Citation: 2011 TCC 237
PLURI VOX MEDIA CORP.,
HER MAJESTY THE QUEEN,
PLURI VOX MEDIA CORP.,
THE MINISTER OF NATIONAL REVENUE,
AMENDED REASONS FOR JUDGMENT
Pluri Vox Media Corp.
("Pluri Vox") appeals from two assessments, one under the
provisions of the Income Tax Act ("Act") on the basis
that the company failed to withhold and remit taxes paid to an employee and the
second appeal from the provisions of the Canada Pension Plan ("CPP")
on the basis that the appellant failed to contribute Canada Pension Plan
contributions on behalf of an employee. The employee in question is
Martin Reesink, the sole shareholder of the appellant. Both the appellant
and Mr. Reesink take the position that Mr. Reesink is an independent
contractor and, therefore, is not an employee of the appellant.
Pluri Vox carries on
the business of media monitoring and translation. As I understand it, the
appellant engages the services of persons to review what stories are being
printed or disseminated in the media and also to provide translations of these
stories for clients of the company. The company operates "without much
supervision", according to Mr. Reesink. He explained that
Pluri Vox hires persons who are independent contractors to perform the
monitoring of the media and to provide translation. Whether these people are
independent contractors is not an issue before me.
The issue is whether or
not Mr. Reesink is an employee of the appellant. Mr. Reesink also
carries on a law practice which is separate from the business carried on by the
Although he was
instrumental in incorporating the appellant, Mr. Reesink has not been a
director for several years and was not a director in 2008, he states directors
reside outside of Ontario and do not participate in the operations
of the company. They do participate in occasional telephone conference calls
presided by Mr. Reesink but I am not at all sure what is discussed during
these calls. Mr. Reesink acknowledged that he is the directing mind of the
company since he is the sole shareholder and he directs and controls the
activities of the appellant. He makes all decisions for the appellant.
It is Mr. Reesink
who determines the contractors' pay and the terms of their engagement with the
On several occasions, Mr. Reesink
stated that he is the one "who calls the shots" together with
Mr. Andrew Baldwin, a project manager. It is Mr. Reesink who
chairs the meetings of the directors and who signs cheques on behalf of the
company. Both he and Mr. Baldwin sign contracts for the company. Mr. Baldwin
is neither a director nor a shareholder of the appellant. Mr. Reesink
supervises Mr. Baldwin.
There is no written
contract between Mr. Reesink and the appellant describing their
relationship. As far as the work he performs for the appellant, Mr. Reesink
said that he dockets time that he provides to the company. His position is that
he sells his services to the company. There is no hourly rate of pay assigned
to the time he devotes to the company. While he may be working 5, 10 or
20 hours, the amount of pay he receives is dependent on the income of the
company and it is he who determines how much the company will pay him. The
company paid Mr. Reesink approximately $3,000 to $8,000 per month, he
informed the Canada Revenue Agency ("CRA"), depending on the volume
of business undertaken by the appellant in a monthly period. Mr. Baldwin
on the other hand has a written contract with the corporation.
The company's head
office is located at Mr. Reesink's residence where he performs his
services for the appellant. The equipment in his home office includes a
computer which he uses for the appellant's business and for other purposes.
Mr. Baldwin and
Mr. Reesink meet regularly to discuss marketing, contractors and quality
of work, among other things.
Mr. Reesink he is an independent contractor since he incurs risk that his
pay from the appellant is dependent on the appellant's income; if the appellant
has little or no income, he does not get paid. His selling his time to the
appellant is a risk since the company is in a "tough market" with
three or five "real competitors". He says he is subject to risk in
the performance of his work.
An affidavit of
Sandra Stewart, a litigation officer of the CRA, was filed on behalf of
the respondent. Ms. Stewart had reviewed CRA's records of the appellant
and Mr. Reesink for the taxation years 2006 to 2009. Attached to her
affidavit were printouts summarizing Mr. Reesink's tax information for the
years 2006 to 2009 inclusive as well as printouts of the appellant's tax
information for the periods 2003 to 2008 inclusive.
According to the
documents, Mr. Reesink reported no employment expenses in his personal
income returns for the years 2006 to 2009. The income statement of the
appellant for each of these years indicate that it claimed office expenses of
$6,589. Mr. Reesink explained that Pluri Vox paid $12 a month for the use
of the telephone at his home. Sometimes, he said, he paid for the phone and
sometimes Pluri Vox paid the bill for the phone. Mr. Reesink did not
invoice Pluri Vox for his services. Both Mr. Reesink and Pluri Vox
are registered for purposes of the goods and service tax. However,
Mr. Reesink has never charged GST to the appellant for his services and
has not reported any sales for GST purposes in 2007, 2008 and 2009. Pluri Vox
has never issued any T4 form for any of the persons it engaged to carry on work
on its behalf.
In a questionnaire
Mr. Reesink completed at the request of the CRA, he stated, amongst other
things, that he was never provided with either written or oral instructions by
the company on how to complete his work. He also stated that he was not
required to perform the services personally but could hire a substitute worker
to perform these services on his behalf, without the company's consent.
It is clear that
without Mr. Reesink Pluri Vox could not have carried on any business in
2008. If he were an independent contractor, the appellant would be carrying on
business without any of its own personnel in charge. The person who is integral
to its business would now be one of its employees.
A leading case in the
matter before me is Wiebe Door Services Ltd. v. M.N.R., a decision of
the Federal Court of Appeal. In the reasons of the Federal Court of Appeal,
MacGuigan J. reviewed tests to determine whether a worker is an
independent contractor or an employee: control test, entrepreneur test,
That the control test
is still fundamental, MacGuigan J. wrote, is indicated by the reasons of
the Supreme Court in Hôpital Notre-Dame de l'Espérance and Theoret v.
Laurent et al.
where the Supreme Court stated that "the essential criterion of employer‑employee
relations is the right to give orders and instructions to the employee
regarding the manner in which to carry out his work". Justice MacGuigan
thought that the control test's inadequacy is "its apparent dependence on
the exact terms in which the task in question is contracted for" and a
literal application of the test might find actual control to be less than
In Wiebe Door,
reference is made to Lord Wright's comments on a fourfold test involving
control, ownership of tools, chance of profit and risk of loss in Montreal v. Montreal Locomotive Works Ltd. et al. MacGuigan J. described
Lord Wright's use of the fourfold test to determine the character of the
relationship in the Montreal Locomotive Works case itself as a
combination and integration of the four tests in order to seek out the meaning
of the whole transaction.
"organization" or "integration" test, was set forth by
Denning L.J. (as he then was).
This test asks whether
a person is engaged as part of the business and the work is done as an integral
part of the business in which case the person is an employee, or whether the
work, although done for the business, is not integrated into it but is only
accessory to it and the person is an independent contractor. Mr. Reesink's
work was integrated into the business carried on by Pluri Vox.
reviewed several leading cases and commentary concentrating on the organization
test and finds it decisive in some cases only as it is difficult to apply. He
found the best synthesis in authorities by Cooke J. in Market
Investigations, Ltd. v. Minister of Social Security:
The observations of Lord Wright, of
Denning, L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this:
"Is the person who has engaged himself to perform these services
performing them as a person in business on his own account?" If the answer
to that question is "yes", then the contract is a contract for
services. If the answer is "no" then the contract is a contract of
service. No exhaustive list has been compiled and perhaps no exhaustive list
can be compiled of considerations which are relevant in determining that
question, nor can strict rules be laid down as to the relative weight which the
various considerations should carry in particular cases. The most that can be
said is that control will no doubt always have to be considered, although it
can no longer be regarded as the sole determining factor; and that factors,
which may be of importance, are such matters as whether the man performing the
services provides his own equipment, whether he hires his own helpers, what
degree of financial risk he takes, what degree of responsibility for investment
and management he has, and whether and how far he has an opportunity of
profiting from sound management in the performance of his task. The application
of the general test may be easier in a case where the person who engages
himself to perform the services does so in the course of an already established
business of his own; but this factor is not decisive, and a person who engages
himself to perform services for another may well be an independent contractor
even though he has not entered into the contract in the course of an existing
business carried on by him.
In 671122 Ontario
Ltd. v. Sagaz Industries Canada Inc.
Major J., delivering reasons for the Supreme Court, agreed with MacGuigan J.
that a persuasive approach to the issue is that taken by Cooke J. He
47 … The central question is 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 or her own
equipment, whether the worker hires his or her own helpers, the degree of
financial risk taken by the worker, the degree of responsibility for investment
and management held by the worker, and the worker's opportunity for profit in
the performance of his or her tasks.
48 It bears repeating that the above factors constitute a non‑exhaustive
list, and there is no set formula as to their application. The relative weight
of each will depend on the particular facts and circumstances of the case.
Mr. Reesink was
not engaged by Pluri Vox to perform services as a person in business on his
account. He was not engaged as Pluri Vox's lawyer. The question of who
controlled whom has no answer: could the corporation control Mr. Reesink
since he was its sole shareholder? Obviously not, qua shareholder. But
Mr. Reesink's work at Pluri Vox had nothing to do with being a
shareholder. Except where there is a unanimous shareholders agreement,
shareholders do not meddle in the management of the business and affairs of a
corporation. It is Mr. Reesink's functions other than as a shareholder that
are relevant in my view.
financial risk in Pluri Vox was as a shareholder and not as a worker. If Pluri
Vox failed, Mr. Reesink may have been at risk as a shareholder, but not
from a business he was carrying on. Mr. Reesink is wearing two hats, a
director and an employee. The opportunity for profit from the business is for
Pluri Vox, not for Mr. Reesink.
To put the situation in
blunt terms, Mr. Reesink's main argument that he is not an employee is
that nobody at Pluri Vox directs his functions in the company. Yet he
controls and directs the operations of the company and the company cannot
function without his labour. The business he is participating in is not his
business but that of Pluri Vox. He is contributing to Pluri Vox's
expectation of profit, not his own. His income from Pluri Vox is not an
exact amount of dollars or an amount ascertainable by formula or otherwise. It
is an amount that he and Pluri Vox agree to pay him from time to time for his
Mr. Reesink was
also a director of Pluri Vox, albeit a de facto
director. The directors, the de jure directors, are not acting as
directors; to the extent they do anything, they follow Mr. Reesink's
wishes. Who is running the company? Mr. Reesink says he is and on the
facts before me he is. It is Mr. Reesink who actually manages and
supervises the management, business and affairs of Pluri Vox. It is clear
that he exercised all the powers of the director he was and is, in fact, a
director of Pluri Vox. And since he was (and is) a de facto
director of Pluri Vox, he may be an officer of the appellant.
Subsection 248(1) of the Act defines office:
“office” means the
position of an individual entitling the individual to a fixed or
ascertainable stipend or remuneration and includes a judicial office, the
office of a minister of the Crown, the office of a member of the Senate or
House of Commons of Canada, a member of a legislative assembly or a member of
a legislative or executive council and any other office, the incumbent of
which is elected by popular vote or is elected or appointed in a
representative capacity and also includes the position of a corporation
director, and “officer” means a person holding such an office;
« charge » Poste qu’occupe un particulier et qui lui donne
droit à un traitement ou à une rémunération fixes ou vérifiables, y compris
une charge judiciaire, la charge de ministre de la Couronne, la charge de
membre du Sénat ou de la Chambre des communes du Canada, de membre d’une
assemblée législative ou de membre d’un conseil législatif ou exécutif et
toute autre charge dont le titulaire est élu au suffrage universel ou bien
choisi ou nommé à titre représentatif, et comprend aussi le poste
d’administrateur de société; « fonctionnaire » ou
« cadre » s’entend de la personne qui détient une charge de ce
genre, y compris un conseiller municipal et un commissaire d’école.
Subsection 2(1) of the CPP
defines "office" and "officer" in similar terms.
Mr. Reesink denies that he is
entitled to a fixed or ascertainable stipend or remuneration. In short, his
position is that any remuneration he gets from Pluri Vox depends on the money
collected by Pluri Vox in carrying on its business. And this fluctuates from
week to week and month to month. At the beginning of the year it is impossible to
ascertain his remuneration. He got paid varied amounts at various times
depending on the cash flow of Pluri Vox. There was no agreement between him and
Pluri Vox that could make his income determinable by some formula, he claims.
This is not different from commission income earned by an employee based on the
employee's sales. Pluri Vox's income, and hence the appellant's income, at the
end of the day is also based on sales.
In an earlier appeal, Pro‑Style
Stucco & Plastering Ltd. v. R.,
I considered facts similar to the appeal at bar. M was president and sole
shareholder of the taxpayer. He was the sole director. M's pay was based on the
taxpayer's profits. The taxpayer's office was in M's residence, but no rent was
charged. M and the taxpayer, unlike Mr. Reesink and Pluri Vox, had
executed agreements that stated M was not the taxpayer's employee. M was not
paid on a regular basis. A difference between the two appeals is that M only
performed services for the taxpayer. In the present appeal, Mr. Reesink is
also a practicing lawyer. At paragraph 21 of Pro‑Style I
In a situation where one person is
the sole director and shareholder of a corporation and provides services to
that corporation, the traditional tests to determine whether that person is an
employee or an independent contractor are not always useful. How can one
measure, for example, the level of control the employer has over the worker's
activities when the person who directs the employer is the worker? It may well
be, as Mr. Marocco implied, that Pro‑Style was incorporated because he
wanted limited liability in carrying on the business. Therefore he caused all
contracts to be taken in the name of Pro‑Style. Pro‑Style, however,
accepted all risk with respect to the quality of the work. The business carried
on was Pro‑Style's, not Mr. Marocco's, and his services were integral to
The remuneration paid to
Mr. Reesink was ascertainable in practice, if not in actual dollars: he
would receive Pluri Vox's income and, in fact, he received at least $3,000 per
month from Pluri Vox for the work he performed.
The appeals are dismissed.
Signed at Ottawa, Canada, this 5th day of May 2011.
"Gerald J. Rip"