Date: 20020208
Docket: 2001-2222-IT-I
BETWEEN:
TERRENCE K. POULTON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND
Docket: 2001-2775(IT)I
BETWEEN:
ALBERT J. LEE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND
Docket: 2001-2102(IT)I
BETWEEN:
CLARENCE E. DALY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, A.C.J.
[1] These appeals are from assessments
for 1997. They were heard on common evidence and although the
facts for each taxpayer differ slightly, the issue is the same:
whether amounts received by them from their employer
McNamara-Pitts-Ballast-Nedam ("MPBN") were a taxable
benefit within the meaning of paragraph 6(1)(a) of
the Income Tax Act.
[2] Mr. Poulton was represented
by counsel, Mr. Ernest Boone. Mr. Lee and Mr. Daly
represented themselves except in the motions to amend the replies
to the notices of appeal to which I shall refer later in which
Mr. Boone agreed to speak on behalf of Mr. Lee and
Mr. Daly as well as his own client Mr. Poulton.
[3] During the period of July from
about July 10, 1997 to the latter part of December 1997 the
appellants worked for MPBN on an oil drilling project at Whiffen
Head, Newfoundland. Mr. Poulton worked on the offshore
semi-submersible rig, Mr. Daly worked on the boat that took
the crews to the rig. Mr. Lee worked on barges on which
large cranes were located and used in the construction of
wharves. They worked 12-hour shifts, and had 12 hours off,
seven days a week.
[4] Whiffen Head is a remote location
in the general vicinity of Arnold's Cove on the narrow strip
of land that connects the Avalon Peninsula with the rest of the
island of Newfoundland. I have been unable to find Whiffen Head
on a map and so I assume it is a geographical location rather
than an inhabited community. It is about 55 km. from
Norman's Cove, where Mr. Daly lived, 160 km. from
St. Mary's, Newfoundland where Mr. Lee lived and
95 km. from Bareneed where Mr. Poulton lived.
[5] The project at Whiffen Head was a
major one, providing substantial employment to a large number of
people. There was virtually no place to stay. Mr. Daly drove
back and forth from the work location to Norman's Cove each
day during the entire period of employment. Mr. Lee found
accommodation somewhere in the vicinity of Whiffen Head.
Mr. Poulton commuted from Bareneed to Whiffen Head from
July 7 to September 7, 1997.
[6] The union to which the three
appellants belonged negotiated with MPBN for the employees to
receive payments of $30.00 per day. The appellants evidently
believed that it was for board and lodging. It was obviously
intended to defray some of the costs of working in a remote
location far from their homes. Both the employer and the
employees believed it was non-taxable and it was not included in
the appellants' T4 slips.
[7] The Minister assessed these
amounts as income, as follows:
(a) Mr. Poulton: $1,864.
This was the amount received in the period July 7 to
September 7, 1997 before Mr. Poulton found
accommodation in Whiffen Head and was commuting from Whiffen Head
to Bareneed.
(b) Mr. Lee: he was taxed $6,167
originally and on objection this was reduced by $3,707 to $2,460.
The assumption was that Mr. Lee did not find accommodation
at Whiffen Head until September 8 and that he commuted from
his house to St. Mary's from July 10 to
September 8. That assumption is wrong. He stayed at Whiffen
Head throughout the entire period so that even on the
respondent's theory of assessing the sum of $2,460 would have
to be deleted.
(c) Mr. Daly. He was taxed $6,507
because he did not find accommodation at Whiffen Head. He worked
from July 9 to December 19, a total of 164 days. 164 X
$30 = $4,920 not $6,507. Where the respondent got $6,507 is a
mystery. Even if I were to uphold the assessment I would have to
reduce the amount to $4,920.
[8] The theory of the assessments
appears to be that the amounts are not taxable so long as the
appellants were living at Whiffen Head but if they could not find
accommodation in the vicinity of the work site they were taxable
on the $30.00 per day they received.
[9] It is clear from the evidence that
wherever they were staying the $30 per day scarcely reimbursed
them for the additional expense of working at Whiffen Head.
[10] The replies to the notices of appeal
all state that the respondent relies on subsection 6(6) and
paragraph 6(1)(a). Only paragraph 6(1)(a)
was referred to in Section C: Statutory Provisions Relied On
and in Section D: Grounds Relied on and Relief Sought.
[11] On the eve of trial the respondent
brought motions to amend the replies to add to sections C
and D a reference to paragraph 6(1)(b). The motion
was fully argued at the commencement of trial. I denied the
respondent's motions and gave fairly extensive oral reasons.
I shall summarize them briefly.
[12] This court and the Federal Court of
Appeal have traditionally been fairly liberal in granting
amendments. I set out my reasons at some length in Continental
Bank Leasing Corporation et al. v. The Queen,
93 DTC 298 at p. 302:
... I prefer to put the matter on a broader basis: whether it
is more consonant with the interests of justice that the
withdrawal or amendment be permitted or that it be denied. The
tests mentioned in cases in other courts are of course helpful
but other factors should also be emphasized, including the
timeliness of the motion to amend or withdraw, the extent to
which the proposed amendments would delay the expeditious trial
of the matter, the extent to which a position take originally by
one party has led another party to follow a course of action in
the litigation which it would be difficult or impossible to alter
and whether the amendments sought will facilitate the court's
consideration of the true substance of the dispute on its merits.
No single factor predominates nor is its presence or absence
necessarily determinative. All must be assigned their proper
weight in the context of the particular case. Ultimately it boils
down to a consideration of simple fairness, common sense and the
interest that the courts have that justice be done.
[13] This passage was quoted with approval
in The Queen v. Canderel Limited,
93 DTC 5357.
[14] After quoting it, the Federal Court of
Appeal went on to add at pages 5361-2:
While it is true that leave to amend may be sought at any state
of a trial, it is safe to say that the nearer the end of the
trial a motion to amend is made, the more difficult it will be
for the applicant to get through both the hurdles of injustice to
the other party and interests of justice. We note that in all the
tax cases referred to by counsel for the appellant, the motion to
amend has been made before trial or was made at trial but was to
be expected by the opposing counsel during
trial.19
________________
9 In Papp Estate v. M.N.R., 63 DTC 1219
(S.C.C.), the amendment was sought after examination
for discovery. In Continental Bank Leasing Corporation et al.
v. The Queen, supra note 18, it was sought before the
examination for discovery of an officer of the Crown. In Meyer
v. Canada, supra note 10, the opposing counsel had been aware
for three months before the trial began that an amendment to the
Statement of Claim would likely be sought. In Vineland
Quarries and Crushed Stone Ltd. v. M.N.R., 70 DTC 6043 (Ex.
Ct.), the amendment was sought before trial.
[15] I think these two passages set out with
sufficient accuracy the general principles to be followed.
Counsel referred as well to SmithKline Beecham Animal Health
Inc. v. R., [2000] 2 C.T.C. 329 (F.C.A.), affirming
[2000] 1 C.T.C. 2552 (T.C.C.); and VISX Inc. v. Nidek
Co., [1998] F.C.J. No. 1766 (a patent case).
[16] Why then did I not allow the amendment
here as was done in the above cases? Well, there is a world of
difference between large public corporations, and multinationals
with batteries of senior counsel to protect them and millions of
dollars at stake and small taxpayers, unrepresented by lawyers,
with relatively small amounts of money in issue.
[17] Procedural fairness requires that in
cases governed by the informal procedure the Crown not be
permitted at the 11th hour to spring a brand new argument on a
taxpayer. Had the appellants known from the outset or at least a
reasonable time before trial that the Crown was going to rely on
paragraph 6(1)(b) their approach might have been
entirely different and they could have called evidence to rebut
the assertion that the amounts were "allowances" within
the meaning of paragraph 6(1)(b) or that they were
exempted from the operation of that paragraph by
subsection 6(6). Had I granted the Crown's motions and
allowed the amendment the appellants would have been entirely
justified in requesting an adjournment and this would have
resulted in an undue delay of these relatively small informal
appeals. I cannot emphasize too strongly that it is of consummate
importance that the court in the informal procedure be vigilant
to ensure that the unrepresented taxpayer not be deprived of
procedural fairness.
[18] I quite agree that by denying the
Crown's motion to amend to refer to
paragraph 6(1)(b) I may have deprived it of what
might be a very potent argument. However the Crown's loss of
these appeals because it slipped up and failed to refer to a
provision that might have helped it is not, in the scheme of
things, a jurisprudential or fiscal catastrophe. What is far more
important is that unrepresented taxpayers in the informal
procedure be given every benefit of procedural fairness. To force
them to confront the complexities of
paragraph 6(1)(b) and subsection 6(6) on the eve
of trial would do the administration of justice irreparable
damage.
[19] It is open to question whether even if
I had allowed the amendment paragraph 6(1)(b) would
have applied.
[20] This $30 per day was merely an amount
estimated to be sufficient to reimburse the employees for the
additional costs of working in a remote location. However since I
did not permit the point to be argued I express no concluded
view.
[21] Paragraphs 6(1)(a),
6(1)(b) and subsection 6(6) read as follows:
6(1) There shall be included in
computing the income of a taxpayer for a taxation year as income
from an office or employment such of the following amounts as are
applicable:
(a) the value
of board, lodging and other benefits of any kind whatever
received or enjoyed by the taxpayer in the year in respect of, in
the course of, or by virtue of an office or employment, except
any benefit
(i) derived
from the contributions of the taxpayer's employer to or under
a registered pension plan, group sickness or accident insurance
plan, private health services plan, supplementary unemployment
benefit plan, deferred profit sharing plan or group term life
insurance policy,
(ii) under a
retirement compensation arrangement, an employee benefit plan or
an employee trust,
(iii) that was a benefit
in respect of the use of an automobile,
(iv) derived from
counselling services in respect of
(A) the mental or physical
health of the taxpayer or an individual related to the taxpayer,
other than a benefit attributable to an outlay or expense to
which paragraph 18(1)(l) applies, or
(B) the re-employment or
retirement of the taxpayer, or
(v) under a salary
deferral arrangement, except to the extent that the benefit is
included under this paragraph because of subsection (11);
(b) all
amounts received by the taxpayer in the year as an allowance for
personal or living expenses or as an allowance for any other
purpose, except
(i) travel,
personal or living expense allowances
(A) expressly fixed in an
Act of Parliament, or
(B) paid under the
authority of the Treasury Board to a person who was appointed or
whose services were engaged pursuant to the Inquiries Act,
in respect of the discharge of the person's duties relating
to the appointment or engagement,
(ii) travel and
separation allowances received under service regulations as a
member of the Canadian Forces,
(iii) representation or
other special allowances received in respect of a period of
absence from Canada as a person described in paragraph
250(1)(b), (c), (d) or (d.1),
(iv) representation or
other special allowances received by a person who is an
agent-general of a province in respect of a period while the
person was in Ottawa as the agent-general of the province,
(v) reasonable
allowances for travel expenses received by an employee from the
employee's employer in respect of a period when the employee
was employed in connection with the selling of property or
negotiating of contracts for the employee's employer,
(vi) reasonable allowances
received by a minister or clergyman in charge of or ministering
to a diocese, parish or congregation for expenses for
transportation incident to the discharge of the duties of that
office or employment,
(vii) reasonable allowances for
travel expenses (other than allowances for the use of a motor
vehicle) received by an employee (other than an employee employed
in connection with the selling of property or the negotiating of
contracts for the employer) from the employer for travelling away
from
(A) the municipality where
the employer's establishment at which the employee ordinarily
worked or to which the employee ordinarily reported was located,
and
(B) the metropolitan area,
if there is one, where that establishment was located,
in the performance of the duties of the employee's office
or employment,
(vii.1) reasonable allowances for the use of a
motor vehicle received by an employee (other than an employee
employed in connection with the selling of property or the
negotiating of contracts for the employer) from the employer for
travelling in the performance of the duties of the office or
employment,
(viii) such part of the total of
allowances received by a person who is a volunteer fireman from a
government, municipality or other public authority for expenses
incurred by the person in respect of, in the course of, or by
virtue of the discharge of the person's duties as a volunteer
fireman, as does not exceed $500, or
(ix) allowances (not in
excess of reasonable amounts) received by an employee from the
employee's employer in respect of any child of the employee
living away from the employee's domestic establishment in the
place where the employee is required by reason of the
employee's employment to live and in full-time attendance at
a school in which the language primarily used for instruction is
the official language of Canada primarily used by the employee
if
(A) a school suitable for
that child primarily using that language of instruction is not
available in the place where the employee is so required to live,
and
(B) the school the child
attends primarily uses that language for instruction and is not
farther from that place than the community nearest to that place
in which there is such a school having suitable boarding
facilities,
and, for the purposes of subparagraphs (v), (vi) and (vii.1),
an allowance received in a taxation year by a taxpayer for the
use of a motor vehicle in connection with or in the course of the
taxpayer's office or employment shall be deemed not to be a
reasonable allowance
(x) where the
measurement of the use of the vehicle for the purpose of the
allowance is not based solely on the number of kilometres for
which the vehicle is used in connection with or in the course of
the office or employment, or
(xi) where the taxpayer
both receives an allowance in respect of that use and is
reimbursed in whole or in part for expenses in respect of that
use (except where the reimbursement is in respect of
supplementary business insurance or toll or ferry charges and the
amount of the allowance was determined without reference to those
reimbursed expenses).
...
(6) Notwithstanding
subsection (1), in computing the income of a taxpayer for a
taxation year from an office or employment, there shall not be
included any amount received or enjoyed by the taxpayer in
respect of, in the course or by virtue of the office or
employment that is the value of, or an allowance (not in excess
of a reasonable amount) in respect of expenses the taxpayer has
incurred for
(a) the
taxpayer's board and lodging for a period at
(i) a special
work site, being a location at which the duties performed by the
taxpayer were of a temporary nature, if the taxpayer maintained
at another location a self-contained domestic establishment as
the taxpayer's principal place of residence
(A) that was, throughout
the period, available for the taxpayer's occupancy and not
rented by the taxpayer to any other person, and
(B) to which, by reason of
distance, the taxpayer could not reasonably be expected to have
returned daily from the special work site, or
(ii) a location at
which, by virtue of its remoteness from any established
community, the taxpayer could not reasonably be expected to
establish and maintain a self-contained domestic
establishment,
if the period during which the taxpayer was required by the
taxpayer's duties to be away from the taxpayer's
principal place of residence, or to be at the special work site
or location, was not less than 36 hours; or
(b)
transportation between
(i) the
principal place of residence and the special work site referred
to in subparagraph (a)(i), or
(ii) the location
referred to in subparagraph (a)(ii) and a location in
Canada or a location in the country in which the taxpayer is
employed,
in respect of a period described in paragraph (a)
during which the taxpayer received board and lodging, or a
reasonable allowance in respect of board and lodging, from the
taxpayer's employer.
[22] Paragraph 6(1)(a) taxes
benefits that an employee enjoys qua employee. It does not
tax a reimbursement of expenses that an employee is required to
incur by reason of his or her employment.
[23] The true principle was that approved by
Heald J.A. in G.R. Huffman v. Canada, [1990]
2 C.T.C. 132 at page 135:
Based on this passage, the learned trial judge set out the test
which he applied to the facts at bar (at page 35 (D.T.C. 5008)):
"It is therefore necessary to consider whether the facts
here show that there was a material acquisition conferring an
economic benefit on the taxpayer." He then proceeded to
review the evidence and to make the findings of fact referred to
supra. In applying the Savage test as enunciated,
supra, to the factual situation at bar, he stated (at page
37 (D.T.C. 5009)):
Based on the jurisprudence defining benefit in paragraph
6(1)(a) of the Income Tax Act, I am unable to conclude in
these circumstances that the plaintiff received a benefit. The
plaintiff was required, in order to carry out his duties as a
plainclothes officer and receive a salary as such, to incur
certain expenses regarding his clothing, and reimbursement of
these expenses should not be considered as conferring a benefit
under paragraph 6(1)(a) of the Act... The taxpayer was simply
being restored to the economic situation he was in before his
employer ordered him to incur the expenses.
I agree with the trial judge. The findings of fact which he made
are amply supported by the evidence. I also think that he
correctly applied the relevant jurisprudence to the facts in this
case.
In oral argument, the appellant's counsel endeavoured to
establish that the references by the trial judge to the decision
of the Exchequer Court in Ransom v. M.N.R., [1968] 1
Ex.C.R. 293; [1967] C.T.C. 346; 67 D.T.C. 5235 and to certain
passages from the reasons in that case were an indication that
the trial judge was applying a text somewhat narrower than the
one approved by the Supreme Court of Canada in Savage,
supra. With respect I do not agree with that perception of
the test applied by the trial judge. It is clear to me that the
trial judge properly applied the Savage test and not a
narrower test. In so far as his references to the Ransom
case are concerned, I can find nothing in the passages from that
decision which would narrow the criteria approved in
Savage.
[24] It is clear that there was no
"material acquisition conferring an economic benefit"
on the appellants.
[25] The appeals are allowed with costs and
the assessments are referred back to the Minister of National
Revenue for reconsideration and reassessment to delete from the
appellants' income the amounts included under
paragraph 6(1)(a) of the Income Tax Act.
Signed at Toronto, Canada, this 8th day of February 2002.
A.C.J.
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