Date: 20020503
Docket: T-565-01
Neutral citation: 2002 FCT 506
Ottawa, Ontario, May 3, 2002
Before: MICHEL BEAUDRY J.
BETWEEN:
JEAN CHRÉTIEN
Plaintiff
and
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA
Defendant
REASONS FOR ORDER AND ORDER
[1] The application by Jean Chrétien for judicial review was heard concurrently with that by Claude Chrétien (T-566-01) by consent of the parties, as the application for judicial review raises the same legal argument and the facts are essentially the same.
[2] The disputed decision is dated March 9, 2001, and was made by the Canada Customs and Revenue Agency (hereinafter "the defendant").
POINT AT ISSUE
[3] Did the defendant make a patently unreasonable decision by exercising her discretion conferred by s. 152(4.2) of the Income Tax Act (hereinafter "the Act"), when she denied the plaintiff the right to deduct the expenses to which he claimed to be entitled for using his vehicle in the course of his employment?
[4] I answer this question in the negative.
FACTS
[5] The plaintiff was employed by Canadian National (hereinafter "the employer") from 1989 to 1996, holding the jobs of labourer, operator and clerk. In the course of his employment, the plaintiff had to use his vehicle to travel to the regions of Quebec, Ontario and New Brunswick.
[6] He was protected by a collective agreement and received an allowance which varied between $0.115 a kilometre in 1989 and $0.1375 in 1996. Following the decision by the Tax Court of Canada in Yvon Royer v. Her Majesty the Queen (case 98-707(IT)I), a decision by Judge Lamarre Proulx, the plaintiff sent the defendant a request on August 17, 2000, asking to be granted a deduction for the expenses incurred in using his vehicle for work from 1989 to 1996.
[7] On January 16, 2001, the defendant disallowed the deductions. The plaintiff asked for his case to be reviewed and by her decision on March 9, 2001, the defendant affirmed the initial decision: hence the application for judicial review.
PLAINTIFF'S ARGUMENTS
[8] The plaintiff alleged that he had no choice but to use his vehicle, whereas in the decision of March 9, 2001, the defendant justified her position by indicating that a choice was possible for use of the plaintiff's personal vehicle.
[9] The plaintiff maintained that s. 8(1)(h.1) allowed him to deduct expenses incurred for his vehicle in performing the duties of his employment.
[10] He stated that s. 6(1)(b)(vii.1) allowed him a deduction with no fiscal penalty, because of the words "reasonable allowances for the use of a motor vehicle".
[11] The plaintiff added that Interpretation Bulletin IT-522R, attached to the letter of March 9, 2001, provided in para. 43:
In addition to the requirements in 42 above, in order to be excluded from income by virtue of paragraphs 6(1)(b)(v), (vi) or (vii.1), the allowance for a motor vehicle must be reasonable. Under section 7306 of the Regulations a payer will be limited to a deduction based on 31 cents for the first 5,000 kilometres and 25 cents for the remaining kilometres . . . [my emphasis.]
[12] The plaintiff added that in para. 33 of the same Interpretation Bulletin, IT-522R, he can deduct costs for his vehicle if their deduction is also allowed by s. 8(1)(h.1). Accordingly, he would be entitled to a deduction of $17,909.23 after deducting from his expenses incurred the allowance paid by his employer.
[13] Relying on the decision by Judge Lamarre Proulx in Yvon Royer v. Her Majesty the Queen cited above, at p. 7, the plaintiff maintained that the door is now open for a taxpayer to show that the allowance paid by his employer is unreasonable so he can benefit from deduction of the expenses incurred in using his vehicle for his employment.
[14] Finally, the latter concluded that once the defendant decided to make a discretionary decision, she should have done so in a fair and equitable manner, and in the case at bar a flagrant error was made, namely not giving the plaintiff an opportunity to explain himself, which led to the unreasonable nature of the decision.
DEFENDANT'S ARGUMENTS
[15] The defendant mentioned that the plaintiff's case was considered pursuant to the discretion conferred in s. 152(4.2) of the Act, and that the decision of March 9, 2001, was made in that context.
[16] The defendant asked the plaintiff's employer what its policy was on payment of automobile expenses.
[17] The employer informed the defendant that the plaintiff was unionized and he was paid a standard allowance under the collective agreement between the employer and his union.
[18] The defendant added that it was not up to her to assess all the conditions of the collective agreement, and unless the information received from the employer was completely unreasonable it was not this Court's function to intervene.
[19] Further, during the course of negotiating a collective agreement, it is very probable that the union will emphasize some areas more than others in order to benefit its employees.
[20] As to the decision in Yvon Royer v. Her Majesty the Queen, supra, the defendant argued that this was an informal procedure in an adversary proceeding, whereas the taxpayer was successful as the result of a technical error.
[21] The defendant concluded, with precedents in support, that she was not obliged to meet with the plaintiff so he could justify the basis of his claim.
ANALYSIS
Standard of review
[22] The standard of review in the present circumstances is that of the patently unreasonable error. For this Court to intervene, it must have come to the conclusion that the decision of March 9, 2001, is vitiated by a patently unreasonable error or an error of law, or that it was made in bad faith.
[23] Pratte J.A. of the Federal Court of Appeal set out the parameters of intervention by this Court when an application for judicial review is made regarding a discretionary decision pursuant to s. 152(4.2) of the Act. See Barron v. Canada (Minister of National Revenue - M.N.R.), [1997] F.C.J. No. 175 (F.C.A.), at para. 5:
Before saying why we think that these findings are wrong, it may be useful to recall that subsection 152(4.2) of the Income Tax Act confers a discretion on the Minister and that, when an application for judicial review is directed against a decision made in the exercise of a discretion, the reviewing court is not called upon to exercise the discretion conferred on the person who made the decision. The court may intervene and set aside the discretionary decision under review only if that decision was made in bad faith, if its author clearly ignored some relevant facts or took into consideration irrelevant facts or if the decision is contrary to law.
[24] The Supreme Court, per McIntyre J., has dealt with the deference which courts must show when a decision has been made in the exercise of a discretionary power. See [1982] 2 S.C.R. 2">Maple Lodge Farms v. Government of Canada, [1982] 2 S.C.R. 2, at 7:
It is, as well, a clearly-established rule that the courts should not interfere with the exercise of a discretion by a statutory authority merely because the court might have exercised the discretion in a different manner had it been charged with that responsibility. Where the statutory discretion has been exercised in good faith and, where required, in accordance with the principles of natural justice, and where reliance has not been placed upon considerations irrelevant or extraneous to the statutory purpose, the courts should not interfere.
[25] In Nunavut Tunngavik Inc. v. Canada (Minister of Fisheries and Oceans), [1998] 4 F.C. 405 (C.A.), at 420, the Federal Court of Appeal repeated the same rule:
Having said that and reviewed the context in which the present exercise of ministerial discretion ought to be analyzed, it bears repeating that the function of the Court in judicial review proceedings is not to "second guess" the Minister in his appreciation of the public needs and interests when fixing the fishing quotas and, then acting in his stead, proceed to substitute its views for that of the Minister. Parliament and the Governor in Council intended the Minister to enjoy in the exercise of his function and duty to establish and implement fishing quotas in the public interest "the widest possible freedom to manoeuvre" . . .
In other words, the Court in judicial review proceedings is concerned with the legality of the ministerial decision resulting from an exercise of discretion, not its opportunity, wisdom or soundness (see Canadian Assn. of Regulated Importers v. Canada (Attorney General), [1994] 2 F.C. 247 (C.A.), at page 260). This means, in this case, that the reviewing court ought to look at the manner in which the Minister exercised his discretion to determine whether the Minister acted in bad faith or on the basis of irrelevant factors, failed to take into account relevant factors or ignored relevant provisions which conditioned or limited the exercise of his otherwise absolute discretion . . .
[26] As to the plaintiff's argument on the question of procedural fairness, with respect, I cannot share this point of view, as the defendant had no duty to meet with the plaintiff so he could explain the basis of his claim. She decided to ask the employer for information and the latter sent her sections of the collective agreement which applied to the payment of automobile expenses reimbursed by the employer.
[27] Did the defendant have to know the ins and outs of the benefits enjoyed by the employees? I do not think so. Moreover, looking carefully at the sections of the collective agreement applicable here, I note that a remedy existed which the plaintiff could have used if he considered that the payment of the standard allowance for his travel was unreasonable. I cite below extracts from pp. 120 and 121 of the collective agreement, which I consider the most important:
[Translation]
Types of aid
As we have already mentioned, various means must be used to aid employees in their travel and it is up to the company's relevant managers to determine these in each case. For example, they may select:
(a) the train;
(b) company vehicles;
(c) payment of a standard allowance . . .
. . . Use of the train as a proper means of transport may be a debatable question, as the length of time spent waiting and the journey must be taken into account, as well as other possible solutions available. The means used must above all be fair and practical, and should neither interfere with the progress of work nor incur excessive cost for the railway. If there is any disagreement in this regard between the employee and his superior, the local representative or the general president of the union and the employee's superior must jointly attempt to resolve the difficulty. (My emphasis.)
[28] I agree with the defendant's argument that it is not the latter's function to scrutinize the benefits of various employees in collective agreements, and this is why counsel for the defendant properly referred to para. 41 of Interpretation Bulletin IT-522R:
If the Department considers that an allowance, which is claimed to be non-taxable under subparagraph 6(1)(b)(v), (vi), (vii) or (vii.1), is unreasonably high, the employee is required to provide vouchers or other acceptable evidence to show that the allowance is not in excess of a reasonable amount. Where the employee is unable to show that the allowance is reasonable, the whole amount of the allowance is included under paragraph 6(1)(b) in computing the employee's income and, if the employee qualifies, an amount may be deducted under paragraph 8(1)(f), (h), (h.1) or (j), depending on the circumstances, as discussed in 31 through 38 above. An allowance for travel expenses is not considered unreasonable merely because the employee's total expenses for business travel exceed the total travel allowances received in the year. (My emphasis.)
[29] As to the decision in Yvon Royer v. Her Majesty the Queen, supra, I consider that the defendant was not required to apply it to the plaintiff's claim. In that case the procedure was an informal one following argument and counter-argument, while the discretionary decision of March 9, 2001, was not of this type. Further, s. 18.28 of the Tax Court of Canada Act provides that:
| A judgment on an appeal referred to in section 18 shall not be treated as a precedent for any other case.
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Les jugements rendus sur les appels visés à l'article 18 ne constituent pas des précédents jurisprudentiels.
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[30] Whether the plaintiff has the option of using his vehicle or not, this argument is not conclusive here as payment of a standard allowance which he did not have to include in his income was made to him for his travel.
[31] I therefore consider that the decision was not patently unreasonable, vitiated by errors of law or made in bad faith.
[32] For these reasons, the application for judicial review is dismissed, but in view of the particular facts of this case without costs.
ORDER
THE COURT ORDERS that:
1. The application for judicial review is dismissed without costs.
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"Michel Beaudry"
Judge
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Certified true translation
Suzanne M. Gauthier, C. Tr., LL.L.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT No.: T-565-01
T-566-01
STYLE OF CAUSE: JEAN CHRÉTIEN v. HER MAJESTY THE QUEEN IN RIGHT OF CANADA
CLAUDE CHRÉTIEN v. HER MAJESTY THE QUEEN IN RIGHT OF CANADA
PLACE OF HEARING: QUÉBEC, QUEBEC
DATE OF HEARING: APRIL 18, 2002
REASONS FOR ORDER AND ORDER BY: MICHEL BEAUDRY J.
DATED: MAY 3, 2002
APPEARANCES:
PIERRE HÉMOND FOR THE PLAINTIFF
GRACIA BITTICHESU FOR THE DEFENDANT
SOLICITORS OF RECORD:
BROCHET, DUSSAULT, LAROCHELLE FOR THE PLAINTIFF
SAINTE-FOY, QUEBEC
ATTORNEY GENERAL OF CANADA FOR THE DEFENDANT
MONTREAL REGIONAL OFFICE
MONTRÉAL, QUEBEC
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