The Queen v. Patterson, 82 DTC 6326, [1982] CTC 371 (FCTD)

Cattanach, J:—This is an appeal by Her Majesty from a decision of the Tax Review Board whereby the defendant’s appeal from an assessment of the defendant by the Minister of National Revenue to income tax for his 1978 taxation year was allowed and referred back to the Minister for reassessment.

In assessing the defendant as he did the Minister disallowed an amount of $103.59 claimed by the defendant as a deduction from income as expenses expended by him in the taxation year for travelling by his privately owned automobile in the course of his employment.

The Minister disallowed that deduction as not having been expended by the defendant in the course of his employment within the meaning of paragraph 8(1 )(h) of the Income Tax Act.

Consequent upon the disallowance of that deduction claimed, a further deduction in respect of the capital cost of the defendant’s automobile was also disallowed but which would otherwise have been deductible under subparagraph 8(1 )(j)(ii).

The total amount of the claim for deduction disallowed by the Minister was $255.39 inclusive of the expense of $103.59 incurred and the capital cost allowance with respect to the defendant’s automobile in accordance with the pertinent regulations.

There is no dispute between the parties with respect to the amounts involved but the dispute revolves about the deductibility of that amount in computing the plaintiff’s income subject to taxation.

That issue falls to be determined upon the applicability of paragraph 8(1 )(h) of the Income Tax Act in the light of the facts established by the plaintiff with respect to the duties incumbent upon him to perform in the course of his employment.

Paragraph 8(1 )(h), ranged under the heading “Deductions”, reads:

8. (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:

(h) where the taxpayer, in the year,

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

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

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

(f) or (g),

amounts expended by him in the year for travelling in the course of his employment;

The marginal note against subsection 8(1) is “Deductions allowed” and against paragraph 8(1 )(h) is “Travelling expenses”.

In order for a taxpayer to be entitled to a deduction under paragraph 8(1 )(h) a taxpayer must fall precisely within the four corners thereof, that is he must satisfy all the requirements thereof.

It has been conceded, and in my view properly so, that the requirement of subparagraph 8(1 )(h)(ii) has been satisfied. Here the taxpayer’s job required him to travel, normally relatively short distances, and that he pay the travelling expenses incurred by him.

So, too, it is conceded the defendant was not in receipt of an allowance from his employer the absence of which is a condition expressed in subparagraph 8(1 )(h)(iii).

Accordingly there remain two matters required to be present to bring the defendant within the applicability of paragraph 8(1 )(h).

Those two requirements, while they overlap, are that:

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

(2) the amounts expended by the defendant were so expended “for travelling in the course of his employment”.

The defendant, after 13 years of service in the City of Winnipeg school system, became the principal of John M King School and occupied that post in 1978.

His employer is Winnipeg School Division No I, administered by an elected Board of Trustees responsible for the policy and overall administration of the school system within its jurisdiction.

The policies laid down by the Board are implemented by the Superintendent of Schools and it is that officer who is the defendant’s immediate superior from whom he takes his instructions as to his duties and responsibilities.

Basically the defendant’s duties and responsibilities as principal of John M King School are twofold; first that of head teacher and second for the detailed administration of the school.

The classes in the school are from nursery through Grade 6. The pupils are from the ages of three to eleven or twelve years. There are usually 780 pupils but that number varies daily because of the peculiarities applicable to the population in the area from which the pupils are drawn. There is a staff of 39 teachers for the pupil population — a ratio of 20 to 1.

In 1977 the Board undertook a policy of development of community schools of which John M King was one and because of the nature of the pupil population a prime site for the implementation of that policy.

The basic objective of that policy was to encourage the school as a public institution to be responsive to the local community. In so doing the school was to be developed as an open democratic institution with parent participation, in all an awesome task.

The role of the principal was set out in guidelines. He was required to be active in the community by making home visits and organizing community meetings, to be fully aware of the social, cultural and economic characteristics of the area and to develop an educational program directed not only to the pupils but to their parents to integrate them into the community life. In short the purpose is to ensure that all, while preserving the aim of multiculturalism adopted in Canada, will nevertheless sponsor the ideals of good Canadian citizenship within the Canadian mosaic.

The community served by the school of which the defendant was the principal was comprised of immigrant families primarily refugees from oppres sive regimes in central Europe and from like war-torn regimes in Asiatic countries. They have suffered in their home-land. They have been deprived of what material resources they may have acquired. They have sought refuge in this democracy in the hope of finding a happier way of life and to recoup or embark upon more secure and advantageous financial opportunities. But they have not abandoned their cultural heritage.

These people gravitated to the district served by the John M King School. They had difficulty in finding employment and consequently their financial resources were very limited. They faced hardships and were frequently forced to resort to welfare.

The defendant has, in my view, exhibited a dedicated acceptance of his responsibilities as an educator.

First off he organized monthly meetings of the parents of his pupils which were held in the school with an average attendance of 22 persons and the meetings lasted from two to four hours. These meetings were held after normal school hours.

The parents, because of their backgrounds, were reluctant to intrude upon the authoritative image and to persuade their attendance was an achievement be the defendant.

But it was a duty his employer expected him to accomplish.

The school superintendent, in the implementation of the Board’s policies, called meetings of an Early Recognition Committee which had been formed. The attendance of the principals of the participating schools, the school of which the defendant was principal was one of such schools, was expected, in fact I think their presence was mandatory.

In rare and exceptional instances the principal could delegate a senior member of his staff to attend in his stead but if this happened too frequently it could be construed as a dereliction of duty and result in delayed promotion or even dismissal.

The defendant was faithful in his regular attendance.

The school superintendent formed committees for the more efficient implementation of the policy.

The defendant became a member of a committee known as the Early Identification Committee, the purpose of which was to recognize and identify learning disabilities in a pupil as soon as possible, to ascertain the cause and take remedial action forthwith.

The defendant was also on a nutritional program. Between 8:20 and 9:00 in the morning on which this appeal was heard over 200 children from the community were fed. They need not be pupils of the school or resident in the community. The only requirements for admittance were that they were children and that they were hungry.

The defendant was responsible for this program at John M King School. He engaged and supervised the staff and the nutritional values of the food served. Naturally to do so there were meetings as to how to best conduct these programs at which the defendant’s attendance was obligatory. Those were meetings of principals charged with this same responsibility to exchange experience.

In the school there was a physical recreation program conducted by staff members, which included speed skating, swimming and track and field.

Competitions were held with participants from other schools. The defendant accepted the responsibility of transporting the competitors to the event in his automobile and that of being present throughout the contests.

That he should do so was expected of him by the contestants’ parents. For example many parents would not permit their daughters to take part in Swimming competitions in which boys were also participating without the presence of the principal. If the principal were not present the girls were not allowed to compete. The parents demanded the rigid supervision of the principal himself in whom their confidence was placed. The principal, therefore, attended.

For three days in June and October of each year, one hundred children went to camp some 88 miles distant from the City for recreation and nature study. The cost of these trips was partially covered by a grant from the Board with the balance made up by the efforts of the children. They produced and displayed a film which produced revenue and it was such like enterprises under the supervision of the school staff that generated the necessary funds. Extreme care was needed to keep within the very limited budget.

The physical presence of the principal was necessary. He used his automobile to transport some of the children to and from camp, the greater number being so transported by bus. But it was necessary that emergency transportation be available. For that purpose the principal’s car was kept at the camp. The insurance coverage permitted the principal to transport the children at those and other times and the coverage was carried by him for that very purpose. My recollection of the evidence was that the School Board insisted upon that coverage. Emergencies did arise. It was eminent common sense that emergency transportation be available for the lowest possible cost. The defendant provided that with the implicit approval of the school superintendent.

In the course of the defendant’s 1978 taxation year he was obliged to attend 56 meetings inclusive of the two camping trips.

Of those meetings three to four were for the whole day, 28 were for one- half the working day and the balance were from one and one-half to three hours in duration excepting the two nature study trips.

The majority of those meetings were during normal working hours.

The defendant’s normal working hours at the school were from 8:00 am to school closing at 3:30 pm. He was to be present at the school’s opening or closing unless that responsibility had been delegated by him when it was impossible for him to be there at those times. Likewise when he was absent from the school during normal working hours his responsibilities were delegated to the vice principal or a senior staff member.

With the exception of the two nature study trips which were for 88 miles each way, the trips to attend meetings, were usually short. They were held at other schools or School Board premises some two to three miles from the defendant’s home school. On the day on which a meeting was convened the defendant would take his car to the John M King School to be present at its opening. There can be no expense claimed for his transportation from his home to his place of business, that being a personal expense which is not claimed by the defendant. But he does claim for the trip from his home school to the place of the meeting and for his return to the school.

The total mileage for which a deduction as an expense was claimed was 908 miles.

The location of the meetings was such that most convenient access was by automobile, and private automobile is far less costly than taxicabs.

From the recital of the foregoing facts there can be no doubt whatsoever that the defendant attended the 56 meetings, sports events and nature study trips in the course of his employment. He was obligated to do so by his employer.

In assessing the defendant as he did the Minister made two assumptions:

1. that John M King School was the place of business of the employer in so far as it related to the defendant, and

2. that the defendant was not ordinarily required to carry on the duties of his employment as principal of John M King School away from that school.

The defendant’s position is that as he was “ordinarily required to carry on the duties of his employment in different places” the total amount of $255.39 was deductible as part of his travelling expenses under paragraph 8(1 )(h).

The authoritative definition of the word “ordinarily” as used in paragraph 8(1 )(h) is that given by Thurlow, ACJ (as he then was) in Her Majesty the Queen v Thomas Healy, [1978] CTC 355; 78 DTC 6239.

He first referred to the meaning of the word “ordinarily” in a recognized dictionary. Those meanings were:

1. In conformity with rule; as a matter of regular occurrence;

2. In most cases; usually, commonly;

3. To the usual extent.

4. As is normal.

Thurlow, CJ then said at 357 [6241]:

In paragraph 8(1 )(h) the word ordinarily modifies “required to carry on the duties of his employment etc”, and it appears to me to be equivalent to “normal” as opposed to “rarely” or “exceptionally”. The meaning “in most cases” does not fit. That of “as a matter of regular occurrence” does.

Accepting as I do as the premise found to be a fact that the defendant’s employer requires him to attend at various places to carry on the duties of his employment and does so as a matter of frequent and regular occurrence it follows that the defendant’s situation falls precisely within the meaning of paragraph 8(1 )(h).

Counsel for the plaintiff pointed out that the expenses incurred by the defendant to attend the meetings that he was obliged to attend were but $105 for the actual expenses of travelling by automobile and the difference was made up by the capital cost allowance.

He accepted the small amount of the expense as illustrative that the intention of Parliament was that exemption thereof was not contemplated in the light of the provision in paragraph 8(1)(a) that a taxpayer may reduce his income from an office or employment by 3% thereof up to a maximum in 1978 of $250 now increased to $500 as an employment expense.

This is a small concession made by the tax collector to reality. Naturally the costs of qualifying and attending to earn income (which are normally not deductible) and the actual costs of doing so far exceed the maximum. The cost of reviewing and processing such claims less than the maximum would no doubt exceed the return to the exchequer.

Thus this concession is made as a straight deduction with no necessity for the production of receipts as is done also with charitable donations less than $100.

The deduction is not universal. There are exceptions made in subsection 8(3). Ineligible to claim are salesmen and others negotiating contracts for their employer for whom special provision is made in paragraph 8(1 )(f), members of parliament and senators because their offices already entitle them to a tax-free allowance and members of provincial legislative assemblies and municipal officers subject to conditions which apply in certain situations. These taxpayers cannot have both exemptions but the first far outweighs the second.

The contention as a consequence of the provision in paragraph 8(1 )(a) made on behalf of the plaintiff was that this provision generous in its terms would preclude a claim for a travelling allowance in a lesser amount.

That contention is, in my view, untenable.

Lord Watson in Salomon v Salomon & Co, [1897] AC 22 has said at 38:

“Intention of the legislature” is a common but very slippery phrase, which, popularly understood, may signify anything from intention embodied in a positive enactment to speculative opinion as to what the legislature probably would have meant, although there has been an omission to enact it. In a Court of law or equity what the legislature intended to be done or not to be done can only be legitimately ascertained from what it has chosen to enact, either in express words or by reasonable and necessary implication.

If the words of a statute are in themselves precise and unambiguous, then no more is necessary than to expound the words in their natural and ordinary sense. The words used declare the intention of the legislators.

Paragraph 8(1 )(a) is a general enactment expressed in clear words. Everybody, except those specifically precluded, gets the benefit of its operation. The defendant is not one of those excluded from its general operation. He is entitled to the benefit thereof.

Paragraph 8(1 )(h) is a special or a particular enactment.

For the reasons which I have previously expressed I have concluded that the defendant’s situation falls precisely within the meaning of paragraph 8(1)(h).

A general provision in a statute, such as paragraph 8(1 )(a) by its nature, is not to control or govern a special provision such as paragraph 8(1 )(h) is. The special provision must be read as excepted out of the general.

Thus, since the defendant falls within the words of paragraph 8(1 )(h) he must be governed thereby and he is entitled to the benefits thereunder as well.

The defendant has successfully demolished the assumptions upon which the assessment by the Minister is based, which is the onus cast upon him, from which it follows that the plaintiff’s appeal is dismissed.

Regardless of the outcome, Her Majesty has properly conceded in Her statement of claim that the Minister of National Revenue shall pay all reasonable and proper costs of the defendant in connection with the appeal. That is in accordance with subsection 178(2) of the Income Tax Act.

That, too, is so ordered.