Genesis Leasing Ltd. v. M.N.R., docket 1999-4841-EI

Date: 20000426

Docket: 1999-4841-EI

BETWEEN:

GENESIS LEASING LTD.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Porter, D.J.T.C.C.

[1] This appeal was heard at Calgary, Alberta, on the 21^st of March 2000.

[2] The Appellant appeals the decision of the Minister of National Revenue (hereinafter called the “Minister”) dated September 20, 1999, that the employment of Wieslaw Krezlewicz (the “worker”) for the period March 18, 1998 to March 18, 1999 was insurable employment under the Employment Insurance Act (the “EI Act”) for the following reason:

“Even though Wieslaw Krezlewicz was self employed, as he was not engaged under a contract of service and therefore not an employee, his employment was included in insurable employment under the Employment Insurance Regulations. His employment is insurable as he did not own more than 50% of the vehicle and he did not own or operate the taxi business.”

The decision was said to be issued pursuant to section 93 of the EI Act and was based on paragraph 6(e) of the Employment Insurance Regulations (the “EI Regulations”), passed under the Act.

[3] The material facts reveal that the Appellant was in the business of leasing vehicles to individuals to use, amongst others, as taxi cabs in the city of Lethbridge, Alberta. The worker had no stake in that business, but simply rented a vehicle from the Appellant on a daily basis, which he used as a taxi cab. He made his dispatcher arrangements through another company, Mesa Enterprises Ltd. (“Mesa”), which was a separate but related company to the Appellant, in the sense that the two companies had a common controlling shareholder. The Minister ruled that although the arrangement did not amount to a contract of service, nonetheless it was included in insurable employment as a result of paragraph 6(e) of the EI Regulations, which reads as follows:

“employment of a person as a driver of a taxi, commercial bus, school bus or any other vehicle that is used by a business or public authority for carrying passengers, where the person is not the owner of more than 50 per cent of the vehicle or the owner or operator of the business, or the owner of the public authority;”

[4] The Appellant maintains that the Regulation does not apply to the arrangement in question and that is the issue.

The Facts

[5] The Minister, in coming to his decision, was said in the Reply to the Notice of Appeal, signed on behalf of the Deputy Attorney General of Canada, to have relied upon the following assumptions of fact:

"(a) the facts as admitted above;

(b) the Appellant's business is the leasing of vehicles to individuals to use for driving a taxi cab in the city of Lethbridge;

(c) the Worker provided services to the Appellant from October 23, 1995 until March 18, 1999;

(d) the Worker was not employed under a contract of service with the Appellant;

(e) the Worker did not own at least $50 of the taxi cab (herein the "vehicle");

(f) the Worker is not the operator or owner of the business;

(g) the vehicle and the equipment contained therein used by he Worker were owned by the Appellant;

(h) the Worker leased the vehicle from the Appellant for $40 per day during the summer and 50% per day during the winter;

(i) the Appellant had accounts with Visa and MasterCard;

(j) the Appellant had a contract with Canada Post to drive for Postal Carriers;

(k) the Worker paid the lease payments to the Appellant usually by way of Visa and MasterCard receipts as well as credits for driving postal workers;

(l) any excess paid to the Appellant over and above the lease payment is paid to the Worker by the Appellant each day;

(m) the dispatch service was provided by Mesa Enterprises Ltd.;

(n) Mesa Enterprises Ltd. and the Appellant are both owned by Emile Theroux."

[6] The Minister was also said, in the Reply, to admit the following facts:

2. c) The lessee was responsible for fuel and operating costs;

d) The lessor was responsible for insurance and licensing.

The worker determined:

a) what days he leased the vehicle;

b) what hours he used the vehicle;

c) what he did with the vehicle;

d) what clothing he wore;

e) what type of gasoline he used.

[7] Evidence was given on behalf of the Appellant by Emile Theroux. He was a director and majority shareholder of the Appellant. He effectively agreed with the following assumptions of fact: 12(a), (b), (d), (e), (f), (h), (i), (k) (subject to other explanation); (m) and (n).

[8] The Appellant disagreed, through the witness, with the following assumptions of fact, namely (c) (in that the worker did not provide any services to the Appellant); (g) (in that the following equipment was provided by Mesa, namely a 2-way radio, a meter, a top light and door signs); (l) (in that the witness said the driver simply paid him $50.00 for his vehicle and kept any remaining amounts that he had collected. There was no payment from the Appellant to the worker).

[9] Emile Theroux explained how the arrangement worked. He explained that his company, the Appellant, leased out vehicles of many different types, including vans, trailers, pickups, and trailers. In particular, he leased a vehicle on a daily basis over the period in question to the worker at $50.00 per day. The agreement was entered as Exhibit A-1. It allowed the worker to use the vehicle for whatever purpose he saw fit, whether that be for private use or as a taxi. There was no restriction, except that another driver could not drive the vehicle. He stressed that his business was simply leasing out vehicles. He also stressed that the Appellant had no control over where the vehicle was used, how fares were picked up, or how they were paid.

[10] He said that the worker could use the dispatch service provided by Mesa, if he wished, or pick up fares directly, or use his own cell phone.

[11] The daily rental was usually paid on a daily basis. There were no credit arrangements and no uniform requirements.

[12] However, if the worker was paid by Visa or MasterCard, he could turn those credit card receipts over to the Appellant as credits for his rent. Mesa apparently had no means of cashing Visa or MasterCard receipts, but the Appellant did. Similarly, there was an agreement between Mesa and Canada Post to transport postal workers. The latter paid the worker for rides by way of charge slips in favour of Mesa, which in turn was then paid by Canada Post. The worker would again use these as credits on his rental payments with the Appellant, who would in turn collect the money back from Mesa.

[13] Lastly, and I feel of significance, was the dispatch service arrangement with Mesa. The worker did not pay Mesa for this service; the Appellant did. The Appellant made payments to Mesa out of the rentals which it collected from the worker. This enabled the worker to utilize the dispatch service.

Application of the Law to the Facts

[14] The case relied upon by both parties is the Federal Court of Appeal case, Canada (Attorney General) v. Skyline Cabs (1982) Ltd., [1986] 5 W.W.R. 16. MacGuigan, J. of the Federal Court of Appeal dealt with this question for the Court. He first pointed out that the word “employment” in the Regulation does not mean employment in the sense of an employer/employee situation, that is a contract of service, but rather it is used in the broader sense of “activity or occupation”. He later went on to say:

“As this Court put it in Sheridan v. M.N.R., A-718-84, decided 21st March 1985, [now reported 85 C.L.L.C. 14,048, 57 N.R. 69], at . 11 [p. 74 N.R.] s. 4(1)(c) applies “to those persons employed in employment not under a contract of service ... in circumstances where they perform a similar type of work and under similar terms and conditions to those persons who are employed under a contract of service.

The respondent’s principal contention before us was based on the interrelationship of s. 4(1)(c) of the Act and s. 12(e) of the regulations, to the effect that, even though the existence of a contact of service is not required under s. 12(e), there must nevertheless be a relationship analogous to an employment relationship between the drivers and the company, that is, the person in the position of employer must do more than merely supply the tools of the trade (in this case, the taxis themselves) to the persons in the position of employees.

In my view the relationship between s. 12(e) and s. 4(1)(c) is somewhat more complex than this analysis would suggest. By s. 4(1)(c) the Unemployment Insurance Commission is made the sole judge of the similarity in employment in question (“if it appears to the Commission”). No doubt, in the absence of evidence to the contrary, a court will be prepared to assume that the Commission has, in making s. 12(e) of the regulations, properly implemented its mandate under s. 4(1)(c) of the Act, but this could be relevant to the interpretation of s. 12(e) only if the court were confronted with a choice between a construction which conformed to the commission’s powers under s. 4(1)(c) and one which did not. I do not find that kind of ambiguity in the application of s. 12(e) in the present case.

On the facts here the respondent owns automobiles which are equipped to operate as taxicabs and which it offers to rent to licensed taxicab drivers at a set rental fee. If that were all, the taxis would not be used by the respondent for carrying passengers, as required by s. 12(e) (“employment of a person as a driver by any taxi ... that is used by a business ... for carrying passengers, where that person is not the owner of the vehicle or the proprietor or operator of the business ...”) But there is much more."(emphasis mine)

[15] He went on to point out that Skyline, in that case, was the holder of a taxi cab broker’s license, its rental fee to the drivers included access to a dispatch service, it enforced a dress and grooming codes upon its drivers, it set a clean car policy, it made provision for payment of credit card slips, it provided for a non-scoop rule, and prohibited the use of drugs and alcohol by the drivers. It also set up a fleet array of signs identifiable to the public as “Skyline Cabs”.

[16] As he pointed out, the sum total of these facts was insufficient to establish a contract of service between the drivers and Skyline. However, in his view, it irrefutably established “a sufficient degree of participation by the respondent [Skyline] in the carrying of the passengers by the taxis.” He went on to say:

“... If such a full degree of participation by the respondent in the carriage of passengers were not enough to establish that the taxis may be said to be used by it as part of its business, it seems to me that the policy of the statute to protect taxi drivers against the “risk of unavailability of work and involuntary idleness”, as expressed by the Supreme Court of Canada in the Martin case, supra, would not be implemented. As I see it, any other reading of the facts would be made in a perverse or capricious manner or without regard for the material.”

[17] The question in the case at hand is whether there was sufficient degree of participation by the Appellant in the operation of the taxi business. As MacGuigan, J. pointed out, if it was simply a rental of a vehicle equipped to operate as a taxi cab, that would be insufficient. In the Skyline case, there was much more. In this case, there is not nearly so much “more”. However, there are, it seems to me, two significant areas of participation. First and foremost, there is the matter of the dispatch service. Although operated by a separate, but I note a fully related company, the dispatch service operated by Mesa was brought into the loop by payment to it from the Appellant of a part of the daily rental received from the worker. At this point, like an electrical circuit the loop is closed and all three, the Appellant, Mesa and the worker, are involved in the operation together. The Appellant is no longer simply renting vehicles as Emile Theroux would have had me believe at the outset of his evidence. He provided the necessary dispatch service through his other company.

[18] The second issue relates to the credit card system which was set up. Credit card payments were accepted by the Appellant as part of its rental. In addition, Mesa had a contract with the postal workers. However, if the worker collected a credit slip from a postal worker, he could use that slip which was really an account with Mesa, to pay his rental to the Appellant. Again, the loop was closed between the worker, the Appellant and Mesa.

[19] I found that it was certainly an ingenious arrangement which had been set up by Emile Theroux. It probably came as close as anything might to escape the provisions of the EI Regulation in question. However, in my view, those items to which I have referred, establish a sufficient degree of participation by the Appellant in the carrying of passengers in the taxi. It was not simply a straight-forward rental as might have been supposed at first blush.

Conclusion

[20] In the result, I find that the worker worked as a taxi driver, that he was neither the owner of more than 50% of the vehicle, nor the owner of the business. His employment, thus, pursuant to Regulation 6(e) of the EI Regulations, is insurable employment.

[21] The appeal is dismissed and the decision of the Minister is confirmed.

Signed at Calgary, Alberta, this 26th day of April 2000.

"Michael H. Porter"

D.J.T.C.C.