Tax Court of Canada Judgments

Docket: 2005-954(CPP) 2005-955(EI)

BETWEEN:

557755 BC LTD. dba VI FITNESS CENTRE,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

____________________________________________________________________

Appeals heard on August 5, 2005, at Nanaimo, British Columbia,

By: The Honourable Justice C.H. McArthur
Appearances:
Agent for the Appellant:	Susan Stevens
Counsel for the Respondent:	David Everett

____________________________________________________________________

AMENDED JUDGMENT

The appeal pursuant to section 28 of the Canada Pension Plan is dismissed; and the determination by the Minister of National Revenue on the application made to him under section 27 of that Plan is affirmed.

          The appeal pursuant to subsection 103(1) of the Employment Insurance Act is dismissed and the decision of the Minister of National Revenue, on the appeal made to him under section 92 of that Act, is confirmed.

Signed at Ottawa, Canada, this 3rd day of November, 2005.

"C.H. McArthur"

McArthur J.

Citation: 2005TCC663

Date:20051103

Docket: 2005-954(CPP) 2005-955(EI)

BETWEEN:

557755 BC LTD. dba VI FITNESS CENTRE,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

AMENDED REASONS FOR JUDGMENT

McArthur J.

[1]      These appeals are from rulings made on January 26, 2005 by Canada Customs and Revenue Agency under the Employment Insurance Act and the CanadaPension Plan. TheMinister of National Revenue determined that Santino Mario DiToro, whose services were retained by the Appellant to train clients of the Appellant at its fitness centre, was employed in insurable employment for the period March 23, 2004 to July 27, 2004.[1] The Appellant position is that DiToro was an independent contractor.

[2]      The Appellant owned and operated a fitness facility and gym in Nanaimo, British Columbia. DiToro is a young man of many talents and occupations. He is a high school teacher, restaurateur, certified personal trainer, and he owns his own fitness centre. His fitness centre has no connection with the Appellant. From time to time he worked for the Appellant, training its clients, maintaining equipment, and following up with those clients. He was paid the amount of $8.00 per hour for orientation courses and $12.50 per hour for personal training.

[3]      The Appellant called no witnesses. DiToro was the only one to testify and he did so on behalf of the Minister. The Appellant's position was that DiToro was not employed in insurable employment during the period within the meaning of paragraph 5(1)(a) of the Employment Insurance Act. The Notice of Appeal is very brief stating:

Mr. DiToro had been an employee at an earlier time, but was not an employee from March 23 to July 27, 2004. Mr. DiToro is a Personal Trainer who operates under the business name of Body Basics Fitness - in fact he was quite insistent that any cheques be made out to Body Basics Fitness, which clearly suggests that his services were being offered as a contractor business, not as an employee.

The Minister's position was simply that DiToro was employed in insurable employment with the Appellant under a contract of service within the meaning of paragraph 5(1)(a).

[4]      The Appellant had the burden of proof to establish its position. It presented no evidence other than that of DiToro who was the Minister's witness.

[5]      DiToro was highly experienced in physical training and needed very little training guidance although he was supervised from time to time by employees of the Appellant. He worked four-hour shifts when he was free and when his services were required by the Appellant. For the most part, the Appellant provided the tools and equipment DiToro needed. He trained only those who were clients of the Appellant. His fees were set by the Appellant and he incurred no personal expenses.

[6]      Prior to March 31, 2004, the Appellant's accounting records treated DiToro as an employee. After advice from its accountant, it reclassified him from employee to independent contractor without any change in the terms and conditions of his employment. DiToro was free to take on other work between engagements with the Appellant. There was no evidence to establish that the parties contracted to the effect that their relationship was not one of employer and employee. The manner in which the parties chose to describe their relationship does not, in itself, determine their relationship. In any event, the reclassification was made unilaterally by the Appellant. There was no mutual contractual consent. One must look at the actual and entire relationship and not at how one party described it.

[7]      DiToro saw himself as an employee. His having directed his pay cheques to be made payable to his corporation does not determine their relationship. He trained the Appellant's clients in the Appellant's premises using the Appellant's equipment, being paid the Appellant's determination of an hourly rate, and being supervised by the Appellant's employees. DiToro had no, or very little, chance of profit and risk of loss. He was paid a specific hourly rate for each hour he worked and his expenses were paid by the Appellant. The Appellant and not DiToro, carried insurance in the event of injuries while DiToro worked at the Appellant's premises.

[8]      The Federal Court of Appeal decision in Wiebe Door Services Ltd. v. M.N.R.,[2] sets out four tests, control, ownership of tools, chance of profit and risk of loss, and integration. These were confirmed by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Ltd.[3] The significance of each test must be considered in the overall context that the entire facts of the case require. Courts generally have difficulty in applying the integration test. The overall picture must be taken into consideration. As stated by Major J. in Sagaz, a trial judge should consider the answer to the question "whose business is it".

[9]      In applying the Wiebe Door tests, I believe the control test is inconclusive. The other tests including ownership of tools, chance of profit or risk of loss clearly favour the Minister's position. In answering the question whose business was it, I have no difficulty in concluding that it was the Appellant's business.

[10]     While DiToro was an expert trainer and needed little or no instruction direction, the Appellant controlled where he trained, who he trained and what equipment he used.

[11]     As stated, while the intention of the parties must be taken into consideration, the factual existing relationship must be determined particularly as in this instance the parties' intention differs. The Appellant owned all the tools - the gymnasium and all its equipment and the clients. This test favours the Minister's position. The Appellant set the hourly rate. The hours were mutually agreed upon. This test favours the Minister's position. Without question, it was the Appellant's business and while he controlled the manner in which he trained the Appellant's clients, the Appellant had the overall control. The Appellant hired him to suit its needs and could fire him at will. The overall picture that emerges is that Mr. DiToro worked for the Appellant in the Appellant's business.

[12]     In conclusion, Mr. DiToro was an employee and the appeal is dismissed.

Signed at Ottawa, Canada, this 3rd day of November, 2005.

"C.H. McArthur"

McArthur J.

CITATION:

2005TCC663

COURT FILE NO.:

2005-954(CPP) and 2005-955(EI)

STYLE OF CAUSE:

557755 BC Ltd. dba VI Fitness Centre and the Minister of National Revenue

PLACE OF HEARING:

Nanaimo, British Columbia

DATE OF HEARING:

August 5, 2005

REASONS FOR AMENDED JUDGMENT BY:

The Honourable Justice C.H. McArthur

DATE OF AMENDED JUDGMENT:

November 3, 2005

APPEARANCES:

Agent for the Appellant:

Susan Stevens

Counsel for the Respondent:

David Everett

COUNSEL OF RECORD:

For the Appellant:

Name:

N/A

Firm:

N/A

For the Respondent:

John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada

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