BETWEEN:
and
Heard at Toronto, Ontario, on February 8, 2006.
Judgment delivered at Ottawa, Ontario, on February 14, 2006.
REASONS FOR JUDGMENT BY: ROTHSTEIN J.A.
CONCURRED IN BY: SHARLOW J.A.
NOËL J.A.
Docket: A-356-05
Citation: 2006 FCA 67
CORAM: ROTHSTEIN J.A.
SHARLOW J.A.
MALONE J.A.
BETWEEN:
BRIAN BURTON
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
[1] This is an appeal from the Tax Court ([2005] 4 C.R.T. 2070) in respect of lodging and automobile expenses reimbursed to an employee by the employer.
[2] The Tax Court judge dismissed the appellant's appeal in respect of these expenses, finding that the Minister properly assessed them as taxable benefits.
LODGING EXPENSES
[3] The general rule is that lodging expenses are personal and reimbursement by an employer should be included in income as a taxable benefit under paragraph 6(1)(a) of the Income Tax Act. However, the appellant claims that such reimbursement should not be considered a taxable benefit in his case because the exemption for special work sites in subsection 6(6) of the Act is applicable.
[4] One of the requirements for application of subsection 6(6) is that the duties of the taxpayer at the work site are temporary in nature. The Tax Court judge found on the "evidence as a whole" that the appellant's duties were not of a temporary nature. That is a finding of fact that is supported by evidence in the record. There was no palpable or overriding error by the trial judge in making this finding and this Court cannot interfere with it.
AUTOMOBILE EXPENSES
[5] In respect of the decision of the Tax Court judge that reimbursement for automobile expenses were taxable benefits, the appellant claims there was a denial of procedural fairness. The transcript of the Tax Court proceedings was provided by the Minister. For some reason that portion of the proceedings in respect of which the appellant claims there was a breach of fairness was not included in the transcript. However, the Minister does not dispute the appellant's recounting of what transpired.
[6] The Minister's January 12, 2005 Reply to the appellant's Notice of Appeal in the Tax Court stated that the statutory provisions upon which the Minister would be relying were paragraphs 6(1)(a), 6(1)(b) and 6(1)(k) of the Income Tax Act.
[7] At the commencement of the proceedings in the Tax Court on July 8, 2005, counsel for the Minister, without any advance notice and without formal motion, requested that he be permitted to file an amended Reply in which the reference to paragraph 6(1)(k) was deleted and 6(1)(l) substituted.
[8] Paragraph 6(1)(l) is the provision that requires that benefits an employee receives from his employer for the operation of an automobile must be included in the employee's income as a taxable benefit. Paragraph 6(1)(l) provides:
| 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 (l) the value of a benefit in respect of the operation of an automobile...received or enjoyed by the taxpayer in the year in respect of, in the course of or because of, the taxpayer's office or employment .
|
6. (1) Sont à inclure 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 sont applicables: l) le montant représentant la valeur des avantages relatifs au fonctionnement d'une automobile...que le contribuable a reçus ou dont il a joui au cours de l'année soit relativement à sa charge ou à son emploi, soit dans le cadre ou en raison de cette charge ou de cet emploi. |
[9] Paragraphs 6(1)(a), (b) and (k), upon which the Minister relied in his original Reply, do not impose such a requirement. In the absence of paragraph 6(1)(l), the appellant would not have to include the automobile expense reimbursement he received from his employer in his income as a taxable benefit.
[10] The Tax Court judge allowed the amended Reply to be filed and gave the appellant the choice of a half-hour recess or an adjournment in order to prepare and respond to the amended Reply. The appellant decided not to ask for an adjournment and agreed to proceed. He explained that as the issues involved his 2000 and 2001 taxation years and the case before the Tax Court judge took place in 2005, he did not want to incur further delay.
[11] The appellant says that the Tax Court judge should have refused the Minister's application to file an amended Reply on the morning of the trial. In not doing so and in offering him only the choice of a short recess or adjournment, there was breach of the rules of procedural fairness. He relies on the decision of Bowman A.C.J.T.C. (as he then was) in Poulton v. R., [2002] 2 C.T.C. 2405. In Poulton, after citing authority to the effect that the Court will normally be permissive in granting leave to amend pleadings, Bowman A.C.J.T.C. explained why he refused to allow the amendment in that case.
[12] As I understand his reasoning, Bowman A.C.J.T.C. was of the view that in cases governed by the informal procedure, the Tax Court should not always be willing to grant a motion by the Crown "at the eleventh hour to spring a brand new argument on a taxpayer". Where an adjournment results "in undue delay" of "relatively small informal appeals", the Tax Court judge must carefully exercise his or her discretion in deciding whether to allow the amendment and the consequent adjournment. He notes that in informal appeals, denying the Crown the opportunity to amend at the last minute would not result in a "jurisprudential or fiscal catastrophe".
[13] At paragraphs 16, 17 and 18 Bowman A.C.J.T.C. wrote:
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.
[14] The question of whether to allow an amendment to pleadings and if so whether a recess or adjournment is appropriate is, of course, a matter of discretion. I do not read Bowman A.C.J.T.C. to purport to lay down fixed rules for dealing with such occurrences. However I do think he was providing some guidance as to the practical considerations to be taken into account by a Tax Court judge in exercising discretion in these cases.
[15] Poulton was not cited to the Tax Court judge by the Minister. The appellant, not having any advance notice of the proposed amended Reply, had no opportunity to research the law on the point.
[16] It appears that the Tax Court judge did not take into account the considerations in Poulton. Where in the exercise of discretion a trial judge fails to have regard for relevant considerations, even inadvertently as in this case because the relevant guiding authority was not cited to her, an appeal court is justified in interfering with that exercise of discretion. While this Court could remit the matter to the Tax Court judge to consider the matter anew, the additional time and costs are not justified. In these circumstances, I would dispose of this appeal by substituting this Court's exercise of discretion for that of the Tax Court judge.
[17] The relevant considerations are, first, that the taxable benefits at issue are $6,348.00 for the year 2000 and $4,801.00 for the year 2001. The amounts of tax involved are of course, only a percentage of these figures - according to the appellant about forty percent. The amounts involved therefore are relatively small.
[18] Second, the matter involved taxation years that were some four and five years old at the time of trial.
[19] Third, the appellant is self-represented. He was justified in expecting that the Minister's original Reply was the basis for the assessment and restricting his preparation to the statutory provisions relied upon by the Minister in that Reply. Section 6 of the Income Tax Act is drafted in a manner that contains exceptions and exceptions to exceptions and is therefore not straightforward. This is not a case in which the Minister's error in not referring to paragraph 6(1)(l) in the original Reply was self-evident and in respect of which, the appellant should have anticipated an amendment.
[20] Having regard to these considerations, I would exercise my discretion to refuse to allow the amendment to add paragraph 6(1)(l) of the Income Tax Act to the Minister's Reply in the Tax Court. As the assessment of the appellant in respect of automobile expenses cannot be supported by any other provision of section 6 of the Act, the assessment cannot be sustained.
CONCLUSION
[21] The appeal should be allowed with respect to automobile expenses. In all other respects, it should be dismissed. The Minister should reassess the appellant in accordance with these reasons. In view of divided success, there should be no order as to costs.
"I agree
K. Sharlow"
"I agree
B. Malone"
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-356-05
STYLE OF CAUSE: BRIAN BURTON
Appellant
and
HER MAJESTY THE QUEEN
Respondent
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: FEBRUARY 8, 2006
MALONE J.A.
APPEARANCES:
| THE APPELLANT IN PERSON
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Eric Sherbert |
FOR THE RESPONDENT
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SOLICITORS OF RECORD:
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FOR THE APPELLANT
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Deputy Attorney General of Canada Ottawa, Ontario |
FOR THE RESPONDENT
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