| Citation: 2009 TCC 594
Dockets: 2007-4979(EI)
2007-4980(CPP)
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| BETWEEN:
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| ESAN INCE-MERCER,
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| Appellant,
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| and
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| THE MINISTER OF NATIONAL REVENUE,
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| Respondent,
and
ALLAN S. BLOTT,
Intervener.
AND BETWEEN:
Dockets: 2007-4981(EI)
2007-4982(CPP)
ALLAN S. BLOTT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
ESAN INCE-MERCER,
Intervener.
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CERTIFICATION OF TRANSCRIPT OF
REASONS FOR JUDGMENT
Let the attached certified transcript of my Reasons for Judgment delivered orally from the Bench at
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|
Weisman D.J.
Signed in
Court File Nos. 2007-4979(EI);
2007-4980(CPP).
TAX COURT OF CANADA
IN RE: the Employment Insurance Act and the
BETWEEN:
ESAN INCE-MERCER
Appellant
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
- and -
ALLAN S. BLOTT
Intervener
Court File Nos. 2007-4981(EI);
2007-4982(CPP).
ALLAN S. BLOTT
Appellant
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
- and -
ESAN INCE-MERCER
Intervener
ORAL REASONS OF MR. JUSTICE WEISMAN
in the Courts Administration Service, Courtroom 6C,
Federal Judicial Centre,
on Tuesday, August 25, 2009 at 4:28 p.m.
APPEARANCES:
Mr. John D. Buote for the Appellants and the Interveners
Mr. Hong Ky (Eric) Luu for the Respondent
Also Present:
Mr. Robert Lee Court Reporter
A.S.A.P. Reporting Services Inc. © 2009
200
(613) 564-2727 (416) 861-8720
--- Upon commencing the Oral Reasons on Tuesday,
August 25, 2009 at 4:28 p.m.
THE REGISTRAR: The Court is now resumed.
JUSTICE WEISMAN: I have heard four appeals, two by Mr. Esan Ince-Mercer and two by Counsel, Mr. Allan Blott, against determinations by the Respondent Minister of National Revenue that the Appellant-Intervener, Esan Ince-Mercer, was employed under a contract of service while engaged by or in Mr. Blott's law office during the period under review, which is January 1, 2006 to May 16, 2007 and that, accordingly, Mr. Blott was liable for Employment Insurance premiums and Canada Pension Plan contributions with reference to that employment.
Each Appellant has intervened in the other Appellant's proceedings. They mutually agree that the Minister was wrong because, in their view, Mr. Esan Ince-Mercer was a subcontractor or independent contractor of Mr. Blott's during the period under review.
In order to resolve this question, which has been variously characterized in the jurisprudence as ‘fundamental’, ‘central’ and ‘key’, the total relationship of the parties and the combined force of the whole scheme of operations must be considered. To this end, the evidence in this matter is to be subjected to the four-in-one test laid down as guidelines by Lord Wright in Montreal (City) v. Montreal Locomotive Works Ltd., [1947] 1 Dominion Law Reports 161, which was adopted by Justice MacGuigan in Wiebe Door Services Ltd. v. The Minister of National Revenue, [1986] 87 Dominion Tax Cases 5025.
The four guidelines are: the payer's control over the worker; whether the worker or the payer owns the tools required to fulfill the worker's function; the worker's chance of profit; and finally, the worker's risk of loss in his or her dealings with the payer.
While there are four guidelines involved in the four-in-one Wiebe Door test, I ran into a complication because, upon reading the Minister's Reply to the Notice of Appeal, I had a question as to whether the assumptions therein set out in paragraph 7 were sufficiently clear so that the Appellants were aware of the case that they had to meet.
There are cases saying that the day of trial by ambush and surprise are long over and that the Appellant or the taxpayer has the right to know the case that he has to meet. That was an issue that concerned me in this case to which I will subsequently allude.
Specifically, as I put it to Counsel for the Minister, the simple statements in paragraph or assumption 7(e) and 7(m), the former being that there was a fixed salary earned by Mr. Ince-Mercer and the latter being that he had expenses, raised the question in my mind as to their sufficiency.
I drew Counsel's attention to Justice L'Heureux-Dubé's decision in Hickman Motors Ltd. v. The Queen, [1997] 2 S.C.R. 336, that the burden was upon the Appellant to rebut the assumptions contained in the Appellants' Notices of Appeal, but no more.
Adverting first to the element of control, Counsel for the Appellants, who is obviously well aware of the law in this area on his own, talked about subordination, which I thought was excellent because, personally, I find the concept of subordination a useful tool that we in the common-law jurisdictions have started to import from the Quebec Civil Code, specifically Article 2099, which defines independent contractors as those who have no subordinate relationship with their payers.
The converse of that proposition is that, if one is to be an employee, then there must be a relationship of subordination between the payer and worker.
I have found it useful in all cases that I have heard, including today's, to think not only in terms of control but in terms of subordination. I do appreciate Counsel's raising of that concept.
The evidence is that during the period under review, January 1, 2006 to May 16, 2007, Mr. Ince-Mercer was a person who was freshly called to the Bar after completing his articles with Mr. Blott's firm. There, he decided to specialize in personal injury matters. The evidence is that he did that work primarily in Mr. Blott's office but also at home, where he had an office and would work late at night.
Sometimes he would come in to Mr. Blott's office at noon, which satisfies me that Mr. Blott did not have Mr. Ince-Mercer punching a clock and he did not have strict control over his comings and goings. This particular factor tends to indicate that he did not have strict control over Mr. Ince-Mercer.
As I understand it, Mr. Blott's clients would see Mr. Blott. He would sign the retainer and then the file would be turned over to Mr. Ince-Mercer to do the paperwork such as the issuing of process and preparation of pleadings. I accept that Mr. Ince‑Mercer's work on the file would constitute 80 per cent of the time and effort required.
On the other hand, it was Mr. Blott's firm and Mr. Blott's clients that Mr. Ince-Mercer was working on. The big decisions were deferred to Mr. Blott as well as the all‑important procedures at the end of a lawsuit or potential lawsuit, such as mediation and settlement conferences and, in the rare case, an actual trial.
It is the Appellants’ position that Mr. Blott subcontracted 80 per cent of the work to Mr. Ince-Mercer under a contract for services, as distinct from a contract of service.
There was evidence that the two of them talked about an ultimate plan, which was not reduced to writing, but that the ultimate plan was that Mr. Blott, with some 30 years' experience, was looking to retire, actually for a second time, and that Mr. Ince-Mercer would take over the practice.
I was interested in that particular piece of evidence because of a case called Woodland Insurance Ltd. v. The Minister of National Revenue, [2005] T.C.J. No. 276, a decision of my Brother Justice Bowie. That was a very interesting case because it was a case of a salesperson who was working very hard to build up the clientele and the business of the person for whom he worked. Because he was building up a business, the issue was whether he was or was not an independent contractor.
Justice Bowie said something that I find very sensible. He said if someone is building up a business and is therefore to be held as an independent contractor, he has to be building up his own business, not somebody else's. Of course, it is obvious why that would be of interest to me in this case, because Mr. Ince-Mercer was clearly building up Mr. Blott's clientele and his business. There is no evidence that he had any clients of his own. As a matter of fact, he said in the witness box that these were Mr. Blott's clients, and it was his office and he had the ultimate authority over the big decisions.
That detracts, I would say, from the argument that Mr. Ince-Mercer was an independent contractor but, in these cases, there is always evidence going both ways. As we all recognize, it is a matter of deciding on which side the matter falls on the balance of probabilities.
I did have trouble giving a great deal of credibility to the argument that a neophyte in the practice of law, working for a man with 30 years' experience, was not in a subordinate relationship with him, but an independent one.
While I was impressed by Counsel for the Appellants, there was one area in which my view of the law differed from his. The argument of Counsel was that Mr. Blott did not have de facto control over 80 per cent of the work done on the files. But the law is not that de facto control is what is important. The law is, it is the right to control that is important; de jure rather than de facto.
You will find that in a number of cases. If you want to read a summary of those cases, you can consult Logitek Technology Ltd. v. The Minister of National Revenue, 2008 TCC 331. It is a decision of my own on May 6, 2008, Court Docket 2006‑2748(CPP).
I was interested in Mr. Blott's right to control Mr. Ince-Mercer. We have a situation where it is Mr. Blott's firm, Mr. Blott's clients, where he has the whole financial investment, where his reputation is at stake and he has responsibility and risk. Surely in those circumstances he has a right to control. In fact, when asked, he admitted that he had the right to control and to dictate to Mr. Ince-Mercer not only what he did but how he did it.
I might interject parenthetically that the law is so technical and deals with such subtle distinctions that there are cases where it makes a difference whether the payer has the right to dictate what to do but not how to do it. But, in this case, once it is established that Mr. Blott had the right to dictate to Mr. Ince-Mercer both what to do and how to do it, that clearly points to a great deal of the right to control, which indicates that the worker is an employee.
Adverting to Counsel's interest in subordination, again, I would find it very difficult to believe that Mr. Ince-Mercer, fresh out of school, would not be subordinate to a man of 30 years' experience, and is working in his firm with all the aforementioned responsibilities. It being his investment and his clientele, I really was not satisfied they are in any way dealing as equals or on an even plane. It is clearly a situation of a subordinate dealing with a principal.
The control factor indicates that, during the period under review, Mr. Ince-Mercer was an employee.
Adverting to tools, the conclusion in my view is equally clear in the same direction. Employees have home offices and home computers and do some work at home. They have vehicles in order to get to work, they have computers. But in this case, there were so many of the tools required by Mr. Ince‑Mercer to do his job and that were provided by Mr. Blott that the tools factor, it was very clear that it indicates that the tools were supplied by the payer, indicating that the worker was an employee.
In case you are interested, the reason the law has developed an interest in ownership of tools, according to the American Re-statement, is that he who owns the tools, controls how those tools are used.
In case I have not been sufficiently particular in the sort of things that were supplied by Mr. Blott, we have everything from an office, paralegals, law clerks, students, a library, receptionist, forms; the list is quite long.
The four-in-one guidelines set out in Montreal Locomotive and in Wiebe Door were only in service of ascertaining the total relationship between the parties in law. The evidence that there was a plan that someday Mr. Ince-Mercer would be owner was vague. It might be a hope, but it was not reduced to writing and it was not something that I could take as a serious piece of evidence that Mr. Ince-Mercer had really in any way any proprietary ownership in this business of Mr. Blott's, even in the near future. Again, I have referred to Justice Bowie's decision as to why that was relevant.
Again, we have Mr. Ince-Mercer telling us very clearly that these were Mr. Blott's clients. It really was not his own clientele he was building up; he was working on Mr. Blott's clients.
The evidence led me to a very clear picture of an actuality that what we have here when one looks at it objectively, which is my role, is a person whose job and whose specialty is to work on pleadings in the area of personal injury. He is a neophyte, fresh out of law school. While he might have done 80 per cent of the work on the file or consumed 80 per cent of the time – I am really not clear, which are necessary to close a file – but it was Mr. Blott who was seized of the client and of the retainer and came into the picture when it came to settlement, mediation and carriage of the trial.
I found myself wondering if it could be argued that a certain percent of the file was subcontracted to the paralegal. You do get to a point where the argument that is really the one that the Appellants are relying upon, begins to lose some force and effect.
The indications so far as tools and control are concerned are clear; they both indicate that Mr. Ince-Mercer was an employee in the period under review.
I have saved profit and loss for the last, and really I am talking about them out of order because the evidence is clear that, with a fixed salary of a thousand dollars a month, Mr. Ince-Mercer had no chance of profit. Again, it was not his business he was building, it was Mr. Blott's.
Similarly, with expenses, I accept that he did have Law Society dues and errors and omissions insurance, and his home office and his home computer and his vehicle, but there is no evidence that constitutes a risk of loss in the sense of business expenses exceeding business income.
I get back to this issue as to whether those two Wiebe Door factors, chance of profit and risk of loss, were sufficiently clearly pleaded in the assumptions so that both Appellants knew the cases they had to meet.
I decided that, yes, they were sufficiently clearly pleaded in the assumptions for a number of reasons; the first of which is that both Appellants were represented by very able Counsel who knew quite well the law in this area and that there was no complaint that they did not know the case they had to meet so far as chance of profit and risk of loss is concerned. As a matter of fact, it was me who raised the issue and nobody else.
At the risk of being redundant, there was no argument that the Appellants were not prepared to face those issues.
The total relationship between the parties is clear; it points to Mr. Ince-Mercer being an employee under a contract of service. All four Wiebe Door factors point in that direction.
Counsel has raised the Royal
It is trite law that the burden is upon the Appellants to rebut the presumptions contained in the Minister's Reply to their Notices of Appeal, which are to be found in paragraphs 7. Counsel, very fairly, agreed with most of them, with the exception of 7(b), (c), (k), (n), (o), (q), (r), (s) and (v).
Starting with 7(b), I have found that the worker was indeed hired. Under 7(c), I acknowledge that the evidence indicates that both worked on the personal injury files. But of importance is that the 20 per cent worked on by Mr. Blott was what I would call the key 20 per cent because it involved the major responsibility areas such as settlements, mediations and trials. I would say that Mr. Ince-Mercer, who did the paperwork, had a subordinate role in those areas of responsibility.
Paragraph 7(k) was true, but as I have already said, this factor of the worker having his own home office and expenses is not unusual among employees.
Paragraph 7(n), I accept the position of the Appellant that the files were not assigned, and that the worker, Mr. Ince-Mercer, had the right to refuse. That is quite interesting because there are a number of cases, one of which is Precision Gutters Ltd. v. The Minister of National Revenue, which is cited at [2002] Federal Court Judgments No. 771, at paragraph 27. They say, and I will quote:
"… In my view, the ability to negotiate the terms of a contract entails a chance of profit and risk of loss in the same way that allowing an individual the right to accept or decline to take a job entails a chance of profit and risk of loss.”
I was, of course, very interested when I heard that Mr. Ince-Mercer had the right to decline to take on files. I was even more interested to hear the reason. His reasons, without exception, had really nothing to do with independence as opposed to subordination. It is not a case of - you can pick any trade - a plumber, saying, "I refuse to work on this house." That is independence. But in Mr. Ince‑Mercer's case, I found that, congruent with the highest standards of the legal profession, his reasons were that, "I already have so much on my plate that I can’t really do the best possible job," or, "This is not in my area of expertise, and therefore I decline to take it." I found a distinction between Mr. Ince-Mercer's right of refusal and the sort of right of refusal to be found in cases such as Precision Gutters, and it did not lead to the inference that he was an independent contractor.
Assumption 7(o) was clearly demolished. The things that motivated Mr. Ince‑Mercer were legal limitation periods, the rules and regulations of the Law Society of Upper Canada, the client's needs, and the exigencies of each case. Those are what determined his priorities and his deadlines, not the payer.
Paragraph 7(q) is true, and I accept that the form that Mr. Blott put his name on was pro forma. But the form that that form was attached to, namely the pleadings, certainly was not. I am quite satisfied that anyone with 30 years' experience would very carefully peruse any document of importance going out of his office, particularly one that he had to certify for court purposes, just as a matter of the caution of good counsel, and also being the person who owns the business and values the client.
Paragraph 7(r), as to who is responsible for resolving customer complaints, we are getting into things that really do not pertain to the legal industry; we are not talking about someone who is manufacturing door handles. As Mr. Blott said, he had trouble identifying with it in his context, and so I put no real weight on it.
The same is with 7(s), talking about work having to be redone. I know why it is there; it is there because if somebody is painting a wall and they do a bad job and they have to repaint the wall, if they are an independent contractor they have to do it on their own time and at their own expense. If they are an employee, their salary goes right on while they are repainting the wall. That is not pertinent to the topic before us, and I do not really know why it is in these assumptions.
This brings me to 7(v), personal services. I also found this one not probative. It is there because of cases like Ready Mixed Concrete v. the Minister of Pensions, 1968 1 All-England Reports 443 in the Queen's Bench Division. The Court says that:
"Freedom to do a job either by one's own hands or by another's is inconsistent with a contract of service …"
That is usually quite helpful in deciding who is an employee and who is an independent contractor. Unfortunately, nothing in law is entirely simple because, if I quote the example of a physician, surely you want your physician to be the one to do the operation on you and yet he is still clearly an independent contractor. I would equate someone with the expertise of Mr. Ince-Mercer to a physician in that, even though you would like him to do his work personally, that does not detract from the fact that he could be an independent contractor.
But in this case, it was not probative because it is accepted by anybody who resorts to legal services that there are paralegals, there are title searchers, there are other people who will be involved in managing your file. The evidence does not substantiate that Mr. Ince-Mercer had to perform his services personally and, even if it did, it is not necessarily probative.
The burden, as I have said, is upon the Appellant to rebut the assumptions contained in the Minister's Reply to the Appellants' Notices of Appeal, and there were some assumptions successfully rebutted. But the law according to the Federal Court of Appeal in Jencan Ltd. v. The Minister of National Revenue, [1997] Federal Court Judgments No. 876, is that if the remaining assumptions that have not been rebutted are sufficient to support the Minister's determination, that suffices. They do not have to rebut all the assumptions.
In this case, it is quite clear that there are sufficient assumptions remaining to support the Minister's determinations.
I have investigated all the facts with the parties and the witnesses called on both Appellants' behalf, none being called by the Minister, to testify under oath for the first time. I found no new facts and nothing to indicate that the facts inferred or relied upon by the Minister were unreal or incorrectly assessed or misunderstood. I can find no business that Mr. Ince-Mercer was in on his own account.
The Minister's conclusions are objectively reasonable. In the result, the appeals, all four, will be dismissed and all four determinations of the Minister will be confirmed.
Gentlemen, I thank you both for your assistance. I shall appear again at 9:30 tomorrow morning.
THE REGISTRAR: Thank you, sir. Court is closed for the day.
--- Whereupon the excerpt concluded at 5:09 p.m.
I HEREBY CERTIFY THAT I have, to the best
of my skill and ability, accurately transcribed
the foregoing proceeding.
_______________________
Robert Lee, Certified Court Reporter
| CITATION:
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2009 TCC 594
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| COURT FILE NOS.:
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2007-4979(EI); 2007-4980(CPP)
2007-4981(EI); 2007-4982(CPP)
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| STYLES OF CAUSE:
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Esan Ince-Mercer
and The Minister of National Revenue and Allan S. Blott
AND
Allan S. Blott
and The Minister of National Revenue and Esan Ince-Mercer
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| PLACE OF HEARING:
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| DATE OF HEARING:
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August 25, 2009
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| REASONS FOR JUDGMENT BY:
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The Honourable
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| DATE OF ORAL JUDGMENT:
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August 25, 2009
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| APPEARANCES:
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| Counsel for the Appellants:
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John David Buote
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| Counsel for the Respondent:
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| COUNSEL OF RECORD:
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| For the Appellants:
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| Name:
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John David Buote
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| Firm:
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J.D. Buote & Associates
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| For the Respondent:
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John H. Sims, Q.C.
Deputy Attorney General of
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