Information Communication Services (ICS) v. M.N.R., docket 97-839-UI

Date: 19981230

Dockets: 97-839-UI; 97-841-UI

BETWEEN:

INFORMATION COMMUNICATION SERVICES (ICS) INC.

o/a INSURANCE COURIER SERVICES,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeals heard on October 13, 1998, at Vancouver, British Columbia, by the Honourable Deputy Judge D.W. Rowe

Reasons for judgment

Rowe, D.J.T.C.C.

[1] It was agreed the two appeals would be heard together. The appellant, Information Communication Services (ICS) Inc. ("ICS") appealed from a decision by the Minister of National Revenue (the "Minister") dated February 5, 1997 that Donna Lockhart was employed under a contract with Insurance Courier Services, a division of D & D ICS Group Ltd. - and was therefore in insurable employment - during the period July 15, 1991 to January 7, 1994.

[2] The appellant further appealed from a decision by the Minister, also dated February 5, 1997 that Russell Lockhart was employed under a contract with Insurance Courier Services, a division of D & D ICS Group Ltd. - and was therefore in insurable employment - during the period September 13 to December 13, 1993.

[3] Counsel for the appellant advised he was taking no issue with the fact the decisions dated February 5, 1997 stated they were "issued pursuant to paragraph 61(3)(a) of the Unemployment Insurance Act. The period of employment which was the subject of a request for determinations fell entirely under the Unemployment Insurance Act but the decision of the Minister regarding the nature of the employment of Donna Lockhart and Russell Lockhart should have been issued pursuant to the relevant provisions of the new Employment Insurance Act.

[4] Counsel agreed a Book of Documents be filed as Exhibit A-1. References to tab numbers hereafter will refer to a document in Exhibit A-1. Counsel for the appellant filed - as Exhibit A-2 - a list setting out the numbers to questions and answers recorded at the Examination for Discovery of Dianne Martineau - an officer authorized to give evidence on behalf of the respondent - together with an attached letter from Counsel for the respondent providing information requested at the discovery. Counsel then proceeded to read in those questions and answers as follows:

"1. Q. This is an examination for discovery in the two proceedings, by which I mean the Donna Lockhart proceeding, the proceeding related to Donna Lockhart, I should say, and the proceeding relating to Russell Lockhart?

A. Yes.

2. Q. And those numbers are, I think we've already established, 97-839(UI) and 97-841(UI)?

A. Yes.

3. Q. And you're authorized to give evidence in this examination for discovery?

A. Yes.

4. Q. On behalf of the Respondent, the Minister of National Revenue?

A. That's correct.

5. Q. And you are an appeals officer with Revenue Canada?

A. Right.

13. Q. And what has your role been in these two appeals, what have you done on these appeals?

A. I was assigned the file when the appeals were filed, and I prepared the replies to the Notices of appeal.

14. Q. I think you signed both those replies.

A. Yes, I did. And I've been in contact with the Department of Justice in regards to the discovery. Basically the file is assigned to me, so that anything that occurs with the file, I would deal with.

15. Q. Is it two separate files, are Donna and Russell separate, are they kept separate or are they all in one file?

A. You have two files.

16. Q. And you've reviewed those files from start to finish at some point?

A. Yes.

17. Q. So have you seen all of the submissions that have been made by or on behalf of ICS?

A. Yes.

18. Q. And have you seen all of the communications with Donna Lockhart and Russell Lockhart?

A. The communications between Revenue Canada and –

19. Q. Yes.

A. Yes.

BY MR. ANDREWS:

26. Q. Now, you see in paragraph 6, you've stated that, "Whether or not Donna Lockhart deducted expenses from her income for tax purposes, is irrelevant for the purposes of this appeal."

Now, if I could just ask you, why did you say it was irrelevant?

A. Because I – the question to be determined is whether on the facts of this particular situation, Donna Lockhart was employed under a contract of service or a contract for services. And I didn't feel that whether she deducted expenses or not, was relevant to that particular determination.

27. Q. I think you'll agree with me though, that it's certainly indicative of whether she thought she was a contractor or an employee?

A. It could be, yes.

28. Q. And in fact, in the course of document disclosure, there has been production of at least one tax return, I believe. Have you seen Donna Lockhart's tax returns?

A. Yes.

29. Q. If you turn to tab 44 of the Respondent's book.

A. Okay, I have it.

30. Q. Now, this is Donna Lockhart's tax return for the 1991 year?

A. That's correct.

31. Q. And if you turn to the fourth page, its schedule 8. We're in a different order; can you find the Schedule 8 in there, the self-employment report?

A. Okay.

32. Q. And you see that she included with her tax return a Schedule 8, self-employment report?

A. Yes.

33. Q. In which she stated that she was a courier; do you see that?

A. Yes. Yes, I do.

34. Q. And I take it that this refers to her relationship with ICS; can you confirm that?

A. I would think so.

35. Q. If you turn to, it's two pages further on in mine, there's a statement of income and expenses from her business; do you see that?

A. Yes.

36. Q. And again she seems to have made her return to Revenue Canada on the basis that she was running a business as a courier; is that true?

A. That appears to be, yes. She's included an income and expense statement from a business.

37. Q. And she has deducted from the income of that business, various things such as accounting and legal; do you see that, $100?

A. Yes.

38. Q. Insurance of $183.33?

A. Right.

39. Q. Maintenance and repairs of $371.48?

A. Right

40. Q. And motor vehicle, I think it says $454.90?

A. I think so, yes.

41. Q. do you see that?

A. Yes.

42. Q. Salaries of $570?

A. Mm-hmm.

43. Q. Workers' compensation of $70?

A. Mm-hmm.

44. Q. Capital cost allowance of $448.50?

A. Right.

45. Q. For total expenses of $2,198.21?

A. Correct.

46. Q. And she shows income from that business, gross income from that business of $4,370?

A. Yes.

58. Q. I see, all right. So let's look at 1993. She shows commission income, on the first page of the T1 General, of $30,131.36?

A. That's right.

59. Q. And net commission income of $15,842.89?

A. That's right.

60. Q. And do you know, can you tell whether that relates to income that she gained in connection with ICS?

A. Yes, there's a statement of business/professional income and expenses, and it says "Donna Lockhart, ICS courier," as the business name. And it has those figures.

61. Q. I see that. And that's a statement of business/professional income and expenses?

A. That's right.

62. Q. So that shows 30 – a little over $30,000 in commission income which she earned, and which she is showing Revenue Canada as being income for a business that she was running?

A. That's correct.

63. Q. And were you able to tell from this form, when this T1 was filed?

A. On the last page there's a date stamp, and it says "penalty", it's on the left-hand side, it says "May 3rd, 1996 penalty."

64. Q. So that was when it was received by Revenue Canada?

A. That was when it was received.

65. Q. May 3rd of 1996?

A. Yes.

66. Q. And it appears to have been signed, the date that it is stated to have been signed, is April 30th, 1996?

A. That's correct.

67. Q. And it's signed, apparently, by Donna Lockhart?

A. Apparently.

68. Q. Now, it appears to me from this that Donna Lockhart in April of 1996, was asserting to Revenue Canada that with respect to the 1993 taxation year, she was a contractor running a business, and not an employee of ICS. Is that not correct?

A. It would appear that that's what she was saying, yes, that's the way she filed it.

75. Q. And looking at Exhibit 6, which is the 1991 tax return, we identified in schedule – the statement of income and expenses, that there was a claim for salaries?

A. Yes.

76. Q. Including employer's contributions.

A. Yes.

80. Q. What I assume that means is that the business – she has filed here on the basis that the business paid an employee some money; is that correct?

A. I would assume so, yes.

81. Q. And that's what you would normally expect an entry there to mean, is it not?

A. Yes.

83. Q. turning to Exhibit 7 then, the 1993 return, I see that – am I correct in thinking that in this Exhibit 7, the 1993 return, that CPP contributions were made?

A. You mean on self-employed earnings?

84. Q. Yes.

A. Yes, it looks that way.

85. Q. Schedule 9 shows a contribution of $163.78?

A. That's correct.

86. Q. And then I take it if we look through here, we'll find that on the actual T1 form somewhere; where will we find that?

A. On page 4, the very last page.

87. Q. Oh yes. All right, so the page that is marked page 4, just by step 6, summary of tax and credits?

A. Yes.

88. Q. Which is the last page of the General T1 form, isn't it?

A. That's correct.

89. Q. And then down at line 421, it shows $163.78 for CPP contribution?

A. Right.

90. Q. which is then included in the calculation of tax?

A. Included in the calculation of the balance owing, yes.

93. Q. Now, what about – I'm looking for unemployment or employment insurance. Where would I find that on Exhibit 7?

A. In the '93 return? I'm not quite sure what you mean.

94. Q. I'm just trying to think of the situation for a self-employed person. The self-employed person is filing a tax return; what would you expect to see on that tax return with respect to employment insurance: nothing, is that right?

A. That's right, yes.

95. Q. Whereas if they were an employee, you would expect to see it on the T4 that they received?

A. If they received a T4 –

96. Q. If they received a T4.

A. If they received a T4, it would be on the T4, yes.

97. Q. If they didn't receive a T4, then you would expect that someone who was an employee would have some difficulty in dealing with it in their tax return?

A. Yes.

98. Q. Where do you find that, I'm trying to remember where it is on the T1 form that you fill in employment insurance amounts that have been deducted; I should remember this.

A. Well, if you've had them deducted, then you get to deduct them in calculating your income. So it should be – it would be a tax credit in '94. There's a page called "Comparative Tax Summary"; she claimed UI there, but I don't see a T4.

99. Q. You're looking at something called "1993 Tax Summary"?

A. It's the "1993 Comparative Tax Summary," it might be the next page, and where it says "tax payable," it's got UI, 903.94. That's calculating the non-refundable tax credits, but I don't see a T4 where that amount came from, which is where it should come from.

100. Q. Well, if you look at step 5, page 3 of the guide, it says, "Unemployment insurance premiums from box 18 on all T4 slips: 903.94." So she was – that's strange, she does seem to have had employment income. Because if you look in that same place, at line 308, it indicates $670 of contributions to CPP, as well as the 163.78 from self-employment?

A. Yes.

104. Q. Now, turning to the statement of business/professional income and expenses, from that same return, Exhibit 7.

A. Okay.

105. Q. It shows certain expenses being claimed?

A. Yes.

106. Q. Interest and bank charges of $387.40?

A. Right.

107. Q. And this is for the business name "Donna Lockhart ICS Courier"; correct?

A. Yes.

108. Q. And it shows meals and entertainment expense being claimed of $136.43?

A. Right.

109. Q. And office expenses of $1,027.90?

A. Right.

110. Q. Workers' compensation expense of $318.16?

A. Right.

111. Q. Total expenses of $1,869.89?

A. Right.

112. Q. And then on the next page, there's a schedule which says "Partnership Schedule – Business/Professional Income"; do you see that?

A. Yes.

113. Q. And it's got some further expenses being deducted?

A. Right.

114. Q. Of $8,679.40 for automobile expenses?

A. Right.

115. Q. And $4,057.34 for a home expense?

A. Yes.

119. Q. Do you know why – well, wait a minute, I've missed something here. Do you see up above, area A, full names of partners, spouse; do you see that? On the same sheet?

A. Yes, but there's no allocation of any income there.

120. Q. But she appears to be saying –

A. I guess so, I don't know what this – I mean she hasn't allocated any of the income to anybody else.

121. Q. No, but under the name of partners, she's put "Spouse."

A. It's there.

131. Q. I'd also like to know whether she was reassessed or assessed with respect to this return?

A. Okay

132. Q. And the same questions with respect to the '91 return, Exhibit 6. Am I correct in thinking that the return in Exhibit 6, the 1991 return, was filed somewhere around the end of April of 1992?

A. I would think so, because there's no stamp on it. And generally speaking, it's only stamped if it's late.

143. Q. Do we have any – I don't think we do, do we have any tax returns for Russell Lockhart?

A. No.

144. Q. Is there any particular reason why we've produced Donna's and not Russell's?

A. Because he didn't file them.

145. Q. Oh, he didn't file them; well, that's a good reason. Okay.

A. There were none to produce.

146. Q. Now, finally getting back to the pleadings. And at paragraph 9 of the notice of appeal – I'm not going to bother saying it's paragraph 9 of the Donna Lockhart appeal, because the pleadings are pretty close to being identical.

So when I ask you these questions, I think, unless either you or I remember that there's something different with Donna, then I'm just going to proceed on the basis that it's common to both.

A. Okay.

147. Q. So in paragraph 9, it was pleaded by the Appellant, "That at all material time, ICS had no employees in Nanaimo and no office." Do you see that?

A. Yes.

148. Q. And the response was, in paragraph 7, that "The Minister denies the facts contained in the first sentence of paragraph 9 of the notice of appeal."

A. Right.

149. Q. Now, I don't want to get enmeshed in the semantics here, but do you accept that ICS had no persons working in Nanaimo that it classified as employees?

A. Yes.

150. Q. It had no – for instance, it had no office or management staff working in Nanaimo?

A. No.

151. Q. The only persons that were working in Nanaimo, that were connected with ICS, were the persons that ICS classifies as brokers?

A. Yes.

165. Q. Now, with respect to paragraph 15, that mentions Donna Lockhart changing routes with her husband, mother-in-law and son, and changing the order in which she visited customers on the route. Are you aware that Donna Lockhart – I think you already said you are – from time to time would have other people drive her route for her?

A. That was my understanding.

166. Q. Do you know who she used to do that? Do you know if she used, for instance, her husband, her mother-in-law, or her son to drive her route?

A. To drive her route?

167. Q. Yes.

A. I believe she used her mother-in-law and her son, I'm not sure whether she used her husband.

174. Q. The last paragraph on that page – well, first of all, is this a document which was prepared by Donna Lockhart?

A. Yes.

175. Q. And provided to Revenue Canada?

A. Yes.

176. Q. And that last paragraph, I think, reads, "As long as I kept ICS informed by updated route sheets, which I always did, ICS didn't care who did what, as long as the job was done and they didn't receive any complaints, which only they knew about." Do you see that?

A. Yes.

177. Q. And obviously that's something that – that's Donna Lockhart's description of the situation?

A. Yes.

178. Q. Now, this sort of litigation is a little unusual in the sense that it's obviously not a lawsuit between ICS and Donna Lockhart, but Revenue Canada is acting, at least in part, on information received from Donna Lockhart.

So let me ask you a question which you can think about if you like, but does Revenue Canada accept that statement that I just read to you, as being accurate?

A. Yes, except that it seems there are other places where that's not exactly what – what was said. But, yes.

186. Q. I would have thought it was a fairly common ground, that they were not being treated as employees by ICS, and were not receiving the usual – let's start with this, they were not receiving the usual statutory benefits that employees would otherwise receive.

A. They were asked if they received vacation pay or sick leave.

187. Q. And what did they say?

A. And they said that they did not.

188. Q. And does Revenue Canada accept that as an accurate statement?

A. Yes.

190. Q. And you probably then don't know anything about – well, I've prejudged the question. Do you know whether the Lockharts received T4 slips from Insurance Courier Services?

A. I don't believe they did.

191. Q. And do you know whether ICS made any deductions in terms of income tax, unemployment insurance or CPP?

A. As far as I know, they didn't.

192. Q. And I think there was a payroll audit conducted, was there not?

A. Yes.

193. Q. And I think it's fairly clear from the result of that audit, as I recall, that there were no deductions, correct?

A. Yes.

194. Q. Now, both Donna and Russell Lockhart – no that's not true. Donna Lockhart registered with the Workers' Compensation Board, did she not?

A. Yes.

195. Q. And that registration number, which is quoted in paragraph 20 of the notice of appeal, is also referred to in this memo that we've got in front of us, page 5, paragraph 27?

A. Right, yes.

196. Q. So isn't that an agreed fact then, that she registered with the Workers' Compensation Board under number 453841-541(020)?

A. That that's her number, yes.

197. Q. And that she was registered with the Workers' Compensation Board?

A. That she was registered with the Workers' Compensation Board, yes.

201. Q. And it appears that Donna Lockhart was registered with respect to goods and services tax, under number 130084816?

A. Right.

202. Q. Who would she have been registered with?

A. Registered with?

203. Q. Yes, who do you register with for goods and services tax purposes? Where do you get your GST number from?

A. From Revenue Canada.

204. From Revenue Canada, okay. And then it states further, "The worker had applied for GST refunds on two occasions, but only received one cheque as the other was undeliverable after she changer her address without advisement to the Department." Is that correct?

A. Yes.

205. Q. Now, GST refunds, I take it what this is telling us is that Donna Lockhart was paying GST with respect to some aspect of this courier business that she was doing?

A. I don't know that for sure. I know she was registered because she had a GST number, but I don't know what it was in respect of.

206. Q. Can you find that information for me?

A. I can try and find that, yes.

223. Q. Well, I'm not – I just want to make sure we're only disagreeing where we need to disagree. My understanding is that the brokers did not – sorry, the company did not pay workers' compensation –

A. Yes, we admit that.

224. Q. -- for brokers. You admit that?

A. Yes.

225. Q. Okay. Now, with respect to dental, life insurance and disability, I think in some cases there was a difference between what employees got and what brokers got; is that correct, to your understanding?

a. I believe so, yes. Yes.

226. Q. Now; is it correct that the Lockharts were not required to wear a uniform, an ICS uniform?

A. I think so, yes. As far as I know.

227. Q. Is it also correct that – I'm looking at the same memo, page 2, paragraph 10, "that any corrections that were needed to be made, i.e. if there was some kind of a mistake with a delivery or something like that, that it needed to be done on the worker's own time. The worker did not get paid for any corrective action."

A. Yes.

230. Q. Then I won't ask you about it, if you haven't read it. I take it that it's common ground that Donna Lockhart did not have to punch a time card or record her time?

A. Yes.

231. Q. And the same with Russell?

A. Yes.

232. Q. You don't know whether or not there was radio disptach?

A. I don't know.

233. Q. And do you – does Revenue Canada agree that there was no employee of ICS located in Nanaimo for the purpose of exercising supervision over the brokers who worked in Nanaimo?

A. Nobody present in Nanaimo, no – yes we agree.

234. Q. And that as a practical matter, the Lockharts were able to find other people to drive their routes in order to take some time off or if they were sick, for those kinds of reasons?

A. Yes.

235. Q. And that the Lockharts in fact did swap routes from time to time with other members of their family?

The words used in the document are change routes.

A. Yes.

236. Q. Does Revenue Canada accept that Donna Lockhart was instrumental in the design of the order in which she visited the customers on her route?

A. It's my understanding that she took over an established route, and I would imagine if any new customers were added, that it was up to her where she placed them.

237. Q. Right, that's really what I'm talking about.

A. Yes.

238. Q. And that she could take whatever route she chose between customers?

A. I believe so.

240. Q. Now, you know that the Lockharts own their own vehicles?

A. Yes.

241. Q. And you know that the Lockharts absorbed all the expenses related to their vehicles? The use of their vehicles in this business.

A. Yes.

242. Q. They had to pay for repair bills, operating costs, gas, insurance of the vehicle, those sorts of things?

A. Right.

243. Q. Now, is it not fair to say then, as a matter of fact, that the Lockharts had the ability to, let's put it neutrally, affect the amount of money that they received from doing this work, by controlling, to the extent that they could control their expenses?

A. Well, the less expenses they had, obviously the more income they would have, yes.

244. Q. I mean for instance, if they decided to lease a Mercedes in order to do these deliveries, and they had huge lease payments, they wouldn't make any money from this – probably wouldn't make any money from this contract?

A. Most likely not.

245. Q. Whereas if they have a vehicle with low acquisition costs and low maintenance costs and low gas costs, then they could increase the amount they would receive from ICS, net?

A. They would have more net if their expenses were lower, yes.

246. Q. Isn't it fair then to say that they do have – they did have some ability to affect the amount of profit or loss that they obtained from this arrangement with ICS?

A. To the extent, I suppose, that they could choose what kind of vehicle they drove, and that that would influence the amount of their vehicle expenses, yes, it would make a difference to the net pay received, or that they had the use of afterwards.

247. Q. But what they were doing was picking up and delivering packages, for the large part?

A. Yes.

248. Q. And the vehicle that they chose, and the route that they chose to drive, seemed to me to be large parts of what they were doing, it's not just a minor thing, is it?

a. Well, they needed to have a vehicle obviously.

249. Q. I mean the bulk of what they were doing involved driving?

A. Yes.

250. Q. So the decision as to what vehicle to acquire and use, seems to me to be a fairly major decision for someone in their position to make.

A. Well, the choice of a vehicle would be important, if the expense would fluctuate enough that it would make a difference.

251. Q. Well, do you have any idea of the difference in the leasing costs, for instance, of a van or a small secondhand car; do you have any idea?

A. No, but I imagine that one would be much higher than the other, yes.

252. Q. But there could be a substantial difference, couldn't there, between those two?

A. Yes.

253. Q. And the mileage, for instance, the gas mileage. Do you know how far Donna's route was, approximately?

A. No.

254. Q. It was in excess of 200 kilometres a day; she went as far as Port Alberni.

A. Right.

255. Q. So the mileage could have a significant impact, couldn't it?

A. Well, it seems to me the mileage is built in from the beginning. They know the distance they have to travel.

256. Q. I'm sorry, that's my fault. When I'm talking about the gas consumption of the car, the amount of miles per gallon.

A. The type of car, you mean, would make a difference, yes.

257. Q. I mean if you have a car which does 40 kilometres per gallon, and I don't know whether I'm talking in ratios that make sense, but it could make a big difference to the bottom line, when you're driving 200 kilometres a day, five days a week, 50 whatever it is weeks per year.

A. Right. Depending on the vehicle, the expenses would be different, yes.

260. Q. Have you ever, in the course of your work, looked at issues such as the basic economics of this kind of business?

A. As far as determining what gas mileage a vehicle should get or how much –

261. Q. No, just something that would give you an ability, in very broad-brush terms, to assess whether decisions like the ones we're talking about now, could have a material effect upon the bottom line profitability of the work we're discussing.

A. I would agree that they could have an effect, but I don't know whether it would be material. It's obviously a personal decision by them, what vehicle they choose, that it would have an effect on the amount of their expenses.

262. Q. Well, it would have an effect; not could, it would.

A. It would have an effect.

263. Q. And the amount of their expenses would have an effect on the profitability of the work they were doing?

A. Yes, it would.

266. Q. And Revenue Canada has never – in the course of this appeal, has ever taken any steps to assess that, to make any assessment of what kind of an impact on the profitability or otherwise of this kind of work, that those sorts of decisions could have?

A No, because I think we're looking at the specific vehicle that's being used. If you're speaking of this particular case, then we would only be looking at the vehicle, for example, that Donna Lockhart used for her deliveries.

267. Q. What was the vehicle that she used?

A. I don't know.

268. Q. But she could have chosen to change that vehicle, any time she wanted?

A. Sure.

269. Q. So Revenue Canada never looked at the economics of the work that she was doing, in order to assess whether those kinds of decisions could have a material impact on the profitability of the work she was doing?

I can look through these documents, I won't find a sheet where someone sat down and said well, this is what the lease payments would do, and this is the gas consumption, and this is how much it is a litre and all the rest of it, no one sat down and did that, to your knowledge?

A. I don't think so, no.

270. Q. Lockhart was responsible to provide a vehicle, correct?

A. Yes.

271. Q. So if her vehicle broke down, she would have to find another one?

A. Yes.

272. Q. And if that meant she had to rent a vehicle, for instance, for the day, in order to cover for it, she would have had to do that?

A. I believe so, yes.

273. Q. And if she – for instance, if she drove carelessly and got speeding tickets and got into accidents and incurred expenses, she would have to bear that?

A. Right.

274. Q. ICS wouldn't bail her out?

A. No.

275. Q. And that could have an impact on the profitability of the work she did?

A. Yes, it could, it could have an impact on the amount of her expenses.

290. Q. But in any event, I think we are in agreement that ICS did not say you have to do it this way, ICS said you can do it the way you want as long as the customers are happy. Is that right? Isn't that what Donna Lockhart wrote in the bit that we looked at earlier?

A. Yes, as far as changing the route or the times, as long as the customer was satisfied, yes.

296. Q. Now, in (f), you say, "Lockhart was represented to the Appellant's customers as a part of the Appellant's business."

A. Yes.

297. Q. And what are you referring to there?

A. Well, they had – the customers would have had a contract with ICS, and I would think they would assume that the persons coming to do the pick-ups and the deliveries, was employed by ICS, as opposed to being –

298. Q. Have you tested that assumption, have you spoken to any customers of ICS?

A. No, I haven't.

299. Q. Beyond that assumption, is there anything else you were thinking of in terms of that paragraph, subparagraph?

A. No, just that the customers would know that she was a representative of ICS, because she was coming there to pick up things and their contract was with ICS, for these pick-ups and deliveries to be made.

300. Q. Okay, well to sort of get to the basic fact, the things that we can either – we can probably agree on, I think what you're telling me is that to your knowledge, the contract was between the customer and ICS?

A. Yes.

301. Q. Number one. And number two, she was coming and actually picking up things and dropping things off?

A. Right.

302. Q. Now, are there any facts that relate to this, other than that?

A. I don't think so.

303. Q. I noted somewhere, and I may have the reference, yes, it's in your Respondent's book of documents at tab 23, page 10. Now, this document is a questionnaire filled in by Donna Lockhart?

A. Right.

304. Q. And delivered to Revenue Canada?

A. Yes.

305. Q. On January 4th, 1995?

a. Yes.

306. Q. Now, if you look at paragraph 28, she seems to describe these people as "my customers"?

A. Yes, I see that.

310. Q. So would you then say that whenever somebody offers services to a member of the public, where some component of that service is done by somebody other than them, that that person is therefore integrated into their business, and an employee?

A. Not in every situation, no.

312. Q. Well, for instance, if I contract to build you a house, but I'm a general contractor and I wouldn't know the first think about putting up drywall or whatever, I'd hire someone else to do that for me. I need the drywaller to perform a service which I'm providing to you. It's not really a factor which makes the person that does the drywall an employee, is it?

A. No.

313. Q. If I hire a drywalling company, for instance. Is that right?

A. If you, as a subcontractor, hire --

314. Q. If I'm a general contractor, and I'm building you a house. But I don't have any labourers. I have to provide you with a house, so I need people to perform bits of what I'm doing for you. And what I'm suggesting is that that doesn't mean that everybody who does bits of what I'm providing to you, is an employee.

A. It doesn't mean they're an employee; it doesn't mean they're not either."

[5] Peter Watts testified he is employed as a supervisor with ICS. He graduated from high school in Australia and then completed a four-year course in motor mechanics. He worked in his trade for five or six years and, after moving to British Columbia, became a courier working under the designation of "broker" which was - and still is - in common usage within the courier industry. He understood that term to refer to individuals who work as independent contractors with their own vehicle and operate as a business with revenue being reported as self-employed income for income tax purposes. Watts stated he worked as a broker for General Insurance between 1981 and 1987 when that entity was acquired by ICS. In November, 1987 he became Operations Manager for ICS in charge of maintaining the timely movement of freight and the hiring of brokers and employees to ensure the efficient delivery of parcels. He was assigned responsibility to set up a system of utilizing the services of other freight and/or delivery companies to cover any gaps in areas where ICS did not operate. During the relevant periods covered by the within appeals, he worked in the Vancouver area. He explained that ICS had rented a 550 square foot space in Nanaimo, British Columbia in order that parcels could be sorted. It had a loading door, a telephone and some other minor supplies. There were no ICS employees in Nanaimo but there were individuals such as Donna Lockhart, her husband Russell Lockhart and others who were considered to be independent contractors by virtue of them all operating, as brokers, under the system common to the courier business. Watts stated the brokers - working as couriers for ICS - own their own vehicles and pay all expenses relating thereto. He explained he might not contact a broker for two weeks but, at other times, could have daily communication during a certain period if circumstances warranted. The items to be delivered to recipients in the Nanaimo area were transported to Nanaimo by a bus line not owned by ICS. At Nanaimo, one of the brokers picked up the shipment and took it to the ICS office where the parcels were sorted according to the route of each broker. The sorting room had a cabinet with slots and the brokers would sort deliveries in accordance with their own method in order to place a delivery in the delivery-sequence within the overall route. When the brokers picked up items from customers for delivery to a recipient, these would be sorted into separate bags and then dropped off at the bus terminal for transport to the ICS office in Vancouver. The ICS Head Office is located in Woodstock, Ontario and the company specializes in deliveries within the finance, insurance and optical industries. In the Nanaimo area, deliveries and pick-ups were made at the same time. On occasion, deliveries were made to a recipient who was not on an established client list and these persons could arrange with one of the Nanaimo-area brokers to have a parcel delivered locally and this arrangement would not involve ICS. The required tasks, in order to perform deliveries in the context of a particular route, started with the pick-up at the bus depot followed by the sorting process. Then, a broker would spend the next six or seven hours on the road making deliveries. Donna Lockhart's route required travel of 230 kilometres per day, five days per week. The brokers did not have any two-way radios, cell phones or pagers in order to be able to contact ICS or to be contacted. Watts stated the brokers were free to change the order of deliveries but added that most clients expected the arrival of the courier at or near the same time each day. The couriers could choose the most efficient or convenient route in order to provide service to the client and to minimize the distance travelled. The broker-drivers completed driver reports and these were sent to ICS in Vancouver. Watts stated Donna Lockhart changed the routing several times during her working relationship with ICS but was required to make the trip to Port Alberni five days per week. There were some customers who did not require daily pick-up. Watts stated Donna Lockhart - and Russell Lockhart later on - were free to arrange for another driver to drive the route any time they chose. Prior to entering into his own contract with ICS, Russell Lockhart often drove the route for Donna Lockhart and Donna's son and mother-in-law had also driven the route. An ordinary passenger car could be used to make the deliveries as, in Watt's view, the cost of operating any vehicle was a major part of the business, especially if the route was lengthy, and an expensive van or other vehicle, hard on fuel or costly to maintain and insure, would affect profitability. Donna Lockhart, during the time she worked as a broker for ICS, also used her vehicle to deliver newspapers prior to commencing her daily run for ICS. Watt referred to a contract dated July 15, 1991 between ICS and Donna Lockhart (Tab 1). The contract with Russell Lockhart was dated September 10, 1993 (Tab 2). The deposit in the sum of $230.00 paid by Donna Lockhart and the deposit of $180.00 paid by Russell Lockhart was to pay premiums to the Workers Compensation Board (WCB) of British Columbia. In instances where workers were regarded by ICS as being employees, ICS paid WCB premiums on its own account and also provided a delivery-vehicle and paid all expenses. At paragraph 3 of the contract, ICS agreed to obtain the necessary motor carrier licenses in respect to the Motor Carrier Commission of British Columbia while the brokers had to provide all necessary licensing from the municipality. Watts explained ICS had received legal advice to the effect it was very difficult for independent contractors - the brokers - to obtain their own courier/delivery license which was a special plate apart from the usual vehicle license. The license, issued to ICS by the Commission, is found at Tab 6. At paragraph 6 of the contracts with Donna Lockhart and Russell Lockhart there were provisions relating to "Broker's Liability and Indemnity" Notwithstanding the requirement that the company - ICS - give express consent prior to a broker arranging for another driver to perform deliveries on a route, Watts stated this was not strictly adhered to when brokers chose to make substitutions. The brokers did not have to follow any particular schedule but the customers on a route had to be satisfied with the service. There was no requirement any broker report to ICS during the day. A route had to be driven five days per week and a broker was paid on that basis. If the route was not driven on a particular day, the driver did not get paid. By way of comparison, the vehicles owned by ICS remained on site at the end of the working day and the drivers were paid an hourly rate - at different pay levels - depending on the municipality in which the work was performed. ICS paid Donna Lockhart the sum of $115.00 per day and Russell Lockhart was paid $90.00 per day for driving a shorter route of approximately 35 kilometres. The contract with the brokers contained a non-competition clause in which the brokers agreed not to enter into any agreement with any other company of a similar nature and agreed to observe correct and proper behaviour towards all persons and firms the broker might contact on behalf of ICS. Watts stated when he interviewed Donna Lockhart he discussed many aspects of the contract including the necessity of registering with WCB and the fact she had to supply her own vehicle and pay all operating expenses. She was also aware there would be no deductions for income tax from payments by ICS based on the daily rate of $115.00. The route for Donna Lockhart was updated from time to time, an example of which is found at Tab 7. The document at Tab 4 – Route Manifest - was one which listed packages requiring a signature upon delivery and were usually optical clients receiving lenses, frames and eye-care products. Donna Lockhart had provided her own handcart for use on her route. If a client had originally been set up on a daily basis for pick-up but no longer required that frequency, then the driver would change the system to a "will-call" basis whereby the customer would telephone the ICS Nanaimo office and leave a message for a particular broker. The brokers were not required to wear an ICS uniform but the vehicle had to carry a decal identifying ICS as the licensee in order to satisfy the Motor Carrier Commission. The drivers could shorten the route considerably by choosing the most efficient path of travel based on their experience. There was no manual, policy or written procedures in use by ICS to deal with brokers as the communication was verbal. The ICS employees on the regular payroll generally worked downtown in major cities and brokers were contracted with to undertake deliveries for ICS in non-metropolitan areas.

[6] In cross-examination, Peter Watts described ICS as serving a particular niche in the marketplace wherein lower rates charged to customers were compensated for by higher volume. In rural areas where there was no ICS supervisor or office staff, the system of contracting with brokers was used and there was a saving to ICS in not having to purchase a vehicle for use by a regular employee. The brokers are required to maintain their own vehicles in a clean and presentable manner. The brokers were required by contract to display the decals on their vehicle indicating affiliation between the broker and ICS. The depot in Nanaimo cost ICS about $550 per month and it was equipped with a sorting table, cabinets, forms, tabs, manifests, ties, sorting bins, telephone and answering machine. ICS had a national standard of next-day delivery and Watts stated he instructed Donna Lockhart to refrain from offering same-day delivery to ICS customers in the Nanaimo area. There were three individuals working as brokers in the Nanaimo area and they would decide among themselves who would attend at the bus depot at 7:00 a.m. to pick up the morning ICS shipment from Vancouver. Donna Lockhart used to arrive at the town of Parksville at 11:00 a.m. and he instructed her to arrive there no later than 10:30 a.m. He trained Donna Lockhart for two days prior to her commencing deliveries on the particular route which had been established earlier. In the event a new customer was added to the route, the location would be placed on the delivery list at the broker's discretion. The centre of Nanaimo was used as a dividing point for the various routes. Once a contract with ICS had been signed by a broker, there was very little variation in volume during the life of the agreement. In the event volumes increased, a new route would be created after consulting with the existing brokers. ICS requested driver's reports within 48-72 hours and the Route Manifest was returned by them to ICS. Although Donna Lockhart and Russell Lockhart had other people substitute for them on the route from time to time, neither could actually assign the contract without the written consent of ICS pursuant to paragraph 12 of the contract. Donna Lockhart had asked - early on - whether it would be permissible for her husband, son or mother-in-law to fill in for her, on occasion, and Watts stated he agreed it would be acceptable to ICS. After that, she did not seek any further permission to arrange for substitute drivers, as required. Any complaints by customers were usually made to the Vancouver ICS office. In the event a particular delivery was to be made to a location more than three kilometres off an existing route, then the broker would negotiate an additional fee to make the delivery and, if unable to agree with ICS on an amount for that service, ICS would make other arrangements for delivery. ICS decided whether a new customer would be added to the delivery system at nationally-set rates. If a broker ceased working for ICS, then the plate issued by the Motor Carrier Commission had to be returned to ICS. ICS would examine a particular route and establish a price which would remain in effect until a new broker took over. Any analysis of a new route involved a determination of the number of kilometres involved. The rates per kilometre paid by the federal government to its employees was used as a guideline. From time to time a supervisor conducted an audit of a route, in order to be satisfied that the amount of time required to deliver the packages was fair in relation to the remuneration paid by ICS to a broker. Watts stated it was acceptable to ICS if a broker undertook a delivery between existing ICS customers or a branch office thereof provided it was same-day delivery and the broker would retain the fee established by the broker and the customer. The national standard of ICS was next-day delivery and Donna Lockhart was informed she was not to promise ICS customers they could have same-day delivery. There were provisions for termination of the contract contained at paragraph 10. Watts stated there had been occasions when the rates paid to brokers were increased due to a rise in gasoline costs or motor vehicle insurance premiums or due to an expansion of a route of additional volume of deliveries. The persons working as brokers participated in the dental plan and life insurance coverage which was available to all ICS employees and they did not have to pay any of the cost of the premium.

[7] In re-examination, Peter Watts stated many customers tried to resolve a problem directly with a broker and would contact him only as a last resort but some did call him initially to deal with their concerns. On one occasion, Donna Lockhart made changes to a route and, when customers complained, he instructed her to revert to the original schedule and she agreed.

[8] Counsel for the appellant submitted there was very little control over Donna Lockhart and Russell Lockhart and the costs of operating the vehicles used on the routes were borne completely by them. As a result, the choice of vehicle and manner of operation impacted upon the "bottom-line" and affected the profit available to the broker. In Counsel's submission, there was evidence Donna Lockhart regarded the clients as her own customers and she and other brokers were free to use their own vehicles to otherwise generate revenue provided it was not for an entity in competition with ICS. The brokers had leeway to carry out deliveries within their contracted route in accordance with geography and customer needs but any mistakes in delivery or pick-up had to be corrected at their own expense. Notwithstanding the Lockharts' license having been issued to ICS by the Motor Carrier Commission - for practical reasons - in Counsel's view, the Lockharts operated their own business and were not fully integrated into the business of ICS. As such, it was normal for customers to complain to ICS because when a business provides service to another business that itself has customers, the end-user will often complain - not the sub-contractor - but to the general contractor who will be expected to resolve the problem with the independent contractor to the overall satisfaction of the customer.

[9] Counsel for the respondent submitted there was control by ICS over the workers and the fact the license was issued to ICS by the Motor Carrier Commission was extremely significant when considering the aspect of integration. The brokers could not control the income stream which was set at a daily rate but they did have a degree of control over expenditures. The rates for delivery were set by ICS and it was clearly the business of ICS that was being carried out by the brokers who were engaged pursuant to a contract of service and were in insurable employment with the appellant.

[10] The Honourable Judge Sobier considered the employment status of an individual working as a courier under the description of "broker" in the case of S & S Investments Ltd. o/a Our Messenger Service v. The Minister of National Revenue, unreported, October 2, 1996. Because of the similarity in the facts, the issue and the analysis undertaken by Judge Sobier, I reproduce below an extensive quotation from his judgment beginning at page 5 and continuing thereafter until the conclusion on page 9.

"The present jumping off point in matters such as in this appeal is Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025 (F.C.A.). There the various tests for determining whether there existed a contract of service (employee) or a contract for services (independent contractor) were canvassed and examined. In the end, it appears to have been the consensus of the Federal Court of Appeal speaking through MacGuigan, J. that the tests previously expounded namely, control, ownership of tools, chance of profit or risk of loss and the integration or organization tests did not constitute a fourfold test but a four-in-one test with the emphasis always retained on what Lord Wright calls "the combined forces of the whole scheme of operations", even while the usefulness of the four subordinate criteria is acknowledged.

While the control test may have been downgraded from what was once one of the most important or decisive tests, it still has a place in the pantheon of tests. The degree and method of control may still go a long way in determining whether an employer/employee relationship exists. However, as was stated at page 5027 of Wiebe Door:

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, 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 carry 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 directing 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.

Nevertheless, notwithstanding the caution of Professor Atiyah, the control test as expounded above does have validity when we are not dealing with skilled workers and professionals.

The detailed instructions given by the Appellant to the brokers is a manual for doing the job. One is not only being told what is to be done but how it is to be done. One is told at what time he must perform and where that performance must take place as well as in what sequence that performance is to take place. There is no leeway given to the brokers except to come forth with a proposal for change in the methodology and seek permission of the Appellant to make a change. Even a fifteen-minute departure in timing required permission of the Appellant.

As to chance of profit or risk of loss, one finds that the Appellant has determined that if the formula which it used in arriving at the remuneration of the brokers is followed, there is little risk of loss barring a major disaster involving the vehicle used by the broker. Fuel costs are measured and will not result in a loss. It may assist in adding to the broker's income if he is fuel efficient but that adds nothing to the income side, merely a possibility of extra money on the cost reduction side. The broker is not able to increase his income stream because it is fixed.

The contrary appears to have been the case here since brokers were required to take a 5% reduction in their remuneration without any input from them. The Appellant unilaterally imposed the reduction on the brokers since it was experiencing financial difficulties and instead of increasing its revenue by increasing its sales or marketing efforts, it chose to reduce costs and passing that reduction on to the brokers. In such a scenario, where stands the chance of profit for the brokers?

What we have is a scheme of the Appellant to reduce capital expenditures for the acquisition or leasing of delivery vehicles by requiring others to supply those items while continuing to pay operating expenses, only this time paying those expenses indirectly to the broker and not directly to suppliers and drivers. The broker's remuneration is based on what the Appellant paid to its drivers plus the operating expenses it felt would be proper in the circumstances. That being so and barring a disaster, the brokers will receive the driver's remuneration plus the operating expenses and then deduct those expenses leaving them with the basic salary plus any windfall from cost saving. This is not how a businessman operates his business. His business will of course profit from cost cutting but more importantly from increased revenue. This avenue is not open to the brokers. There is no chance for growth. The structure renders it impossible for the broker to expand his business over and above what is offered to him by the Appellant. This is, of course, what is contemplated in the organization tests.

After dealing with the question of whether there would be a business of Wiebe Door without the installers, and here the Appellant's business without the brokers, MacGuigan, J. goes on to say at page 5030:

Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer", because it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity. We must keep in mind that it was with respect to the business of the employee that Lord Wright addressed the question "Whose business is it?"

Perhaps the best synthesis found in the authorities is that of Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732, 738-9:

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.

Looked at through the eyes of Mr. Capicio, he must ask the question: Do I have a business? Can I grow and expand? Can I increase my income? These questions answered objectively would require "no" as an answer.

Mr. Capicio was there to do the work provided for him by the Appellant. He could do no more. He must do that work in the manner the Appellant tells him to do it and when the Appellant tells him to do it.

The passage immediately following the above quote of Cook, J. states:

No exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk be taken, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him.

The degree of control over Mr. Capicio was great. There was little he could do except to follow the dictates of the Appellant. He could not, according to the Contract, allow others to drive and deliver. He could not profit much above what he was paid less his costs. He had no input in management of any business. No sound management on his part in performing his tasks would result in increased profitability.

Therefore the answer to the question of whose business is it, asked from Mr. Capicio's point of view, must be: the Appellant's business. Mr. Capicio was not in business for his own account. He was performing these services for the account of the Appellant and therefore his contract was a contract of service no matter how couched.

For these reasons, the appeal is dismissed and the determination is affirmed."

[11] The relevant period under consideration - as it applies to Donna Lockhart - is from July 15, 1991 to January 7, 1994. The corresponding period for Russell Lockhart is only three months in duration from September 13, 1993 to December 13, 1993. Obviously, the majority of the evidence relates to details of the relationship between Donna Lockhart and ICS and the nature of the relationship with Russell Lockhart has to be drawn from the evidence as it pertains to the method of operation of ICS and the persons working in the Nanaimo area under the system in place at times relevant to these appeals.

[12] Dealing with the matter of control over Donna Lockhart, it is beyond dispute there was no ICS supervisor in the Nanaimo area. Peter Watts, ICS office staff and couriers on the regular ICS payroll operated in Vancouver. The Nanaimo brokers were not contacted by ICS through radio dispatch or cellular telephones, The evidence of Peter Watts and the statements made by Donna Lockhart in replying to the Questionnaire sent to her by Revenue Canada - referred to in the Examination for Discovery of Dianne Martineau - indicate there were times when several days passed without any communication between ICS supervisors and the brokers. The brokers, including Donna Lockhart and Russell Lockhart did not have to punch any time card. Initially, Donna Lockhart spoke with Peter Watts about substituting other persons as drivers on her route, if needed, and when Watts agreed that could be done under the contract, thereafter Donna Lockhart proceeded to have her husband, son or mother-in-law handle the route, as required. The information provided by Donna Lockhart to the Minister on the issue of control is found at Q. 176 in the Examination for Discovery of Dianne Martineau, as follows:

"As long as I kept ICS informed by updated route sheets, which I always did, ICS didn't care who did what, as long as the job was done and they didn't receive any complaints, which only they knew about."

[13] As a result of this practical approach in carrying out the terms of the contract, ICS still paid the broker the appropriate daily rate for the run even though someone else had driven it on a particular day as a result of an arrangement with a broker - directly - without any input by ICS. In filing her return of income for the 1991 taxation year - on the basis she was a self-employed person operating a business - she deducted certain amounts paid as salary or wages to an employee, including certain contributions made by her in accordance with her status as an employer. In filing her return for the 1993 taxation year, Donna Lockhart again reported income on the basis of being self-employed and deducted certain expenses pertaining to the operation of said business. In that year, she also appears to have been earning employment income from some other source. It was also clear on the evidence that Donna Lockhart earned income by using her own vehicle to deliver newspapers in Nanaimo prior to commencing her ICS route. The brokers had some flexibility in the manner in which the route was handled and they were not under the thumb of some supervisor in the same city who could contact them on a constant basis through some communication device. Donna Lockhart had taken over an established route and when additional customers had to be serviced she decided where they would be placed on the delivery-sequence within her overall method of carrying out her duties along the route. Similarly, the brokers could take whatever route they chose between customer locations.

[14] Having regard to the matter of ownership of tools, the Lockharts owned their own vehicles used on the routes. They were responsible for all operating expenses including fuel, maintenance, insurance, repairs, regular licensing, parking and would be affected by depreciation of the vehicles being used - in the case of Donna Lockhart - more than 1,200 kilometres per week. In the event their own vehicle was not available to perform the daily route, then they had to use a rental vehicle, taxi or make some other arrangement in order to be paid the fee for that day. Donna Lockhart also supplied a handcart for use in making deliveries. The office supplied by ICS was used as a sorting room by the brokers and there was minimal office equipment in that space but did include some supplies, a telephone and answering service but they were not of much import once the morning sorting had been accomplished. The special license required by the Lockharts in order to make the deliveries was issued by the Motor Carrier Commission to ICS and the ICS decal was displayed on their private vehicles in accordance with the conditions of that license. In other instances I have expressed the view that the traditional concept of tools is becoming less relevant to the point where it can be awkward applying it to modern business technology. Today, carrying on business can involve rights and licenses to use specialized methods and procedures or to utilize certain intellectual properties. It is not only hardware in the form of computers and accessories which are the tools of the modern workplace having replaced the traditional saws, hammers, wrenches and chisels of previous generations. It seems to me that a license or right could be regarded as a necessary instrument in order to enable a business activity to be carried on. However, there has not been much support from my colleagues or from other courts in accepting the proposition that a specialized license can be regarded as a tool when applying the tests in the manner directed by the Federal Court of Appeal in Wiebe Door, supra. Therefore, the Motor Carrier Commission license issued to ICS which allowed Donna Lockhart and Russell Lockhart to operate their routes cannot be regarded as ownership, by the appellant, of a tool.

[15] The opportunity for the Lockharts to earn a profit from the operation of the daily route - at the rate of $115.00 per day rising later to $120.00 for Donna Lockhart - and at $90.00 per day for Russell Lockhart rested - to a large extent - on their ability to control costs of operating their own vehicles. However, there was the ability to charge a fee for handling deliveries on a same-day basis between existing customers on the route without the knowledge or consent of ICS. Similarly, if a delivery had to be made to a point more than three kilometres off an existing route, a fee for that service was negotiated between ICS and the particular broker and if no agreement could be reached then ICS made other arrangements for delivery. There was no suggestion on the evidence the Lockharts would have been subjected to any arbitrary reduction in the daily fee paid and it was recognized that increases in gasoline costs or insurance premiums and an extension of a route or added volume would call for a re-negotiation of the existing contract. The Lockharts had to bear the cost of any missed deliveries or pick-ups and were responsible for paying any replacement driver. I agree the ability to increase the revenue side of the equation is significant but it is important to consider that a great number of small businesses provide a product or service to a larger entity at a rate - for all practical purposes - fixed by that entity. Such a system of payment is common to governments at all levels who will advertise publicly and invite bids for the provision of goods or services - requiring adherence to specific (and often lengthy) requirements - at a rate already established and set out in the advertisement. In these cases, the independent contractor has to watch the bottom-line because the income stream will be fixed for the duration of the contract. Presumably, the operating costs have been factored into the desire to respond to the invitation to bid but it will be necessary - on an ongoing basis - to ensure the expenses are controlled as much as possible so as not to have a negative impact on profitability. There was also the ability to negotiate a rate which depended on the size of the route and the dependability of the particular broker in performing satisfactorily over a period of time. Within the current context of stiff competition and narrow profit margins, the ability to control costs - even within a range of 5-15% - is extremely significant. The hiring of replacement drivers - in order to take time off from the route - would affect the profit position but it also afforded the opportunity for a substitute to handle the route while Donna Lockhart was able to earn income from another source in 1993. In addition, Donna Lockhart used her vehicle to earn income by delivering another product - newspapers - on a regular basis and the costs of doing so would be included in the overall financial reporting she undertook when filing her income tax return on the basis of being a self-employed individual.

[16] From the viewpoint of the Lockharts, the question that must be answered is: Whose business is it? There was evidence that Donna Lockhart regarded the recipients of the deliveries as "her customers" but that is common among dedicated persons in a service industry when referring to persons with whom they have regular contact. There is evidence that - to some degree - Donna Lockhart was integrating the activities of ICS into her own schedule in that she used her vehicle to make deliveries prior to attending at the bus depot - if it was her turn to do so - and sorting packages destined for customers of ICS on her route. The ability to hire replacements and the need to pay for those persons from her own pocket is consistent with operating as a business, albeit one in which the contract with ICS was an extremely important part, producing the majority of the revenue for the Lockharts. It is apparent Donna Lockhart regarded herself as a self-employed individual, in business on her own account, by virtue of the manner of filing her income tax returns which were not subject to reassessment by the Minister. Donna Lockhart also had registered as a contractor with WCB - presumably to cover herself and any driver hired by her to do deliveries on the route - and registered with Revenue Canada for purposes of the Goods and Services Tax (GST). The account she opened was a business account in which she described the major activity as: Interline Carrier (Delivering Parcels for Ins. Courier Service). On this particular aspect within the context of the overall analysis, the business of operating as a courier in delivering packages to a select group of customers within a niche market in accordance with national standards set by ICS, pursuant to license issued to ICS by the appropriate regulatory body, was more readily identifiable as being the business of ICS to which the brokers had to accommodate their own schedules and activities. However, as Peter Watts stated in his testimony, there was a distinction between the operations of ICS in metropolitan areas and the methods used in areas classified as rural. The method used by ICS to deliver packages from other parts of Canada to northern Vancouver Island was not seamless. ICS had to rely on a busline - a common carrier - to transport their "mail " and offload the containers at the Nanaimo bus depot. In a sense, the parcels were now in non-ICS territory where there was no office staffed by ICS employees nor any corporate mechanism in place to undertake supervision, thereafter, as it related to actual delivery of the packages to the intended recipients. The brokers - through an arrangement between themselves - took turns picking up the container at the depot and taking it to the rented space where the sorting took place in order to assign items to the proper route for delivery that day. The items picked up on the route were taken by the brokers to the bus depot for shipment back to ICS at Vancouver where the usual corporate delivery network could again function in order to speed the items on their way in accordance with national policy of ICS. It is apparent that where there were gaps in the ICS network the company had to rely on other freight, delivery, and courier services or public transport, including taxis. In effect, these other persons or firms were inter-line carriers which fit the description used by Donna Lockhart is describing her business activity when registering for GST.

[17] The Lockharts entered into a contract with ICS in which they purported to provide services on the basis of being independent contractors. What the parties thought their relationship was will not change the facts. In the case of The Minister of National Revenue v. Emily Standing, 147 N.R. 238, Stone J.A. at pages 239-240 stated:

"There is no foundation in the case law for the proposition that such a relationship may exist merely because the parties choose to describe it to be so regardless of the surrounding circumstances when weighed in the light of the Wiebe Door test."

[18] Unlike the evidence in many of these cases, the parties acted in a manner consistent with their intended status acquired through contract and there was not any sense of unilateral imposition of rules, tyrannical conduct or imposition of working conditions or policy on a take-it-or-leave-it basis so often the hallmark of the so-called entity-to-entity arrangements between "equals" which are usually surrounded by a smokescreen or facade that - fortunately - cannot withstand close scrutiny when examined on a day-to-day basis.

[19] I have read the case of Meadowvale Express Courier Ltd. v. Minister of National Revenue, unreported, a decision of Watson, D.J.T.C.C. dated November 19, 1990. In that case, the worker was subject to a high degree of control and was remunerated on a commission basis without any ability to control profit except by making more deliveries. The worker also operated a vehicle owned by the payor and all expenses were paid by the company. The worker had to wear a company identification card and follow a route dictated by the dispatcher.

[20] Returning to the case of S & S Investments Ltd., supra, there was a finding by Judge Sobier that the control over the worker was "great". That individual could not allow other persons to drive and deliver and he had no input into the management of the business. The worker had to follow a detailed timetable and routing and had to report by telephone three times a day and send in daily reports. The control over the worker was so extensive Judge Sobier found, at page 4 of his judgment:

"The Contract, the schedules and the routes set out in minute detail how the work was to be performed down to the requirement that a pen be used on charge slips."

[21] These cases are extremely fact-driven and any reader should exercise caution before taking too much comfort from a particular result. In the within appeals there is a combination of factors which are important but the lack of control is significant as is the matter of ownership of tools and the manner of operation by Donna Lockhart during the relevant period in consistently conducting herself in accordance with various aspects of a self-employed business person. In cases where there has been no testimony from the workers it is much more difficult to arrive at a solid appreciation of working conditions on a day-to-day basis. There is nothing on the evidence that would permit me to find the working relationship between ICS and Russell Lockhart was substantially different from the one involving Donna Lockhart or the other brokers. Having regard to the evidence before me, I find the appellant has discharged the onus and is entitled to succeed.

[22] The appeals - 97-839 (UI) and 97-841(UI) - are allowed. The decision of the Minister is hereby varied to find that during the period between July 15, 1991 and January 7, 1994, Donna Lockhart was not employed pursuant to a contract of service with the appellant and was, therefore, not in insurable employment. The decision of the Minister - as it applies to Russell Lockhart - is hereby varied to find that during the period between September 13 and December 13, 1993 he was not employed pursuant to a contract of service with the appellant and was, therefore, not in insurable employment.

Signed at Sidney, British Columbia, this 30th day of December 1998.

"D.W. Rowe"

D.J.T.C.C.