Dubé v. R., [1999] 2 CTC 2871

Tremblay T.C.J.:

Point at issue

According to the notices of appeal and the replies to the notices of appeal, the question is whether the appellants, all forestry workers, were correct in each claiming that the sum of $5,250 received from Opérations forestières Martin Dubé & Fils Inc. (hereinafter referred to as “the employer”) was not income because the place where they worked was a special work site or remote location within the meaning of s. 6(6) of the Income Tax Act (“the Act”).

The appellants worked at several locations in the State of Maine but resided at Jackman in a leased trailer. They received an allowance of $105 a week to cover the cost of meals, transportation and accommodations.

Burden of proof

The appellants have the burden of showing that the respondent’s assessments are incorrect. This burden of proof derives from a number of judicial decisions, including that of the Supreme Court of Canada in Johnston v. The Minister of National Revenue.'

In Johnston the Supreme Court held that the facts assumed by the respondent in support of assessments or reassessments must be presumed to be true until the contrary is shown. In the instant case the facts assumed by the respondent are set out in subparagraphs (a) to (j) of paragraph 6 of the Reply to the Notice of Appeal. Paragraph 6 reads as follows:

[TRANSLATION]

6. In making these reassessments the Minister took the following facts into account, inter alta:

(a) the appellant is a forestry worker; [admitted]

(b) the appellant was a shareholder and employee of “Opérations forestières Martin Dubé & Fils Inc.” during the years at issue; [admitted]

(c) during the years at issue Opérations forestières Martin Dubé & Fils Inc. rendered services to Reginald A. Griffin, Jr. [admitted] pursuant to a contract for services for an indefinite period; [denied]

(d) Reginald A. Griffin, Jr., was the prime contractor on lands known as the “S.D. Warren lands”, which consisted of wood lots scattered among a dozen municipalities in the State of Maine; [denied]

(e) the various work sites were regarded as forming part of a single special work site; [denied]

(f) the Minister considered that there was only one special work site, which was located at Jackman, the place of business of the contractor Reginald A. Griffin, Jr.; [denied]

(g) the appellant maintained a self-contained domestic establishment at Saint-Côme de Linière as his principal place of residence; [admitted]

(h) the Minister considered that the appellant’s duties were not of a temporary nature because the activities of Opérations forestières Martin Dubé & Fils Inc. on American soil were located at a single special work site, the contract for services with the American company was renewed annually and the project lasted longer than two years; [denied]

(i) during the work week the appellant lived in a rented trailer so as to be close to his workplace, and for this purpose received a weekly allowance of $105 (50 weeks a year x $105) from Opérations forestières Martin Dubé & Fils Inc. during the years at issue to help him cover the cost of meals, transportation and accommodations; [admitted I

(j) the Minister accordingly considered the annual allowance of $5,250 to be taxable as a benefit received by the appellant from Opérations forestières Martin Dubé & Fils Inc. in each of the years at issue. [denied]

In addition to the above admissions, the evidence consisted of the testimony of Martin Dubé, president of Opérations forestières Martin Dubé & Fils Inc., Reginald Griffin, Jr. and Roch Roy, an accountant.

Before the witnesses were heard counsel indicated that the issues were limited to the following:

-whether, as the respondent maintained, all the sites on which they worked constituted a single special work site, that is, the “S.D. Warren lands”, and the work was not of a temporary nature but done on a permanent basis;

-or whether, as the appellants argued, there were several sites and the work was of a temporary nature within the meaning of s. 6(6)(a)(1) of the Income Tax Act (“the Act’).

Further, the weekly amount of $105 paid to the appellants by the employer did not, as stated in subparagraph 6(i) (reproduced in paragraph [4] of these reasons), cover transportation expenses.

Testimony of Martin Dubé

Martin Dubé testified that he and his sons had worked for the employer in the U.S. State of Maine for several years, including 1993, 1994 and 1995, the last two of which are the years at issue. Gaston worked on the tree feller, Gérald on the chain saw and Guy on the grapple.

During these years the employer worked at various locations for Reginald A. Griffin, Jr. As Exhibit A-l the witness filed a list of the said locations (called “towns”) with the period, duration, name of site and distance from Jackman, Maine, as appears below:

A map filed as Exhibit A-2 shows the “towns” where the “special work sites”, as they are called in s. 6(6) of the Act, are located.

The witness told the Court that the employer was incorporated in 1986. He also told the Court that before working for Mr. Griffin, the employer had worked for the E.J. Carrier logging business from 1977 to 1986, in Maine except for six months in New Brunswick.

Following an investigation by the respondent in respect of 1989, the employer received a letter dated January 23, 1991, which was filed as Exhibit A-3. It reads as follows:

[TRANSLATION]

Opérations forestières

Martin Dubé et Fils Inc.

2020, 8 rue

St-Prosper

GOM 1Y0

Audit Directorate

Ref.: Bruno Murray

Tel.: 649-3216

Attention: Martin Dubé

Québec

January 23, 199]

Dear Sir:

Further to our audit of the income tax returns of Opérations forestières Martin Dubé et Fils Inc., we hereby request that from now on the corporation require and keep supporting documentation for expenses relating to a special work site or remote location and for gasoline expenses where employees are reimbursed therefor by the corporation.

This supporting documentation will be required in the future before expenses of this type will be allowed.

Yours truly,

(s) B. Murray

Business Audit

Revenue Canada

Your tax return for the aforementioned taxation year [1989] has been the subject of a reassessment. The following are explanations of the change(s) made:

Former net income:	($54,636.00)
Adjustments to income from active business
Add:
Disallowed temporary work site allowance	$10,552.00
Disallowed retroactive temporary work site allowance	$12,425.00
	$31,659.00
Income from active business	NIL
Canadian investment income	NIL

According to the witness, the remote location deduction was taken in 1990 and allowed. There was no change in the facts in 1993, 1994 or 1995.

The witness told the Court that the cost of his machinery broke down as follows:

Testimony of Reginald A. Griffin

Mr. Griffin has been a forestry contractor since 1974. He lives at Moose River in the State of Maine. However, his place of business is in Jackman, Maine. Mr. Griffin admitted that he does not own the wood lots he cuts under contract. He obtains contracts from the S.D. Warren company, which has several paper mills across the U.S.

He recognized the map filed as Exhibit A-2 and said that he has other wood lots in other U.S. states.

The respondent filed as Exhibit 1-1 the two contracts entered into in 1994 and 1995 by Reginald A. Griffin, Jr. and Opérations forestières Martin Dubé & Fils Inc. of St-Georges, Quebec, Canada. They are essentially similar. The contract for 1995 reads as follows:

Agreement

THIS AGREEMENT made this 1st day of January, 1995, by and between REGINALD A. GRIFFIN, JR. of Moose River, in the County of Somerset and State of Maine, hereafter called GRIFFIN, and OPERATIONS FORESTIERES MARTIN DUBE & SONS INC. of St. Georges, in the Province of Quebec, Canada, hereafter called CONTRACTOR.

WHEREAS, GRIFFIN now is a prime contractor on S.D. Warren lands and desires to have the forest products on said lands cut, skidded, delimbed and slashed as appropriate, and

WHEREAS, it is understood that forest products will be produced to meet mill specifications and payment will not be made for any log culled for failure to meet specifications which have been provided to CONTRACTOR, and

WHEREAS, CONTRACTOR has the knowledge, skills and equipment necessary to harvest timber.

NOW, THEREFORE, the parties agree as follows:

I. CONTRACTOR agrees to employ such other persons as may be necessary to carry out the terms and conditions herein set out, and shall use, employ or hire the necessary equipment to harvest timber.

2. GRIFFIN has no right, or retains no right as to the details of the work, the hours of work and other conditions of employment.

3. GRIFFIN shall in no way be liable for any personal injuries (including death), whether the same be injuries to its employees or to other persons or damage to any type of property, caused by, resulting from, or attributable to, the operations of CONTRACTOR or any subcontractor under this Agreement, and CONTRACTOR does hereby agree to indemnify and hold harmless GRIFFIN from and against any and all claims, damages, debts, demands, suits, actions, attorney fees, court costs and expenses arising out of, attributable to, or resulting from said operations, whether the same are caused or alleged to have been caused in whole or in part by the negligence of GRIFFIN, its agents or employees.

4. Under this Agreement, CONTRACTOR is an independent employer and shall be liable and hereby expressly assumes exclusive liability as an employer under all Federal, State and Local Tax and Employment Laws and Regulations, and shall be liable for any social security, unemployment compensation and shall be responsible for the collection and remittance of any such taxes, interest and penalties.

5. Heavy equipment maintenance is the responsibility of the CONTRACTOR. CONTRACTOR agrees to maintain his equipment and vehicles in safe and serviceable condition as required by State and Federal regulatory agencies. Waste lubricating oil or hazardous materials are not to be disposed of on work site. Whenever there is a spill or release of oil or hazardous material, the CONTRACTOR or operator is responsible for clean-up and reporting to the appropriate agencies and to landowner.

6. CONTRACTOR shall follow landowner’s litter policy, to wit: Litter is unsightly and littering is a violation of the law. Please be sure to take everything that you bring in with you.

7. GRIFFIN shall not be liable for any worker’s compensation or other such benefits for owners or employees of CONTRACTOR but such liability, if any, shall be exclusively that of CONTRACTOR.

8. CONTRACTOR shall provide and pay for any Workers’ Compensation Insurance covering any and all employees he/they utilize in performing services for GRIFFIN. Furthermore, shall provide for the owners such alternative insurance as is deemed acceptable under the laws of the State of Maine and by the insurance carrier of GRIFFIN and by the owners of the lands on which such services are performed and such mills as may accept the timber. Failure to do so shall in no circum- stances result in any claims against GRIFFIN, and CONTRACTOR shall indemnify GRIFFIN against such claims.

9, CONTRACTOR agrees to comply with and hold GRIFFIN harmless from penalties, damages, fines and fees causing out of violations of any federal or state worker safety laws, regulations, or standards in conduct of this operation including employee training and seatbelt use requirements.

10. This agreement shall remain in effect for one year, but GRIFFIN reserves the right to use services of CONTRACTOR only as needed.

11. Following prices shall apply:

Logs -	$65.00 MBF
Delimbing -	$1.50 per thousand pounds
Spruce/Fir: T/L -	$4.81 per thousand pounds
Hardwood, Hemlock, Pine:
T/L Pulp	$4.09 per thousand pounds
Fuel Chips: Hardwood -	$2.08 per thousand pounds

IN WITNESS THEREOF, the parties have hereto set their hands on the day first above written.

SIGNED AND WITNESSED:

WITNESS

Reginald A. Griffin Jr.

WITNESS

The guarantee of work given to the contractor Opérations forestières Martin Dubé & Fils Inc. by Griffin, in clause 8 of the agreement for 1994 and clause 10 of the agreement for 1995, reads as follows:

8. This agreement shall remain in effect for one year, but GRIFFIN reserves the right to use services of CONTRACTOR only as needed.

Mr. Griffin said that he is bound by his contracts with the S.D. Warren company, which are similar in nature. S.D. Warren might tell him to stop cutting wood at any time due to any of a number of factors, such as the market or an inventory surplus. He said that he may be able to continue for several more years, although that would not be at any one site in particular, but at several. He repeated that this will depend on the contracts with S.D. Warren. Essentially, he said, “There is no guarantee”.

Testimony of Roch Roy, accountant

According to the witness, the employer paid $5,250 from 1987 to 1993, and also thereafter.

The witness noted that in Maine there are annual taxes on machinery and that they are divided between the municipalities responsible for the sites.

The witness further noted that Mr. Griffin has contracts with S.D. Warren for locations other than those in Maine.

As Exhibit I-2 the witness filed a letter to the respondent dated September 4, 1996. It reads as follows on the two topics relating to the points at issue, namely the special work sites and the temporary nature of the work:

[TRANSLATION]

Special Work Site

(A) The written contracts state that the client is the prime contractor for the S.D. Warren lands and that at the request of the client the company will do work on the said lands. According to the map, the said lands cover over 1,619 square kilometres, or 625 square miles.

(B) According to Appendix A, there were more than 12 movements of machinery and personnel to various sites in 24 months.

In view of the fact that the company has no place of business in the U.S. (see the document already provided, which is sent to the I.R.S. each year together with an 1120-F), it clearly works at a number of special work sites one after another, and never for long periods at the same location. The location where the workers sleep (in a trailer in Jackman, Maine, which the employees pay for personally) should not be confused with the locations where the work is done. The company’s place of business is in Quebec and the company has worked at a number of special work sites within an area of 1,619 square kilometres in the U.S.

Temporary Nature

According to IT-91 R4, para. 6, the I.T.A. does not define the word “temporary”. However, as a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years.

As we know, under the written contracts it is the client who decides at his option if the company will have work to do at a given location for periods of from one to three months (Appendix A).

It is thus clear that the work given to the company by the client at a special work site will be of a temporary nature for the employees and that, taken site by site, the duties to be performed will not provide continuous employment beyond a period of two years.

In that same paragraph it is stated that the following factors should be given particular consideration:

(1) the nature of the duties to be performed by the employee

-at the outset, the employee knows that he will have to cut wood for a period of one to three months at a special work site;

(2) the time estimated for a project

-each site is a separate project for the company and there is no overall project defined by the company (to date, all sites have been for less than three months);

(3) the agreed period of time for which the employee was engaged

-the company and its employees agreed upon no period of time, except on a site-by-site basis.

In short, in speaking of “duties”. the reference is to duties whose existence is known on a site-by-site basis when the client decides on them. This therefore is the starting point for the given duties, and it is at this point, when the terms for performing these duties are known, that temporary employment of the employees by the company begins.

Bruno Murray, an auditor for the respondent and the person who wrote Exhibit A-3, which is reproduced in paragraph 12 of these reasons, testified that the 1989 assessment related to only the reasonableness of the expenses, not to the points at issue in the instant case.

Act

The provision of the Act governing the instant case is s. 6(6)(a)(i). It reads as follows:

6(6) Employment at special work site or remote location. 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....

Case law

The parties referred to the following cases and commentary:

1— James J. Forestell v. The Minister of National Revenue, 11 D.T.C. 394 (T.R.B.);

2- James K. Middleton v. The Minister of National Revenue, 79 D.T.C. 597 (T.R.B.);

3- Kenneth W. King v. The Minister of National Revenue, 80 D.T.C. 1037 (T.R.B.); and

4- Interpretation Bulletin IT-91R4 of June 17, 1996, paragraphs 4(a), 5 and 6.

Analysis

The Court must admit that the arguments given by the accountant Roch Roy in his letter to the respondent dated September 4, 1996, which was filed by the respondent (Exhibit I-2, see para. [23]), are valid for the points at issue in the instant case.

Counsel for the appellant referred to Kenneth W. King (para. [26], item 3). Mr. King worked for 23 years at a location 400 miles from his home and deducted allowances he received for working at a remote work site.

What is at issue in the instant case is not remoteness, but the fact that the appellant had worked for the same employer for eight years, from which the respondent concluded that this was permanent employment.

The following extract from King can be found at pp. 29 and 30 of the transcript of the appellant’s argument:

Moreover, if one takes into account the fact that the appellant could be laid off on a five days’ notice in 1973 and on a one month’s notice in 1974 ... this confirms that the appellant’s decision not to move his family at Castlegar was reasonable.

Counsel for the respondent argued that there was in fact no clause regarding layoff after five days’ or a month’s notice in the contracts signed by Griffin with Opérations forestières Martin Dubé & Fils Inc. (Exhibit I-1). According to Mr. Griffin’s testimony, he depends on the decisions of the S.D. Warren company and can, stop the work at any time (para. [19]). There was not even a time clause. Although it was stated that Mr. Griffin’s contracts with Opérations forestières Martin Dubé & Fils Inc. were entered into primarily to protect Mr. Griffin in dealing with his insurance companies, making Opérations forestières Martin Dubé & Fils Inc. liable for any acci- dents of its employees, that does not alter the clause according to which renewal of the contracts was not guaranteed.

As to whether the duties were of a temporary or permanent nature, it should be noted that paragraph 5 of Interpretation Bulletin IT-91R4 refers to the duration of the duties performed by the employee, not the expected duration of the project as a whole:

5. The expression “duties performed by the taxpayer were of a temporary nature” as used in subparagraph 6(6)(fl)(i) (see point 4(a) above) refers to the duration of the duties performed by the individual employee, not the expected duration of the project as a whole. For example, a project might take ten years to complete but the individual’s duties at that project might take only a few months.

Even considering the project as a whole, the contracts stated that they were not for over two years. The following appears in paragraph 6 of Interpretation Bulletin 91R4:

6. ... However, as a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years.

The duties can thus be considered to be of a temporary nature.

Conclusion

The appeal is allowed with costs and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment.

Appeal allowed.