Tax Court of Canada Judgments

Date: 19981209

Dockets: 97-1402-UI; 97-150-CPP

BETWEEN:

WOMEN IN FILM & TELEVISION TORONTO INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

MARGOT La ROCQUE,

Intervenor.

Reasons for judgment

(Delivered orally from the Bench in Toronto, Ontario, on November 3, 1998.)

Hamlyn, J.T.C.C.

[1] This is in the matter of Women In Film & Television Toronto Inc., the Appellant, and the Minister of National Revenue (the "Minister"), the Respondent, and Margot La Rocque, the Intervenor.

[2] By Notice of Assessment dated June 6, 1996 the Appellant was assessed for failure to remit unemployment insurance premiums in respect of Margot La Rocque in the amount of $1,602.93 and for related penalties and interest for 1995 and 1996. And by Notice of Assessment dated June 6, 1996 the Appellant was assessed for failure to remit Canada Pension Plan contributions in respect of Margot La Rocque in the amount of $1,082.74 and for related penalties and interest for 1995 and 1996.

[3] The Appellant applied to the Respondent for reconsideration of the assessments and the Respondent confirmed the assessments by letter dated May 9, 1997. From the confirmation of the Minister, the Appellant appealed to this Court and Margot La Rocque intervened.

THE PLEADINGS

[4] From the Notice of Appeal the following Statement of Facts was pleaded and I will comment as to the Minister's position as found from the Reply to the Notice of Appeal (the "Reply") in relation to the Statement of Facts.

[5] "1. On or about July 15, 1995, Margot LaRocque's services were contracted on a per diem basis to carry out a specific project because of her knowledge and expertise. It involved developing a professional program and preparing a report to follow." That was denied by the Minister.

[6] "2. Ms. LaRocque rendered invoices as services were provided..." That was denied by the Minister.

[7] "3. Ms. LaRocque's hours and methodology were not under the control of WIFT-T." That part was denied. The following was admitted: "She was not responsible for any employees or assets of WIFT-T, nor for any of the day to day operations of the organization."

[8] "4. Ms. LaRocque provided services to other entities during the course of the months that she provided services for WIFT-T." That was admitted.

[9] "5. The terms of the contract were confirmed by WIFT-T, as described in the letter attached dated February 13, 1996." That was admitted.

[10] "6. The terms of Ms. LaRocque's services were limited in scope and timeframe." That was denied by the Minister.

[11] "7. WIFT-T is a non-profit organization with limited financial resources. At that time WIFT-T employed one or two employees to carry out office / administrative functions for the organization. All other services are provided by volunteers or when funds are available, paid consultants, such as Ms. LaRocque, to write courses, programs, reports, etc." That was admitted.

[12] "8. In April of 1996 Revenue Canada sent an auditor to audit the payroll, including a review of payments for professional services." That was admitted.

[13] "9. Revenue Canada issued assessments dated June 6, 1996 assessing CPP of $480 and UI of $652.53, plus penalty and interest for 1996 and C.P.P. of $602 and U.I. of $950, plus penalty and interest for 1995." That was admitted by the Minister.

[14] "10. On July 9, 1996 WIFT-T filed Form CPT 100 to appeal against the assessment." That was admitted by the Minister.

[15] "11. On July 12, 1996 WIFT-T also filed a Form T400A Notice of Objection with respect to the charge of Federal and Provincial income tax for 1996 with respect to the same situation." The Minister said there was no knowledge in relation to that.

[16] "12. In a letter dated May 9, 1997 Revenue Canada, Appeals issued a letter (...) confirming their assessment." That was admitted by the Minister.

[17] Turning now to the Reply. On page 2 (paragraph 8) of the Reply we have the following in terms of the facts relied upon by the Minister. I am dealing at this time with the Reply that was filed in relation to the unemployment insurance matter that follows right along with the Reply that was filed with the Canada Pension Plan matter:

[18] "(a): the Appellant is a non profit corporation." This was agreed to by the Appellant at trial.[1]

[19] "(b) the Appellant is in the business of promoting women in film." This was agreed to by the Appellant.

[20] "(c) The Appellant's business is controlled by a volunteer board of directors." This was agreed to by the Appellant.

[21] "(d) the Worker [I am now going to change that throughout to the word 'Intervenor', just to make it quite clear] was hired as a Director of Professional Development." The Appellant at trial indicated that specifically related to the function of Director of Professional Development but not beyond.

[22] "(e) the [Intervenor] had a variety of duties to perform in her role as Director of Professional Development such as:

- research and review courses offered by the Appellant

- write reports for funding agencies

- provide support and advice to members

- design and administer the Mentor program

- attend committee and board meetings

- work on the development and promotion of professional development workshop

- research funding opportunities

- represent the Appellant at a conference on professional development."

In relation to those assumptions the Appellant generally agreed with the assumptions as stated but clearly delineated only insofar as they related to the project that was undertaken for the Appellant by the Intervenor. In relation to one specific assumption, that is attend committee and board meetings, the Appellant stated to the Court that this was on occasion and it was only in relation to progress of the report. The Intervenor, in her evidence, indicated that this was only part of her duties.

[23] "(f) the [Intervenor] also performed some general office work when needed, such as answering the telephone, proof reading letters and calendars, helping out with computer problems and helping to find staff for short term contracts." The Appellant's position in relation to this was that if she (the Intervenor) was in the office and she helped carrying out the mandate of this small organization, those tasks were done. But the Appellant stipulated clearly that she was not required to do so under her contract. The Intervenor, in her evidence, stated that she felt that she had to do these things and that it was part of her arrangement with the Appellant.

[24] "(g) The [Intervenor] was to be paid an annual salary of $30,000.00 based on a weekly salary in the amount of $600.00 for a 3 day work week." The Appellant totally disagreed with this and I will review this a little later on. The Appellant said it was really a per diem basis payment and it was not a fixed salary of $30,000.00 a year. The Intervenor felt that the assumption was correct.

[25] "(h) the [Intervenor] was paid by cheque on a regular bi-weekly basis, whether or not she submitted the invoices requested by the Appellant." The Appellant's position was that this was an informal organization and that if an invoice had not arrived, in good faith they paid the Intervenor in any event but at the end of the day, when the whole matter was completed, all invoices had been provided.

[26] "(i) even if the hours of work and/or the days of work could vary based on meetings to attend, the [Intervenor] had to report to the Executive Director on each day of work." The Appellant disagreed with this assumption and I will review that later on in terms of reporting to the Executive Director.

[27] "(j) the [Intervenor] was supervised by the Executive Director." The evidence of Ms. Day, the Executive Director of the Appellant, indicated the supervision was related only to the project that the Intervenor undertook at the behest of the Appellant and it was nothing more than to report to the Executive Director on behalf of the Appellant organization as to the progress of that contract and was not supervision of the Intervenor as an employee as such. I will speak to that later.

[28] "(k) the [Intervenor] had to perform her duties personally." That was agreed to by the Appellant.

[29] "(l) all the required tools and equipment were provided to the [Intervenor] by the Appellant, at no charge." I will review this later but generally the equipment involved was office equipment including the use of a computer and use of telephone and space.

[30] "(m) the [Intervenor] was reimbursed for out-of-pocket expenses incurred in performing her duties." That was agreed to.

[31] "(n) the Appellant had the right to terminate the [Intervenor's] services." That was agreed to.

[32] The next assumption is a question of law. I won't review it at this time. And the last one: "(p) the Appellant did not withhold unemployment insurance premiums from the [Intervenor's] remuneration." That was agreed to.

[33] Also, in relation to the Canada Pension Plan, the Appellant did not withhold Canada Pension Plan contributions from the Intervenor's remuneration. That did not appear to be in contention.

OTHER EVIDENCE AND CONCLUSIONS

[34] So with that background, we will go now to certain significant evidence and conclusions that emerged during the hearing.

[35] I find the intention of the parties at the outset was for a contract for service. The Intervenor had specific expert intellectual skills that the Appellant needed for a project and that project was in part to assess and administer a mentor programme, amongst other things.

[36] The Intervenor invoiced for her services and both the Appellant and the Intervenor discussed the question of Goods and Services Tax ("GST") and there was GST to be charged. No deductions were taken (withheld) nor intended to be taken (withheld).

[37] The record of employment filled out by the Appellant was done by the Appellant organization at the insistence and behest of Revenue Canada and the Appellant organization disagreed that such a record of employment should be issued.

[38] The Appellant organization was small, a volunteer organization and could only undertake projects after funding was found.

[39] At the end of the relationship the Intervenor and the Appellant organization were at the point of disengagement and the Intervenor was dismissed.

[40] I conclude in retrospect the Intervenor saw her role at that time, looking back, more of an employee than as an independent contractor, whereas throughout the process, including to today, the Appellant saw the Intervenor as an independent contractor engaged under a contract for service.

[41] Some of the other evidence I heard included the evidence of an office manager but I found that that evidence was somewhat influenced by the office manager's view that some of the tasks that she was asked to do and some of the tasks that the Intervenor was asked to do were outside defined tasks, the tasks being the office manager's tasks, and the Intervenor's tasks. Those directions from the Executive Director were resented by the office manager.

[42] In assessing the role of the Intervenor, I find her evidence was not complete as to specifics of what went on whereas the Appellant's witness, that is, the Executive Director, Ms. Day, was more precise and more exact.

[43] In terms of the assumptions of the Minister and the significant evidence as to the role of Director of Professional Development, this assumption has been somewhat rebutted by the Appellant's evidence in that those tasks done related only to the Intervenor's contractual relationship for the projects engaged and not beyond.

[44] The other tasks that the Intervenor did as to office assistance, etc., were not part of the Intervenor's contractual relationship but were done by the Intervenor in an effort to keep the small organization moving. She was not required to do these things, however, as such.

[45] The fee for the contractual engagement was $200.00 a day not to exceed $600.00 a week. The Intervenor had a choice of how the project was to be done within the Appellant's organization and the engagement operated around the Intervenor's other schedule.

[46] The method of supervision by the Executive Director was not in the sense of master and servant supervision but by way of a report by the Intervenor on a regular basis as to where the project was at in terms of the Appellant organization. However, from the Intervenor's evidence, as the relationship progressed towards the end, she interpreted the supervision more as a mandatory mode than a report mode. The Appellant's position was constant throughout.

JURISPRUDENCE

[47] From that we go now to a brief review of the jurisprudence background to the analysis of this relationship. As has been cited in many cases, including Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R., 88 DTC 6099, the Federal Court of Appeal at page 6100 stated:

The definitive authority on this issue in the context of the Act, is the decision of this Court in Wiebe Door Services Ltd. v. The Minister of National Revenue, 87 DTC 5025. MacGuigan J. speaking on behalf of the Court, analyzed Canadian, English and American authorities, and, in particular, referred to the four tests for making such a determination enunciated by Lord Wright in City of Montreal v. Montreal Locomotive Works Ltd., [1974] 1 D.L.R. 161 at 169-170. He concluded at page 5028 that:

Taken thus in context, Lord Wright's fourfold test [control, ownership of tools, chance of profit, risk of loss] is a general, indeed an overarching test, which involves "examining the whole of the various elements which constitute the relationship between the parties". In his own use of the test to determine the character of the relationship in the Montreal Locomotive Works case itself, Lord Wright combines and integrates the four tests in order to seek out the meaning of the whole transaction.

At page 5029 he said:

...I interpret Lord Wright's test not as the fourfold one it is often described as being but rather as a four-in-one test with emphasis always retained on what Lord Wright, supra, calls "the combined force of the whole scheme of operations," even while the usefulness of the four subordinate criteria is acknowledged. (emphasis added)

At page 5030 he had this to say:

What must always remain of the essence is the search for the total relationship of the parties.

He also observed "there is no escape for the trial judge, when confronted with such a problem, from carefully weighing all the facts."

[54] The four in one test referred to by MacGuigan J. from the City of Montreal v. Montreal Locomotives Works Ltd. (supra) is made up of the following subordinate tests, that is: control, ownership of tools, chance of profit, risk of loss.

ANALYSIS

[55] And with that background I will now give you my analysis of the relationship.

[56] To determine if a contract of service or a contract for service exists, looking firstly at control and supervision, the key question. At the inception, the intent of the Appellant was to engage the Intervenor under a contract for service where the Intervenor developed projects for the Appellant and the Intervenor had to report to the Appellant as to the status and progress of the project. After the engagement there was a certain evolution that took place where the Intervenor attended at the Appellant's premises on a part-time schedule and during the period of attendance, from time to time, also did other tasks at the request of the Appellant organization, including answering the telephone and miscellaneous office tasks.

[57] The Appellant maintained that this was not part of the contract but part of keeping the overall volunteer organization going.

[58] It would appear from the evidence that towards the end the Intervenor saw her services, and more particularly after dismissal, as that of an employee. And, as I have indicated, the Appellant continued to see the Intervenor as an independent contractor with a fixed defined role.

[59] In my overall view of the relationship and terms of control and supervision, I find the supervision was on a report basis as to progress and not on a job supervision basis. The Intervenor clearly had a choice to do or not to do the other activities over and above her retained intellectual skills in relation to the report preparation and the mentor programme.

[60] In terms of the second heading, profit and loss: the opportunity of profit and the risk of loss is based on the notion that in an employee/employer relationship, the employee does not generally incur expenses and does not bear any financial risk and has no chance of profit.

[61] In this case the retained fee was $200.00 per diem and not to exceed $600.00 per week. The definition originally was one of trainor coordinator and that evolved to a Director of Professional Development, and the Intervenor took this role in relation to specific projects that were specifically funded on the condition that she would not engage in a contractual relationship with a competitor, but she could work for other organizations and indeed did so in her continued work. She did have other clients. More particularly, in relation to the Appellant organization, she invoiced for her services as she did invoice other individuals for her services.

[62] Ownership of tools: generally, if an employer supplies the tools this indicates control over the worker, however, there are exceptions. One example discussed earlier was a mechanic who supplies tools to do the job.

[63] In this case, I conclude the Intervenor was retained for her intellectual capabilities and skills and that she did provide some of the tools and the Appellant provided some of the tools and, at least at one point, the Intervenor used her own office in the home but through most of the time used the office of the Appellant organization.

[64] So with that overall analysis of the fourfold test, we now go to the organization or integration test. That is the analysis to determine the ultimate question, whose business is it? The combined force of the whole scheme of operations is used to what conclusion? It is necessary to look at more than the surface relationship, that is look at the overall intrinsic relationship between the parties.

[65] And from that, with the foregoing analysis, I find the Intervenor performed services to the Appellant organization as a person in business on her own account. She had intellectual skills to assist the Appellant organization to carry out part of its mandate and operated a project and entered into a contract for service towards this end.

CONCLUSION

[66] I conclude the evolution to a contract of service, as viewed by the Intervenor at the end of the engagement, did not happen. Thus, I have reached the conclusion that the Intervenor was not in insurable employment within the meaning of paragraph 3(1)(a) of the Unemployment Insurance Act (the "Act") as she was engaged by the Appellant under a contract for service, with the result that the Appellant was not properly assessed pursuant to section 56 of the Act.

[67] In relation to the Canada Pension Plan appeal, the Intervenor was not in pensionable employment within the meaning of paragraph 6(1)(a) of the Canada Pension Plan as she was engaged by the Appellant under a contract for service, with the result that the Appellant was not properly assessed pursuant to section 22 of the Canada Pension Plan.

DECISION

[68] Therefore, my decision in this matter is that the appeal is allowed and referred back to the Minister for reconsideration and reassessment on the basis that the Intervenor was engaged under a contract for service.

Signed at Ottawa, Canada, this 9th day of December 1998.

"D. Hamlyn"

J.T.C.C.

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