Citation: 2009 TCC 490
Date: 20091001
Docket: 2008-1946(IT)I
BETWEEN:
MARVA A. OLLIVIERRE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rip, C.J.
[1]
In this appeal (Informal
Procedure) poorly drafted agreements conspired to complicate a modest
taxpayer's fiscal problem. Ms. Ollivierre, the appellant wanted to deduct,
in computing her income for 1996, monies laid out or disbursed by her for the
benefit of her purported employer and for which she had right to be reimbursed but
was not. The Minister of National Revenue disallowed the expenses on the basis
that although the appellant was an employee she was not entitled to an
employment expense pursuant to paragraph 8(1)(f) of the Income
Tax Act ("Act") and, in the alternative, any purported
business carried on by her was not undertaken in a sufficiently commercial
manner that would result in the earning of income and did not constitute a
source of income: sections 3, 4 and 9 of the Act.
[2]
Ms. Marva Ollivierre
thought that in 1995 she entered into two agreements with the Canadian Artists
Network: Black Artists in Action ("CAN: BAIA"), a "letter
of agreement" to act as General Manager of a conference or festival known
as CELAFI 1997 ("CELAFI"), an event entitled Celebrating African Identity:
Entering the Millennium ("letter of agreement"), the other, a
contract between her and CAN: BAIA where she was to act as an independent
contractor to coordinate and promote a magazine called Revue Noire ("Revue
Noire Agreement").
[3]
CAN: BAIA was an unincorporated
non‑profit organization promoting art in the Black community. It had
ceased to function at time of trial.
[4]
According to the letter
of agreement, the General Manager, among other things, was responsible for:
i) all logistics,
administrative, implementation, refund on invested capital and human resources
for CELAFI;
ii) the coordination,
facilitating and presentation of artists skills development/workshops;
iii) hiring and
management of all CELAFI administrative personnel;
iv) control of all
budgetary aspects of CELAFI, and;
v) overseeing
marketing and publicity matters.
[5]
The General Manager was
to report directly to the Board of Directors. She was to oversee all funding
applications and was to liaise with all CELAFI Committees. She was to share
information with the Executive Director of CAN: BAIA.
[6]
CAN: BAIA was to
reimburse the General Manager for travel, promotion, entertainment and
"like" expenses.
[7]
Clause 16 of the
letter of agreement provided that:
The General Manager will indemnify and save harmless CAN: BAIA and
its Board of Directors, employees and agents from any and all costs, losses,
claims, demands, suits, actions, judgments and proceedings made brought or
recovered against CAN: BAIA and arising out of this agreement. This clause
survives the termination or expiry of this Agreement.
[8]
The letter of agreement
is dated October 13, 1995 and was amended by an "Addendum to Letter
of Agreement" on October 28. The addendum altered or cancelled provisions
of various clauses in the agreement letter. One of the clauses was to
effectively delete Clause 14 which had provided for payment to
Ms. Ollivierre of "a monthly salary based upon $45,000 per year, to
be invoiced to the Employer on the 15th of each month in the amount of
$3,750.00".
[9]
The change to Clause 14
reads:
Changes to Clause #14
CAN: BAIA agrees to pay Marva Ollivierre a fee of $50,000.00
per year to be invoiced to CAN: BAIA in 24 instalments of $2,083.33 per. CAN:
BAIA also agrees to pay to Marva Ollivierre a bonus of 20% of gross
contract should CELAFI achieve its budgetary target.
The G.M. shall submit all grant applications to Pres. Of Exec.
Committee before submitting to Funders Ass.
Clause to be added
CAN: BAIA shall make instalment payments on contract on the 15th and
30th of each month during the term. CAN: BAIA shall make payment on bonus at
the end of CELAFI post-production.
[10]
The Revue Noire
Agreement is dated November 16, 1995. Ms. Ollivierre is referred to
as the Programmer. The final line of the "RE: line" reads "PROGRAMMING
EXPENSES AND FEES", and then continues "To be reimbursed and paid
from the residual sale of the Magazine Publication Revue Noire according to the
terms and conditions set out below".
[11]
The "Terms and
Conditions" provide, among other things that CAN: BAIA is to administer
all funds generated from Revue Noire magazine sales. Ms. Ollivierre was to
be "responsible for all logistics associated with the implementation of
all Programs for which she is responsible".
[12]
Paragraphs 4, 5
and 6 of the Revue Noire Agreement read as follows:
4. The PROGRAMMER shall ensure that adequate
documentation exists for all Program expenditures, and supply on request all
vouchers evidencing expenditures.
5. CAN: BAIA shall reimburse the PROGRAMMER
for expenses and fees incurred for the implementation of the Programs.
6. The PROGRAMMER agrees that all such
expense reimbursement and fees are to be paid solely from the funds generated
from Revue Noire magazine sales.
[13]
Paragraph 7 of the
Revue Noire Agreement provides for indemnification by Ms. Ollivierre to
CAN: BAIA similar to that provided in Clause 16 of the letter of agreement.
[14]
Neither the letter of agreement
nor the Revue Noire Agreement makes reference to the other agreement. The Revue
Noire Agreement, although it uses the word "fees", makes no provision
for payment of any fees by CAN: BAIA to Ms. Ollivierre for her services and
that appears to be the main problem in this appeal.
[15]
Neither term
"budgetary target" in Clause 14 of the letter of agreement nor
the terms "residual sale" and "funds generated" in the
Revue Noire Agreement are defined. I have no idea what these words mean.
[16]
With respect to the
Revue Noire Agreement, Ms. Ollivierre viewed her work as an independent
contractor. She believed that she was to receive 20 per cent of the
proceeds from the sale of the magazine Revue Noire. This alleged consideration
is not specified or even alluded to in the Revue Noire Agreement.
Ms. Ollivierre declared that it is the 20 per cent reference in
Clause 14 of the Employment Agreement that was contemplated as payment for
her work under the Revue Noire Agreement.
[17]
Neither of the two
agreements was vetted by a lawyer before they were signed by
Ms. Ollivierre. I note that both parties to this litigation as well as a
Statement of Claim by Ms. Ollivierre against CAN: BAIA referred to the letter
of agreement as an employment agreement, a contract of service. There are
clauses in the letter of agreement, however, that would suggest that it may not
be a contract of service, for example, Clause 16. However, no party originally
argued that it was not a contract of service; the submissions of the parties
assumed the letter of agreement was a contract of service. This may be an error
of law.
[18]
For some time,
apparently, Ms. Ollivierre was not being paid by CAN: BAIA for her
services as General Manager under the letter of agreement and on
October 23, 1997 she filed a Statement of Claim in the Ontario Court
(General Division) against CAN: BAIA for a "a declaration that her
employment with [CAN: BAIA] was constructively or, alternatively, wrongfully
terminated on or about July 16, 1997" as well as for damages as a
result of the constructive or wrongful termination of [her] employment in the
amount of $16,706.64. She also claimed for mental distress, punitive damages
and "expenses incurred pursuant to the Employment Contract". She was
awarded $26,485 in a default judgment.
[19]
No action was taken by
Ms. Ollivierre at the time against CAN: BAIA for any default in the
Revue Noire Agreement or in respect of the 20 per cent bonus in new
Clause 14 of the letter of agreement. Her lawyer advised her that such
action was premature.
[20]
Only
Ms. Ollivierre testified in the appeal at bar. She informed me that the
only other potential witness who may have direct knowledge of the arrangement
between her and CAN: BAIA, and who worked for CAN: BAIA, now resides in Jamaica.
[21]
In carrying on her
duties under the Revue Noire Agreement, Ms. Ollivierre paid out of her own
resources expenses and fees "for the implementation of the Programs".
CAN: BAIA never reimbursed her. What she seeks to deduct in computing her
income for 1996 are these expenses and fees that she incurred.
[22]
The respondent pleaded
that Ms. Ollivierre did not provide any evidence that she actually
disbursed her own funds. Ms. Ollivierre testified that she had prepared
receipts for submission to CAN: BAIA for reimbursement under the agreement
but a person who assisted her in her duties under the contract moved to Vancouver taking a number of her personal items, including her
business records. This person also prepared some of the financial records for
the Revue Noire Agreement. Ms. Ollivierre said she had made efforts earlier
but had been unable to contact this person, who, in February 2001, committed
suicide. According to the deceased's family, who wrote to Ms. Ollivierre
in May 2001, they were informed by Vancouver police that about a week after her
death, a male and female having ID from "the Landlord and Public Trustee"
proceeded to remove everything from the deceased's apartment.
[23]
I found
Ms. Ollivierre a credible witness. Notwithstanding that she could not
provide the Canada Revenue Agency ("CRA") with documentary proof of
her disbursements, there is sufficient evidence ― documents prepared by the deceased person
who prepared an account, for example ― to corroborate
her claim that she incurred the expenses. I accept her evidence on this matter.
[24]
Several weeks after the
trial in this appeal I asked the parties to make further submissions with
respect to whether the letter of agreement was an employment contract. In
essence, I had questioned whether, perhaps, the two agreements may be business
related and thus both may be sources of business income. The parties returned
to Court to make submissions on this point.
[25]
The respondent's
counsel appeared to concede that the letter of agreement was not an employment
contract but, notwithstanding this, there were two separate agreements with two
separate attempts at a source of income within the meaning of the Act. Section 9
of the Act provides that a taxpayer's loss for a taxation year from a
business is his or her loss, if any, for the taxation year from a source. However,
he said the Revue Noire Agreement fails as a separate attempt at a source of
income for lack of commerciality. There was, in counsel's view, no possibility
of profit disclosed in the Revue Noire Agreement; there was no provision for
payment to be received by the appellant for her services under that agreement.
Therefore, the Revue Noire Agreement could not constitute a source from which
Ms. Ollivierre could earn income from a business.
[26]
Counsel for the respondent
argued that the 20 per cent bonus referred to in the letter of
agreement relates to Ms. Ollivierre's role as general manager and not to
her functions as a programmer under the Revue Noire Agreement. The bonus relies
on successful budgeting on behalf of the festival.
[27]
According to the respondent,
the two functions in the two agreements are separate, the appellant's role as
general manager was a unique relationship with CAN: BAIA and of a
different nature from programming activities in the Revue Noire Agreement. They
are, counsel inferred, separate watertight compartments.
[28]
In giving evidence,
Ms. Ollivierre explained that she was one of several programmers, each
responsible for a particular program for the festival and whose financial
reward would depend on the program. Respondent's counsel concluded that
"one may have multiple programmers for the festival but only one general
manager of the non‑profit organization, and that speaks to them being two
different and separate activities".
[29]
Respondent's counsel
also distinguished the type of expenses included in each of the two agreements.
As general manager, the appellant had the right to be reimbursed for travelling,
promotions, entertainment and similar expenses. As programmer, she was entitled
to be reimbursed for fees and expenses for the implementation of the program.
Counsel concluded that the different nature of the expenses covered by the
agreements indicate the different nature of the activity contemplated by each
agreement.
[30]
Ms. Ollivierre was
described by respondent's counsel as a sophisticated person capable of being
"the point person" for a major festival. He also referred to Doe Eye
Productions Canada Ltd., a company Ms. Ollivierre had incorporated and had
incurred expenses in 1995. Ms. Ollivierre's sole proprietorship had a
quantum of expenses in 1996 similar to what the corporation had in 1995. Since
she was "capable of shifting expenses from a corporation" to herself,
counsel suggested she was a sophisticated taxpayer and had sufficient expertise
in business and in negotiating the two agreements with CAN: BAIA. This is
quite a stretch.
[31]
In any event, the respondent's
main argument is that the Revue Noire Agreement discloses no possibility of
profit and cannot, therefore, be a source of income.
[32]
Ms. Ollivierre
explained that CAN: BAIA had agreements with other programmers as well.
She described the activity of one programmer who organized a team to prepare
the music program for the festival.
[33]
According to
Ms. Ollivierre this group was responsible for a music program along Queen Street in Toronto. Tickets were sold for the program and the
receipts from the ticket sales paid for music at various venues. The difference
between the ticket sales and the cost of the musicians was profit to the
programmer in the same way that Ms. Ollivierre says she was to receive
20 per cent of the gross sales of Revue Noire. Ms. Ollivierre
explained:
… What I negotiated with Canbia is repayment not only for the act of
putting this together and putting those aspects of the program together, but on
the sale of Revue Noire I would get 20 per cent. In my head, in my mind,
in terms of my negotiating with them, that was the profit. This was the
business part of arranging it. …
[34]
Ms. Ollivierre
argued that she undertook the role of programmer in the Revue Noire Agreement to
make money; she did not do it for nothing. With respect to the program
agreements Ms. Ollivierre testified the board of CAN: BAIA prepared the
agreements and made them available to the programmers.
[35]
Respondent's counsel
conceded that if Ms. Ollivierre was entitled to 20 per cent of
the gross sales of Revue Noire "over and above the bare recuperation of
her expenses as outlined in her programming agreement that would be a source of
revenue". However, counsel insisted the written document is silent as to
any profit.
[36]
Earlier in these
reasons I commented on the credibility of the appellant. It is also obvious
that the Revue Noire agreement in and by itself does not provide for any
payment. According to Ms. Ollivierre, the reference to
20 per cent payment in the letter of agreement is for her services
under the Revue Noire agreement. It is also clear that although Ms. Ollivierre
is not quite the sophisticated taxpayer described by respondent's counsel, she
is not someone who would work for nothing.
[37]
The parole evidence
rule, that is, giving weight to oral evidence, may be used to clarify ambiguity
in a contract. But there must be an ambiguity and the evidence must pertain to
surrounding circumstances prevalent at the time of the contract.
[38]
Under the parole
evidence rule when a contract is reduced to writing it cannot be varied, added
to or subtracted by parole evidence or prior extrinsic matter in writing.
However, an exception to the parole evidence rule permits the parties to lead
evidence demonstrating that the written agreement is not the complete
agreement; more precisely that it refers to any prior oral or written communication. In United
Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd.,
Sopinka J. wrote that extrinsic evidence is admissible when there is
ambiguity in the contract but cautioned that determining whether a provision is
ambiguous is "far from easy".
[39]
The Revue Noire Agreement
is ambiguous: there is no provision for payment in the Revue Noire Agreement
notwithstanding that fees are contemplated in the "re: line" of the
agreement. Also, as I have said, Ms. Ollivierre did not work for nothing. I
am prepared to accept Ms. Ollivierre's parole evidence to describe the
surrounding circumstances culminating in the letter of agreement, its amendment
and the Revue Noire Agreement. I also find that as a programmer
Ms. Ollivierre was carrying on a business on her own account. The
20 per cent reference in the letter of agreement is for her work as
programmer under the Revue Noire Agreement. That agreement, in the letter of
agreement, is a source of income to Ms. Ollivierre and she is entitled to
deduct the losses she incurred in carrying out her obligations under the Revue
Noire Agreement.
[40]
The appeal is allowed
with costs, if any.
Signed at Ottawa, Canada, this 1st day of October 2009.
"Gerald J. Rip"
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