Allen Adams o/a Miramichi Crafters v. M.N.R.

Allen Adams o/a Miramichi Crafters v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2003-10-17 Neutral citation 2003 TCC 567 File numbers 2000-2438(EI) Judges and Taxing Officers Sylvio J. Savoie Subjects Employment Insurance Act Decision Content Docket: 2000-2438(EI) BETWEEN: ALLEN ADAMS O/A MIRAMICHI CRAFTERS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on June 26, 2003 at Miramichi, New Brunswick Before: The Honourable S.J. Savoie, Deputy Judge Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Vlad Zolia ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for judgment. Signed at Grand-Barachois, New Brunswick, this 17th day of October 2003. "S.J. Savoie" Savoie, D.J. Citation: 2003TCC567 Date: 20031017 Docket: 2000-2438(EI) BETWEEN: ALLEN ADAMS O/A MIRAMICHI CRAFTERS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Savoie, D.J. [1] This appeal was heard on June 26, 2003 at Miramichi, New Brunswick. [2] This is an appeal from a decision by the Minister of National Revenue (the "Minister") that Suzanne Clancy, the Worker, was employed in insurable employment while engaged by the Appellant, from May 28 to August 15, 1998, the period in question, within the meaning of the Employment Insurance Act (the "Act"). [3] The Minister informed the Appellant that it had been decided that the Worker's engagement with the Appellant during the period in question was insurable employment because she was employed pursuant to a contract of service. [4] In making his decision, the Minister relied on the following assumptions of fact: a) the Appellant was the sole proprietor of a shop where he sold local crafts placed on consignment (the "Shop"); b) the Worker was hired to make contacts with craft people, to help the Appellant set up the Shop and to manage the operation; c) the Appellant operated the Shop under the name Miramichi Crafters, but during the period in question the name was not registered; d) the Appellant opened a bank account for the operation of the Shop under his own name; e) the Appellant had sole signing authority to the bank account mentioned above; f) the Appellant owned the building in which the Shop operated; g) the Appellant paid for the utilities; h) the Appellant provided the necessary equipment such as the cash register; i) the Worker had no investments in the business; j) the Worker paid herself $100 per week from the cash available to a total of $1,100.00 during the period in question; k) the Worker also received a cheque from the Appellant for $563.74; l) the Appellant issued a Record of Employment to the Worker reporting earnings of $624.00 and a period of employment from May 26 to June 13, 1998; m) the Appellant issued a T4 to the Worker reporting earnings of $624.00; n) the Worker was employed until August 15, 1998; o) there was a contract of service between the Worker and the Appellant; [5] The Appellant admits the assumptions of fact relied upon by the Minister as stated in subparagraphs d), e) and m), denies those as stated in subparagraphs a), b), f), g) and o) and admits in part the assumptions in c), h), i), j), k), l) and n). [6] Although the Appellant has denied a number of the Minister's assumptions of fact, his position was not supported by the evidence. When confronted by the contents of certain documents, such as his own application for funding from the government, which formed the very basis of some of those assumptions, he suggested another interpretation to those documents which flew in the face of the plain meaning of its wording, and in some cases, defied common sense. [7] The craft shop opened on May 26, 1998. The premises, which housed the shop, were owned by Saddlers' Cafe Ltd. a company wholly owned by the Appellant who was its sole shareholder and director. The company paid all the expenses of the building including taxes, insurance and utilities. [8] The Appellant owned and operated Saddlers' Cafe. As such, he put up an advertisement for a waitress. The Worker approached the Appellant for the job. In a meeting between the Worker and the Appellant, the subject of setting up a crafters' shop came up. It was brought up by the Appellant who offered to provide for this shop the vacant space on the second floor, above the restaurant. The project was formulated in vague terms at first, but at subsequent meetings the venture began to take shape. [9] The Appellant proposed to renovate the vacant space to accommodate the shop. The Worker, for her part, would contact crafters and gain their involvement in the shop whereby their crafts would be sold on consignment. She would also be responsible for the management and operation of the shop while the Appellant would run his restaurant business. It was agreed that the Worker would run the crafters shop at a salary of $400 per week from the opening of the shop which was on May 26, 1998. [10] The Worker paid no expenses for the setting up of the shop except she brought her own crafts to sell, a basket to place her crafts in and an old walnut crate. [11] The Appellant brought in a cash register and some counters and shelving borrowed from relatives. [12] The Appellant applied to the provincial government for a grant to assist the project under the Partners Program. The application was turned down because the project already had an employee on salary, namely, the Worker. [13] Although the agreed salary was estimated at $400 per week it became clear at the outset that the shop could not support that kind of expense and it was agreed that she would take $100 per week to cover her babysitter's expenses. [14] The Worker attended to the management and operation of the shop, was the contact person with the crafters and did the paperwork. She paid the crafters monthly for items sold as per the consignment agreement. This Court received in evidence the application of the Appellant for funding under the aforementioned Partners Program which was filed as Exhibit R-2. The Appellant signed it July 16, 1998. In his application he describes the Worker as the Managing Clerk of the crafters shop. Further, he states that the Worker has experience within the local retail trade, has ability to deal with the public and suppliers and has bookkeeping abilities. [15] He sets out her duties as the operation of the retail portion of the business, receiving products from suppliers and selling products to consumers, making bank deposits and payments to suppliers. [16] The Appellant conducted his restaurant business and he had daily contacts with the Worker who reported to him. The Appellant opened a bank account for the shop under his own name and had sole signing authority under it. [17] It was established that the Worker worked for 12 weeks and was paid for 11 at $100 per week. Clearly, the parties agreed that the Worker was underpaid but the Appellant kept promising that funds were forthcoming. The Worker also received an amount of $563.74 on September 17. [18] The Appellant purported to lay off the Worker in order to qualify under the Partners Program and he issued records of employment which he signed. These are in evidence as Exhibits R-6 and R-7. The records of employment describe the reason for the lay off as: unable to maintain employment level due to start-up costs. [19] Under cross-examination, the Appellant was unable to explain how the project came about, speaking, in vague terms, of meeting with the Worker to discuss a joint project. [20] He did not recall that the Worker had applied for a waitress job at Saddlers' Cafe. [21] The shop paid no rent to the Appellant. [22] He could not explain how the selling price for the crafts was established. [23] He went on to explain that the assistance program he applied for required a record of employment and payroll sheets. He added that he was endeavouring to tailor the Worker's job in order to obtain the required help from the government assistance program. He explained that the application for assistance failed because there was a slow down in the operations. However, he was confronted with the letter of the Department of Labour of the Province of New Brunswick signed by Maurice Vautour, Employment Development Officer filed in evidence as Exhibit R-3, which states an entirely different reason, that being, the employee, the Worker, was already in place. [24] The Worker applied for a ruling under the Employment Standards Act, alleging that as an employee she was not paid her salary and vacation pay earned by her in the management of a craft shop owned by the Appellant. [25] Her complaint was investigated and following the recommendation of the Employment Standards Officer, the Director ordered the Appellant to pay the Worker the amount of $3,136.26 which represents $3,015.63 in wages, plus $120.63 vacation pay. The Appellant referred the matter to the Labour and Employment Board and the order of the Director was confirmed. [26] The Appellant was questioned about this and testified that he could not remember if he had appealed this decision. The Worker, however, testified that she was not aware of any appeal of that decision and that the Appellant had never paid her the amount of the award. [27] I believe it is useful to quote the following excerpt of that decision signed by Eugene McGinley, Chairperson, Labour and Employment Board, dated June 9, 1999 as follows: When Clancy initially approached Adams she was seeking employment as a waitress. It eventually transpired that she worked for him as Manager of a fledgling business of retailing crafts. The business itself was a product of Adams' initiative and was to be conducted under his supervision in premises associated with his currently existing restaurant business. Although there was no evidence whether Adams was the owner or merely occupier of the building, it was apparent that he controlled the entire premises, and it was Adams, as proprietor, who attended personally to the renovation of the premises and remained in control following the termination of Clancy's employment. It appears that Adams was pleased to accept Clancy's advice in the operation of the business, but while she managed the day-to-day operations Adams appears to have maintained the aura of control, as seen more particularly with reference to the operation of the bank account. In the Board's opinion, it was Adams who was essentially the proprietor. He was the person who would have profited if the business had prospered, and he was the one who ran the risk and suffered the loss. The Board's opinion is supported by reference to the often cited "Montreal v. Montreal Locomotive Works Ltd." [1947] 1 D.L.R. 161 case. Further, the Board was inclined to its finding by reflection upon the fact that the Record of Employment clearly indicated that Clancy was an employee. Whether or not the Record of Employment had merely been issued as a sham to enhance Adam's application for participation in the Partners Program, the Board feels that a person should not be permitted to speak, as it is sometimes described, "from both sides of the mouth" in order to take advantage of programs of public assistance. This panel of the Board affirms Director's Order No. 0990305. [28] The Minister relies in his determination on the legislation under paragraph 5(1)(a) of the Act, which reads as follows: 5. (1) Subject to subsection (2), insurable employment is (a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise; ... [29] The criteria to be considered in determining whether the Worker was employed by the Appellant under a contract of service has been set down by the Federal Court of Appeal in the often quoted case of Wiebe Door Services Ltd. v. M.N.R, 87 DTC 5025. [30] Control: Evidence has shown that the Worker regularly reported to the Appellant. Specifically, the Worker needed permission to leave the shop at 5:00 p.m. The Appellant set up the prices for the craft articles sold, a 33% mark up. The Worker had no signing authority at the bank. [31] Ownership of tools: The operation of the business although requiring a minimum of tools, nonetheless the cash register was furnished by the Appellant as were the counters and shelves. The premises were provided by the Appellant. [32] Chance of profit and risk of loss: This criteria was considered by the Appellant himself and written by him in a letter to the Chief of Appeals which was received in evidence as Exhibit R-8. Here is an excerpt of that letter: ... The terms of her employment did not allow her to profit or expose her to risk of loss. Since, as stated earlier, her terms of employment were based on a partnership with me, this did allow her to be exposed to a profit or loss situation. If the pilot project was a success, the craft shop would be moved to a larger building and she would become the General Manager of the new shop. In order for the project to be deemed a success, all bills would have to be paid for the start-up project as well as a reasonable salary for Suzanne. This I would consider as potential for profit. If this pilot project did not succeed, the larger project would not be attempted. The failure of the project would be determined if, at the end of the season, bills were outstanding and not enough revenue/funding was received in order to compensate Suzanne for her time. This would expose Suzanne to a risk of loss of a possible full-time job. ... [33] Integration: Since the Worker was the manager and operator of the business, her duties and functions were very much integrated within the craft shop to the extent that without her, the venture could not operate unless someone else carried out those functions. [34] The analysis of the facts in issue as established by the oral and documentary evidence under the criteria above set out, leaves no doubt that the nature of the work done by the Worker, establishes an employer-employee relationship between the Appellant and her. It characterizes a contract of service as defined under paragraph 5(1)(a) of the Act. [35] The onus of proof lies on the Appellant on a balance of probabilities. [36] As was stated by this Court on numerous occasions, the case of Elia v. Canada (Minister of National Revenue - M.N.R.), [1998] F.C.J. No. 316, decided by the Federal Court of Canada, stands for the proposition that the Minister's assumptions of fact are taken to be admitted by the Appellant unless he specifically disproves them. This, the Appellant has failed to do. [37] Furthermore, the evidence called by the Respondent and the documentary proof received in evidence was conclusive in advancing the Minister's conclusion to an extent far exceeding the standard of proof required of him [38] The Appellant and the Worker both testified and each gave an entirely different version from the other. [39] This Court had to assess the testimonies heard and compare them with the rest of the evidence. In that exercise, it became clear upon a reading of the trial notes that the evidence of the Appellant was often tentative, frequently ambiguous and generally vague and evasive. It was contradicted by the testimony of the Worker, the documents in evidence, often his own, and the findings of the Labour and Employment Board of New Brunswick. [40] Consequently, on the whole of the evidence, this Court concludes that the Worker was engaged by the Appellant in insurable employment within the meaning of paragraph 5(1)(a) of the Act for the period in question because there was a contract of service between her and the Appellant. [41] The appeal is therefore dismissed and the Minister's decision is hereby confirmed. Signed at Grand-Barachois, New Brunswick, this 17th day of October 2003. "S.J. Savoie" Savoie, D.J. CITATION: 2003TCC567 COURT FILE NO.: 2000-2438(EI) STYLE OF CAUSE: Allen Adams o/a Miramichi Crafters and M.N.R. PLACE OF HEARING: Miramichi, New Brunswick DATE OF HEARING: June 26, 2003 REASONS FOR JUDGMENT BY: The Honourable S.J. Savoie, Deputy Judge DATE OF JUDGMENT: October 17, 2003 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Vlad Zolia COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada