Tax Court of Canada Judgments

Date: 20000823

Docket: 1999-3989-IT-I

BETWEEN:

GARRY O'NEIL,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Rip, J.T.C.C.

[1] Garry O'Neil appeals (informal procedure) income tax assessments for 1994, 1995 and 1996 in which the Minister of National Revenue ("Minister") denied him motor vehicle expenses for travel between his residence and his place of employment.[1]

[2] At all relevant times Mr. O'Neil held the position of Security Coordinator for the City of Ottawa ("City") and, as such, was responsible for the safety and security of the City's employees as well as the City's property. Mr. O'Neil had an office at Ottawa City Hall where he regularly reported for work. He was also required to work away from City Hall attending at various City properties. One of the conditions of his employment with the City was that he provide his own vehicle for use in his employment.

[3] The City owns various types of property located in various areas of the municipality: arenas, community centres, garages, fire stations, industrial yards. Mr. O'Neil was on call at all hours of the day. He would receive telephone calls at night when he was at home that City property had been damaged or a break-in had taken place on the property. When a City employee "becomes aware" of an incident, the employee, according to City By Law 384.68, is to report the incident "forthwith" to the Security Coordinator or police. An employee risks dismissal of employment if he or she fails to report the incident. "Traditionally", Mr. O'Neil testified, the employee calls him rather than the police.

[4] Calls from employees vary with the season. The calls are not daily; they are not regular. When an incident does occur and Mr. O'Neil is telephoned at home, for example, he will determine the severity of the incident and may decide to attend to it the next day or he may visit the scene of the incident immediately. About 20 per cent of the time his immediate presence is required. He also decides whether to call the police. If he has to interview employees he will visit them at their place of employment usually at the beginning or end of the employee’s shift. There are three eight-hour shifts each day. Over half the municipal employees work away from City Hall. Mr. O’Neil also interviewed employees at sites of incidents. He prepared a report of each incident.

[5] Because he is on call at all times, he is required to have his automobile available when he is at his office at City Hall and when he is at home, testified Mr. O'Neil. On a normal day he would report to his office at City Hall and then, during the day, visit various City properties. While his contract of employment does not require him to have a car at home for use, this "was implied" by his supervisors. In his view he could not refuse to own a car or to take it home. Mr. O'Neil stated that the family has another car for use by his wife and son.

[6] The City gave Mr. O'Neil an allowance for the use of his vehicle computed at 38.46 cents per kilometre driven for City business. The amount of the allowance was the same amount of allowance paid to employees of the City who were subject to a collective labour agreement. Mr. O'Neil was an exempt employee, not subject to the agreement, but the automobile allowance was paid to all employees according to the rates in the collective agreement. The allowance included "work-related" automobile expenses but not expenses between an employee's residence and City Hall. Mr. O'Neil submitted his claim to the City Solicitor, his immediate supervisor, and would be reimbursed accordingly. All his travel claims with the City were accepted. The City paid Mr. O'Neil only for distance driven between City Hall and municipal sites and between municipal sites. He did not make any claim for travel between his residence and City Hall because he knew it would be refused. He was paid for travel between his residence and a site of incident.

[7] The distance between Mr. O'Neil's residence in Orleans, Ontario and City Hall is 18 kilometres. He maintained a log of work-related travel by automobile.

[8] The appellant claimed that he drove 4,000 kilometres in 1994, 9,886 kilometres in 1995 and 11,904 kilometres in 1996 to earn employment income. The City paid an allowance on the basis he drove his vehicle in the performance of his duties as follows: 645 kilometres in 1994, 2,008 kilometres in 1995 and 3,444 kilometres in 1996.

[9] The City provided a form T2200 (Declaration of Conditions of Employment) to Mr. O'Neil for the years in issue. According to the form Mr. O'Neil was ordinarily required to work away from the employer's place of business or in different places, he was required to pay his own expenses and he received an automobile allowance.

[10] Mr. Jerry Bellomo, Ottawa City Solicitor, confirmed Mr. O'Neil's evidence. Mr. O'Neil is on call 24 hours a day, seven days a week. Mr. Bellomo explained that no “formal” contract exists between Mr. O'Neil and the City. The terms of their relationship is contained in the job description for the office of Security Coordinator and in a letter offering the position to Mr. O'Neil. The letter stated that Mr. O'Neil provide a vehicle for work as a condition of employment. In Mr. Bellomo's view, if Mr. O'Neil did not have a vehicle, he would be breaking his contract with the City and would be subject to termination.

[11] Travel between an employee's residence and City Hall, Mr. Bellomo testified, is not considered by the City to be work-related. Travel between another City site and Mr. O'Neil's residence is "probably" work-related and Mr. Bellomo would approve such a claim.

[12] Paragraph 8(1)(h.1) of the Income Tax Act ("Act") provides that:

(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:	(1) Sont déductibles dans le calcul du revenu d'un contribuable tiré, pour une année d'imposition, d'une charge ou d'un emploi ceux des éléments suivants qui se rapportent entièrement à cette source de revenus, ou la partie des éléments suivants qu'il est raisonnable de considérer comme s'y rapportant :
. . .	[...]
(h.1) 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 motor vehicle expenses incurred in the performance of the duties of the office or employment, amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment, except where the taxpayer	h.1) dans le cas où le contribuable, au cours de l'année, a été habituellement tenu d'accomplir les fonctions de son emploi ailleurs qu'au lieu d'affaires de son employeur ou à différents endroits et a été tenu, aux termes de son contrat d'emploi, d'acquitter les frais afférents à un véhicule à moteur qu'il a engagés dans l'accomplissement des fonctions de sa charge ou de son emploi, les sommes qu'il a dépensées au cours de l'année au titre des frais afférents à un véhicule à moteur pour se déplacer dans l'exercice des fonctions de son emploi, sauf s'il a, selon le cas:
(iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer's income for the year, or	(i) reçu une allocation pour frais afférents à un véhicule à moteur qui, par l'effet de l'alinéa 6(1)b), n'est pas incluse dans le calcul de son revenu pour l'année,
(iv) claims a deduction for the year under paragraph (f);	(ii) demande une déduction pour l'année en application de l'alinéa f);

[13] Appellant's counsel submitted that if her client must have his automobile available for work at all times when he is at City Hall and at home, the automobile must be work-related.

[14] Appellant's counsel relied on the reasons for judgment in Evans v. The Queen,[2]in this Court and Hoedel v. The Queen,[3] a decision of the Federal Court of Appeal. In Evans, the appellant, an employee of a school district, claimed automobile expenses incurred while travelling from her residence and to the first and last schools that she visited on a given day. Her appeal was allowed on the basis that she was transporting work-related material in the trunk of her car. Porter D.J.T.C., explained that:

[i]f the Appellant had simply to get herself between her residence and the various schools where she started and finished her days, it would seem to me that her travel expenses would properly be limited to the cost of such travel less the amount that she would have expended to travel on a daily basis to and from the administrative centre. In the normal course of events, her cost of travel between her residence and the administrative centre would be considered personal in nature. It is only the excess that she should be able to claim.[4]

[15] In Hoedel, the appellant, a constable in the Canine Division of the Regina Police, deducted expenses incurred in transporting a police dog in his own vehicle from his home to his place of employment and to other locations. He was provided with a police dog and kennel, which he kept at home. While on duty he was provided with a police vehicle adapted for transporting dogs. He contended that his duties required him to transport the dog on trips of a personal nature. The appellant's supervisor officer testified that it was mandatory for the appellant to take the dog with him when he was off-duty and that non-compliance with this condition of employment would reflect negatively on his job performance valuation. The Court of Appeal found the possibility that his failure to carry out a mandatory condition of employment that he take the dog with him while off-duty or risk an unfavourable valuation was evidence that the task was a duty of employment. The expenses incurred in transporting the dog between the appellant's residence and the police station, among travel, were deductible.

[16] The issue before me is not whether the appellant's automobile is "work-related". The issue is whether the appellant incurred the automobile expenses in the course of his employment. Paragraph 8(1)(h.1) requires four conditions to be satisfied for a taxpayer to deduct automobile expenses:

(i) the taxpayer was ordinarily required to carry on his or her duties of employment away from the employer's business or in different places;

(ii) the taxpayer was required to pay automobile expenses under his or her contract of employment; and

(iii) the expenses were incurred in the performance of the duties of employment;

(iv) provided, that if the expenses were incurred in performing the duties of employment, the taxpayer did not receive a non-taxable allowance from the employer for motor vehicle expenses pursuant to paragraph 6(1)(b) of the Act.

[17] The phrase "away from the employer's place of business or in different places" in paragraph 8(1)(h.1) has been interpreted in Royer v. Canada.[5] If an employee has to carry on his duties at several places of business, those places of business come precisely within the meaning of "different places". If the employee ordinarily works at one of those different places and works at the others at the employer's discretion, travel to the usual place of business will be a personal expense.[6] There is no issue between the parties that Mr. O'Neil was ordinarily required to carry on his duties of employment in many areas of the City. Respondent's counsel did not question this obvious fact.

[18] There are at least two phrases in paragraph 8(1)(h.1) that need to be considered for purposes of these appeals. First is the phrase "expenses incurred in the performance of the duties of . . . employment". The French version of this phrase is "d'acquitter les frais . . . qu'il a engagés dans l'accomplissement des fonctions . . . de son emploi". These words in both languages appear to insist that, to be deductible, the automobile expenses must be incurred in actually performing or carrying out one's employment duties.

[19] The second phrase is ". . .travelling in the course of . . . employment". The French version is ". . . dans l'exercice des fonctions de son emploi". This phrase also appears to imply that the taxpayer incurs the automobile expense in work while working in his employment.

[20] Rule 9 of Schedule E of the Income Tax Act of the United Kingdom uses the words ". . . travelling in the performance of the duties of . . . employment". In the United Kingdom costs of travelling to work from home are not deductible in computing income because the costs are not incurred in the course of performing the duties, but rather to get to the place where the duties will be carried out.[7] And, even if an employee's automobile is required for his work once he arrives at the place of work, his costs of travel from or to his home are not deductible.[8] In the Income Tax Act of the United Kingdom, unlike the Canadian Act, for an expense to be deductible, it must be also necessarily incurred. However, the principles adopted by the English Courts as to what constitutes performance of duties of employment are helpful. I shall briefly refer to two judgments of the English courts, Ricketts v. Colquhoun,[9]and Burton v. Rednall.[10]

[21] In Ricketts, the taxpayer lived in London and was a practising member of the London bar. He was taxable as an individual having his own business, that of a barrister. He was also Recorder of Portsmouth and, as such, was taxable as an employee. He sought to deduct the costs of travelling from his home to Portsmouth. The House of Lords rejected his appeal on two main premises. First, when travelling to his place of work he was travelling not in the course of his duties as Recorder but in order to enable him to perform them.[11] His duties only began at Portsmouth. Secondly, the expenses were not incurred necessarily.[12]

[22] In Burton, the appellant was unable to rent a house in Ipswich but had secured one in a village about 19 miles away. Under the terms of his employment, he was required to have an automobile available in order to visit farmers in the district. In order to satisfy this condition, the appellant used his automobile to travel from his residence to Ipswich. The appellant claimed that the automobile expenses incurred from travelling from his residence to Ipswich should be deductible. The court rejected his claim and held that:

. . . he is not performing his duty when he travels between his home and Ipswich. It is reasonable for him to do so – indeed he is bound to do so – but he is not then in the performance of the duties of his office; he is either going to perform his duties or he is going home after performing his duties and the authorities make it clear that that is the proper construction to give to the Act.[13]

[23] The Canadian and English courts are consistent. The word "performance" has been defined, among other ways, by the Shorter Oxford English Dictionary on Historical Principles ("Oxford") as the "carrying out of a command, duty, etc. " and "[t]he accomplishment, carrying out, doing of any action or work; working, action". The words "...incurred in the performance of...employment" refer to automobile expenses incurred by the employee while providing services under the employment contract.[14] The English cases have drawn a sharp distinction between an expenditure incurred in the performance of the duties of an office or employment and expenditure incurred in order to enable oneself to do the job initially or to enable oneself to perform the duties of that office more efficiently. This was emphasized in W. Friedson v. The Rev. F.H. Glyn-Thomas[15] where Sankey J. stated:

. . . I do not think it is possible to say that the expense of removal in order to get there was an expense necessarily incurred in the performance of his duties. There is all the difference in the world between an expense which you have to incur in order to go to a place in order to take up your duties, and an expense incurred in the performance of your duties.

[24] The word "course" is defined by Oxford as the "[h]abitual or ordinary manner of procedure; . . .". The phrase ". . . travelling in the course of . . . employment" has been dealt with in Luks [No. 2] v. M.N.R.,[16] and Chrapko.[17] In Luks, it was held that a person could not be deemed to be "travelling in the course of the office or employment . . ." unless the travel actually involved the performance of some service as compared to simply getting oneself to the place of work. The Federal Court Trial Division in Chrapko, held that words "in the course of his employment" do not preclude a deduction in such circumstances. However, in appeal, the Federal Court of Appeal appeared to recognize that a taxpayer may deduct expenses for travelling from his home to a place of work if that place of work is not the place to which he "usually" reports to work. In assessing Mr. O’Neil, the tax authority accepted the principle that the appellant may deduct his automobile expenses for travel between his home and a work site that was not City Hall.

[25] Mr. O'Neil's costs of travel between his home and City Hall are not deductible in computing his income for the years in appeal.

[26] In Baxter v. Canada,[18] this court considered the collective agreement between the employer and its employees in order to determine whether similar automobile expenses should be deductible. After viewing the collective agreement, Beaubier T.C.J. concluded that since the employee's collective agreement paid for all work-related automobile expenses, any other expenses incurred by the employee were a personal expense. The facts at bar are not dissimilar in this regard.

[27] The appellant received an automobile allowance from the City of Ottawa for travelling in the performance of the duties of his employment. The amounts of the allowance were not included in Mr. O'Neil's employment income. There was no evidence led to cast any doubt that the allowance paid was not reasonable. Hence, for this reason alone, the appeals would fail. That the City did not pay an allowance for travel between City Hall and Mr. O'Neil's residence is not unreasonable.

[28] The appeals are dismissed.

Signed at Ottawa, Canada, this 23rd day of August 2000.

"Gerald J. Rip"

J.T.C.C.

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