1075752 Ontario Ltd. v. M.N.R.

1075752 Ontario Ltd. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2006-03-10 Neutral citation 2006 TCC 141 File numbers 2005-1814(EI) Judges and Taxing Officers Lucie Lamarre Subjects Employment Insurance Act Decision Content Docket: 2005-1814(EI) BETWEEN: 1075752 ONTARIO LTD., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on February 27, 2006, at Ottawa, Ontario. Before: The Honourable Justice Lucie Lamarre Appearances: Counsel for the Appellant: D. Scott Murray Counsel for the Respondent: Geneviève Léveillé ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act is allowed, without costs, and the decision of the Minister of National Revenue dated February 25, 2005, for the period from May 5, 2003, to June 22, 2004, is varied on the basis that the worker, James Buchanan, was not employed under a contract of service and therefore was not employed by the appellant in insurable employment within the meaning of paragraph 5(1)(a) of the Employment Insurance Act. Signed at Ottawa, Canada, this 10th day of March 2006. "Lucie Lamarre" Lamarre J. Docket: 2005-1815(CPP) BETWEEN: 1075752 ONTARIO LTD., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on February 27, 2006, at Ottawa, Ontario. Before: The Honourable Justice Lucie Lamarre Appearances: Counsel for the Appellant: D. Scott Murray Counsel for the Respondent: Geneviève Léveillé ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 28(1) of the Canada Pension Plan is allowed, without costs, and the decision of the Minister of National Revenue dated February 25, 2005, for the period from May 5, 2003, to June 22, 2004, is varied on the basis that James Buchanan was not employed by the appellant in pensionable employment within the meaning of paragraph 6(1)(a) of the Canada Pension Plan. Signed at Ottawa, Canada, this 10th day of March 2006. "Lucie Lamarre" Lamarre J. Citation: 2006TCC141 Date: 20060310 Docket: 2005-1814(EI) 2005-1815(CPP) BETWEEN: 1075752 ONTARIO LTD., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Lamarre J. [1] The appellant is appealing a decision by the Minister of National Revenue ("Minister) that the worker, James Buchanan, was employed under a contract of service while working for the appellant during the period from May 5, 2003, to June 22, 2004. [2] The appellant's sole shareholder is Regan Ellis. During the period at issue, the appellant owned four tractors used for the transportation of freight for various carriers, who owned the trailers and supplied the customers. During the period at issue, the appellant contracted with two workers (including Mr. Buchanan) to have them drive the trucks for the different carriers. In the case of Mr. Buchanan, he was given exclusive use of one truck that he drove for one specific carrier, "Cassidy's Transfer & Storage" ("Cassidy's"). [3] Cassidy's provided the plates and permits and paid the fuel tax and for the maintenance of the trailers. Cassidy's and the appellant shared the cost of insurance on the trailers and the appellant alone paid the insurance on the tractors. The appellant also paid for the maintenance of the tractors and for the fuel. [4] According to Mr. Buchanan's testimony, Cassidy's owned approximately 25 trucks and hired its own drivers to drive them. Cassidy's also turned to subcontractors (including the appellant) to ship excess freight when its own trucks were insufficient to meet the demand. [5] When providing its tractors, the appellant also provided drivers. Mr. Buchanan was hired as a truck driver by Mr. Ellis on the recommendation of a friend, Mr. Burns, who had operated the same kind of business until it went bankrupt. It is not disputed that Mr. Buchanan had been employed as a self-employed driver by Mr. Burns. Mr. Buchanan was paid at the rate of 29 ¢ per mile by Mr. Burns and was registered for goods and services tax ("GST") purposes (Exhibit R-4). When Mr. Burns's business went bankrupt, Mr. Buchanan started working for Mr. Burns's former dispatcher at a rate of remuneration of 32 ¢ per mile, again as a self-employed contractor. Mr. Buchanan ceased to be registered for GST purposes on June 30, 2002 (Exhibit R-5). When Mr. Ellis approached Mr. Buchanan, he offered him 35 ¢ per mile, which he accepted. Mr. Ellis said that Mr. Buchanan introduced himself as an independent contractor and he was therefore under the impression that Mr. Buchanan was registered for GST purposes. Mr. Ellis's wife, Ms. Bev Proctor, who takes care of the appellant's paperwork, testified that Mr. Buchanan and his wife made it clear from the beginning that they did not want any tax or employment insurance ("EI") or Canada Pension Plan ("CPP") deductions withheld at source. Apparently they did not discuss the matter of the GST. On the other hand, the Buchanans testified that Mr. Ellis and Ms. Proctor had asked them to handle the tax themselves. [6] Mr. Buchanan did not deny, however, that although he characterized himself as a truck driver who did not own a business, he always considered himself as a self-employed contractor. In his tax returns, he declared himself to be self-employed and deducted in the computation of his income a portion of his home electricity, telephone, and internet costs, as well as an amount for an office at home and his meal and overnight accommodation expenses while on the road. However, he did not have a separate bank account for his trucking activity, nor did he ever advertise himself as owning a truck-driving business. [7] In October 2003, Mr. Ellis was made aware by Mr. Buchanan that, as he did not own or lease the truck, he had to pay workmen's compensation premiums, and that Cassidy's required those premiums to be paid in order for Mr. Buchanan to drive the truck. Mr. Ellis and Mr. Buchanan agreed to share the cost of the premiums, and Mr. Buchanan's rate of pay was accordingly reduced from 35 ¢ to 34 ¢ per mile at that time. [8] Ms. Proctor testified that from the beginning she told the Buchanans that they had to charge GST. Mrs. Buchanan, who did the accounting for her husband, testified that, in her view, Mr. Buchanan did not have to charge GST and that, in any event, he was not registered for the GST. Mr. Ellis said that Mr. Buchanan had misled him by giving him the impression that he was self-employed. Mr. Ellis thus inferred that he was registered for GST purposes, which was indeed confirmed to be the case by his friend, Mr. Burns. On April 6, 2004, Ms. Proctor started paying GST to Mr. Buchanan (Exhibit A-1), as she felt it was her legal responsibility to do so, Mr. Buchanan having reached the threshold of $30,000 of income. The Buchanans unwillingly collected $937 in GST in total from the appellant and deposited it in a bank account, while seeking advice on their GST concerns. Mrs. Buchanan said that she had been told by the federal government that Mr. Buchanan could not register for GST as he did not own or lease the truck. Mr. Ellis ceased contracting with Mr. Buchanan on June 22, 2004, following their misunderstanding regarding the GST. Mr. Buchanan then began working directly for Cassidy's as an employee, driving their trucks. [9] While working for the appellant, Mr. Buchanan was given the use of a particular truck, with Cassidy's logo on it, which he parked at home. He contacted Cassidy's directly for work assignments. He was free to accept or refuse the destination, the freight and the number of miles to be driven. He was bound by Cassidy's rules on speeding and safety checks. Apart from advising of mechanical problems with the truck, he did not report to the appellant. He was provided with a logbook by Cassidy's in order to meet the Ministry of Transportation's requirements respecting maximum hours and mileage per day for truck drivers. Mr. Buchanan filled in a statement of his mileage for each trip, which he handed in to Cassidy's. Cassidy's then used that sheet to calculate the amount to be paid to the appellant ($1.06 per mile), which in turn paid Mr. Buchanan (34 ¢ per mile). Cassidy's also paid an allowance of $15 per week for Mr. Buchanan's use of his own cellular phone and an amount of $25 for each pickup and drop-off (these payments being made through the appellant). Mr. Buchanan was paid by direct deposit on a weekly basis. He did not receive vacation pay nor was he entitled to any employee benefits. He was provided with a debit card by the appellant in order to pay for fuel and repairs for the truck. Mr. Ellis did not intervene in, and was not even consulted regarding, the assignment of work by Cassidy's to Mr. Buchanan. Mr. Ellis did not require Mr. Buchanan to drive a minimum number of miles in order to ensure that profits were made with his truck. This testimony was not contradicted and it was even corroborated by Mr. Buchanan. [10] Mr. Buchanan always drove the truck himself, but Mr. Ellis said that Mr. Buchanan could have hired someone else to do so, provided that approval was obtained from Mr. Ellis and Cassidy's for insurance purposes. Mr. Ellis also testified that Mr. Buchanan could have driven other trucks for other companies, but he did not know whether he had. [11] Mr. Buchanan is now working as an employee of Cassidy's. He is paid the same rate per mile and does exactly the same work as while working for the appellant. He has the same latitude in the choice of his hours and destinations. Analysis [12] It is my understanding that Mr. Buchanan deliberately chose to offer his services as a self-employed contractor rather than as an employee when he first met Mr. Ellis. It is also clear that Mr. Ellis chose to hire independent contractors rather than employees (indeed, Mr. Ellis subcontracted with another truck driver, who was an independent contractor). Cassidy's operated a freight transportation business and subcontracted excess work to Mr. Ellis. In turn, Mr. Ellis subcontracted to truck drivers. The truck driver then dealt directly with Cassidy's for work assignments. Mr. Ellis did not exercise any control with regard to the truck driver's time sheets, his mileage, or the destinations accepted by him. This was all left to the truck driver's discretion. The truck driver filled in a statement of the mileage driven that was sent directly to Cassidy's. It was not approved beforehand by Mr. Ellis. The truck driver drove a truck belonging to both the appellant (which owned the tractor) and Cassidy's (which owned the trailer), with Cassidy's logo on it. As a matter of convenience, when the tractor was not in use the driver kept it at his home. The truck driver was the one who decided when he would work and what distances he would drive. Mr. Ellis did not require that any minimum number of miles be driven. The rate per mile offered by Mr. Ellis was accepted by Mr. Buchanan, who acknowledges that he could have negotiated that rate if not satisfied with it. It is true that the appellant paid for repairs to the tractor and for the fuel and shared the insurance costs with Cassidy's and that it also shared the workmen's compensation premiums with Mr. Buchanan. However, this fact alone does not change, in my view, the nature of the relationship between the appellant and Mr. Buchanan. [13] In my view, Mr. Buchanan organized his own affairs to suit himself. There seemed to be a genuine agreement between him and Mr. Ellis that he would be hired under a contract for services (i.e., as a self-employed contractor), and that was the common intention of the parties. At least, Mr. Buchanan did not give the impression that he thought it to be otherwise. As a matter of fact, both Mr. Ellis and Mr. Buchanan acted in a manner that was consistent with such a relationship. This fact cannot be disregarded (see Wolf v. The Queen, 2002 DTC 6853, [2000] T.C.J. No. 696 (QL)). [14] The case of Bicz Transport Corp. v. Canada, [2001] T.C.J. No. 511 (QL), cited by counsel for the respondent, does not change my conclusion. The truck driver here was not required to comply with the appellant's instructions. The truck driver here could have worked for other companies. Although he did not own the truck, he was providing his truck-driving services, and this he did at his own convenience. Furthermore, the fact that Mr. Buchanan had a different arrangement when he started working directly for Cassidy's does not alter my conclusion either. The common intention in that situation was that he would be an employee, and that made sense considering the control exercised by Cassidy's over their truck drivers. But, while Mr. Buchanan was working for the appellant the arrangement was different. The common intention of the parties was that he be hired as a self-employed contractor. Mr. Ellis did not have control over Mr. Buchanan's work. Mr. Buchanan determined his own work schedule, and accordingly, his own income. In my view, Mr. Buchanan was offering his services as an independent contractor. He was self-employed. [15] The appeal is allowed. Signed at Ottawa, Canada, this 10th day of March 2006. "Lucie Lamarre" Lamarre J. CITATION: 2006TCC141 COURT FILE NO.: 2005-1814(EI), 2005-1815(CPP) STYLE OF CAUSE: 1075752 ONTARIO LTD. v. M.N.R. PLACE OF HEARING: Ottawa, Ontario DATE OF HEARING: February 27, 2006 REASONS FOR JUDGMENT BY: The Honourable Justice Lucie Lamarre DATE OF JUDGMENT: March 10, 2006 APPEARANCES: Counsel for the Appellant: D. Scott Murray Counsel for the Respondent: Geneviève Léveillé COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada