The applicant employer sought a determination that it was entitled to deduct withholding tax and employer statutory contributions from a settlement payment resolving an employment dispute.
The respondent employee brought a motion for summary judgment to enforce the minutes of settlement, arguing that legal costs payable to counsel were expressly to be paid without deductions.
The court held that the minutes clearly distinguished between legal costs payable directly to counsel and employment income payments subject to withholding tax.
The employer was not entitled to deduct withholding tax from the legal fee payment or subtract CPP, EI, and Employer Health Tax contributions from the settlement amount.
However, the court declined to enforce the default penalty clause because the deductions resulted from a mistaken interpretation of tax obligations rather than deliberate default.