Hoedel v. The Queen, 86 DTC 6535, [1986] 2 CTC 419 (FCA)

Heald, J. (Thurlow, C.J. and Hugessen J. concurring):—This is an appeal from a judgment of the Trial Division which confirmed a reassessment made by the Minister of National Revenue in respect of the appellant's 1980 income tax return. The issue is whether the appellant is entitled to deduct from the wages of his employment certain expenses incurred by him when travelling and transporting a police dog from his home to his place of employment and to other locations. The appellant submits that he is entitled to claim such a deduction pursuant to the provisions of paragraph 8(1 )(h) of the Income Tax Act, R.S.C. 1952, c. 148, as amended. That paragraph reads:

In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto: . . .

(h) where the taxpayer, in the year,

(i) was ordinarily required to carry on the duties of his employment away from his employer’s place of business or in different places,

(ii) under the contract of employment was required to pay the travelling expenses incurred by him in the performance of the duties of his office or employment, and

(iii) was not in receipt of an allowance for travelling expenses that was, by virtue of subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing his income and did not claim any deduction for the year under paragraph (e),

(f) or (g),

amounts expended by him in the year for travelling in the course of employment; [Emphasis added.]

The appellant joined the Regina City Police Department (the department) in January of 1974. He volunteered for and was selected for service in the Canine Division (C.D.) of that department in January of 1980. At all material times he was employed as a constable in that Division. Police officers in that Division including the appellant, worked in two shifts (the night shift and the afternoon shift). The shift of an officer commenced when that officer reported for duty at the police station. The appellant was provided by the Department, as a C.D. officer, with a dog, a kennel and a doghouse. The department paid him the costs of feeding the dog as well as reimbursing him for all veterinarian bills. He was also paid a cleaning allowance and a further undesignated allowance of $70 per month. A police vehicle, specially adapted for transporting dogs, was provided to the appellant for use during his duty hours, at no expense to him. This same vehicle was also used by him when responding to emergency calls to scenes of disturbance as well as when attending to demonstrations of the dog’s skills. Such demonstrations were arranged from time to time to promote the public relations of the Division. That vehicle was also available to transport the dog to a veterinarian when necessary.

The travelling expenses claimed by the appellant in his 1980 tax return as a deduction pursuant to paragraph 8(1 )(h), supra, constituted 90 per cent of all the expenses incurred by the appellant in 1980 with respect to the use of his private vehicle. The total amount of his motor vehicle expenses for the year were $5,279.37 which included: gasoline; repairs and maintenance; licence and insurance; interest and capital cost allowance. The total number of miles travelled was 7,000 miles. Mileage incurred in transporting the dog was said to be 90 per cent of the total — or — 6,300 miles. Accordingly, the deduction claimed on the 1980 return was $4,733.43, being 90 per cent of the total of vehicle expenses as particularized in paragraph 10 of the statement of claim. The expenses claimed were said to have been necessarily incurred because, in working so closely with the dog, the appellant was required as a condition of his employment, to transport the dog to and from the appellant’s home where the dog resided in the following situations:

(a) while travelling to and from the police station;

(b) while he was accompanying his wife on shopping trips;

(c) while he was transporting his children to and from school;

(d) while he was travelling to and from a cottage on weekends and for vacations;

(e) while his wife was engaged in shopping trips, the dog having accompanied her rather than remaining at home with the appellant during off-duty hours;

(f) while travelling to and from Calgary for a vacation; and

(g) while transporting the dog to various sites for training, grooming, exercising, socializing and for medical care.

The appellant did not receive any salary or overtime pay from his employer in relation to these trips.

The learned trial judge said that for the appellant’s claim to be acceptable under paragraph 8(1)(h), it must be shown that the expenses claimed are related to the taxpayer’s duties of employment. He then proceeded to con- sider what constituted this appellant’s duties of employment. He first considered the applicable contract of employment, in this case, the governing collective agreement. After concluding that the collective agreement was of no assistance in determining whether it was a duty of the appellant’s employment to transport the dog with him wherever he went, he next proceeded to consider the appellant’s submission that a secondary verbal contract of employment provided for this duty. He decided that the existence of such a secondary verbal contract had not been proven to his satisfaction. He then concluded that the applicable provisions of the Police Act and the Municipal Police Discipline Regulations were, likewise, of no assistance in deciding this issue. Finally, after consulting dictionary definitions, and conceding that the evidence established that non-compliance with the instructions to transport the dog with him, whenever and wherever he travelled could result in an unfavourable evaluation which might eventually result in his removal from the C.D., the trial judge concluded, nevertheless, that if the appellant failed to transport the dog with him wherever he went, his conduct would not be questioned by way of disciplinary action but would rather, be reflected in the yearly evaluation of his work performance in the C.D. on this basis, and apparently for this reason, he concluded that the instructions with respect to transportation of the dog were not duties of the appellant’s employment.

With every deference to the trial judge, I do not think this conclusion was open to him on this record. The uncontradicted evidence of the appellant and of Sergeant Forbes, his superior officer, makes it perfectly clear, in my view, that it was mandatory for the appellant to take the dog along with him when he was off-duty. The rationale for this provision, according to Sergeant Forbes, was ". . . to better socialize the dog". He explained that the socialization of the dog began during a 12-week training course. It was necessary to continue the socialization program following completion of the course. The witness characterized this program as a continuing process, the object being to teach the dog to respond to his trainer better by eliminating a "pack instinct” or a "pack environment”. At page 84 of the case, Sergeant Forbes stated unequivocally, that transportation of the dog during off-duty hours was a condition of the appellant being a member of the C.D. I am unable to agree with the view of the trial judge that since non-compliance with this condition would not result in disciplinary action, it was, in reality, only a minor matter and therefore not a condition of employment. The evidence is all to the contrary. Sergeant Forbes said that non-compliance with the provision would likely result in a bad work performance evaluation which could affect a member's future in the police force for years to come. This is surely a very serious matter with highly undesirable consequences for the employee concerned. When this evidence is coupled with the evidence summarized, supra, relating to the importance of the dog accompanying the member at all times, I fail to see how it is possible to conclude that the condition in issue is not a "requirement" of the appellant’s duties of employment. I also think the evidence establishes that the condition is one which is ordinarily and regularly "required". I would add, moreover, that even if, as the trial judge held, the requirement to transport the dog was something which, if he failed in its performance "would not be questioned by way of disciplinary action but rather in the yearly evaluation of his work performance in the C.D.” (Case p. 48), it by no means follows that such transport was not a duty of his employment. On the contrary, if an employee's failure to carry out a task can result in an unfavourable assessment by his employer, it would seem to me that such a circumstance is compelling evidence that the task in issue is a duty of employment.

For these reasons, I conclude that the expenses incurred by the appellant to the extent they were incurred in transporting the police dog, are covered by the provisions of paragraph 8(1 )(h).

However, such a conclusion does not finally dispose of all the issues raised by this appeal. While it was conceded by the respondent at trial that the quantum of the amounts claimed was not in issue, it was submitted that the appellant failed to establish that 90 per cent of his expenses in 1980 with respect to his private vehicle were related solely to his employment.

I agree that the existing record is deficient when considered from the perspective of establishing this fact. In my view, the appellant's expenses incurred in transporting the dog between the police station and his home are properly deductible. I think also that further transportation of the dog solely for the purposes of police work, training, demonstration or veterinary care are in the same category. However, expenses incurred in trips of a personal nature such as for shopping or leisure or vacation purposes would not be deductible, in my view, except to the extent that such expenses were increased because of the necessity of taking the dog along on such trips.

Accordingly, and for all of the reasons given herein, I would allow the appeal with costs of the appeal and of the proceedings in the Trial Division. I would set aside the reassessment appealed from and refer the matter back to the Minister of National Revenue for reconsideration and reassessment on the basis set out in the next preceding paragraph hereof. Such reconsideration and reassessment should be made only after affording to the appellant a reasonable opportunity to make representations as to the proper apportionment on that basis of the 6,300 miles referred to in paragraph 10 of the statement of claim.

Appeal allowed.