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Citation: 2006TCC461
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Date: 20060818
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Dockets: 2005-4280(CPP)
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BETWEEN:
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LAMBROS CONTRACTING 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.
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REASONS FOR JUDGMENT
Little J.
A. The Facts
[1] The
Appellant was incorporated in 2003 under the laws of the Province of Alberta.
[2] The
Appellant was in the house construction and framing business.
[3] Richard
Lamontagne ("Mr. Lamontagne") was the President, sole shareholder and
sole director of the Appellant.
[4] Mr.
Lamontagne provided management and labour services to the Appellant. His duties
included arranging work crews, supervising workers, preparing invoices and
managing the Appellant's business.
[5] Mr.
Lamontagne's wife, Carla, provided office management services to the Appellant.
Carla's duties included processing invoices, preparing cheques and filing
records and documents for the Appellant. Mr. Lamontagne testified that he had
expected that Carla would learn to use a computer and organize and maintain the
Appellant's financial records. However, this did not happen and the Appellant's
financial records were prepared by Ronald Agar, C.A.
[6] In
2004 Mr. Lamontagne received management fees of $50,000.00 from the Appellant.
[7] In
2004 and 2005 the Appellant paid Carla Lamontagne the following payments:
2004 $6,300.00
2005 $1,250.00
B. Issue
[8] The
issue to be decided is whether Mr. Lamontagne and Carla Lamontagne were
employed in pensionable employment under the rules of the Canada Pension
Plan.
C. Analysis and Decision
[9] Over
the years Canadian Courts have developed various tests to determine if a Worker
is an employee or an Independent Contractor. These tests were outlined by Justice
MacGuigan in Wiebe Door Services Ltd. V. M.N.R., 87 DTC 5025 and the
four tests are:
1. The control exercised by the alleged employer;
2. Ownership of tools;
3. Chance of profit and Risk of loss; and
4. The integration test.
There is a fifth test which has been developed and refined by
Courts recently and that is the Intention of the Parties. The most
recent example of the Intention of the Parties test is found in the Royal
Winnipeg Ballet v. Canada, [2006] F.C.J. No. 339 a decision of
Sharlow, J.A. of the Federal Court of Appeal. I will now deal with each of the
tests.
[10] I will now comment upon each of the tests.
1. Control
[11] The evidence of Mr. Lamontagne was to the effect that the Workers were
not supervised in the same manner that an employee is generally supervised.
Mr. Lamontagne said he decided what he should do on a job.
[12] Based on the testimony that was before me I have concluded that with
respect to the CONTROL test Mr. Lamontagne was not controlled in the
same way that employees would be controlled. There was insufficient evidence
before me with respect to the control exercised over Carla Lamontagne.
2. Ownership of tools
[13] The evidence indicated that Mr. Lamontagne provided his own tools and
equipment. This is similar to the situation in Precision Gutter v. Canada,
[2002] F.C.J. No. 771. While, in my view, this test is merely one factor I
believe that the Appellant satisfies this test. I did not hear sufficient
evidence concerning Carla Lamontagne on this point.
3. Chance of profit and Risk of loss
[14] The evidence indicated that Mr. Lamontagne was paid a fixed amount and
he was not specifically required to work any minimum number of hours.
[15] While I do not believe that this test is that significant in this
situation I believe that the Appellant satisfies this test regarding Mr.
Lamontagne. I did not hear sufficient evidence on this point regarding Carla
Lamontagne.
4. Integration test
[16] Mr. Lamontagne appears to be an integral part of the Appellant's
business in the years under appeal. However, I am sure that other Workers could
be hired by the Appellant to replace Mr. Lamontagne and Carla Lamontagne.
5. Intention of the Parties
[17] The evidence indicates that the Appellant and Mr. Lamontagne clearly
understood that Mr. Lamontagne would be engaged as an independent contractor
and he would govern his affairs accordingly.
[18] In connection with the Intention of the Parties test I refer to the
Reasons for Judgment of Sharlow, J. where she stated at paragraph 64:
64. In these circumstances, it seems to me wrong
in principle to set aside, as worthy of no weight, the uncontradicted evidence
of the parties as to their common understanding of their legal relationship,
even if that evidence cannot be conclusive. The judge should have considered
the Wiebe Door factors in the light of this uncontradicted evidence and
asked himself whether, on balance, the facts were consistent with the
conclusion that the dancers were self-employed, as the parties understood to be
the case, or were more consistent with the conclusion that the dancers were
employees. (Emphasis mine)
[19] If I apply the Intention of the Parties test as established by Justice
Sharlow I conclude that the facts in this case are more consistent with a
finding that Mr. Lamontagne was self-employed and I so find.
[20] I also wish to quote with approval the comments that were made by
Chief Justice McLachlin in Shell Canada Ltd. v. The Queen, [1999] S.C.J.
No. 30 where the learned Chief Justice said at paragraph 39:
…we have held that, absent a specific provision of the
Act to the contrary or a finding that they are a sham, the taxpayer's legal
relationships must be respected in tax cases. Recharacterization is only
permissible if the label attached by the taxpayer to the particular transaction
does not properly reflect its actual legal effect:
[21] In this situation the Appellant and Mr. Lamontagne entered into an
agreement where the parties intended to create a contractor relationship
as opposed to an employee relationship and they conducted themselves according
to that Plan.
[22] On the various legal authorities that I have reviewed I believe that Mr. Lamontagne
was an independent contractor and not an employee of the Appellant. I have
therefore concluded that the Appellant has no liability under the Canada
Pension Plan with respect to Mr. Lamontagne.
[23] I am not satisfied on the evidence presented that Carla Lamontagne was
an independent contractor. In my opinion Carla Lamontagne was an employee of
the Appellant and the Appellant must recognize that status for Carla Lamontagne
under the Canada Pension Plan.
Signed at Vancouver, British Columbia,
this 18th day of August 2006.
Little
J.
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