Citation: 2007TCC491
Date: 20070820
Docket: 2007-682(EI)
BETWEEN:
BRUCE YUN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND BETWEEN:
Docket: 2007-683(CPP)
BRUCE YUN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND BETWEEN:
Docket: 2007-684(EI)
CHRISTINA YUN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND BETWEEN:
Docket: 2007-685(CPP)
CHRISTINA YUN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
O'Connor, J.
[1] The issue in these
appeals is whether, in the period from June 23, 2004 to November 3, 2005 (the
“Period”), the Appellants, Bruce Yun (“Bruce”) and Christina Yun (“Christina”)
were engaged in insurable employment pursuant to paragraph 5(1)(a) of the Employment
Insurance Act and in pensionable employment pursuant to subsection 6(1) of
the Canada Pension Plan in their relationships with Southbay College of
Traditional Oriental Medicine Ltd. (“Payor”) or (“Southbay”).
[2] This type of issue comes before the Courts
frequently and, as is well known, the issue has generally been resolved on the
basis of a four-fold test. The tests are:
(1) control;
(2) ownership
of tools;
(3) chance of
profit and risk of loss; and
(4) the integration
test.
[3] Also, more recently, the Courts have
considered the intention of the parties as to their relationship and, in
certain cases, have decided that intention can be important, especially when
some tests point to a contract of service and other tests do not.
[4] Before analyzing these tests, the following
general comments are relevant.
[5] In deciding the issue, I am not simply to
substitute my opinion for that of the Minister but I am to give some deference
to the decision of the Minister. These principles have been developed by the
Federal Court of Appeal in the following cases. In Légaré v. Canada (Minister of National Revenue
– M.N.R.), [1999] F.C.J. No. 878 the Court had
occasion to review the issue. Paragraph 4 of that decision by Marceau,
Desjardins and Noël, J.J. stated as follows:
The Act requires the Minister to make a
determination based on his own conviction drawn from a review of the file. The
wording used introduces a form of subjective element, and while this has been
called a discretionary power of the Minister, this characterization should not
obscure the fact that the exercise of this power must clearly be completely and
exclusively based on an objective appreciation of known or inferred facts. And
the Minister’s determination is subject to review. In fact, the Act confers
the power of review on the Tax Court of Canada on the basis of what is
discovered in an inquiry carried out in the presence of all interested
parties. The Court is not mandated to make the same kind of determination as
the Minister and thus cannot purely and simply substitutes its assessment for
that of the Minister: that falls under the Minister’s so-called discretionary
power. However, the court must verify whether the facts inferred or relied on
by the Minister are real and were correctly assessed having regard to the
context in which they occurred, and after doing so, it must decide whether the
conclusion with which the Minister was “satisfied” stills seems reasonable.
[6] In my opinion, the following are the most
important facts in the determination of the issue in question.
[7] Southbay was a secondary career training
institute focusing on Chinese medicine. It was incorporated in June of 2004.
Its shares were owned 90% by a Mr. Hong Chae Choi (“Choi”) and 10% by Christina.
[8] Christina is Bruce’s wife.
[9] Choi was a resident of Korea during the Period.
[10] Testimony was given by Bruce and
Christina but not by Choi, who was not present, presumably because he was out
of Canada. It is clear that
Choi, with 90% of the shares, was the governing mind of Southbay, and the
absence of his testimony has made it very difficult to determine the
relationship between the parties.
[11] Prior to his involvement with Southbay, Bruce
had operated a similar institute named Lotte Enterprises Ltd. o/a Pacific Northwest International College (“Northwest”) for 8 years.
[12] Northwest’s assets were seized by a bailiff
in August 2004 for non-payment of rent and subsequently, the students of
Northwest transferred to Southbay after Northwest shut down.
[13] Both Bruce and Christina had signing
authority on the bank accounts of Southbay for a time. Bruce’s signing
authority was removed in August 2005, when relations between Choi and Bruce had
become strained.
[14] Bruce was
responsible for essentially all campus matters, all day-to-day operations until
October 2004. His duties included negotiating the lease for Southbay, operating
the bank account, obtaining the necessary licenses and permits, opening Telus
and hydro accounts, dealing with enrolment, tuition fees, bookkeeping and
marketing.
[15] Christina, to use her expression, was a
“girl Friday”, assisting Bruce, cleaning tables, installing a database, doing
computer work, tracking tuition fees and general bookkeeping.
[16] Bruce’s hours in
these duties were from approximately 8:30 a.m. to 6:30 p.m. Monday to Friday
and in some cases longer. The hours of Christina were practically the same. Bruce and/or Christina determined their own
hours of work. They received no training, Bruce having run Northwest, a
similar school, for eight years. Neither Bruce nor Christina was supervised by
Choi or anyone else.
[17] Choi had promised to inject funds into
Southbay in some fashion, described as an infusion of capital. In fact, the
only amounts Choi remitted were amounts to cover the first and last month’s
rent for Southbay’s lease and the remuneration mentioned below.
[18] Choi agreed that Christina’s remuneration
would be $31. per hour but the only amount she received over a three month
period in 2005 was $12,000. Bruce made many attempts to be paid by Choi and to
have Choi inject capital into the business so that it could continue. The only
remuneration Bruce received was $3,000 in 2005.
[19] Relations between Choi and Bruce
deteriorated due essentially to a lack of trust on both parts. According to
Bruce’s Notice of Appeal, one Sang-hoon Na (“Na”) was sent by Choi to
Canada from Korea to take over
Bruce’s position on October 28, 2004 and gradually control of Southbay shifted
to Na and another appointee of Choi, Mr. Kim.
[20] Considerable shortages of money developed
and Exhibit A-1, being the bank statements of Southbay, shows numerous negative
balances. These statements also show deposits of monies from UiDuke University,
sponsor of some of the students, of amounts of $36,431.50 on September 6, 2005
and $36,000 on September 14, 2005. Bruce testified he used some of
those funds to pay bank loans and to reimburse “petty cash”. Choi accused Bruce
of appropriating funds to himself. Those events and others caused relations to
further deteriorate. Exhibit A-2 comprises two letters from Southbay to Bruce,
signed on behalf of Southbay by Choi. They read as follows:
November 2, 2005
VIA HAND
Bruce Yun
744 East 38th Avenue
Vancouver
BC V5W 1J1
RE: Southbay College
of Traditional Oriental Medicine Ltd. (the “Company”)
On behalf of the Company, in my capacity as
director and majority shareholder, I hereby demand that you account for the
following withdrawals from the Company’s bank account:
|
|
Date
|
Amount
|
|
Exhibit 6
|
#1
|
September 02, 2005
|
C$1,228.85
|
|
Exhibit 7
|
#2
|
September 21, 2005
|
3,017.20
|
|
Exhibit 8
|
#3
|
September 26, 2005
|
18,445.00
|
|
Exhibit 9
|
#4
|
October 07, 2005
|
7,000.00
|
|
Exhibit 9, 10
|
#5
|
October 07, 2005
|
3,000.00
|
|
Exhibit 11
|
#6
|
October 13, 2005
|
7,000.00
|
|
Exhibit 12
|
#7
|
October 13, 2005
|
4,500.00
|
|
Exhibit 13
|
#8
|
October 13, 2005
|
7,500.00
|
|
|
Total
|
51,691.05
|
Based on the records of the Company’s bank
accounts, it would appear that all of these amounts were withdrawn by way of
internet banking. You and/or your wife, Christina Yun are the only people
capable of carrying out internet transactions on this account.
You have until noon on Thursday, November 3,
2005 to prove that these funds were used for proper Company purposes. In the
event you cannot comply with the foregoing, we demand that you return these
funds to the Company forthwith. Furthermore, if you cannot comply with this
request your employment with the Company will terminate immediately.
In the meantime, we hereby demand that you turn
over all assets of the Company, including keys, records and passwords, school
domain (www.southbaycollege.ca) to Sanghoon Na immediately and that you vacate
the premises of the Company’s school forthwith and cease all contact with the
Company, the school and it’s staff and students until this matter is resolved.
…
November 3, 2005
VIA HAND
Bruce Yun
744 East 38th Avenue
Vancouver
BC V5W 1J1
RE: Southbay College of Traditional Oriental Medicine Ltd. (the “Company”)
Further to my letter of November 2,
2005 sent on behalf of the Company which was hand delivered to you, you have
not replied to our request concerning the whereabouts of approximately
$51,691.05 of the Company’s funds that have been withdrawn from the Company’s
bank account without authorization or explanation.
Accordingly, your employment and involvement
with the Company and its school are hereby terminated effective immediately.
You are demanded to vacate the school premises immediately. You are to cease
all contact with any party having any involvement with the Company and its
school. Furthermore, the Company demands that you return all property of the
Company forthwith including, without limitation, all keys, passwords, files,
records and financial information. Failure to comply with these demands will [sic]
pursued to the full extent of the law and the Company’s rights.
Submissions
[21] Bruce submits that
he and Christina were employees during the Period, employed under oral
contracts in pensionable and insurable employment and that they are entitled to
payments under those plans. Bruce argues that he and
Christina had oral contracts of employment and were entitled to be paid
salaries. Bruce questions how he and Christina can be fired if they were not
employees. He points to some of the Exhibits in which Choi appears to indicate
an employee relationship and others which indicate the relationship might be a
partnership or a joint venture. He argues that these inconsistencies in Choi
show Choi is not credible. In particular, he points to Exhibit A-2, the letter
of November 3, 2005 from Southbay (signed by Choi) where the words used are:
… your employment and involvement with the
Company and its school are hereby terminated.
[22] Bruce also argues that his Charter
rights have not been respected. Bruce’s Notice of Appeal refers to s. 15 of the
Canadian Charter of Rights and Freedoms and to the Employment
Standards Act and states as follows:
…
In my opinion, on all wage related laws, such as
the Employment Standards Act and Employment Insurance Act must be applied
effectively to a person integrally without discrepancy.
With the greatest respect, in terms of the
result of my ruling, it appears I have no right to equal protection.
First of all, I must be protected under the
Employment Standard Act, if I am protected by that Act, and my employer paid me
on time and then I could have paid CPP and UI premium on time. I am a victim of
an employer who is not law abiding.
There is no reason why my case has to be denied
based on the Insurance Act.
It is a total disregard for principle of the
matter and my fundamental human rights and protection of my wage has been
exploited. I am not being treated proportionately, and the department’s ruling
is irrational.
…
[23] Counsel for the Respondent submits that
there was no employee relationship and that the relationship should be
characterized as a joint venture or some other arrangement, but clearly not an
employee relationship. She points to the lack of control and supervision, the
peculiar relationship between Choi and the Appellants and the inability to clearly
determine Choi’s version of the relationship.
Analysis and Decision
[24] As to the element of control, the evidence
is extensive and not entirely conclusive but considering all factors, I
conclude that the test of control in this appeal points to contracts which are
not contracts of service, i.e., not an employee relationship. My principal
reasons for this conclusion are as follows:
The Appellants
were not supervised;
The Appellants chose
their own hours and were not obliged to report to Choi;
The Appellants received
no medical coverage, no vacation or sick leave nor overtime;
The Appellants received
hardly any wages although they worked long hours as indicated; and
Bruce had run the
prior school in a similar fashion. In other words, he had all the skills
required to run a school and essentially was running it as if he was the owner
thereof.
[25] The ownership of tools, in my view, is not
an important consideration. The main tool was the premises and the school
supplies and other school furniture etc. The ownership presumably was with Southbay.
Some of the supplies etc. were paid for by Bruce but it appears that he was
reimbursed for same. The exact question of ownership of the tools is difficult
to determine but, as stated, in my view, the ownership of tools is not that
important in this appeal.
[26] With respect to chance of profit and risk
of loss, again, the evidence is not clear. Bruce had expected to receive
either an infusion of capital which would cover costs of the school presumably
including his wages. This money, however, was never forthcoming except the
amounts mentioned above and eventually the lack of funds lead to the collapse
of Southbay. Again, the evidence is not clear as to what exactly was the
intention of Bruce as to how he was to receive remuneration. It appears,
primarily, that he wished to receive wages but it is also clear that this did
not happen. There is also evidence that the 10% of the shares allotted to
Christina represented a kind of remuneration for her services. On balance, I
believe the evidence discloses that the 10% shares were put in Christina’s name,
at Choi’s demand, because Bruce was heavily in debt.
[27] With respect to the integration test,
reference is made to Precision Gutters Ltd. v. Canada, [2002] F.C.J. No.
771 (F.C.A.), where Sexton J.A., said the question to be answered with respect
to this test is “is the person who has engaged himself to perform the services
performing them as a person in business on his own account”. It does appear
clear that Bruce and Christina were performing services essentially on their
own account. Mr. Choi was never present and the Appellants ran the school business
essentially as their own. This certainly does not point to a contract of
service or an employee relationship.
[28] In my opinion, considering that there was
no control and that Bruce essentially ran the business, and had the previous
experience (8 years experience with Northwest), considering further that Bruce
and Christina received very little pay (would any person in an employee
relationship continue without being paid?), considering further that the
students from the former school transferred to the new school thus indicating a
continuation of the previous business run by Bruce, considering also that the
Appellants have the burden of proof and have not succeeded in refuting or
demolishing the assumptions of fact raised by the Minister in the Reply, I find,
on a balance of probabilities, that the Appellants were not engaged in contracts
of service, i.e., not an employee relationship.
[29] The second issue in these appeals is
whether there has been any infringement of the Canadian Charter of Rights
and Freedoms or similar laws.
[30] It is common, in cases heard in the
Informal Procedures of this Court, to have Charter arguments raised. In
these cases, the Court will ordinarily hear the argument and if, upon
consideration, it finds merit in it, will adjourn the case to permit the
Appellant to give any notices to the Provincial Attorneys General and/or to the
Attorney General of Canada that may be required. In the present cases, notices
would have to be given to the Provincial Attorneys General under section 57 of
the Federal Court Act R.S. 1985 c.F-7, as amended as well as under
section 19.2 of the Tax Court of Canada Act, R.S. 1985, c.T-2 and to the
Attorney General of Canada under the British Columbia Constitutional
Question Act, R.S.B.C., 1996, c.68.
[31] I am not satisfied that the Appellants have
established that their rights to equality under section 15 of the Charter
have been impinged. In Law v. Canada (Minister of
Employment & Immigration), [1999] 1
S.C.R. 497 (S.C.C.), the Supreme Court of Canada set out the
following guidelines for determining whether subsection 15(1) of the Charter
has been infringed:
1. Does the law in question, impose
differential treatment on the Appellant on the basis of the Appellant's
personal characteristics or fail to take into account the Appellant's
disadvantaged position in society, resulting in differential treatment on the
basis of personal characteristics?
2. Is the Appellant subject to the
differential treatment based on the prohibitive grounds enumerated in the
Charter (race, national or ethnic origin, colour, religion, sex, age or mental
or physical disability), or grounds which are analogous to those?
3. Does the differential treatment
discriminate by imposing a burden or withholding a benefit which promotes
(through stereotypes or otherwise) the view that the Appellant is an individual
less capable or worthy of recognition or value as a human being ... equally
deserving of concern, respect and consideration?
[32] Although not clearly stated, the Appellants’
position appears to be that, as employees, they have been discriminated against
in being denied employment insurance benefits and Canada Pension Plan
benefits.
[33] I refer to the following quote of Mogan, J.
of this Court in Walsh v. Canada, [1993] T.C.J. No 316, which deals with
employees and entrepreneurs as follows:
… I refer to the decision of the Ontario Court
of Appeal in Ontario Public Service Employees Union et al. v. National Citizens
Coalition et al. (1990), 69
D.L.R. (4th) 550 in which Blair J.A., delivering the Judgment of the
Court, stated at page 555:
In my opinion, Canadian taxpayers earning income
from employment, who constitute the great majority of the working population,
do not constitute a group suffering discrimination on grounds analogous to
those enumerated in s. 15(1) of the Charter. This huge group of taxpayers is
not a "discrete and insular minority". It is a large segment of the
population which we described in Mirhadizadeh, supra, at p. 601 as "not
linked by any personal characteristics relating to them as individuals or to
members of a group". They are what we called in Mirhadizadeh, supra, as
"a disparate and heterogeneous group", linked together only by the
fact that they are taxed on their employment income. They are incapable of
being discriminated against on grounds analogous to those enumerated in s.
15(1). The appellants' claim that the I.T.A. infringes the equality rights of
taxpayers earning income from employment must fail.
To me, that passage clinches the argument
against the Appellant's claim to be under section 15 because, if the Ontario
Court of Appeal can conclude in such straightforward language that Canadian
taxpayers earning income from employment cannot constitute a group suffering
discrimination on grounds analogous to those of section 15 of the Charter, I
would turn the coin and ask: how can those Canadian taxpayers earning income
from some source other than employment constitute such a group? I adopt the
specific words of Blair J.A.: they are "not a discrete and insular
minority"; they are "not linked by any personal characteristics
relating to them as individuals or to members of a group". They are, as
entrepreneurs, a disparate and heterogeneous group of which the Appellant is
only one.
[34] Based on this authority and many others the
Charter argument cannot succeed and there is no reason to adjourn these appeals.
[35] Consequently, the appeals are dismissed and
the decisions of the Minister dated November 7, 2006 are confirmed.
Signed at Ottawa, Canada this 20th day of August, 2007.
"T. O'Connor"
Email this Content