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Citation: 2003TCC567
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Date: 20031017
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Docket: 2000-2438(EI)
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BETWEEN:
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ALLEN ADAMS O/A MIRAMICHI CRAFTERS,
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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
Savoie, D.J.
[1] This appeal was heard on June 26,
2003 at Miramichi, New Brunswick.
[2] This is an appeal from a decision
by the Minister of National Revenue (the "Minister")
that Suzanne Clancy, the Worker, was employed in insurable
employment while engaged by the Appellant, from May 28 to August
15, 1998, the period in question, within the meaning of the
Employment Insurance Act
(the "Act").
[3] The Minister informed the
Appellant that it had been decided that the Worker's
engagement with the Appellant during the period in question was
insurable employment because she was employed pursuant to a
contract of service.
[4] In making his decision, the
Minister relied on the following assumptions of fact:
a) the
Appellant was the sole proprietor of a shop where he sold local
crafts placed on consignment (the "Shop");
b) the Worker
was hired to make contacts with craft people, to help the
Appellant set up the Shop and to manage the operation;
c) the
Appellant operated the Shop under the name Miramichi Crafters,
but during the period in question the name was not
registered;
d) the
Appellant opened a bank account for the operation of the Shop
under his own name;
e) the
Appellant had sole signing authority to the bank account
mentioned above;
f) the
Appellant owned the building in which the Shop operated;
g) the
Appellant paid for the utilities;
h) the
Appellant provided the necessary equipment such as the cash
register;
i) the
Worker had no investments in the business;
j) the
Worker paid herself $100 per week from the cash available to a
total of $1,100.00 during the period in question;
k) the Worker
also received a cheque from the Appellant for $563.74;
l) the
Appellant issued a Record of Employment to the Worker reporting
earnings of $624.00 and a period of employment from May 26 to
June 13, 1998;
m) the Appellant
issued a T4 to the Worker reporting earnings of $624.00;
n) the Worker
was employed until August 15, 1998;
o) there was a
contract of service between the Worker and the Appellant;
[5] The Appellant admits the
assumptions of fact relied upon by the Minister as stated in
subparagraphs d), e) and m), denies those as stated in
subparagraphs a), b), f), g) and o) and admits in part the
assumptions in c), h), i), j), k), l) and n).
[6] Although the Appellant has denied
a number of the Minister's assumptions of fact, his position
was not supported by the evidence. When confronted by the
contents of certain documents, such as his own application for
funding from the government, which formed the very basis of some
of those assumptions, he suggested another interpretation to
those documents which flew in the face of the plain meaning of
its wording, and in some cases, defied common sense.
[7] The craft shop opened on May 26,
1998. The premises, which housed the shop, were owned by
Saddlers' Cafe Ltd. a company wholly owned by the Appellant
who was its sole shareholder and director. The company paid all
the expenses of the building including taxes, insurance and
utilities.
[8] The Appellant owned and operated
Saddlers' Cafe. As such, he put up an advertisement for a
waitress. The Worker approached the Appellant for the job. In a
meeting between the Worker and the Appellant, the subject of
setting up a crafters' shop came up. It was brought up by the
Appellant who offered to provide for this shop the vacant space
on the second floor, above the restaurant. The project was
formulated in vague terms at first, but at subsequent meetings
the venture began to take shape.
[9] The Appellant proposed to renovate
the vacant space to accommodate the shop. The Worker, for her
part, would contact crafters and gain their involvement in the
shop whereby their crafts would be sold on consignment. She would
also be responsible for the management and operation of the shop
while the Appellant would run his restaurant business. It was
agreed that the Worker would run the crafters shop at a salary of
$400 per week from the opening of the shop which was on May 26,
1998.
[10] The Worker paid no expenses for the
setting up of the shop except she brought her own crafts to sell,
a basket to place her crafts in and an old walnut crate.
[11] The Appellant brought in a cash
register and some counters and shelving borrowed from
relatives.
[12] The Appellant applied to the provincial
government for a grant to assist the project under the Partners
Program. The application was turned down because the project
already had an employee on salary, namely, the Worker.
[13] Although the agreed salary was
estimated at $400 per week it became clear at the outset that the
shop could not support that kind of expense and it was agreed
that she would take $100 per week to cover her babysitter's
expenses.
[14] The Worker attended to the management
and operation of the shop, was the contact person with the
crafters and did the paperwork. She paid the crafters monthly for
items sold as per the consignment agreement. This Court received
in evidence the application of the Appellant for funding under
the aforementioned Partners Program which was filed as Exhibit
R-2. The Appellant signed it July 16, 1998. In his
application he describes the Worker as the Managing Clerk of the
crafters shop. Further, he states that the Worker has experience
within the local retail trade, has ability to deal with the
public and suppliers and has bookkeeping abilities.
[15] He sets out her duties as the operation
of the retail portion of the business, receiving products from
suppliers and selling products to consumers, making bank deposits
and payments to suppliers.
[16] The Appellant conducted his restaurant
business and he had daily contacts with the Worker who reported
to him. The Appellant opened a bank account for the shop under
his own name and had sole signing authority under it.
[17] It was established that the Worker
worked for 12 weeks and was paid for 11 at $100 per week.
Clearly, the parties agreed that the Worker was underpaid but the
Appellant kept promising that funds were forthcoming. The Worker
also received an amount of $563.74 on September 17.
[18] The Appellant purported to lay off the
Worker in order to qualify under the Partners Program and he
issued records of employment which he signed. These are in
evidence as Exhibits R-6 and R-7. The records of employment
describe the reason for the lay off as:
unable to maintain employment level due to start-up costs.
[19] Under cross-examination, the Appellant
was unable to explain how the project came about, speaking, in
vague terms, of meeting with the Worker to discuss a joint
project.
[20] He did not recall that the Worker had
applied for a waitress job at Saddlers' Cafe.
[21] The shop paid no rent to the
Appellant.
[22] He could not explain how the selling
price for the crafts was established.
[23] He went on to explain that the
assistance program he applied for required a record of employment
and payroll sheets. He added that he was endeavouring to tailor
the Worker's job in order to obtain the required help from
the government assistance program. He explained that the
application for assistance failed because there was a slow down
in the operations. However, he was confronted with the letter of
the Department of Labour of the Province of New Brunswick signed
by Maurice Vautour, Employment Development Officer filed in
evidence as Exhibit R-3, which states an entirely different
reason, that being, the employee, the Worker, was already in
place.
[24] The Worker applied for a ruling under
the Employment Standards Act, alleging that as an employee
she was not paid her salary and vacation pay earned by her in the
management of a craft shop owned by the Appellant.
[25] Her complaint was investigated and
following the recommendation of the Employment Standards Officer,
the Director ordered the Appellant to pay the Worker the amount
of $3,136.26 which represents $3,015.63 in wages, plus $120.63
vacation pay. The Appellant referred the matter to the Labour and
Employment Board and the order of the Director was confirmed.
[26] The Appellant was questioned about this
and testified that he could not remember if he had appealed this
decision. The Worker, however, testified that she was not aware
of any appeal of that decision and that the Appellant had never
paid her the amount of the award.
[27] I believe it is useful to quote the
following excerpt of that decision signed by Eugene McGinley,
Chairperson, Labour and Employment Board, dated June 9, 1999
as follows:
When Clancy initially approached Adams she was seeking employment
as a waitress. It eventually transpired that she worked for him
as Manager of a fledgling business of retailing crafts. The
business itself was a product of Adams' initiative and was to
be conducted under his supervision in premises associated with
his currently existing restaurant business. Although there was no
evidence whether Adams was the owner or merely occupier of the
building, it was apparent that he controlled the entire premises,
and it was Adams, as proprietor, who attended personally to the
renovation of the premises and remained in control following the
termination of Clancy's employment. It appears that Adams was
pleased to accept Clancy's advice in the operation of the
business, but while she managed the day-to-day operations Adams
appears to have maintained the aura of control, as seen more
particularly with reference to the operation of the bank account.
In the Board's opinion, it was Adams who was essentially the
proprietor. He was the person who would have profited if the
business had prospered, and he was the one who ran the risk and
suffered the loss. The Board's opinion is supported by
reference to the often cited "Montreal v. Montreal
Locomotive Works Ltd." [1947] 1 D.L.R. 161 case.
Further, the Board was inclined to its finding by reflection upon
the fact that the Record of Employment clearly indicated that
Clancy was an employee. Whether or not the Record of Employment
had merely been issued as a sham to enhance Adam's
application for participation in the Partners Program, the Board
feels that a person should not be permitted to speak, as it is
sometimes described, "from both sides of the mouth" in
order to take advantage of programs of public assistance.
This panel of the Board affirms Director's Order
No. 0990305.
[28] The Minister relies in his
determination on the legislation under
paragraph 5(1)(a) of the Act, which reads as
follows:
5. (1) Subject to subsection (2), insurable employment is
(a)
employment in Canada by one or more employers, under any express
or implied contract of service or apprenticeship, written or
oral, whether the earnings of the employed person are received
from the employer or some other person and whether the earnings
are calculated by time or by the piece, or partly by time and
partly by the piece, or otherwise;
...
[29] The criteria to be considered in
determining whether the Worker was employed by the Appellant
under a contract of service has been set down by the Federal
Court of Appeal in the often quoted case of Wiebe Door
Services Ltd. v. M.N.R, 87 DTC 5025.
[30] Control: Evidence has shown that
the Worker regularly reported to the Appellant. Specifically, the
Worker needed permission to leave the shop at 5:00 p.m. The
Appellant set up the prices for the craft articles sold, a 33%
mark up. The Worker had no signing authority at the bank.
[31] Ownership of tools: The
operation of the business although requiring a minimum of tools,
nonetheless the cash register was furnished by the Appellant as
were the counters and shelves. The premises were provided by the
Appellant.
[32] Chance of profit and risk of
loss: This criteria was considered by the Appellant himself
and written by him in a letter to the Chief of Appeals which was
received in evidence as Exhibit R-8. Here is an excerpt of that
letter:
...
The terms of her employment did not allow her to profit or
expose her to risk of loss.
Since, as stated earlier, her terms of employment were based
on a partnership with me, this did allow her to be exposed to a
profit or loss situation. If the pilot project was a success, the
craft shop would be moved to a larger building and she would
become the General Manager of the new shop. In order for the
project to be deemed a success, all bills would have to be paid
for the start-up project as well as a reasonable salary for
Suzanne. This I would consider as potential for profit.
If this pilot project did not succeed, the larger project
would not be attempted. The failure of the project would be
determined if, at the end of the season, bills were outstanding
and not enough revenue/funding was received in order to
compensate Suzanne for her time. This would expose Suzanne to a
risk of loss of a possible full-time job.
...
[33] Integration: Since the Worker
was the manager and operator of the business, her duties and
functions were very much integrated within the craft shop to the
extent that without her, the venture could not operate unless
someone else carried out those functions.
[34] The analysis of the facts in issue as
established by the oral and documentary evidence under the
criteria above set out, leaves no doubt that the nature of the
work done by the Worker, establishes an employer-employee
relationship between the Appellant and her. It characterizes a
contract of service as defined under paragraph 5(1)(a) of
the Act.
[35] The onus of proof lies on the Appellant
on a balance of probabilities.
[36] As was stated by this Court on numerous
occasions, the case of Elia v. Canada (Minister of National
Revenue - M.N.R.), [1998] F.C.J. No. 316, decided by the
Federal Court of Canada, stands for the proposition that the
Minister's assumptions of fact are taken to be admitted by
the Appellant unless he specifically disproves them. This, the
Appellant has failed to do.
[37] Furthermore, the evidence called by the
Respondent and the documentary proof received in evidence was
conclusive in advancing the Minister's conclusion to an
extent far exceeding the standard of proof required of him
[38] The Appellant and the Worker both
testified and each gave an entirely different version from the
other.
[39] This Court had to assess the
testimonies heard and compare them with the rest of the evidence.
In that exercise, it became clear upon a reading of the trial
notes that the evidence of the Appellant was often tentative,
frequently ambiguous and generally vague and evasive. It was
contradicted by the testimony of the Worker, the documents in
evidence, often his own, and the findings of the Labour and
Employment Board of New Brunswick.
[40] Consequently, on the whole of the
evidence, this Court concludes that the Worker was engaged by the
Appellant in insurable employment within the meaning of paragraph
5(1)(a) of the Act for the period in question
because there was a contract of service between her and the
Appellant.
[41] The appeal is therefore dismissed and
the Minister's decision is hereby confirmed.
Signed at Grand-Barachois, New Brunswick, this 17th day of
October 2003.
Savoie, D.J.
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