Judgments

[1995] 3 F.C. 294

A-522-94

Dianne M. Giannakopoulos (Applicant)

v.

The Minister of National Revenue (Respondent)

Indexed as: Giannakopoulos v. M.N.R. (C.A.)

Court of Appeal, Marceau, Strayer and Linden JJ.A.—Edmonton, June 22; Ottawa, July 6, 1995.

Income tax — Income calculation — Deductions — T.C.C. disallowing deduction of moving expenses under Income Tax Act, s. 62(1), requiring move bring taxpayer at least 40 kilometres closer to work — According to car odometer, new residence 44 kilometres closer to work — Tax Court measuring distance using “straight line” or “as the crow flies” approach — Distance moved should be measured using real routes of travel — Shortest normal route proper test — T.C.C. erred in law by interpreting “distance” out of context.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Income Tax Act, S.C. 1970-71-72, c. 63, s. 62 (as am. by S.C. 1984, c. 45, s. 21).

CASES JUDICIALLY CONSIDERED

DISTINGUISHED:

Lake v. Butler (1855), 24 Law J Rep (NS) 273; Jewell and Another v. Stead (1856), 25 Law J Rep (NS) 294.

OVERRULED:

Cameron (D.) v. M.N.R., [1993] 1 C.T.C. 2745; (1993), 93 DTC 437 (T.C.C.).

CONSIDERED:

Bernier (J.-C.) Estate v. M.N.R., [1990] 1 C.T.C. 2535; (1990), 90 DTC 1220 (T.C.C.).

REFERRED TO:

Haines (R C) v MNR, [1984] CTC 2422; (1984), 84 DTC 1375 (T.C.C.); Bracken (S) v MNR, [1984] CTC 2922; (1984), 84 DTC 1813 (T.C.C.); Jennings v. Menaugh et al., 118 Fed. 612 (Circ. Ct. 1902).

APPLICATION for judicial review of Tax Court decision disallowing deduction for moving expenses (Giannakopoulos (D.M.) v. Canada, [1995] 1 C.T.C. 2562 (T.C.C.)) under Income Tax Act, subsection 62(1). Application allowed.

appearance:

Dianne M. Giannakopoulos on her own behalf.

COUNSEL:

Rhonda Nahorniak and Jehad Haymour for respondent.

APPLICANT ON HER OWN BEHALF:

Dianne M. Giannakopoulos, Edmonton.

solicitor:

Deputy Attorney General of Canada for respondent.

The following are the reasons for judgment rendered in English by

Marceau J.A.: The issue raised by this application for judicial review of a decision of the Tax Court of Canada [[1995] 1 C.T.C. 2562] is narrow but not without some important implications. When a legislative enactment speaks of the distance between two geographic points as a condition for the application of a rule of law, how is that distance to be measured if no method is specified? Should the distance be measured in a straight line, i.e. “as the crow flies”, or by following a normal route of public travel? The Tax Court of Canada has consistently adopted the “straight line” approach,[1] however, this is the first time this Court has had occasion to address the question and it definitely merits some scrutiny.

The applicant was employed as a research interviewer with the University of Alberta when, in 1991, she accepted a new position as an administrative assistant with her employer, which required her to work at a different location. In order to be closer to her new workplace, she moved from Stony Plain to Edmonton, where the University administration offices are located.

Section 62 of the Income Tax Act [S.C. 1970-71-72, c. 63 (as am. by S.C. 1984, c. 45, s. 21] (the Act) reads in part as follows:

62. (1) Where a taxpayer has, at any time, commenced

(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as his “new work location”), or

…

and by reason thereof has moved from the residence in Canada at which, before the move, he ordinarily resided (in this section referred to as his “old residence”) to a residence in Canada at which, after the move, he ordinarily resided (in this section referred to as his “new residence”), so that the distance between his old residence and his new work location is not less than 40 kilometres greater than the distance between his new residence and his new work location, in computing his income for the taxation year in which he moved from his old residence to his new residence or for the immediately following taxation year, there may be deducted amounts paid by him as or on account of moving expenses incurred in the course of moving from his old residence to his new residence, to the extent that

(c) they were not paid on his behalf by his employer.

Using the odometer in her car, the applicant calculated that her new residence was 44 kilometres closer to the University administration centre than her prior one. Considering herself to have met the conditions prescribed by the provisions of subsection 62(1) of the Act, the applicant claimed her moving expenses on her income tax returns for the 1991 and 1992 taxation years. The deduction, however, was disallowed and she was reassessed on the basis that, measured in a straight line, her new residence was only 36 kilometres closer to her workplace than the prior one. The applicant appealed to the Tax Court of Canada where the reassessment was confirmed, it being the jurisprudence of the Court, as mentioned above, that the “straight line method” was indeed the appropriate one.

The applicant applied to this Court for judicial review of the decision of the Tax Court of Canada.

In coming to its conclusion regarding the appropriate measuring technique, the Tax Court of Canada, in its early decisions, relied on two antiquated English cases,[2] one of which involved a court’s territorial jurisdiction, the other the appropriate placement of a toll gate. Neither of these cases had any relation to a taxpayer travelling to work and, because of that, neither of them, in my opinion, can be adequately applied to the situation addressed by subsection 62(1).

Subsection 62(1) permits a taxpayer to deduct moving expenses when he moves closer to a new workplace. An employee must live within a reasonable distance of his work. When he accepts a new position, the employee may have to move in order to remain within a practical commuting distance of his job. Subsection 62(1) recognizes that relocation is a legitimate work-related expense. In order to prevent the provision from being invoked when a taxpayer simply desires a change in residence, the provision requires that the move bring the taxpayer at least forty kilometres closer to work. Usually, a taxpayer travels to work using ordinary routes of public travel, i.e. roads, highways, railways. In determining whether the taxpayer has really moved forty kilometres closer to work, it only makes sense to measure the distance he has moved using real routes of travel. A realistic measurement of travelling distance is necessary in order to give effect to the purpose of the provision. The straight line method bears no relation to how an employee travels to work. It is illogical to apply this technique to a provision which exists to recognize work related relocation expenses. It leads to absurd results where the old residence and the new workplace are separated by a body of water. A taxpayer who moves across a river to be closer to his workplace may have only moved a few miles “as the crow flies” but may actually be several dozen miles closer to work. In fact, this is exactly what happened in Cameron (D.) v. M.N.R.[3] wherein the taxpayer moved across the Ottawa River from Aylmer, Quebec to Kars, Ontario. The Tax Court of Canada held that he could not deduct his moving expenses because the distance was less than 40 kilometres using a straight line measurement.

In one case before the Tax Court of Canada, Bernier (J.-C.) Estate v. M.N.R.,[4] Lamarre Proulx T.C.J. held herself to be bound by the prior decisions but only after expressing her own discordant personal view. She stated:

In my view, the remedy in subsection 62(1) should be interpreted in relation to the workers, and the distance in question should be measured by the worker’s normal route or the route that he would normally take to go from home to his place of work.

While the use of the normal route notion is more realistic and more effectively furthers the purpose of the section, I would not go so far as Lamarre Proulx T.C.J. would apparently have been prepared to go, i.e. to accept a measurement based merely on the worker’s normal route or the route that he would normally take to go from home to his place of work. Such a subjective approach would introduce a source of uncertainty which might become “a trap for litigation”, which was precisely the reason invoked by the judges to explain their adherence to the direct line approach. It is necessary to be more objective. The idea of the shortest route that one might travel to work should be coupled with the notion of the normal route to the travelling public. Thus, the shortest normal route would be a preferable test to the straight line method,[5] for it is both realistic and precise. It also furthers the purpose of the provision. This test would prevent a taxpayer from being expected to use an extraordinary route such as a neglected or unpaved road. It would also leave room to consider travel not only on roads but on ferries and rail lines.

In my introductory remarks, I spoke of a general problem regarding interpretation of the word “distance” in legislative enactments. In common parlance, the word itself, or its equivalent in French, has to be interpreted in relation to the context in which it is used. The “distance” between two steeples in a city or between Ottawa and Paris could not be understood as meaning the same thing as the “distance” between two runners in a marathon. I am of the view that there is no reason to do otherwise when the word is used in the body of a legislative enactment. In my opinion, by applying the straight line rule to the calculation of the distance referred to in subsection 62(1) of the Act, the Tax Court of Canada has interpreted the word without regard to the context and, in so doing, has committed an error of law which must be reversed.

I would, therefore, allow this application, set aside the decision of the Tax Court of Canada and refer the matter back to it for a reconsideration in accordance with these reasons.

Strayer J.A.: I agree.

Linden J.A.: I agree.

---