3928366 Manitoba Ltd. v. M.N.R.

3928366 Manitoba Ltd. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-12-13 Neutral citation 2005 TCC 781 File numbers 2005-2466(EI) Judges and Taxing Officers David W. Beaubier Subjects Canada Pension Plan Employment Insurance Act Decision Content Docket: 2005-2466(EI) BETWEEN: 3928366 MANITOBA LTD., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JESSIE WIEBE, Intervenor. Appeal heard together on common evidence with the appeal of 3928366 Manitoba Ltd., (2005-2521(CPP)) on November 30, 2005 at Brandon, Manitoba By: The Honourable Justice D.W. Beaubier Appearances: Counsel for the Appellant: Robert Johnston and Matthew T. Burgoyne Counsel for the Respondent: For the Intervenor: Penny L. Piper The Intervenor herself JUDGMENT The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Vancouver, British Columbia, this 13th day of December 2005. "D.W. Beaubier" Beaubier, J. Docket: 2005-2521(CPP) BETWEEN: 3928366 MANITOBA LTD., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JESSIE WIEBE, Intervenor. Appeal heard together on common evidence with the appeal of 3928366 Manitoba Ltd., (2005-2466(EI)) on November 30, 2005 at Brandon, Manitoba By: The Honourable Justice D.W. Beaubier Appearances: Counsel for the Appellant: Robert Johnston and Matthew T. Burgoyne Counsel for the Respondent: For the Intervenor: Penny L. Piper The Intervenor herself JUDGMENT The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Vancouver, British Columbia, this 13th day of December 2005. "D.W. Beaubier" Beaubier, J. Citation: 2005TCC781 Date: 20051213 Docket: 2005-2466(EI) 2005-2521(CPP) BETWEEN: 3928366 MANITOBA LTD., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JESSIE WIEBE Intervenor. REASONS FOR JUDGMENT Beaubier, J. [1] These appeals were heard together on common evidence at Brandon, Manitoba, on December 1, 2005. Appellant's ("3928366") counsel called the Intervenor who was sworn in as a hostile witness. The Intervenor called Orest Smoliak who proposed to testify about Ms. Wiebe's relationship with another corporation altogether, "Wise Buys", which was objected to; as a result his proposed testimony was ruled irrelevant to the issues before the Court and he did not continue testifying. [2] The issues in both appeals were set out in the Reply to Notice of Appeal 2005-2466(EI). Paragraphs 3 to 9 inclusive read: 3. By letter dated February 3, 2005, a CPP/EI Rulings Officer in the Winnipeg Tax Services Office issued a ruling that the Worker was employed in insurable employment with the Appellant. 4. By letter dated February 16, 2005, the Appellant appealed to the Minister for a reconsideration of the ruling. 5. By letter dated April 4, 2005, the Minister advised the Appellant of the Minister's decision that: (a) the Worker was employed in insurable employment with the Appellant during the period October 1, 2002 to January 6, 2005 as the Worker was employed under a contract of service with the Appellant, and (b) the Minister was satisfied that the Appellant and the Worker would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. 6. In deciding as the Minister did, the Minister relied on the following assumptions of fact: (a) the Appellant operated The Fast Cash Company; (b) the Appellant operated a cheque cashing and short-term loan business; (c) the Appellant operated out of various locations in Manitoba: (d) the sole shareholder of the Appellant was Len Thompson (hereinafter "the Shareholder"); (e) the Worker was the common-law spouse of the Shareholder; (f) the Worker was hired as an administrative assistant; (g) the Worker's duties included assisting in office setup, interior design, travel, hiring staff, training staff, assisting in producing a policy manual, ordering inventory, customer relations, typing, filing, paper work, answering phones and computer work; (h) the Worker performed her services at the Appellant's various premises; (i) the Worker had been working for the Appellant since the year 2000; (j) the Worker earned a set salary of $750.00 per week; (k) the Appellant paid the Worker by cheque, on a bi-weekly basis; (l) the Appellant determined the Worker's wage rate; (m) the Worker's wage rate was reasonable; (n) the Appellant originally withheld premiums and contributions from the Worker's wages; (o) the Appellant issued T4s to the Worker for the 2001 and 2002 years; (p) the Worker did not provide unpaid services to the Appellant; (q) the Worker took vacation leave; (r) the Worker received the following earnings from the Appellant: 2001 $20,769 2002 $14,095 2003 $37,950 2004 $42,610 (s) the Worker worked full-time for the Appellant; (t) the Worker normally worked during the Appellant's business hours, Monday to Friday; (u) the Appellant determined the Worker's hours and days of work; (v) the Worker worked along side the Shareholder; (w) the Worker's hours and days of work were reasonable; (x) the Shareholder made the major decisions for the Appellant; (y) the Worker was under the direction and control of the Appellant; (z) the Appellant instructed the Worker; (aa) the Appellant assigned work to the Worker; (bb) the Appellant supervised the Worker; (cc) the Worker reported directly to the Shareholder; (dd) the Worker could not hire her own helpers of (sic) replace herself; (ee) the Worker informed the Appellant of any leave requirements; (ff) the Appellant provided all of the tools and equipment required including the work locations and a furnished office; (gg) the Worker did not pay for the use of the Appellant's equipment; (hh) the Worker did not incur any operational expenses in the performance of her duties; (ii) the Appellant reimbursed the Worker for any expenses incurred; (jj) the Worker did not have a chance of profit or risk of loss; (kk) the Worker did not sign loans for the Appellant's business; (ll) the Worker did not have money invested in the Appellant's business; (mm) the Worker stated that she was not treated differently then (sic) the arm's length employees as an arm's length employee would perform the same services and be paid the same wage; (nn) the Appellant stated that the Worker was treated differently as an arm's length employee would not have been hired to perform these duties and the Worker's wage was high; (oo) the Minister considered all of the relevant facts that were made available to the Minister, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, and (pp) the Minister was satisfied that it was reasonable to conclude that the worker and the Appellant would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. B. ISSUES TO BE DECIDED 7. The issue to be decided is whether the Worker was employed under a contract of service with the Appellant during the period October 1, 2002 to January 6, 2005. C. STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT 8. The Respondent relies on section 93, subsections 2(1) and 5(3) and paragraphs 5(1)(a) and 5(2)(i) of the Employment Insurance Act and section 251 and subsection 248(1) of the Act. 9. The Respondent submits that the Worker was employed in insurable employment within the meaning of paragraph 5(1)(a) of the Employment Insurance Act during the period October 1, 2002 to January 6, 2005 since the Worker was employed pursuant to a contract of service with the Appellant. [3] Assumptions 5(a), (b), (c), (d), (i), (k), (n), (o), (r), (cc), (ff), (kk) and (ll) were not refuted. [4] Ms. Wiebe is a middle-aged woman with a B.Ed. degree. Ms. Wiebe is not currently receiving employment insurance. She has intervened to establish that she was an employee of 3928366 in order to become entitled to employment insurance. [5] The fundamental problem in these appeals and in the assumptions is the relationship between Ms. Wiebe and Len Thompson. Ms. Wiebe alleges a common-law spousal relationship. On the evidence, they were living in the same premises from time to time, they travelled together on occasion and Mr. Thompson paid the bills. But whether it was more than sexual is being litigated in other Courts in Manitoba. In particular, one of Ms. Wiebe's lawsuits claims that Mr. Thompson owns 50 percent of the shares of the Appellant in trust for her. Ms. Wiebe was evasive and not credible when she was examined on the alleged trust and its relationship to her E.I. claim. That allegation was apparently not previously presented to the Minister respecting these appeals. [6] The Appellant's counsel asked for an adjournment at the opening of the hearing on November 30, 2005, on the basis that Mr. Thompson was at that moment attending his former wife's funeral in Dauphin, Manitoba, about a two hour drive from Brandon. Counsel wanted a total of five days for arrangements respecting the deceased. Ms. Wiebe opposed the adjournment since it would be months before the Court returned to Brandon and she was cut off of employment insurance. On the stand she falsely denied that she had opposed the adjournment request. This is an example of her evasive testimony. Her testimony was generally not credible. This finding confirms in part her erratic relationship and behaviour respecting Mr. Thompson and 3928366. The Court adjourned the case until 9:30 on December 1 when it proceeded. Respondent's counsel asked for an adverse finding when Len Thompson didn't testify. The Court refused to make such a finding on the basis that the Court had ordered the December 1 hearing, in part out of sympathy to the Intervenor's situation and in part on Respondent's counsel's calculation that the next hearing in Brandon might be a year away. [7] The remainder of these reasons will proceed in the approximate order of the assumptions quoted herein. [8] (e) The evidence is that at times Ms. Wiebe and Mr. Thompson had a sexual relationship. The evidence before this Court is that it was not a common law spousal relationship. (f) Ms. Wiebe was originally hired by the Appellant as an employee, with all of the appropriate EI, CPP and Income Tax deductions from her pay. Ms. Wiebe and Mr. Thompson developed a sexual relationship at that time, namely in 2000 and 2001. Ms. Wiebe testified that on December 26, 2001 she obtained her first of three Restraining Orders against Mr. Thompson and simultaneously filed a complaint under the Manitoba Human Rights Code (Exhibit A-2) against 3928366 in which she claimed $177,317.67 damages (Exhibit A-3), as an employee of 3928366. She settled this by a Memorandum of Agreement dated 10 May, 2002 with 3928366 for $2,500 (Exhibit A-4). She testified that after this episode 3928366 refused to ever again hire her as an employee. At this time she ceased being "hired as an administrative assistant" to use the words of (f). The Court finds that after 2001 she was never an employee of 3928366. There was no agreement or contract to that effect and Ms. Wiebe subsequently formed her own business firm and trade name by which she contracted with 3928366. (h) Ms. Wiebe testified that she and Mr. Thompson resumed sexual relations in about May, 2002. In September, 2002 Ms. Wiebe formed the firm "Jess Designs/Consultation" ("JD/C"). It was not registered as a business name or with GST. She had business cards made and she began invoicing the Appellant's trade name in Brandon, "The Fast Cash Co.". The initial one dated September 20, 2002 for a "retainer" was for $800.00. Later ones added GST of $56.00 (Exhibit A-5). These allege numerous services including "travel". When she travelled she stayed in the same hotel room as Mr. Thompson where on occasion they had breakfast together. At this point it should be noted that Ms. Wiebe had been previously an employee of 3928366; she knew about employee deductions; she had a B.Ed. so she was mature and educated; she had business cards and invoices printed for JD/C and she billed for GST which she didn't remit. She had been involved in the legal system with Mr. Thompson and starting in February 2003 she had a lawyer, Scott Abel, negotiating with Mr. Thompson's lawyer over their relationship and a possible "prenuptial" agreement. She alleges that JD/C and her relationship with 3928366 were coerced upon her by Mr. Thompson. They were not. As will be seen, she filed complaints in Court and she engaged in on and off sexual relations with Mr. Thompson. She is a mature, educated, experienced woman who knew and knows what she is doing. She knew and decided for herself to have a non-employee relationship with 3928366 and to get paid by 3928366 for her specified services and, at times, to collect GST which she didn't remit. What the services were and to whom they were rendered remains to be reviewed. Ms. Wiebe testified that on about September 26, 2003 she obtained another Restraining Order against Mr. Thompson but she testified that they reconciled within 2 days. (g) By January 2003, Ms. Wiebe testified, she and Mr. Thompson were in "counselling". On January 6, 2003 Ms. Wiebe wrote to Len Thompson and outlined what she considered her role in 3928366 to be (Exhibit A-7), with a number of policy and physical layout recommendations. On January 8, 2003, Mr. Thompson replied (Exhibit A-8). In it he described Ms. Wiebe's and JD/C's exact contract. The Court finds that that Exhibit A-8 sets out the exact contract and extent of Ms. Wiebe's contract with 3928366. It was not a contract of employment. Rather, it was a contract for specific services. (h), (j), (l), (m) and (p) - This is what Ms. Wiebe alleged respecting 3928366. However the premises she testified rendering services to outside of Manitoba were not 3928366's. They were owned by other corporations, some of which were owned by Mr. Thompson's daughters from his marriage. The Court finds that when Ms. Wiebe travelled outside of Manitoba it was personal travel for her, with Mr. Thompson, and that at those times she did not render services to 3928366 or act as an employee of 3928366. When putting in her own evidence as Intervenor, Ms. Wiebe filed a number of Exhibits. I-6 is dated December 30, 2002 to November 30, 2003, and I-7 is a printout for the North Bay Ontario corporation dated October 28, 2003, and appears to include statistics from Brandon for calendar 2002. Ms. Wiebe testified that they were in her possession and that she personally marked the North Bay printout respecting client debt status. If 3928366 did this, as Ms. Wiebe alleged, it was on a voluntarily basis as North Bay was not part of 3928366's business. If Ms. Wiebe did this in 2002 and 2003, she billed it as JD/C in those years. Commencing in 2003 JD/C invoiced 3928366 on an alleged hourly basis. However the invoices (Exhibit A-9) were all for round numbers - $500.00, $750.00, $1,000.00 etc. No GST was invoiced and no employee withholdings were taken. Ms. Wiebe alleged these were after-the-fact invoices, but she appears to have initialled them and she did take that exact money. No withholdings were alleged or taken at the time. The Court accepts Exhibit A-9 at face value and does not accept Ms. Wiebe's testimony about them. She initialled them, she took the money and she clearly knew what she was doing respecting these billings. She admitted that commencing in February 2003 she had her own lawyer respecting her dealings with Mr. Thompson. The evidence is that her dealings with Mr. Thompson were part and parcel of her dealings with 3928366 and that she instigated the mixing throughout the Period before the Court. Indeed, Exhibits A-7 and A-8 and her testimony respecting them establish that she used the counselling respecting their personal relationship as a tool to instigate negotiations in her business relationship with 3928366. She wasn't billing for or receiving wages. She was billing 3928366 for fees for contracted services. In 2004 she stated that she did work setting up "Wise Buys", a separate corporation. On the evidence she did not provide any services to 3928366 in 2004 or 2005. Rather any alleged services were provided to "Wise Buys." She testified that 3928366 paid her for this. If so, such payment was not for services as an employee of 3928366. In fact she alleged that she and Mr. Thompson were jointly setting up "Wise Buys" as their joint corporate business. If that work could be interpreted as 3928366, it was consulting work to create the new Wise Buys business or corporation, or it may have related to decorating for Wise Buys. (q) Ms. Wiebe did not take vacation "leave". She and Len Thompson did go to Las Vegas and to Cuba together. She did not specifically testify respecting her pay status on those occasions or describe them as employee vacations. They were personal trips. (s), (t), (u), (v) and (w) - Except when alleging work during travel, Ms. Wiebe did not testify as to her exact hours of work for 3928366. She worked on "Wise Buys" (a different corporation) affairs in 2004, for which she states that 3928366 paid her. On June 8, 2004 she wrote all employees of 3928366 (A-10) and on June 18, 2004 Fast Cash wrote them requesting all information to Jesse Wiebe to cease immediately (A-11). These exhibits before the Court indicate that when Ms. Wiebe tried to participate or interfere in 3928366's general business activities, she was immediately stopped and rebuffed. Ms. Wiebe testified that on December 26, 2004 Mr. Thompson hit her against a wall and she obtained a third Restraining Order against him on December 31, 2004. On January 6, 2005, 3928366's lawyers notified her to stay out of 3928366's premises in Brandon. Ms. Wiebe did file Exhibit I-4 which she said was "likely" for April 2003. In it she is described as substituting for employee "Daryl". However it is covered by JD/C's invoice for April, 2003 (Exhibit A-9) if indeed it is for 2003 (April 9, 2003 is a Wednesday.) Her last pay was January 4, 2005, when she received a net from $1,000.00 of $612.50; no employee withholdings occurred respecting it (Exhibit I-5). Rather the deductions were described in the exhibited documents as relating to credits Ms. Wiebe had taken from or on account of 3928366. Exhibit I-4 describes April 9 as a Monday. The only time that April 9 occurred on a Monday from 2001 to 2005 inclusive was in 2001, when Ms. Wiebe is acknowledged to have been an employee of 3928366. When Ms. Wiebe introduced exhibit I-4 as her evidence-in-chief she described it as "likely" for the year 2003. Thus, she did not commit perjury respecting Exhibit I-4. That form of introduction was sufficiently unusual that, given her previous evasiveness, the Court noted it. In the Court's view Exhibit I-4 and Ms. Wiebe's phraseology when introducing it is another example of Ms. Wiebe's lack of credibility in her testimony. [9] The remaining assumptions relate primarily to the Wiebe Door criteria as set out by the Federal Court of Appeal. Respecting them: Ownership of Tools - Ms. Wiebe did not require tools during the Period. Any decorating and consulting ideas she had were communicated orally to Mr. Thompson. Jess Decorating/Consulting (JD/C) was not in the business of painting etc. Rather it advised. It did not even direct. Any actual directions to 3928366 came from Len Thompson. Control - JD/C was a one woman "consulting" firm. It controlled its affairs. It was not controlled by Len Thompson or 3928366; they controlled and conducted their own businesses. Ms. Wiebe and JD/C could solicit elsewhere for their business if they so chose. The Exhibits indicate that rather than being controlled by 3928366, JD/C and Ms. Wiebe were directed to stay out of 3928366's business during the Period, and to do what they contracted to do in Exhibit A-8. Chance of Profit, Risk of Loss - Ms. Wiebe and JD/C chanced profit or loss. After January, 2005, they suffered a loss because they had not obtained other consulting or decorating clients. They were free to do that during the Period. There is no evidence that JD/C did this. Ms. Wiebe did not file her income tax returns showing her status during the Period. So her exact profit or loss is not in evidence. Integration - Ms. Wiebe and JD/C were not integrated with 3928366's business during the Period. On the evidence the Court finds that on April 9 - 14, 2003 Ms. Wiebe was not working as an employee as described in Exhibit I-4; rather that was either for the earlier years when she was an employee or she filled in and simply billed her JD/C fee as otherwise exhibited. The evidence is that when she tried to integrate herself into 3928366's business operations she was immediately rejected. Any assignments or instructions or alleged "supervision" she received was in her contractual capacity under JD/C. She was simply a one woman professional whom 3928366 retained to do the tasks set out in Exhibit A-8. [10] Ms. Wiebe was in business for herself during the Period. She contracted that way and her business with 3928366 during the Period was conducted that way under her trade name JD/C. [11] The appeals are allowed. Ms. Wiebe was not an employee of 3928366 during the Period. Signed at Vancouver, British Columbia, this 13th day of December 2005. "D.W. Beaubier" Beaubier, J. CITATION: 2005TCC781 COURT FILE NOS.: 2005-2466(EI) and 2005-2521(CPP) STYLE OF CAUSE: 3928366 Manitoba Ltd. v. The Minister of National Revenue PLACE OF HEARING: Brandon, Manitoba DATE OF HEARING: November 30, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice Beaubier DATE OF JUDGMENT: December 13, 2005 APPEARANCES: Counsel for the Appellant: Robert Johnston and Matthew Burgoyne Counsel for the Respondent: For the Intervenor: Penny L. Piper The Intervenor herself COUNSEL OF RECORD: For the Appellant: Name: Matthew Burgoyne Firm: Roy, Johnston & Company LLP For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada