The Queen v. Diemert, 76 DTC 6187, [1976] CTC 301 (FCTD)

Cattanach, J:—This is an appeal by Her Majesty the Queen from a decision of the Tax Review Board dated September 12, 1975 with respect to the assessment of the defendant to income tax by the Minister of National Revenue for the defendant’s 1971 taxation year.

The defendant was employed by the Canadian Pacific Railway originally as a fireman but he became qualified for and was promoted to a locomotive engineer. Because of this promotion, which I! recall the evidence to indicate as occurring late in 1970, the defendant ranked high on the seniority list of firemen but very low on the seniority list of engineers.

Assignments for work as an engineer, as well as for fireman, are on the strict basis of seniority. Because the defendant was low on the seniority list for engineers, it follows that he received the least desir- able jobs, but high on the list for firemen. If no assignments were available to him as an engineer, he was not averse to accepting a bid as a fireman.

The defendant by personal choice resided in Regina, Saskatchewan with his wife and children.

Twice a year all engineers bid for jobs and there are three zones of choice, Regina, Saskatoon and Moose Jaw but an engineer resident in one of these zones is not limited to that zone. Rather he may bid on any zone. On the basis of those bids and the seniority of those bidders, assignments are made from the bid book in which those bids are recorded.

However at the beginning of each week those assignments are subject to change due to a variety of circumstances such as the work available, the desires of the more senior engineers who may wish to book off, take vacations, who may be ill or take another assignment and like reasons. Otherwise the assignments remain constant for six months until bids are made afresh.

The defendant’s preference for assignments were (1) Regina to Saskatoon, through freight, (2) road switcher at a calcium plant just outside Regina, (3) Regina yard switcher on two of the more desirable of three 8-hour yard shifts, (4) Regina spare board, (5) the late or least desirable of the three Regina yard switcher shifts, (6) Weyburn, and

(7) Assiniboia. The defendant does not specifically recall if he bid in that order of preference but since these are his preferences I would assume that he did so bid. Significantly Assiniboia was his last choice.

At the beginning of 1971 the defendant’s assignment was to Assiniboia there to operate a locomotive on way freights to Shaunovan, Big Beaver, Killdeer or Mankota as schedules dictated. That was the defendant’s assignment consequent upon the six months’ bid and remained so until there was a change in the work available or a change in the seniority which created a change in the jobs available to allow the defendant to take on a different job which might occur at the beginning of any week:

The weekly scheduling of trains is done by the locomotive foreman in Moose Jaw. For example, if a way freight is to run from Assiniboia to Shaunovan on a Monday, the locomotive foreman in Moose Jaw advises the Regina division that a crew is required for that time and place. lt is the responsibility of the Regina division to select and advise the personnel. The Moose Jaw locomotive foreman advises Regina of the requirements and Regina fulfils those requirements from its bid book and posts those assignments in its weekly bulletin board.

More specifically, as the assignments affect the defendant, the locomotive foreman in Moose Jaw advises Regina that a way freight is to run out of Assiniboia on a Monday at a certain time. The clerk in Regina consults his list of available crew on the basis of the bids, seniority and assignments and determines that the job is the defendant’s. He therefore telephones the defendant at his home in Regina and advises him that he is required to take the way freight out of Assiniboia at a specific time. Under the terms of the collective agreement between the Canadian Pacific Railway and the Brotherhood of Locomotive Engineers, of which the defendant is a member, the defendant must be given a minimum of two hours’ notice. However, all subsequent orders are given by the locomotive engineer in Moose Jaw and are transmitted to Assiniboia. All that the Regina office conveys to the defendant is an advance notice of his first assignment for that week in Assiniboia.

The defendant worked out of Assiniboia for the full months of January, February, March and April, from May 15 to May 31, June 1 to June 19, and September 8 to December 11. What the defendant would do was to drive from his home in Regina by his own private automobile in time to take his first run out of Assiniboia. His assignments to Assiniboia would normally begin on the Monday of the week. That assignment normally lasted for five or six days. On the completion of the week’s assignment in Assiniboia, the defendant would then return to his home in Regina in his own automobile for the weekend. This exercise would then be repeated for the next week as is evident from the defendant’s assignments to Assiniboia in 1971 which have been listed above. In fact, he drove to Assiniboia from Regina 37 times and returned to Regina the same number of times as well as one trip to Weyburn and return to. Regina.

In preparing his income tax return for 1971. the defendant claimed as a deduction an amount of $2,589 for “meals and car expenses” of which $1,760 was for meals consumed by him while away from: his employer’s establishment to which he had been assigned and $829 as the expense of driving from Regina to Assiniboia :and return 37 times and from Regina to Weyburn and return once, a total of 8,290 miles at 10¢ per mile.

In assessing the defendant as he did the Minister allowed the defendant’s claim for meals in the amount of $1,760 as a proper deduction within the four corners of subsection 11(7) of the Income Tax Act which reads:

11. (7) Notwithstanding paragraphs (a) and (h) of subsection (1) of section 12, where a taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport and the duties Of the employment required him, regularly, _.

(a) to travel, away from the municipality where the employer’s establishment to which he reported for work was located:and away from the metropolitan area, if there is one, where it was located, on vehicles used by the employer to transport the goods or passengers, and

(b) while so, away from. such municipality and metropolitan area, to make disbursements for meals and lodging,

amounts so disbursed by him in a taxation year may be deducted in computing his income for the taxation. year to the extent that he has not been reimbursed and is not entitled to. be reimbursed in respect thereof.

It is significant to note that the defendant did not claim for meals consumed by him in. Assiniboia but only for meals while he was driving his employer’s locomotive on runs outside of Assiniboia. Neither did he claim for lodging while in Assiniboia because his employer provided accommodation there which was described in evidence as a courtesy.

However, the Minister did disallow the amount of $829 as a deduction from income as had been claimed by the defendant.

The Tax Review Board held that this amount claimed by the defendant was properly deductible and allowed the defendant’s appeal.

The present appeal by Her Majesty the Queen results from that decision.

There is no dispute between the parties as to the accuracy of the amount of $829 claimed by the defendant as a deduction. The only dispute is as to the deductibility thereof.

Subsection 178(2) of the Income Tax Act now in force reads:

178. (2) Where, on an appeal by the Minister other than by way of crossappeal, from a decision of the Tax Review Board, the amount of tax that s In controversy does not exceed $2,500, the Federal Court, in delivering judgment disposing of the appeal, shall order the Minister to pay all reasonable and proper costs of the taxpayer in connection therewith.

lt follows that, regardless of the success of this appeal, there shall be an order directing the Minister to pay all reasonable and proper costs of the defendant.

It is common ground that the defendant is an employee of the Canadian Pacific Railway. It is so pleaded in the statement of claim and that fact is admitted in the statement of defence and is infer- entially pleaded in the statement of defence.

Income from employment is specifically defined in section 5 of the Income Tax Act as the salary, wages or other remuneration, including gratuities, received by the taxpayer in the taxation year plus any benefits received by him as are set forth in paragraphs (a) and (b) of subsection (1) of section 5. Paragraph (b) includes as income all amounts received by the taxpayer in the taxation year as an allowance for personal or living expenses or as an allowance for any other purpose except, and I here quote subparagraph (b)(vii):

5. (1) Income for a taxation year from an office or employment {s the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year plus

(b) all amounts received by him In the year as an allowance for personal or living expenses or as an allowance for any other purpose except

(vii) allowances (not in excess of reasonable amounts) for travelling expenses received by an officer or employee (other than an employee employed in connection with the selling of property or negotiating of contracts for his employer) from his employer if they were computed by reference to time actually spent by the officer or employee travelling away from

(A) the municipality where the employer’s establishment at which the officer or employee ordinarily worked or to which he ordinarily made his reports was located, and

(B) the metropolitan area, if there is one, where that establishment was located,

in the performance of the duties of his office or employment, or

section 5 goes on to preclude any deduction from a taxpayer’s income as defined in the section save what is expressly permitted by certain particular subsections of section 11 of the Income Tax Act. The pertinent portion of section 5 reads:

minus the deductions permitted by paragraphs (i), (ib), (q) and (qa) of subsection (1) of section 11 and by subsections (5) to (11), inclusive, of section 11 but without any other deductions whatsoever.

The subsections of section 11 applicable to the present appeal are subsections (7), (9) and (9a). Subsection (7) has been quoted above. Subsections (9) and (9a) read:

11. (9) Where an officer or employee, in a taxation year,

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

(b) 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

(c) was not in receipt of an allowance for travelling expenses that was, by virtue of subparagraph (v), (vi) or (vii) of paragraph (b) of subsection (1) of section 5, not included in computing his income and did not claim any deduction for the year under subsection (5), (6) or (7),

there may be deducted, in computing his income from the office or employment for the year, notwithstanding paragraphs (a) and (h) of subsection (1) of section 12, amounts expended by him in the year for travelling in the course of his employment.

(9a) An amount expended in respect of a meaj ^consumed by an officer or employee shall not be included in computing the amount of a deduction under subsection (6) or (9) unless the meal was consumed during a period while he was required by his duties to be away, for a period of not less than twelve hours, from the municipality where the employer’s establishment to which he ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located.

Subsection (7) is obviously a special section devoted to the expenses of transport employees in what in common parlance is referred to as the “running trades” such as employees of railways, buses, airlines, steamship companies and like businesses. On the other hand, subsections (9) and (93) are more general in nature and are designed to cover travelling expenses of employees generally who may fall precisely within the conditions therein provided. The most obvious type of job in the category of jobs envisioned by subsections (9) and

(9a) that occurs to me by way of example is that of a commercial traveller.

It was by virtue of the provisions of subsection (7) of section 11 that the defendant’s claim for deduction of the amounts disbursed by him for meals consumed while operating his employer’s locomotive out of Assiniboia was properly allowed. However, if the amount which the defendant seeks to deduct as a consegence of driving his private automobile from his house in Regina to Assiniboia 37 times and to Weyburn once is to be properly deductible, then the defendant must bring himself precisely within subsection 11(9).

In Walter G Lumbers v MNR, [1943] Ex CR 202; [1943] CTC 281; 2 DTC 631, Thorson, P said at page 211 [290]:

. . . a taxpayer cannot succeed in claiming an exemption from income tax unless his claim comes clearly within the provisions of some exempting section of the Income War Tax Act: he must show that every constituent element necessary to the exemption is present in his case and that every condition required by the exempting section has been complied with.

The essence of the contention by counsel for the defendant, as I understand it, was simply that for the defendant to do his job on the occasions here in question, which was to drive a railway locomotive along railway tracks emanating from Assiniboia, and Weyburn in one instance, to other points on those tracks, the defendant must of necessity first get to Assiniboia or Weyburn from his residence in Regina. The logic of that contention is irrefutable but it is well settled law that the expenses of travelling to work cannot be deducted trom the remuneration received for performing the work for the purpose of computing taxable income. The distinction is between travelling on the taxpayer’s work, which, in the present instance is while the defendant is driving a locomotive along the tracks leading out of Assiniboia, and travelling to his work, which again in the present instance is when the defendant drives his private automobile from his home in Regina to Assiniboia.

It is implicit in this submission on behalf of the defendant that the starting point of the defendant’s work is Regina. That the starting point of the defendant’s work was Assiniboia and in one instance Weyburn rather than Regina has been decided by myself in The Queen v Thomas E Little, [1974] CTC 678; 74 DTC 6534. In the Little case, the taxpayer also a locomotive engineer, resident in Moose Jaw, Saskatchewan, was frequently assigned to yard duty in Swift Current, Saskatchewan, where he would remain for five day shifts. Prior to and at the conclusion of his shifts he would drive by private automobile to and from his home in Moose Jaw to Swift Current. The defendant sought to deduct an amount laid out by him for meals while on duty at Swift Current. The deductibility of this expense fell to be determined upon the interpretation of subsection (7) of section 11, which is quoted above. There was no question that the defendant’s employer had an establishment in Moose Jaw and another in Swift Current. The question in the Little case was to which establishment did the taxpayer report for work. While it was true that the assignment of work was done by the locomotive foreman in Moose Jaw, nevertheless the taxpayer reported for work in Swift Current. It was in Swift Current that he received his orders as to his specific duties.

Similarly so in the present appeal. Here the scheduling of work in Assiniboia was done by the locomotive foreman in Moose Jaw. Notice of such schedule was relayed to Regina and the Regina division selected the locomotive engineer who was to be assigned to duty in Assiniboia and notified the engineer selected. In th numerous instances here in question the defendant was so selected. It is abundantly clear that the defendant reports for work at Assiniboia. Apart from advance notice as to the first schedule run, it was there that he received all subsequent orders. The assistant superintendent specifically testified that Assiniboia was to Regina as Swift Current was to Moose Jaw. Furthermore, in a schedule prepared by the defendant as part of his income tax return and entitled ‘Road Expenses for 1971—Meals away from Home Terminal”, Assiniboia is described by him as the Home Terminal, and still later in this same schedule when the defendant was assigned from June 20 to August 28, 1971 to the spare board in Regina, which is a biddable assignment, the defendant describes Regina as his home terminal.

This being so, it follows that the defendant in driving by automobile to and from his home in Regina to Assiniboia was travelling to his work as contrasted with travelling on his work and accordingly the expenses of so doing do not fall within the meaning of ‘amounts expended by him in the year for travelling in the course of his employment” as used in subsection 11(9).

As I have said at the outset, the defendant in order to succeed must meet all the conditions precedent to the applicability of subsection (9). However in the view I take of the matter, it is not necessary for me to determine if the preliminary conditions outlined in paragraphs (a), (b) and (c) of subsection (9) have been met. Without so deciding I am content to assume that they have been met.

In all likelihood the defendant meets the conditions in paragraph (a) in that he was ordinarily required to carry on the duties of his employment in different places, that is to say in places where his employer has a place of business or an establishment such as Assiniboia, Weyburn, Regina and others.

It may be that the defendant under his contract of employment was required to pay the travelling expenses incurred by him “in the performance of the duties of his employment” although I have distinct reservations that this is so in that the duties he performed were driving a freight train out of his employer’s establishment to which he had been assigned. While so engaged, he incurred no “travelling expenses”. He travelled in the locomotive he was driving. He was not reimbursed by his employer for the disbursements he made for meals and lodging but his claim of those expenses as a deduction was allowed to him as a deduction for income tax. He did not claim for meals in Assiniboia nor for lodging there which was provided by the employer. The blunt fact remains that the employer did not reimburse the defendant for the expenses incurred by him in travelling to and fro between his home in Regina and Assiniboia by automobile although it was the only practical way for the defendant to get there to begin the performance of his duties. There is a specific provision in the collective agreement that the defendant was entitled to wages and travelling expenses while “dead heading’’ but in travelling by private automobile to Assiniboia the defendant was not dead heading. The only occusion on which his travelling expenses were paid was when he was assigned to Assiniboia from the Regina spare board. Under the collective agreement the employer was not required to pay these expenses incurred by the defendant. The question was raised that because the employer was not so obliged whether the defendant could be considered to be “required” to pay these expenses “under the contract of employment” in the absence of a positive provision requiring him to do so. I do not decide this matter and leave the matter entirely open to be decided when it may become material and essential to do so.

Under paragraph (c) the defendant was not in receipt of a “travelling allowance” but I am doubtful if the condition of paragraph

(c) has been met in that the defendant did claim a deduction for meals which was allowed as such by virtue of subsection (7) of section 11, of which specific mention is made in paragraph (c) of subsection (9) of section 11. Again, because of the view I have taken of the matter, it is not necessary for me to decide this question and I do not do so leaving the question open for decision when it becomes material untrammelled by any remarks I may have made incidentally.

Assuming as I have that all preliminary conditions have been met, then by subsection (9) what may be deducted is “amounts expended by the taxpayer in the year for travelling in the course of his employment” and this raises the question whether the expenses of travelling from Regina to Assiniboia claimed by the defendant is “for travelling in the course of his employment”. I have expressed the opinion that they are not and I base that conclusion on Ricketts v Colquhoun, [1926] AC 1; Mahaffy v MNR, [1946] SCR 450; [1946] CTC 135; 3 DTC 937; and Luks v MNR, [1959] Ex CR 45; [1958] CTC 345; 58 DTC 1194.

Ricketts v Colquhoun is the leading case and lays down the general rule that the expense incurred by an employee in travelling to and from his place of work is not deductible. In this case the taxpayer was a barrister practising in London who also held an appointment of Recorder of Portsmouth. He claimed as a deduction his travelling expenses from London to Portsmouth on the occasions when he sat as Recorder. The House of Lords rejected his claim because the expenses were not incurred “in the course of” the taxpayer’s duties. Viscount Cave, LC said at page 4:

They [the expenses] are incurred not because the appellant holds the office of Recorder of Portsmouth, but because, living and practising away from Portsmouth, he must travel to that place before he can begin to perform his duties as Recorder and, having concluded those duties, desires to return home. They are incurred, not in the course of performing his duties, but partly before he enters upon them, and partly after he has fulfilled them.

In Mahaffy v MNR the Supreme Court of Canada dealt with a claim for travelling expenses incurred by a member of a legislative assembly in travelling from his home to the provincial capital and back on weekends during the legislative session. Rand, J said at page 455 [141]:

The question is whether the items deducted are travelling expenses “in the pursuit of a trade or business” or “disbursements or expenses wholly, exclusively and necessarily laid out or expended for the purpose of earning the income” and in my opinion they are neither. Whether or not attending a session of a Legislative Assembly can be deemed “business” which I think extremely doubtful, certainly making the extra trips and lodging in a hotel in Edmonton cannot be looked upon as “in the pursuit” of it. That expression had been judicially interpreted to mean “in the process of earning” the income: Minister of National Revenue v Dominion Natural Gas Co, [1940-41] CTC 155 (Can SC). The sessional allowance is specifically for attendance by members at the legislative proceedings: it has no relation to any time or place or activity outside of that . The “pursuit” of a business contemplates only the time and place which embrace the range of those activities for which the allowance is made: the “process of earning” consists of engaging in those activities. To treat the travelling expenses here as within that range would enable employees generally who must, in a practical sense, take a street car or bus or train to reach their work to claim these dally expenses as deductions. Employees are paid for what they do while ‘‘at work”; and the legislators receive the allowance for their participation in the sessional! deliberations: up to those boundaries, each class is on its own. For the same reason it cannot seriously be urged that the expenses are “wholly, exclusively and necessarily” laid out for the purpose of earning the allowance: they are for acts or requirements of the member as an individual and not as a participant in the remunerated field.

In Luks v MNR (supra), my brother Thurlow had under consideration the case of an electrician who found it necessary to drive his automobile to and from job sites on which he was engaged at different times in order to transport his tools. He sought to deduct from his income the expenses incurred in driving to and from his place of employment and a capital cost allowance for his automobile as well. Thurlow, J, after quoting the passages from Ricketts v Colquhoun (supra) and Mahaffy v MNR (supra), substantially as I have quoted them above, said at page 50 [350, 1197]:

In the present case, travelling between the appellant’s home and the several places where he was employed was not part of the duties of his employment, nor was it any part of the duties of his employment to take his tools from the place of employment to his home each day, nor to carry them each day from his home to the place of employment. This may well have been the practical thing for him to do in the circumstances, but the fact that it was a practical thing to do does not make it part of the duties of his employment. Both travelling from his home to the place of employment and carrying his tools from his home to the place of employment were things done before entering upon such duties, and both travelling home and carrying his tools home at the close of the day were things done after the duties of the employment for the day had been performed. The journeys were not made for the employer’s benefit, nor were they made on the employer’s behalf or at his direction, nor had the employer any control over the appellant when he was making them. The utmost that can be said of them is that they were made in consequence of the appellant’s employment. That is not sufficient for the present purpose. In my opinion, neither the appellant’s travelling nor the carrying of his tools were “travelling in the course of his employment” within the meaning of Section 11(9).

I acknowledge the severity of the rule as laid down in Ricketts v Colquhoun (supra).

It is a variant on the category of itinerant jobs that the concept of two places of work has been introduced particularly in Owen v Pook, [1969] 2 All ER 1, and Taylor v Provan, [1973] 1 All ER 1201, both decided by the House of Lords. Basically, that variant is that if a man has to travel from one place of work to another place of work he may deduct the expense of this travel because he is travelling on his work, but not those of travelling from either place of work to his home or vice versa unless his home happens to be a place of work. For this concept to apply, the facts must be that the work or the job must be done in two places. It is not enough that the man might choose to do part of the work in a place separate from where the job is objectively located.

But neither of the decisions in Owen v Pook (supra) or Taylor v Provan (supra) detract from the authority of Ricketts v Colquhoun (supra). In Owen v Pook their Lordships did not say that Ricketts v Colquhoun was wrongly decided, but on the contrary it was distinguished on its facts. In the Ricketts case there was only one place of employment, Portsmouth. No duties were performed in London. In Owen v Pook there was a finding of fact that the work was done in two places, first when the doctor was contacted by the hospital authorities and secondly at the hospital. Similarly in Taylor v Provan, Owen v Pook was applied and Ricketts v Colquhoun was distinguished on the facts.

Mr Justice Thurlow anticipated the decisions of the House of Lords in Owen v Pook and Taylor v Provan by some two years in Cumming v MNR, [1968] 1 Ex CR 425; [1967] CTC 462; 67 DTC 5312. In the Cumming case, an anaesthetist held an appointment at a hospital where he rendered all his services to his patients. All of the administrative work in connection with his practice was carried on at his home. No facilities were available to him at the hospital for this purpose. The appellant’s expenses in travelling to the hospital where he treated his patients from his home base where he performed all administrative work and returning to his home were allowed as a deduction. Because the doctor was engaged in a business, Thurlow, J pointed out that in the Luks case (supra) the taxpayer was an employee and so the Luks case had no application to the Cumming case.

In the present appeal it was common ground that the defendant was an employee and accordingly the Luks case is applicable to the present appeal and the Cumming case is not. I have found as a fact, predicated on the Little case (supra), that the defendant while assigned Assiniboia had but one place of employment and that place was Assiniboia, and in another instance, Weyburn.

Here the defendant’s journeys in his private automobile were not made for the employer’s benefit, on its behalf, at its direction nor did the employer have any control over the defendant when he was making these journeys. The only interest that the employer had in the matter was that the defenadnt should be present at the appropriate time and place to begin the performance of his duties.

As Mr Justice Thurlow said in Luks v MNR, the utmost that can be said of the 37 journeys made by the defendant to Assiniboia and the one journey to Weyburn is that they were made in consequence of the defendant’s employment which is a far different thing than travelling in the course of his employment.

Incidentally, while the defendant was on the spare board in Regina, he was assigned to Assiniboia and elsewhere from the spare board between June 20 to August 28, 1971. Being so assigned from the spare board, his travelling expenses to those points were paid by the Canadian Pacific Railway and the defendant quite properly refrained from claiming these expenses as a deduction.

For the reasons I have expressed, it follows that the claim for $829 for travelling expenses were properly disallowed by the Minister and the appeal by Her Majesty is allowed. As I pointed out at the outset, the defendant is entitled to his taxable costs in accordance with subsection 178(2) of the Income Tax Act.