Citation: 2009TCC205
Date: 20090421
Docket: 2008-3252(IT)I
BETWEEN:
TYRONE GANPAUL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Mr. Tyrone Ganpaul, is appealing the reassessment of the Minister of National
Revenue in which the Minister assessed his 2005 income on the basis that he was
an employee rather than an independent contractor. The Minister also disallowed
any claim for business expenses.
[2] The Appellant
has the onus of proving that the facts upon which the Minister based his
decision were incorrect. The Appellant and the Appeals Officer responsible for
his objection to the reassessment, Mr. Arun Nanthakumaran, testified at the
hearing; both were credible witnesses.
[3] Mr.
Nanthakumaran was candid in his testimony that in deciding the Appellant was an
employee, he relied solely on the information contained in the Canada Revenue
Agency file regarding the Appellant’s reassessment. According to the material
on file, the CRA had requested additional information from the Appellant, including
the completion of the department’s standard form questionnaire geared towards
determining whether he had been an employee or independent contractor. Although
he noted that the Appellant had been granted a 30-day extension of time to
produce the information, Mr. Nanthakumaran testified that he saw nothing on the
file to show that the Appellant had ever provided the information requested; as
a result, he confirmed the reassessment.
[4] The
Appellant insisted at the hearing that he had sent the information, including
the completed questionnaire[1], twice: once in April 2008 after he had been granted
the 30-day extension and again, in September 2008 after he received the Notice
of Confirmation. Mr. Nanthakumaran confirmed the Appellant’s testimony that
upon receipt of the Notice of Confirmation, he had been called by the
Appellant, puzzled about the decision and asking why his information had not
been considered. Mr. Nanthakumaran referred him to the official who had
made the request, but at that point, whether or not that information had been
sent or received was no longer of any consequence because the issuance of the
Notice of Confirmation had put an end to the Notice of Objection process.
[5] The Appellant’s
only recourse, then, was to appeal to the Tax Court of Canada. Whether the
Appellant was providing his services as an employee or an independent
contractor of Sweet Valley Food Corporation depends on the facts reviewed in
light of the four-fold test developed in Wiebe Door Services Ltd. v.
Minister of National Revenue[2] and applied by the Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc.[3]:
[47] Although
there is no universal test to determine whether a person is an employee or an
independent contractor, I agree with MacGuigan J.A. that a persuasive approach
to the issue is that taken by Cooke J. in Market Investigations, supra.
The central question is whether the person who has been engaged to perform the
services is performing them as a person in business on his own account. In
making this determination, the level of control the employer has over the
worker's activities will always be a factor. However, other factors to consider
include whether the worker provides his or her own equipment, whether the
worker hires his or her own helpers, the degree of financial risk taken by the
worker, the degree of responsibility for investment and management held by the
worker, and the worker's opportunity for profit in the performance of his or
her tasks.
[6] As counsel for
the Respondent correctly submitted, the jurisprudence is clear that no one
factor has precedence[4]; rather, they are intended to provide a framework for
the analysis of the particular facts of each case.
[7] The Appellant is
a gentleman with many years of experience in the marketing, production and packaging
of sugar for the retail market. In addition to his expertise, the Appellant’s
primary asset is an extensive database of suppliers and customers in the sugar
industry.
[8] In 2002, he had
been providing consulting services to Sweet Valley Foods Ltd.[5]; in June 2004, that company was taken over by a
business known as the “Monaco Group”. A new company, Sweet Valley Food
Corporation, was incorporated and became part of that conglomeration. From a
practical point of view, Sweet Valley Food Corporation carried on essentially
the same business as had Sweet Valley Foods Ltd.
[9] So, too, the Appellant’s
role with the new company continued as before. Just as he had done prior to the
transition, at Sweet Valley Food Corporation he was responsible for overseeing
the marketing and packaging process. Although there was an increase in his remuneration,
the change was in quantum, not mode of payment. When consulting for Sweet
Valley Foods Ltd., he received a fee of $5,000 per month; with Sweet Valley
Food Corporation, it was agreed that he would be paid $100,000 per year in
monthly increments of $8,333. I accept the Appellant’s evidence that he
negotiated this change because he had mortgaged his home to invest in the new
company and needed a fixed monthly payment to cover his obligations under the
mortgage. It is not unusual for a consultant to be paid a fixed monthly fee for
his services; it is not, in itself, determinative of employee status.
[10] Turning, then, to
the consideration of the evidence under the four-fold test, the Minister argued
that the Appellant was under the “control” of Sweet Valley Food Corporation.
Counsel for the Respondent characterized the Appellant as a “professional
employee”, one who exercises a greater degree of autonomy over how he performs
his employment but is nonetheless, subordinate to a superior. In support of the
Minister’s position, she pointed to the fact that the Appellant had to “report”
to the principal of Sweet Valley Food Corporation at regular board meetings;
that he was required to work 30-40 hours per week; and that he was not
providing his services to any other party during the period he was at Sweet
Valley Food Corporation.
[11] In my view,
however, the Appellant’s evidence shows that he reported as an advisor, providing
strategic advice to Sweet Valley Food Corporation within the scope of his
consulting mandate; that is not the same as an employee who must account to a
supervisor for the proper performance of tasks assigned. By contrast, the
purpose of the Appellant’s reports to the principal of Sweet Valley Food
Corporation was to provide his specialized information regarding suppliers,
customers and the sugar packaging process. As for his hours of work, the
Appellant estimated that he worked 30 to 40 hours per week depending on the
demands of the project at any given time: during busy phases, he testified, he
might work much longer hours, including weekends. Regardless of the hours
actually worked, the fact remains that it was the Appellant who set his
schedule. Where he worked was also up to him: he often worked from home, other
times on site or visiting customers and suppliers and sometimes, at the
headquarters of Sweet Valley Food Corporation. Sweet Valley Food Corporation
was interested in the results he produced, not in how he achieved them.
[12] As for tools, the
Respondent argued that because the Appellant had access to an office and a
computer at Sweet Valley Food Corporation, the company supplied his “tools”. In
fact, the “office” was one room with a work table that was available for use by
anyone who needed it. The Appellant used the Sweet Valley Food Corporation
computer to input into the company’s system the information that he had been
mandated to provide; for example, data needed to regulate the production
schedule. His specialized marketing and production information, including his
contacts database, he maintained on his laptop. Other than some casual help and,
from time to time, his wife’s assistance, the Appellant did not need others for
the performance of his contact with Sweet Valley Food Corporation because what
he was providing was his own specialized expertise and advice.
[13] As for chance of
profit/risk of loss, the Respondent submitted that neither of these factors
were present in the Appellant’s circumstances: he received a fixed monthly
income that did not fluctuate with Sweet Valley Food Corporation’s fortunes;
his remuneration did not change according to the number of hours actually
worked; if a project took more time than anticipated, he did not incur a loss; and
finally, he did not have to answer to complaints from Sweet Valley Food
Corporation’s customers.
[14] The weakness of the
Respondent’s argument is that it blurs the distinction between the Appellant’s
contract to provide advice and information to Sweet Valley Food Corporation
with Sweet Valley Food Corporation’s own contractual obligations to its
customers. It was not part of the Appellant’s mandate to account to Sweet Valley
Food Corporation customers if the company failed to meet a delivery deadline. If,
on the other hand, the Appellant had failed to provide his consulting services
to Sweet Valley Food Corporation, no doubt the company could have taken steps
against him for that default. The fact that his salary did not fluctuate with
the time actually spent on such duties is not, in itself, indicative of
employee status. As the Appellant put it, “time is money”; time he invested in
a project that did not bring results was time (and thus, profits) lost on other
potentially successful pursuits.
[15] That leaves the
fourth element, the degree to which the Appellant was integrated into the
business of Sweet Valley Food Corporation. The Respondent’s argument that the
Appellant was well-integrated into Sweet Valley Food Corporation began with the
fact that the Appellant’s role with that company remained the same as his
former role at Sweet Valley Foods Ltd. Counsel for the Respondent also pointed
to his admission that he was a director of the company and had signing
authority and further, that he had had no other clients while with Sweet Valley
Food Corporation.
[16] The Appellant
agreed that the nature of his relationship with Sweet Valley Food Corporation
was the same as at Sweet Valley Foods Ltd. but contended that his status at
both companies had been that of independent contractor. As for his signing
authority, I accept as reasonable his explanation that it was limited to Sweet
Valley Food Corporation’s first contract; it was a large order from an
important customer. At that early stage, it was agreed the Appellant should
have signing authority on employees’ hours and payroll as part of his duties
for overseeing the production process. When that project was completed, his
signing authority ceased. As for being a director of Sweet Valley Food
Corporation, I accept his evidence that his name had been registered as such without
his consent or knowledge. However, even if he had willingly occupied that
office, that factor alone would not tip the scales in favour of his having been
an employee. He had no long-term commitment to the company as evidenced by his
having terminated his contract with Sweet Valley Food Corporation, without notice
and at his discretion, in 2006. Finally, while the Appellant admitted that he
had had no clients during his contract with Sweet Valley Food Corporation, he
was nonetheless, tilling the soil for future opportunities throughout that
period.
[17] Further support
for the conclusion that the Appellant was providing his services to Sweet
Valley Food Corporation as an independent contractor lies in the Minister’s own
assumptions
that Sweet Valley Food Corporation had made no deductions from the Appellant’s
fees for Canada Pension Plan, employment insurance or income tax; and in his
testimony and the answers given at paragraph 13 of the questionnaire that
he incurred expenses in the performance of his contract with Sweet Valley Food
Corporation for travel, gas and the like. I also accept his evidence that he
was reimbursed by the company for “one-off” purchases such as parts needed on
an urgent basis during the production process.
[18] All in all, I am
satisfied that the Appellant was an independent contractor. The appeal is
allowed and referred back to the Minister for reconsideration and reassessment
on that basis.
Signed at Ottawa, Canada, this 21st day of April, 2009.
“G. A. Sheridan”
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