Citation: 2011 TCC 321
Date: 20110624
Dockets: 2010-1506(EI)
2010-1505(CPP)
BETWEEN:
ALERT CARPET CLEANING (NIAGARA) INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
DAVID HALL,
Intervenor.
REASONS FOR JUDGMENT
Hershfield J.
[1] These appeals
concern the decision of the Minister of National Revenue (the “Minister”) that
the employment of the Intervenor, Mr. Hall, was insurable under the Employment
Insurance Act (the “EIA”) and pensionable under the Canada
Pension Plan (the “CPP”).
[2] The issue under the
EIA and the CPP is whether Mr. Hall was engaged under a contract
of service or a contract for services as contemplated in paragraph 6(1)(a)
of the CPP and paragraph 5(1)(a) of the EIA.
[3] Mr. George Callura
who is the manager of the Appellant company (“Alert”) and his wife Ms. Anita
Prain who provides office administrative services testified at the hearing on
behalf of Alert. Mr. Christopher Johnson testified on behalf of Alert as well.
The Respondent called Mr. Hall, who, in effect, testified on his own behalf as
the sole worker whose services are at issue.
Background
[4] Mr. Callura has
been in the carpet cleaning business for some 20 years. He testified that he personally
carries out most of Alert’s cleaning activities himself but does have workers, as
well, to perform such services. Some of the work he does is quite specialized.
For example, he referred to cleaning up after dead bodies. Such work, he said, he
does himself. Most of the work, however, involves steam-cleaning and
deodorizing carpets.
[5] Alert operates
three enclosed trucks in which carpet cleaning units have been installed. The
trucks, referred to at the hearing as truck mounts, required special heavy duty
features and cost in the area of $70,000 to $80,000 each.
[6] The truck mounts
provide the power supply to the cleaning equipment mounted in the truck itself.
One truck mount used, a one-ton enclosed specially fitted truck, is capable of servicing
a 40 storey high building although the highest that Mr. Callura has actually
ever run his hoses was about 23 stories.
[7] The carpet cleaning
equipment includes hosing, a blower and a pump, a stainless steel clean water holding
tank holding up to 200 gallons, a 180 gallon dirty-water tank and a large
muffler. The pump and blower are belt driven, powered by the truck’s diesel
engine using a drive shaft designed for that purpose. The clean water is heated
up to 200 degrees Fahrenheit and the set-up produces water pressure from 50 psi
to clean a velvet chair to up to 3000 psi to clean a fired wall. Hoses are run
up and down the interior of the building through stairwells so the trucks do
not require cranes of any sort. In the Niagara region, there are only between six
to eight truck mounts available with that capacity.
[8] Two of the truck
mounts are usually used just for water clean-up as opposed to carpet cleaning
as there is less demand for the carpet cleaning unit. If a second carpet
cleaning truck mount was needed, it had to be prepared differently such as
flushing lines that might have contained anti-freeze. Water clean-up is generally
flood related work. There is clean water clean-up from water lines, water tanks
and the like and sewage water clean-up. In the former case, after water
removal, carpets may be dried and sprayed for mildew and cleaned and in the latter
case they are cut and ripped and removed. All such tasks require a certain
amount of training as does the operation of the truck mounts. Tool requirements
for these jobs for the worker are minimal but, as necessary, would have to be
provided by the worker. They might include a good knife, cutters and other
equipment such as hammers and screwdrivers, depending on the project. Cleaning
up after a flood might require such tools.
[9] Although the
evidence relating to the ownership of the truck mounts was not clear, I am
satisfied that at least one of the truck mounts was owned by Mr. Callura
personally not by Alert.
[10] Mr. Callura
testified that when a worker is first engaged by Alert, he is advised of the
nature and terms of the relationship contemplated. That relationship is clearly
set out as being that of a subcontractor. He said that he had between six and
eight people that he would call upon regularly as subcontractors. If one is not available
he goes down the list until one says he can do the job. They might be middle of
the night calls for emergency flood work jobs so several calls might be
required to find a willing worker. As well, since there is not always work, you
cannot expect someone to stand around and wait. They have to have the freedom
to do other things and to say no to work.
[11] These subcontractors
included retired persons that were already experienced, however, training as
and if required would be provided by Mr. Callura or another subcontractor. If a
subcontractor had their own truck mount and all their own equipment then they
receive 50% of what is charged to the customer. If they used his (or Alert’s) truck
mount, Alert pays the expenses and the worker receives 25% of what is charged
to the customer.
[12] In the immediate Niagara
Falls and St.
Catharines
area there are only two or three other truck mounts. It is therefore quite rare
that the subcontractor will actually have their own heavy equipment. In Niagara Falls there would be no subcontractor
that has such equipment except a major carpet cleaning company known as
F.I.R.E.. However, Mr. Callura acknowledged that more often he acted as a subcontractor
for them. If Alert was swamped he might refer work to F.I.R.E. but in such case
the customer was essentially turned over to F.I.R.E.. Alert received no benefit
from such a referral except that it encouraged getting subcontract work from F.I.R.E.
when F.I.R.E. could not handle a particular job.
[13] In other words, none
of the workers that Alert used as subcontractors had their own truck mounts.
When such a worker agreed to do a job, he would usually come, pick up the truck
mount, find out the job requirement and then go out and do the work. Alert
provided all the cleaning supplies and paid for the maintenance of the truck
mounts. Mr. Callura said a subcontractor might get additional work from the
same customer all of which would go to that subcontractor not to Alert. For
example, if Alert was hired to do a living room, dining room and bedrooms then
that is all that would be billed to the customer by the company. If the subcontractor
was able to do additional work such as upholstery, he said they were allowed to
do that on their own.
[14] Turning to Mr.
Hall’s work with Alert, Mr. Callura’s testimony was along the following lines:
·
Mr.
Hall was introduced to Mr. Callura through Mr. Hall’s brother on the basis that
there would be occasional work for Mr. Hall if he wanted to learn how to do it.
It was offered as a favour;
·
Mr
Hall was told originally that there would not be much work available and that
he would be a subcontractor not an employee. Mr. Callura insisted that Mr. Hall
wanted to be a subcontractor and understood that to be the nature of the relationship
from the beginning;
·
At
first Mr. Hall went out with another subcontractor, Mr. Al Decaire (Al). They
went out together a number of times doing hallways and apartment buildings. Mr.
Callura asserts that Mr. Hall was trained by Mr. Decaire on the use of the
truck mount and all the cleaning equipment and on how to clean carpets with the
cleaning supplies provided by Alert. He acknowledged that he did take Mr. Hall
out a few times to make sure that he knew how to use the equipment properly and
how to clean carpets and upholstery. Proper operating and maintenance
instruction was essential because the equipment was so expensive;
·
Mr.
Hall was then allowed to use the carpet cleaning truck mount on his own but at first
Mr. Callura did not call him. It was after Al began to have reliability issues
that Mr. Hall was called. Mr. Hall was continually asking for work so by that
time he was being used more often;
·
He
was told he had to have a cell phone so he could be reached if there was a job
for him but he was entitled to refuse work;
·
Mr.
Callura acknowledged that three or four months after Mr. Hall first started, Alert
provided him with a cell phone and that they would, from time to time, call
forward Alert’s line to that number if circumstances were such that Alert would
otherwise miss calls. Alert did not have a secretary or voice mail so this was
necessary as there were people calling for immediate service, such as when
their basement was filling with water and sewage. They wanted to reach somebody,
not hear a recorded message. The phone provided was an extra phone owned by
Alert. It was provided because Mr. Hall’s phone was not operative or was lost at
the time;
·
Mr.
Callura also testified that he made business cards for Mr. Hall. He said that
at first Mr. Hall carried his own business card without Alert’s number and that
he did not like that. The card that Mr. Callura gave him had both numbers. Mr.
Hall was supposed to pay for half the cost of the card but paid nothing;
·
Mr.
Hall was given four or five Alert logo shirts which he was not required to
wear. However, they were nice golf shirts and Mr. Callura suggested that Mr.
Hall may have wanted to wear them. Mr. Callura said providing subcontractors
such shirts was not uncommon. He said he personally had subcontracted for as
many as five companies including F.I.R.E. and that he had different shirts for
each of them. Alert even had magnetic signs for its trucks that would show
F.I.R.E. as the operator when they were subcontracted to do a job for them.
Still, Mr. Hall was not required to wear Alert shirts. Mr. Callura said he gave
Mr. Hall a variety of his old clothes that did not have logos. They could be
used on the job – it was dirty work. He did this as a personal favour to Mr.
Hall as they had become friends. Their friendship was illustrated in a number
of ways:
o
Mr.
Callura lent him a vehicle on more than one occasion when Mr. Hall did not have
a vehicle to go pick up the truck mount. Such vehicles were owned by Mr.
Callura personally as was the truck mount used by Mr. Hall. The loan of the personal vehicles was
a personal gesture;
o
In
the summer he let Mr. Hall take the truck mount home when he did not have a
vehicle to come to pick it up or when it was too late to return it;
o
He
lent Mr. Hall money – several thousand dollars never to be repaid;
o
They
met together with their wives as couples and exchanged Christmas gifts;
o
When
Alert received a garnishment order demanding funds owed to Mr. Hall, Mr.
Callura at Mr. Hall’s request, went to see if he could have it rescinded on the
basis that Mr. Hall was not an employee;
o
He
and his wife had talks with Mr. Hall and his wife about their taking over the
company;
o
He
introduced Mr. Hall to his accountant;
o
He
let him use his credit card and allowed continued use in spite of repeated
abuses. It was supposed to be used for gas for the truck mount but Mr. Hall put
all types of personal expenses on it like lottery tickets and cigarettes and he
never repaid Mr. Callura;
o
He
co-signed a loan for Mr. Hall.
·
After
a job was complete, Mr. Hall would prepare an invoice to calculate his percentage
and then the company would pay him as an independent contractor;
·
The
invoices are on a form entitled D+J’s Carpet Cleaning. D stood for David
(the Intervenor, Mr. Hall) and J for Jill, his wife. It is a registered business
name. Cheques
were made payable to David Hall with a notation of sub-contracting on
each cheque. In spite of the name on the invoice, Mr. Callura understood
that the cheque was to be in Mr. Hall’s name because he did not have a
bank account in the name of D+J’s Carpet Cleaning;
·
The
invoices did not have a GST component which did not seem unusual since Mr.
Callura understood that that was not necessary if gross income of the subcontractor
was less than $30,000 a year;
·
One
invoice reviewed by Mr. Callura during the hearing was an invoice where
he had subcontracted for F.I.R.E. and Mr. Hall did the work. Mr. Hall had put
in 8.5 hours for F.I.R.E.. That invoice would indicate that Mr. Hall was paid
by Alert by the hour. The 25% remuneration formula would have required a
payment of less than the amount actually paid at $15 per hour;
·
Mr.
Hall would be free to use helpers. On larger jobs, Mr. Hall would need an
assistant to help handle the hose and assist in other work. He was free to choose
his own helpers and he would be responsible to pay them. Invoices indicated
that there were other workers involved on work invoiced by Mr. Hall such as
his brother, his sons and his wife. Mr. Callura insisted that such
assistants were never retained or paid by Alert. They were brought along
by Mr. Hall who was responsible for whatever arrangements he made with
those assistants. He was also responsible for the work done and the care
and operation of the equipment. Invoices examined at the hearing
showed that some jobs, said to be flood work, were paid by the hour. This was
insurance referral work. Where assistants were engaged for such work, the
hourly rate was increased from $15 per hour to $25 per hour to, in
effect, allow the subcontractor, Mr. Hall in this case, to pay the
assistant $10 per hour;
·
At
one point, Mr. Hall had a sore shoulder and had to use an assistant. Mr. Hall
complained that he was not making enough to pay his assistants. Further, due
to his condition and the number of medical appointments, he was often not
available to work which was acceptable as he was free to decline work
for any reason. Mr. Callura cited another example of this freedom to
decline work as well. It concerned a flood clean-up where he, Mr. Hall,
arrived, said “no” to the work, and Mr. Callura had to come in and do it;
·
If
work was done unsatisfactorily then Mr. Hall would have to go back and do
the job over again for free. Even if the problem was not his fault, such as
the removal of a difficult stain, he is still required to go back and redo the
job for free;
·
There
was never any withholding for income tax or EI or CPP. This was understood
between them on the basis that Mr. Hall was a subcontractor. Mr. Hall
never requested a T4 statement;
·
Mr.
Callura also testified that he was aware that Mr. Hall did other work on
his own, independent of Alert. For example, he did work on his own for Christopher
Johnson and work for the landlord of a retail jewellery store. In
fact, Mr. Callura understood that Mr. Hall intentionally manoeuvred this latter
client away from Alert so that he could do the work for his own account.
Mr. Callura said he did not object to this and that he understands his
subcontractors will look to do their own work;
·
Mr. Callura
acknowledged that he paid for workers’ insurance as made available
under the Workplace Safety and Insurance Act for people like Mr.
Hall but he understood that he was not doing it to cover “employees”. To the
contrary, it was his understanding from the Workplace Safety and Insurance
Board that insurance should be carried whether or not the worker was
an employee or subcontractor. Although he thought they should pay it
themselves, Alert paid it to protect itself. Accordingly, Alert paid workers’
insurance premiums based on amounts paid for work done by its
subcontractors as shown on invoices submitted by them. Mr. Callura said that he understood
that Mr. Hall made a worker’s compensation claim related to his shoulder
injury and that the claim was denied on the basis that the injury had
been sustained prior to any engagement by Alert;
·
Mr.
Callura testified that he agreed to pay for half the cost of having Mr. Hall
certified by a cleaning supplies company that offered courses. He said that
Mr. Hall never completed the course so he never paid Mr. Hall the promised
half of the cost for attending. The
course was important as carpet cleaners get business from carpet
manufacturers and retailers who have warranties that were only good if
cleaning was done by persons on an approved list. To be, and to stay, on the
list you have to take certain courses;
·
Mr.
Callura did not dispute that Mr. Hall was available for work for much of
the period between late 2006 and 2009 when Alert stopped using his services.
This is suggested by invoices indicating several jobs a month showing that
Mr. Hall had worked fairly consistently for Alert since 2006;
·
Still
Mr. Callura maintained that contact would only be when there was work
for him. However, on average he said they were in contact once a week and
that jobs might be for three to four days at a time. Other subcontractors were
still being engaged as needed;
·
Mr.
Callura testified that the reason for ending Mr. Hall’s subcontractor services
was that he got stuck with three months of credit card bills and unpaid
parking tickets in addition to loans to Mr. Hall of over $6,000 initially to
bail him out of financial difficulty and which mounted to some $12,000
in unpaid loans. He co-signed other loans obtained by Mr. Hall as well and
Mr. Callura said he was using up his own RRSP funds to help Mr. Hall.
[15] On cross-examination
by Respondent’s counsel and by Mr. Hall the following further evidence was
solicited from Mr. Callura:
·
invoices
were prepared and paid on the basis of reducing the amount payable for services
by 40% and adding that amount as payable for materials even though Mr. Hall
provided no materials at all;
·
The
remuneration paid to subcontractors, including Mr. Hall, was determined by
Alert;
·
Mr.
Callura was not so easy-going about Mr. Hall billing Alert’s customers for his
own account as he had suggested in his earlier testimony;
·
The truck
mount parked at Mr. Hall’s residence at times in the summer was not out of the reach
of Mr. Callura. If the truck was at Mr. Hall’s place, Mr. Callura could pick it
up with another set of keys. He was only five minutes away;
·
In
spite of suggestions to the contrary made by Mr. Hall in cross-examining Mr.
Callura, Mr. Callura did not back down regarding who trained Mr. Hall, how
often he had the truck mount parked at his residence, whether he had his own
business card, who hired and paid the assistants, who came up with the idea of
a business name registration for D+J’s Carpet Cleaning and whether
subcontracting was discussed at their first meeting. Mr. Hall (acting in the
capacity of a person cross-examining a witness) stated: “How can I be a subcontractor
when I am just a normal person?”;
[16] The next witness to
testify was Mr. Johnson.
[17] Mr. Johnson operated
an auto repair shop and was a volunteer firefighter as well. He knew Mr.
Callura as one of his customers at the shop and as a friend.
[18] He said he met Mr.
Hall when he came to have some work done on a van that Mr. Hall said he was
buying from Mr. Callura. Mr. Hall had said that the van was going to be used
for his business. He checked with Mr. Callura who said that it was okay to work
on the van as long as Mr. Hall took care of the bill personally. He said Mr.
Hall never paid him all that was owed.
[19] Still, he retained
Mr. Hall to clean his house. He was told by Mr. Hall, at that time, that he was
a contractor and worked separately from Alert. He remembered that Mr. Hall used
the name D+J’s Carpet Cleaning.
[20] The cleaning job did
not involve carpet cleaning, it was just general cleaning. It was a once-over
of the whole house. Mr. Callura, whom Mr. Johnson had known for some eight to
ten years, had provided such services in the past. Mr. Hall was paid $150 for
the clean-up job. There were no invoices, no GST, just a cash transaction.
[21] Mr. Hall cross-examined
Mr. Johnson getting him to correct a few details of his testimony but none that
were of much consequence. The relevant aspects of Mr. Johnson’s testimony were
unshaken.
[22] The next witness was
Ms. Anita Prain.
[23] Ms. Prain gave
evidence along the following lines:
·
She
was involved with Alert for 20 years;
·
Her
work primarily concerned doing the paper work or office administration for the
company. She received invoices from subcontractors and paid bills. She is the
one that personally signs the cheques. She only pays for work done if she
receives an invoice and she testified that she received invoices on a regular
basis from D+J’s Carpet Cleaning. Her husband, George, verified the invoices
first;
·
She
confirmed that material costs on invoices were a breakdown of the total amounts
payable on a formula that was 60% for labour and 40% for materials;
·
She
denied that she prepared any of the invoices.
[24] Last to testify was Mr.
Hall.
[25] Mr. Hall’s testimony
was along the following lines:
·
Mr.
Hall testified that he came to work with Alert having been called by his
brother who knew Mr. Callura through the hotel, Travel Lodge, and was told that
Mr. Callura was looking for workers. So he met with him and he was told he
could get a 25% fee for his work but as an assistant he understood that he
would get paid $10 an hour to pull hoses and that sort of thing because he did
not know about the truck mount and other aspects of the work. Mr. Hall admits
that he was told he would get work only if work comes in;
·
At
the first meeting with Mr. Callura, Mr. Hall said that he was just told what
the pay arrangement would be. At the hearing Mr. Hall said: “I was just a
person” so I thought I was getting a job as an employee. There was no mention
of subcontractor;
·
Prior
to meeting Mr. Callura in about August 2006, Mr. Hall said he was employed by the
Flamingo Hotel. He was just looking for some extra money when he met with Mr.
Callura. He continued to work for the hotel for a while and acknowledged that
Mr. Callura would call for work but that he could not take it because of his
obligations to the hotel. Sometime later, Mr. Hall received a call to do a
flood in Welland with Al. He was
instructed by Al. Next he was asked to do an apartment building and again he
was assisting Al;
·
In
spite of such admission, Mr. Hall insisted that it was really Mr. Callura that
trained him. Mr. Callura (George) taught him about the use of the truck mount and
how to handle floods and clean carpets. He also trained him on how to deal with
customers. That included self-grooming and he got along with him well. Mr. Hall
said it was on-the-job training when he would go out with George on different
types of jobs. He worked with George in October of 2006 during a flood when
they were getting a lot of work from F.I.R.E.. After that George approached him
to take over a truck mount and from that point on Mr. Hall said he “ran the
business until 2009.” He did the phone, the truck, everything, booked
appointments and did more carpet cleaning than George himself. He did more
floods than George himself. Even George’s wife worked harder than George. He
said he ran the company, not George. The equipment was provided by George and Alert;
·
George
only appeared for the big jobs where it affected his reputation;
·
Mr.
Hall said he was required to wear a shirt with the Alert logo and that he wore one
everyday except during a flood clean-up and dirty work like that when he would
not necessarily wear the shirt. He said he never had a F.I.R.E. shirt. He
admitted however that George’s real concern was just to be presentable;
·
Mr.
Hall said he was not able to hire his own workers or subcontractors and that he
never hired any of his own subcontractors except as a person running the
business. He said that both he and George did that and that he was told by George
to get helpers to help him but they were Alert’s helpers, not his;
·
He
admitted that he got his family to help him. At first he said that when his
family helped him, they never got paid. Contradicting himself he also said that
he did not want the payments he was making to his brother, as a helper, to be
on his cheque. He said it made no sense the way George wanted to do it by
paying him $15 an hour and if he worked with a helper it was $25 an hour;
·
Mr.
Hall testified that he took a three day training course at Corporate Chemicals
in St. Catharines and that it was
arranged through George for him to go there while George was away in Florida and he, Mr. Hall, was
running the company. Mr. Hall confirmed that he did complete the program and
did get his Certificate which would have been mailed to Alert. Mr. Hall said he
took the course because George insisted that he had to take it in order to do
floods for F.I.R.E.;
·
Mr.
Hall acknowledged that the only way he would make money with Alert was if there
were jobs. Floods were good paying because they paid on your time;
·
Mr.
Hall admitted that he was asked whether or not he wanted to buy the company in
April of 2007 and that is when he registered a business in the name of D+J’s
Carpet Cleaning, a name he discussed with George. He also obtained information
as to GST and other business compliance requirements relating the operation of
D+J’s Carpet Cleaning. Mr. Hall said he was getting along great and that he did
think that he could make a lot of money by taking over the company;
·
Mr.
Hall admitted that he was borrowing money from George who also helped in many
other ways including helping him get a place to live;
·
Mr.
Hall admitted that he was responsible to correct his own mistakes. He did not
get paid extra.
[26] In
cross and re-examination, the following further evidence was given:
·
Mr.
Hall acknowledged that Al did teach him about doing carpets and “just a little
bit about the truck but not fully.” He acknowledged that some of the shirts
that George provided, at the beginning at least, were just used shirts without
the Alert name, so that he would have some work shirts for floods which was
very dirty work;
·
He
acknowledged that he could call a helper but non-related helpers were people
that had worked with Alert before and they would invoice Alert separately;
·
For
tax purposes, Mr. Hall said that he never treated a helper like his brother
Dale, as his employee. He treated all he received from Alert as his own and
then would pay Dale without any accounting for him as an employee. For example,
he did not withhold for tax;
·
When
asked whether or not he had a corporation, Mr. Hall denied that he did.
Presented with a corporate registration for a company called 1602066 Ontario
Inc. which he had registered, at first he still denied that he had a company.
On being further confronted with corporate reports showing his name and that it
was active, he admitted he had incorporated the company. Later in his testimony
he elaborated. He said that he was approached by an individual to open up a
submarine restaurant. Mr. Hall was to get a percentage of the business. He
would have had to come up with $30,000 as his participation in the operation.
The deal fell through because of the rental charge on the property that they
were planning to operate the outlet on. All the surveys and everything required
to be done had been done and the other fellow was happy with the arrangement and
it only fell through because of the rental issue. The other fellow ended up
opening in another location in Port Colborne and Mr. Hall did not want to go
there and the operation, in any event, was shut down in a couple of months.
This all happened in 2004 and that is when the corporation was incorporated,
February 2004;
·
Regarding
invoicing Alert for his services, he was shown invoices he had signed showing,
in his handwriting, D+J’s Carpet Cleaning as a subcontractor. He noted that he
only registered the business name D+J’s Carpet Cleaning in early 2007 and said
that any invoices that showed earlier use of a name D+J’s Carpet Cleaning would
have been back-dated. Evidence to the contrary makes this dubious and suggests
that he was the one who would have done it if, in fact, they were back-dated .
·
Mr.
Hall denied being able to do other cleaning work on his own. However, he
changed his testimony and said he was allowed to do so but because he was on
call at Alert, he did not do other work. He argued that his work for Mr.
Johnson and for the landlord of the jewellery store were isolated examples;
·
He
denied refusing work when offered by George but acknowledged that because of his
shoulder injuries, he required MRIs on several occasions and that he would have
been unable to do any work during those periods. Mr. Hall testified that, in
fact, it was ultimately the shoulder injuries that caused him to be unable to
work at all;
·
He
denied walking off the job the time George had testified that he had done so and
then he recanted and said that he was not sure if he completed the work there because
he only stayed until the others arrived;
·
With
respect to filing tax returns, Mr. Hall said that he believed he filed tax
returns because of his income from the Flamingo Hotel in 2006. He acknowledged
getting a T4 from the hotel but not getting a T4 from Alert. He never asked
for a T4. He said he never filed returns for 2007;
·
At
previous jobs, Mr. Hall acknowledged that he would receive T4s when he was
employed;
·
Mr.
Hall denied having business cards for D+J’s Carpet Cleaning and testified that he
was supervised by George from time to time;
·
Mr.
Hall acknowledged that he had told George and his wife at a meeting early on
all about the subway shop and having a business.
·
Mr.
Hall testified that he knew nothing about the reason for the 60%- 40% split for
materials on his invoices.
Submissions of the Parties
[27] As the hearing ended
late in the day, I asked for written submissions. I was careful to point out
that what I wanted counsel to do was turn their minds to evidence that might be
dismissed on one hand or given more weight on the other. I made that suggestion
given that it seemed obvious at the hearing that the reliability of the
testimony of the two principal witnesses was an issue given that both engaged
in business practises that were less than laudable and both spun their
testimony in a manner that made fact finding challenging to say the least. More
pointedly, I suggested that there were credibility issues that they should
address in their submissions. Some adversarial input on what evidence should
carry the day might have been helpful. However, the challenge was not accepted
by Appellant’s counsel and to the extent it was dealt with by Respondent’s
counsel, it left me unconvinced that I should trust much of Mr. Hall’s
testimony. In any event, in the end, it was not a helpful aspect of the
submissions requested. I have therefore employed a somewhat detailed recitation
of the evidence of each witness in the hope that the picture painted speaks for
itself. On that basis, my summary of submissions and my analysis will be brief.
Appellant’s Submissions
[28] The Appellant
referred me to the following cases: Wiebe Door Services Ltd. v. Canada
(Minister of National Revenue – M.N.R.),
Watson (c.o.b. Bonnie’s Cleaning Services) v. Canada (Minister of National
Revenue – M.N.R.), Royal
Winnipeg Ballet v. Minister of National Revenue, Vandervelde v. Canada (Minister of National
Revenue – M.N.R.).
[29] Applying the tests
in Wiebe Door on the question of control it was argued that: Mr. Hall
could decline or accept work;
he operated his own competing business as he was free to and did do cleaning
work for others; he was not supervised in the performance of his work. On the
question of tools it was argued that the onerous costs of the major equipment
like the truck mount could not work against a finding of independent contractor. On the question of the chance of
profit it was argued that the opportunity to compete reflected a chance to
profit as did the percentage method of payment. Not much was said about the
risk of loss. The integration test was addressed as well. The argument was that
Alert had a choice of a variety of contractors and was not dependent on any one
contractor and that D+J’s Carpet Cleaning was a distinct business operated for
Mr. Hall’s benefit. As to the intention of the parties, a factor considered in Royal
Winnipeg Ballet, a list of indicators pointed out by Appellant’s counsel
include: Mr. Hall was aware that there were no payroll deductions or T4s issued;
he registered a business and obtained information as to GST and other business
compliance requirements relating the operation of D+J’s Carpet Cleaning.
Respondent’s
Submissions
[30] The Respondent provided
the Court with the following authorities: 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., OLTCPI
Inc. v. Canada (Minister of National Revenue - M.N.R.), Gagnon v. Canada (Minister of
National Revenue - M.N.R.),
Hodgkinson v. Canada (Minister of National Revenue – M.N.R.), City Water International Inc. v.
Canada (Minister of National Revenue – M.N.R.), Royal Winnipeg Ballet v. Canada (Minister
of National Revenue – M.N.R.), Wiebe
Door Services Ltd. v. Canada (Minister of National Revenue – M.N.R.), Choi v. Canada (Minister of National
Revenue – M.N.R.), Dynamex
Canada Corp. v. Canada (Minister of National Revenue – M.N.R.), Dempsey v. Canada (Minister of
National Revenue – M.N.R.), Ferme
Yoanie Inc. v. Canada (Minister of National Revenue – M.N.R.), Hodgkinson v. Canada (Minister of
National Revenue – M.N.R.), Gagnon
v. Canada (Minister of National Revenue – M.N.R.), Direct Care In-Home Health
Services Inc. v. Canada (Minister of National Revenue – M.N.R.), Britcom Communications Ltd. v.
Canada (Minister of National Revenue – M.N.R.), Gartry v. Canada.
[31] Addressing the Wiebe
Door tests on the question of control, reliance was placed on the training
given Mr. Hall done to be sure the way in which the work was done and the means
employed in doing it would be adhered to. Relying on Gagnon, the
Respondent asserts that initial supervision and training that assures less
supervision does not alter the ultimate right to control. The Respondent’s counsel
argued that Mr. Callura controlled the staff by controlling the choice of assistants
used by Mr. Hall. I note, however, that this assertion ignores the whole
question of Mr. Hall’s credibility and his conflicting evidence relating to the
use of assistants and how they were paid.
[32] As to doing
contractor work for others, reliance is placed on Dynamex where Justice
Archambault spoke of casual workers having many jobs. I do not see this as an
analogous situation.
[33] While not dealing
with “control” per se, Respondent’s counsel argued that dealing with complaints
about the quality of work, that resulted in Mr. Hall having to redo it at no
charge, was part of Alert’s guarantee to its customers. This overlooks Alert’s
perspective that it was the worker’s guarantee to Alert and its customers.
[34] As to tools, it was
pointed out that the most necessary tools, the truck mount and all cleaning
supplies, were provided by Mr. Callura or Alert.
[35] On the question of
chance of profit and risk of loss, Appellant’s counsel argued that there was no
substantial investment in tools so there was no risk if loss. Mr. Hall was not,
as described in Gagnon, an entrepreneur employing capital and skillful
management together with the concomitant risk of suffering a loss. It was
argued that Mr. Hall could not profit from engaging an assistant, a conclusion
with which I do not agree as set on in my analysis below.
[36] Under a different
heading dealing with whether Mr. Hall had a business, it is argued that the
business name was registered for a specific purpose unrelated to his work with
Alert. It was argued then that there were no indicia of Mr. Hall having his own
separate business.
[37] On the question of
the intentions of the parties, it is asserted that Mr. Callura imposed subcontractor
status on all his workers. It was a self-serving imposition aimed at avoiding
Alert’s responsibility to include its workers in social assistance programs
that were not intended to be optional or unilaterally avoided.
Intervenor’s
Submission
[38] Mr. Hall’s
submission offered a restatement of his evidence adding an occasional new
asserted fact. He denies assertions made by Mr. Callura based, in some cases,
on evidence he, Mr. Hall, gave at the trial, and in other cases, based on
freshly asserted facts. Unfortunately, much of the evidence he gave at trial was
not convincing and his freshly asserted facts are not evidence that I can
consider.
[39] Mr. Hall does review
exhibits filed at the hearing and in doing so raises some points that showed some
inconsistencies in Mr. Callura’s testimony. As well, he used a few of the
exhibits to raise hypothetical questions aimed at undermining more of Mr.
Callura’s assertions regarding his, Mr. Hall’s, status as a worker. However,
none of these points impressed me as being particularly helpful to Mr. Hall and
certainly did not dissuade me from my view of the evidence.
[40] Some of his review
of the evidence did raise questions such as distances he travelled, variations
in the fixed rates, evidence of training periods and how often he was in
contact with Mr. Callura. In this regard, I can only say I am in total
agreement with Mr. Hall that Mr. Callura’s testimony often varies from the truth.
Unfortunately, I come to the same conclusion in respect of his, Mr. Hall’s,
testimony, but more so. He has failed to convince me that he is anything other
an opportunist who eagerly embraced entrepreneurship for all the advantages it
offered. Mr. Callura gave the impression by his testimony that he was led on by
Mr. Hall about many things. Whether that is the case of or not, I cannot be certain,
but I am certain that that is my impression of what Mr. Hall was attempting to
do with me.
Analysis
[41] This case might best
have been dealt with from the bench. The troubling aspect of it that needed
reflection was what to say when the two principal witnesses had so little
difficulty spinning a tale. As past good friends, they may still deserve each
other notwithstanding Mr. Hall’s ultimate betrayal.
[42] Mr. Hall’s attempt
at portraying himself as an ordinary person did not impress me. His inflated
sense of his ability to carry that off went flat from the outset. However, it
did encourage me to believe that he was right in there getting his own business
name, taking clients and imagining that he had taken over Alert’s business –
after all, according to him, he was running it anyway. This man was under the
control of Mr. Callura only as much as it served his purpose.
[43] The one witness
whose credibility might be taken as disinterested and credible was Mr. Johnson.
His testimony essentially corroborates the picture Mr. Callura painted as to
Mr. Hall having his own business; however, that does not add to my confidence
in much of Mr. Callura’s own evidence. Saying a worker was welcome to take work
from an Alert client was nonsense. If Alert got a contract to do carpets, he
said a worker was free to clean upholstery for his own account? No such
concocted tolerance was displayed when he spoke of Mr. Hall taking the business
of the landlord of the jewellery store away from Alert.
[44] And what do I make
of this doctoring of invoices? Is everyone here colluding in a blatant fraud?
False invoices for services on the basis of 60% for services and 40% for materials
are knowingly submitted by Mr. Hall and accepted? Would I really be impressed
to discover whose idea that was? They are all co-conspirators. As to their
respective objective, that is not clear. Was it to understate Mr. Hall’s
revenue both for income tax and GST collection purposes? Or was it simply to
misrepresent service fees for insurance premium purposes as boldly asserted by
Mr. Callura? Let me just say that I have concluded that each of these two storytellers
act on their own behalf for their own entrepreneurial purposes.
[45] Having said that, I
must acknowledge that I have no idea what the business relationship is between
Alert and Mr. Callura. Mr. Callura owns the main truck mount used for
commercial cleaning services. That is the truck mount that was used by Mr. Hall
as provided by Mr. Callura. Do I still assume that Alert, the asserted employer,
provided the equipment to the worker? I am not satisfied of that at all and
even if that were an assumption in respect of which the Appellant has some
burden of proof, that assumption, based on the say-so of Mr. Hall whose respect
for the truth I have already commented on, must fail. I do not even know who
the principals of Alert are and whether they are aware of the shenanigans here although
I suspect they are Mr. Callura and or his wife.
[46] A review of the
authorities in this case is not necessary. I am very familiar with them.
However, to assure the parties that I have not ignored them, my brief
conclusions on the application of those authorities are as follows.
Control
[47] I find on the
evidence that Mr. Hall worked when he wanted to work. He was free to turn down
work and even though the invoices show that he provided his services on a
fairly regular basis, that degree of regularity was part of Mr. Hall’s business
plan of running his own business and taking over that of Alert. His entrepreneurial
ambition, course of acting and mindset is also displayed by his own evidence of
how he approached a previous business opportunity. He knew full well what he
was doing when he registered D+J’s Carpet Cleaning and acted accordingly. That
Alert contracted out much of its work from time to time by relaying calls to
Mr. Hall is not persuasive of a master servant relationship in this case. Mr.
Hall’s role, in this regard, is not indicative of his being in a subservient
position. He is simply not a subservient character acting under a contract of
service.
Tools
[48] The ownership of
tools is neutral in this case. Even if it favoured a finding of a contract of
service it would not be a factor that I would weigh heavily in this case.
Chance of
Profit and Risk of Loss
[49] Mr. Hall had a
chance of profit by being free to hire assistants. He was free to pay them as
he might negotiate with them. He was paid $25 an hour if an assistant worked
with him. His profit was not just on his own time but was based on the leverage
he could obtain by paying an assistant less than $10 per hour which in one
version of his testimony he did do at least when the assistant was a family
member.
[50] Mr. Hall admitted having
a risk of loss where he had to redo work for no remuneration whether it was his
fault of not.
Whose Business Was It?
[51] If it is not already
clear, the evidence supports a finding, considering all relevant factors
including those mentioned above, that there was a business here being engaged
in by Mr. Hall. Admittedly, that business might have been distinct from his
work for Alert. A person can in one endeavour be an employee while at the same
time be operating as an independent contractor in other endeavours. Taking
calls for Alert could be acting as an employee while doing work for Mr. Johnson
could be as an independent contractor. Alternatively, having one major client
who you assist at many levels and who keeps you so busy as to limit your work
for other clients or potential clients, does not make you an employee of that
client. At best, this might be a close call in this case, however, on balance,
there is an underlying entrepreneurial independence here in the way Mr. Hall
conducts himself that I find makes it hard for me to come to any other conclusion
than that his work for Alert was carried out in the course of his operating his
own business.
Intentions
[52] Should this have
been a close call, I would not hesitate for a moment in finding that it was the
mutual intention of the parties not to engage in a contract of service. Mr.
Hall intended to take full advantage of independent contractor status. This was
clearly not a status imposed on him.
Conclusion
[53] Notwithstanding the
brevity of this analysis, I am hopeful that my review of the testimony of the
witnesses in this case and my observations about such testimony made throughout
these Reasons speak for themselves.
[54] In any event, for
all these reasons the appeals are allowed, without costs, on the basis that Mr.
Hall was not engaged in either insurable or pensionable employment throughout
the periods in respect of which such appeals have been filed.
Signed at Ottawa, Canada this 24th day
of June 2011.
"J.E. Hershfield"
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