Flowerday v. M.N.R., docket 1999-1323-EI

Date: 19991122

Dockets: 1999-1323-EI; 1999-1324-CPP

BETWEEN:

GERALD FLOWERDAY,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

HULLAND TRUCK SERVICE LTD.,

Intervener.

Reasons for Judgment

Cain, D.J.T.C.C.

[1] This appeal was instituted by Gerald Flowerday, hereinafter called the "Appellant", in respect to a ruling of the Minister of National Revenue, hereinafter called the "Minister", that the former was not employed in insurable employment or pensionable employment by Hulland Truck Service Ltd., hereinafter called the "Intervener", for the period November 21, 1997 to and including July 22, 1998, within the meaning of the Employment Insurance Act (the "Act") and the Canada Pension Plan respectively.

[2] At the outset the parties agreed to combine the appeals, to proceed with the appeal relating to employment insurance and then apply that evidence to the appeal relating to Canada Pension.

[3] The Appellant and the Intervener led evidence in respect to their respective positions. The Minister did not call any evidence. The Court finds the facts to be as follows.

Facts

[4] Prior to November 21, 1997, the Appellant was enrolled in training to become a transport truck driver. Some three weeks prior to that date, he obtained information from a government employment office that the Intervener was looking for drivers. He attended at the Intervener's office, was tested and the latter, who was satisfied that the Appellant was qualified to drive, agreed to offer him employment on unusual terms.

[5] The Intervener presented him with a prepared form of contract to be entered into between the Intervener, referred to therein as the "Broker" and a company to be incorporated under the laws of Ontario by the Appellant, referred to therein as the "Subcontractor". The company was to supply the Intervener with drivers to drive the latter's transport trucks. The Appellant signed the agreement on November 21, 1997 (Exhibit A-4).

[6] The Appellant caused 1255408 Ontario Inc. (hereinafter called the "Company") to be incorporated under the laws of the Province of Ontario on November 24, 1997 and delivered a copy of the Articles of Incorporation to the Intervener. The Appellant was the sole director and shareholder of the Company and opened accounts for corporation income tax, payroll deductions and GST/Harmonized sales tax. The business to be carried on by the Company was the transportation of goods.

[7] The Company performed services for the Intervener during the time stated in the Appellant's application for employment insurance benefits.

[8] All accounts submitted to the Intervener for services rendered by the Company were on the billhead of the Company. The Company instructed the Intervener to deposit all monies due into the Company's bank and all confirmation of such deposits were made on the billhead of the Intervener addressed to the Company in care of the Appellant (see Exhibit I-3 for sample).

[9] The application of the Appellant for employment insurance benefits was originally approved by the Minister but when notice of assessment was sent to the Intervener, the latter denied that it had any relationship with the Appellant. After further investigation the Minister reversed his original approval and found that the Appellant had no insurable employment with the Appellant.

Submissions

[10] The Minister submitted:

(a) that pursuant to paragraph 5(1)(a) of the Employment Insurance Act, the Appellant was not engaged by the Intervener in insurable employment for the period referred to as there was not a contract of service between the parties.

[11] The Appellant submitted:

(a) that he was the person who in fact was employed by the Intervener, that he only complied with the conditions that the Intervener stipulated because he needed employment and had no other choice, that he was hired by the Intervener as a truck driver, and his employment was pursuant to a contract of service;

(b) that the whole relationship between the Intervener and 1255408 Ontario Inc. was a fiction designed to prevent him from taking advantage of employment insurance in the event that he was laid off by the Intervener and at the same time permitting the Intervener to escape its liabilities under the Employment Insurance Act;

(c) that the contract was entered into between he and the Intervener and 1255408 Ontario Inc. is not mentioned in the contract;

(d) that in any event pursuant to paragraph 5(1)(a) of the Employment Insurance Act, he was a person who received income from "some other person" namely his Company, and that his employment was insurable employment.

Decision

[12] The contract was rather crude in form presumably drawn by someone with very little legal talent. The name of the "Subcontractor" on the first page is omitted and the contract was signed by the Appellant above a line entitled "Subcontractor". Attached to the contract are two appendices in which the Intervener is referred to as the "Owner" and the "Subcontractor" is referred to as the "Driver". In one of the appendices, the Appellant is referred to as the "Contractor" and as "a registered business with the Ministry of Consumer and Corporate Affairs". The contract was entered into four days before the Company was incorporated.

[13] Jan Hulland, Vice-President of the Intervener, testified that the Appellant knew that at the time the contract was signed on November 21, 1997, that it was his responsibility to incorporate the Company under the laws of the Province of Ontario and that any service contracted between the Company and the Intervener was to be performed by the Company.

[14] The Appellant agreed that this was in fact the arrangement; that he incorporated the Company; billed all of the services on the Company's billhead and that all payments for services were made to the Company. In addition the Appellant agreed that the terms set out in the various documents mentioned above were the terms that governed the relationship between the Company and the Intervener.

[15] In the face of this evidence the relationship between the Intervener and the Company was not a fiction but a legal contract. It seems clear that it was a practice adopted by the Intervener to avoid the administration involved in hiring employees and to shift that burden onto the Company. The actions of the Intervener and the Company together with the written document satisfy the Court that services contracted for were rendered by the Company for the Intervener. Those services are not insurable employment and since the Appellant had no insurable employment with the Intervener the appeal cannot stand on that ground.

[16] In the alternative, the Appellant submitted that even if the Court found that the contract for services was between the Intervener and the Company, he was still entitled to benefits because he was a person who received income from "some other person" namely the Company and that his employment was insurable pursuant to paragraph 5(1)(a) of the Act.

[17] Paragraph 5(1)(a) of the Act reads as follows:

"5. (1) Subject to subsection (2), insurable employment is

(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;

..."

[18] The Appellant interpreted the words "whether the earning of the employed person are received from the employer or some other person" to mean that the monies he received from the Company were earnings received from "some other person" namely, the Intervener, and therefore he qualified for employment insurance. However, the "employed person" here was the Company and not the Appellant. While he did receive earnings from the Company, he received those earnings as an employee of the Company and not as an employee of the Intervener.

[19] The Appellant's appeal on this ground also cannot stand and his appeal is dismissed.

[20] The Appellant's appeal in respect to the alleged pensionable employment is dismissed for the same reasons.

Signed at Rothesay, New Brunswick, this 22nd day of November 1999.

"Murray F. Cain"

D.J.T.C.C.