Citation: 2011 TCC 422
LUKE E. FOLLWELL,
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
(Edited from Reasons Delivered from the
Bench on August 26, 2011
at Kingston, Ontario)
 The Appellant
appeals a reassessment of his tax liability under the Income Tax Act (the
“Act”) for the 2007 taxation year.
 The Appellant
claimed that certain amounts received by him in that year as an assistant rugby
coach for Queen’s University in Kingston were income earned as an independent contractor. He
claimed business expenses in respect of those earnings in an amount equal to
the amount received by him for his coaching services.
 The Respondent
maintains that the Appellant is an employee and he has been assessed as having
received employment income in the amount of $3,119.00 paid to him by Queen’s in
the subject year in consideration of the performance of his coaching duties.
 The issue then is
simply whether the Appellant was engaged by Queen’s in the subject year in a
contract of service as opposed to a contract for services.
 The Appellant
testified at the hearing on his own behalf and the Respondent called one
witness namely Ms. Dal Cin, Director of Queen’s Athletics and Recreation division.
Both witnesses were candid and their evidence was honestly given.
 The Appellant
graduated from Queen’s in 2004 with a Bachelor Degree in Civil Engineering and
has worked for the City of Kingston in various capacities since that time. All positions held
by him with the city were and are as a full-time employee.
 The Appellant was
an avid participant in rugby throughout his university days at Queen’s and
prior to that as well. His sense of pride in and loyalty to the university and
to its rugby programs is demonstrated by his remarkable commitment to it. I
note, as well, that his pride and loyalty are very much a family tradition. His
father and siblings attended Queen’s and his brothers played rugby for the
school as well. This is a case of love and devotion to a sport and of a strong
loyalty to an alma mater.
 As to coaching at
Queen’s, he was brought on board in 2004 by the head coach who had been a
fellow rugby player and colleague at Queen’s. There was no real interview with
Queen’s management regarding his retention rather, as indicated by Ms. Dal Cin,
the retention by Queen’s would have occurred as a result of the head coach
making a recommendation to the university’s manager of inter-university sports.
While Ms. Dal Cin did not have personal knowledge of the Appellant’s retention
in 2004, having only joined the university in 2006, she was able to speak knowledgably
of the process in respect of 2007. The process would be for the head coach to
meet with the manager of inter-university sports and discuss the retention of
the assistant coach for the coming year. This was an annual undertaking and the
Appellant has been engaged each year since 2004, to the present, as the
assistant coach of Queen’s rugby teams.
 Exhibits tendered
at the hearing were annual written contracts between the Appellant and the
university from 2007 to present. The 2007 contract was for a term commencing
August 15, 2007 to April 15, 2008. It has appended a list of specific
responsibilities which include the following:
assistant coach is a member of the inter-university sport program unit at
Queen’s Athletics and Recreation. The assistant coach reports directly to the head
coach and works in cooperation with the manager and other athletes and
is required to attend all team-related events and functions.
the request of a head coach, to assist as necessary in the administration of
season planning; identification, recruitment and selection of athletes to the
team; planning, preparation and direction of training and practice activities;
evaluating and monitoring the progress of the athletes throughout the year;
preparing and management and evaluation of games played by the team; and assuming
responsibilities of the head coach in their absence.
in the development of a positive image and winning culture for the team and
maintain professional conduct in appearance on and off the field.
as an ambassador for the team and demand appropriate behaviour and appearance
for members of the team under the direction of the head coach or yourself.
in a timely manner with the Athletics and Recreation office in all matters
relating to involvement as a member of the team.
available for coaching meetings as necessary and as reasonably requested.
in program review and evaluations as requested by Athletics and Recreation.
Athletics and Recreation in the promotion of sponsor obligations where
necessary by acknowledging sponsor support when speaking with media, and wearing
appropriate sponsor apparel while representing Queen’s Athletics and
 The contract also
itemizes several codes of conduct and behavioural guidelines. More specifically
they are (i) inter-university coaching duties (ii) guidelines on conduct for the
Athletics and Recreation division (iii) student athlete conduct – welcoming
guidelines and (iv) student athlete conduct guidelines.
 These codes of
conduct and behavioural guidelines are not appended to that contract, however,
subsequent contracts do have appended the coaching code of ethics and the
policy terms and conditions imposed by the university on its employees. The
latter document states that the Appellant has accepted an offer of employment.
Both such documents were signed by the Appellant. I also note here that Ms. Dal
Cin testified that a major reorganization occurred in the unification of
departments at Queen’s that resulted in revisions in the form of the contracts
after 2007. However, the Appellant testified that his working relationship did
not change. That is, the nature and character of his work and the way it was
carried out was the same in 2008 and subsequent years as it was in 2007
notwithstanding changes in the form of the written contract. It is noteworthy
that even though subsequent contracts are expressed in terms of being a contract
of employment, the Appellant, being a part-time or casual employee, is not
identified with an employment number on the contracts and is not treated the
same as full-time employees. Full-time employees would have employee numbers
and university benefits would accrue to them. Casual employees such as the
Appellant receive no such benefits. More specifically, there are no health
benefits, pension benefits, vacation benefits and the like for casual employees
such as the Appellant.
 I will turn now to
the Appellant’s testimony of his services. His testimony was that his
pre-season coaching required five to six hours a day of practice and training
sessions with the players. The pre-season practices typically lasted five weeks
- from the end of August to the second week in November. During the regular
season training time would be more limited as it would be during playoffs but
even then it could be in the order of two or three hours of training and practice
several times a week. There are also off-season practices and training for the
next year although it is not clear whether these were part of his contractual
 The Appellant
testified that Queen’s University not only had its varsity team which was its
inter-university competitive team but it also had what he referred to as a
rugby club with an additional two or three teams, one of which also competed
with other schools or clubs. My understanding is that the Appellant worked with
all of these teams. There would be a large roster in each group perhaps as many
as 20 to 25 athletes, and the coach and the Appellant could and would juggle
players in the formation of the varsity team from week to week as circumstances
required. This required coordination in which the assistant coach was largely
involved, keeping, in effect, a depth chart of personnel for each position.
 In terms of games
attended, there would be seven or eight games in a regular season. There would typically
be two exhibition games and hopefully two playoff games. On average then, the
total number of games that the assistant coach would be required to attend
could be between 32 and 35 and in 2007 he attended 100% of the games played by
the varsity and club teams.
 In addition to
attending practices, training sessions, games and working with the teams and
individual athletes, the Appellant assisted with the setting up of schedules
and this involved a couple of hours per week throughout August and September.
He met with the coaches or heads of other university teams to establish such
schedules. He assisted in finding referees and fields for practices and
exhibition games if necessary. Recruiting players required additional time
 He also worked with
the head coach in the engagement of other assistant coaches. These were
volunteer coaches although as indicated by Ms. Dal Cin, they all had to be
approved by the university and sign similar contracts as that signed by the
Appellant even though there was no remuneration involved for these assistants.
 As reflected by the
terms of his written contract, the Appellant’s responsibilities and duties also
required his attending to the athletes as individuals in terms of their
personal grooming and general good citizenship.
 While the Appellant
denied any supervision or relevant contact with any of Queen’s management,
there was no denial that he was, as provided in the written agreement, necessarily
under some direction and supervision by the head coach although he worked
together with him as a colleague. For example, the head coach was responsible
for determining when and if and which meetings the assistant coach would
attend. Nonetheless, I do not mean to suggest that the Appellant was not
capable of performing his coaching duties without supervision. In all
probability he was given, as he said, pretty much a free hand in respect of
those duties. However, that he and the head coach were colleagues and friends
harmoniously working together for years in a collaborative effort does not
prevent my concluding, as I have, that the Appellant was subject to the
direction and supervision of the head coach whether or not same were actually
imposed on him in a way that would make him feel like a subordinate. It is the
inherent authority to exercise such direction that has been imposed on him
under the terms of his engagement with the university that evidence a material
degree of control over what his specific duties might be from time to time.
 Returning to the
2007 contract, I note that in addition to showing a salary of $3,119 it shows expenses
paid in the amount of $631. The expenses were a negotiated item to cover the
costs of the Appellant for meals and gas costs incurred in attending to his
duties with the university, excluding travel costs associated with travelling
with the team for a regular scheduled game. These were paid directly by the
university and were not an expense for which the Appellant was responsible.
 The contract for the
next year, from August 15, 2008 to April 17, 2009, shows a salary of $2,813 and
expenses of $582. The expenses are shown as payable in September and salary
amounts are shown as payments for October and November. The total payment is
described as an honorarium. Indeed, throughout Ms. Dal Cin’s testimony she
referred to these payments as honorariums recognizing that they are in no way
related to the amount of time and value associated with the duties performed by
the Appellant. These were in essence token compensation for valuable services
performed. The next contract, from August 15, 2009 to April 16, 2010, showed
salary payments of $255 for September and a total of $3,120 for expenses for
October and November. Again, the total was referred to as an honorarium. In the
next contract, from August 15, 2010 to April 15, 2011, the salary amount
payable in November was $996 and expenses payable in September and October were
$3,504. Once again these are all described as part of an honorarium.
 As a last comment on
the time spent by the Appellant in performing his duties and on the remuneration
received, I want to make it clear that I am not suggesting that I have made a
determination of the amount of time that he devotes to his duties as an
assistant coach of the Queen’s University’s rugby teams. I have not even
considered the amount of time he spends travelling with the team on away games.
I have not talked about the time he spends on evaluations or on monitoring an
athlete’s performance or on considering eligibility of athletes from an
academic and a health point of view or on so many other matters that concern
the rugby program at Queen’s. The Appellant is no doubt totally committed and
totally involved in the program for compensation that really is nothing more than
an honorarium as described both by Ms. Dal Cin in her testimony and in the
contracts that followed the 2007 contract. Indeed, as noted in describing the
amounts paid each year after 2007, one can see that in terms of remuneration
for services the honorarium declined considerably and recognition of expenses
increased dramatically. I cannot help but feel that this reflects the nature of
the remuneration arrangement between the Appellant and the university in a more
 In any event, I
should also note that the Appellant maintained that he has home office expenses
in addition to personal travel expenses. In 2007 he personally paid his travel
expenses to a New Hampshire competition. As to home office expenses, he said he had costs relating to
his home computer and computer supplies and the like. His testimony was that
there were no office facilities available for him at the university in 2007. On
the other hand, Ms. Dal Cin testified that, indeed, all assistant coaches for
all athletic divisions that year had access to and shared a single
administrative office facility. Even though it was not until later years that each
sport had their own office facilities made available to them, her evidence, in
respect of 2007, does contradict the testimony of the Appellant on this point.
 There is no doubt,
on the evidence, that the Appellant supplied virtually nothing in the way of
tools. The fields were provided by the university and if outside fields were
being used, they would be paid for by the university provided there was prior
approval by the manager of inter-university sports.
 As part of the
promotion of the university, and of the team and coaches as a part of the
university, coaches were asked to wear certain attire with Queen’s logos and on
occasion were asked to wear attire with logos of sponsors. Based on the
evidence of both witnesses, I find it hard to suggest that this was an absolute
mandate but, on the other hand, I acknowledge the Appellant’s testimony that,
as circumstances permitted, he would honour the obligation to promote the
school, the team and the sponsors in the best way that he could including the
wearing of Queen’s University and sponsor apparel as provided.
 The Appellant
mentioned two other rugby related activities. On one occasion for two weeks in
the summer of 2008 he was a video analyst for Rugby Canada’s national men’s team. He received
no compensation for this work. He was paid expenses only. In 2009, in an unpaid
capacity, he worked with Rugby Ontario which included a five day trip to St. John, Newfoundland in respect of which he
was only paid for his expenses.
 When asked whether
the Appellant was free to do other coaching, he indicated that he could and
that, in fact, he had had other opportunities to coach with another team,
namely the Belleville Bulldogs, but he had no time to undertake such work. He
commented that this would not be in conflict with his work at Queen’s
notwithstanding a number of non-competition type covenants that were contained
in the contractual material to which he was a party.
 Ms. Dal Cin
acknowledged that the head coach of the rugby team was also a casual worker.
She acknowledged that the coaching budget would have included a budget for the
head coach and the assistant coach but she was not aware, as testified by the
Appellant, that that budget had been essentially divided equally between the
two on the recommendation of the head coach. At this point, I also note that the
head coach would have entered into contracts virtually the same as the
contracts entered into by the Appellant, both being so-called casual employees
as opposed to full-time employees.
 When asked about the
control that the university exercised over the Appellant, Ms. Dal Cin
acknowledged that considerable latitude would be given to the head coach to
assign particular duties to the Appellant and that consultations between
coaches and management would be between the head coach and the manager of
inter-university sports and less so, if at all, with the Appellant. She
acknowledged that the annual retention of the Appellant year after year would
primarily be based on the head coach’s recommendations barring problems known
to the university in respect of matters such as dealings with athletes or how
the Appellant’s conduct in general might reflect on the university. Ms. Dal Cin
also acknowledged that there were volunteer assistant coaches that would be
identified by the head coach and assistant coach. If accepted by the manager of
inter-university sports, such volunteer assistant coaches would, as noted
earlier in these Reasons, be required to sign agreements which were the same or
similar as those signed by the Appellant and, in this case, by the head coach.
 The Appellant’s
counsel argued that I should not put much if any relevance on the written
contracts. The post 2007 contracts which spoke in terms of employment were
suggested not to be relevant to the 2007 year. As well, he noted that most or
all of the duties and responsibilities set out in those contracts were
responsibilities that would be imposed on an independent contractor to the same
extent as they would be imposed on an employee. Accordingly, they were
determinative of nothing. During his cross-examination of Ms. Dal Cin he
suggested that the university would sign an independent contractor contract if
a casual worker were incorporated. While he took her to agree, her response was
that human resources policies would have to be followed. I note, in any event,
that such a hypothetical is not relevant and that the Act deals with
incorporated employees in a manner that might make it impractical for a worker
such as the Appellant to consider incorporating his services.
 As to control, he
argued that there was virtually no control over the Appellant’s services by
Queen’s University. If there was any control or supervision it would be by the
head coach who was not the purported employer in this case. Citing an academic
commentary and portions of the Supreme Court of Canada decision in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., he noted the importance of control and
emphasized that control included control over how work was done. He argued that
there was virtually no control or supervision even by the head coach of how the
Appellant carried out his coaching duties. He was responsible for working out
training programs, practices for the teams and the like without direction or
supervision by the university and little, if any, by the head coach with whom
he worked collaboratively without supervision.
 A recent decision of
Justice Sheridan was also referred to by the Appellant’s counsel, namely, Kowalchuk
where she too emphasized the significance of control in the determination
of a status of a worker. She referred to factors relied on in the decision in Wolf
that included lack of job security, disregard of employee-type benefits and
freedom of choice and mobility. On the role of the intentions of the parties,
Justice Sheridan emphasized the need for a common intention. Relying on all
such aspects of Justice Sheridan’s decision, Appellant’s counsel encouraged me to
come to a similar conclusion, in the case at bar, as Justice Sheridan came to
in that case. That is, there being no common intention here that has been
demonstrated and no benefits, no job security and no effective control, the
cases warranted similar treatment – namely as found by Justice Sheridan in Kowalchuk,
the worker must be found to be an independent contractor.
 Appellant’s counsel
also dealt with the other factors required to be considered in determining the
status of a worker.
 With respect to risk
of loss and chance of profit he argued that the risk was obvious in the sense
that the endeavour was a losing proposition. Losing money it was argued, in
effect, demonstrated risk of loss. Little of relevance was said in relation to
chance of profit.
 As to tools, an
argument was made that the ability to select alternate fields somehow
constituted a supply of tools by the Appellant.
 As well, he argued
that there was no mutuality of intention between the parties.
 Respondent’s counsel
emphasized that the terms of the contract would indicate that this was an
employment engagement and more particularly he argued that no tools were
provided by the Appellant and that he had no chance of profit and no risk of loss.
He relied heavily on the principles in Sagaz Industries that the central
question is always whether the person who has been engaged to perform the
services is performing them as a person in business on his own account. In
making this determination the level of control the employer has over the
worker’s activities will always be a factor. However, other factors to consider
include whether the worker provides his own equipment, whether the worker hires
his own helpers, whether there is a degree of financial risk and the worker’s
opportunity for profit. It is argued that none of these factors point to the
Appellant having a business being conducted for his own account.
 The central question
was phrased again in Sagaz Industries as a query namely: “Whose business
is it?” The Respondent’s counsel argues that there is no evidence that the Appellant
has a business.
 I see no basis upon
which the Appellant can succeed in this case. Addressing the central question
phrased as: “Whose business is it?” begs the question as to whether or not the
Appellant has a business at all. To have a business means to have a source of
income from a business activity. This requirement is most clearly set out in
the Supreme Court decision in Stewart v. Canada. That case focuses not on the
distinction between independent contractor and employee but rather looks at the
distinction between expenses incurred to earn income from a business and
expenses of a personal nature. Notwithstanding the different focus, I believe
it is impossible to suggest that a worker is an independent contractor carrying
on business for his own account where the activity being undertaken is not a
source of income from a business carried on by him. Further, the activity here
is not capable of being a source of income at all in the sense of ever
producing a profit which, in the context of the central test in Sagaz
Industries, is the focus of one of the factors to consider, namely: is
there a chance of profit from a business carried on by the worker? In this case,
I regard this factor as having considerable weight.
 The Appellant
testified that he was not engaged in his own words “in a money making venture”.
The honorarium he received was primarily targeted as a form of expense
reimbursement as evidenced by subsequent contracts. Honorariums, which I am
satisfied the subject payments were, are not a source of income in respect of
which the Appellant has established a business to earn. He earns the
honorariums for services performed out of devotion and loyalty to a sport and
an institution. These are receipts earned through the pursuit of personal endeavours
offered as services for compensation in the form of an agreed and fixed
 That the receipts
can be said to result from the pursuit of personal endeavours speaks of the
motivation behind the pursuit. That does not suggest that they are not taxable
receipts. Although the Act does not deal specifically with honorariums,
in a case such as this, where the payment is for services rendered, it cannot
be considered a gift and the personal motivation to accept a low remuneration
in the form of an honorarium cannot change its nature from income to
non-income. There is little law on the taxation of honorariums but the leading
case on that question is still the decision in Mr. C. v. Minister of
That case distinguishes taxable honorariums from non-taxable gifts. Given the
state of the law and that the Appellant’s receipts were for services rendered without
any assertion that they were gifts made to him, the question is, as posed by
the parties: is the income earned from a business operated by the Appellant, or,
is it from engaging in a contract of service? As indicated at the outset of
this analysis, I can come to no other conclusion than that the Appellant earned
his honorarium by performing duties under a contract of service. And I add
here, as well, that I cannot, and have not been asked, to re-allocate the
amount specified under the contract as being paid as salaries to the worker
versus the amount paid for expenses. These were fixed by the parties at the
time as properly reflecting the arrangement between them. I have no evidence or
pleas to suggest a different allocation.
 Notwithstanding the
weight given to my determination that the Appellant did not carry on a business,
I will make further comment, largely by way of summary, on the other factors to
 As to tools, in my
view, the Appellant provides none of significance but, in any event, I would
not put much weight on this factor in this case. Many professionals, even independent
contractor professionals, provide few if any tools other than their know-how.
 As to the intention
of the parties, I agree with the Appellant, I have no compelling evidence here
of any mutuality of intention in 2007.
 In summary then the
Appellant has no chance of profit, no meaningful risk of loss and was subject
to sufficient control to constitute him an employee. Further, and importantly,
in the absence of having a business of his own I would suggest that while the
integration test is largely out of favour these days, where it is clear as in a case like
this that the person performing the services has no business of their own, then
it is important to acknowledge that the worker, the Appellant, is an integral
part of the team that is his employer, namely Queen’s University in this case.
 Relying on that
perspective of the independent contractor analysis, I again have no doubt that
the Appellant cannot be found to be anything but an employee of Queen’s
University. Reiterating the same view in yet a different way, I should also
note that employment income under section 5 of the Act includes income
from an office or employment. I believe it can be said in this case that the
Appellant holds an “office” in the sense of being held out by the university as
holding the office of “assistant coach” of its rugby teams. He is presented,
with his knowledge and consent, as holding a position or office with the
university. He is being remunerated for holding and carrying out duties of that
office. He has no other capacity in which to hold himself out as earning the
contracted for income, honorarium or otherwise. On this basis one can conclude
that the case at bar is on all fours with the decision in Mr. C. v M.N.R.
which dealt with the taxable nature of an honorarium paid to a person holding
 In any event, for
all these reasons, the appeal must be dismissed, without costs.
Signed at Ottawa,
Canada this 13th day of September 2011.