Joseph Floro v. Minister of National Revenue, [1988] 2 CTC 2319, 88 DTC 1675

Taylor, T.C.J.: —This is an appeal heard in Toronto, Ontario, on August 22, 1988, against an income tax assessment for the year 1983 in which the Minister of National Revenue assessed on the basis that Mr. Floro was an employee, rather than an independent contractor. The notice of appeal read:

Following is a summary of the facts relating to the money I received from Bobsien Construction.

1) An agreement was made between the Company and myself that I would act as a self-employed man on labour contract based on mutually agreed to hourly rate.

2) I provided all the tools required for the job.

3) I didn't give any employee forms, no deductions were made, nor did I receive any benefits from Bobsien Construction.

4) I was not directly supervised by anybody, was not told when to start or finish work or when to take coffee and lunch breaks.

5) The job could've been done by a substitute of myself at any time.

I bought a variety of tools at this time from my savings, all of which are still in my possession. In all, there were three small contracting outfits on this project including myself; we all worked on the same principle. Unaware of the total scope of work involved due to the nature of this project (no plans, urgent job). Bobsien Construction chose the labour contract route to insure a smooth progress of the job. None of Bobsien Construction company’s own employees were involved on that job.

I therefore respectively ask, that the sum of $4,215.00 be considered as a legitimate deduction from my 1983 income.

The reply to notice of appeal stated:

— The Appellant was employed by Bobsien Construction Ltd. and had income from office or employment from it in the amount of $2,544.00 in 1983.

— The Appellant was employed as a carpenter and was subject to the direction and control of Bobsien Construction Ltd.

— The Appellant incurred no expenses which were deductible under section 8 of the Income Tax Act.

— In the alternative, the Respondent submits that if the Appellant was self- employed, which is denied, he had income of $2,544.00 from Bobsien Construction Ltd. and he did not incur expenses of $4,215 as alleged to earn income from the business and that his only allowable expenses which were not personal or living expenses or expenses on account of capital are as set out in Schedule "A".

— The Respondent submits that he has properly included into income the amount of $2,544.00 as income from office or employment of Bobsien Construction Ltd. and that no deductions have been incurred and which are deductible under section 8 in respect of this income.

— The Respondent further submits that if the Appellant was a self-employed person, he earned income from this business in the amount of $2,544.00 and puts the Appellant to the strict proof of showing that any expenses are deductible within the meaning of any other provision of the Income Tax Act, other than as set out in Schedule "A" of this Reply.

— The respondent relies, inter alia, upon sections 3, 5, 8, 18(1)(a), (b) and (h), and 20(1) of the Income Tax Act.

According to the testimony of Mr. Floro, his working arrangements with the company Bobsien came from a simple telephone call to him, out of which he was asked to report to a certain location and do whatever was required to complete some construction work going on there. He agreed to work for $11 per hour. During the course of his work, he had no contact with anyone from Bobsien except to receive some money usually by cheque, from time to time as "advances". There was another workman on the job, and essentially he worked along with the other man. He had no supervision, no hours of work were prescribed, and no one checked when he came and went. He soon found he required additional small tools, which he bought, and he purchased a small truck to carry his supplies, etc., since he had understood from the one telephone conversation earlier, and from his coworker, that he could expect several small jobs such as this one. Any instructions regarding the renovations needed came from persons at the location (not connected with Bobsien) whom he regarded as the proprietor or owner of the store. During this “job” he remained a member of the Union to which he belonged. He collected unemployment insurance during a portion of the year also.

In filing the reply to notice of appeal (in connection with the alternative argument noted therein), counsel for the Minister included a statement showing a calculation of possible expenses.

SCHEDULE "A"

Automobile

Gas and oil	$1,875
Insurance	400
Parts and repairs	680
Capital cost allowance
($2,200 at 30%)	660
Total expenses	$3,615
Less: Personal use — 90%	3,254
	$ 361
Capital cost allowance —
tools ($915 X .20)	183
Small tools	120
Allowable business expenses	$ 664

In argument, counsel for the Minister reviewed certain case law, in particular Wiebe Door Services Ltd. v. M.N.R., [1986] 2 C.T.C. 200; 87 D.T.C. 5025.

Analysis

I have examined the Wiebe Door case, supra, as well as a subsequent judgment Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R., 88 D.T.C. 6099 in the appeal of Bradford v. M.N.R., (unreported). As I understand the current state of the jurisprudence on this point, this Court must follow the direction from Wiebe Door Services Ltd., supra, at page 206 (D.T.C. 5030):

There is no escape for the trial judge, when confronted with such a problem from carefully weighing all of the relevant factors . . .

In this appeal, the Court is not to judge the propriety of the appellant's action in not filing his 1983 income tax return on time, nor in not including as an amount of income the $2,544 he earned — without regard to his view that it was more than accounted for by expenses. Equally, that he remained a member of the Union, or that he collected unemployment insurance, are not issues before the Court. The primary question is whether in the particular circumstances of this case, it can be said that Mr. Floro was an independent contractor for the purpose of earning the $2,544 at issue. His reasons for considering himself in that category for income tax purposes have been detailed earlier in this judgment. For the Minister, the position was summarized as follows:

. . . no one test should be determinative but instead the whole scheme of the operation must be looked at, and each test weighed individually, and then one must look at the global situation to determine the relationship between the payer and the worker.

As I see it, Mr. Floro made a working arrangement with Bobsien, which he regarded as that of an "independent contractor", and we have no evidence upon which to conclude that such a view was not held also by Bobsien. Certainly there was nothing in the conduct of either Mr. Floro or Bobsien in 1983 which would dictate, even indicate, otherwise, The first suggestion of a contrary view came in 1986 from Revenue Canada to Mr. Floro, and one might conclude that this occurred after some examination of the circumstances of Bobsien by Revenue Canada. Obviously, if Revenue Canada, considered that Mr. Floro had been an employee of Bobsien in 1983, and that by not properly deducting income tax, and preparing a T-4 slip, Bobsien was in error, then redress for that situation against Bobsien was available under the Act. I find little in the circumstance of this case, for the Minister to attack Mr. Floro's perception of the arrangement, since it appears to be consistent both in contract and in conduct with the view taken of it by Bobsien. I would further note that no action was taken by the Minister at this hearing to join Bobsien to the appeal as provided for under section 174 of the Income Tax Act, which then would have provided this Court with a more complete review of all the facts.

In the end analysis, no substantive reason has been presented which would serve to support the contention of the Minister that Mr. Floro was an employee, as opposed to his intention, contention and evidence, that he was an independent contractor. While the appellant's approach of filing a statement of expenses ($4,215) which exceeded his contract income ($2,544) did little to uphold his contention that he was “in business" — with a reasonable expectation of profit — that argument was not advanced by the respondent, and while the Court is not called upon to review that prospect, it would not be the only factor to consider if that were the issue. As I see it, the Minister has simply followed a practice of dumping into the "employee" basket, another item of income without sufficient attention to the basic contention of this taxpayer.

The determination having been made that Mr. Floro is entitled to the status of "independent contractor", the Minister’s alternative argument from the reply to notice of appeal faces the Court. The Schedule "A" expenses from the reply, supra, were not seriously addressed or challenged by Mr. Floro, and I am satisfied that they do represent a fair and reasonable apportionment by the Minister.

The appeal is allowed in order that Mr. Floro can consider the $2,544 income at issue, as from his position as an ''independent contractor", and that he be permitted to deduct therefrom expenses in the amount of $664. The appellant is entitled to party-and-party costs.

Appeal allowed.