Date: 20000823
Docket: 1999-3989-IT-I
BETWEEN:
GARRY O'NEIL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Rip, J.T.C.C.
[1] Garry O'Neil appeals (informal procedure) income tax
assessments for 1994, 1995 and 1996 in which the Minister of
National Revenue ("Minister") denied him motor vehicle
expenses for travel between his residence and his place of
employment.[1]
[2] At all relevant times Mr. O'Neil held the position of
Security Coordinator for the City of Ottawa ("City")
and, as such, was responsible for the safety and security of the
City's employees as well as the City's property. Mr.
O'Neil had an office at Ottawa City Hall where he regularly
reported for work. He was also required to work away from City
Hall attending at various City properties. One of the conditions
of his employment with the City was that he provide his own
vehicle for use in his employment.
[3] The City owns various types of property located in various
areas of the municipality: arenas, community centres, garages,
fire stations, industrial yards. Mr. O'Neil was on call
at all hours of the day. He would receive telephone calls at
night when he was at home that City property had been damaged or
a break-in had taken place on the property. When a City employee
"becomes aware" of an incident, the employee, according
to City By Law 384.68, is to report the incident
"forthwith" to the Security Coordinator or police. An
employee risks dismissal of employment if he or she fails to
report the incident. "Traditionally",
Mr. O'Neil testified, the employee calls him rather than
the police.
[4] Calls from employees vary with the season. The calls are
not daily; they are not regular. When an incident does occur and
Mr. O'Neil is telephoned at home, for example, he will
determine the severity of the incident and may decide to attend
to it the next day or he may visit the scene of the incident
immediately. About 20 per cent of the time his immediate presence
is required. He also decides whether to call the police. If he
has to interview employees he will visit them at their place of
employment usually at the beginning or end of the
employee’s shift. There are three eight-hour shifts each
day. Over half the municipal employees work away from City Hall.
Mr. O’Neil also interviewed employees at sites of
incidents. He prepared a report of each incident.
[5] Because he is on call at all times, he is required to have
his automobile available when he is at his office at City Hall
and when he is at home, testified Mr. O'Neil. On a normal day
he would report to his office at City Hall and then, during the
day, visit various City properties. While his contract of
employment does not require him to have a car at home for use,
this "was implied" by his supervisors. In his view he
could not refuse to own a car or to take it home.
Mr. O'Neil stated that the family has another car for
use by his wife and son.
[6] The City gave Mr. O'Neil an allowance for the use of
his vehicle computed at 38.46 cents per kilometre driven for City
business. The amount of the allowance was the same amount of
allowance paid to employees of the City who were subject to a
collective labour agreement. Mr. O'Neil was an exempt
employee, not subject to the agreement, but the automobile
allowance was paid to all employees according to the rates in the
collective agreement. The allowance included
"work-related" automobile expenses but not expenses
between an employee's residence and City Hall.
Mr. O'Neil submitted his claim to the City Solicitor,
his immediate supervisor, and would be reimbursed accordingly.
All his travel claims with the City were accepted. The City paid
Mr. O'Neil only for distance driven between City Hall and
municipal sites and between municipal sites. He did not make any
claim for travel between his residence and City Hall because he
knew it would be refused. He was paid for travel between his
residence and a site of incident.
[7] The distance between Mr. O'Neil's residence in
Orleans, Ontario and City Hall is 18 kilometres. He maintained a
log of work-related travel by automobile.
[8] The appellant claimed that he drove 4,000 kilometres in
1994, 9,886 kilometres in 1995 and 11,904 kilometres in 1996 to
earn employment income. The City paid an allowance on the basis
he drove his vehicle in the performance of his duties as follows:
645 kilometres in 1994, 2,008 kilometres in 1995 and 3,444
kilometres in 1996.
[9] The City provided a form T2200 (Declaration of Conditions
of Employment) to Mr. O'Neil for the years in issue.
According to the form Mr. O'Neil was ordinarily required
to work away from the employer's place of business or in
different places, he was required to pay his own expenses and he
received an automobile allowance.
[10] Mr. Jerry Bellomo, Ottawa City Solicitor, confirmed Mr.
O'Neil's evidence. Mr. O'Neil is on call 24 hours a
day, seven days a week. Mr. Bellomo explained that no
“formal” contract exists between Mr. O'Neil
and the City. The terms of their relationship is contained in the
job description for the office of Security Coordinator and in a
letter offering the position to Mr. O'Neil. The letter stated
that Mr. O'Neil provide a vehicle for work as a
condition of employment. In Mr. Bellomo's view, if Mr.
O'Neil did not have a vehicle, he would be breaking his
contract with the City and would be subject to termination.
[11] Travel between an employee's residence and City Hall,
Mr. Bellomo testified, is not considered by the City to be
work-related. Travel between another City site and Mr.
O'Neil's residence is "probably" work-related
and Mr. Bellomo would approve such a claim.
[12] Paragraph 8(1)(h.1) of the Income Tax Act
("Act") provides that:
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(1) 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:
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(1) Sont déductibles dans le calcul
du revenu d'un contribuable tiré, pour une
année d'imposition, d'une charge ou d'un
emploi ceux des éléments suivants qui se
rapportent entièrement à cette source de
revenus, ou la partie des éléments suivants
qu'il est raisonnable de considérer comme
s'y rapportant :
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. . .
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[...]
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(h.1) where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of
the office or employment away from the employer's place
of business or in different places, and
(ii) was required under the contract of employment to
pay motor vehicle expenses incurred in the performance of
the duties of the office or employment,
amounts expended by the taxpayer in the year in respect
of motor vehicle expenses incurred for travelling in the
course of the office or employment, except where the
taxpayer
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h.1) dans le cas où le
contribuable, au cours de l'année, a
été habituellement tenu d'accomplir les
fonctions de son emploi ailleurs qu'au lieu
d'affaires de son employeur ou à
différents endroits et a été tenu, aux
termes de son contrat d'emploi, d'acquitter les
frais afférents à un véhicule à
moteur qu'il a engagés dans
l'accomplissement des fonctions de sa charge ou de son
emploi, les sommes qu'il a dépensées au
cours de l'année au titre des frais
afférents à un véhicule à
moteur pour se déplacer dans l'exercice des
fonctions de son emploi, sauf s'il a, selon le cas:
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(iii) received an allowance for motor vehicle
expenses that was, because of paragraph 6(1)(b), not
included in computing the taxpayer's income for the
year, or
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(i) reçu une allocation pour frais
afférents à un véhicule à
moteur qui, par l'effet de l'alinéa
6(1)b), n'est pas incluse dans le calcul de son
revenu pour l'année,
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(iv) claims a deduction for the year under
paragraph (f);
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(ii) demande une déduction pour
l'année en application de l'alinéa
f);
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[13] Appellant's counsel submitted that if her client must
have his automobile available for work at all times when he is at
City Hall and at home, the automobile must be
work-related.
[14] Appellant's counsel relied on the reasons for
judgment in Evans v. The Queen,[2]in this Court and Hoedel v.
The Queen,[3] a
decision of the Federal Court of Appeal. In Evans, the
appellant, an employee of a school district, claimed automobile
expenses incurred while travelling from her residence and to the
first and last schools that she visited on a given day. Her
appeal was allowed on the basis that she was transporting
work-related material in the trunk of her car. Porter D.J.T.C.,
explained that:
[i]f the Appellant had simply to get herself between
her residence and the various schools where she started and
finished her days, it would seem to me that her travel expenses
would properly be limited to the cost of such travel less the
amount that she would have expended to travel on a daily basis to
and from the administrative centre. In the normal course of
events, her cost of travel between her residence and the
administrative centre would be considered personal in nature. It
is only the excess that she should be able to claim.[4]
[15] In Hoedel, the appellant, a constable in the
Canine Division of the Regina Police, deducted expenses incurred
in transporting a police dog in his own vehicle from his home to
his place of employment and to other locations. He was provided
with a police dog and kennel, which he kept at home. While on
duty he was provided with a police vehicle adapted for
transporting dogs. He contended that his duties required him to
transport the dog on trips of a personal nature. The
appellant's supervisor officer testified that it was
mandatory for the appellant to take the dog with him when he was
off-duty and that non-compliance with this condition of
employment would reflect negatively on his job performance
valuation. The Court of Appeal found the possibility that his
failure to carry out a mandatory condition of employment that he
take the dog with him while off-duty or risk an unfavourable
valuation was evidence that the task was a duty of employment.
The expenses incurred in transporting the dog between the
appellant's residence and the police station, among travel,
were deductible.
[16] The issue before me is not whether the appellant's
automobile is "work-related". The issue is
whether the appellant incurred the automobile expenses in the
course of his employment. Paragraph 8(1)(h.1)
requires four conditions to be satisfied for a taxpayer to deduct
automobile expenses:
(i) the taxpayer was ordinarily required to carry on his or
her duties of employment away from the employer's business or
in different places;
(ii) the taxpayer was required to pay automobile expenses
under his or her contract of employment; and
(iii) the expenses were incurred in the performance of the
duties of employment;
(iv) provided, that if the expenses were incurred in
performing the duties of employment, the taxpayer did not receive
a non-taxable allowance from the employer for motor vehicle
expenses pursuant to paragraph 6(1)(b) of the
Act.
[17] The phrase "away from the employer's place of
business or in different places" in paragraph
8(1)(h.1) has been interpreted in Royer v.
Canada.[5] If
an employee has to carry on his duties at several places of
business, those places of business come precisely within the
meaning of "different places". If the employee
ordinarily works at one of those different places and works at
the others at the employer's discretion, travel to the usual
place of business will be a personal expense.[6] There is no issue between the
parties that Mr. O'Neil was ordinarily required to carry on
his duties of employment in many areas of the City.
Respondent's counsel did not question this obvious fact.
[18] There are at least two phrases in paragraph
8(1)(h.1) that need to be considered for purposes of these
appeals. First is the phrase "expenses incurred in the
performance of the duties of . . . employment". The French
version of this phrase is "d'acquitter les frais . . .
qu'il a engagés dans l'accomplissement des
fonctions . . . de son emploi". These words in both
languages appear to insist that, to be deductible, the automobile
expenses must be incurred in actually performing or carrying out
one's employment duties.
[19] The second phrase is ". . .travelling in the course
of . . . employment". The French version is ". . . dans
l'exercice des fonctions de son emploi". This phrase
also appears to imply that the taxpayer incurs the automobile
expense in work while working in his employment.
[20] Rule 9 of Schedule E of the Income Tax Act of the
United Kingdom uses the words ". . . travelling in the
performance of the duties of . . . employment". In the
United Kingdom costs of travelling to work from home are not
deductible in computing income because the costs are not incurred
in the course of performing the duties, but rather to get to the
place where the duties will be carried out.[7] And, even if an employee's
automobile is required for his work once he arrives at the place
of work, his costs of travel from or to his home are not
deductible.[8] In
the Income Tax Act of the United Kingdom, unlike the
Canadian Act, for an expense to be deductible, it must be
also necessarily incurred. However, the principles adopted by the
English Courts as to what constitutes performance of duties of
employment are helpful. I shall briefly refer to two judgments of
the English courts, Ricketts v. Colquhoun,[9]and Burton v.
Rednall.[10]
[21] In Ricketts, the taxpayer lived in London and was
a practising member of the London bar. He was taxable as an
individual having his own business, that of a barrister. He was
also Recorder of Portsmouth and, as such, was taxable as an
employee. He sought to deduct the costs of travelling from his
home to Portsmouth. The House of Lords rejected his appeal on two
main premises. First, when travelling to his place of work he was
travelling not in the course of his duties as Recorder but in
order to enable him to perform them.[11] His duties only began at
Portsmouth. Secondly, the expenses were not incurred
necessarily.[12]
[22] In Burton, the appellant was unable to rent a
house in Ipswich but had secured one in a village about 19 miles
away. Under the terms of his employment, he was required to have
an automobile available in order to visit farmers in the
district. In order to satisfy this condition, the appellant used
his automobile to travel from his residence to Ipswich. The
appellant claimed that the automobile expenses incurred from
travelling from his residence to Ipswich should be deductible.
The court rejected his claim and held that:
. . . he is not performing his duty when he travels between
his home and Ipswich. It is reasonable for him to do so –
indeed he is bound to do so – but he is not then in the
performance of the duties of his office; he is either going to
perform his duties or he is going home after performing his
duties and the authorities make it clear that that is the proper
construction to give to the Act.[13]
[23] The Canadian and English courts are consistent. The word
"performance" has been defined, among other ways, by
the Shorter Oxford English Dictionary on Historical Principles
("Oxford") as the "carrying out of a command,
duty, etc. " and "[t]he accomplishment, carrying out,
doing of any action or work; working, action". The words
"...incurred in the performance
of...employment" refer to automobile expenses incurred
by the employee while providing services under the employment
contract.[14] The
English cases have drawn a sharp distinction between an
expenditure incurred in the performance of the duties of an
office or employment and expenditure incurred in order to enable
oneself to do the job initially or to enable oneself to perform
the duties of that office more efficiently. This was emphasized
in W. Friedson v. The Rev. F.H. Glyn-Thomas[15] where Sankey J.
stated:
. . . I do not think it is possible to say that the expense of
removal in order to get there was an expense necessarily incurred
in the performance of his duties. There is all the difference in
the world between an expense which you have to incur in order to
go to a place in order to take up your duties, and an expense
incurred in the performance of your duties.
[24] The word "course" is defined by Oxford as the
"[h]abitual or ordinary manner of procedure; . . .".
The phrase ". . . travelling in the course of . . .
employment" has been dealt with in Luks [No. 2] v.
M.N.R.,[16]
and Chrapko.[17] In Luks, it was held that a person could not
be deemed to be "travelling in the course of the office or
employment . . ." unless the travel actually involved the
performance of some service as compared to simply getting oneself
to the place of work. The Federal Court Trial Division in
Chrapko, held that words "in the course of his
employment" do not preclude a deduction in such
circumstances. However, in appeal, the Federal Court of Appeal
appeared to recognize that a taxpayer may deduct expenses for
travelling from his home to a place of work if that place of work
is not the place to which he "usually" reports to work.
In assessing Mr. O’Neil, the tax authority accepted the
principle that the appellant may deduct his automobile expenses
for travel between his home and a work site that was not City
Hall.
[25] Mr. O'Neil's costs of travel between his home and
City Hall are not deductible in computing his income for the
years in appeal.
[26] In Baxter v. Canada,[18] this court considered the
collective agreement between the employer and its employees in
order to determine whether similar automobile expenses should be
deductible. After viewing the collective agreement, Beaubier
T.C.J. concluded that since the employee's collective
agreement paid for all work-related automobile expenses, any
other expenses incurred by the employee were a personal expense.
The facts at bar are not dissimilar in this regard.
[27] The appellant received an automobile allowance from the
City of Ottawa for travelling in the performance of the duties of
his employment. The amounts of the allowance were not included in
Mr. O'Neil's employment income. There was no evidence led
to cast any doubt that the allowance paid was not reasonable.
Hence, for this reason alone, the appeals would fail. That the
City did not pay an allowance for travel between City Hall and
Mr. O'Neil's residence is not unreasonable.
[28] The appeals are dismissed.
Signed at Ottawa, Canada, this 23rd day of August 2000.
"Gerald J. Rip"
J.T.C.C.
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