Citation: 2011TCC229
Date: 20110429
Dockets: 2010-3001(EI)
2010-3003(CPP)
BETWEEN:
5256951 MANITOBA LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The Appellant was
assessed (by notices of assessment that were all dated July 10, 2009)
pursuant to the Employment Insurance Act (the “EI Act”) for
employment insurance premiums and pursuant to the Canada Pension Plan (the
“CPP”) for Canada Pension Plan contributions in relation to the amounts
paid by the Appellant to Wayne Scholz in 2006, 2007, 2008 and 2009. The amounts
assessed under each Act are as follows:
|
Year
|
Amount Assessed under the EI Act
|
Amount Assessed under the CPP
|
|
2006
|
$880.54
|
$1,595.88
|
|
2007
|
$1,061.63
|
$2,086.42
|
|
2008
|
$882.41
|
$1,757.26
|
|
2009
|
$128.71
|
$278.02
|
|
Total:
|
$2,953.29
|
$5,717.58
|
[2]
The issue in these
appeals is whether Wayne Scholz was an employee or an independent contractor. The question of whether
an individual is an employee or an independent contractor has been the subject
of several cases. In 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] S.C.J. 61, 2001 S.C.C. 59 (“Sagaz”), Justice
Major of the Supreme Court of Canada stated as follows:
46 In my opinion, there is no one
conclusive test which can be universally applied to determine whether a person
is an employee or an independent contractor. Lord Denning stated in Stevenson
Jordan, supra, that it may be impossible to give a precise definition of the
distinction (p. 111) and, similarly, Fleming observed that "no single test
seems to yield an invariably clear and acceptable answer to the many variables
of ever changing employment relations ..." (p. 416). Further, I agree with
MacGuigan J.A. in Wiebe Door, at p. 563, citing Atiyah, supra, at p. 38,
that what must always occur is a search for the total relationship of the
parties:
[I]t
is exceedingly doubtful whether the search for a formula in the nature of a
single test for identifying a contract of service any longer serves a useful
purpose.... The most that can profitably be done is to examine all the possible
factors which have been referred to in these cases as bearing on the nature of
the relationship between the parties concerned. Clearly not all of these
factors will be relevant in all cases, or have the same weight in all cases.
Equally clearly no magic formula can be propounded for determining which
factors should, in any given case, be treated as the determining ones.
47 Although there is no universal
test to determine whether a person is an employee or an independent contractor,
I agree with MacGuigan J.A. that a persuasive approach to the issue is that
taken by Cooke J. in Market Investigations, supra. 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.
[3]
In Royal
Winnipeg Ballet v. Minister of National Revenue, 2006 FCA 87, 2006
DTC 6323, the dancers and the ballet company had a common intention that the
dancers would be hired as independent contractors. The Federal Court of Appeal
reviewed the relevant facts of that case as determined by the factors outlined
in Wiebe Door Services Ltd. v. Minister of National Revenue,
[1986] 2 C.T.C. 200, 87 DTC 5025 (“Wiebe Door”). A majority of the
Justices of the Federal Court of Appeal concluded that the relevant facts in
that case did not change the intended relationship between the dancers and the
Royal Winnipeg Ballet and that the dancers were independent contractors.
Justice Sharlow of the Federal Court of Appeal made the following comments in
the Royal Winnipeg Ballet case in writing for the majority of the
Justices of the Federal Court of Appeal:
65. The judge chose the following factors
as relevant to the Wiebe Door analysis (it is not suggested that he
chose the wrong factors or that there are any relevant factors that he failed
to consider):
· The indispensable element of
individual artistic expression necessarily rests with the dancers. The RWB
chooses what works will be performed, chooses the time and location of the
performances, determines where and when rehearsals will be held, assigns the
roles, provides the choreography, and directs each performance.
· The dancers have no management or
investment responsibilities with respect to their work with the RWB.
· The dancers bear little financial
risk for the work they do for the RWB for the particular season for which they
are engaged. However, their engagements with the RWB are for a single season
and they have no assurance of being engaged in the next season.
· The dancers have some chance of
profit, even within their engagement with the RWB, in that they may negotiate
for remuneration in addition to what is provided by the Canadian Ballet
Agreement. However, for the most part remuneration from the RWB is based on
seniority and there is little movement from that scale.
· The career of a dancer is
susceptible to being managed, particularly as the dancer gains experience.
Dancers engaged by the RWB have considerable freedom to accept outside
engagements, although there are significant contractual restrictions (the need
for the consent of the RWB, and the obligation to hold themselves out as being
engaged by the RWB).
· Although the dancers bear many
costs related to their engagement with the RWB and their dancing careers
generally, the RWB is obliged to provide dance shoes, costumes, tights, wigs
and certain other necessary items.
· The dancers are responsible for
keeping themselves physically fit for the roles they are assigned. However, the
RWB is obliged by contract to provide certain health related benefits and
warm-up classes.
66. The control factor in this case, as in
most cases, requires particular attention. It seems to me that while the degree
of control exercised by the RWB over the work of the dancers is extensive, it
is no more than is needed to stage a series of ballets over a well planned
season of performances. If the RWB were to stage a ballet using guest artists
in all principal roles, the RWB's control over the guest artists would be the
same as if each role were performed by a dancer engaged for the season. If it
is accepted (as it must be), that a guest artist may accept a role with the RWB
without becoming its employee, then the element of control must be consistent
with the guest artist being an independent contractor. Therefore, the elements
of control in this case cannot reasonably be considered to be inconsistent with
the parties' understanding that the dancers were independent contractors.
67. The same can be said of all of the
factors, considered in their entirety, in the context of the nature of the
activities of the RWB and the work of the dancers engaged by the RWB. In my
view, this is a case where the common understanding of the parties as to the
nature of their legal relationship is borne out by the contractual terms and
the other relevant facts.
[4]
In D.W. Thomas Holdings Inc. v. Minister of National Revenue, 2009 FCA 371,
Justice Layden-Stevenson, stated, on behalf of the Federal Court of Appeal,
that:
5 Contrary to
the appellant's assertion, Miller J. did consider the issue of intention. In
keeping with the approach set out in Royal Winnipeg Ballet v. Canada
(Minister of National Revenue), [2007] 1 F.C.R. 35 (FCA), she examined the
evidence to ascertain whether it supported that intention and concluded that it
did not.
[5]
The Appellant carried
on a business of buying and selling boats as “The Boat Finders”. It appears
that the boats would generally be purchased in the United States and sold to customers in Canada.
The Appellant would pick up boats from various locations and bring them to its
premises. Once the Appellant sold a boat it would be delivered to the purchaser.
Wayne Scholz was retained by the Appellant to drive the Appellant’s truck to
pick up boats and bring them to the Appellant’s place of business. It also
appears, as determined below, that Wayne Scholz was retained by the Appellant’s
customers to deliver boats to them.
[6]
In this case there is a
dispute between the Appellant and Wayne Scholz with respect to whether there
was a common intention that Wayne Scholz would be an employee or an independent
contractor. Lorne Neyedly, who was the general manager of the Appellant and the
father of the shareholder of this company, testified during the hearing. He
stated, during cross-examination that:
Q You say in your evidence that
Mr. Scholz declared himself to be an independent contract driver to you,
is that correct?
A Continually to me and the other witnesses.
Q And you say that at the initial meeting he
declared himself to be a contract driver, is that correct?
A At the initial meeting, at the ending
meeting he declared himself to be a contract driver.
[7]
During his testimony,
Wayne Scholz stated that:
Q At that, when you first started, did you
discuss whether you would be an employee or a contractor?
A I just assumed employee because we never
talked about any kind of contract at all, period.
Q So what did you think you were?
A Employee.
Q Did you ever tell Mr. Neyedly you were an
independent contractor?
A Never.
Q And throughout the time you were working
for Boat Finders, what did you think you were?
A An employee.
[8]
There is clearly a
discrepancy between the testimony of these two witnesses. The Appellant also
called Carla Provencal as a witness. I have no hesitation in accepting her
testimony. She was a very credible witness. She stated that:
Q So what was your understanding of Wayne Scholz' position?
A That he wasn't an employee, he was an independent contract
driver.
Q Were you ever asked to do payroll?
A Once I issued the paycheques when Louise
was away and I was still fairly new, still training, it was in the fall of
2008, and Louise coached me by phone. And I asked who all had to have paycheques
and she said pull the time sheets, and I filled out a time sheet and the other
employees filled out time sheets. So I pulled the time sheets.
I asked about Wayne. She says, don't worry about Wayne. You don't have to issue a cheque for him because he's not on the
payroll. So I just issued cheques for myself, for Jared, for Mike.
Q Did she identify Wayne as an employee or –
A No. She said that he wasn't an employee so
I didn't have to worry about a payroll cheque for him.
[9]
Louise is Louise Scholz,
the wife of Wayne Scholz. She was also the bookkeeper / office manager of the
Appellant. It appears that Louise Scholz was given a significant amount of
autonomy in carrying out her duties for the Appellant. She also was granted
signing authority for cheques. It seems to me that it is more likely than not
that Louise Scholz would not have told Carla Provencal that Wayne Scholz
was not an employee if Wayne Scholz really intended to be and thought that he
was an employee.
[10]
Carla Provencal also
stated that:
Q And what was your thoughts when Brian Fey
came in, the trust examiner for CRA?
A Brian had stated that the reason that he
was there for the audit was because Wayne Scholz had stated that he was an
employee and had applied for EI benefits, and that's what generated or kicked
off the audit.
And I was actually very shocked and
flabbergasted because, in the time that I had been there, Wayne had referred to himself as an
independent contract driver in our conversations and that's what I was told he
was by Louise Scholz and by everyone else at The Boat Finders.
Q Did he ever make reference about being a
farmer to you?
A Yes. When he would come in and be waiting
for some of the documentation for going out for picking up boats, because I was
up at the front as the receptionist and he would be waiting there, we'd talk,
of course, like normally like people do, about what the weather was doing and,
you know, how the farm was going and just all that kind of stuff.
And I became an independent self-employed
person in the 1st of July, so I didn't work as an employee for The Boat
Finders. And so in March when I was there and he was in, we'd had a
conversation and just kind of general conversation about, yes, I'm not, you
know, I'm going to be self-employed, and just talking in that respect, and he
said, yes, it's good to be self-employed. Like, you know, I like being a
farmer. I like, you know, doing the contract driving because you're not an
employee for anybody and you get to kind of choose your days and your times,
and that kind of stuff.
[11]
Wayne Scholz also
stated that he reported his income from the Appellant as an employee when he
filed his income tax returns. His income tax returns for these years were not
submitted into evidence. It seems more likely than not that the Appellant would
not have access to the income tax returns filed by Wayne Scholz. However, the
Respondent, The Minister of National Revenue, would have access to the income tax
returns that were filed by Wayne Scholz.
[12]
In the Law
of Evidence in Canada, third edition, by Justice Lederman, Justice Bryant
and Justice Fuerst of the Superior Court of Justice for Ontario, it is stated
at p. 377 that:
§6.449 In civil cases, an unfavourable inference can be drawn
when, in the absence of an explanation, a party litigant does not testify, or
fails to provide affidavit evidence on an application, or fails to call a
witness who would have knowledge of the facts and would be assumed to be
willing to assist that party. In the same vein, an adverse inference may be
drawn against a party who does not call a material witness over whom he or she
has exclusive control and does not explain it away. Such failure amounts to an
implied admission that the evidence of the absent witness would be contrary to
the party’s case, or at least would not support it.*
§6.450 An adverse inference should be drawn only after a prima
facie case has been established by the party bearing the burden of proof.*
(* denotes a footnote reference that is in the
original text but which has not been included.)
[13]
It seems to me that
this can also apply to a failure to produce documents that are within the
exclusive control of a party. In this case those documents are the income tax
returns of Wayne Scholz for 2006, 2007, 2008 and 2009. These income tax returns
would either have confirmed Wayne Scholz’s statement that he intended to be and
considered himself to be an employee or they would have contradicted these
statements since employment income is not reported on the same line in the income
tax return as income from a business. Wayne Scholz was a witness called by the
Respondent, he was not a witness called by the Appellant.
[14]
Counsel for the
Respondent stated during closing arguments that the Appellant had the onus of
proof with respect to the intention of the Appellant and Wayne Scholz.
[15]
In The Queen v. Anchor
Pointe Energy Ltd., 2003 DTC 5512, Justice Rothstein (as he then was)
stated that:
23 The
pleading of assumptions gives the Crown the powerful tool of shifting the onus
to the taxpayer to demolish the Minister's assumptions. The facts pleaded as
assumptions must be precise and accurate so that the taxpayer knows exactly the
case it has to meet.
[16]
In The Queen v. Loewen,
2004 FCA 146, Justice Sharlow also made the following comments:
9 It
is the obligation of the Crown to ensure that the assumptions paragraph is
clear and accurate. For example, the Crown cannot say that the Minister
assumed, when making the assessment, that a certain car was green and also that
the same car was red, because it is impossible for the Minister to have made
both of those assumptions at the same time: Brewster, N C v. The Queen,
[1976] CTC 107 (F.C.T.D.).
10 Nor
is it open to the Crown to plead that the Minister made a certain assumption
when making the assessment, if in fact that assumption was not made until
later, for example, when the Minister confirmed the assessment following a
notice of objection. The Crown may, however, plead that the Minister assumed,
when confirming an assessment, something that was not assumed when the assessment
was first made: Anchor Pointe Energy Ltd. v. Canada, 2003 DTC 5512
(F.C.A.).
11 The
constraints on the Minister that apply to the pleading of assumptions do not
preclude the Crown from asserting, elsewhere in the reply, factual allegations
and legal arguments that are not consistent with the basis of the assessment.
If the Crown alleges a fact that is not among the facts assumed by the
Minister, the onus of proof lies with the Crown. This is well explained in Schultz
v. Canada, [1996] 1 F.C. 423 (C.A.) leave to appeal to S.C.C. refused,
[1996] S.C.C.A. No. 4.
[17]
There is no reference
in either the Reply filed in relation to the Appeal under the EI Act or
in the Reply filed in relation to the Appeal under the CPP that the
Minister had assumed that the parties had any particular intention. If the
Respondent should now want to allege that the parties did not have a mutual
intention that Wayne Scholz would be an independent contractor then the
Respondent would have the onus of proving this. It seems to me that in relation
to this the tax returns for Wayne Scholz would have either confirmed Wayne
Scholz’s statements that he always considered himself to be an employee and
that he reported his income as such or they would have contradicted these
statements. It seems to me that an unfavourable inference can be drawn from the
failure of the Respondent to introduce copies of the income tax returns that
Wayne Scholz had filed for 2006, 2007, 2008 and 2009. The negative inference is
that these returns would have indicated that he reported his income derived
from the services that he provided to the Appellant as income from a business
and not as income from employment.
[18]
Since Louise Scholz was
Wayne Scholz’s wife and since she was also the bookkeeper / office manager for
the Appellant, if Wayne Scholz considered himself to be an employee throughout
these four years, why did he not ask his wife to provide him with a T4 slip?
Wayne Scholz confirmed during his cross-examination that he had never asked for
a T4 slip or a record of employment.
[19]
I accept the testimony
of Lorne Neyedly and Carla Provencal and I do not accept the testimony of Wayne
Scholz. Therefore I find that there was a mutual intention that Wayne Scholz
would be retained as an independent contractor and not as an employee.
[20]
In Royal
Winnipeg Ballet, the facts related to the dancers and the circumstances of
their work were not sufficient to alter the arrangement from that which was
intended by the parties. Therefore it seems to me that “in keeping with the
approach set out in Royal Winnipeg Ballet”, the relevant facts in this
case, as determined by the factors as set out in Wiebe Door and Sagaz, would have
to more strongly indicate an employer/employee relationship than did the facts
in the case of the Royal Winnipeg Ballet in order for Wayne Scholz to be
considered to be an employee. In both the Royal Winnipeg Ballet case and
in this case, there was an intention to create an independent contractor
relationship and not an employer/employee relationship.
[21]
The Respondent
submitted that the Royal Winnipeg Ballet case could be distinguished on
the basis that in that case, as stated by Justice Sharlow “there is no dispute
between the parties as to what they believe that relationship to be” but in this
appeal there was a dispute between the parties. However, since I do not accept
the testimony of Wayne Scholz in relation to the issue of whether he intended
to be an employee, I find that there was also no dispute in this case with
respect to what the parties believed their relationship to be.
[22]
With respect to the
control factor, the evidence in this particular case was that the amount of
control that the Appellant had over Wayne Scholz would have been less than the
amount of control that the Royal Winnipeg Ballet had over the ballet
dancers. In the Royal Winnipeg Ballet case, Justice Sharlow described
the degree of control that the Royal Winnipeg Ballet had over the dancers as
“extensive”. As noted by Justice Sharlow in the above decision:
The RWB chooses what works will be performed, chooses the
time and location of the performances, determines where and when rehearsals
will be held, assigns the roles, provides the choreography, and directs each
performance.
[23]
Wayne Scholz drove the
Appellant’s truck to pick up boats. He was retained by the Appellant to
perform a certain task when the need arose. If Wayne Scholz was not available
to drive the truck, the Appellant would contact another driver on its list.
During the period from 2006 to 2009 the Appellant had a list of six to seven
drivers that it could call upon to drive the truck. One of these other drivers
was an employee of the Appellant.
[24]
In the case of Direct
Care In-Home Health Services Inc. v. Minister of National Revenue,
2005 TCC 173, Justice Hershfield made the following comments in relation
to control:
11 Analysis of this factor involves a determination of who
controls the work and how, when and where it is to be performed. If control
over work once assigned is found to reside with the worker, then this factor
points in the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship.* However, in times
of increased specialization this test may be seen as less reliable, so more
emphasis seems to be placed on whether the service engaged is simply “results”
oriented; i.e. “here is a specific task -- you are engaged to do it”. In such
case there is no relationship of subordination which is a fundamental
requirement of an employee-employer relationship.* Further, monitoring the
results, which every engagement of services may require, should not be confused
with control or subordination of a worker.*
12 In the case at bar, the Worker was free to decline an
engagement for any reason, or indeed, for no reason at all. …
(emphasis added)
(* denotes a
footnote reference that was in the original text but which has not been
included.)
[25]
Wayne Scholz was engaged to
perform a certain task – to drive the truck. He was free to decline an
engagement for any reason. If he declined, the Appellant simply called another
driver on the list. While Wayne Scholz indicated that he felt that he could not
decline too often, this would be the same for anyone who was on a list for
potential assignments. If any person would decline too often the person
assigning the task could stop calling.
[26]
In ACE-J Transportation Inc. v. Canada (Minister of National Revenue), 2010 TCC 174 Justice Weisman held that five truck
drivers were retained as independent contractors. He stated in part that:
18 Of
great importance in this case is that these same cases talk about the
importance of a worker having a right to refuse assignments. The evidence in
this case is quite clear that the five workers indeed had such a right, and
that the controls mentioned above only came into effect once the driver
accepted an assignment.
[27]
The ability to refuse an
assignment is a significant factor in determining whether a person is an
employee or an independent contractor. If an employee refuses an assignment,
there is a possibility of disciplinary action or dismissal. If an independent
contractor refuses an assignment, there is simply the possibility that the
person requesting the assignment may look elsewhere the next time that such
person requires the services offered by the independent contractor. This is
part of the control test. An employer has control over an employee with respect
to the assignment of work while a person retaining the services of an
independent contractor does not have any control over the assignment of work to
an independent contractor who may refuse an assignment with no consequences
other than the risk of not being called the next time the person has work to be
done. I find that in this case Wayne Scholz had the right to refuse any driving
assignment that was offered to him. Since the only consequence of refusing an
assignment would be that the Appellant may be less likely to call him the next
time the Appellant needs a driver, this strongly indicates that Wayne Scholz
was an independent contractor not an employee.
[28]
With respect to the
ownership of equipment, the Respondent placed significant emphasis on the fact
that the Appellant owned the truck that Wayne Scholz was retained to drive. In ACE-J Transportation Inc., referred to above, Justice Weisman made the
following comments:
22 This
brings me back to the truck. The truck is of interest because I am not sure
that it is a tool in these circumstances. This goes directly to a submission
made by counsel for the Minister that surely a driver needs a truck to drive. I
had not read a case that says this and I have yet to see one, but it seems to
me that there is a difference between a business where the person's business is
to drive trucks and a business where it is the person's business to do haulage
which involves having a truck with which to do the hauling.
23 I would
think that for someone who is in the haulage business a truck is a necessary
tool. I am not sure whether or not it is in a business where the person is
solely a driver. I do know that some of the cases at the provincial level say
that the truck is an essential tool.
24 That
brings me back to Precision Gutters. It does sound to me like this
machine that made gutters and these gentlemen were found to be independent
contractors, notwithstanding that the payer supplied that essential instrument
just as the payer here was supplying and repairing a truck.
[29]
Therefore the fact
that the Appellant owned the truck does not mean that Wayne Scholz could not be
carrying on a business of driving the truck. In Royal Winnipeg Ballet
the dancers bore many costs but the Royal Winnipeg Ballet was obliged to
provide dance shoes, costumes, tights, wigs and certain other necessary items.
[30]
It is not clear
whether Wayne Scholz would have been able to hire other
workers to perform the tasks that he was to perform. It appears that the
interest of the Appellant was simply that the boat (or boats) would be picked
up and delivered to the Appellant and not necessarily that Wayne Scholz had to
be the person who drove the truck. It was clear that Louise Scholz could also
drive the truck as she would drive it from the Appellant’s premises to Wayne
Scholz and return it when the trip was finished. She also accompanied him on
trips to the United States to pick up boats. Since she could drive
the truck, it seems more likely than not that she did drive for parts of long
trips, notwithstanding the statements of Wayne Scholz to the contrary. In
the Royal Winnipeg Ballet case, there was no discussion with
respect to whether or not the dancers could hire any helpers but it would seem
illogical to suggest that the dancers could hire any person to replace them in
the production.
[31]
With respect to the
degree of financial risk/opportunity for profit, Wayne Scholz, as were the
other drivers who were retained as independent contractors, was paid a fixed
amount based on the location to which he had to travel. There was a significant
discrepancy between the testimony of Lorne Neyedly and Wayne Scholz also
with respect to the question of who set the rates.
[32]
The following is an
excerpt from the testimony of Lorne Neyedly provided during his testimony in
chief:
Wayne Scholz would set his fees and charge The Boat Finders
accordingly and we agreed to pay the sums that he charged us.
[33]
The following is an
excerpt from the testimony of Lorne Neyedly provided during his testimony on cross-examination:
Q Okay. Now you said today that Mr. Scholz set his own
rates?
A Absolutely.
Q Did you have all your drivers set their rates?
A Yes.
Q So just to understand, all the different drivers, they
came to you –
A Yes.
Q -- and told you what they would charge, is that correct?
A They would tell us what they would want for
a trip back from Grand Forks or from Fargo, and we agreed or we didn't agree.
Q So you didn't set any of the rates then?
A No.
Q Well, Mr. Neyedly, I put it to you that you
did set the rates?
A How?
Q Is that not true?
A Tell me how I set the rates.
Q I'm asking you.
A If you wanted to pick –
Q I'm putting it to you.
A If you wanted to pick up a boat from Fargo, you call me up and you said, I want
to go pick up a boat. Give me a hundred and a half. That's how they set their
rates.
Q So you are saying you did not then?
A H'mn, h'mn.
[34]
The following is an
excerpt from the testimony of Wayne
Scholz provided during his examination in chief:
Q Okay. I would like to turn now to the issue
of payment. When you first started, did you discuss how you would be paid?
A He told me that he would give me $300 to go
to Minneapolis. He told -- he
give me the prices all upfront.
Q Yes.
A It was so much a trip.
Q You said it was so much a trip?
A So much a trip, yes.
Q So like a set rate then?
A A set rate.
Q And what was the set rate based on?
A On mileage, I guess, how he figured, how
the distance was.
Q Yes.
A And then if I was hauling the pheasants
then he always gave us more because it was more labour intensive to unload.
Q But we're just talking about Boat Finders
today though. Who came up with these figures?
A Lorne did.
Q Okay. Now, and you just told us these
figures, they were based on distances, right?
A Yes, I believe they are.
[35]
There is obviously an
issue of credibility in this case. As I had noted earlier I accept the
testimony of Lorne Neyedly in relation to the issue of whether there was a
mutual intent that Wayne Scholz was to be retained as an independent
contractor. I also accept the testimony of Lorne Neyedly in relation to the
question of who set the rates. Therefore I find that the rates were set by
Wayne Scholz. This would be consistent with an independent contractor
relationship.
[36]
There was also another
area in which the witnesses did not agree. The truck was used to pick up boats,
generally, in the United States that were to be delivered to the Appellant and
the truck was also used to deliver boats to the customers of the Appellant.
While both Lorne Neyedly and Wayne Scholz did agree that the Appellant paid
Wayne Scholz to drive the truck when boats were being picked up, they did not
agree on who paid Wayne Scholz when he used the truck to deliver a boat to a
customer.
[37]
Leon Schellenberg
stated during his testimony that:
Q Do you recognize these as invoices in The
Boat Finders' sales journal?
A Yes, I do. However in here, and all these
invoices or most of these invoices here, as I mentioned before, Wayne Scholz'
wife, Louise Scholz, was the bookkeeper for The Boat Finders and on all these
invoices here she's put a little notation on the left‑hand side or in the
middle of the thing which isn't in the total here, stating that the purchaser
of the boat, in the first instance Bruce Larson, Calgary Alberta, should pay
directly to the driver $650 for delivery. That's in invoice 8151.
And if we go, skip a page, go to invoice
number 7301, Kelvin Kozak, Edmonton, Alberta, again the wife of the driver,
Louise Scholz, apparently when she prepared these things, she's the one that
typed these things up, again put on the side, "Delivery $300.00 Paid
directly to [the] driver".
So these amounts here, and it goes on,
there's 7302 another $300, 7303 another $600, 6105 $1,000, 7306 "$400 Paid
directly to driver Wayne Scholz".
So all these amounts worked through the
books of Boat Finders. These were paid directly to Wayne Scholz and had really
nothing to do with them. They didn't go -- they weren't in the total on the
invoices. It was something that the bookkeeper, the spouse of Mr. Scholz,
put on the, sort of as a notation on these invoices. So he was being paid
directly by the purchaser of the boat and –
…
THE WITNESS: They were not, they were not
through the books. They were not through the books.
[38]
The following is an
excerpt from the testimony of Lorne Neyedly provided during his testimony in
chief:
…The Evidence document number 3, all of those boats and sleds were
sold to various clients out west. We would -- once we sold them, we were fully
paid for them. They would have to get insurance on them before they could be
transported, and Wayne and Louise Scholz offered to deliver the clients, to
deliver to their now clients these sleds and boats and they were to be paid
cash at the other end.
The amounts on the invoice, as testimony by Carla Scholz, [sic]
was actually in our computer located underneath the invoice. And I've brought
it up on top of the invoice to show, we had to reconcile for Leon the amount of monies that Wayne Scholz
received as cash, not through our books.
MR. JUSTICE: So if I take a look at the very first one –
THE WITNESS: Yes.
MR. JUSTICE: -- this says sold to Bruce Larson.
THE WITNESS: Yes.
MR. JUSTICE: And there is a note. "Delivery to Regina $650.00 Pay driver direct"?
THE WITNESS: Yes. That's not on the original invoice.
That's below the invoice in the computer.
MR. JUSTICE: But it is on the invoice I am looking at.
THE WITNESS: Because I put it there for –
MR. JUSTICE: You added that?
THE WITNESS: I had to, I had to bring it up to show what
was going on.
MR. JUSTICE: Okay. So when I see, all the ones that say
delivery to wherever, you are the one who typed those?
THE WITNESS: Yes, they weren't on the original invoice, but
they are in the computer underneath the invoices. We have testimony to
substantiate that.
MR. JUSTICE: So how do you know that $650 was paid to
him?
THE WITNESS: The only thing I did is I copied on the back
of Bruce Larson's an email to Louise. The actual amounts, the only way I
know these amounts is they were underneath the invoices in the computer.
She would negotiate -- how it unfolds is I'm the seller. I would
sell a boat, I would sell a sled, and we sell a fair piece of equipment, number
of equipment out west, up in through Regina and up to Edmonton, Calgary and on
up to Fort McMurray. All the sleds that Wayne and Louise took out to Alberta,
they combined a load, I think they got about four sleds minimum, if not five
sleds, and they would make arrangements with these clients and the sleds, they
were getting $400 apiece. And then they would go out there.
And I had no responsibility for what they were charging these
clients. Louise would do this on behalf of her and Wayne in our office,
actually in our office.
And then they would get the load loaded up and then they would take
the trip on the weekend or they'd leave on a Friday, and then they would head
out and delivery these units and they'd be paid by the clients, which I
consider to be their clients, and they either got paid cash or they got paid
cheques. I don't know. That money never came back to our books. That's why this
came up with Leon Schellenberg.
And then from there, when they took the trips to Alberta, they'd go
on and visit their son up in the Fort McMurray region, and we allowed them to
use our truck and trailer, I guess just because we were nice guys and trying to
help them make an extra buck.
[39]
Carla Provencal stated
during her testimony as follows:
Q Yes, okay, I'll just reword it. Are you
aware that Wayne Scholz delivered boats and sleds out west?
A Yes, he did, quite often.
Q Are you aware of how he was paid?
A He was paid independently by the customer
that was receiving the boat. At one point in time when I was training, the
invoices for the customers from The Boat Finders are computer generated from an
Excel spreadsheet and Louise would track who was getting deliveries by putting
the delivery fee on the bottom of the invoice, but it was outside the printable
area because it wasn't a fee to The Boat Finders. It was paid independently to Wayne.
And one time when there was training, I
accidentally printed out the entire page with the $500 fee, that particular one
was a $500 fee, for delivery and I was told by Louise, my supervisor, that that
wasn't the correct invoice, not to print that, that it was for informational
purposes only, and that the fee was an independent fee going to Wayne as a
contract driver and that he would collect it when he got there separately. So
it wasn't actually part of The Boat Finders' invoice.
[40]
Wayne Scholz stated
during his examination in chief that:
Q Were you ever paid directly by the customers?
A No.
[41]
During
cross-examination Wayne Scholz stated that:
Q Okay. Delivering the units out west, [sic]
whom paid you for the delivery of those units out west?
A Well, didn't you?
Q I'm asking you.
MR. JUSTICE: He is asking you now.
THE WITNESS: Okay. The Boat Finders.
BY MR. NEYEDLY:
Q So the Boat Finders paid you to deliver these units out
west?
A Yes, you did.
[42]
It seems clear to me
that the customers who purchased boats from the Appellant were responsible for
paying for the delivery of the boats to them. The only issue is whether the
customers paid the Appellant, who in turn paid Wayne Scholz, or the
customers paid Wayne Scholz directly. If, as suggested by Wayne Scholz, the
Appellant paid Wayne Scholz to deliver boats to its customers, (which would
mean that the customer paid the Appellant for delivery), why was this not
reflected on the invoice that Louise Scholz (Wayne Scholz’s wife) prepared for
the sale of the boat to the customer? If the customer had paid the Appellant to
deliver the boat, then GST would have been charged on the delivery fee. It
seems obvious that Louise Scholz did not include GST on the delivery fee as the
delivery fee itself was not included in the invoice that she prepared.
[43]
I do not accept the
testimony of Wayne Scholz and I do accept the testimony of the other witnesses
and I find that the customers of the Appellant retained Wayne Scholz to
deliver their boats to them and that they paid Wayne Scholz directly for
the delivery of the boats that they had purchased from the Appellant. The
amount charged for delivering the boat to the customer (based on the amounts
added by Lorne Neyedly to the invoices) ranged from $300 to $1,000. The
Appellant had an interest in ensuring that its customers received the boats
that they had purchased and it does not seem unreasonable that the Appellant
would have allowed Wayne Scholz to use its truck for this purpose. Therefore
Wayne Scholz did have an opportunity for profit as he set the fees that he
would charge the Appellant to pick-up boats and he set the fee that the
customers of the Appellant would pay him to deliver the boats to them. Wayne
Scholz’s fee and billing arrangements are more consistent with an independent
contractor relationship than they are with an employer / employee relationship.
[44]
In the Royal
Winnipeg Ballet case, the dancers, as acknowledged by the Federal Court of
Appeal, had little financial risk. With respect to the opportunity for
profit, the dancers with the Royal Winnipeg Ballet could negotiate for
additional remuneration, although most were paid in accordance with a
predetermined scale. In Royal Winnipeg Ballet the dancers were allowed
to accept outside engagements provided that they had the consent of the Royal
Winnipeg Ballet and provided that they held themselves out as being engaged by
the Royal Winnipeg Ballet. In this case, there were no such restrictions
imposed on Wayne Scholz in accepting outside engagements.
[45]
In the Royal
Winnipeg Ballet case, the dancers did not have any management or investment
responsibilities with respect to their work with the Royal Winnipeg Ballet. In
this case Wayne Scholz did not have any management or investment
responsibilities.
[46]
There is another issue
in this case. Leon Schellenberg, a chartered accountant testified. He stated
that he had reviewed the accounting records of the Appellant and had found
significant discrepancies between the amounts of several cheques that had been
prepared by Louise Scholz for Wayne Scholz and the amounts of the invoices related
to such cheques. There were also a number of cheques for which no supporting
documentation could be found. In this appeal the only issue is whether Wayne
Scholz was an employee or an independent contractor. Whether Wayne Scholz has
received more than he was entitled to receive from the Appellant is a matter
that will need to be (and should be) resolved in another hearing by a court
with the jurisdiction to resolve this matter.
[47]
As a result, I find
that the relevant facts related to the engagement of Wayne Scholz by the
Appellant as determined by the factors as set out in Wiebe Door and
Sagaz do not suggest more strongly an employer/employee
relationship than did the facts in Royal Winnipeg Ballet and in this case
the relevant facts related to the engagement of Wayne Scholz by the Appellant
more strongly indicate an independent contractor relationship than they do an
employer/employee relationship. As a result Wayne Scholz was an
independent contractor and not an employee of the Appellant during the period
under appeal.
[48]
The Appeals by the Appellant from
the assessments under the Employment Insurance Act for employment
insurance premiums in respect of Wayne Scholz for 2006, 2007, 2008 and 2009 are
allowed, without costs, and these assessments are vacated.
[49]
The Appeals by the Appellant from
the assessments under the Canada Pension Plan for Canada Pension Plan
contributions in respect of Wayne Scholz for 2006, 2007, 2008 and 2009 are
allowed, without costs, and these assessments are vacated.
Signed at Ottawa, Canada, this 29th day of April 2011.
“Wyman W. Webb”
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