Date: 20010123
Docket: 1999-3332-EI, 1999-3334-CPP
BETWEEN:
DANIELLE IRVINE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Cain, D.J.T.C.C.
[1]
The Appellant appealed the decision of the Respondent dated
October 6, 1998 that the Appellant's engagement by First
Light Productions Inc. (the "Payor") during the period
June 16, 1997 to August 3, 1997 (the "period in
question") was not insurable or pensionable employment
within the meaning of the Employment Insurance Act (the
"EI Act") and the Canada Pension Plan
(the "CPP") respectively. The parties agreed
that the two appeals should be heard at the same time, the
evidence led to be applied to each appeal as the context required
and that it was unnecessary to create two records.
[2]
The Respondent based his decision on the following:
"(a) from
January, 1997 to June 15, 1997, the Appellant and
Anna Stassis (the "partners") operated a business
similar to the Payor as a partnership (the
"partnership");
(b)
after June 15, 1997, the Payor continued with the projects which
were begun by the partnership and there is no clear division
between the activities of the partnership and the Payor;
(c)
the partnership obtained a business loan in the amount of $15,000
from the Y Enterprises for which the partners were personally
liable;
(d)
the funds borrowed by the partnership were used to operate the
Payor;
(e)
on June 16, 1997, the Payor incorporated under the laws of the
Province of Newfoundland as a non-profit corporation which did
not consist of any shareholders;
(f)
to satisfy the requirements of the The Corporations Act for the
Province of Newfoundland and Labrador, the Payor was required to
have a minimum of 3 directors;
(g)
the Appellant, Anna Stassis and Kelly Jones became the
Payor's directors;
(h)
Kelly Jones did not invest in the Payor and did not share
liability for the funds borrowed by the partnership which were
used to operate the Payor;
(i)
during the calendar year 1997, Kelly Jones primarily performed
services for other employers and was not involved in the
Payor's operations;
(j)
during the calendar year 1997, the Payor was operated by the
partners;
(k)
the Payor completed the project which was begun by the
partnership and ran a production on Bell Island, Newfoundland,
called "Place of First Light: the Bell Island
Experience" from June 30, 1997 to September 7, 1997;
(l)
from May, 1997 to June 16, 1997, prior to the Payor's
incorporation, the Appellant performed some duties as a producer
and her duties included applying for funding through government
grants, ensuring government regulations were met and
co-ordinating approval for the project through the Bell
Island community;
(m) the
Appellant was paid $1,000 for the duties referred to in
subparagraph 9(1) by cheque dated July 21, 1997 and issued on the
Payor's bank account;
(n)
prior to June 16, 1997, the Appellant also auditioned actors and
performed some of the duties required as co-producer and artistic
director to ensure the production would be ready to begin
performances on June 30, 1997;
(o)
the Appellant was put on the Payor's payroll on June 16,
1997, the date of incorporation, as the artistic director and
production manager and her duties included auditioning actors,
rehearsal of the actors, identification of appropriate locations
for public performance and co-ordination of all aspects of the
production including sets, costumes, technical requirements,
transportation for the actors and the audience;
(p)
the only individuals included on the Payor's payroll, in
addition to the Appellant, were the actors;
(q)
all other workers were hired by the Payor through the Human
Resources Development Job Creation Program, including
Anna Stassis;
(r)
prior to August 3, 1997, the Appellant did not qualify to be
hired under the Human Resources Development Job Creation
Program;
(s)
the Appellant's involvement as a Director in the Payor
ensured she would be hired for the position even though she did
not qualify under the Human Resources Development Job Creation
Program and would have to be paid by the Payor;
(t)
after August 3, 1997, the Appellant was also paid through the
Human Resources Development Job Creation Program;
(u)
after August 3, 1997, the Appellant continued to perform services
as an artistic director and co-producer for the Payor and she was
not paid by the Payor for those duties;
(v)
the Appellant was in control of her own employment and determined
when she would be included on the Payor's payroll and when
she would be laid off;
(w) the
Appellant was included on the Payor's payroll in an attempt
to enable her to qualify for employment insurance benefits and,
therefore, qualify her for the Human Resources Development Job
Creation Program;
(x)
there was no contract of service between the Appellant and the
Payor."
[3]
The Appellant admitted assumptions (c) to (g) inclusive, (k), (o)
to (q) inclusive, (t) and (u) but denied all other assumptions
hereinabove set out.
Facts
[4]
From the evidence adduced the Court makes the following findings
of facts.
[5]
In or about 1997 the Appellant, Anna Stassis and Kelly Jones as a
partnership under the name of First Light Productions set about
to raise funds to finance a theatrical production on Bell Island
Newfoundland (the "Bell Island Production").
[6]
They were successful in negotiating a bank loan of $15,000 which
qualified them to make application to Canada Council for the
Arts, the Newfoundland Labrador Council for the Arts and the
Department of Human Resources and Development for additional
funding. The Appellant and Anna Stassis personally
guaranteed the bank loan.
[7]
Once the theatrical production was scripted, the trio made
application to the above Councils for additional funding. Actors
who were on unemployment insurance were eligible to act in the
production and their benefits were topped off with an additional
allowance to entice them to participate.
[8]
Prior to the above agencies advancing or approving any funding,
they required that the partnership be incorporated as a
non-profit company. The Payor was incorporated on June 16, 1997.
At that time all of the partnership funds were deposited to the
credit of the company.
[9]
The structure of a non-profit theatre company is as follows:
Board of Directors - the Board exercises complete control
over the whole operation.
The officers of the company are:
Executive Producer - acts similar to a general manager
Artistic Director - co-ordinates the selection of
productions to be undertaken by the company.
The Company then employs the following staff:
Director - person engaged to participate in the selection
of actors and actresses and to prepare the production for the
stage performances.
Actors
Stage crew
Publicist
Accountants
[10] The Payor
being a young company, the initial Board had difficulty
attracting anybody to the Board so the three formed the Board of
Directors. The Appellant became Artistic Director and Anna
Stassis became Executive Producer.
[11] The
Appellant had been the genesis of the script for the Bell Island
Production, and a graduate of the National Theatre School of
Canada. The Board concluded that she was the most appropriate
person to direct the production. She was hired at $400 a week,
the minimum salary required to be paid to a director of a
production funded by the above mentioned agencies.
[12] She
worked as director from June 16, 1997 to August 3, 1997 at a
negotiated salary of $400 a week. The director has almost
exclusive control over the preparation of the actors for the
production.
[13] On July
16, the company paid to the Appellant $1,000 for work that she
had performed in raising money for the original partnership. The
money was not paid out of the original loan, as all of that money
was required to support the additional applications for loans
subsequently made. The company was in better financial shape to
make the payment in July.
[14] During
the first few weeks of the performance, the Appellant continued
to have input to smooth out any deficiencies. On August 3, 1997,
the Appellant finished her duties as director. She resumed her
position as artistic director. The control of the production from
then on was in the hands of the executive producer Anna
Stassis.
[15] No
evidence was introduced to show that the Board of Directors had
authorized the hiring of the Appellant as director of the Bell
Island Production except the viva voce evidence of the
Appellant.
Decision
[16] I was
impressed with the evidence of the Appellant and was satisfied
that all of the activities she was involved in during the period
in question, whether in her capacity as a director of the Payor
or during her subsequent engagement as director of the production
at Bell Island Newfoundland, were bona fide. While it is usual to
require that the evidence of an appellant be corroborated either
by documentary evidence or the viva voce testimony of
another, knowledgeable of the circumstances, in this case I find
that the evidence of the Appellant was accurate and credible
enough to support her appeal.
[17] The
Respondent was hampered by the fact that his assumptions were
made as a result of an investigation by one who had no knowledge
of the structure and operation of a theatre company. From his
viva voce evidence at the hearing, it was clear that at
the time of his investigation he did not understand the nature
and duties of the various players who make up a production
company's staff as outlined hereinabove.
[18] The
evidence of the Appellant either demolishes or makes irrelevant
assumptions (a), (b), (h), (i), (j), (l), (m), (n), (r), (s),
(v), (w) and (x) made by the Respondent and established a
prima facie case. None of the evidence led by the
Respondent challenged that prima facie case.
[19] The
Appellant, Anna Stassis and Kelly Jones did in fact form a
partnership in early 1997 in the hopes of raising funds to
underwrite the Bell Island Production. The fact that Kelly Jones
decided not to personally guarantee $15,000 borrowed by the
partnership to place them in a position to make an application
for more funding, is irrelevant. As a partner she would probably
have been liable in any event.
[20] The Payor
was incorporated to assume the financial burden of the
partnership, notwithstanding that the Appellant and Anna Stassis
were still liable on the original $15,000 loan. The fact that the
Payor carried on the same projects begun by the partnership is
irrelevant. As will be discussed later in this judgment, the
Payor was in law a separate entity.
[21] The Payor
was not a joint stock company and none of the members including
Kelly Jones made any investment in the company. The Partnership
loaned to the Payor the $15,000 borrowed and that became a debt
due by the company to the original partnership. By agreement, the
partnership agreed to pay to the Appellant, $1,000 for all of the
services she performed prior to the incorporation and it is
irrelevant that the sum was paid after the Payor was incorporated
and from the account of the Payor. That payment reduced the
Payor's liability to the partnership by that amount.
[22] The
Payor, after its incorporation, was a separate legal entity and
was governed by the Appellant, Anna Stassis and Kelly Jones in
their capacity as members and not in their capacity as
partners.
[23] Although
denied by the Appellant, who was not represented by counsel,
assumption (l) is true but is irrelevant. There is no question
that she worked for the partnership and would have performed
duties similar to those performed in her capacity as a governing
member of the Payor. But the Payor was a separate legal
entity.
[24] The
Appellant admitted assumption (o), however, her evidence clearly
showed that from June 16, 1997 until August 3, 1997, she did not
perform any of the duties of artistic director and production
manager but even if she did the Court is of the view for reasons
hereinafter set out, that would be irrelevant as well.
[25] In
respect to assumption (r) the Appellant testified that she did in
fact have sufficient work inventory, as a result of employment
with a travel agency, to qualify for benefits under the EI
Act. No evidence was led to refute that fact.
[26] The
evidence led in respect to assumption (s) was that the Appellant
was the best person available to act as director of the Bell
Island Production and no evidence was led by the Respondent to
support demolished assumption (w).
[27] In
respect to assumption (u) the fact that the Appellant reverted
from her status as a bona fide employee of the Payor to her
status as an active governing member of the Payor is
irrelevant.
[28] The
Respondent's position, realistically stated, is that the
Payor was the alter ego of the partners and merely a structure
through which they operated their partnership. And further that
the engagement of the Appellant to direct the Bell Island
Production was a scheme to permit her to qualify for benefits
under the EI Act. The Respondent also submitted that
if there was a contract between the Appellant and the Payor then
it was a contract for services since the Payor had little or no
control of the Appellant in the execution of her contract as a
director.
[29] A member
or shareholder of a corporation may become an employee of that
entity. In Lee v. Lee's Air Farming Ltd., [1960] 3 All
E.R. 420 the Privy Council considered the case of a pilot who
controlled a corporation and who appointed himself the chief
pilot at a salary arranged by him. Following the death of the
pilot in the course of performing his duties the Court held that
the shareholder's special position as governing director and
principal shareholder did not preclude him from making on the
company's behalf, a contract of employment with himself and
did not preclude him from entering into or working in the
capacity as a servant under a contract of service.
[30] At page
425 Lord Morris of Borth-Y-Gest who wrote the judgment for the
Council said:
"... Was he a person who had entered into or worked
under a contract of service with an employer? The Court of Appeal
thought that his special position as governing director precluded
him from being a servant of the respondent company. On this view,
it is difficult to know what his status and position was when he
was performing the arduous and skilful duties of piloting an
aeroplane which belonged to the respondent company and when he
was carrying out the operation of top-dressing farm lands from
the air. He was paid wages for so doing. The respondent company
kept a wages book in which these were recorded. The work that was
being done was being done at the request of farmers whose
contractual rights and obligations were with the respondent
company alone. It cannot be suggested that, when engaged in the
activities above referred to, the deceased was discharging his
duties as governing director. Their Lordships find it impossible
to resist the conclusion that the active aerial operations were
performed because the deceased was in some contractual
relationship with the respondent company. That relationship came
about because the deceased, as one legal person, was willing to
work for and to make a contract with the respondent company which
was another legal entity."
and continuing at page 426 the learned Justice said:
"There is no reason, therefore, to deny the possibility
of a contractual relationship being created as between the
deceased and the respondent company. If this stage is reached,
then their Lordships see no reason why the range of possible
contractual relationships should not include a contract for
services and if the deceased, as agent for the respondent
company, could negotiate a contract for services as between the
respondent company and himself there is no reason why a contract
of service could not also be negotiated. It is said that therein
lies the difficulty, because it is said that the deceased could
not both be under the duty of giving orders and also be under the
duty of obeying them. But this approach does not give effect to
the circumstance that it would be the respondent company and not
the deceased that would be giving the orders. Control would
remain with the respondent company, whoever might be its agent to
exercise the control. The fact that so long as the deceased
continued to be governing director, with amplitude of powers, it
would be for him to act as the agent of the respondent company to
give the orders does not alter the fact that the respondent
company and the deceased were two separate and distinct legal
persons. If the deceased had a contract of service with the
respondent company, then the respondent company had a right of
control. The manner of its exercise would not affect or diminish
the right to its exercise."
[31] The
position of the Appellant was not unlike that of the pilot.
Although a person in a governing position, she was selected
because of her talent to direct the Bell Island Production. The
pilot did not abandon his governing position and the Privy
Council found that when crop dusting farmer's fields he was
not exercising that function but was performing his duties as an
employee of the company. There is nothing in the EI Act
which would prohibit such an arrangement and where the Court
finds that such an arrangement was a bona fide one as in the case
at bar, then such employment, if it meets all of the other
requirements, must be insurable.
[32] The
Respondent argues that there is a prohibition against
deliberately creating or increasing the likelihood that a claim
may be made under the EI Act and cites Tanguay v.
Canada (Unemployment Insurance Commission)
68 N.R. 154 in support. However that case has very
limited application. There, employees voluntarily left their
positions to give younger employees the chance for advancement
and guaranteed employment. The Court held that kind of created
unemployment was not insurable as the fund was an insurance
against unemployment and unemployment deliberately created or
which deliberately increases the risk, was not insurable. Here
the employment of the Appellant was not deliberately created. The
Appellant was hired to do a particular job, which had to be done
and resigned when the task was completed. Her unemployment was
not deliberately created.
[33] The
Appellant testified that during the period in question she had
complete control over the rehearsals and preparation of the
actors for their various roles. The Respondent submitted that
this made the contract one "for" services as opposed to
one "of" service.
[34] In
Wiebe Door Services Ltd. v. M.N.R. [1986] 2 C.T.C. 200,
the late Mr. Justice McGuigan who wrote the judgment for the
majority of the Federal Court of Appeal said about the whole
question of control when distinguishing between a contract of and
for services at page 203 as follows:
"The traditional common-law criterion of the employment
relationship has been the control test, as set down by
Baron Bramwell in R. v. Walker (1858), 27 L.J.M.C.
207, 208:
It seems to me that the difference between the relations of
master and servant and of principal and agent is this: A
principal has the right to direct what the agent has to do; but a
master has not only that right, but also the right to say how it
is to be done.
That this test is still fundamental is indicated by the
adoption by the Supreme Court of Canada in Hôpital
Notre-Dame de l'Espérance and Theoret v. Laurent et
al., [1978] 1 S.C.R. 605 at 613, of the following statement:
"the essential criterion of employer-employee relations is
the right to give orders and instructions to the employee
regarding the manner in which to cary (sic) out his
work."
Nevertheless, as Professor P.S. Atiyah, Vicarious Liability in
the Law of Torts, London, Butterworths, 1967, p. 41, has put it,
"the control test as formulated by Bramwell, B., ...
wears an air of deceptive simplicity, which ... tends to
wear thin on further examination." A principal inadequacy is
its apparent dependence on the exact terms in which the task in
question is contracted for: where the contract contains detailed
specifications and conditions, which would be the normal
expectation in a contract with an independent contractor, the
control may even be greater than where it is to be exercised by
direction on the job, as would be the normal expectation in a
contract with a servant, but a literal application of the test
might find the actual control to be less. In addition, the test
has broken down completely in relation to highly skilled and
professional workers, who possess skills far beyond the ability
of their employers to direct."
[35] The
Appellant was apparently skilled in her profession and the
best-qualified director available. She testified that to
effectively carry out her duty as director she had to have
complete control over the training of the actors and preparation
of the production. If the Payor was dissatisfied with the
director's performance, it had the authority and right to
replace her. She was hired on a weekly basis at a fixed wage and
was required to be on the job daily at rehearsal times. The other
members of the Payor did not possess the training and competence
to direct the Bell Island Production but retained the right to
control the performance of the Appellant's contract of
service.
[36] The Court
finds that the period in question was both insurable and
pensionable employment, allows the appeal and vacates the
decision of the Respondent.
Signed at Rothesay, New Brunswick, this 23rd day of January
2001.
"M.F. Cain"
D.J.T.C.C.
COURT FILE
NO.:
1999-3332(EI)
STYLE OF
CAUSE:
Danielle Irvine and M.N.R.
PLACE OF
HEARING:
St. John's, Newfoundland
DATE OF
HEARING:
August 23, 2000
REASONS FOR JUDGMENT BY: The
Honourable Deputy Judge M.F. Cain
DATE OF
JUDGMENT:
January 23, 2001
APPEARANCES:
For the
Appellant:
The Appellant herself
Counsel for the
Respondent:
John O'Callaghan
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE
NO.:
1999-3334(CPP)
STYLE OF
CAUSE:
Danielle Irvine and M.N.R.
PLACE OF
HEARING:
St. John's, Newfoundland
DATE OF
HEARING:
August 23, 2000
REASONS FOR JUDGMENT BY: The
Honourable Deputy Judge M.F. Cain
DATE OF
JUDGMENT:
January 23, 2001
APPEARANCES:
For the
Appellant:
The Appellant herself
Counsel for the
Respondent:
John O'Callaghan
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-3332(EI)
BETWEEN:
DANIELLE IRVINE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal
of Danielle Irvine (1999-3334(CPP)) on August 23,
2000 at St. John's, Newfoundland, by
the Honourable Deputy Judge M.F. Cain
Appearances
For the Appellant:
The Appellant herself
Counsel for the
Respondent:
John O'Callaghan
JUDGMENT
The
appeal is allowed and the decision of the Minister is vacated in
accordance with the attached Reasons for Judgment.
Signed at Rothesay, New Brunswick, this 23rd day of January
2001.
D.J.T.C.C.
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