Citation: 2011 TCC 77
Date: 20110224
Docket: 2010-960(EI)
2010-961(CPP)
BETWEEN:
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AQUAZITION 2007 LTD.,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
and
ANDREA CARDWELL,
Intervener.
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REASONS FOR JUDGMENT
(Edited from the transcript of Reasons for Judgment
delivered orally from the Bench on December 1, 2010 in Toronto, Ontario)
Weisman D.J.
[1]
I have heard two appeals
by Aquazition 2007 Ltd. against decisions by the Respondent, The Minister of
National Revenue (the
“Minister”), that the worker
Andrea Cardwell was employed under a contract of service while engaged by the
Appellant as an Operator in Training during the period under review which has
been agreed to be January 1, 2008 to April 8, 2009.
[2]
The Appellant's appeal
is based on its contention that during the period under review, the worker was
an independent contractor carrying on business on her own account, and,
therefore, the Appellant is not liable for unpaid Canada Pension Plan contributions
and Employment Insurance premiums as assessed by the Minister.
[3]
In order to resolve the
question before the Court, the total relationship of the parties and the
combined force of the whole scheme of operations must be considered. To this
end, the evidence in this matter is to be subjected to the four‑in‑one
test laid down as guidelines by Lord Wright in Montreal City v Montreal Locomotive Works [Montreal Locomotive Works], the citation of which is [1947] 1 Dominion Law Reports, page 161 in the Privy Council in England, which
guidelines were adopted by Justice of Appeal MacGuigan in Wiebe Door Services v Minister of National Revenue, [Wiebe
Door Services], which is
cited at (1986),
87 Dominion Tax Cases, page
5025 in our Federal Court of Appeal. The four guidelines are the payer's right
to control the worker, whether the worker or the payer owns the tools required
to fulfil a worker's function, and the worker's chance of profit and risk of
loss in his or her dealings with the payer.
[4]
Before I canvass the
evidence that I have heard relating to the four guidelines, I would like to say
that I found both Mr. Cargill and Ms. Cardwell to be nice, honest, and well‑meaning
people. It was a pleasure to have them in my Court. Where there was a
difference in the various versions given by them, I attributed that difference
to a difference in their ability to recollect events and dates and also whether
or not they had other complications in their life during the relevant period
that might affect the accuracy of their recollection of events.
[5]
Adverting to the first
guideline, the right to control, as the Minister has recognized in the
jurisprudence, what is important is not the actual supervision and control
exercised by the payer, in this case the Appellant, but it is the right,
whether or not there was such a right, vested in the payer. What we look for is
that right whether or not it exists, and also whether there is a relationship
of subordination between the worker and the payer. Obviously, independent
contractors are not in a subordinate position to the person that contracts with
them, whereas employees are.
[6]
Here, of importance, is
the document found in Exhibit R‑2, tab 5, pages 9 and 10 which is
guideline No. 5.1 issued by the Minister of Environment. It makes it very clear
that OITs, Operators in Training, such as Ms. Cardwell must be supervised by an
OIC, an Operator in Control, and which person typically makes the day‑to‑day
operating decisions and instructs other operators on system procedures. On the
following page of that guideline, under "Operator in Training", it
says that an Operator in Training cannot be designated "ORO", which
is Overall
Responsible Operator, and also an Operator in Training cannot be designated as
an "OIC", Operator in Charge.
[7]
By law, as an Operator
in Training during the entire period under review, it was not possible by law
for the Intervener, Ms. Cardwell, to be in the water testing business on her
own account because she had to be working under the supervision of an Operator
in Charge, namely Mr. Cargill.
[8]
As a matter of the way
the working relationship actually worked, I accept her evidence that she was
required to be at work at seven in the morning. She had to give 24‑hours'
notice of absences, and she did testify to one telling incident where a
representative of the Ministry of Environment inspected a job site and required
her to forthwith beckon Mr. Cargill who had to come without delay to the job
site. To me, this is a clear example of her not being in a position other than
a subordinate position with reference to the Appellant. I note that it was
required that she do her work personally and as we all know, independent
contractors, such as your electrician or your plumber, don't always show up
personally, but they have someone they can hire, but Ms. Cardwell is not in
that position. I accept her version of events that her various remunerations
were not negotiated, but they were fixed by Mr. Cargill, and they went up as
her experience and her expertise as a result of her experience and her taking
various training courses warranted.
[9]
I find that by law and
in actual fact, the Appellant had the right to control the worker; that she was
in a subordinate position; and that the control factor accordingly indicates
that during the period under review, she was an employee.
[10]
Passing on to the
ownership of tools, the Minister's reply to the Appellant's Notice of Appeal in
paragraph 7(t) says:
The Appellant provided the back-flow preventer, fittings, water
tanks, generators, pumps, copper pipes, gauges, wrenches, screwdrivers, swabs,
flanges, hoses, hydrant keys, tapping machines, chlorine residual machines,
lithium paper, safety jacket, gloves, hat, glasses and company vehicle. [As
Read]
[11]
Mr. Cargill was helpful
in clarifying that there was no safety jacket. While she was provided with a
company vehicle, she had to have her own vehicle because after the 24‑hour
waiting period, she would go to the job site in her own vehicle in order to do
the necessary testing for submission to the Ministry of the Environment.
[12]
It is clear that the
bulk vast majority of the tools required for her to do her job were provided by
the Appellant. There was an exhibit offered by the Intervener, Exhibit I‑1,
which showed that the Appellant actually paid $577.50 for repairs to her car. There
is no evidence that they ever recovered the money or, as Mr. Cargill thought,
deducted from her final invoice, because this repair occurred on March 19,
2009, which was just weeks before their relationship ended. I was unable to
conclude from that anything different than I already arrived at, that the tools
factor indicates that she was an employee.
[13]
As to chance to profit
and risk of loss, as I drew to the attention of Counsel for the Minister, if
the remuneration was negotiated, there would be a chance of profit and risk of
loss, but I have found that there was no such negotiation. As far as her manner
of remuneration was concerned, she was paid by the hour. We have the authority
of the case of Hennick v Minister of
National Revenue [Hennick] which says if one works by the hour or on piece work,
then they can make more money by working longer hours or by putting out more
pieces, but that is not profit by sound management. The citation for Hennick
is [1995] Federal Court Judgments No. 294.
[14]
As far as risk of loss
is concerned, the evidence is that the Appellant reimbursed the worker for all
her out‑of‑pocket expenses which she invoiced them for, including
gas for her personal vehicle. Contrary to what Mr. Cargill thought, she carried
no liability insurance, and the Appellant also paid for various courses that
she took towards attaining her Operator in Charge licence, which is something
one does for an employee, but not an independent contractor. The only expense
she had was the normal upkeep of her own personal vehicle, which everybody has.
Therefore, I found that the chance of profit and risk of loss factors both
indicated that she was an employee.
[15]
In this appeal, Mr.
Cargill relied on three things. The first thing he relied upon was the
agreement, Exhibit R‑1, that was executed by the parties back on
June 21, 2007, in which Andrea Cardwell specifically agrees to be a
subcontractor and to pay all her own source deductions and that the Appellant,
Aquazition 2007 Ltd., will not be held responsible for any such payments. The question
arises in the face of that document: How can one claim the benefits of the Employment
Insurance Act and appear here in this Court of law and maintain that she
was an employee?
[16]
I can well understand
why Mr. Cargill would rely on this document, but it has been held many, many
times that these agreements setting out the intent of the parties are not
determinative of a relationship between the parties because that relationship
is a matter of law. It is not a matter of private agreement. At the risk of
boring you, I won't list all the cases. There must be at least 15 of them, but
we go all the way from early days, Ready-Mixed
Concrete (South East) Limited v Minister of Pensions and National Insurance, [1968] 1 All
England Report 433, to Wiebe Door Services itself ‑‑
I have already cited that case ‑‑ to modern times and with
authority as high as the Supreme Court of Canada, 671122 Ontario Ltd. v
Sagaz Industries Canada Inc., [2001] S.C.C. 59 [Sagaz Industries]. Finally, to get to more modern times, we
have the Federal Court of Appeal Decision in the
Royal Winnipeg
Ballet v Minister of National Revenue, [2006] Federal Court Judgments No. 339.
[17]
The Supreme Court of
Canada in Sagaz Industries explains why the status of a worker is a
matter of law and not of private agreement. The reason is that third parties
are affected by that status. It doesn't just affect the parties to the
documents, such as Exhibit I‑1. The law is ‑‑ and I will use
a term that may be confusing ‑‑ the best example is the law of
vicarious liability. What that means is: When is one responsible for the
negligence of their worker? The law is that you are responsible for the
negligence of your worker but not of an independent contractor. That's where
third parties become involved. It is one of the ways; there are others. That's
the one that makes most sense to most people to help understand why these
agreements or the status of a worker is a matter of law rather than agreement. Third
parties have an interest.
[18]
The second thing that
Mr. Cargill relies upon is the GST number that
Ms. Cardwell had. There is nowhere in the law that says that merely having a
GST number makes your working relationship one of an independent contractor. The
final thing is the invoicing. I can understand Mr. Cargill's reasoning that
independent contractors invoice and employees don't, but, again, there is no
law that says that the mere submission of an invoice can convert someone who is
an employee into an independent contractor. That would be too easy, too simple
and expedient to establish that someone is an independent contractor. What
governs is the actual working relationship between the parties as governed by
the four‑in‑one test set out in Wiebe Door Services as I
have previously indicated, as well as in Montreal Locomotive Works.
[19]
Having raised the topic
of agreements between parties, I would like to say that I have read the Revenue
Canada bulletin that governs employees and independent contractors. I find that
it is deficient when it addresses itself to the topic of agreements. The fact
that we are here today is some proof of that ‑‑ not in this case,
but in cases past, I have had Appellants bring the bulletin and the agreement,
and they think once they have the agreement signed that the person is an
independent contractor, and they don't understand why they are assessed. I am
pretty clear that this bulletin is not as lucid a document as it might be when
it comes to the relevance of agreements between parties as to their status and
working relationship. Were someone to consider revising and improving it, I
would think it would be important to point out, which I have already done, that
someone's status is a matter of law and not a private agreement. I would go on
and say that's because third parties are affected, and I would even use the
vicarious liability example.
[20]
I think the public
should be very clear that agreements are not totally irrelevant because if the
intention of the parties is not clear after applying the facts to the four‑in‑one
test as I have done, if the results are inconclusive, then the intention of the
parties takes on great weight. I would even go on to say that agreements will
only take on weight if they reflect the actual working relationship between the
parties.
[21]
In these matters, the
burden lies upon the Appellant to rebut or demolish the assumptions set out in
the Minister's Reply to its Notice of Appeal. In this case, the Minister's
assumptions are found in paragraph 7, and I took Mr. Cargill through, and he
agreed with all of them as being true until we got down to (l), "the
Appellant supervised the Worker." It was his evidence that this woman,
after a short time, was sufficiently competent that she could just go out on
the job and knew what to do and how to do it. To use his words, he said, "How
she did it was up to her." Her evidence was that if there was supervision,
it was by phone and that Mr. Cargill was not on the job site.
[22]
I accept that there was
no on‑site supervision, but I have already said that the Ministry
guidelines are very clear that he had that obligation to control and supervise
her, and, therefore, that's what I find when it comes to (l).
[23]
He also objected to
(m), "the Worker had to work the scheduled hours set by the Appellant."
His view was, no, it was just a matter that there had to be daylight and after
24 hours of doing the cleansing ‑‑ if I can use that word ‑‑
of the pipes, she had to go back after the flushing and take a water sample to
the Ministry. That doesn't agree with her evidence that she had to be at work at
seven in the morning, and some days she put in 16‑hour days as a result.
[24]
I find that the
evidence indicates that the truth is somewhere between the two, that she was
usually free to go to jobs which were, indeed, assigned to her either by Mr.
Cargill or by Mr. Enzo Sorrentino, but once on the assigned job, she was there
to do the job as she was trained to do it.
[25]
He objected to (o),
"the Worker was instructed by the Appellant on how to swab, tap a water
main, and how much chlorine to use." His evidence is that those things
were determined by the length of the pipe. It was something she had to work out
herself. He elaborated that the water quality results tell how proficient you
are, which would necessitate whether or not further work had to be done to get
the water quality up to standard. I find that he has, in part, demolished the
assumption 7(o), and that she might have been trained on how to do the job and
how much chlorine to use at the beginning, but very quickly, she could judge by
herself, particularly when she saw the results of the water quality tests.
[26]
Then (q) came under
question by Mr. Cargill: "the Worker had to receive approval from the
Appellant for making appointments." I didn't find that that was
established on the evidence, because the only example that Ms. Cardwell was
able to give was this one occasion where she wanted to go back to rectify a job
and made an appointment to do so, but that was overruled by the previous
mentioned two gentlemen because they had made an appointment for her elsewhere.
On one hand, I don't find that she had to receive approval from the Appellant,
but this incident certainly shows she was in the subordinate position and was
not independent.
[27]
(r) says: "the Appellant approved
appointments made by the Worker." That has been refuted.
[28]
And (v), "the Appellant provided a
uniform for the Worker." I find that there was no uniform. What there was
was: When Shell Oil was involved, they provided a fireproof set of clothing of
some sort.
[29]
In (y), "the Worker
had to receive an approval from the Appellant for purchases," I didn't
find that the evidence supported that assumption. She could put gas in the
truck, and whatever expenditures she deemed necessary, she was reimbursed for.
[30]
According to Mr.
Cargill, all these assumptions – (z), (aa), (bb), (cc) ‑‑ were
negotiated, but on the evidence, I didn't find that he was able to establish
that.
[31]
In (ff), he said that
he did not determine the rate of pay. The evidence is that he did.
[32]
Then there was (kk): "the
Appellant covered the costs of the Worker redoing work." Mr. Cargill very
fairly said that in some cases it wasn't necessarily her fault if the water
quality wasn't up to standard because in some cases dirt or soil or whatever
would just continue to come down the pipe. Sometimes it took more than one
application of chlorine or whatever in order to get things up to standard, and,
therefore, she would be paid for going back and redoing work.
[33]
Then we have (ll): "the
Appellant covered the costs of the goods/materials lost or damaged by the Worker."
It was Ms. Cardwell's view if she damaged the truck, she would be held
responsible. That never, in fact, happened, so we don't know, and he very
fairly admitted that if it was screwdrivers or something that she lost, she
wouldn't be required to pay for those. I didn't see evidence of anything that
she was required to pay for. I'm left to think that that assumption has not
been demolished.
[34]
Then there came (oo): "the
Worker wore the Appellant's uniform at the customer's location." That has
been demolished.
[35]
Then there were the
final assumptions, (tt), (uu), (vv), and (ww), that the Appellant would have no
knowledge of and, therefore, couldn't rebut, and his failure to rebut those
should not be held against him.
[36]
While there was the odd
assumption that was successfully rebutted by the Appellant, the vast majority
he agreed with. The law is that even though some of the assumptions are
demolished, if the remaining assumptions are sufficient to support the
Minister's determinations, the Minister's determinations must stand.
[37]
I have investigated all
the facts of the parties and the witnesses called ‑‑ one on behalf
of the Appellant and one on behalf of the Intervener ‑‑ to testify
under oath for the first time. I found some new facts, but I found no new facts
that would indicate that the facts inferred or relied upon by the Minister were
unreal or incorrectly assessed or misunderstood. I can find no business that
Ms. Cardwell was in on her own account. Therefore, the Minister's conclusions
are objectively reasonable.
[38]
Unless I am remiss in
neglecting to say, before I conclude, I thought that Ms. Turvey did quite a credible
job for her client today. So in the result, the Minister's determinations have
to be confirmed. The two appeals are dismissed. I thank you all for your
assistance.
Signed at Toronto, Ontario, this
24th day of February 2011.
“N. Weisman”
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