Citation: 2007TCC304
Date: 20070523
Docket: 2006-3458(EI)
2006-3459(CPP)
BETWEEN:
EDWIN F. PINFOLD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
LANDMARK AUTO SALES LTD.,
Intervenor.
REASONS FOR JUDGMENT
Beaubier, J.
[1] These appeals were
heard together on common evidence at Victoria, British Columbia on May 11, 2007. The Appellant
testified. The Intervenor called two witnesses, Lee Henderson, the owner of
Landmark Auto Sales Ltd. (“Landmark”) and his wife, Catherine Henderson, who is
the bookkeeper and accountant for Landmark.
[2] The particulars in
dispute are set out in paragraphs 2 to 9 of file 2006‑3459(CPP) which are
virtually identical to those in file 2006-3458(EI). They read:
2. By letter dated June 21, 2005 the Rulings
division of the Canada Revenue Agency (“CRA”) determined that the Appellant was
employed by Landmark Auto Sales Ltd. (“Landmark”) in pensionable employment
commencing on January 1, 2003.
3. By letter dated July 21, 2005 Landmark
appealed the CRA Rulings decision to the Minister of National Revenue (the “Minister”)
pursuant to section 27 of the Canada Pension Plan (the “Plan”).
4. By letter dated September 8, 2006, the
Minister decided that the Appellant was not employed by Landmark under a
contract of service from January 1, 2003 to June 20, 2005 (the “Period”) within
the meaning of paragraph 6(1)(a) of the Plan.
5. In making his decision the Minister relied
on the assumptions of fact as follows:
a) during the Period Landmark operated a used
automobile sales and services business in Victoria, British Columbia;
b) during the Period the Appellant sold automobiles
for Landmark from Landmark’s business location;
c) by contract signed on or about January 2,
2003 the Appellant agreed to perform services for Landmark as an independent
contractor;
d) the Appellant did not have scheduled hours
of work and was free to set his own schedule;
e) Landmark did not direct or provide
instructions to the Appellant during the Period;
f) the Appellant was not required by
Landmark to provide his personal services during the Period;
g) the Appellant could subcontract his work
without Landmark’s approval;
h) Landmark provided the business location,
the inventory of automobiles for sale, the equipment and supplies used by the
Appellant to sell automobiles;
i) the business licence required to sell
used automobiles was in Landmark’s name; and
j) the Appellant was paid by Landmark on a
set commission basis for every automobile sale he completed.
B. THE ISSUE TO BE DECIDED
7. The issue is whether the Appellant was
employed by Landmark in pensionable employment during the Period.
C. THE STATUTORY PROVISIONS UPON WHICH THE
RESPONDENT RELIES
8. He relies upon subsections 2(1) and 6(1)
and on section 27 of the Plan.
D. THE REASONS WHICH HE INTENDS TO SUBMIT
9. He submits that the Appellant was not
employed by Landmark in pensionable employment during the Period within the
meaning of paragraph 6(1)(a) of the Plan as the Appellant was providing
services to Landmark under a contract for service.
[3] At the opening of
the hearing, Appellant’s counsel admitted assumptions 5(a), (b), (h) and (i).
[4] Respecting the
remaining assumptions:
5(c) – Is correct except that the
contract was dated January 2, 2003, but it may not have been signed that day.
However, Mr. Pinfold’s activities for Landmark did not change after the
contract was signed, and the contract describes those activities fairly
accurately.
5(d) – Mr. Pinfold was first under
contract with Landmark in August, 2000, as a salesman of used cars on
Landmark’s Bay
Street
lot. Landmark is a low-priced used car dealer in Victoria and it had two lots in 2001 and
during the Period. Mr. Pinfold had owned two car dealerships, a Subaru
dealership and a Chrysler dealership in Nanaimo. In 2001 and during the Period,
Mr. Pinfold was constantly avoiding collection proceedings and attachments of
assets by Revenue Canada and he was also involved in matrimonial litigation and
proceedings. He was always instructing Landmark that he did not want salary and
he was clearing his Landmark cheques as he got them. As a result, Mr. Pinfold
wanted to work as an independent contractor, and not as an employee and
Landmark agreed to this; that was the mutual intent. Commencing in October 2001,
Mr. Pinfold contracted with Landmark to become the manager of Landmark’s Esquimalt Street used car lot. The
Esquimalt lot contained about 25 used cars and reconditioned, cleaned and detailed
all the used cars that Landmark purchased. From October 1, 2001 until the end
of the Period, Mr. Pinfold and Landmark agreed on the following:
1. Mr. Pinfold would open the
Esquimalt lot at 9:00 a.m. Monday
through Saturday and leave work at 5:00 p.m. Landmark wanted the lot open
throughout all day light hours and at times, perhaps at the end of the Period
and later, hired a salesman for the evening hours, since Mr. Pinfold would not
work after 5:00 p.m.
2. Mr. Pinfold was paid a
commission of 35% of the gross profit to Landmark on each car he sold. The
deductions from the sale price were the cost of the car and the cost of its reconditioning,
detailing and cleaning. However, Mr. Pinfold explained to Landmark, based
on his experience, that a loss on a car sale might cause a Revenue Canada
investigation; so if a sale price was too low, and would book a loss, Mr.
Pinfold and Landmark would allocate a portion of that cost to another car in
the lot. The result of this practice was that no cars were sold at a loss. Mr.
Pinfold had to be at the lot at 9:00 a.m. to be sure that the mechanic was
there and working on Landmark’s car purchases; Mr. Pinfold was in complete
charge of the reconditioning, detailing and cleaning of all of Landmark’s
purchased cars, including the extent of that and the cost of all purchases and
labour associated with that. He also recorded all of those costs in Landmark’s
car records. He was completely experienced in this, needed no training and had
full discretion respecting this. Mr. Henderson purchased the cars and decided
that cost and Mr. Pinfold decided on the second part of the cost to process the
cars for sale. Because Mr. Pinfold wanted it, and because he was more than a
salesman, Landmark and Mr. Pinfold agreed that Mr. Pinfold had a guaranteed
base draw of $2,000 per month which was offset against his commissions on
sales. Mr. Pinfold also hired and fired mechanics and car washers and any other
staff on the Esquimalt Street lot.
5(e) – Landmark did not instruct Mr.
Pinfold respecting any aspect of the reconditioning, detailing and cleaning of
the cars or on the operation of the Esquimalt lot. Mr. Henderson tried to get
Mr. Pinfold to wash cars on the lot and clean the lot, where he was the only
salesman, but Mr. Pinfold said that this was not a part of his duties and did
not do this, although he says that he cleaned out a corner of the lot once.
5(f) – Mr. Pinfold was required to
provide his personal services during the Period. In the Court’s view, the
contract between Landmark and Mr. Pinfold was similar to a partnership or a
joint venture contract with a base guaranteed draw. Each put in a clearly
separate contribution. Mr. Pinfold’s input was services – his skill and
knowledge as a manager of a car lot, of reconditioning, detailing and cleaning
used cars for resale, of pricing cars to sell without a book loss to attract
Revenue Canada and of selling cars.
Landmark’s contribution was the rest, including, particularly, capital and the
cost and choice of cars purchased. Mr. Pinfold’s contract was to provide
his professional services for specified remuneration, much as a doctor or a
lawyer might provide contract services to an existing professional practice for
specified remuneration and for specified, limited, services.
5(g) – Mr. Pinfold could not
subcontract his work.
5(j) – Is correct within the bounds
already described and subject to the $2,000 per month draw. Because sales on
the Esquimalt
Street lot
fell from six or seven per month to about one per month while Mr. Pinfold was
there, the guaranteed draw was reduced to $1,500 per month. It appears that
this reduction did not occur within the Period. The parties concluded their
relationship on August 30, 2006, when Mr. Pinfold went elsewhere.
[5] The written
contract dated January 2, 2003 was signed by the parties after an investigation
of Landmark by CRA. Mr. Pinfold urged Landmark to do this so as to frustrate
any attachment to his Landmark income by CRA. He also suggested that Landmark
hold back 10% of his net commission income pending a possible “employment”
finding by CRA which might require contributions for withholdings, and this was
also done.
[6] The result, based
on the criteria proposed in Wiebe Door Services Ltd. v. Canada (Minister of National
Revenue), [1986] 3 F.C. 553 (F.C.A.) is:
1. Contract – Landmark and
Mr. Pinfold each controlled their own contributions to their operation of the Esquimalt Street lot during the Period.
2. Ownership of Tools –
Landmark supplied the capital input. Mr. Pinfold supplied his services and even
his expenditures of Landmark’s money on reconditioning cars was not scrutinized
or controlled by Landmark.
3. Chance of Profit or Risk of
Loss – Mr. Pinfold could not lose because he contracted for a base draw and
their mutual agreed accounting practice on each car sold was that cars could
not be sold at a loss.
4. Integration – Each party
operated independently of the other and throughout the Period they preserved
that independence.
[7] Mr. Pinfold was in
business for himself. That was what the parties intended from the outset and
they conducted themselves that way throughout the Period. Mr. Pinfold had an
independent contract to provide his specialized services and expertise to
Landmark.
[8] The appeal is
dismissed.
Signed at Ottawa, Canada this 23rd
day of May, 2007.
"D.W. Beaubier"
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