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Citation: 2004TCC682
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Date: 20041018
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Dockets: 2003-3801(CPP)
2003-3802(EI)
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BETWEEN:
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JOHN B. ARMSTRONG, M.D.,
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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
O'Connor, J.
[1] The issue in these appeals is
whether in the years 2001 and 2002, Ms. Joanne Shovar
("Joanne") and Ms. Tracy Martyn ("Tracy"),
(together the "Workers"), 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 the Appellant.
[2] The Minister of National Revenue
(the "Minister") determined that the Workers were
engaged in insurable employment and pensionable employment on the
basis that they were hired under contracts of service as opposed
to contracts for services (independent contractors) and assessed
the Appellant in the amounts of $800.01 and $1,455.64 for
employment insurance premiums not deducted in 2001 and 2002
respectively and $1,017.48 and $2,043.22 for Canada pension plan
contributions not deducted in 2001 and 2002 respectively, for a
grand total of $5,316.35.
[3] This type of issue comes before
this Court 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,
(4) the integration test.
[4] Before analysing 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 substitute 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"
still seems reasonable.
[6] Also in the case of
Pérusse v. Canada(Minister of National
Revenue - M.N.R.) [2000] F.C.J. No. 310, Marceau, J. at
paragraph 14 said:
In fact, the judge was acting in the manner apparently
prescribed by several previous decisions. However, in a recent
judgment this court undertook to reject that approach, and I take
the liberty of citing what I then wrote in this connection in the
reasons submitted for the court.
[7] Then at paragraph 15 he said:
The function of an appellate judge is thus not simply to
consider whether the Minister was right in concluding as he did
based on the factual information which Commission inspectors were
able to obtain and the interpretation he or his officers may have
given to it. The judge's function is to investigate all the
facts with the parties and witnesses called to testify under oath
for the first time and to consider whether the Minister's
conclusion, in this new light, still seems "reasonable"
(the word used by Parliament). The Act requires the judge
to show some deference towards the Minister's initial
assessment and, as I was saying, directs him not simply to
substitute his own opinion for that of the Minister when there
are no new facts and there is nothing to indicate that the known
facts were misunderstood. However, simply referring to the
Minister's discretion is misleading.
[8] In my opinion the following are
the most important facts in the determination of the issue in
question:
1. The Appellant ran a
medical practice operating from a clinic. His practice dealt
mainly with the management of patients with chronic
non-cancer pain and addiction and in some cases certain
patients had both maladies. The Workers and the Appellant were
all involved in certain administrative duties and bookkeeping.
The Appellant was the medical practitioner with a degree from
McGill University in Montreal. However, other duties of Joanne
involved patient care duties and Tracy, in addition to the
administrative duties was involved in her own counselling
sessions as she saw fit.
...
Generally, the services provided by the Workers included
general office management, patient care, collection of patient
specimens, running group therapy sessions, dealing with the
Ministry of Human Resources (BC) in obtaining benefits for
patients, individual counselling, and responding to patients in
crisis including after hours.
The Workers were not required to perform their duties at the
clinic at all times and to the extent they provided their
services they did so at their sole discretion and in some cases
provided services outside of the clinic and in some cases from
home.
2. The rates of pay were
not set by the Appellant but rather were agreed to by the Workers
and the Appellant. For Joanne the rate was $11.50 per hour and
for Tracy the rate was slightly higher and moreover Tracy was
paid extra for hours devoted to counselling. The Workers were
paid twice a month. They kept track of their own hours and were
paid on that basis. At a point in time the rate of pay for Tracy
was increased.
3. When the Appellant
engaged the services of the Workers it was agreed with both of
them that their services were to be offered on an independent
contractor basis.
[9] As to the element of control. The
evidence is extensive and not entirely conclusive but in my view
considering all factors I conclude that the test of control when
applied to the situation at hand points to a contract for
services. My principal reasons for this conclusion are as
follows:
The Workers were not supervised;
They chose their own hours and were not obliged to report to
the clinic on a regular basis;
They received no medical coverage, no vacation, sick leave nor
overtime pay and were not paid for hours worked at home;
They could accept work from others;
The Appellant was extremely busy with his own medical practice
and did not have the necessary time to supervise and control.
They were retained for their personal skills with respect to
patient care and therefore their inability to retain helpers or
substitutes is not an important factor.
[10] As to the ownership of tools, this test
is probably not that important in the present case. The main tool
might be considered as the Appellant's clinic where most of
the services by the Workers were performed. Tracy did have her
own pager or cell phone but this cannot be considered as an
important consideration. On balance the test of ownership of
tools would favour a contract of service relationship. However,
as mentioned the ownership of tools in the present case is not
that important.
[11] With respect to chance of profit, the
evidence is that Joanne organized after-hour meetings outside of
the clinic with patients to talk with them and interest them in
products she was selling. Tracy had discretion to schedule
additional counselling hours at a higher fee and on her own
initiative expanded her opportunities for profit by taking some
chronic pain patients into her counselling program, thus
providing additional remuneration. In conclusion, although the
chance of profit test is not absolutely clear, on balance, in my
opinion, it leans more to a conclusion as to a contract for
services as opposed to a contract of service.
[12] As to risk of loss, although the
Appellant has argued vigorously that there was some risk of loss,
it appears at best that this risk was remote and certainly no
losses were proven. The conclusion is that this test points more
to the contract of service as opposed to a contract for
services.
[13] 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". This treatment of the question allows for
circumstances where there is more than one business. It is
acknowledged that the question should be approached from the
perspective of the alleged employee/contractor. The Appellant
submits that the work of the Workers was accessory to his and
further while it was helpful and desirable it was not essential
or integral in that the Appellant had previously operated the
practice both administratively and with respect to patient care
with only casual help. He points out that in the absence of the
contributions of the Workers he still had a medical practice. In
my view the position of the Appellant is correct in that what the
Workers were doing was accessory to the Appellant's practice
as opposed to being an integral part of that practice. The result
of this test, although once again not conclusive, points to a
contract for services as opposed to a contract of service.
ANALYSIS AND CONCLUSION
[14] I find firstly that the Minister did
not consider all the factors or did not give sufficient
importance to certain factors. With respect to all the tests, see
my above comments.
[15] I find secondly that the testimony of
both the Appellant and Tracy was entirely credible, an important
consideration in cases of this nature.
[16] What must be examined is the total
relationship between the parties and doing that in the context of
the tests analyzed above, I conclude on a balance of
probabilities that what existed were contracts for services.
[17] Moreover although the basic arrangement
between the parties does not necessarily establish a presumption
nor definitely determine the issue, it is a prime consideration.
Specifically, see Wolfe v. Canada, [2002]
4 F.C. 396, (FCA) where Noël, J. stated as
follows:
...This was a case where the characterization placed by the
parties on their relationship ought to be given great weight. In
a close case such as the present one, where the relevant factors
point in both directions with equal force, the parties'
contractual intent, and in particular their mutual understanding
of the relationship could not be disregarded. As the parties
considered that they were engaged in an independent contractor
relationship and as they acted in a manner consistent with this
relationship, it was not open to the Tax Court Judge to disregard
their understanding.
Also in Bradford v. M.N.R., 88 DTC 1661 Taylor, T.C.J.
stated at page 11 of the decision:
The general principle that commends itself to me arising out of
this appeal and the recent jurisprudence noted is that under a
given set of circumstances within which there are certain aspects
of 'employee', some others of 'independent
contractor', and even others that are somewhat ambiguous,
that the intentions and objectives of the parties, if clearly and
unequivocally stated and agreed upon, should be a prime factor in
the determination of the Court ...
[18] In conclusion, as mentioned, some of
the tests point one way and some of the tests point another, but
in my opinion on a balance of probabilities I find that Joanne
and Tracy were engaged under contracts for services, namely,
independent contracts.
[19] Consequently, the appeals are allowed
and the decisions of the Minister are vacated.
Signed at Ottawa, Canada, this 18th day of October, 2004.
O'Connor, J.
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