George E. Waugh, Jerry W. Higgins, K. Michael Lowther, Trevor S. Russell, Constance K. Duncan, Christopher G. Duncan, Ronald Rodrique, Alex Bodnar, Brian Smedley, Robert L. Brewin, Leslie H. Shumka v. Minister of National Revenue, [1990] 1 CTC 2346, 90 DTC 1117

Christie, A.C.J.T.C.:—This is a test case. It is agreed that its disposition shall apply to 11 other appeals. [1]

The appellant was employed as a pilot in the Air Services Branch of the British Columbia Ministry of Transportation and Highways. In computing his income from that employment for 1983, 1984 and 1985 he seeks to deduct disbursements made by him for meals. In this regard he invokes paragraph 8(1)(g) of the Income Tax Act ("the Act”). It provides:

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:

(g) where the taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport and the duties of the employment required him regularly,

(i) to travel, away from the municipality where the employer's establishment to which he reported for work was located and away from the metropolitan area, if there is one, where it was located, on vehicles used by the employer to transport the goods or passengers, and

(ii) while so away from such municipality and metropolitan area, to make disbursements for meals and lodging,

amounts so disbursed by him in the year to the extent that he has not been reimbursed and is not entitled to be reimbursed in respect thereof.

The neat point for determination is whether the appellant was an employee of a person whose principal business was passenger, goods, or passenger and goods transport within the meaning of paragraph 8(1)(g).

It is implicit in the evidence that the appellant was appointed to his position in the public service of British Columbia under the Public Service Act of that province. He is a member of the British Columbia Government Employees' Union. In his returns of income for 1983, 1984 and 1985 the name of his employer on the Statements of Remuneration Paid (T4 slips) is the Province of B.C. The prescribed forms (TL2) included in those returns pertaining to the claims for meals contain a part entitled “Conditions of Employment" to be completed by the taxpayer's employer. In each year this part is signed by the Manager of Financial Services for the Ministry of Transportation and Highways. This question is on each form: “Is the principal business of your company transport of goods and/or passengers? . . . Yes . . . No . . .”. In respect of 1983 and 1984 the question is answered "No" and in 1985 it is answered "Yes". In this regard a memorandum to Mr. J. Taylor, Acting Director of Aircraft Services, Air Services Branch, Transportation Division, Ministry of Transportation and Highways, from Mr. M. C. Buckley, Manager, Financial Services, Transportation, was placed in evidence. It reads:

Attached for information purposes is an excerpt from the Canadian Master Tax Guide and a covering letter from the Comptroller-General which provides authority for us to respond affirmatively to the question “Is the principal business of your company (Air Services Branch) transport of goods and/or passengers?” In the past, the principal business of the Government of B.C. as a whole was not construed to be the transport of goods and/or passengers.

Please advise employees affected accordingly.

While this memorandum may explain the circumstances under which the change in the answer given in the forms regarding principal business occurred, it does not in any way determine which is the correct answer for the purposes of this appeal. That is precisely what the Court must decide.

I am satisfied that during the relevant years the legal entity that was the appellant's employer was Her Majesty in Right of British Columbia. I am also satisfied that the principal business of Her Majesty in that right was not passenger, goods, or passenger and goods transport. In the course of argument, counsel for the appellant expressed agreement on both points and, on the basis of the evidence before the court, I believe he was quite right in doing so. Nevertheless Mr. Hatter argued that his client was entitled to succeed and he relies heavily on this 1969 decision of the Tax Appeal Board: Anderson v. M.N.R., [1969] Tax A.B.C. 913; 69 D.T.C. 636. In that case the sole question to be determined was whether the respondent erred in disallowing a deduction for disbursements made for meals claimed by Anderson in computing his income for 1966. The claim had been disallowed on the ground that he was not an employee of a person whose principal business was passenger, goods, or passenger and goods transport within the meaning of what was then subsection 11(7) of the Income Tax Act. The words in that subsection that are relevant to this appeal are the same as those in paragraph 8(1)(g). Board member Maurice Boisvert held that the respondent's assessment was in error and allowed the appeal.

The appellant Anderson was a marine engineer employed on the Comox 'Queen, a ferry boat that transported passengers and goods between two points in British Columbia. At that time the operations of the ferry system in British Columbia were carried on by two groups of employees. The right of the employees in the first group to make the kind of deductions claimed by Anderson had not been challenged by the taxing authorities. Anderson was in the second group. Mr. Boisvert described this in these words at pages 918-19 (D.T.C. 639-40):

In British Columbia, the ferry system is divided in two groups. One group falls under the administration of a Crown Corporation which is a government agency. The employees of this agency have been granted the right to deduct the cost of their noon meal. The other group is falling under the Ferries Act (1960 R.S. of B.C.,

c. 144). Section 2 of this Act stipulates that:

. . . unless the context otherwise requires, "ferry" means any ferry under the control of the Legislature.

The Minister of Highways is the designated person whose duties are to administer the Act. The Department of Highways Act (1960 R.S. of B.C., c. 103) "has charge of all matters relating to the construction, alteration, and repairs of all Government roads, bridges, ferries, wharves and other Provincial public works throughout the Province to which the Highway Act applies” (section 4). Section 5 reads:

A Deputy Minister, a Chief Engineer, and such other officers and employees as are required for the proper conduct of the business of the Department may be appointed, subject to the provisions of the Civil Service Act, all of whom shall hold office during pleasure.

Under Chapter 380 of the above-mentioned Statutes, a Crown Corporation known as the “British Columbia Toll Highways and Bridges Authority” was created, and for the purposes of the Act, was an agent of Her Majesty in the right of the Province (Section 4). Since the Act says that "toll-highway includes all public streets, roads, ways, trails, lanes, bridges, trestles, tunnels, ferries, ferry landings and approaches, and any other public way so designated by by-law of the Authority”, it is the reason why the first group of ferries falls under the administration of the Authority. In 1964, an Act amending Chapter 380 was adopted to change the name of the Authority to “British Columbia Ferry Authority Act", (1964, Statutes of British Columbia, C. 57). Under Chapter 380 as amended, the officers and servants were appointed and remunerated by the Authority. Because the employees of the first group had their remuneration paid by the Authority, which was an agent of the Crown, the respondent allowed the deductions for noon meals to the employees of the first group and disallowed the said deductions for the noon meals to the employees of the second group.

My conclusion after a careful consideration of the reasons given by the learned member of the Tax Appeal Board is that his disposition of the appeal turned on his belief that the applicable provisions of the Income Tax Act should not be construed and applied so as to differentiate between employees in the manner indicated. He said at page 919 (D.T.C. 640):

We must bear in mind that the appellant was an employee of the British Columbia Legislature and was paid a salary from the provincial revenue. Therefore the Government of British Columbia was the employer. Since the appellant was taxable under section 5 [2] of the Income Tax Act as any other Government employee, he must receive the same privilege as any other employee of the same Government employed in any other branch of such Government activity.

He added this obiter dicta at page 920 (D.T.C. 641):

I am of the opinion that section 11(7) must receive an interpretation coping with other provisions of the Act. It never intended to restrict any right a taxpayer may hold under the general implication of the Statute. To argue the opposite would mean that if a Government of a province nationalizes the railways or the merchant marine, the taxpayers involved would lose their rights under the Act because they would be government employees.

In the later appeal of Roy v. M.N.R., [1981] C.T.C. 2266; 81 D.T.C. 238, St- Onge, T.C.J., who was then a member of the Tax Review Board, considered what was essentially the same legal issue as that dealt with by Mr. Boisvert in Anderson. He came to a different conclusion. In brief reasons for judgment delivered orally he said at pages 2266-67 (D.T.C. 239):

The appeal of Mr. Raymond R. Roy came before me on December 8, 1980 in the City of Victoria, B.C. and the issue is whether the appellant is allowed to deduct an amount of $703.50 as "Transport Employee Expenses", pursuant to Section 8(1)(g) of the Income Tax Act in his 1977 taxation year.

The respondent disallowed this deduction on the following assumptions of fact:

3. by an assessment dated March 16, 1979, the Respondent disallowed the deduction of the said amount of $703.50 and in so assessing, did so on the following assumptions of fact, inter alia:

(a) the Appellant was employed by Her Majesty The Queen in right of the Province of British Columbia in the Department of Highways throughout the 1977 taxation year, and

(b) the Appellant was not, in the 1977 taxation year, employed by a person

whose principal business was transportation of goods or passengers.

Also, Section 8(1)(g) of the Act reads as follows:

Transport employee’s expenses.—where the taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport and the duties of the employment required by him, regularly,

(i) to travel, away from the municipality where the employer's establishment to which he reported for work was located and away from the metropolitan area, if there is one, where it was located, on vehicles used by the employer to transport the goods or passengers, and

(ii) while so away from such municipality and metropolitan area, to make disbursements for meals and lodging,

amounts so disbursed by him in the year to the extent that he has not been reimbursed and is not entitled to be reimbursed in respect thereof.

At the hearing, counsel for the respondent filed Chapter 109 with respect to the Minister of Highways and Public Works Act. At paragraph 2 of this Act, I quote:

"Minister" means the member of the Executive Council charged by Order of the Lieutenant-Governor-in-Council with the administration of this Act, and "the Ministry" means the Ministry established by Section 3. "Government Buildings, Highways and Public Works" includes subparagraph 3(i). Ferries and ferry landings that are part of the highway system except British Columbia ferries.

The evidence has shown that the ferry on which the appellant was working was a ferry under the jurisdiction of the Ministry of Highways and Public Works Act.

Consequently, according to the evidence adduced, the Minister has proven his two subparagraphs. The appellant was employed by Her Majesty The Queen in the right of the Province of British Columbia in the Department of Highways through out the 1977 taxation year and was not in the said year employed by a person whose principal business was transportation of goods and passengers.

Consequently, for these reasons the appeal is dismissed.

The decision rendered by St-Onge, T.C.J. being subsequent to that of Mr. Boisvert and as I agree with the former, I regard Roy as the judgment having precedential value for the purposes of this appeal.

Finally, I believe that it is clear from The Queen v. Creamer, [1976] C.T.C. 676; 76 D.T.C. 6422 (F.C.T.D.) that the proper approach in applying paragraph 8(1)(g) of the Act is first to ascertain the legal entity that employed the taxpayer during the relevant period and then to answer the question of whether the principal business of that entity was passenger, goods, or passenger and goods transport at that time. In Creamer, the Minister of National Revenue had disallowed the deduction made by the defendant in computing his income for 1972 in respect of disbursements for meals. The ground for the disallowance was that the respondent's employer was Imperial Oil Limited and that its principal business was not the transportation of passengers or goods or both. The defendant alleged that he was an employee of the transportation department of Imperial Oil Limited or, in the alternative, that transport was the principal business of Imperial Oil Limited. In 1972 he was a truck driver employed delivering petroleum products in southern New Brunswick from a terminal located in Saint John. He received his instructions from an Imperial Oil dispatcher and drove about 250 miles a day. It was established that in the National Revenue form included in his return of income pertaining to the claimed deduction the respondent showed Imperial Oil Limited as his employer as did the T4 slip. His Statement of Investment Income included in his return referred to “T3 Imperial Oil Savings Plan" and “T4 PS Imperial Oil Savings Plan”. His regular paycheques were issued by that company. A letter from the company that was in evidence stated that the defendant was not employed by a subsidiary of Imperial Oil Limited. There was evidence that he was employed in the company's "Transportation Department", but as Mr. Justice Dubé observed at page 678 (D.T.C. 6423): "There is no evidence that the transportation department is a separate legal entity." He went on at page 678 (D.T.C. 6424):

I have no hesitation in finding that the defendant was in 1972 an employee of Imperial Oil Limited. There now remains to decide whether or not the “principal business” of Imperial Oil Limited was “passenger, goods, or passenger and goods transport" as required by paragraph 8(1)(g) of the Act.

He answered the remaining question in the negative and the Minister's assessment was upheld. He added this at pages 680-81 (D.T.C. 6425):

Well might the taxpayer be aggrieved at the apparent inequity of an Act which deprives him of an exemption allowed his fellow truck drivers (whose employers' principal business is transport), but he will not find his remedy before the Courts who must interpret the law as written by the legislators.

In 1983, 1984 and 1985 the appellant in the appeal at hand was not a taxpayer described in paragraph 8(1)(g) of the Act. It follows that the appeal is dismissed.

Appeal dismissed.