Date: 20010920
Docket:
2000-2639-IT-I
BETWEEN:
STÉPHANE
RIVARD,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
McArthur,
J.T.C.C.
[1]
This is an appeal by the appellant, who represented himself, from
assessments made by the Minister of National Revenue ("the
Minister") for the 1995, 1996 and 1997 taxation years. The
Minister, in computing the appellant's employment income,
disallowed the deduction of certain expenses incurred by the
appellant.
[2]
The first issue is whether the appellant was an employee of
Métal Marquis inc. ("the company"). In issuing
and confirming the notices of reassessment dated March 22,
1999, for the taxation years at issue, the Minister assumed the
following facts, inter alia:
[TRANSLATION]
(a)
in 1994, the appellant was an employee of Métal Marquis
inc. . . . during the entire year;
(b)
the appellant was a junior engineer when he was hired by the
company;
(c)
the appellant's duties and responsibilities have not changed
much since he was hired;
(d)
during the taxation years at issue, the appellant worked under
the supervision of Guillaume Marquis;
(e)
during the taxation years at issue, the planning of the work to
be done was handled by his supervisor, Guillaume
Marquis;
(f)
. . . the appellant worked on several projects at once for the
company;
(g) .
. . the appellant had a regular work schedule, which corresponded
with the company's hours, namely from 8:00 a.m. to 5:00
p.m.;
(h) .
. . the appellant had to fill out a time allocation
form;
(i)
. . . the appellant was paid at an hourly rate by the
company;
(j)
. . . during the taxation years at issue, all the expenses
incurred by the appellant in doing his work were reimbursed by
the company;
(k)
the appellant's expense accounts were submitted on the
company's letterhead and approved by the company;
(l)
. . . the appellant had an office at the company's place of
business;
(m) . . .
the company was the appellant's only client;
(n) .
. . the Minister concluded that the appellant was an employee of
the company during the taxation years at issue;
(o)
the Minister therefore issued the notices of reassessment dated
March 22, 1999, for the taxation years at issue.
[3]
Mr. Rivard testified for himself, and Guillaume Marquis testified
for the respondent.
[4]
The appellant stated the following facts:
[TRANSLATION]
Relevant
facts:
(1)
From 1995 to 1998, I was an engineering consultant. I had a fixed
place of business.
(2)
I carried on business under the firm name S.R.I. I was a
registrant for the purposes of the consumption taxes
(GST/QST).
(3)
I performed consulting work for various clients, who called upon
me for very specific projects.
(4)
My office was my principal workplace, even though I had to travel
regularly to see my clients in the performance of my work for
them.
(5)
Métal Marquis inc. (hereinafter "Marquis") was one of
my most important clients.
(6)
I had no written contract with Marquis. Unlike its employees, I
was not covered under any benefit plan paid for by Marquis. I
took out income insurance on my own.
(7)
I paid all business expenses myself. In 1997, I hired an employee
to help me with my various contracts. I paid all the
contributions, payroll taxes, etc. associated with that
employee.
(8)
My fees were calculated on the basis of the time spent on the
various contracts and the economic value of the work performed. I
was the one who decided how much to bill for a
contract.
(9)
I organized and planned the performance of my contracts based on
various factors. Among other things, I took account of the
availability of the other people involved. However, I myself
determined the deadlines, where the work was done and the
schedule.
(10)
During the period in question, I myself assumed the professional
risk associated with the practice of my profession. I limited
that risk by complying with professional standards and taking out
liability insurance. Finally, I was considered a consultant in
private practice for the purposes of the Ordre des
ingénieurs du Québec.
(11)
I owned all the equipment (computer and other equipment, tools
and vehicles) needed to perform my contracts. I paid all
maintenance, repair and insurance costs. I bore the risk of
breakdown or theft.
(12)
I billed my clients. I assumed all the financial risks of
business.
(13)
For tax purposes, I prepared my income tax returns on the
assumption that I was "self-employed".
(14)
Following an audit at Marquis, Revenue Canada Taxation determined
that my providing of services to that company constituted
employment.
[5]
The comments I would make about those facts are as
follows:
1.
Correct in part but somewhat misleading. As an engineering
consultant, the appellant basically had only one client, the
company, and his business was operated mainly out of the
company's premises.
2.
Correct.
3.
He actually had just one client, the company.
4.
His principal place of business was not his office at home but
rather the company's premises, where he spent more than 90
percent of his working hours.
5.
Correct, but the company was more than a client:
Guillaume Marquis was also his supervisor.
6.
Correct.
7.
For the most part, the company reimbursed him for his expenses.
The other two sentences are correct.
8.
It is true that he billed the company for his services at $20 an
hour most of the time. The monthly billing corresponded to 35 to
50 hours of work a week, done regularly, month after month,
aside from two weeks of vacation in the summer.
9.
Probably correct, although I am convinced that the final decision
was the company's.
10.
Correct.
11.
The appellant owned a personal computer; however, he could use
the company's equipment.
12.
I do not think that the appellant assumed any financial risk
other than the risk of the company's bankruptcy, which exists
in most employer-employee relationships.
13.
Correct.
14.
Also correct.
[6]
The Court of Appeal has explicitly approved the following
formulation of the issue by Cooke J. in Market
Investigations:
The observations of LORD WRIGHT, of DENNING, L.J., and of the
judges of the Supreme Court in the U.S.A. suggest that the
fundamental test to be applied is this: "Is the person who
has engaged himself to perform these services performing them as
a person in business on his own account?" If the answer to
that question is "yes", then the contract is a contract
for services. If the answer is "no" then the contract
is a contract of service.
[7]
The Minister believes that Mr. Marquis and the appellant
attempted to establish a relationship between independent
contractors but that they actually had an employer-employee
relationship. The appellant had been an employee in 1994 and
considered himself an employee of the company after 1997 when an
employee stock option plan was created.
[8]
Applying the tests set out in Wiebe Door, [1986] 3 F.C.
553, I conclude as follows:
1. Control
test
There is no doubt that the
company, and specifically Mr. Marquis, exercised control over the
appellant.
2.
Profit-loss
The appellant recorded his
hours and billed for them on the basis of a fixed hourly rate. He
was reimbursed for some of the expenses he incurred when he
travelled on company business. It is difficult to say which
expenses he may have paid himself and not been reimbursed for. He
occasionally worked for third parties, but 98 percent of his
services were provided to the company. The appellant had little
or no risk of loss. He was paid at a fixed hourly rate. He
submitted his invoice to the company every month and was then
paid.
3. Tools
The company provided most of
the tools.
4.
Integration
The company had 50 or so
employees. The appellant was one of several engineers on whom the
company's production depended.
[9]
The foregoing shows that the appellant and Mr. Marquis
attempted but failed to establish an employer-employee
relationship. It is legitimate to seek to organize one's
affairs in such a way as to obtain income tax relief insofar as
this is permitted by law. In this case, however, the appellant
did not succeed.
[10]
The appellant stated that he became an employee of the company
again in 1998 because he wanted to take advantage of the employee
stock options. It is not enough to call oneself an independent
contractor. It is not just a matter of nomenclature. The Court
must examine the whole of the relationship between the parties. I
am satisfied that the appellant was an employee of the company
during the taxation years at issue, and the expenses in question
are not deductible. The appeal is dismissed.
Signed at Ottawa, Canada, this 20th day of
September 2001.
"C. H. McArthur"
J.T.C.C.
Translation certified
true on this 21st day of June 2002.
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH
TRANSLATION]
2000-2639(IT)I
BETWEEN:
STÉPHANE RIVARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on August 15, 2001, at
Rouyn-Noranda, Quebec, by
the Honourable Judge C. H. McArthur
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Dany Leduc
JUDGMENT
The appeals from the assessments made under the Income Tax
Act for the 1995, 1996 and 1997 taxation years are dismissed
in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada,
this 20th day of September 2001.
J.T.C.C.
Translation certified
true
on this 21st day of June
2002.
Erich Klein, Revisor
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