[70] Allan D. Windt in Insurance Claims and Disputes (New York: McGraw-Hill Inc., 1982) described the obligations of an insurer as follows at s. 2.01:
Once an insurer is put on notice of a claim, it should take certain actions vis-à-vis the insured. As a general matter, it should:
1. Promptly respond to the notice of claim
2. Notify the insured of its preliminary coverage position if the policy contains a duty to defend
3. Promptly pay an undisputed claim
4. Properly notify the insured if it decides to deny coverage
5. Promptly rescind the policy if there are grounds for doing so
Four of the five required “actions” are based on “promptly” carrying out the obligation…
[249] … The duty simply dictates that an insurer bring reasonable diligence, fairness, an appropriate level of skill, thoroughness and objectivity to the investigation, and the assessment of the collected information with respect to the coverage decision. My criticisms of the calibre of Ms. Baadsvik’s investigation and the shortcomings of her ultimate assessment should not be interpreted as suggesting that each individual omission or failing is, of itself, necessarily a violation of good faith and fair dealing. It is their cumulative effect that constitutes a breach of its duty of good faith.
[250] It is not possible to perform a fair and proper evaluation in the absence of a reasonably thorough underlying investigation…
[263] This is an exceptional case. The nature of ICBC’s bad faith behaviour took different shapes throughout the time line. The overall handling and evaluation of the claim was overwhelmingly inadequate. ICBC also allowed its objectivity to be tainted by the fact that the claim indirectly involved the “very difficult” Mr. McDonald. While I recognize that the tainting of impartiality was only slight, it was nonetheless real and improper.
[264] In my opinion, ICBC’s conduct was harsh, high-handed and oppressive as those concepts have been developed in the jurisprudence, and marked a significant departure from the Court’s sense of decency and fair play. Some of the acts of bad faith were inadvertent and others were not and they persisted over a considerable period. The plaintiff was in a vulnerable position and suffered harm in consequence of ICBC’s misconduct…

If the insurance money is not paid to indemnify the plaintiff for a pecuniary loss, but simply as a matter of contract on a contingency, then the plaintiff has not been compensated for any loss.
To say that the exception applies only to private insurance, where actual premiums are paid to the insurance company, would create barriers that are unfair and artificial.
If the plaintiff can show that he or she has paid for the benefits in the nature of insurance against unemployment akin to private insurance, that same proof will also demonstrate personal prudence and deprivation.

Generally speaking, any of the following examples, by no means an exhaustive list, provide the sort of evidence that could well be sufficient to establish that the employee paid for the benefit:
(1) Evidence that there were trade-offs in the collective bargaining process, which demonstrate that the employee has forgone higher wages or other benefits in return for the disability benefits. In such a case, the employee has paid for the benefits through wages foregone.
(2) Evidence of some money foregone by the employee in return for the benefits. For example if the employees gave up the return of a percentage of their Unemployment Insurance Plan premiums in return for the benefits.
(3) Evidence of a direct contribution by the employee, in a form such as payroll deductions, in return for the benefits. Such a contribution need not be 100 percent of the premium.
(4) Evidence of payments by the employer for the benefits made on behalf of the employee which shows that those payments were part of the employee's wages, and thus the employee provided work for the employer in order to have the premium paid. For example, if the employer's contribution is listed on the employee's pay slip or statement of benefits, it can reasonably be inferred that the contribution is part of the employee's wage package.
Socially, these disability payments represented a significant safeguard for her. They meant that she could live and remain independent without resort to social assistance. Nor should it be forgotten that the insurance itself represents a gamble for the insured person.
In any event, there is evidence of a direct contribution by the plaintiff to both the long term and the short term benefits in this case. There was a payroll deduction made for the employee's contribution to the long term disability plan.
Altman v. Steve’s Music, 2011 ONSC 1480 (CanLII)

[111] In this case, there is no written employment contract, and no written provision precluding recovery of both damages for wrongful dismissal and disability benefit payments. It is reasonable to infer from all the circumstances that Ms. Altman should retain the disability benefits in addition to the damages. The relevant circumstances are that, a) Ms. Altman paid part, if not all, of the premiums for the long term disability benefits, b) Standard Life, not Steve’s, paid the benefits to Ms. Altman, c) Ms. Altman received no disability payment until December 2009 – more than one year from the date she took her medical leave – due to Steve’s failure to complete the policyholder’s portion of the claim form, and d) Steve’s terminated Ms. Altman while on medical leave, but before she had received any disability payment.
Toronto Transit Commission v. Canada (National Revenue), 2010 FCA 33 (CanLII)
[8] The TTC has contracted with Sun Life Assurance Company of Canada (“Sun Life”) to administer the plans as agent of the TTC, not as an insurer.

[1] Nancy Murphy and Herschell Green were both permanently disabled in 2006 while employed under contracts of service by the Toronto Transit Commission (the “TTC”). Fortunately, the TTC had long term disability income plans in place that assured the two employees of a percentage of their earned income when their monthly disability benefits began.

[2] The Minister of National Revenue (the “Minister”) has decided that these monthly payments constitute remuneration for pensionable employment, and as such are subject to employer’s contributions under the Canada Pension Plan[1] (the “Plan”). The TTC now appeals that determination.

[4] TTC policy manuals confirm that while receiving disability payments, workers are on personal leaves of absence and remain employees. They are transferred to inactive status, and may be replaced temporarily or permanently, or reinstated. Their seniority is not affected by being on inactive status; their disability benefits are subject to a cost of living adjustment; their healthcare and dental benefits are maintained; and they are still entitled to retain their transportation privileges.

[5] While the plans are funded by the TTC, they are administered by a life insurance company as agent for the TTC and not as an insurer. Although the insurance company makes the actual disability payments, it is reimbursed by the TTC, which retains the right to make the final determination of any dispute concerning a person’s eligibility or his or her coverage under the plan or right to receive benefits; any situation where a person has disputed the amount due; and generally any controversial matter or non-routine matter arising out of the administration of the plan.

[14] The Minister has a different point of view, also supported by jurisprudence. His position rests on subsection 9.(1) above, together with subsection 12.(1) under the Plan, as well as subsection 5(1) and subparagraph 6(1)(f)(ii) of the Income Tax Act[8] (the “ITA”), which provide in part as follows:

12.(1) The amount of the contributory salary and wages of a person for a year is the person's income for the year from pensionable employment, computed in accordance with the Income Tax Act ..…

5(1) Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year.

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


(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

(ii) a disability insurance plan, …

to or under which his employer has made a contribution…..

[15] Since subsection 12.(1) under the Plan incorporates the ITA by reference, subparagraph 6(1)(f)(ii) of that Act includes in the computation of income “an income disability insurance plan” … “to or under which his employer has made a contribution”, prima faciethe benefit payments received from the TTC by the two workers in the matter before me, are pensionable even though no services were performed.

[16] The Minister further contends that sections 9 and 12 of the Plan should be construed harmoniously in order to avoid incongruous results. Amounts received could otherwise be taxable but not pensionable, or vice versa.

[17] Finally, the Minister minimizes the significance of the words “for a year” in subsection 12.(1) under the Plan, in answer to the TTC’s argument that no services are being provided in the year the employee receives his or her disability benefits. The Minister points out that a bonus paid in one year for services rendered in prior years, are nonetheless taxable and pensionable, even if no services are performed in the year of receipt. He asserts that the TTC’s disability benefit payments similarly constitute remuneration for past services performed.

[18] The Minister has brought several cases to the Court’s attention. Unfortunately, only two of them involve the Plan. In Peters v. M.N.R.[9], the Court held that long term disability payments received by an employee from a third party insurer over which the employer had no control, were not pensionable because that required employment income to be paid by an employer for services performed under a contract of service. There was no such contract between the employee and the insurance company.

[19] In contrast, Desender v. M.N.R.[10] held disability payments both insurable and pensionable, because the employer University funded the disability plan, the employees contract of service remained in effect; and she continued to have all the rights of an employee during that time. Unfortunately the Court’s attention does not seem to have been drawn to subsection 1.(2) under the IECPR above, which provides as follows:

1.(2) For the purposes of Part IV of the Act and for the purposes of these Regulations, "employer" includes a person who pays or has paid earnings of an insured person for services performed in insurable employment.

[20] This definition of “employer” is similar to that in subsection 2.(1) of the Plan. Both require payment for services performed. We cannot know if the result would have been different if this subsection had been considered by the Court.

[21] Université Laval v. M.N.R. [11] (“Laval”) deals with insurable earnings, but is otherwise factually very similar to the scenario before me. The University’s collective agreement with its employees required it to maintain a wage loss indemnity plan that it paid for in its entirety. The plan paid benefits equal to a percentage of the employee’s normal salary. An insurance company acted merely as the account administrator. The workers were still employed by the University; if there was a salary increase the benefits increased accordingly; the benefits were paid during normal pay periods for the first 52 weeks of the disability, and the workers did not perform any services.

[22] Unlike Desender, the Court does consider subsection 1.(2) under the IECPR above, which defines “employer” as a person who pays earnings for services performed as aforesaid. The Court also refers to paragraph 2.(1)(a) under Part I of the same Regulations, as did the Court in Cité, which found Government funded income replacement indemnities not to be insurable earnings because, inter alia they were not remuneration for services performed. The Appellant stressed the fact that no services were performed as required by subsection 1.(2). The Minister countered that as long as an employment relationship is maintained, disability payments paid by the usual employer rather than by an insurer, constitute insurable earnings even though services have not been performed during the disability period.
Leslie Ryan v. Sun Life Assurance, 2003 NSSC 247 (CanLII)

[2] The Application before the Court is described as a request for “an order determining the applicability and, if applicable, the meaning and scope of a “subrogation” clause in a group disability insurance plan (the DI Plan) administered by the Respondent, SunLife Assurance Company of Canada (“Sun Life”)”.

[4] The group term Insurance Policy 12500-G (the “Policy”) was issued to Her Majesty the Queen in Right of Canada as represented by the President of the Treasury Board. The Policy provided for long-term disability insurance coverage to employees of the Federal Government.

[5] The Applicant, Leslie Susan Ryan, was employed by the Canada Customs and Revenue Agency. As a Federal Government employee, the Applicant was required to join the DI Plan…

[22] Our courts have set out the principles of common law subrogation in clear terms. The right of subrogation arises to an insurer only if benefits were paid under a policy of indemnity and the rights arise when the insured was indemnified in full for a loss. (SeeNova Scotia Public Plan Trust Fund v. McNally 1999 NSCA 129 (CanLII), (1999), 179 N.S.R. (2d) 314 (NSCA) and Mutual LifeAssurance Co. v. Tucker 1993 CanLII 3154 (NS CA), (1993), 119 N.S.R. (2d) 417). The principles of common law subrogation or equitable subrogation can be changed by statute or the terms of the policy (See Insurance Law in Canada, Brown and Menezes (2nded. 1991) paragraph 15:3:1) It is not disputed the policy was a contract of indemnity.

[33] In Maritime Life Assurance Co. v. Mullenix (1986), 75 N.S.R. (2d) 118 at 121, Rogers J. quoted Brown and Menezes Insurance Law in Canada, Toronto, Carswell’s 1982 at p. 313:

The right of subrogation in insurance arises under common law and its operation is governed by common law principles.

[44] In the letter from the Treasury Board to the applicant dated December 13, 2000 there is the following paragraph:

The Disability Insurance Plan employee booklet, issued by the Treasury Board Secretariat, explains how the Plan will supplement other income sources. In other words, some additional income the employee receives will be deducted from benefits payable under the Plan.
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