Citation: 2012 TCC 452
Date: 20121217
Docket: 2012-1145(IT)I
BETWEEN:
IAN BROWN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
C. Miller J.
[1]
Mr. Brown appeals by
way of the Informal Procedure the denial by the Minister of National Revenue
(the "Minister") of his deduction of $10,634 in 2008 and $5,548 in
2009 as travel expenses. The expenses relate to the cost for Mr. Brown, an
airline pilot with Cathay Pacific Airways, to travel from his home in Calgary to his base in Los Angeles.
Facts
[2]
The facts are
uncomplicated. In 2008 and 2009, Mr. Brown resided in Calgary. He was employed
by USAB Ltd., a wholly-owned subsidiary of Cathay Pacific Airways Ltd., a fully
registered company subject to the laws and regulations of Hong Kong
("Cathay Pacific"). Although recently Cathay Pacific changed its
policy to have local employers in the jurisdictions in which it operates
throughout the world, in 2008 and 2009 everything was run out of Hong Kong.
[3]
Mr. Brown, as a captain
for Cathay Pacific, did the vast majority of his flying between Los Angeles and Hong Kong. He incurred the expenses of $10,634 and $5,548 in 2008 and 2009
respectively to travel between Los Angeles and Calgary. He was unable to live
in the United States of America. He took me through the United States Green Card
application form as well as the Diversity Visa Program application. It was
clear that only if Cathay Pacific sponsored Mr. Brown could he have resided and
worked out of Los Angeles. Given Cathay Pacific’s policy at that time,
sponsorship was not an option. I am satisfied that while working for Cathay
Pacific in 2008 and 2009 Mr. Brown was simply unable to live in the United
States. Mr. Brown acknowledged that the expenses were commuting expenses. There
was no element of performing his duties as a captain for Cathay Pacific while
commuting. He simply had to get to Los Angeles.
[4]
Mr. Brown also
testified, supported by a copy of Cathay Pacific’s seniority list, that, as he
was way down on the seniority list, the ability to successfully apply to have
Vancouver or Toronto as a home base was very limited, if not impossible, at
that stage.
Issue
i) Are Mr. Brown’s travel expenses
deductible in 2008 and 2009?
Analysis
[5]
The applicable
paragraph of the Income Tax Act (the "Act") is
paragraph 8(1)(h):
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 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 the travel expenses incurred
by the taxpayer in the performance of the duties of the office or employment,
amounts expended by the
taxpayer in the year (other than motor vehicle expenses) for travelling in the
course of the office or employment, except where the taxpayer
(iii) received an
allowance for travel expenses that was, because of subparagraph 6(1)(b)(v), 6(1)(b)(vi) or 6(1)(b)(vii), not included in
computing the taxpayer’s income for the year, or
(iii)
claims a
deduction for the year under paragraph 8(1)(e),
8(1)(f) or 8(1)(g);
…
[6]
The law is well settled
that commuting expenses, the expense of getting to and from work, are not
deductible. This has been confirmed by the Federal Court of Appeal in Hogg
v. R.
which relies on the classic English case of Ricketts v. Colquhoun. There is
a similarity between the Hogg decision and Mr. Brown’s situation, in
that they both claimed they really had no choice: Mr. Hogg because of security
reasons, and Mr. Brown because of immigration restrictions. The Federal Court
of Appeal, however, emphasized that, regardless of the reason for the expense,
to be deductible the provision clearly requires that the expenses be incurred
by the employee while performing his duties. Mr. Hogg did not perform any duties,
in transit, nor has Mr. Brown while traveling to Los Angeles. As Chief Justice
Rip put it in the case of O’Neil v. R., also cited by the Federal Court of Appeal
in Hogg, traveling in the course of the office or employment necessarily
involves the performance of some service as compared to simply getting oneself
to the place of work.
[7]
Now that would
ordinarily be the end of the analysis to dismiss Mr. Brown’s claim, except for
two further considerations:
a) the impact of
personal choice, or lack thereof, in distinguishing personal expenses from
travel expenses, as described by Justice Jorré in the recent decision of Blackburn
v. R.;
and
b) the impact of a
consent judgment of Justice Woods in the decision of Hayden v. Her Majesty
the Queen,
a general procedure case, in which the Crown agreed to the deduction of similar
expenses of an airline pilot to report to work outside Canada.
The Blackburn decision
[8]
Mr. Brown argues that
he had no choice but to live in Canada and commute to Los Angeles, and that
this would render the travel expenses deductible as they were not personal
expenses. In the Blackburn decision, Justice Jorré was dealing with an
employee who was required on a temporary basis to work at a considerable
distance from home. Justice Jorré stated:
44. At what point does the decision to
travel rather than to move become a personal choice? One cannot reasonably
conclude that the fact that one does not relocate for a business trip of a few
weeks is a personal choice. However, if someone takes a permanent position in
another far away city, there cannot be any doubt that it is a personal choice
if the person keeps his or her house and family in his or her hometown and
chooses to travel between the two cities every Monday morning and Friday
evening and to rent a small apartment in the city where he or she works.
45. In this case, it is very
important to mention that the Appellant already worked for Équipement Fédéral
when he took the position based in Sherbrooke and that he expected to fill that
position for only five to six months.
46. Considering the effort
involved in moving and moving again, one cannot characterize as a personal
choice the fact that someone is transferred by his or her employer to another
city on a temporary basis for a relatively short period of time.
47. If the temporary employment is
prolonged, there is a point where the choice to move becomes personal.
[9]
Implicit in his
reasoning is that travel expenses incurred by an employer’s requirement for
temporary work away from home are indeed incurred in the performance of the
employment duties, and not personal expenses. But Justice Jorré
acknowledged that at some point the choice becomes personal. The emphasis, I
believe, is still properly on whether the expenses were incurred in the
performance of duties. In Mr. Brown’s case it was not Cathay Pacific that
required Mr. Brown to have to travel such a distance, and indeed there was
nothing temporary about the arrangement. Mr. Brown accepted the full-time
position knowing full well that he would have an expensive commute. I do not
see that Blackburn helps Mr. Brown’s cause.
The Hayden decision
[10]
In a consent judgment
signed by Justice Woods in June 2005 she accepted the parties’ deal and allowed
the appeal with respect to travel costs for someone in a similar position as
Mr. Brown, for travel to employment outside Canada. Regrettably, I received
little more detail than that. Crown counsel had no further explanation as to
why the Crown might have agreed to such a settlement, but it is this case upon
which Mr. Brown has hung his hat.
[11]
It is unfortunate that
Mr. Brown and taxpayers generally might, with some justification, feel that
because of this consent judgment such travel expenses are deductible,
apparently from an administrative perspective. While it remains a judgment of
this Court, it is a consent judgment, an agreement reached by the parties, not
ultimately deliberated upon through trial by a judge. With no reasoning or
analysis to review, I am not prepared to rely on it as having any precedential
value. It appears to fly in the face of Federal Court of Appeal authority and
jurisprudence generally on this issue.
[12]
Mr. Brown cannot be
faulted for believing that because the Government allowed a colleague of his a
deduction for similar expenses, he should be entitled to similar treatment. He
put considerable effort into preparing his case and providing documents. Notwithstanding
the result, in these circumstances, I award Mr. Brown costs of $200. The
appeals however are dismissed.
Signed at Ottawa, Canada, this 17th day of December 2012.
"Campbell J. Miller"
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