A French citizen residing in Canada had helped to run the family farm in France and, to thank him for those seven years of contribution, his father paid him a lump sum as “deferred salary”, a concept introduced by the French legislature pursuant to a Decree for the purpose of equity, namely to compensate a person who had contributed without consideration to the enrichment of the family group and to reduce the overall cost of transferring ownership to the son or daughter who remained part of the parental estate. The beneficiary had the right to claim (referred to as being pursuant to an deferred salary employment contract) the deferred salary on distribution of the estate of the farmer, but the beneficiary could be paid out sooner, as occurred here. Notwithstanding this label, the Decree specified that the deferred salary was not governed by the special rules governing contracts of employment.
In finding that the deferred salary was not employment or pension income given the absence of an employer-employee relationship, CCRA stated:
The term “pension” is not defined in the Act or the [Canada-France] Convention. However, paragraph 1 of Article XVIII of the Convention, which deals with pensions and annuities, refers to “pensions and other similar allowances ... paid in respect of past employment”. However … article 72 of the Decree and the absence of an employment contract or subordination relationship seem to indicate that the relationship between the creditor and the debtor of the “deferred salary” does not constitute an employer-employee relationship. Consequently, it seems to us that a payment made as “deferred salary” should not be considered a pension payment for the purposes of the Act and the Convention.