TAX COURT OF CANADA
IN RE: The Income tax Act
2007-926(CPP),
2007-925(EI),
2007-928(CPP),
2007-927(EI),
BETWEEN:
JIM F. MOORE,
ANTOINETTE (ARYA) MOORE
Appellant;
- and -
THE MINISTER OF
NATIONAL REVENUE
Respondent.
--------------
Held before Mr. Justice Paris at the Provincial Courthouse in
Nelson, B.C., on Wednesday, August 15, 2007.
--------------
APPEARANCES:
Mr. J. Moore, For the Appellants;
Mr. M. Matas, For the Respondent.
--------------
THE REGISTRAR: L.
Giles
--------------
Allwest
Reporting Ltd.
#1200
- 1125 Howe Street
Vancouver,
B.C.
V6Z
2K8
Per: H.H. Bemister
REASONS FOR JUDGMENT
(Delivered Orally in Nelson, B.C. on August 15, 2007)
(PROCEEDINGS COMMENCE AT 9:38 A.M.)
JUSTICE: These appeals which were heard on common
evidence are from the determinations made by the Minister of National Revenue
that both appellants were not employed in insurable or pensionable employment
as defined in the Employment Insurance Act and the Canada Pension
Plan by the intervenors, Ms. Ann Gover and Mr. W.D. Main. For Ms. Moore,
the period covered by the determinations was from September 1st,
2004 to September 28th, 2005 and for Mr. Moore, the period covered
is December 1st, 2004 to September 28th, 2005.
The appellants contend that throughout the relevant periods
they were employed by the intervenors under contracts of service. The
respondent and the intervenors maintain that the appellants were independent
contractors engaged by the intervenors under contracts for services. The
intervenors are married and were the owners of an apartment complex in Nelson,
B.C. During the relevant periods, the appellants worked for the intervenors,
Ms. Moore, as a property manager of the complex, and Mr. Moore, as maintenance
person, and later on as property manager as well.
The intervenors acquired the apartment complex in June 2004,
and in July 2004 the appellants approached the intervenors to work as property
managers when they were visiting Nelson. The intervenors contacted the
appellants after they had returned home to Victoria and after an exchange of
e-mail messages, on July 30th, 2004, the intervenors offered Ms.
Moore employment as the resident property manager, starting September 1st,
2004. Ms. Moore's intended status as an employee was confirmed in follow-up
e-mails from Ms. Gover in August 2004. Ms. Moore's salary was set at $2,000 a
month with work above the regular duties of the resident property manager to be
paid at $15 an hour.
Mr. Main testified that in August 2004 he told Ms. Gover
that he did not want to hire Mr. and Ms. Moore as employees and that he wanted
them to be independent contractors. This information was apparently not
communicated to the appellants until late October 2004, after they had moved
with their family to Nelson and into the apartment complex and begun, in Ms.
Moore's case, her duties as resident property manager.
In a letter she wrote to the intervenors at the time, Ms.
Moore said that this change left her without EI protection, which was a serious
concern to her, but otherwise did not refuse the change. Eventually on
December 15th, 2004 a written contract entitled "Management and
Basic Cleaning Contract" was entered into by the intervenors and Ms.
Moore, who was shown as doing business as Expect Moore Property Management.
The contract purportedly was effective from September 1st, 2004 to
August 31st, 2005.
Mr. Moore did not have a written contract with the
intervenors, although a proposed draught of a maintenance contract dated
October 24th, 2004 was put into evidence. It showed a term from
September 1st, 2004 to August 31st, 2005. However, Mr.
Moore said that he did not perform any paid maintenance work for the
intervenors until after November 2004. This coincides roughly with the period
of work covered by the Minister's determination which started December 1st,
2004. Mr. Moore's evidence that he did not work for, or get paid by the
intervenors prior to December 1st, 2004 was not seriously challenged
and I accept that his work started at that point.
Finally, a new contract entitled "Management and Basic
Cleaning Contract" was entered into July 29th, 2005 between the
intervenors and both Mr. and Ms. Moore doing business as Expect Moore Property
Management for the period September 1st, 2005 to August 31st,
2006. However, in mid-September 2005 the intervenors terminated the contract
and the appellants and their family vacated their two apartments at the
complex.
The contracts themselves will form appendices to these
reasons.
I'll deal separately with the question of whether the work
done by Mr. and Mrs. Moore for the intervenors was done under a contract of
service, or a contract for services. The relevant considerations in making
this determination are set out by the Supreme Court of Canada in the Sagaz decision
cited by counsel for the respondent at paragraph 47. And I read:
"The central question is whether the person who has been
engaged to perform the services has performed 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."
The terms and conditions of the work performed by Ms. Moore for
the intervenors from September 1st, 2004 to August 31st,
2005 is set out in Exhibit A-1. The following points, in my view, indicate the
existence of a level of control by the intervenors over her work that is more
consistent with a contract of service than a contract for services.
Firstly, Ms. Moore was required to personally perform all
the management and cleaning duties listed in the appendices to the contract,
except that she was permitted to use a relief manager for weekends and for a
two-week holiday period. Even in the case of weekend relief, Ms. Moore was
only permitted to have Mr. Moore perform the service.
While the evidence showed that Ms. Moore may have used
others to do some of the work required by her contract, under the terms of the
contract, the intervenors had the power to require her to do the work
personally. It is the right to control, rather than the exercise of the right
that is material.
Secondly, Ms. Moore was required to reside on site and be
available to take emergency calls from the tenants, and to be available to show
suites to perspective tenants from 9:00 a.m. until 8:00 p.m. seven days a
week. The requirement of Ms. Moore's presence on site is a further indicia of
control by the intervenors.
Thirdly, the details of Ms. Moore's work are set out in
relatively precise terms in the appendices to the agreement and set out
specific procedures that must be followed for many tasks, including the
provision of rent rolls, preparation of petty cash reports, the filing of
forms, and following procedures when tenants vacated the property, and the use
of specific filing systems and forms, and meetings with the bookkeeper and
evictions. The cleaning schedule is also set out in detail. These
requirements, in effect, amounted to control over the manner in which Ms. Moore
did the work.
Fourthly, the contract required Ms. Moore to meet with the
intervenors' bookkeeper Beryl Knight in the first ten days of each month to
view vacant apartments. It appears that this was intended as a means of
control or supervision of the work to be done, or actually done, by Ms. Moore,
cleaning the vacant apartments. This was confirmed by the evidence of Mr. Main
who said it was his and Ms. Gover's expectation that Ms. Knight would
periodically inspect Ms. Moore's work. This, though, did not work out.
In any event, it is not material whether the intervenors
exercised this right of inspection of the suites. It is sufficient to say that
they had the right to do so under the contract.
It is somewhat difficult to determine the level of actual
supervision and control exercised by the intervenors over matters not covered
in the contract. It is apparent that there were frequent communications
between the Moores and Main and Gover, because of the many problems presented
by the complex. Also Mr. Main was staying at the complex on an average of ten
nights per month during the year, and he admitted, he could have left notes for
Ms. Moore about things that he felt needed to be done or that were not being
properly done, at least in the fall of 2004 until he became involved in a major
renovation of the complex with CMHC funding.
Ms. Gover also provided specific instruction on occasion by
e-mail. It seems that the Moores wished to keep Mr. Main and Ms. Gover
informed about what was going on, and Mr. Main and Ms. Gover were appreciative
of their input and suggestions, and responded with directions when asked.
Overall, however, given the particular terms of the written contract, I am
satisfied that Mr. Main and Ms. Gover retained a degree of control over Ms.
Moore's work that points to the existence of a contract of service.
With respect to the ownership of tools required for the job,
the evidence shows that Ms. Moore provided a vehicle, a computer and a filing
cabinet, while all other equipment and supplies were furnished by the
intervenors including a phone. Ms. Moore was reimbursed for gas for the
vehicle. It is not clear how much use was made of it, or of the computer, or
the cost of these items. Ms. Moore used part of her apartment, as well, as an
office, but paid a reduced rent for it. This test does not point strongly in
either direction.
The next factor is the degree of financial risk undertaken
by Ms. Moore. She had no financial risk or responsibility for investment and
no real chance of profit or risk loss from her work for the intervenors. Under
the first contract she had a fixed salary, or hourly rate with extra work, and
was not permitted to subcontract her work except in very limited circumstances
as mentioned above. Also the contract, by its terms, indemnifies Ms. Moore
from any loss arising from carrying out the contract. I refer to paragraph 12
thereof. This factor tends to show Ms. Moore was an employee rather than in
independent contractor.
Another consideration is the intentions of the parties to
the contract. The evidence in this regard, again is somewhat problematic. It
appears that for the first months of the contract the parties considered Ms.
Moore to be an employee. However, by late October 2004 the intervenors let Ms.
Moore know they wished her to be an independent contractor instead. With some
reluctance, she agreed. However, there is no evidence that any of the terms of
her contract changed after October 2004, therefore this appears to be a case
where the parties, or at least the intervenors, believed that they can control
the nature of their legal relationship simply by virtue of the name they give
to it. However, as stated by the Federal Court of Appeal in the Royal
Winnipeg Ballet v. the Queen case, at paragraph 56:
"There is ample authority for the proposition that parties
to a contract cannot change the legal nature of that contract merely by
asserting that it is something else. The elements of the contract must be
examined to determine whether the parties did, in fact, create the relationship
they intended."
For the reason already noted above, I am of the view that the
relationship created by the contract between Ms. Moore and the intervenors for
the period September 1st, 2004 to August 31st, 2005 was a
contract of service and that Ms. Moore was not in business on her own account.
The insertion of the business name was a device intended to create the
impression that she was running her own business, while the terms of the
contract did not support that conclusions.
The second contract, dated July 29th, 2005
contains two material differences from the first contract. It is between both
the appellants and the intervenors without specifying which tasks are to be
done by Mr. or Ms. Moore. Next the rate of pay has been changed to a
percentage of gross rents with a minimum salary. This introduces a chance of
profit that was not present in the first contract. However, the contract still
required personal service and that the appellants live on site. The duties of
the appellant are set out in the same terms, and the situation regarding the
ownership of tools, provision of supplies is still the same. Overall, in my
view, this contract is also one of service rather than a contract for services
for both appellants.
Finally, it remains to be determined whether Mr. Moore was
an employee or independent contractor from December 1st, 2004 to
August 31st, 2004. No written contact was executed between the
parties. The draft contract is of little assistance in determining the rights
and obligations of Mr. Moore and the intervenors since it was never signed by
Mr. Moore. Mr. Moore's statement that it was verbally binding is not accepted,
because if he had accepted the contract, there would have been no reason not to
sign it. Furthermore, such an allegation was never put to Mr. Main or Ms.
Gover for confirmation.
The evidence produced at the hearing showed that Mr. Moore
carried out small repairs and minor renovations at the apartment complex for $15
an hour. There was no evidence that he was paid by the intervenors for any
property management work done during that period. Mr. Moore's evidence was
that Ms. Moore was responsible for the property management work set out in her
contract, except for weekend relief work, but he wasn't paid by the intervenors
for that.
Mr. Moore invoiced for his work and no deductions were taken
from the payments he received. The Minister assumed, in determining that Mr.
Moore was an independent contractor, that he set his own schedule, priorities
and timelines for completing the repairs and renovations. Mr. Moore alleged
that the e-mails from Ms. Gover demonstrate control and supervision over his
work. The only e-mails that deal with Mr. Moore's work, however, is Exhibit
A-25 written or sent on June 18th, 2005 instructing Mr. Moore not to
do certain things in light of the CMHC renovations being planned and carried
out.
With respect to set work times, Mr. Moore said he had to
work when units were vacated. Some members of Mr. Moore's family assisted him
with the work, but they were paid directly by the intervenors and most tools
and equipment were supplied by the intervenors. Mr. Moore used his van to pick
up supplies and was paid for gas. Mr. Main said Mr. Moore was much more
experienced than himself and that he could not tell Mr. Moore how to do the
work required. He also said that he did not supervise Mr. Moore because he was
busy with the CMHC renovations.
In cross-examination Mr. Main was only able to recall one
instance where he had shown Mr. Moore how he wanted a particular job, some
window repairs, done. Mr. Moore gave two other examples where Mr. Main had
input in the way a particular job was done, once in the type of paint that was
to be used, and once regarding the removal of an asbestos tile floor. On the
basis of the evidence that was presented, I'm satisfied that neither intervenor
exercised any significant control, correction, or supervision over the work
done by Mr. Moore. The few examples cited by him appear insignificant in light
of the amount of work done by him over the period.
Also, given Mr. Moore's experience, and Mr. Main's
occupation with other matters, it is much more likely that Mr. Main did not
direct or supervise Mr. Moore when he was at the complex.
I'm also satisfied that Mr. Moore did not work fixed hours
but worked when needed and set his own job priorities in order to look after
the complex. On the other hand, the tools were supplied mostly by the
intervenors, except for the appellant's fan, and the wages of helpers for Mr.
Moore were paid by the intervenors.
No evidence was led about who was responsible for the cost
of redoing any work that was not properly done. No other risk of loss was
shown to have been incurred by Mr. Moore and no investment of capital was
required. There did not seem to be any restrictions placed on Mr. Moore that
would have prevented him from working for others during this time, but Mr.
Moore said he was kept too busy at the complex to work elsewhere.
Finally, with respect to the intention of the parties, it is
clear that the intervenors, from mid-October 2004 on made it clear to both Mr.
and Ms. Moore that they wished to engage them as independent contractors rather
than employees. Mr. Moore would have been aware of that when he began working
on December 1st, 2004. There was no evidence that he objected to
this arrangement, or to the fact that no deductions were taken from his pay. I
read into this contract an acceptance by Mr. Moore of the status as independent
contractor.
In light of the absence of control and supervision, and the
absence of any other factor which would counter the common intention that Mr.
Moore performed his services from December 1st to August 31st,
2005 for the intervenors as an independent contractor, I find that he was, in
fact, an independent contractor at the material times, rather than an employee
of the intervenors.
For all of these reasons, therefore, the appeals of Ms.
Moore are allowed, and the appeals of Mr. Moore are allowed only to the extent
that the period from September 1st, 2005 to September 28, 2005 was
worked as an employee rather than an independent contractor.
Thank you.
(PROCEEDING CONCLUDED AT 9:58 A.M.)
Email this Content