Date: 20010123
Docket: 1999-3332-EI, 1999-3334-CPP
BETWEEN:
DANIELLE IRVINE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Cain, D.J.T.C.C.
[1] The Appellant appealed the decision of the Respondent dated October 6, 1998 that the Appellant's engagement by First Light Productions Inc. (the "Payor") during the period June 16, 1997 to August 3, 1997 (the "period in question") was not insurable or pensionable employment within the meaning of the Employment Insurance Act (the "EI Act") and the Canada Pension Plan (the "CPP") respectively. The parties agreed that the two appeals should be heard at the same time, the evidence led to be applied to each appeal as the context required and that it was unnecessary to create two records.
[2] The Respondent based his decision on the following:
"(a) from January, 1997 to June 15, 1997, the Appellant and Anna Stassis (the "partners") operated a business similar to the Payor as a partnership (the "partnership");
(b) after June 15, 1997, the Payor continued with the projects which were begun by the partnership and there is no clear division between the activities of the partnership and the Payor;
(c) the partnership obtained a business loan in the amount of $15,000 from the Y Enterprises for which the partners were personally liable;
(d) the funds borrowed by the partnership were used to operate the Payor;
(e) on June 16, 1997, the Payor incorporated under the laws of the Province of Newfoundland as a non-profit corporation which did not consist of any shareholders;
(f) to satisfy the requirements of the The Corporations Act for the Province of Newfoundland and Labrador, the Payor was required to have a minimum of 3 directors;
(g) the Appellant, Anna Stassis and Kelly Jones became the Payor's directors;
(h) Kelly Jones did not invest in the Payor and did not share liability for the funds borrowed by the partnership which were used to operate the Payor;
(i) during the calendar year 1997, Kelly Jones primarily performed services for other employers and was not involved in the Payor's operations;
(j) during the calendar year 1997, the Payor was operated by the partners;
(k) the Payor completed the project which was begun by the partnership and ran a production on Bell Island, Newfoundland, called "Place of First Light: the Bell Island Experience" from June 30, 1997 to September 7, 1997;
(l) from May, 1997 to June 16, 1997, prior to the Payor's incorporation, the Appellant performed some duties as a producer and her duties included applying for funding through government grants, ensuring government regulations were met and co-ordinating approval for the project through the Bell Island community;
(m) the Appellant was paid $1,000 for the duties referred to in subparagraph 9(1) by cheque dated July 21, 1997 and issued on the Payor's bank account;
(n) prior to June 16, 1997, the Appellant also auditioned actors and performed some of the duties required as co-producer and artistic director to ensure the production would be ready to begin performances on June 30, 1997;
(o) the Appellant was put on the Payor's payroll on June 16, 1997, the date of incorporation, as the artistic director and production manager and her duties included auditioning actors, rehearsal of the actors, identification of appropriate locations for public performance and co-ordination of all aspects of the production including sets, costumes, technical requirements, transportation for the actors and the audience;
(p) the only individuals included on the Payor's payroll, in addition to the Appellant, were the actors;
(q) all other workers were hired by the Payor through the Human Resources Development Job Creation Program, including Anna Stassis;
(r) prior to August 3, 1997, the Appellant did not qualify to be hired under the Human Resources Development Job Creation Program;
(s) the Appellant's involvement as a Director in the Payor ensured she would be hired for the position even though she did not qualify under the Human Resources Development Job Creation Program and would have to be paid by the Payor;
(t) after August 3, 1997, the Appellant was also paid through the Human Resources Development Job Creation Program;
(u) after August 3, 1997, the Appellant continued to perform services as an artistic director and co-producer for the Payor and she was not paid by the Payor for those duties;
(v) the Appellant was in control of her own employment and determined when she would be included on the Payor's payroll and when she would be laid off;
(w) the Appellant was included on the Payor's payroll in an attempt to enable her to qualify for employment insurance benefits and, therefore, qualify her for the Human Resources Development Job Creation Program;
(x) there was no contract of service between the Appellant and the Payor."
[3] The Appellant admitted assumptions (c) to (g) inclusive, (k), (o) to (q) inclusive, (t) and (u) but denied all other assumptions hereinabove set out.
Facts
[4] From the evidence adduced the Court makes the following findings of facts.
[5] In or about 1997 the Appellant, Anna Stassis and Kelly Jones as a partnership under the name of First Light Productions set about to raise funds to finance a theatrical production on Bell Island Newfoundland (the "Bell Island Production").
[6] They were successful in negotiating a bank loan of $15,000 which qualified them to make application to Canada Council for the Arts, the Newfoundland Labrador Council for the Arts and the Department of Human Resources and Development for additional funding. The Appellant and Anna Stassis personally guaranteed the bank loan.
[7] Once the theatrical production was scripted, the trio made application to the above Councils for additional funding. Actors who were on unemployment insurance were eligible to act in the production and their benefits were topped off with an additional allowance to entice them to participate.
[8] Prior to the above agencies advancing or approving any funding, they required that the partnership be incorporated as a non-profit company. The Payor was incorporated on June 16, 1997. At that time all of the partnership funds were deposited to the credit of the company.
[9] The structure of a non-profit theatre company is as follows:
Board of Directors - the Board exercises complete control over the whole operation.
The officers of the company are:
Executive Producer - acts similar to a general manager
Artistic Director - co-ordinates the selection of productions to be undertaken by the company.
The Company then employs the following staff:
Director - person engaged to participate in the selection of actors and actresses and to prepare the production for the stage performances.
Actors
Stage crew
Publicist
Accountants
[10] The Payor being a young company, the initial Board had difficulty attracting anybody to the Board so the three formed the Board of Directors. The Appellant became Artistic Director and Anna Stassis became Executive Producer.
[11] The Appellant had been the genesis of the script for the Bell Island Production, and a graduate of the National Theatre School of Canada. The Board concluded that she was the most appropriate person to direct the production. She was hired at $400 a week, the minimum salary required to be paid to a director of a production funded by the above mentioned agencies.
[12] She worked as director from June 16, 1997 to August 3, 1997 at a negotiated salary of $400 a week. The director has almost exclusive control over the preparation of the actors for the production.
[13] On July 16, the company paid to the Appellant $1,000 for work that she had performed in raising money for the original partnership. The money was not paid out of the original loan, as all of that money was required to support the additional applications for loans subsequently made. The company was in better financial shape to make the payment in July.
[14] During the first few weeks of the performance, the Appellant continued to have input to smooth out any deficiencies. On August 3, 1997, the Appellant finished her duties as director. She resumed her position as artistic director. The control of the production from then on was in the hands of the executive producer Anna Stassis.
[15] No evidence was introduced to show that the Board of Directors had authorized the hiring of the Appellant as director of the Bell Island Production except the viva voce evidence of the Appellant.
Decision
[16] I was impressed with the evidence of the Appellant and was satisfied that all of the activities she was involved in during the period in question, whether in her capacity as a director of the Payor or during her subsequent engagement as director of the production at Bell Island Newfoundland, were bona fide. While it is usual to require that the evidence of an appellant be corroborated either by documentary evidence or the viva voce testimony of another, knowledgeable of the circumstances, in this case I find that the evidence of the Appellant was accurate and credible enough to support her appeal.
[17] The Respondent was hampered by the fact that his assumptions were made as a result of an investigation by one who had no knowledge of the structure and operation of a theatre company. From his viva voce evidence at the hearing, it was clear that at the time of his investigation he did not understand the nature and duties of the various players who make up a production company's staff as outlined hereinabove.
[18] The evidence of the Appellant either demolishes or makes irrelevant assumptions (a), (b), (h), (i), (j), (l), (m), (n), (r), (s), (v), (w) and (x) made by the Respondent and established a prima facie case. None of the evidence led by the Respondent challenged that prima facie case.
[19] The Appellant, Anna Stassis and Kelly Jones did in fact form a partnership in early 1997 in the hopes of raising funds to underwrite the Bell Island Production. The fact that Kelly Jones decided not to personally guarantee $15,000 borrowed by the partnership to place them in a position to make an application for more funding, is irrelevant. As a partner she would probably have been liable in any event.
[20] The Payor was incorporated to assume the financial burden of the partnership, notwithstanding that the Appellant and Anna Stassis were still liable on the original $15,000 loan. The fact that the Payor carried on the same projects begun by the partnership is irrelevant. As will be discussed later in this judgment, the Payor was in law a separate entity.
[21] The Payor was not a joint stock company and none of the members including Kelly Jones made any investment in the company. The Partnership loaned to the Payor the $15,000 borrowed and that became a debt due by the company to the original partnership. By agreement, the partnership agreed to pay to the Appellant, $1,000 for all of the services she performed prior to the incorporation and it is irrelevant that the sum was paid after the Payor was incorporated and from the account of the Payor. That payment reduced the Payor's liability to the partnership by that amount.
[22] The Payor, after its incorporation, was a separate legal entity and was governed by the Appellant, Anna Stassis and Kelly Jones in their capacity as members and not in their capacity as partners.
[23] Although denied by the Appellant, who was not represented by counsel, assumption (l) is true but is irrelevant. There is no question that she worked for the partnership and would have performed duties similar to those performed in her capacity as a governing member of the Payor. But the Payor was a separate legal entity.
[24] The Appellant admitted assumption (o), however, her evidence clearly showed that from June 16, 1997 until August 3, 1997, she did not perform any of the duties of artistic director and production manager but even if she did the Court is of the view for reasons hereinafter set out, that would be irrelevant as well.
[25] In respect to assumption (r) the Appellant testified that she did in fact have sufficient work inventory, as a result of employment with a travel agency, to qualify for benefits under the EI Act. No evidence was led to refute that fact.
[26] The evidence led in respect to assumption (s) was that the Appellant was the best person available to act as director of the Bell Island Production and no evidence was led by the Respondent to support demolished assumption (w).
[27] In respect to assumption (u) the fact that the Appellant reverted from her status as a bona fide employee of the Payor to her status as an active governing member of the Payor is irrelevant.
[28] The Respondent's position, realistically stated, is that the Payor was the alter ego of the partners and merely a structure through which they operated their partnership. And further that the engagement of the Appellant to direct the Bell Island Production was a scheme to permit her to qualify for benefits under the EI Act. The Respondent also submitted that if there was a contract between the Appellant and the Payor then it was a contract for services since the Payor had little or no control of the Appellant in the execution of her contract as a director.
[29] A member or shareholder of a corporation may become an employee of that entity. In Lee v. Lee's Air Farming Ltd., [1960] 3 All E.R. 420 the Privy Council considered the case of a pilot who controlled a corporation and who appointed himself the chief pilot at a salary arranged by him. Following the death of the pilot in the course of performing his duties the Court held that the shareholder's special position as governing director and principal shareholder did not preclude him from making on the company's behalf, a contract of employment with himself and did not preclude him from entering into or working in the capacity as a servant under a contract of service.
[30] At page 425 Lord Morris of Borth-Y-Gest who wrote the judgment for the Council said:
"... Was he a person who had entered into or worked under a contract of service with an employer? The Court of Appeal thought that his special position as governing director precluded him from being a servant of the respondent company. On this view, it is difficult to know what his status and position was when he was performing the arduous and skilful duties of piloting an aeroplane which belonged to the respondent company and when he was carrying out the operation of top-dressing farm lands from the air. He was paid wages for so doing. The respondent company kept a wages book in which these were recorded. The work that was being done was being done at the request of farmers whose contractual rights and obligations were with the respondent company alone. It cannot be suggested that, when engaged in the activities above referred to, the deceased was discharging his duties as governing director. Their Lordships find it impossible to resist the conclusion that the active aerial operations were performed because the deceased was in some contractual relationship with the respondent company. That relationship came about because the deceased, as one legal person, was willing to work for and to make a contract with the respondent company which was another legal entity."
and continuing at page 426 the learned Justice said:
"There is no reason, therefore, to deny the possibility of a contractual relationship being created as between the deceased and the respondent company. If this stage is reached, then their Lordships see no reason why the range of possible contractual relationships should not include a contract for services and if the deceased, as agent for the respondent company, could negotiate a contract for services as between the respondent company and himself there is no reason why a contract of service could not also be negotiated. It is said that therein lies the difficulty, because it is said that the deceased could not both be under the duty of giving orders and also be under the duty of obeying them. But this approach does not give effect to the circumstance that it would be the respondent company and not the deceased that would be giving the orders. Control would remain with the respondent company, whoever might be its agent to exercise the control. The fact that so long as the deceased continued to be governing director, with amplitude of powers, it would be for him to act as the agent of the respondent company to give the orders does not alter the fact that the respondent company and the deceased were two separate and distinct legal persons. If the deceased had a contract of service with the respondent company, then the respondent company had a right of control. The manner of its exercise would not affect or diminish the right to its exercise."
[31] The position of the Appellant was not unlike that of the pilot. Although a person in a governing position, she was selected because of her talent to direct the Bell Island Production. The pilot did not abandon his governing position and the Privy Council found that when crop dusting farmer's fields he was not exercising that function but was performing his duties as an employee of the company. There is nothing in the EI Act which would prohibit such an arrangement and where the Court finds that such an arrangement was a bona fide one as in the case at bar, then such employment, if it meets all of the other requirements, must be insurable.
[32] The Respondent argues that there is a prohibition against deliberately creating or increasing the likelihood that a claim may be made under the EI Act and cites Tanguay v. Canada (Unemployment Insurance Commission) 68 N.R. 154 in support. However that case has very limited application. There, employees voluntarily left their positions to give younger employees the chance for advancement and guaranteed employment. The Court held that kind of created unemployment was not insurable as the fund was an insurance against unemployment and unemployment deliberately created or which deliberately increases the risk, was not insurable. Here the employment of the Appellant was not deliberately created. The Appellant was hired to do a particular job, which had to be done and resigned when the task was completed. Her unemployment was not deliberately created.
[33] The Appellant testified that during the period in question she had complete control over the rehearsals and preparation of the actors for their various roles. The Respondent submitted that this made the contract one "for" services as opposed to one "of" service.
[34] In Wiebe Door Services Ltd. v. M.N.R. [1986] 2 C.T.C. 200, the late Mr. Justice McGuigan who wrote the judgment for the majority of the Federal Court of Appeal said about the whole question of control when distinguishing between a contract of and for services at page 203 as follows:
"The traditional common-law criterion of the employment relationship has been the control test, as set down by Baron Bramwell in R. v. Walker (1858), 27 L.J.M.C. 207, 208:
It seems to me that the difference between the relations of master and servant and of principal and agent is this: A principal has the right to direct what the agent has to do; but a master has not only that right, but also the right to say how it is to be done.
That this test is still fundamental is indicated by the adoption by the Supreme Court of Canada in Hôpital Notre-Dame de l'Espérance and Theoret v. Laurent et al., [1978] 1 S.C.R. 605 at 613, of the following statement: "the essential criterion of employer-employee relations is the right to give orders and instructions to the employee regarding the manner in which to cary (sic) out his work."
Nevertheless, as Professor P.S. Atiyah, Vicarious Liability in the Law of Torts, London, Butterworths, 1967, p. 41, has put it, "the control test as formulated by Bramwell, B., ... wears an air of deceptive simplicity, which ... tends to wear thin on further examination." A principal inadequacy is its apparent dependence on the exact terms in which the task in question is contracted for: where the contract contains detailed specifications and conditions, which would be the normal expectation in a contract with an independent contractor, the control may even be greater than where it is to be exercised by direction on the job, as would be the normal expectation in a contract with a servant, but a literal application of the test might find the actual control to be less. In addition, the test has broken down completely in relation to highly skilled and professional workers, who possess skills far beyond the ability of their employers to direct."
[35] The Appellant was apparently skilled in her profession and the best-qualified director available. She testified that to effectively carry out her duty as director she had to have complete control over the training of the actors and preparation of the production. If the Payor was dissatisfied with the director's performance, it had the authority and right to replace her. She was hired on a weekly basis at a fixed wage and was required to be on the job daily at rehearsal times. The other members of the Payor did not possess the training and competence to direct the Bell Island Production but retained the right to control the performance of the Appellant's contract of service.
[36] The Court finds that the period in question was both insurable and pensionable employment, allows the appeal and vacates the decision of the Respondent.
Signed at Rothesay, New Brunswick, this 23rd day of January 2001.
"M.F. Cain"
D.J.T.C.C.
COURT FILE NO.: 1999-3332(EI)
STYLE OF CAUSE: Danielle Irvine and M.N.R.
PLACE OF HEARING: St. John's, Newfoundland
DATE OF HEARING: August 23, 2000
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge M.F. Cain
DATE OF JUDGMENT: January 23, 2001
APPEARANCES:
For the Appellant: The Appellant herself
Counsel for the Respondent: John O'Callaghan
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE NO.: 1999-3334(CPP)
STYLE OF CAUSE: Danielle Irvine and M.N.R.
PLACE OF HEARING: St. John's, Newfoundland
DATE OF HEARING: August 23, 2000
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge M.F. Cain
DATE OF JUDGMENT: January 23, 2001
APPEARANCES:
For the Appellant: The Appellant herself
Counsel for the Respondent: John O'Callaghan
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-3332(EI)
BETWEEN:
DANIELLE IRVINE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Danielle Irvine (1999-3334(CPP)) on August 23, 2000 at St. John's, Newfoundland, by
the Honourable Deputy Judge M.F. Cain
Appearances
For the Appellant: The Appellant herself
Counsel for the Respondent: John O'Callaghan
JUDGMENT
The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Rothesay, New Brunswick, this 23rd day of January 2001.
|
"M.F. Cain" |
D.J.T.C.C.
1999-3334(CPP)
BETWEEN:
DANIELLE IRVINE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Danielle Irvine (1999-3332(EI)) on August 23, 2000 at St. John's, Newfoundland, by
the Honourable Deputy Judge M.F. Cain
Appearances
For the Appellant: The Appellant herself
Counsel for the Respondent: John O'Callaghan
JUDGMENT
The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Rothesay, New Brunswick, this 23rd day of January 2001.
|
"M.F. Cain" |
D.J.T.C.C.