McAlpine v. M.N.R.

McAlpine v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-08-26 Neutral citation 2005 TCC 561 File numbers 2004-4116(CPP) Judges and Taxing Officers David W. Beaubier Subjects Canada Pension Plan Decision Content Docket: 2004-4116(CPP) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE , Respondent. Appeal heard together on common evidence with the appeals of Michael McAlpine (2004-4117(EI), 2004-4118(CPP), 2004-4119(EI), 2004-4120(CPP) and 2004-4121(EI)) on August 12th, 2005 at Saskatoon, Saskatchewan By: The Honourable Justice D.W. Beaubier Appearances: Counsel for the Appellant: Collin K. Hirschfeld Counsel for the Respondent: Penny L. Piper JUDGMENT The appeal is allowed and the decision of the Minister is vacated. The Appellant is granted such costs as are permitted under the Canada Pension Plan. Signed at Regina, Saskatchewan on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. Docket: 2004-4117(EI) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE , Respondent. Appeal heard together on common evidence with the appeals of Michael McAlpine (2004-4116(CPP), 2004-4118(CPP), 2004-4119(EI), 2004-4120(CPP) and 2004-4121(EI)) on August 12th, 2005 at Saskatoon, Saskatchewan By: The Honourable Justice D.W. Beaubier Appearances: For the Appellant: Collin K. Hirschfeld Counsel for the Respondent: Penny L. Piper JUDGMENT The appeal is allowed and the decision of the Minister is vacated. The Appellant is granted such costs as are permitted under the Employment Insurance Act. Signed at Regina, Saskatchewan on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. Docket: 2004-4118(CPP) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE , Respondent. Appeal heard together on common evidence with the appeals of Michael McAlpine (2004-4116(CPP), 2004-4117(EI), 2004-4119(EI), 2004-4120(CPP) and 2004-4121(EI)) on August 12th, 2005 at Saskatoon, Saskatchewan By: The Honourable Justice D.W. Beaubier Appearances: For the Appellant: Collin K. Hirschfeld Counsel for the Respondent: Penny L. Piper JUDGMENT The appeal is allowed and the decision of the Minister is vacated. The Appellant is granted such costs as are permitted under the Canada Pension Plan. Signed at Regina, Saskatchewan on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. Docket: 2004-4119(EI) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE , Respondent. Appeal heard together on common evidence with the appeals of Michael McAlpine (2004-4116(CPP), 2004-4117(EI), 2004-4118(CPP), 2004-4120(CPP) and 2004-4121(EI)) on August 12th, 2005 at Saskatoon, Saskatchewan By: The Honourable Justice D.W. Beaubier Appearances: For the Appellant: Collin K. Hirschfeld Counsel for the Respondent: Penny L. Piper JUDGMENT The appeal is allowed and the decision of the Minister is vacated. The Appellant is granted such costs as are permitted under the Employment Insurance Act. Signed at Regina, Saskatchewan on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. Docket: 2004-4120(CPP) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE , Respondent. Appeal heard together on common evidence with the appeals of Michael McAlpine (2004-4116(CPP), 2004-4117(EI), 2004-4118(CPP), 2004-4119(EI), and 2004-4121(EI)) on August 12th, 2005 at Saskatoon, Saskatchewan By: The Honourable Justice D.W. Beaubier Appearances: For the Appellant: Collin K. Hirschfeld Counsel for the Respondent: Penny L. Piper JUDGMENT The appeal is allowed and the decision of the Minister is vacated. The Appellant is granted such costs as are permitted under the Canada Pension Plan. Signed at Regina, Saskatchewan on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. Docket: 2004-4121(EI) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE , Respondent. Appeal heard together on common evidence with the appeals of Michael McAlpine (2004-4116(CPP), 2004-4117(EI), 2004-4118(CPP), 2004-4119(EI) and 2004-4120(CPP), on August 12th, 2005 at Saskatoon, Saskatchewan By: The Honourable Justice D.W. Beaubier Appearances: For the Appellant: Collin K. Hirschfeld Counsel for the Respondent: Penny L. Piper JUDGMENT The appeal is allowed and the decision of the Minister is vacated. The Appellant is granted such costs as are permitted under the Employment Insurance Act. Signed at Regina, Saskatchewan on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. Citation: 2005TCC561 Date: 20050826 Docket: 2004-4116(CPP), 2004-4117(EI), 2004-4118(CPP), 2004-4119(EI), 2004-4120(CPP), 2004-4121(EI) BETWEEN: MICHAEL McALPINE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Beaubier, J. [1] These appeals were heard together on common evidence by consent of the parties at Saskatoon, Saskatchewan on August 12, 2005. The Appellant testified, as did his wife Kelly McAlpine. The Respondent called the Appeal Officer on the file, Herman Mah. At the outset, Appeal 2004-4117(EI) was quashed because the Minister did not issue a decision respecting this matter. [2] The appeals are respecting the calendar years 1999, 2000 and 2001. The question in all of the appeals is whether an amount of $7.00 per operating hour of oil field service rigs of three firms - Lanco Well Services (Elk Point) Corp, ("E.P."); Lanco Well Services Ltd., ("Lanco") and T. Gale Well Servicing Ltd ("T. Gale") was paid to the Appellant by these firms as a fee for the use of his 4X4 ¾ ton truck ("truck") or was a fee for contract for services by the Appellant to these companies. The Appellant states that he was paid this as an independent contractor. [3] The Appellant is a middle-aged man who has been working in the field in the well service rig business since 1984. At all material times he and his wife lived on a seven acre parcel of land off a municipal road near a highway close to Kindersley, Saskatchewan. They have a house and a large shop-like garage on it. One of the companies placed an oilfield metal "dog house" (measuring 24' X 10') on it to hold rig material and at times the companies parked service rigs on it. They usually used a separate road entrance to this area for which the Appellant had hired gravelling to be done. [4] In what follows, "LWSEP" is EP. Paragraphs 13 to 20 of the Amended Reply to the Notice of Appeal of file 2004-4119(EI) read as follows: 13. LWSEP appealed to the Minister for a reconsideration of the 1999, 2000 and 2001 year assessments. 14. In response to the appeal, the Minister decided to confirm the assessments for the 1999, 2000 and 2001 years as LWSEP had been properly assessed with respect to payments made to the Appellant. The Minister's decision letter incorrectly referred to Notices of Assessment dated November 19, 2003 rather than the correct date of November 6, 2003. 15. In so deciding as the Minister did with respect to the Appellant, the Minister relied on the following assumptions of fact: (a) LWSEP was in the business of oil well servicing; (b) the Appellant was hired as a field supervisor; (c) LWSEP and the Appellant dealt with each other at arm's length; (d) the Appellant's duties included keeping the service rigs running properly, hiring people, finding work for the oil rigs and ordering parts; (e) the Appellant was an employee of ­­­under a contract of service by LWSEP; (f) LWSEP paid the Appellant a salary of $500.00 per month per rig supervised, (the "Salary"); (g) LWSEP withheld CPP contributions, EI premiums and income tax from the Worker's Salary; (h) the Appellant was required to use his own truck in the performance of his duties for LWSEP; (i) in addition to the Salary, LWSEP paid the Appellant for the use of his truck; (j) LWSEP paid the Appellant $7.00 per hour for each hour a rig was in operation for the use of his truck; (hereinafter the "Truck Allowance"); (k) LWSEP paid the Appellant the Truck Allowance twice monthly; (l) the Truck Allowance was received by the Appellant in respect of, in the course of, or by virtue of his employment with LWSEP; (m) the Appellant was not in the truck or equipment rental business; (n) the use of the Appellant's vehicle was bound to the Appellant's employment with LWSEP; (o) the Truck Allowance was predetermined without any regard to actual cost or expense; (p) the Truck Allowance was an arbitrary amount which was not required to be accounted for by the Appellant to LWSEP; (q) the Truck Allowance was not based on prescribed per kilometre rates; (r) the Truck Allowance was not reasonable; (s) the Appellant was in a position of economic gain from the Truck Allowance; and (t) the Travel Allowance received by the Appellant from LWSEP was $10,531.00 in 1999, $13,194.00 in 2000 and $11,715.00 in 2001. B. ISSUES TO BE DECIDED 16. The issue to be decided is whether the Employment Insurance premiums have been properly assessed on the Truck Allowance paid to the Appellant. C. STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT 17. The Respondent relies on paragraph 5(1)(a) of the Employment Insurance Act and on section 2 of the Insurable Earnings and Collections of Premiums Regulations. 18. The Respondent submits that the Appellant was engaged in insurable employment within the meaning of paragraph 5(1)(a) of the Employment Insurance Act as he was engaged under a contract of service by LWSEP in the 1999, 2000 and 2001 years. 19. The Respondent submits that the Truck Allowance was received by the Appellant in respect of, in the course of, or by virtue of his employment with LWSEP. 20. The Respondent submits that employment insurance premiums have been properly assessed on the Truck Allowance paid to the Appellant as the Appellant was engaged under a contract of service by LWSEP in the 1999, 2000 and 2001 years. [5] The assumptions in paragraph 15 describes the Minister's position in all of the appeals. In what follows in these reasons, the reference to "companies" will refer to all of the three companies unless otherwise specified and to all of the years in appeal. That will also be the way that the assumptions quoted will be dealt with in this paragraph. Assumptions 15 (a), (c), (d), (f), (g), (h), (k), (o), (p), (q), (s), and (t) relate to all of the appeals. They were not refuted by the evidence, except insofar as stated hereafter. With respect to them and the remaining assumptions, the Court finds: (b): The Appellant was hired for $500 per month per rig he supervised to act as a field supervisor for each company for their service rigs working for oil well companies such as Conoco-Phillips in the Kindersley area of Saskatchewan. This is a wide-spread rural geographic area stretching along the Alberta border about halfway between Lloydminster and Swift Current with dirt and gravel roads and, at certain wells, dirt trails through ranch and farmland. (d) and (e): Is overstated as far as it goes. The Appellant's duties as an employee primarily were that the Appellant personally (1) check the rig workers' time sheets and (2) rig "tickets" and to place them on an immediate timely basis on specified nights on the bus to Calgary so that payrolls could be paid quickly and on time. No excuses were tolerated for this task which was his sole task as an employee. This was more than a collection task since these documents had to be checked for clarity, for errors and for accuracy. This involved interviewing the oil field workers or checking rig time in addition to going out to the rig itself and getting the papers in good condition and placing them on the bus to Calgary - about 320 kilometres away. The Appellant is believed when he testified that the other alleged task, was for business purposes so as to get more rig time to be paid to him at $7.00 per rig per operating hour. In other words, he was not paid for time he controlled, rather he was paid $7.00 per hour for each hour a rig he contracted for was actually operating (not just sitting) in the field for an oil company such as Conoco-Phillips. Thus it was important that he get parts to them, that service equipment and material was available to keep them running, that new contracts be obtained and that oil companies such as Conoco-Phillips be kept happy: each year he held a barbecue at his own expense for service rig and oil company employees and representatives - that is not what an employee does. He also solicited work for the companies' service rigs from the oil companies at their offices. His wife, Kelly, answered the phone and delivered parts to the rigs. He had an office in his home, but he was on the road constantly at the rigs or trying to get more service work for them. Both the employment and the $7.00 per hour in contracts were oral; there is no writing. He invoiced the $7.00 per hour and charged G.S.T. If he let them use his truck he charged them a separate fee of $100.00 per day. (i), (j), (k) and (l): See above. In the Court's view, the alleged truck allowance was not in fact a truck allowance at all. It was not related to the truck. It was related to the length of time each rig operated. It was paid to the Appellant because he was retained to get operating contracts and to keep the rigs working for the oil companies. He was in business as a form of broker to get contracts, provide workers and parts to the rigs and do whatever it took to get that done. That is why he let the companies store equipment and parts on his property, that is why Kelly answered the phone and delivered parts to rigs, that is why he approached oil companies for contracts and that is why he put on his annual barbecue. (m), (n) and (r): This was completely separate from his $500 per month employment contract. But it was not merely the rental of a truck, equipment or property. The $7.00 was predetermined on the basis that it was an incentive to to the Appellant to keep the service rigs operating and under contract. That is why it was based on service rig operating time. On this basis it was reasonable and sensible. [6] Using the criteria set out in Wiebe Door Services Ltd v. The Minister of National Revenue [1986] C.R.T. 200: 1. Control: The Appellant controlled his own time and that of his property and equipment. 2. Tools: The Appellant had his own tools - his property and shop to store service material and rigs for the companies; his office and phone to run his business and provide services; his truck to travel in and carry and trailer the companies' material; and his wife, Kelly, who acted as his secretary and substitute when he was attending to other business or one of the other two companies' affairs or doing business or soliciting contracts for them. 3. Profit-Loss: If he was not successful in soliciting oil company work for the service rigs, or if the rigs had break downs, the Appellant got no income from a rig. If a service rig was operating, he got $7.00 per hour. The expenses were his in any event. He had a clear chance of profit or risk of loss based on his own efforts and equipment. If he could not get rig contracts, or if they were not operating, he lost. 4. Integration: The Appellant was not integrated with the service companies or the rigs. He could obtain other or additional contracts and they could obtain other brokers or agents. He could substitute others such as Kelly at his own expense. [7] The Appellant was in business for himself respecting the fee of $7.00 per rig per operating hour. [8] The appeals are allowed. The Appellant is awarded such costs and disbursements as are permitted under the Employment Insurance Act and the Canada Pension Plan. Signed at Regina, Saskatchewan, on this 26th day of August, 2005. "D.W. Beaubier" Beaubier, J. CITATION: 2005TCC561 COURT FILE NO.: 2004-4116(CPP), 2004-4117(EI), 2004-4118(CPP), 2004-4119(EI), 2004-4120(CPP), 2004-4121(EI) STYLE OF CAUSE: Michael McAlpine v. The Minister of National Revenue PLACE OF HEARING: Saskatoon, Saskatchewan DATE OF HEARING: August 12th, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice Beaubier DATE OF JUDGMENT: August 26th, 2005 APPEARANCES: Counsel for the Appellant: Collin K. Hirschfeild Counsel for the Respondent: Penny L. Piper COUNSEL OF RECORD: For the Appellant: Name: Collin K. Hirschfeild Firm: McKercher McKercher & Whitmore For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada