Date: 20010725
Docket: 2000-1220-EI
BETWEEN:
HOWARD WELLMAN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasonsfor Judgment
Beaubier, J.T.C.C.
[1] This appeal was heard at St. John's, Newfoundland on July 13, 2001. The Appellant was the only witness.
[2] The Appellant has appealed a determination under paragraph 3(1)(a) of the Unemployment Insurance Act that he was not employed pursuant to a contract of service for the period May 22, 1995 to December 15, 1995.
[3] Paragraphs 4 and 5 of the Reply to the Notice of Appeal read:
4. The Respondent informed the Appellant that it had been determined that his engagement with the Payor during the period from May, 22, 1995 to December 15, 1995 (the "period in question") was not insurable employment for the reason that he was not employed pursuant to a contract of service.
5. In making his decision, the Respondent relied on the following facts:
(a) the Payor incorporated under the laws of the Province of Newfoundland on November 15, 1988;
(b) at all material times the Payor's shareholders were the Appellant (35%), Donald Barry (35%) and Brian Whitehorn (30%);
(c) Brian Whitehorn was not employed by the Payor in any capacity;
(d) in 1988 Brian Whitehorn paid $1,000 for his shares in the Payor and in 1997 he sold them to the Appellant for $1;
(e) Brian Whitehorn's only involvement with the Payor was to attend annual meetings where the discussions centered around changes in the Payor's address and the directors;
(f) Brian Whitehorn was neither informed of nor consulted on decisions which affected the direction of the Payor's business or its operations;
(g) the Appellant and Don Barry made all decisions regarding the Payor;
(h) the Appellant and Don Barry represented themselves as 50% shareholders to the Atlantic Canada Opportunities Agency (ACOA);
(i) the Payor provided industrial vegetation control and most of the contracts were with the provincial government and utility companies;
(j) in addition to industrial vegetation management, the Payor also operated a number of divisions which included Nutri Lawn (lawn care), Weed Free Lawn (lawn care, general contracting and landscaping) and Pioneer Pest Control (pest control services);
(k) the Appellant was hired to supervise and oversee the contracts obtained by the Payor which related to lawn care, herbicide spraying and vegetation management as well as managing the field work and supervising other workers;
(l) the Appellant continued to perform duties for the Payor during periods where he is not included on the payroll;
(m) the Appellant was in control of his own employment and he decided when he would be paid for his services and when he would not;
(n) there was no contract of service between the Appellant and the Payor.
[4] Assumptions 5(a) and (b) are true. Assumption 5(k) was not refuted by the evidence.
[5] Assumptions 5(e), (f) and (g) are not correct. On the evidence, the original shareholders of Nfld. Vegetation Control Ltd. (the "Payor") continued holding the same percentages of shares until April 1997. Brian Whitehorn had 30%, Donald Barry 35% and the Appellant 35%. Both Mr. Barry and the Appellant were employed by the Payor from the beginning. Mr. Whitehorn had a good job and was planning to be employed by the company, but he never was. However, the directors had informal meetings three to six times per year and Mr. Whitehorn participated in these while he was a director. There is one period when the Appellant was the Payor's only director. At other times there were other directors as well. However, Mr. Whitehorn, Mr. Barry and the Appellant participated together in the decisions which affected the direction of the Payor's business or its operations while they were directors. Therefore, assumptions 5(e), (f) and (g) are wrong.
[6] Assumption 5(h) is wrong. the Appellant and Donald did not make this representation. The Appellant testified that he did not recognize it (Exhibit A-R 1, Vol. 1, Tab 26). It is dated February 15, 1996.
[7] Assumptions 5(i), (j), (k) and (l) are correct.
[8] With respect to 5(l), the Appellant performed administrative duties for the Payor, including signing cheques, when he was not on the payroll. He also continued to try out a plant sprayer machine which the Payor was manufacturing during the period that he was off the payroll.
[9] Assumption 5(m) is not correct. The Court accepts the Appellant's testimony that he and Messrs. Barry and Whitehorn controlled his employment and, together, decided when he would be paid for his services and when he would not. The Payor was in the plant control business at its very beginning and this was, and is, seasonal. However, the Payor always had an administrative staff consisting, at least, of an office accountant and Mr. Barry.
[10] Assumption 5(h) is the subject of the dispute.
[11] The Payor appears to have operated amicably and with a business that grew rapidly throughout Newfoundland and Labrador. It was essentially in the plant control business around industrial sites including power line areas, industrial areas, oil operations and government sites. In early 1997 the Appellant discovered that Mr. Barry had been misusing about $79,000. On April 2, 1997, Mr. Whitehorn transferred his shares to the Appellant for $1.00 and on about April 7, 1997, Mr. Barry transferred his shares to the Appellant for $75,000 and a 1/2 share in a building. Part of the Respondent's argument is that this establishes that Mr. Whitehorn was merely a nominal shareholder. However, in the totality of evidence, the Court finds that Mr. Whitehorn was a complete legal shareholder of his 30% who simply walked out of the Payor during the difficulties of April 1997. (It is clear that the three men based their values on their own "sweat equity" and that Mr. Whitehorn had not yet paid in all of the sweat to which the Payor was entitled from him.) At the same time Mr. Wellman wanted Mr. Barry out of what had become a good business, at any cost, because Mr. Barry could not be trusted and he was handling the Payor's money.
[12] The Respondent's theory that the Appellant controlled and was the prime mover of the Payor is refuted by the evidence that Mr. Barry was able to misappropriate over $79,000 from the Payer by 1997, and by the evidence that, in addition, the Appellant paid him another $75,000 and part of a building to sell Mr. Barry's shares to the Appellant in April 1997. If the Appellant had enjoyed the control envisaged by the Respondent, none of this would have happened. Finally, it should be noted that all of this happened after the "period" in 1995.
[13] On the other hand, most employees would not do duties on behalf of the Payor while they were laid off. The Appellant did this, as stated in paragraph [8] hereof.
[14] Using the tests discussed by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025, in 1995 the Appellant owned 35% of the Payor and did not control it; rather the Payor controlled the Appellant's and the other employees' work. The Payor owned the tools. Any profit or loss was the Payor's. The Appellant's work was integrated into the operations of the Payor. In fact and in law, the business of the Payor was the Payor's, not the Appellant's.
[15] In particular, the Appellant's work was outside of the Payor's office premises, while Mr. Barry's was inside - doing accounting, finance and administration. The Appellant supervised employees and contractors of the Appellant working on sites all over Newfoundland and Labrador. He was the Payor's chief employee in supervising herbicide purchases and applications and he bossed the workers in the field. Both he and Mr. Barry obtained contracts for the Payor in the course of their employment. Contract renewals were done in office and Mr. Barry or the office accountant instructed the Appellant respecting them. The Payor hired workers by the job, by the hectare, or work to be completed, or by the hour or on a monthly basis. For each year from 1995 through 1997 it hired about 100 workers. Now it hires about 200 workers per year. The work was largely seasonal, except for administration, but the Payor is almost on a year-round basis at present. It now does domestic lawn work as well as the industrial work it started with.
[16] The Appellant is not its only shareholder. He owns about 69% of the Payor at present. He is a high school drop out and his work experience is not related to paperwork or accounting. The Court accepts his testimony that, particularly in 1995 and 1997 he was not familiar with finance, buy-sell contracts or corporate matters. He says that he relied on others including Mr. Barry and his lawyers and signed contracts on faith and signed blank cheques. He is believed in part because of the foregoing, in part because that is why the Payor hired other people, and in part because he is obviously an outdoor person who has, with others, helped to build the Payor into a success and he simply did not have enough time to do it all or to do it all by himself.
[17] But a very ordinary employee who wanted to get ahead in a growing little corporation and who was interested in machinery might very well drop into the office during his holidays or while he was laid off, and sign something or do some more work on an experimental machine. Especially if he did not have much money with which to go on holidays - and the Appellant did not, since his wages before withholdings were $850.00 per week in 1995.
[18] Moreover, if he had been doing much administrative work, he might have become aware of Mr. Garry' financial misappropriations before 1997. His failure to do so indicates that he was, as he testified, signing blank cheques and not doing true administration during his holidays.
[19] Based upon these findings, the Appellant was employed from May 22, 1995 to December 15, 1995 in insurable employment pursuant to a contract of service with the Payor. The appeal is allowed.
Signed at Ottawa, Canada, this 25th day of July, 2001.
"D. W. Beaubier"
J.T.C.C.
COURT FILE NO.: 2000-1220(EI)
STYLE OF CAUSE: Howard Wellman v. M.N.R.
PLACE OF HEARING: St. John's, Newfoundland
DATE OF HEARING: July 13, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge D.W. Beaubier
DATE OF JUDGMENT: July 25, 2001
APPEARANCES:
Forr the Appellant: The Appellant himself
Counsel for the Respondent: Kelly Smith Wayland
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1220(EI)
BETWEEN:
HOWARD WELLMAN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on July 13, 2001 at St. John's, Newfoundland, by
the Honourable Judge D.W. Beaubier
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Kelly Smith Wayland
JUDGMENT
The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Ottawa. Canada this 25th day of July 2001.
|
"D. W. Beaubier" |
J.T.C.C.