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Citation: 2004TCC555
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Date: 20040811
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Docket: 2003-1342(CPP)
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BETWEEN:
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SPACE PLACE NW STORAGE LTD.,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
and
KIMBERLY MORIARITY,
Intervenor.
AND
2003-1449(CPP)
KIMBERLY MORIARITY,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
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REASONS FOR JUDGMENT
Bonner, J.
[1] Space Place NW Storage Ltd. (Space
Place) and Kimberly Moriarity appeal to this Court under the
Canada Pension Plan from assessments for the years 1999 to
2002 and from a decision by the Minister of National Revenue (the
"Minister") dated March 27, 2003. The decision and
assessments were made on the basis that Kimberly Moriarity (the
Worker) was employed during the period by Space Place in
pensionable employment within the meaning of s. 6(1)(a) of
the Canada Pension Plan (CPP).
[2] The appeals were heard together on
common evidence. The sole issue is whether the worker was
employed by Space Place under a contract of service or under a
contract for services.
[3] The findings or assumptions of
fact on which the Minister acted are essentially the same in both
cases. The following are the findings or assumptions in the Space
Place appeal:
(a) the Appellant
operates a self-storage facility;
(b) the share
structure of the Appellant was as follows:
350441 Alberta
Ltd.
50%
MT Moriarity & Associates
Ltd.
50%
(c) the share
structure of 350441 Alberta Ltd. was as follows:
Merton
Moriarity
100%
(d) the share
structure of MT Moriarity & Associates Ltd. was as
follows:
Merton
Moriarity
66%
Francis
Moriarity
13%
the
Worker
7%
Krista
Moriarity
7%
Leonard
Moriarity
7%
(e) the Worker was
the daughter of Merton Moriarity hereinafter "the
Shareholder") and Francis Moriarity;
(f) the Worker
was hired as a site manager and her duties included overseeing
activities, obtaining clients, hiring/firing workers, paper work,
bookkeeping, purchasing, banking and administration;
(g) the Appellant
and the Worker signed an "Independent Sales/Management
Contractor Agreement" on January 1, 2002 ("the
Agreement");
(h) the Agreement
included the following:
(i) a list of the
worker's duties,
(ii) the Worker was
accountable for sales, monthly financials, annual budgets and
monthly meetings,
(iii) the contract is for one
year;
(iv) the Worker will be paid
8.7% of the gross sales,
(v) the Appellant will
pay the Worker monthly,
(vi) the Appellant is only
liable to pay for extra services that were authorized in writing
and
(vii) the Appellant will provide
WCB coverage;
(i) the Worker
performed her services at the Appellant's premises and in the
field;
(j) the Worker
was paid by commissions;
(k) the Worker
received a percentage of the gross revenues;
(l) the worker
was paid monthly;
(m) the Worker also
received WCB and Blue Cross benefits from the Appellant;
(n) the
Appellant's business hours were as follows:
Monday to Saturday 8:30 a.m. to 5:30 p.m.
Sunday
Noon to 4:00 p.m.
(o) the Worker
worked whatever hours were required to perform her duties;
(p) the Worker was
on-call 24 hours per day;
(q) the Appellant
retained the right to control the Worker;
(r) the Worker was
not the operating mind of the Appellant;
(s) major decisions
required a majority vote of the shareholders;
(t) the Worker
had an equity interest in the Appellant;
(u) the Worker
represented the Appellant while performing her services;
(v) the Worker
notified the Appellant of any leave requirements;
(w) the Worker performed
her services personally and did not replace herself;
(x) the Worker has
worked for the Appellant's business since it's inception
in 1997;
(y) in conjunction
with her work for the appellant, the Worker also served as a
board member on various "self-storage
associations";
(z) the shareholder
had signing authority for the Appellant's bank account;
(aa) the Appellant used the
Shareholder's address as a mailing address;
(bb) the Appellant provided all
of the tools and equipment required including a vehicle, cell
phone and the work location;
(cc) the Worker provided hr
mental capacity and expertise;
(dd) the Appellant paid all
operating expenses including the Worker's vehicle
expenses;
(ee) the Worker has not assumed
personal liability for the Appellant;
(ff) the Worker was
employed under a contract of service with the Appellant, and
(gg) wages paid by the Appellant
to the worker, for the 1999, 2000, 2001 and 2002 years are as
follows:
1999
$56,999
2000
$60,500
2001
$71,500
2002
$42,000
In the main, the assumptions as pleaded are correct save of
course for (q) and (ff). They must, however, be interpreted in
light of the evidence adduced.
[4] At the hearing of the appeal,
evidence was given by the Worker and by Merton T. Moriarity of
M.T. Moriarity and Associates Ltd. holder of 50% of the shares of
Space Place.
[5] The Worker's evidence was
difficult to evaluate. By way of background I should note that it
was evident that her description of the facts was greatly
affected by her apparent desire to establish that she was not an
employee of Space Place. Nevertheless, I am inclined to the
view that her evidence was essentially truthful.
[6] It is clear from the testimony and
from the written contract referred to in assumption (g) that both
parties to the contract wished to form a relationship which would
be regarded as a contract for services. That contract was the
same as contracts for the previous years. All open with the words
"it is agreed that ... the contractor will provide the hirer
with the following services as an independent contractor
...". (emphasis added)
[7] Space Place owned and operated a
self-storage facility. The Worker's duties can best be
described as those of general manager of that facility. She was
in charge of hiring, firing and otherwise dealing with personnel,
maintenance of the facility, the security of the facility, all
matters financial including the collection and deposit of
revenues, the payment of debts, the keeping of accounts, the
supervision of the construction of additions to the facility and,
it appears, all other aspects of the day-to-day operations.
[8] The Worker was not obliged to keep
regular hours. On the one hand she was required to respond to
emergency calls on a twenty-four hour a day basis. On the other
hand she was heavily involved in the activities of a trade
association. Those activities which were not part of her Space
Place duties kept her away from the business and premises of
Space Place for substantial periods. While away she arranged for
coverage by a replacement worker.
[9] The Worker's compensation was
a percentage of the gross revenues of the business. That
percentage was renegotiated from year to year. I gather she
received a monthly draw against the commission account.
[10] The Worker indicated that Space Place
did not furnish her with an office. She stated also that she used
her own computer, software, telephone, adding machine, fax and
office supplies all at a home office. Space Place furnished a
motor vehicle for use by the Worker.
[11] There is no suggestion in the evidence
that the Worker carried on any sort of business in which she
offered her services as general manager to the public at large.
It was not suggested that the Appellant was gainfully employed
except with Space Place.
[12] With respect to control of the manner
in which the Worker carried out her commitment to Space Place, I
find the testimony of Merton Moriarity highly persuasive. He
stated "We never did control the hours. We never did control
the Worker. We had general meetings every now and then and that
was about the extent of control". It appears that Space
Place defined the task to be done and that it was the Workers
obligation to perform the task in such manner as she saw fit. The
focus of the contract was payment for results not payment
measured by hours spent on the job.
[13] The leading case on the distinction
between a contract for services and a contract of service
(employment) is 671122 Ontario Ltd. v. Sagaz Industries Canada
Inc., 2001 SCC 59. There, Major, J. delivering the judgment
of the Court reviewed the control test, the four-factor test[1] and the
integration test. He held that the key is set out in Market
Investigations Ltd. v. Minister of Social Security, [1968] 3
All. E.R. 732. At paragraphs 47 and 48, Major, J. stated:
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.
It bears repeating that the above factors constitute a
non-exhaustive list, and there is no set formula as to
their application. The relative weight of each will depend on the
particular facts and circumstances of the case. (emphasis
added)
[14] Applying the test it seems reasonably
clear that the Worker did not furnish her services to Space Place
as an employee. As just noted Space Place did not retain the
right to control the manner in which the Appellant performed the
task of managing its business. She came and went as she saw fit
and was permitted to provide coverage during her absences by
retaining a substitute. She furnished much of the equipment
required to do the work. She was not compensated at an hourly or
periodic rate. Rather the scheme of compensation tied her reward
directly to her success or failure in managing Space Place's
business.
[15] In cases such as this it is helpful to
compare employment and contracts for services in a broad and
general sense. In Alexander v. M.N.R., 70 DTC 6006,
Jackett, P. stated at page 6011:
... On the one hand, a contract of service is a contract under
which one party, the servant or employee, agrees, for either a
period of time or indefinitely, and either full time or part
time, to work for the other party, the master or the employer. On
the other hand, a contract for services is a contract under which
the one party agrees that certain specified work will be done for
the other. A contract of service does not normally envisage the
accomplishment of a specified amount of work but does normally
contemplate the servant putting his personal services at the
disposal of the master during some period of time. A contract for
services does normally envisage the accomplishment of a specified
job or task and normally does not require that the contractor do
anything personally.
Here, as I see it the Appellant managed the Space Place
facility under a series of annual contracts in which the emphasis
was placed on the accomplishment of the contract work rather than
on an agreement to place the Worker's personal services at
the disposal of Space Place for some defined period of time. The
emphasis was on the work agreed to be done rather than the
Worker's time. Thus the use of a substitute was permitted and
compensation was not tied to time spent by the Worker.
[16] It is of some significance that the
parties deliberately set out to create an independent contractor
relationship. There was no legal impediment to the achievement of
that goal. Nothing in the details of the relationship is
inconsistent with the relationship sought. Although the
description adopted by the parties as to the nature of their
contractual relationship is not determinative, that description
should be allowed to govern where the factors pointing to
employment are evenly balanced with those pointing to a contract
for services. In Wolf v. Canada [2002] 4 F.C. 396,
Noël, J.A. stated at paragraph 122:
... In my view, this is a case where the characterization
which the parties have placed on their relationship ought to be
given great weight. I acknowledge that the manner in which
parties choose to describe their relationship is not usually
determinative particularly where the applicable legal tests point
in the other direction. But in a close case such as the present
one, where the relevant factors point in both directions with
equal force, the parties' contractual intent, and in
particular their mutual understanding of the relationship cannot
be disregarded.
[17] For the foregoing reasons the appeals
will be allowed, the decisions of the Minister set aside and
assessments vacated.
Signed at Ottawa, Canada, this 11th day of August 2004.
Bonner, J.
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