Bruce S Hoyt v. Minister of National Revenue, [1977] CTC 2401, 77 DTC 270

The Assistant Chairman:—The appellant, in his appeal to this Board, has raised two issues. He contends, in the circumstances of his case, that he is not liable to taxation by the Province of New Brunswick for the 1974 taxation year. At the same time he contends that he had expenses in the amount of $2,296.29 which were properly de- ductible in arriving at his taxable income for the same year and the respondent did not allow them. There is no dispute by the respondent that the appellant incurred the expenses; the respondent’s position is that the expenses are not deductible.

For many years prior to June 1974 the appellant was a high school teacher at various high schools in the Province of New Brunswick. His specialties were social studies and history and for the last few academic years prior to June of 1974 he had taught at the Southern Victoria High School at Perth-Andover, New Brunswick. Over at least the last several years, if not all the years the appellant was teaching in the province, there was an agreement between the province as represented by the Treasury Board and the New Brunswick Teachers’ Federation who represented the appellant as well as others with respect to his employment as a teacher. While the agreement concerned itself mainly with matters relating to teaching, it did contain an article (Article 36) which is relevant to this appeal. It reads as follows:

36.01 Every teacher who has been employed as a teacher in New Brunswick for seven (7) years, of which at least three (3) were with the same Board of School Trustees shall be eligible for a one-year sabbatical leave with sixty- six and two-thirds per cent (6623) of the actual salary which he would have received had he been employed during the period of the sabbatical leave in the position which he held at the time his application was made.

36.02 Teachers will apply in writing to the Secretary of the Sabbatical Leave Committee. The Committee will review the applications after having received recommendations from local Boards and such other sources as it deems fit, and shall in each school year grant sabbatical leaves to three quarters of one percent (% of 1%) of the teachers covered by this Agreement to a maximum of sixty (60) teachers.

36.03 The Sabbatical Leave Committee shall consist of one representative of the NBTF, one representative of the NBTA, one representative of the AEFNB, one representative of the NBSTA, and three representatives of the Department of Education. One of the three Department of Education representatives shall be designated Chairman by the Minister of Education. A secretary, provided by the NBTF, shall be a non-voting member.

36.04 A teacher granted sabbatical leave shall be guaranteed the same or equivalent position on returning to that School District.

36.05 Subject to 36.06, teachers on sabbatical leave are considered to be under full contract with the Board of School Trustees and therefore retain full status and receive all the benefits that any other teacher would receive.

36.06 The sick leave provisions of this Agreement shall not apply to those on sabbatical leave; however, those teachers on sabbatical leave shall not lose their accumulated sick leave.

36.07 No teacher serving on the Sabbatical Leave Committee shall lose salary, sick leave benefits or pension benefits due to an absence or absenses from school under this Article. The agreed expenses other than Salaries, of this Committee, shall be borne equally by the Employer and the Federation.

36.08 No teacher shall be eligible for a subsequent sabbatical leave until he has been employed as a teacher in New Brunswick for a further five years, three years of which must be with the same Board of School Trustees.

By the end of the 1973 calendar year the appellant had, at least by that time if not earlier, acquired the qualifications as set forth in the said agreement, to apply for sabbatical leave—he had been employed as a teacher in New Brunswick “for seven (7) years, of which at least three (3) were with the same Board of Trustees . . .”’. Pursuant to the agreement and the rules relating to sabbatical leave, the appellant filed with the Sabbatical Leave Committee the requisite application form with the appropriate information requesting leave for travel purposes. The appellant’s application was considered along with others and subsequently he was orally advised by Mr Kingett (a voting member of the Sabbatical Leave Committee) that he was awarded Sabbatical leave starting at the end of the 1973-74 academic year. The Assistant Deputy Minister of the Department of Education, by letter of March 15, 1974, wrote to the appellant with respect to the granting to him of sabbatical leave and the opening paragraph of that letter reads in part as follows:

The Sabbatical Leave Committee established under article 36.02 of the Collective Agreement between Treasury Board and the New Brunswick Teachers’ Association. . . .

While the agreement itself does not state the purpose for which the sabbatical leave is granted, the rules read as follows:

Sabbatical leave may be granted to a teacher wishing to take a year off from teaching to study, or to study and travel, for a full academic year.

The letter of March 15, 1974 referred to above contains the following three paragraphs:

For the past several years the Sabbatical Leave Committee has awarded Sabbatical leaves for study or study and travel purposes only, and has not awarded sabbatical leaves for travel only.

This year, the Committee felt that it should award a sabbatical leave to a candidate for the purpose of travel, with the understanding that the candidate would obtain information during his period of travel that would allow him to improve professionally and, hopefully, to be a more proficient teacher as a result of this experience.

Your application seemed to be an ideal one for this purpose. Consequently, it was agreed that, as an experiment, a sabbatical leave be awarded to you with the understanding that you would document your travel programme, outline the benefits that you believe are derived from it, and provide a report for the committee at the end of the 1974-75 school year.

As stated, the agreement makes no reference to the purpose of the sabbatical leave, nor does it give the power to any rule committee to determine the purpose. In the result, as I view the matter, the reference to “travel’’ in the rules, and the reference in the advising letter to the “document [of] your travel programme’’, do not assist me in determining whether or not the expenses claimed are deductible.

Following the award of the sabbatical leave, the appellant decided to travel in keeping with his history courses—roughly, Europe—travelling through as much as possible of the area which he would teach in his history course, which covered the period from the 17th century to current times. He was of the view that, if he could see “primary documents” of history, they would be of greater assistance to him than the secondary documents from which he had worked in the past. In this respect he made some arrangements through the various Canadian Embassies. He likewise planned to (and did) visit Waterloo, the D-Day invasion area, the trenches of World War I and other historical sites. He prepared his own itinerary and, in so far as he was concerned, while on his leave, he was under the control of no one although he did submit his itinerary before he left. No report was made in any respect to anyone except for one on his return, to which reference shall later be made.

Shortly after school finished, in June of 1974, the appellant, with his wife and older son (who was then two years old), flew from Fredericton to Amsterdam and then virtually immediately to London. I do not know whether or not other children were left at home. I do not know whether or not a home, a car, and any other property was owned before his departure and, if so, whether or not it was sold before leaving or was retained. If property had been rented, I do not know whether he continued as a tenant or the lease was surrendered. Pursuant to the agreement (Article 36.01) he was paid each month two-thirds of his actual monthly salary and twice a month half of each monthly payment was deposited in his bank account in New Brunswick. He drew on that account while overseas. From the time he left (shortly after June 1974) until May 8, 1975 the appellant was not in the Province of New Brunswick. In fact on December 31, 1974 the appellant stated he was in Spain. I accept that the appellant was in Spain on December 31, 1974 and that he was not in the Province of New Brunswick on that date. The appellant stated he performed no services for anyone in the Province of New Brunswick from at least September 1974 to May 8, 1975. There was no suggestion by the Crown that he did, nor that he was in New Brunswick on December 31, 1974.

Shortly after his arrival in London, the appellant purchased a camper which he and his wife and son used for their whole time overseas, except for the last couple of weeks. Without recounting individually the cities and countries he visited, it would appear he visited virtually all European countries and their major cities. In addition, through a relative who was teaching in Switzerland, he talked to her supervisor about his curriculum. Through the Canadian Embassies he also looked at the various school curricula in other countries. Just before he returned to Canada in May of 1975 the appellant sold his camper and took a 7-day trip to Moscow.

The appellant primarily contends that he was awarded a grant within the meaning of paragraph 56(1 )(o) of the Income Tax Act as amended by tax reform and so, while that grant is to be included in income (as the appellant did include it), he may deduct his (travel) expenses. The expenses consist of amounts spent with respect to himself and no one else. They include air fare, gas, slides and photographs, costs with respect to camper, museum fees, etc. They do not include any charge for food or lodging.

In addition to filing the application for the sabbatical leave, the appellant had to obtain and did obtain the approval of his principal and the Board of Trustees. He did not request that the board, in addition to paying him as set forth in Article 36.01, also pay his expenses. It should be noted that Mr Kingett stated in evidence that a teacher being granted sabbatical leave in New Brunswick must undertake to teach in the province and in the field of education for two years out of the five years next succeeding his return from Sabbatical leave. He continued that most teachers satisfied that condition immediately on return. I believe the appellant returned to his former teaching duties immediately on his return.

As mentioned previously, the letter advising the appellant of his award of sabbatical leave mentioned the agreement he made that he “would document your travel programme . . . and provide a report . . .”. The appellant filed a report with the Sabbatical Leave Committee dated May 31, 1975, bearing the caption “Final Report to Sabbatical Leave Committee’’. While the report is described by the appellant as “Final”, no reference was made at any time to any other report having been made; indeed, the evidence was, if I recall correctly, that he only made one report. It consisted of a one and one-half page report together with three appendices, which appendices totalled 11 pages: Appendix I (9 pages) lists (presumably) the names of all countries visited together with the cities or points of interest seen in each country if these were not enumerated after the city; Appendix II lists the names of education officials interviewed; and Appendix III lists the expenses he incurred not only for himself, but his wife and son as well. The expenses are the total expenses, exceeding by far the amount claimed in this appeal.

The appellant, through his counsel, contends that what he received is within the ambit of said paragraph 56(1 )(o) and so the expenses as Claimed are deductible. The Crown contends that what he received was not within that paragraph but, if it were, the expenses would be deductible. The Crown says that the appellant is an employee (that is, while on sabbatical leave) and so the amount received is income and there is no provision in the Income Tax Act permitting him to deduct those expenses. They are personal or living expenses, or, when they were incurred, he was not ordinarily required to carry on the duties of his employment away from his employer’s place of business. Counsel for the appellant also contended that the appellant (while on sabbatical leave) was not an employee of anyone: if he were, who was his employer—who had control of him—who could tell him what to do or what not to do—who could tell him where to go, when to go, what to see? He had no employer. His counsel continued that he was engaged in a contract for services and so the expenses claimed were deductible pursuant to paragraph 18(1)(a) of the said Act.

The facts of the case as they existed at the time of the application for the sabbatical leave must be looked at as well as the facts as they existed till the end of the 1974 calendar year. The appellant was represented by “The New Brunswick Teachers’ Federation.’’ The other party to the agreement was “Her Majesty in the Right of the Province of New Brunswick, as represented by Treasury Board hereinafter called the ‘Employer’’’. Article 1.01 of that agreement reads as follows:

“Employer” includes Treasury Board and the Boards of School Trustees designated by the Minister of Education under the Schools Act.

The appellant, in late 1973 (when he made his application), clearly was a person covered by that agreement as he was one of “Every teacher who has been employed as a teacher . . .” (Article 36.01 of the agreement). He made, pursuant to that agreement, his application for sabbatical leave in the appropriate fashion. He had the right to make such an application as he was covered by that agreement and it was, in effect, part of his contract of employment. It was pursuant to that contract, pursuant to that agreement, pursuant to those vested rights and obvious qualifications that the appellant was awarded the sabbatical leave. Not only did he not resign his position, and not only did he agree to write a report on his return, but he was required by that same contract and agreement to return to the field of education in the Province of New Brunswick for at least two of the next five years following his return. I have no hesitation in holding that, while on sabbatical leave in 1974, the appellant was an employee and within the agreement referred to. The fact that, through an arrangement between a person who is the employer and a person who is not the employer, the other person pays the employee his salary (or part of it) does not mean the employee is no longer the employee of the employer. That is, as stated, just an arrangement between two people, not affecting the contractual relationship between the employeremployee. What he received was not a research grant. It was a special form of holiday pay from his employer and not within the ambit of said paragraph 56(1)(o). Such being the case, there is no need to deal with the alternative contention of the appellant.

Even though the appellant, in my opinion, cannot succeed on the main issue under appeal, his counsel still contended that the appellant “was not resident in the Province of New Brunswick on December 31, 1974’’. Subsection 1(1) of the Income Tax Act, RSNB 1973, c I-2, reads as follows:

1.(1) An income tax shall be paid as hereinafter required for each taxation year by every individual

(a) who was resident in New Brunswick on the last day of the taxation year, or

(b) who, not being resident in New Brunswick on the last day of the taxation year, had income earned in the taxation year in New Brunswick as defined in paragraph 2(4)(b).

He contended that, if the appellant was not resident in that province on that day, he was not liable to taxation by that province for the 1974 taxation year. However, counsel did agree that, were this argu- ment successful, the appellant would be liable to additional federal income tax under the federal Income Tax Act. Where was the appellant resident on December 31, 1974? The reason for the absence from the province was not referred to in any way as determining whether or not the appellant was a resident in the Province of New Brunswick on December 31, 1974. The absence could have been caused by a holiday, a business trip, treatment of an illness or even an enforced or involuntary absence; the submission, I presume, would have been the same regardless of the reason for the absence on December 31, 1974. First of all there was no suggestion that he was not resident in New Brunswick, say in the month of May 1974. There was no suggestion that he was resident anywhere, even in Spain, although he was there on December 31, 1974. As was pointed out previously, it could be that, on December 31, 1974, he had a family in New Brunswick, and owned or leased a home there, and possibly a car and other property. Two things he did have were a bank account, and all rights under the agreement together with some obligations under the same document which could run for possibly a further 5 /2 years.

If one interprets “was a resident in’’ to mean “lived in” on the 31st day of December 1974, then the appellant did not live in New Brunswick in this case. In such a case, if one took a holiday for a full day out of a province and that day were December 31, then that person was not a resident in the province which he left for that one day. I am of the view that unless someone is shown to be a resident on December 31 in a second place, having been immediately previously thereto a resident in another place, he is still resident in the former place when he is only absent from that place because of a holiday. A person, in my view, does not cease to be a resident in a province when he goes to another province or even another country just for a holiday, even though it be of a reasonably extensive duration. It is all the more so, when not only were the ties with that place not broken, but rather he was required to return.

The result is, I hold that on the last day of the 1974 taxation year the appellant was resident in New Brunswick.

The result is the appeal is dismissed.

Appeal dismissed.