Docket: 2007-3845(CPP)
BETWEEN:
KEWCORP FINANCIAL INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
JAMES KEW,
Intervenor.
____________________________________________________________________
Appeal
heard on October 7, 2008, at Edmonton,
Alberta
Before: The Honourable
Justice Valerie Miller
Appearances:
|
Agent
for the Appellant:
|
James
Kew
|
|
Counsel for the Respondent:
|
Gregory Perlinski
|
____________________________________________________________________
JUDGMENT
The appeal is allowed in accordance with the attached
Reasons for Judgment and the matter is referred back to the Minister of National Revenue for
reconsideration and reassessment.
Signed at Ottawa,
Canada, this 10th day of November 2008.
“V.A. Miller”
Citation: 2008TCC598
Date: 20081110
Docket: 2007-3845(CPP)
BETWEEN:
KEWCORP FINANCIAL INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
JAMES KEW,
Intervenor.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1]
Kewcorp Financial Inc.
appeals the decision of the Minister of National Revenue (the Minister) that
James Kew was engaged by it in pensionable employment for the 2005 year.
Facts
[2]
James Kew caused the
Appellant to be incorporated in 1998. In 2005 he was its president, director
and sole shareholder. The Appellant operated a financial planning business
which included insurance, mortgage services, financial planning and tax
preparation. James Kew performed all the duties necessary to operate the
Appellant. It is his position that he was engaged by the Appellant as a
self-employed person, an independent contractor.
[3]
Prior to incorporating
the Appellant, James Kew provided the same services as the Appellant but as a
sole proprietor. He operated under the name “James Kew Financial Services” and
he had been in business since 1979. He is a financial planner and has received
his accreditation as a Certified Senior Advisor (CSA) and a Personal Financial
Planner (PFP).
[4]
According to the Notice
of Appeal, the duties performed by James Kew for the Appellant were marketing,
planning, administration, accounting, preparation and prospecting. James Kew
testified that he performed these duties as an independent contractor and
received commissions for his services. He decided the amount of his commissions
and when he would receive his commissions in accordance with the Appellant’s
ability to pay. In 2005 he received $65,459.92 as commissions and $20,000 as a
dividend. He reported these amounts in his income tax return.
[5]
James Kew stated that all clients of James Kew Financial
Services remained his personal clients whereas any clients acquired since the
Appellant was incorporated were the Appellant’s clients. All financial planning
services were provided personally by James Kew.
[6]
James Kew owned the
office space where the Appellant carried on its business. The Appellant paid
rent to him. During the period, the Appellant leased its computer and James Kew
was both a co-lessee and a guarantor on the lease. It was necessary for James
Kew to have a vehicle to perform his work and he supplied his own as the
Appellant did not own a vehicle.
[7]
James Kew’s hours of work for the Appellant were flexible and
were determined by him. He determined when he would work for the Appellant and
when he would work for his other clients. He did not have a benefit plan, sick
leave, or paid vacation from the Appellant.
Analysis
[8]
It was clearly
established by the parties that they intended James Kew to be an independent
contractor. The question is whether the facts are consistent with the parties’
intention[1].
The facts must be analyzed, using the traditional factors from Wiebe Door,
to determine whether the facts are consistent with that intent.[2]
[9]
In this situation where
the worker is also the sole shareholder, director and officer of the Appellant
it is important in applying the tests from Wiebe Door Services Ltd. v.
Minister of National Revenue[3]
not to pierce the corporate veil[4].
There was no assumption by the Minister that a sham existed. In fact, as in Zupet
v. Minister of National Revenue[5],
the Minister has assessed the Appellant on the basis that a contract of service
existed between the Appellant and its shareholder, James Kew.
[10]
One of the assumptions
made by the Minister in the Reply was that James Kew was not operating his own
business while performing services for the Appellant. The evidence tendered by
the Appellant undoubtedly rebuts this assumption. James Kew operated his own
business under the name James Kew Financial Services. He personally received
payments from AIG Life Insurance of Canada, a client he has had since the early
1980’s. He and the Appellant are each licensed by the Alberta Insurance
Council to transact insurance business. James Kew Financial Services is listed
in the Yellow Pages. James Kew Financial Services and the Appellant each have
their own Visa card. According to the uncontradicted evidence of James Kew, he
has his other clients in addition to the Appellant.
[11]
James Kew had a chance
of profit and a risk of loss. If the Appellant’s business made income this was
reflected in the business James Kew obtained from the Appellant. James Kew
determined the Appellant’s business and thus the income he received from the
Appellant. If the Appellant’s business was slow, then James Kew had other
clients from whom he earned income.
[12]
James Kew stated that he hired other contractors to perform
duties for the Appellant. In 2005, he hired his son Scott Kew who worked as an
independent contractor with the Appellant for two weeks. I have assumed that
James Kew was acting in his capacity as President or director of the Appellant
when he hired his son, as Scott Kew billed the Appellant at the rate of
$20/hour and was paid by cheque by the Appellant.
[13]
Did the Appellant
control or have the right to control how the worker carried out his duties?
Technically it could. It is difficult to apply the control test to the facts of
this case where the worker is also the sole shareholder, sole director and
President of the Appellant. However, that does not mean that I can ignore this
factor or that it must be decided that the worker was an employee[6].
[14]
James Kew’s hours of
work with the Appellant were flexible and were determined by him. He did not
have any of the indicia of an employee. He had no benefits; he did not receive
sick leave or vacation pay. He did not receive his commissions on a regular
basis.
[15]
As stated above the
Appellant leased its office space from James Kew. In 2005 the annual rent was
$8,400. James Kew was both co-lessee and guarantor on the lease of the computer
used by him and the Appellant. He supplied his own vehicle in the performance
of his duties for the Appellant and for James Kew Financial Services. He
advertised the business of James Kew Financial Services and he paid for these
advertisements. The Appellant’s business was advertised separately and paid for
by the Appellant. He purchased his own licences to sell life, accident and
sickness insurance. He belonged to the Academy
of Senior Advisors and he paid for this membership. James Kew
paid for training he received. In particular, in 2005 he followed and paid for
a course from The Financial Advisors Association of Canada Education Program.
[16]
The application of the
tests from Wiebe Doors has satisfied me that the facts of this case are
consistent with the parties’ intention; that is, a contract for services
existed.
[17]
Based on the evidence I
am satisfied that the Appellant has successfully shown that the Minister’s
assessment was incorrect. James Kew was an independent contractor.
[18]
The appeal is allowed.
Signed at Ottawa, Canada, this 10th day of November 2008.
“V.A. Miller”
CITATION: 2008TCC598
COURT FILE NO.: 2007-3845(CPP)
STYLE OF CAUSE: KEWCORP FINANCIAL INC. AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Edmonton,
Alberta
DATE OF HEARING: October 7, 2008
REASONS FOR JUDGMENT BY: The
Honourable Justice Valerie Miller
DATE OF JUDGMENT: November 10, 2008
APPEARANCES:
|
Agent for the
Appellant:
|
James Kew
|
|
Counsel for the
Respondent:
|
Gregory Perlinski
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa, Canada
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