Citation: 2011 TCC 365
Date: 20110825
Docket: 2008-1830(IT)I
BETWEEN:
MARC SÉNÉCHAL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1838(IT)I
RICHARD GAGNÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1839(IT)I
DENIS BOUCHER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1841(IT)I
MICHEL BERGERON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1843(IT)I
DENIS HARVEY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1844(IT)I
HÉLÈNE LECLERC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1846(IT)I
DOMINIC LEMIEUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1849(IT)I
ANDRÉ PARENT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1850(IT)I
CHARLES PARENT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1852(IT)I
JOCELYN SIMARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1853(IT)I
MICHEL SIMARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN: Docket:
2008-1855(IT)I
LUC TURCOTTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
During the years in
issue, namely 2002, 2003 and 2004, the twelve appellants were police officers
for the municipality of Saguenay and were members of the executive of the
Fraternité des policiers et policières de la Ville de Saguenay (the Police
Union).
[2]
During those years,
they received funds from the Police Union to cover some of the expenses they
incurred in connection with their union duties. The expenses included
transportation and meal expenses for all the appellants, and, for some of the
appellants, child care, Internet and computer expenses, and allowances for
attending union meetings.
[3]
The Canada Revenue
Agency (CRA) took the position that the amounts were taxable allowances
received in the course of an office of employment within the meaning of
sections 5 and 6 of the Income Tax Act (ITA), and the Minister of
National Revenue (the Minister) assessed each appellant in order to add the
amounts to their income in accordance with the detailed table adduced by the
appellants as Exhibit A‑2. The appellants dispute the addition of
these amounts to their taxable income.
The facts
[4]
The sole witness for
the appellants was Marc Sénéchal, who was elected president of the Police Union
in late 2001. He testified on behalf of all the appellants.
[5]
Mr. Sénéchal explained
that the Police Union was created after the amalgamation of the cities of Chicoutimi,
Jonquière and La Baie. Before the amalgamation, each city had a distinct
collective agreement with its own police service. The Chicoutimi collective
agreement expired on December 31, 2001, and the other two collective agreements
expired on December 31, 2002 (Exhibit A‑1, tables 20,
21 and 22).
[6]
On January 10, 2002, an
agreement on the terms of integration (Exhibit A-1, tab 18) was reached between
the Comité de transition de la ville de Saguenay, the party of the first part, and
the Syndicat des policiers de Chicoutimi, the Fraternité des policiers et
policières de Jonquière, and the Syndicat des policiers-pompiers de ville
de La Baie, the parties of the second part. It stated that, effective
February 18, 2002, the provisions of the Convention collective régissant
un policier [the police officer collective agreement] would continue to
apply, except to the extent that they were specifically amended by this agreement
(section 10.1).
[7]
Section 9 of the
agreement of January 10, 2002, contained specific rules regarding leave for
union business from February 18, 2002, onward. The section stipulated
as follows:
[translation]
SECTION 9 - LEAVES OF ABSENCE FOR UNION BUSINESS
9.01 As of February 18, 2002, the
provisions of the collective agreements concerning leaves of absence for union
business (Chicoutimi: clauses 5.03, 5.04 and 5.06 to 5.11; Jonquière:
clauses 8.01 to 8.03; and La Baie: clauses 5.01 to 5.04, 5.07, and 5.08) shall
be replaced by the provisions of this section, until the first collective
agreement applicable to all salaried members of the Saguenay municipal police
service come into force.
9.02 The employer grants the
representatives of all unions permission to be absent from their jobs, without
loss of pay, for the activities and in the quanta set out below:
(a)
A maximum of six (6) representatives to take
part in the sessions of the joint union-management integration committee and in the negotiations, conciliation or arbitration
sessions aimed at achieving the first collective agreement applicable to
all salaried members of the Service de police de Ville de Saguenay.
(b)
A maximum of three (3) representatives to
take part in the discussions of the joint health and safety committee formed
pursuant to the Act respecting occupational health and safety and any
other joint union-management committee, as of the
time that such a committee is put in place by the Ville de Saguenay; and in the
meantime, the applicable provisions of the collective agreements continue to
apply with respect to the number of union representatives on such a committee.
(c)
For grievance hearings, two (2) union
representatives, plus the employee concerned by the
grievance.
(d)
In addition, an annual bank of one thousand (1000)
hours shall be available to all unions for the purposes of leave for any union
business for a representative or member. The
employer must be notified at least two (2) days in advance for any leave time
to be taken from this bank, unless there are exceptional circumstances, in
which case the employer shall not refuse it without valid cause.
9.03 The president of the new
Fraternité des policiers et policières de la Ville de Saguenay [the Police
Union] is granted leave with pay for a total of five hundred and forty (540)
hours per year for his union duties. This time bank must be used in periods
of eight (8) or twelve (12) continuous hours based on his work schedule. He
must notify the employer at least two (2) days in advance of any day of leave
that he intends to take, unless there are exceptional circumstances, in which
case the employer shall not refuse it without valid cause.
9.05 Notwithstanding
any contrary provision of a collective agreement, where the Ville de Saguenay decides
to replace a police officer on leave under this section, it may use temporary
police officers, regardless of the duration of the replacement.
[Emphasis added.]
[8]
The collective
agreement between Ville de Saguenay and the Police Union (Exhibit A‑1,
tab 19) was signed on February 22, 2005, and applied to the period from
January 1, 2003, to December 31, 2006. Section 5 of the agreement
governs union business and leave for union business. It is reproduced below:
[translation]
5.01 General meetings
The Employer authorizes the Union to hold its general meetings on
the premises of the service that it designates, outside regular office hours.
The request shall be made to the chief of police within a reasonable amount of
time.
5.02
Leave for union business
The Employer grants the Union's representatives permission to be
absent from work, without loss of pay, for the activities and the quanta set out below:
(a) A maximum of six (6) representatives
to participate in the negotiation, conciliation or dispute arbitration sessions
aimed at achieving the collective agreement;
(b) a maximum of three (3) representatives
to take part in the discussions of the joint health and safety committee formed
pursuant to the Act respecting occupational health and safety and any
other joint union-management committee, as of the time that such a
committee is put in place by the Employer. If the meeting takes place
outside the employee's work schedule, the employee shall accumulate compensable
time equal to the duration of the meeting and must take this compensable
time as time off, subject to the ratios set out in section 15, prior to the end
of the calendar year, failing which the employee loses that time.
(c) For grievance hearings, two (2)
union representatives, plus the employee concerned by the grievance.
(d) For hearings before the Commissaire
à la déontologie policière [police ethics commissioner], the Commission des
relations du travail [labour relations board], the Commission de lésions
professionnelles [occupational injury board] the Commission des normes
du travail [employment standards board], and the disciplinary committee
formed under the Règlement sur la discipline des policiers de Ville de
Saguenay, one union representative.
(e) In addition, an annual bank of one
thousand (1000) hours shall be available to all unions for the purposes of
leave for any union business for a representative or member. The employer
must be notified at least two (2) days in advance for any leave time to be
taken from this bank, unless there are exceptional circumstances, in which case
the employer shall not refuse it without valid cause.
5.03
The president of the Fraternité des policiers
et policières de la Ville de Saguenay [the Police Union] is granted leave
with pay for a total of five hundred and forty
(540) hours per year for his union duties. This time bank must be used in
periods of ten (10) or twelve (12) continuous hours based on his work schedule.
He must notify the employer at least two (2) days in advance of any day of
leave that he intends to take, unless there are exceptional circumstances, in which
case the employer shall not refuse it without valid cause.
5.04
Sections 3 and 9 apply to replacements in the
event of absences caused by the granting of leave under this section.
5.05
If a Union member is elected to the Executive of
the Fédération des policiers et policières municipaux du Québec, that Union member
may take time off work, without pay, to attend the meetings of that
organization for the duration of his mandate, provided he gives the chief of
police at least seven days' notice, in writing, of any absence, unless there
are exceptional circumstances, in which case the employer shall not refuse it
without valid cause.
5.06
The Employer shall make available to the Union
an adequate room that is appropriate for holding meetings of its board of
directors and for keeping its documents.
[Emphasis added.]
[9]
In addition, the Police
Union's articles of association and by-laws, adopted on January 22, 2002, and
amended on April 24, 2002, stated that the Police Union's executive would
consist of 12 members from the three amalgamated unions (four from Jonquière,
four from Chicoutimi and four from La Baie) until the signing of the Police
Union's first collective agreement. They also stated that the initial pooled
capital fund consisted in admission dues of $500 per permanent member
(Exhibit A‑1, tab 17, section XXVII). Later on, according to
Mr. Sénéchal, this fund was to be financed by weekly deductions from each
member's pay (see also section VI of the articles and by-laws of the
Police Union: Exhibit A-1, tab 17).
[10]
In his testimony, Mr. Sénéchal
explained that the members of the executive had the use of a bank of 1000 hours,
out of their total work output, to look after their union duties, and that he
personally had 540 additional hours as president. Everyone needed to
obtain the employer's permission before being absent during their hours of
work. Mr. Sénéchal arranged with the employer to devote all his Wednesdays
to union duties, and the employer looked after his replacement as the lieutenant
in charge of the investigations unit. Mr. Sénéchal says that in actual fact,
the members of the Police Union executive tried to meet or carry out their
union work outside hours of work in order to limit the amount of leave for
union business granted by the employer.
[11]
When the appellants
were absent during their hours of work, they received their pay from the
employer, the Ville de Saguenay, and the Ville de Saguenay was not
reimbursed by the Police Union. Some appellants, like Mr. Sénéchal, had to
be replaced by the Ville de Saguenay while they were away. Patrol officers were
not necessarily replaced.
[12]
The appellants received
no remuneration from the Police Union. That is why the Police Union adopted a
policy on expenses incurred by members of the executive (Exhibit A‑1,
tab 15) on February 13, 2002 (the Expense Policy). Mr. Sénéchal explained
that since the Police Union spanned three former municipalities which were,
according to him, roughly 20 to 25 kilometres apart, the policy sought to cover
expenses related to travel, living, lodging, hospitality, long-distance calls,
and participation by directors. According to a map (Exhibit I‑3)
adduced by the respondent, the total distance between Jonquière and La Baie,
via Chicoutimi, is a bit less than 33 km.
[13]
Hence, lodging expenses
were refundable upon submission of supporting documents. Living expenses were
reimbursed without vouchers at a rate of $10 for breakfasts, $20 for lunches
and $40 for dinners, with an additional $20 for other incidentals if a member
of the executive had to spend the night away from home. (The amount allotted
for dinners is double the allotment made in the new collective agreement
between the Ville de Saguenay and its police officers: see Exhibit A-1, tab 19,
page 883). Travel expenses for personal automobile use were reimbursed at a
rate of $0.36 per kilometre outside the municipality Saguenay, and parking was
reimbursed upon submission of receipts. Each member was entitled to a $50 hospitality
allowance, without receipts, for every event he or she was directed by the
Police Union to attend. The members were also entitled to two long-distance
phone calls a day. Child care expenses were also reimbursed in some cases, and
if so, they were reimbursed at a fixed rate. Lastly, the directors of the
Police Union received a $50 director's fee for any event designated by the
president, subject to a $1,000 maximum. According to Mr. Sénéchal, the
appellants, in their capacity as members of the executive, did not receive
these directors' fees. In fact, based on a reading of the Expense Policy,
it appears that six directors were entitled to director's fees. Mr. Sénéchal
stated that these director's fees were only paid if the union activity took
place outside working hours and the member was therefore not being paid by the
employer. Also, the reimbursement of expenses incurred by members of the
executive was limited to a maximum that varied based on the position held when
the travel was within the boundaries of the municipality of Saguenay and when
the living expenses were not directly related to their obligation of representation.
(See the Expense Policy, Exhibit A-1, tab 15, at page 694.)
[14]
All the expenses
claimed by the Police Union had to be approved by the president first. In Mr. Sénéchal's
case, it was the treasurer who countersigned the expense account approvals. The
president was the person who approved union business and travel. The union
leave forms required his approval before being sent to the chief of police for
approval.
[15]
Mr. Sénéchal stated
that the Police Union did not have an office during the transitional period
which coincides with the period in issue, and that all members needed to be
able to operate from home and have access to their own computer and mobile
phone. The Police Union could reimburse some of these expenses if they were not
incurred for personal use and were reasonable, but all reimbursements needed to
be approved in advance by Mr. Sénéchal. And the meetings were most often
held in a reserved room at a restaurant, which inevitably gave rise to meal
expenses. Mr. Sénéchal said that he claimed all his travel from the Jonquière
police station from which he worked. If he was off work that day, he claimed
travel from his residence. However, he admitted that he did not have the detail
of all his union meetings because he could not find his day planner for the
years in question. Nonetheless, he adds that the details were not important to
him, because he sent a weekly report to his members. He confirms that all the
kilometres of driving claimed from the Police Union matches his trips on Police
Union business. The same goes for the other appellants, because he ensured that
each person's claims were justified and reasonable.
[16]
It appears that the CRA
considered all the amounts paid to the appellants for their trips on union
business within the municipality of Saguenay — that is to say, between Jonquière,
Chicoutimi and La Baie —
as taxable benefits. According to the CRA, this travel was not away from the
municipality where the employer's establishment at which the employee
ordinarily worked was located (see the Exhibit I-1, tab 6, the letter by the
CRA, dated February 15, 2006).
Statutory provisions
Income Tax Act,
RSC 1985, c 1 (5th Supp)
PART I – Income Tax
DIVISION B – Computation of Income
Subdivision a – Income or Loss from Office or Employment
Basic Rules
Income from
office or employment
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.
. . .
Inclusions
Amounts to be
included as income from office or employment
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
Value of benefits
(a) the value of board, lodging and other benefits of any kind whatever
received or enjoyed by the taxpayer in the year in respect of, in the course
of, or by virtue of an office or employment . . .
Personal or living expenses
(b) all amounts received by the taxpayer in the year as an
allowance for personal or living expenses or as an allowance for any other
purpose, except
. . .
(v) reasonable allowances for travel
expenses received by an employee from the employee's employer in respect of a
period when the employee was employed in connection with the selling of
property or negotiating of contracts for the employee's employer,
. . .
(vii) reasonable allowances for travel
expenses (other than allowances for the use of a motor vehicle) received by an
employee (other than an employee employed in connection with the selling of
property or the negotiating of contracts for the employer) from the employer
for travelling away from
(A) the municipality where the employer's
establishment at which the employee ordinarily worked or to which the employee
ordinarily reported was located, and
(B) the metropolitan area, if there is one,
where that establishment was located,
in the performance of the duties of the
employee’s office or employment,
(vii.1) reasonable allowances for the use
of a motor vehicle received by an employee (other than an employee employed in
connection with the selling of property or the negotiating of contracts for the
employer) from the employer for travelling in the performance of the duties of
the office or employment,
. . .
and for the purposes of subparagraphs
6(1)(b)(v), 6(1)(b)(vi) and 6(1)(b)(vii.1), an
allowance received in a taxation year by a taxpayer for the use of a motor
vehicle in connection with or in the course of the taxpayer's office or
employment shall be deemed not to be a reasonable allowance
(x) where the measurement of the use of the
vehicle for the purpose of the allowance is not based solely on the number of
kilometres for which the vehicle is used in connection with or in the course of
the office or employment, or
(xi) where the taxpayer both receives an
allowance in respect of that use and is reimbursed in whole or in part for
expenses in respect of that use (except where the reimbursement is in respect
of supplementary business insurance or toll or ferry charges and the amount of
the allowance was determined without reference to those reimbursed expenses);
PART XVII - Interpretation
Definitions
248. (1) In this Act,
. . .
"office" means the position of an individual
entitling the individual to a fixed or ascertainable stipend or remuneration
and includes a judicial office, the office of a minister of the Crown, the
office of a member of the Senate or House of Commons of Canada, a member of a
legislative assembly or a member of a legislative or executive council and any
other office, the incumbent of which is elected by popular vote or is elected
or appointed in a representative capacity and also includes the position of a
corporation director, and "officer" means a person holding
such an office.
"employment" means the position of an individual
in the service of some other person (including Her Majesty or a foreign state
or sovereign) and "servant" or "employee"
means a person holding such a position;
"employee" includes officer;
"employed" means performing the duties of an
office or employment.
The appellants' arguments
[17]
The appellants submit
that the amounts received from the Police Union in connection with their union
business are not taxable, because they carried out that business on a volunteer
basis and the amounts paid by the Police Union served solely to reimburse the
expenses that they incurred to carry out their duties. Counsel for the
appellants seeks to distinguish this case from the situation in Succession
Vachon v. Canada, 2009 FCA 375, [2009] F.C.J. No. 1630 (QL). That
situation, which is somewhat similar to this one, was analyzed by the Federal
Court of Appeal. The issue was the tax treatment of certain allowances paid to
union officials by their central council. The union officials argued that they
were volunteers and could not be considered holders of an office or employment
with the central council within the meaning of sections 5 and 6 and subsection
248(1) of the ITA, since their positions did not entitle them to any fixed or
ascertainable stipend or remuneration. The evidence showed that the officials
obtained leave for union business without loss of pay, and that the central
council reimbursed the employer for that portion of their pay that was paid during
union leave. The Federal Court of Appeal held that the officials were not
volunteers and that they held an office entitling them to fixed and
ascertainable remuneration. At first instance, it had been accepted that, if
they held an office, the allowances were taxable. Counsel for the appellants in
the case at bar seek to distinguish that decision on the basis that the Ville
de Saguenay was not reimbursed by the Police Union for the salary that it paid
them during union leave, and that the appellants cannot be considered to have
been entitled to fixed and ascertainable remuneration from the Police Union.
Moreover, the appellants submit that a major part of their union activities was
outside their hours of work for the Ville de Saguenay, and that they received
no remuneration for those activities in such an event.
[18]
In the case of
appellant André Parent, the Minister added the amounts of $3,055 in 2003 and
$3,337 in 2004 to his income under the heading [translation] "Miscellaneous". According to Mr. Sénéchal's
explanations, these amounts constitute the Ville de Saguenay's refund of an
employment insurance overpayment for several police officers. It is alleged
that the municipality paid the Police Union and that the Police Union then
remitted the amounts in question to André Parent, the Police Union
treasurer. The two cheques in question were signed by Mr. Sénéchal and Mr. Parent
on behalf of the Police Union and have been adduced in evidence as
Exhibit A‑1, tab 8, page 437. Mr. Parent allegedly deposited
these cheques into his personal account and then distributed them, in cash, to
all the police officers concerned. According to other documents, the amounts
paid by the Ville de Saguenay to the Police Union were $3,101.74 in 2003 and
$3,355.78 in 2004. These amounts allegedly correspond to the reduction of
the EI contribution rate, of which the employee is entitled to five-twelfths (Exhibit
A-1, tab 8, pages 438, 439 and 440). Therefore, according to the counsel
for the appellants, these amounts cannot be attributed solely to André Parent.
[19]
Counsel for the
appellants also relies on the decision of the Quebec Court of Appeal in Québec
(Sous-ministre du Revenu) v. Confédération des Caisses populaires et d’économie
Desjardins du Québec, 2002 DTC 7404, [2001] Q.J. No. 2623
(QL), which establishes that living expense allowances are not taxable benefits
if the employees derive no profit from the allowances, and the allowances are paid
solely to reimburse expenditures that the employer has directed the employees
incur. In the appellants' view, the amounts received from the Police Union
served solely to reimburse them for the expenses that they incurred out of
pocket in performing their union duties. And, in their submission, if they did
not benefit from them, they should not have been taxed on the allowances paid
by the Police Union (see also Bernier v. Québec (Sous‑ministre du Revenu),
2007 QCCA 1003, [2007] R.J.Q. 1519, [2007] Q.J. No. 7566
(QL).
[20]
Lastly, counsel for the
appellants argues that the tax-exempt status of the allowances for the use of a
motor vehicle are not contingent on the travel expenses having been incurred
outside the municipality where the employer's establishment at which the
employee ordinarily worked or to which the employee ordinarily reported was
located (subparagraph 6(1)(b)(vii.1) of the ITA).
The respondent's arguments
[21]
The respondent argues
that the appellants did in fact conduct their union business as office holders.
She submits that the decision of the Federal Court of Appeal in Succession
Vachon v. Canada settles this question, and cannot be distinguished, because
the Police Union did not reimburse the Ville de Saguenay for the compensation
paid to the police officers during their leave for union business. As far as
she is concerned, the fact that the appellants received their full pay means that
they cannot be considered volunteers. Furthermore, she submits that the evidence
does not show on a balance of probabilities that the appellants primarily
carried out their union activities outside their hours of work. Neither the
requests for leave submitted to the employer, nor the attendance sheets, were
adduced in evidence. Moreover, the respondent emphasizes that if one looks
closely at the hospitality expenses paid to the appellants, one sees that few
amounts of $50 were claimed by the appellants from the Police Union to attend
union activities during periods when they were not on union leave (see Exhibit A‑2).
[22]
The respondent also
notes that the allowances that were added to the appellants' income are fixed
amounts which were paid without justification by the appellants. Such
allowances are taxable under paragraph 6(1)(b) of the ITA (see MacDonald
v. Canada, [1994] F.C.J. No. 378 (QL); The Queen v. Savage, [1983] 2
S.C.R. 428). Moreover, a benefit can be received from a person other than the
employer and constitute a taxable benefit (see Norris v. The Queen,
[1994] T.C.J. No. 81 (QL)). Here, the appellants were granted leave
by the Ville de Saguenay in order to perform their union duties, and thus, the
allowances received from the Police Union were received in connection with the
performance of their remunerated duties.
[23]
The respondent notes
that, by virtue of the exception set out in subparagraph 6(1)(b)(vii)
of the ITA, the allowances paid to the appellants for activities outside the
municipality of Saguenay were not added to their income. However, the
allowances for meals within that metropolitan area were considered taxable. In
the respondent's submission, the meal allowance cannot be considered reasonable,
given, firstly, that it is higher than what the Collective Agreement contemplates
for cases where it is paid directly by the employer, and, secondly, that the
appellants receive the full amount for their meals whereas subcontractors are
only entitled to 50% of such expenses under the ITA. The respondent also draws
a parallel with subsection 81(3.1) of the ITA, which provides that no income
tax is payable on allowances for travel between two workplaces if the taxpayer
has a part-time employment and another employment, and the distance between the
two workplaces is greater than 80 km. Here, the total distance between the
three former cities is no greater than 33 km. In addition, the auditor
split the allowances given by the Police Union for group meals between the
members of the union executive, because the appellants provided no details
regarding the persons present at such meals (Exhibit I-1, tab 5).
[24]
The respondent also
submits that in order to benefit from the exemption in subparagraph 6(1)(b)(vii.1)
of the ITA for allowances received for motor vehicle travel, the appellants had
to prove that their residence was the main base from which they performed their
duties, and that they were travelling to take part in union activities that
were being conducted at a second place of work (see Daniels v. Canada
(Attorney General),2004 FCA 125, [2004] F.C.J. No. 573 (QL)). In the
respondent's submission, the appellants' evidence in this regard is incomplete.
[25]
Lastly, in the case of
André Parent, the respondent submits that it has not been proven that he distributed
the funds from the EI overpayment cheques that he cashed to the other employees.
No list of names was provided which would have enabled the Minister to allocate
the amounts in question between the various persons supposedly concerned.
Analysis
[26]
In Succession Vachon
v. Canada, supra, at paragraph 34 et seq., Justice Noël
addressed the issue of determining whether the union officials held an office
as defined in subsection 248(1) of the ITA:
34 The only issue is therefore the one
that the TCC judge identified at the beginning of his reasons: "whether …
the [union] officials held an office within the meaning of
subsection 248(1) of the [Act and] … subsection 2(1) of the CPP".
If so, the appeals should be allowed; if not, they should be dismissed
(reasons, para. 36).
. . .
36 In this case, the relevant legal
tests underlying the existence of an office are twofold: first, the individuals
involved must hold an "office, the incumbent of which is elected by
popular vote or is elected or appointed in a representative capacity" and,
second, the position in question must entitle the individual to a fixed or
ascertainable stipend or remuneration.
37 The first test seems to have been
met, since the union officials were all elected to the positions that they hold
on the central councils. It is the second test that was not met, according to
the TCC judge.
38 There are two requirements for
meeting this second test. The office or position held must "entitle"
the individual to remuneration, and this remuneration must be "fixed or
ascertainable". The fixed or ascertainable aspect of the remuneration
seems to have been met, since the union officials knew exactly what the monetary
conditions associated with their union leave were when they applied for a union
position (Testimony of Pierre Morel, appeal book, Vol. III, p. 707).
39 However, in the TCC judge's opinion,
the requirement that the position or office must "entitle" the
individual to this remuneration was not met. The TCC judge drew this conclusion
mainly because "the union officials are not entitled, under any
contractual relationship or any central council constitution or by-laws, to a
fixed or ascertainable stipend or remuneration" (reasons, para. 54).
40 With respect, that the union
officials are not entitled to this remuneration under any contractual
relationship or any central council constitution or by‑laws is
immaterial. The only issue is whether the union officials were paid for their
activities as union officers during their union leave (on this point, see
Justice Lamarre Proulx's decision in Duguay v. Canada, [2000] T.C.J.
No. 381 (QL) at paragraph 37, where she identifies this issue in the
same way in a comparable context).
41 In my humble opinion, the answer is
evident. The union officials received their full salaries and all of the fringe
benefits set out in their collective agreement, despite the fact that they
performed no services for their regular employers. The regular employers were
reimbursed by the respective unions, and the cost of this remuneration was
ultimately borne by the central councils. Only the services that the union
officials rendered as in that capacity can explain why they received their
usual remuneration during their union leave, and only the fact that the regular
employers were reimbursed explains why they agreed to pay the remuneration even
though they received no services.
42 That the remuneration was paid through the
regular employer does not change the analysis. Contrary to the submissions of
counsel for the respondents, this is not a case of recharacterization of the
legal relationships between the parties (Shell, above, para. 39)
but, rather, of recognizing these relationships for what they are. It is clear
that the regular employers were acting on behalf of the respective unions and,
ultimately, the central councils when they agreed to remunerate the union
officials during their union leave.
43 Based on this analysis, the TCC
judge’s finding that the union officials were acting as volunteers is unfounded
and even contrary to the evidence. A volunteer acts [translation] "voluntarily and without pay" (Le
Petit Robert, French language dictionary). However, the evidence shows
that, once elected, the union officials undertook to assume the powers and
duties associated with their union positions (union constitution and by‑laws,
appeal book, Vol. I, pp. 254 and 268), for which they were
entitled to their usual remuneration. This is not volunteering.
[27]
In this decision,
Justice Noël held that, for two reasons, the union officials were not carrying
out their union duties as volunteers. Firstly, the elected union officials
undertook to assume the powers and duties associated with their union
positions, and secondly, they were entitled to their usual remuneration in
exchange.
[28]
In the case at bar, the
appellants were also elected as union representatives, and they also undertook
to assume the powers and duties associated with that position (according to the
Police Union articles and by-laws, Exhibit A-1, tab 17). As for
remuneration, the evidence is that the employer, Ville de Saguenay, paid them
their full salary, while they were on union leave. In my opinion, just because
the Police Union did not reimburse the employer, does not mean that the
appellants received no remuneration in consideration for their services to the
Police Union. In fact, the appellants had to obtain their employer's
approval for their union leave, and their remuneration, whenever they were on
union leave, was directly tied to the performance of their union duties.
[29]
The other difference
between the appellants' situation and the situation that appears to have
existed in Succession Vachon v. Canada, supra, is that the
appellants could perform their duties outside the hours of work with their
employer. In such a case, the Expense Policy provided that the members of the
Police Union's executive were entitled to a $50 allowance for each instance of
participation in a union activity, up to the maximum total contemplated in the
said Expense Policy. In my opinion, this constitutes fixed or ascertainable
remuneration. In fact, it constitutes a fixed amount to which the executive
member is entitled from the moment the member participates in a union activity,
without being required to provide supporting documents.
[30]
If the executive member
exceeded the permitted limit under the Expense Policy while carrying out his
union duties outside the hours remunerated by the municipality, one might think
that he was no longer remunerated for the duties carried out for the Police
Union. However, upon referring to the total amounts received by the appellants
during the years in issue, the details of which amounts are set out in Exhibit
A-2, I see that these limits do not ever appear to have been attained, or that,
at the very least, it has not been proven that they were ever attained. On the
contrary, unlike what Mr. Sénéchal appears to be alleging, one can see
that the event-related allowances paid to the appellants when they are not on
the employer's clock appear to be rather modest. In fact, both the agreement on
the terms of integration, and the collective agreement finally signed in 2005,
provided that a total of 12 union representatives could be absent from work
without loss of pay in order to take part in various specified activities, and
that an annual 1000‑hour leave bank was also available to
representatives or members for any union activity. This suggests that the appellants,
as members of the executive, could be granted paid leave for the specified
activities, such as participation in the sittings of the union‑management
integration committee (sections 9.02 (a), (b) and (c) of the integration terms
agreement; sections 5.02(a), (b), (c) and (d) of the Collective Agreement)
without even dipping into the 1000-hour bank.
[31]
With respect to the
taxation of the amounts paid to the appellants by the Police Union, the
Minister only appears to have added to the appellant's income the allowances
for which they were not required to provide justification, and for the expenses
that the Minister considered personal.
[32]
With respect to the
meal expenses, the Expense Policy provided for a fixed amount, which, according
to Mr. Sénéchal, was to be approved by him if he acknowledged that the
executive member had indeed taken part in an activity for which he had to dine
away from home. The Minister was of the opinion that this was not an expense
reimbursement, and, moreover, that this allowance was not tax‑exempt
under subparagraph 6(1)(b)(vii) of the ITA, when the meals were taken
within the municipality of Saguenay.
[33]
I agree with the
respondent that the amount paid for meals was a taxable allowance, not an
expense reimbursement. The respondent properly finds support in following
excerpt from MacDonald, supra, at paragraph 8:
8. The decision of the Exchequer Court in Ransom v.
Minister of National Revenue, (1967) 67 D.T.C. 5235, provides a good
starting place in determining the qualities of an allowance. Noël J. reasoned
as follows:
[A]
reimbursement of an expense actually incurred in the course of the employment
or of a loss actually incurred in the course of the employment is not an "allowance"
within the meaning of the word in section 5(1)(b) [now 6(1)(b)] as an
allowance implies an amount paid in respect of some possible expense without
any obligation to account (p.5243).
He continued:
An allowance is quite a different thing from reimbursement. It is,
as already mentioned, an arbitrary amount usually paid in lieu of
reimbursement. It is paid to the employee to use as he wishes without being
required to account for its expenditure. For that reason it is possible to use
it as a concealed increase in remuneration and that is why, I assume, "allowances"
are taxed as though they were remuneration (p.5244)
[34]
Moreover, the meal
allowances that were included in the appellants' income were paid in connection
with the appellants' performance of their duties within the municipality of
Saguenay. Even though that municipality results from a merger of three former
cities, the meals eaten within it cannot, in my view, be considered to have been
eaten away from the municipality where the employer's establishment was
located, or away from the metropolitan area where it was located. In any event,
the appellants did not stress this point, or at the very least, they did not
provide me with anything persuasive to the contrary.
[35]
As for the allowance
for motor vehicle use, it appears that the Minister only included the
allowances for travel within the municipality of Saguenay. Relying on Daniels,
supra, the respondent argues that trips from the appellants' residences
to their places of work are personal in nature. I heard only Mr. Sénéchal's
testimony on the subject. He said he went to his employer's office in Jonquière
every Wednesday and, from there, travelled between Jonquière, Chicoutimi and La
Baie to meet the Police Union members. When he did not have to go to the
employer's office — he had
every other Friday off —
he left for his union activities from his residence. He explained that during
the transitional period between the creation of the Ville de Saguenay in late
2001 and the signing of the Collective Agreement in 2005, the Police Union did
not really have any premises and the employer did not provide any spaces for
the conduct of union business. In fact, I note that the new collective
agreement provided that the employer had to make a space available to employees
for union meetings. If my understanding is correct, even the CRA auditor
appears to have acknowledged this state of affairs in the letter
(Exhibit I‑1, tab 6, page 7) that he wrote to counsel for the
appellants. However, he took the position that, under the Police Union's
Expense Policy, the members of the executive had to use their compensation to
cover all distance-based expenses for travel between their residence and any
place located within the boundaries of the municipality of Saguenay.
Consequently, his position was that the allowance received for travel within
the municipality of Saguenay was for the appellants' personal benefit and was
therefore taxable. Moreover, few details concerning these trips were given. If
one looks at the expense justification tables in the various volumes of Exhibit
I-2, one often sees the entry "déplacement Ville de Saguenay"
["Travel - municipality of Saguenay"] with high and round numbers of
kilometres driven monthly, frequently ranging from 100 km to the
occasional 400 km, without further details. No log book for kilometres
driven for non-personal purposes was adduced in evidence either.
[36]
In my opinion, the
appellants' evidence is insufficient to show that the allowance received from
the Police Union for their travel within the municipality of Saguenay was a
reasonable allowance for the use of a motor vehicle in order to travel as part
of their duties. Even though Mr. Sénéchal approved the payments of the
allowances, my understanding is that, more often than not, they covered the
appellants' trips from their residences to union activities (at any rate, Mr. Sénéchal
did not convince me otherwise.) These are personal expenses, and an allowance
for such expenses is taxable (see Daniels, supra, at paragraph 7).
[37]
As for the office
expenses (Internet and computer expenses) related to work done at home, these
expenses constitute personal expenses that the appellants would have incurred
even if they did not have union duties. An employer's payment of an employee's
regular or current expenses constitutes a taxable benefit. In reimbursing the
appellants this way, under the pretext that they use their computers to carry
out union tasks, the Police Union was giving the appellants a form of
remuneration. This was no longer in the realm of expenses incurred due to
a specific demand by the Police Union, and is within the realm of partial
compensation of a personal expense (see Leduc (Estate) v. Canada, [1995]
T.C.J. No. 1514, 1995 CarswellNat 2065). As for the child care expenses
for which, based on Mr. Sénéchal's testimony, the appellants received a fixed
amount, I also find that they are a taxable benefit. Mr. Sénéchal made a
point of noting that he considered child care expenses incurred when the
appellants concerned were being remunerated by the Ville de Saguenay to be personal
in nature, and that they were therefore not reimbursed by the Police Union. How
could these same expenses lose their personal nature because they are incurred
outside the hours of work for the Ville de Saguenay? In my opinion, these
expenses remain personal in nature. First of all, the appellants voluntarily
came forward to fill the positions that they hold in the Police Union, and they
were elected to those positions. Thus, this is not a requirement tied to
their employment. Secondly, my understanding is that the amount remitted
by the Police Union is a fixed amount, that it requires no supporting
documents, and that it is paid on the honour system. Given the
circumstances, it is my opinion that the decisions of the Quebec Court of
Appeal cited by the appellants do not apply to the case at bar.
[38]
As for the amount paid
to the Police Union by the Ville de Saguenay and transferred to André Parent,
and the auditor's allocation, between the appellants, of group meal expenses,
the appellants deliberately refused to provide the names of the people
concerned who, in the first case, received sums of cash from André Parent,
or who, in the second case, were supposedly present at the group meals, as
documented by Exhibit I‑1, tabs 5, 6 and 7. And as for the two cheques
drawn by the Police Union and deposited into André Parent's account, they
do not match the amounts paid by the Ville de Saguenay to the Police Union.
Under the circumstances, I find that the evidence adduced by the appellants,
who bore the burden of proof, was incomplete.
[39]
Consequently, the
appeals are dismissed, and the assessments under appeal are confirmed.
Signed at Ottawa,
Canada, this 25th day of August 2011.
"Lucie Lamarre"
Translation certified true
On this 27th day of October 2011
Monica F.
Chamberlain, Reviser
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