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.
|
"D.G.H. Bowman" |
A.C.J.
COURT FILE NOS.: 2001-2222(IT)I, 2001-2775(IT)I,
2001-2102(IT)I
STYLE OF CAUSE: Between Terrence K. Poulton and
Her Majesty the Queen AND
Between Albert J. Lee and
Her Majesty The Queen AND
Between Clarence E. Daly and
Her Majesty The Queen
PLACE OF HEARING: St. John's, Newfoundland
DATE OF HEARING: January 14, 2002
REASONS FOR JUDGMENT BY: The Honourable D.G.H. Bowman
Associate Chief Judge
DATE OF JUDGMENT: February 8, 2002
APPEARANCES:
Counsel for the Appellant Terrence K. Poulton: Ernest Boone, Esq.
For the Appellant Albert J. Lee: The Appellant himself
For the Appellant Clarence E. Daly: The Appellant himself
Counsel for the Respondent: Cecil Woon, Esq.
John Bodurtha, Esq.
COUNSEL OF RECORD:
For the Appellant Terrence K. Poulton:
Name: Ernest Boone, Esq.
Firm: Ottenheimer Boone
St. John's, Newfoundland
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-2222(IT)I
BETWEEN:
TERRENCE K. POULTON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard with the appeals of Albert J. Lee (2001-2775(IT)I) and Clarence E. Daly (2001-2102(IT)I) on January 14, 2002 at St. John's, Newfoundland, by
The Honourable D.G.H. Bowman
Associate Chief Judge
Appearances
Counsel for the Appellant: Ernest Boone, Esq.
Counsel for the Respondent: Cecil Woon, Esq.
John Bodurtha, Esq.
JUDGMENT
It is ordered that the appeal from the assessment made under the Income Tax Act for the 1997 taxation year be allowed with costs and the assessment be referred back to the Minister of National Revenue for reconsideration and reassessment to delete from the appellant's income the amount of $1,864 included under paragraph 6(1)(a) of the Act.
Signed at Toronto, Canada, this 8th day of February 2002.
|
"D.G.H. Bowman" |
A.C.J.
2001-2775(IT)I
BETWEEN:
ALBERT J. LEE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard with the appeals of Terrence K. Poulton (2001-2222(IT)I) and Clarence E. Daly (2001-2102(IT)I) on January 14, 2002 at St. John's, Newfoundland, by
The Honourable D.G.H. Bowman, Associate Chief Judge
Appearances
Counsel for the Appellant: The Appellant himself
Counsel for the Respondent: Cecil Woon, Esq.
John Bodurtha, Esq.
JUDGMENT
It is ordered that the appeal from the assessment made under the Income Tax Act for the 1997 taxation year be allowed and the assessment be referred back to the Minister of National Revenue for reconsideration and reassessment to delete from the appellant's income the amount of $2,460 included under paragraph 6(1)(a) of the Act.
The appellant is entitled to his costs, if any.
Signed at Toronto, Canada, this 8th day of February 2002.
|
"D.G.H. Bowman" |
A.C.J.
2001-2102(IT)I
BETWEEN:
CLARENCE E. DALY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard with the appeals of Terrence K. Poulton (2001-2222(IT)I) and Albert J. Lee (2001-2775(IT)I) on January 14, 2002 at St. John's, Newfoundland, by
The Honourable D.G.H. Bowman, Associate Chief Judge
Appearances
Counsel for the Appellant: The Appellant himself
Counsel for the Respondent: Cecil Woon, Esq.
John Bodurtha, Esq.
JUDGMENT
It is ordered that the appeal from the assessment made under the Income Tax Act for the 1997 taxation year be allowed and the assessment be referred back to the Minister of National Revenue for reconsideration and reassessment to delete from the appellant's income the amount of $6,507 included under paragraph 6(1)(a) of the Act.
The appellant is entitled to his costs, if any.
Signed at Toronto, Canada, this 8th day of February 2002.
|
"D.G.H. Bowman" |
A.C.J.