Aron Rozen v. Minister of National Revenue, [1984] CTC 3038

Kempo, TCJ:—

Part I — Issue

The sole issue for determination in this appeal is whether or not, for his 1979 and 1980 taxation years, the appellant was entitled to a deduction for travelling expenses under paragraph 8(l)(h) of the Income Tax Act (the Act). There was no dispute that the appellant had not met the requirements of subparagraph (i) and

(iii) thereof. The appeal is whether or not the requirements of subparagraph (ii) had been met and, as with the case of Cival v The Queen, [1983] CTC 153; 83 DTC 5168 (FCA) at 154 [5168],

The answer depends on whether he was required by his contract of employment to pay the expenses incurred by him in using the automobile.

Part II — Decision

The answer to the above question, on the evidence, is no and therefore the appeal is dismissed.

Part III — Reasons

The outcome of this case is essentially one of fact.

In 1979 the appellant was engaged by the accounting firm of Thorne Riddell as a student in their chartered accountancy program for students. In 1980 the appellant received his chartered accountancy designation.

The orientation course given by his employer in 1979 was to advise the appellant about the firm, its policies, procedures and as to their expectations of professionalism. The latter was said to include competence, neatness, courtesy and promptness. For both years the nature of the appellant’s accounting duties required the majority of his working time to be in the client premises. Most of these were outside of the city of Vancouver and generally were all over the lower mainland. This meant his travelling to and between such clients and to have his files with him.

It was established that his employer had a policy of reimbursement as follows:

(Extract from Exhibit A3)

15.5 CAR EXPENSE ALLOWANCE

(a) Mileage

A mileage allowance as may be determined from time to time will be paid to staff using a car on approved firm or client business outside the City of Vancouver, based on the distance from the office to the client.

(b) Parking

Reasonable parking expenses will be reimbursed where firm business makes it necessary to drive to a client location, as long as these expenses can be legitimately charged to the client. Charges to “office” will not be approved.

Note: A person who uses his car on firm business should disclose this fact to ICBC and may be charged at higher commercial premium rates. Failure to do so may be reason enough for the insurer to void the insurance coverage on the grounds of misrepresentation.

It is essential that staff who claim mileage and car expense allowances discuss this with their insurance agent.

In the early spring, come income tax filing time, all of the firm’s staff were asked to complete form T-2200 for declaration and certification by the employer (Exhibits Al and A2). While the appellant relied very heavily on these forms as being proof that his contract of employment required him to pay the expenses incurred by him in using his automobile, it is clear that these forms do not specifically say that. In any event a more accurate description of the appellant’s actual nature and conditions of employment was given by a Mr Harry Hoff who is a chartered accountant and a manager with Thorne Riddell.

Mr Hoff’s evidence was that there may have been an expectation on the part of the firm that the appellant would have used an automobile for the sake of efficiency, punctuality and professionalism in the performance of his duties. However his evidence was that, as far as he knew, there had not been any stated requirement in this respect and he was unable to say what could have happened under the contract of employment if the appellant did not, or refused to, use his car. At best it would have depended on how it might have affected the appellant’s work. The rest was conjecture.

In my opinion the appellant has not established that which subparagraph 8(l)(h)(ii) of the Act requires, namely, that he was required by his contract of employment to pay the expenses incurred by him in using his car in the performance of the duties of his employment.

In other words I am not able to discern any reciprocal promise or agreement by the appellant to use his car and pay his expenses in exchange for his employer’s undertaking to reimburse him.

Because the circumstances of this appellant and that of Cival, (supra), are analogous, this appeal may be disposed of by reference to the findings of Ryan, J as set out on page 158 [5171] of Cival:

. . . as I see the arrangement, Mr Cival was not contractually bound to use his car in doing his job and to pay the expenses involved; if at any time during 1977 he had refused to use his car for this purpose, he would not have been suable by his employer for breach of contract.

As the above is enough to dispose of this appeal, I find it unnecessary to deal with the respondent’s alternative assertion that once the appellant was in receipt of a reimbursement he would no longer be required, by the contract, to pay the travelling expenses, (vide, Meier v MNR, [1967] Tax ABC 324; 67 DTC 224; Guay v MNR, [1970] Tax ABC 1201; 70 DTC 1781; Mackin v MNR, [1982] CTC 2431; 82 DTC 1408; and Tozer v MNR, [1982] CTC 2835; 82 DTC 1815).