Tax Court of Canada Judgments

Date: 19991112

Docket: 96-4842-GST-G

BETWEEN:

VANEX TRUCK SERVICE LTD.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Margeson, J.T.C.C.

[1] This appeal is from an assessment of the Minister, notice of which was numbered 11DU-113852941 and dated September 26, 1996 in respect of the reporting periods from January 1, 1991 to July 31, 1994.

[2] In this opening remarks, counsel for the Appellant admitted that the questions before the Court were twofold: 1) was a supply made by the Appellant? 2) if the supply was made, was it a taxable supply?

[3] Also, counsel for the Appellant made a motion to amend the notice of appeal to include a plea for due diligence. The Crown objected and the motion was refused.

Facts

[4] Zeta Leong was a senior licensing representative of the Insurance Corporation of British Columbia (I.C.B.C.) which licenses commercial vehicles hauling in and out of the province of British Columbia and administers pro-rate licensing of vehicles travelling in and out of the province. Funds are collected by I.C.B.C. Other agreements are in existence as well. If a carrier has no pro-rate license he has to stop at the point of entry and obtain a permit. This operation is more expensive and may be done only so many times per year. All of the provinces of Canada with the exception of the Territories and all States of the United States except Hawaïi have an agreement with British Columbia. The original owners of the tractors go to work for a company which holds a license (operating authority) and sign over the registration of their tractors to a company (such as the Appellant) but remain the beneficial owners of the tractors.

[5] In Exhibit A-1, admitted by consent, tab 16 shows the type of form in use in British Columbia for registration or transfer of vehicle ownership and this was the type of form completed by the Appellant and the (beneficial) owner of the tractors. Tab 17 of Exhibit A-1 was a similar transfer form for a flat deck trailer. The witness said that the seller has transferred over the vehicle for licensing and insurance purposes only but not for the purpose of sale.

[6] The witness said that her department considered that Vanex Truck Service Ltd. (hereinafter referred to as Vanex) is the owner and would be liable for any damages. Tab 13 was a copy of an owner certificate of insurance, vehicle license and facsimile of registration in the name of Vanex Truck Service Ltd. The witness said that Vanex was the registered owner. Tab 15 was a copy of an owner's certificate of insurance, vehicle license and facsimile registration in the name of Vanex Truck Service Ltd. Vanex is the insured and I.C.B.C. is the insurer. This insurance would be taken out by Vanex. Vanex was the license owner and the insurance owner and that they could not be transferred or assigned.

[7] The reason why an owner-operator would transfer the vehicle over to Vanex would be to obtain the use of its license and to obtain the insurance. If a carrier registers five or more vehicles he obtains a fleet policy. Vanex did have a fleet policy. A buyer discount was available on the insurance premiums for a fleet policy. This was characteristic of the industry. These actions were approved by I.C.B.C. and the licensing authority.

[8] In cross-examination the witness said that any independent owner-operator would have to have a license and insurance and would have to file a report. In order for a person to obtain the benefit of the fleet policy he would have to transfer over the ownership of the vehicle to the transferee. The beneficial owner was still responsible for the sales tax. Nothing prevents a transferee (like Vanex) from making agreements with the owner-operators to replace a vehicle in the event of any damages to it or to pay any other charges that might occur. In the event of an accident the proceeds from I.C.B.C. insurance would go to the registered owner.

[9] When the transfer takes place from the owner-operator to a transferee the owner-operator receives a tax and licence form which is used to have the unit transferred back to the owner-operator. There is no sales tax on it at this time.

[10] In re-direct the witness said that the provincial authority does not get involved in requiring the transferee to complete the license and transfer form back into the owner-operator. No individual operator or fleet operator is required to buy insurance from I.C.B.C. but they must get an exemption if they do not.

[11] Operators must keep logs and receipts of all fuel purchased and where it was purchased as well as the total number of miles that were driven in each state or province. I.C.B.C. would not issue a policy until the premium was paid. If the premiums were not paid I.C.B.C. would claim against the registered owner.

[12] Ruth Hall was involved in accounting. She said that she does some work for Vanex. She referred to herself as the controller. She was also involved in the cash flow of the company, she was in charge of accounting methods, she performed work in personnel, she was involved in the payroll, she filed tax returns and reported to agencies on behalf of the company. She assisted in the company decision making. She was not a shareholder of Vanex.

[13] Vanex had approximately 30 to 35 employees. Twenty-four of these employees were truck drivers, six were non-drivers. There were two dispatchers and two clerks involved in invoicing and filing. There was a general manager who was in charge of the logbooks. Between 1991 and 1994 total sales for Vanex were two to five million per year which is mostly freight revenue. None of this was from the sale of fuel, oil, tires, licenses or insurance.

[14] She described the business of Vanex as being that of a carrier. They transferred freight from point A to point B for a fee. It operated in British Columbia and other jurisdictions including the Yukon and Alberta and they had a U.S. inter-states commerce authority. Their fees were paid by their customers. She described some of the terms used in the industry. A shipper was the place from which the product was picked-up. A consignee was a place to which the product was delivered. Either one might be the customer. Vanex performed freight services for other couriers as well. This was referred to as interlining.

[15] Vanex issues the invoices to the customer. They include GST in these invoices. When they are interlining they do not include GST. Ten per cent of the revenue was interlining revenue.

[16] Vanex owns approximately 28 to 30 tractors. There were two types of truck drivers, employees or regular employees who only bring their services to the company and the owner-operators who bring the tractor and their services to the company. Twenty-two to 28 of the tractors were transferred from the owner-operators to Vanex. Vanex was a registered owner and motor vehicle licensee of all vehicles operated under its motor carrier license.

[17] The regular drivers drove the vehicles purchased by Vanex. The company's name was on the door. The other tractors also had Vanex's name on the door. She described the trailer as being the vehicle in which the goods were hauled. Vanex had four kinds of trailers, being low bed, high boy, super-trains and refrigerator vans or reefers. The low beds were used for hauling machinery, the high boys, which are one unit, were used for hauling small machinery and lumber. The super-trains were used for hauling culverts, bridges and steel. These are actually two units coupled together. The reefers are used for refrigeration.

[18] Vanex obtained its income by charging fees or tariffs. These fees or tariffs depend upon the type of goods hauled, the time of delivery and other business considerations. The fees are set by weight and the type of trailer used. The terms are net 30 days. The company remitted all GST when assessed on all hauling other than interlined hauling. The duties of the regular employees included inspection of vehicles, doing a pre-trip safety check of the tractor and trailer, ensuring the safe and secure loading of the goods, ensuring the compliance with regulations and operating safety and the completion of logbooks. The description of the goods that are being hauled are set out on the bills of lading or pro-bills. The company invoiced from their bills of lading.

[19] The regular employees could not haul for other companies. If they did they would be dismissed. The company used 30 trailers, 28 of which were purchased for value and two others which were lease operators' trailers. Some of the lease operators had purchased the tractor and trailer for value. Sometimes the owner-operators would use the trailers that Vanex had purchased for value but they mostly used their own. Neither the owner-operators nor the employees operated under their own licenses, motor carrier licenses nor had their own insurance for the tractors or the trailers.

[20] The tractors used mostly diesel fuel but a couple of the pick-ups used gas. These pick-ups were not used for freight hauling. Sometimes the drivers paid for their fuel and oil and were reimbursed. The company set up a "card lock" agreement with Shell where no attendants were involved and each of the users had a PIN number.

[21] Tab 23 of Exhibit A-1 was a credit card application with Shell by Vanex for the "card lock". She estimated that the fuel purchases for a month were about $70,000.00.

[22] The company had more than 20 cards which were issued to Vanex and which were given to the drivers. Vanex recorded the cards and the PIN numbers. The agreement with Shell showed the customer as Vanex. Statements were to be sent to Vanex. Vanex was responsible for paying what was owed and did pay what was owing for fuel, oil and GST. The company obtained a bulk fuel discount off of the regular listing price. A single operator could not obtain such a rate even if he had a similar volume. He would probably have to pay a higher rate. These cards were issued to regular employees as well as owner-operators but were for the business purposes of Vanex only and not for their own frolic or for business purposes of someone else.

[23] Tab 24 of Exhibit A-1 was a credit application to Petro Canada for a "Petro" pass card for Vanex. This provided a volume discount for Vanex. Page 2 was an application for the purchase of wholesale products other than fuel, such as lubricants. According to the witness the exhibits at tabs 23 and 24 were in force during the period 1991 to 1994. They were never assigned to any lease operator or any regular employee. Vanex complied with clause 9 with respect to liability insurance. This agreement was to be used for Vanex business only. This applied to all lease operators and employees. They could be dismissed if it was misused.

[24] Vanex's responsibility was to report the miles driven and the litres of fuel purchased in each jurisdiction. There was an extra fuel tax provision if the company drove more miles in British Columbia and bought less fuel there. The company had to send the cheque to British Columbia to "top it up" if necessary.

[25] Tab 19 was a copy of a motor carrier insurance policy with the Laurentian P & C Insurance Company on behalf of Vanex. Her company did not insure through I.C.B.C. The policy was a fleet policy. The company needed to have five or more vehicles registered in order to obtain a gross revenue premium. This essentially meant that the premium was determined, at least in part, on the basis of gross revenue received by Vanex for freight. A similar policy was in effect during the years 1991, 1992, 1993 and 1994. The policy with Laurentian P & C Insurance Company covered all policies registered in the name of Vanex.

[26] Tab 9 was an in-house list of the equipment of Vanex for the year 1992 and tab 10 was a similar list provided for the years 1990 to 1994. All of these units were insured under the policy. The premium was paid by means of a down payment together with post-dated cheques through a financing agreement. The final premium was calculated at the end of the year and the account was credited or debited as required. This policy was never assigned or transferred to any lease driver. Vanex is not licensed to carry on insurance in British Columbia.

[27] Vanex receives no insurance premiums from the lease operator and no lease operator paid any insurance premiums. No lease operator paid Vanex anything for fuel under Vanex's account and no one paid on Vanex's account to the supplier. The lease operators had the option of purchasing their own fuel or using the fuel card. Some of the operators purchased their own fuel on their own accounts.

[28] In the event of an accident and resulting damages the proceeds would be paid to Vanex. With respect to the allegation in paragraph 8(i) of the Reply, the witness said that Vanex never marked up the insurance charges to the lease operators.

[29] Tab 5 was a copy of a collective agreement between Vanex and Transport, Construction and General Employees Association, Local No. 66 (CLAC) which was signed by the general manager Dwayne Dunkley on behalf of the company. This was in place in the years 1992, 1993 and 1994. Between January of 1991 and August 11, 1991 there was no agreement or collective agreement in place. The witness referred to clause 1 and said that the owner-operators were considered to be employees and were covered by the agreement. The union dues were deducted and remitted to CLAC. They were remitted and deducted. The short term and long term disability premiums, which were the responsibility of the employees, were deducted from the pays and remitted by Vanex.

[30] The witness referred to clause 6 of the Collective Agreement which provided that employee compensation would remain as per current practice and may change from time to time as the parties may agree. As far as the current practice was concerned the witness said that respecting drivers' compensation there were three rates: 1) percentage of the revenue; 2) the mileage rate; and 3) an hourly rate.

[31] For super trains it was 28% and for the high boy load it was 29%. The reefer-vans were paid according to the miles driven and they were paid 42 cents per mile. Now the rate for low beds was $17.50 for the regular drivers. The drivers also received $70.00 a month for medical, plus their vacation pay. That was the gross pay. The company deducted income tax, CPP and UI, together with union dues, short term and long term disability.

[32] With respect to owner-operators remuneration, that they were paid 70% for the high boys and 75% for super-trains. The mileage rate for the reefer-vans and the smaller tandems was a $1.12 per mile and the longer tandems were paid $1.16 per mile.

[33] As indicated this was their gross pay and any expenses incurred by Vanex for that trip were deducted from this amount including insurance for that unit and other amounts expended on that tractor for that month. As well, union dues, short term and long term disability premiums were deducted.

[34] No owner-operator paid Vanex for fuel, insurance, motor carrier or vehicle license. Different rates were paid because the regular drivers only supplied the driving service whereas the owner-operators had brought in a tractor trailer unit.

[35] Any owner-operator could have bought his own license and insurance and operated under Vanex's umbrella and paid for his own fuel. If he did so Vanex's cost would not have been taken out. Vanex also contracted work out to other haulers such as Kilrich Industries.

[36] The witness referred to tab 6 of Exhibit A-1 which was a letter from Frank Kooger, the British Columbia representative of CLAC Local 66 to Dwayne Dunkley regarding the renewal of the Collective Agreement. This letter was dated December 13, 1994. The witness said that the company agreed to $18.50 per hour. Clause 2, and clause 3 were implemented and paragraph 5 was partly implemented.

[37] The witness was referred to tab 17 of Exhibit A-1 and indicated that this type of transport form was completed for all tractors and trailers of the owner-operators. Vanex paid the license fee for all the tractors for all of the years in question. Vanex did not transfer or assign a motor vehicle license to any lease operator unless he left the employ of the company and a transfer took place. This was common practice. It was approved by I.C.B.C. Vanex was the owner of the motor carrier license as set out at tab 25. There are some restrictions on the license which the company complied with.

[38] The witness explained that there is not an annual fee for a motor carrier license but the company pays for the motor carrier plate issued under the license and this fee was paid by Vanex. A sample copy was shown at tab 26. None of these licenses or permits were transferred to any owner-operators nor did the company apply to the motor carrier board to assign or transfer it. A couple of the owner-operators had some motor carrier licenses but they operated under Vanex. If they had used Vanex's motor carrier license to haul for others they would have been dismissed. Vanex does not permit any owner-operator to haul for other carriers or their own customers.

[39] At tab 7 of Exhibit A-1 were a number of pay statements or disclosure sheets of owner-operators showing how their pay was calculated. According to the witness the last of these disclosure sheets was for a person by the name of Kilrich. No expenses were incurred by Vanex with respect to this independent contractor as he paid all of his own expenses. When the owner-operator is paid revenue for mileage he receives a rate plus the miles traveled. When he receives a percentage rate it is the percentage of Vanex's revenue.

[40] The witness again said that no mark-up was made by the company on insurance. They charged the same amount as they were charged. Vanex provided no services to the owner-operators. What they received was their income for their service to Vanex.

[41] Tab 8 was a type of pay statement provided to the owner-operators. The witness also identified tab 3, a notice of reassessment; tab 4, the notice of decision; tab 11 a fleet renewal listing for Vanex; and tab 12, which was a summary prepared for I.C.B.C. for the years 1994 and 1995. According to this witness the common practices in place at Vanex after the union agreement came into force were basically the same as before the union came in.

[42] In cross-examination the witness confirmed that she was the controller for Vanex. She was there in July 1992. She is now part-time. She considered herself a sub-contractor. She admitted that the reporting of GST was one of her responsibilities. She was not a shareholder of Vanex. She filed one GST return quarterly. The financial statement was prepared each year and she gave the figures to the accountant to prepare them. She had an overall knowledge of what was going on in the company. The GST return was filed for January 1, 1991 to January 31, 1991 for one month, and thereafter up to October 1994, they were filed quarterly. The returns from February 1, 1992 to October 31, 1994 were filed by consent as Exhibits R-1 to R-10. She used a computer program to generate the GST return. She printed the return out at the end of the period.

[43] She indicated that one Norman Ferris had his vehicle transferred back to him from the company. She was directed to the pay packages and she said that each lease operator had one prepared each month for him. A trip sheet was prepared for each month. Each trip has a number. Each trailer has a number. Each tractor has a number. There was also a monthly trip manifest report. Exhibits R-11 to R-34 were admitted into evidence.

[44] She was familiar with the accounting procedures of the company. She prepared pay statements for the lease-operators as well as the employees. She was familiar with the type of statement found in Exhibit A-1 at tab 7 and said that she prepared one similar to that. Deductions were set out at the bottom of the cheque. She was referred to tab 37 which was Exhibit R-28 and indicated that it was a trip sheet for Troy Shallard for unit number 027 for January 1995. The figure of $1,725.00 listed as the revenue was the amount that they invoiced the customer. They totalled the pay owing to the lease-operators and deducted from that amount their taxes which were remitted to the government based upon the total income. They also deducted long term and short term disability, union dues and paid the balance to the lease operator.

[45] In the years 1991 to 1994 the lease operators worked for Vanex by agreement to receive 75% of gross revenue or the mileage rate less costs incurred by that unit. There was no written agreement in force. The 75% figure was in effect during that period. She was not involved in the mileage rate. There was no agreement for expenses. Expenses were costs incurred by Vanex for those trips.

[46] In Exhibit R-33 she indicated that the figure marked revenue $14,365.41 was what was earned by Bob Cleland and not by unit number 004. The union dues were those of Bob Cleland.

[47] She was referred to the pay statement of Bob Cleland for February 1993 and indicated that the amount of $4,501.43 was deducted from his pay as this was the amount of fuel the company charged on the card allotted to Bob Cleland for that tractor. Further, the insurance deducted of $6,010.53 was an expense of Vanex like the fuel cost. Likewise, repairs to the tractor was an expense.

[48] She was referred again to the figure $14,365.41 which is shown as revenue and she said that that figure represented the portion of Vanex's gross revenue which was allotted to that tractor. The remainder is what was allotted to the trailer. She said that if you pull your own tractor you receive 86% to 87% of the revenue. She admitted that some of the money generated would be kept by Vanex.

[49] When shown Exhibit R-33 she said that the amount of revenue allotted to the tractor ($14,365.41) represented 75% of Vanex's revenue for that vehicle. With respect to the fuel cost of $4,501.43 she said that GST was included in that figure. When unit 004 was changed back to Bob Cleland he was not charged any depreciated amount. Monthly fuel costs for each trailer were a considerable amount.

[50] The expenses of some contractors were considered to be those of Vanex. She was referred to the year end report for Vanex dated July 31, 1993, the Revenue statement and she said that the company's revenue was $4,349,939.00 up to July 31, 1993. The cost of fuel and lubricants was $133,813.00. These charges were for employee drivers only and did not include lease operators. The lease operators are treated differently. The accountant referred to them as sub-contractors. They did not deduct UI or CPP for lease operators nor did they deduct income tax.

[51] She referred to the company's balance sheet for July 31, 1993. She said that the wages and deductions figures were for non-lease-operators or regular employees. She was referred to the operating expenses sheet for the end of July 31, 1993 and indicated the figure of $160,855.00 was insurance and license fees. It was pointed out to her that this figure represented less than 4.25% of gross earnings. It was suggested that this only related to drivers of trucks provided by Vanex and she would not agree. She said this was a net figure after you take out the figure for the lease operators. This answer was confusing for the Court. It was suggested to her that the figure of $2,779,437.00 shown as wages and benefits included the insurance costs. She said that she did not know.

[52] At this point in time the witness did not appear to be completely forthright and she was either being deliberately evasive or did not know what this figure represented. The witness was shown Exhibit R-33, which showed that an input tax credit had been claimed of $243.91 on the Shell statement whereas on the statement of Bob Cleland the whole amount was claimed against him. She was asked how the driver could ever owe money to Vanex if all of the deductions were expenses of Vanex. She said that they may have overspent by obtaining loans from the company and so on.

[53] The statement of change in the financial position of the company for the year ending July 31, 1993 showed a decrease of $2,006.00 in lease truckers receivables which was explained as a decreasing amount owed to the company by the lease truckers.

[54] She was shown a GST return of the company to Revenue Canada wherein the company claimed input tax credits. She said that she had some input in preparing the notice of objection to Revenue Canada and she went to see the lawyer about it. She was shown a notice of objection with the reasons for the objection and statement of facts and she identified the signature of the President of the company. She indicated that if a lease operator left the company then he had to take the name of the company off of the door of his vehicle.

[55] Vanex had an insurance policy to cover all vehicles used by the lease-operators. If there was an accident the proceeds would be put into an account and the owner-operator would be paid. The company did not charge the owner-operator any additional GST, only that which was on the Shell bill. The same thing applied with respect to the license charges and the insurance charges.

[56] She was asked if she was aware that the lease-operators were claiming input tax credits. She said that she was not originally, but she found out later. She admitted that Vanex claimed input tax credits on the fuel from Shell and Petro.

[57] She was shown the balance sheet for the year-end of July 31, 1993 under the heading, ASSETS, $476,109.00 and she said that she did not know what was intended by that figure. Then she said that she assumed it was only the assets of Vanex and did not include any assets transferred over from others.

[58] She was shown the notes to financial statements for the year ending July 31, 1993 and the figure $1,311,258.00 shown as capital assets - automotive. She said that she believed that this was divided between the six Vanex trailers.

[59] She was referred to the CLAC's letter to Vanex dated September 13, 1994 and was asked what the term "absence of fuel surcharge" meant. She said that this was an additional charge to that which was charged to the company by Shell and Petro. The company did not sign this agreement as they disagreed with several items in it. They only agreed with line 1 in that letter, with respect to the effective rate as of January 1, 1995 on an hourly basis of $18.50. She said that Vanex did not charge a mark-up in the year 1994.

[60] She was shown the pay statements of Bob Cleland from January 7, 1993 and she said that they generally represented the type of report sent out by Vanex to the owner-operators.

[61] In re-direct she was referred to the capital asset figure of $476,189.00 and she said that if a truck was purchased for zero dollars no amount would be included in this figure of capital assets. She was referred to a pay statement of Bob Cleland for unit number 004 for the year 1993 and she said that the company gave disclosure to the drivers as to how they arrived at the figures so that they knew that "they were not ripping them off". If they were not making full disclosure the revenue line would have read $995.15 rather than $14,365.41. The figure of $995.15 was shown at the bottom right hand corner after all deductions had been taken.

[62] With respect to an owner-operator or a lease operator the witness said that they could hire their own driver and the pay statement would be the same.

[63] When she was again referred to the figure of $14,365.41 as the total revenue figure for Bob Cleland for February 1993 for unit number 004, she said that he might have hauled a trailer for which he would have been entitled to claim a mileage rate. She could not tell if all that he hauled entitled him to the 75% rate. With respect to the same figure, she said that $19,153.88 would represent the amount invoiced to Vanex's customers if the 75% rate were used. This would show up in Vanex's books as billings. If the driver had paid all of his own expenses he would have received $14,365.41, which was 75% of Vanex's revenue for that vehicle plus his medical, and Vanex would not have made any deductions.

[64] She was referred to a trip sheet for one Kilrich for February 1993 showing a total of $1,051.36 with a revenue line of $914.68. She said that the $1,051.36 would have represented Vanex's income from that unit. This amount would have been invoiced to the customer. The $914.68 figure represented 87%, being 75% for the tractor and 12% for the trailer. This was Kilrich's revenue. He was an independent contractor and provided his own fuel, license, insurance, tractor and trailer.

[65] Gordon Edward Oakford was a senior loss control consultant for Axa Pacific Insurance Corporation, Motor Carrier Division (formerly Laurentian). He identified the cover sheet shown in tab 19 which was the fleet insurance policy. The named insured was Vanex. The coverages were under a fleet policy based upon gross receipts. The policy covered physical damage, cargo, warehouse, property damage and the rate was $4.25 per $100.00 of receipts. This covered any and all equipment registered in the name of Vanex. There was no coverage if the vehicle was not owned or registered in the name of Vanex. A list of equipment is provided as to what is to be covered. In general he said that the fleet policy was used by companies who had more than five power units registered and owned by them.

[66] The rate of $4.25 was calculated by taking into account a number of factors such as the amount of equipment, the values, the gross revenue (estimated), the areas of the operation (in Canada or the United States), the previous loss history and the result of the safety evaluation. There were also non-fleet policies but these are scheduled policies. They can insure one to five units on a scheduled policy. The rates are different.

[67] A base figure is calculated and then other factors such as equipment, loss history, area of coverage and type of coverage desired also enter into the picture. The difference between the cost on a fleet policy and a scheduled policy might be 20% or more.

[68] In the event of a loss Vanex would receive the money. This was not transferable or assignable. None of the policies issued by them were assigned.

[69] The company knew that Vanex had owner-operators working for them. They were not covered by this policy. Only Vanex was. If an owner-operator had an accident with a vehicle covered by the policy it would be covered and Vanex would receive the funds. If an owner-operator used a trailer of Vanex to deliver for his own customer Vanex would not pay any premium for it. If an owner-operator had an accident while delivering freight for non-Vanex customers he would not be insured.

[70] In cross-examination he said that there was coverage under the policy for trailers not owned by Vanex but which they were using for their work.

[71] In British Columbia the first $250,000.00 of coverage is with I.C.B.C. Over that amount the owner can look elsewhere for coverage. It is not necessary to have permission from I.C.B.C. to obtain insurance from other than I.C.B.C. unless the operation is only in British Columbia. If the operator has pro-rate plates they can opt out of I.C.B.C. automatically. They must file proof of insurance with the other company. Pro-rate licenses were still involved in these cases. It was his position that the companies are the registered and legal owners. Any proceeds of the policy are paid to Vanex and distributed by them to any claimant and any owner-operator. The proceeds could be paid to the owner-operator or any other claimant directly with the permission of Vanex. However, the insurance company would be legally bound to pay to Vanex.

[72] The Respondent called Robert Cleland who was an owner-operator and truck driver. He had thirty-two years experience. He drove his own truck. He was familiar with Vanex. He worked seventeen years with them off and on. At first he was an employee and then he became an owner-operator. He started in the late 1970s. He drove Vanex's trucks and at that time he was an employee for three to four years. He then bought one of their trucks and drove for them as an owner-operator. As far as the remuneration was concerned, when he was an employee he was paid an hourly rate, plus 38 cents per mile, plus other benefits. In 1984 he bought the truck and he was then paid 70% of the revenue.

[73] Unit 004 was his. If he generated $20,000.00 of revenue he would receive 70% of $20,000.00. The Company received $20,000.00 and he received 70% back. He paid all costs of the rig including fuel cost, insurance cost, tires, repairs, grease and truck payments. He was entitled to use the company account or he could use his own account. He used Vanex's fuel card and their license. Vanex deducted costs for these from his monthly cheque. The process never changed, although the percentage did.

[74] When Dunkleys bought Vanex the rate was changed to 75%. He knew Dwayne, Dean and David who bought out Vanex. He considered them to be the owners. His terms with the company did not change. He was financing his own truck through a company and paid monthly by deductions from his 70% of the revenue. Then he traded it for a 1989 unit and left the unit in the company's name (Vanex). They drew up a document to say that it was his truck. This was drawn up by a lawyer.

[75] He identified Exhibit R-33 which were his monthly pay statements and Exhibit R-34 which were his deductions. These documents were prepared by Vanex and delivered to him. The amount of $14,505.41 was the amount that he received from Vanex. All of the deductions other than $140.00, which was added on to the revenue figure of $14,365.41, were owed to the company. He further indicated that the amount of $19,148.88 was the total amount received by Vanex for that period from unit number 004. The $14,365.41 figure represented 75% of that amount.

[76] He identified a credit note from Crown Tire Service Ltd. in the amount of $2,578.45. He further identified a fuel statement from Shell which represented the cost of gas that he had burned and charged to the Shell credit card of Vanex for that month amounting to $3,728.57. GST was shown on this statement amounting to $243.91. His position was that he asked the company to separate the GST. He said, "the company claimed the total amount against us including the GST. We claimed it and got it back". He further identified a work order number 1568 indicating work done on unit number 004 on February 28, 1993 in the amount of $228.38. This included the GST. The same applied to work orders numbers 1509 and 1532.

[77] He testified that the trucks, including his own, were put into Vanex's name for licensing purposes only. He was the owner of the truck. He bought his insurance through Vanex. They were running pro-rated plates so they had to go through Vanex. He had to pay the deductibles because it was his truck. He saw one cheque which was made out to Vanex and the owner-operator.

[78] The witness identified Exhibit R-35. This exhibit was the Appellant's own income tax return for the year 1993. He prepared it as well as the expense statement for 1993. In it he claimed meals and lodging. Dwayne Dunkley signed it as well. He identified a note on the claim as well as his signature. It was in his handwriting on the envelope and he sent it in to Revenue Canada. They used Exhibits R-33 and R-34 to prepare Exhibit R-35. The totals were taken off of each statement. He identified other sections of the income tax return including lease payments, fuel bills, outside accounts, license plate charges and he said that Vanex paid them out but he paid them to Vanex. Here again he indicated that he used these pay statements.

[79] If they bought fuel outside of the credit card, Vanex wanted them to show what they bought and for what amount. If he paid cash, he told Vanex how much he had paid and that he had paid cash in order to allow Vanex to remit the proper fuel tax, but Vanex did not pay him back. He calculated net business income. He was audited and he had to pay more money.

[80] He stopped working for Vanex in June 1995 because they were going to surcharge his fuel. He obtained his own license. When he quit working for Vanex he took his truck with him. He paid nothing for it. He purchased it in March. He paid no sales tax when he transferred the vehicle over from Vanex to his name because it already belonged to him. There was no sale.

[81] In cross-examination he said that he was a licensee under a motor carrier license. He applied in 1995. He did not have a license before that. He identified the running rights for Vanex contained in Exhibit A-1 at tabs 25, 27, 28 and 29. He said that he ran under Vanex's license for which he paid 25%. He could not operate except under that license. He identified tab 19, being the motor carrier insurance for Vanex Truck Service Ltd. He indicated that he did not have one. He had a little pink card but he did not pay any insurance to the insurance company. He paid it to Vanex. In Alberta, he said, "you cannot operate independently, you have to be with a company who has running rights. He could have obtained one if he had gone through the steps".

[82] He identified the document at tab 23 with respect to the access card of Vanex, and he said that he saw one like it before, but he could not recognize that one. He admitted that he had no agreement with Shell for an access card. He had an oral agreement with Vanex. He was not a party to Vanex's card agreement.

[83] Between the years 1991 and 1994 he was an owner-operator, a lease operator. He did not know what an independent contractor was. When referred to Exhibit R-35 he said that all the expenses claimed were expenses incurred while doing Vanex's hauling. He was shown the Collective Agreement found in the Respondent's Book of Documents at tab 5. He did not think that that was the one that he had. There was nothing in it with respect to lease-operators. There was one in place but he did not see it. He admitted that there was nothing specific in the agreement which said that he was responsible for purchasing fuel, insurance or a license. However, he said, "they take my money and hold it for sixty days. I catch up when I quit. They take deductions off for fuel, license and insurance."

[84] He was asked what the duties of an employee were. He said that the employees were required to do trip inspection, secure the load, drive safely, keep the schedule, although this was not a "tight" requirement. They were required to fill out trip manifestos, obtain the signature from the consignee and those were his duties as an employee. With respect to the schedule he said, "you have a little bit of control over it because you are only allowed to drive 60 hours in seven days". If there is an accident it goes against him and Vanex. When he became an owner-operator he did pre-trip inspections and basically performed the same duties as an employee except that he had to look after the truck himself. He had to provide paint, tires, repairs, etc. He obtained the financing for his own truck. It was his truck. By agreement with Vanex he arranged for the financing himself. It was a lease that he obtained. The leasing company was an excellent company to do business with. He was required to register the vehicle in the name of Vanex. However, he could take the vehicle with him when he left. He signed the financing agreement for the vehicle as principal. Vanex was the co-signer. "The bookkeeper did not bring all of the papers to Court with respect to his vehicle because he signed it."

[85] With respect to the fuel card, he was responsible for fuel. He was entitled to 75% of the rate charged. There was another agreement out there with the drivers rate on it other than that shown at tab 6 of the Respondent's Book of Documents. The reason for the agreement was so that drivers could go into union places. He ignored the contract except for that. The way that you were hired was that you received 75% of the revenue. He received 75% of the revenue and then they took out the deductions (Vanex).

[86] He did not agree with the way Vanex calculated their income. There was no way that you could tell how much fuel the truck was going to burn in a given day. Vanex does not compute his pay in relation to their costs. "When you are hired on with them you are hired on a 75% of the gross revenue basis." There is nothing about their expenses in the agreement. If Vanex was purchasing the fuel, we (the drivers) would not care what the costs were. A copy of the statement of account is sent to us. They were told by Vanex not to disclose what fuel they used. Between the years 1991 and 1994 he hauled for Vanex but only containers. He claimed an input tax credit for fuel for the years 1991 to 1994 and it was not denied. Again he was referred to Exhibit R-33 and he said that he paid the GST. The bookkeeper for Vanex knew that they were claiming the GST and they asked her to divide it up on the Shell card the same way that it was done on the Petro card. Copies were attached to his pay statement and as far as he was concerned that meant that it was issued to him.

[87] He made arrangements with Revenue Canada to deduct 40% after his expenses for fuel and insurance had been deducted. Exhibit R-35 was his statement of income and expenses and it contained lease payments for the 1989 truck. He never issued a cheque to Vanex for fuel but it was his money. He never paid Vanex cash for fuel nor licenses or insurance.

[88] Dean Dunkley did some dispatching for Vanex. Around 1990, Dunkley bought the shares of Vanex. His former boss said that he would protect his (Bob Cleland's) rate and he had a discussion with David Dunkley. He had the same agreement with Vanex. He was to receive 75% of revenue. The fish vans got a mileage rate but he only received a percentage rate. Sometimes it was impossible to tell whether or not there was a surcharge on the fuel by looking at the bills.

[89] He was referred to the time that he was a dispatcher and he said that he hired someone else to drive his truck during this time. He was paid $1,000.00 for his truck per month when he worked in the office. He asked the question, "Why would they pay me if it were their truck? I told them that that was what I wanted. I paid the fuel and truck payment and everything else. I signed a contract for that as well."

[90] He described bulk fuel discounts as the means by which one could obtain a greater discount the greater the volume that was used. The price was determined by the volume. The owner-operators in Prince George had made such a deal.

[91] In the year 1994 there was a fight with the insurance company about a claim and Vanex "did not get off their butts. The cheque was paid to Vanex and Ken Schulure because it was his truck." There was no stipulation as to what he did with the fuel except that he could not use it to haul for another owner.

[92] In re-direct he said that he did not have a policy of insurance with Vanex. The plates were put on through I.C.B.C. and he paid for them. The insurance was put on through a pro-rate insurance company and he paid for it. If there was a problem with the truck he went down to see the insurance company, not Vanex. The present practice was 75% of gross revenue and the company would pay the medical of $70.00 per month. They received medical benefits and, then the company took it back and said that they would not surcharge the owner-operators for the fuel, parts, etc. but they went ahead and did it anyway. Insofar as the insurance was concerned he said, "what it cost them it cost us" (meaning the lease-operators). The lease operators received 75% for supplying the power unit (tractor). Vanex got 25% for the licenses, fuel cards, insurance, permits and licenses. Vanex paid for the tires for vehicles that were driven by employees.

[93] Frank Kooger was a labour representative of the Christian Labour Association of Canada. He was familiar with Vanex since 1991 in the summer. He paid a casual visit to the employer. He discussed what access the employees had to a benefit plan, etc. He met with the employees and concluded a voluntary recognition agreement. It addressed recognition, dispute resolution, benefit premiums, remittances, dues and a continuation of the compensation to be provided. This was subject to agreement of the parties from time to time.

[94] He was referred to tab 5 of the Respondent's Book of Documents and said that this collective Agreement was the one in place between Vanex and his association. It was dated the October 17, 1991. It covered employees, that is direct hire employees and owner-operators as well. It continued in effect until 1994.

[95] In 1994 he visited Dwayne Dunkley to identify the current practices regarding compensation. Dwayne provided notes as to current practice. The witness had that note which is shown at tab 51 of the Respondent's Book of Documents and this was referred to as Exhibit R- 36. It showed that owner-operators received 75% of the gross and 25% was returned to the carrier. Other rates were also set out. That was prepared by Dwayne Dunkley in the presence of the witness. Where the company owned the trucks, 27% was paid to the drivers. Where fish was hauled in a tandem fish truck $1.12 per mile was paid to the owner-operator. There were rates set out for low beds under lease where 70% was paid. This sheet set out all of the provisions regarding compensations except for health benefits. The owner-operator was expected to pay all of his own costs such as meals, fuel, insurance, etc.

[96] The next day he met with the employees to draft a contract renewal proposal. The purpose was to confront the drivers with their demands. The note that he made was the base line. There was discussion with respect to the remuneration for owner-operators and it was a 75/25 split. He was referred to tab 50 of the Respondent's Book of Documents and he said that this represented a copy of the minutes of the meeting with Vanex held in January 26, 1994. His proposal provided, as of September 1, 1994, that the hourly rate would be $18.50; the mileage rate would increase to 44 cents; the percentage rate would remain unchanged; an owner-operator would continue at 75/25 for a truck only; truck and trailer 90/10; fish tandem which is currently $1.12, would increase to $1.15; $1.16 would increase to $1.25. He prepared these rates. These proposals were conveyed to the employer by letter in April.

[97] He referred to a letter to Vanex from Frank Kooger dated July 12, 1994 found at tab 53 of the Respondent's Book of Documents. This correspondence reflected accurately the proposals at the membership meeting and addressed the compensation that they wanted. Owner-operators were to have a 75/25 split for truck only and a 90/10 split for truck and trailer.

[98] The costs of operating an owner-operator vehicle was not addressed but it was understood that all of these costs were to be borne by the owner-operator. The employer counter-proposed on September 1, 1994. There would be no change in hourly rates for the company drivers and the owner-operators would pay the costs of their health benefit package. There were no concessions by the employer that would increase his costs. It included a hold on the hourly rate and no changes in the other company drivers split or mileage rate and there would be no changes to the owner-operators splits which were 75/25 for the truck only and 90/10 for the owner-operators truck and trailer. The employer wanted the owner-operator to pick up the cost of the benefits package amounting to $120.00 a month.

[99] He sent the letter of July 12, 1994 shown at tab 52 of the Respondent's Book of Documents to the company with a view to renewing the collective agreement. On December 13, 1994 he wrote a letter to Dwayne Dunkley, shown at tab 6 of the Appellant's Book of Documents, which he said concluded their new agreement and which identified changes that had been made in the current practices up to that date. He indicated that the membership had ratified it. The $70.00 benefit payment to the owner-operators was to be dropped.

[100] The witness said that the agreement was that the owner-operator received 75% of the gross revenue, he supplied the power unit only and there would be no subtraction for any of these charges. He said that the owner-operators were responsible for the costs of the tractor.

[101] In cross-examination he said that as far as he was concerned the terms "independent contractor" and "owner-operator" were the same thing. All members of a bargaining unit in British Columbia do not have to be employees. Owner-operators can be represented by a union. A person can be an employee for collective bargaining purposes and not for other purposes. In accordance with article 4.03 of the Collective Agreement the only deductions for the employees were the costs of long term and short term disability benefits. That allowance would be deducted from the employees' revenue and would have to be remitted on their behalf. There was nothing else that the employer could deduct from the employee and that was subject to practice.

[102] It was not possible that Vanex could have calculated the pay of the owner-operators on the basis of their expenses. Vanex bought fuel from a supplier and received it at lower cost. It made the prices available to their owner-operators. As far as Vanex was concerned he knew that the lease operators received 75% and Vanex received 25% of revenue.

[103] Cosima Stea was an Appeals officer with Revenue Canada. He received a notice of objection on behalf of Vanex on June 23, 1995 at the Prince George office and forwarded it to Vancouver on July 7, 1995. He described the relevant documentation in the department file including the file from Prince George. He also described a notice of objection as received at the department. He identified Exhibit R-38 which was a notice of objection and attachments which were admitted into evidence.

Argument of the Appellant

[104] Counsel for the Appellant argued that the issues are threefold: 1) Should GST have been charged by the Appellant on the insurance coverage provided to the owner-operators? 2) Should GST have been charged by Vanex on the motor vehicle licenses and the motor carrier licenses in its name allegedly provided to the owner-operators who performed services for Vanex? 3) Should GST have been charged by Vanex on the diesel fuel and oil allegedly supplied to the owner-operators by the Appellant?

[105] Counsel argued that Vanex did not supply licenses to the owner-operators because Vanex was the licensee under both. These licenses were not transferable or assignable and none were transferred or assigned. Further, Vanex did not supply insurance to the owner-operators because Vanex was the insured under the policies and they were not transferable or assignable, nor were they it transferred or assigned.

[106] The Minister assumed that Vanex obtained I.C.B.C. insurance and transferred it to the owner-operators, but it was clear from the evidence that I.C.B.C. insurance was not obtained, as the insurance was obtained through another carrier.

[107] Insofar as the fuel and oil are concerned Vanex was the recipient of those supplies from Petro and Shell and these goods were only to be used by the owner-operators to deliver the goods of Vanex to its customers. Therefore, Vanex had obtained title to the fuel and not the owner-operators. The owner-operators did not have possession of the fuel. They had the use of it only to deliver Vanex's goods for Vanex's customers.

[108] In the evidence of Mr. Cleland he indicated that he was not prepared to bear the risk of the loss of the cost of the fuel in the event that the company should fail and he might not be reimbursed. Consequently, he wanted to use the fuel card provided by Vanex. In such case, if he received the fuel and Vanex went out of business, he would not have suffered the loss. On the contrary, when Kilrich did obtain his own fuel, and he would bear the loss under similar circumstances.

[109] Even if licenses, insurance, fuel and lubricants were supplied to the owner-operators, they paid no consideration for those items. They paid no cash, no valuable property and the only way there was any consideration for these goods was if there were offsetting benefits. Under the facts as disclosed by the evidence in this case there were no mutual debts to offset the cost of these goods because Vanex was responsible for paying for them. All that Vanex paid the owner-operators was for their labour only and a return on their investment (underlining is mine). They were not entitled to the percentage rate because they did not pay the expenses as Kilrich did. The contract between the owner-operators and Vanex was the Collective Agreement which has been placed into evidence. Under that agreement Vanex could only deduct three things from the owner-operators pay: (1) union dues; (2) short term disability; (3) long term disability (these items were paid by Vanex and deducted from the owner-operators pay). In the evidence of Ruth Hall she indicated that Vanex did not have to pay the owner-operators the percentage rate unless they paid their own expenses. This they did not do.

[110] With respect to the insurance, the only interest that the owner-operators had in the insurance was to be paid for the damage to their vehicles. Vanex was responsible for all the other liabilities and not the owner-operators. The policy of insurance was for Vanex and not for the owner-operators.

[111] With respect to the motor carrier licenses, none of the owner-operators had their own motor carrier licenses. Only the holder of a license may operate on a highway. The owner-operators operated under the license of Vanex. They were not assignable or transferable and they were not so assigned or transferred. With respect to the motor vehicle licenses, the owners of the vehicles were the owners of the licenses. Vanex was the owner of all vehicles except for the purposes of sales tax when the vehicle was initially obtained.

[112] Counsel referred to Exhibit A-1 at tabs 25, 26 and 27 and said that these were all issued under the Motor Carrier Act.

[113] The Motor Carrier Act defines "license", "licensees", "public freight vehicle" and "public vehicle". Under section 3 of the Motor Carrier Act, an owner-operator could not operate without Vanex holding the license. None of these owner-operators held a motor carrier license. Therefore they operated on behalf of Vanex only.

[114] Section 7 deals with transfer and assignment and counsel pointed out that these were not assigned or transferred nor was there any application to do so. The result was that Vanex owned the right to operate the vehicles and the owner-operators were acting on behalf of Vanex only. Vanex held the license at all time in issue.

[115] Counsel referred to the definition of "supply" and the definition of "sale". He argued that the license in the case at bar was property under the definition set out in the appropriate legislation. The licenses gave the right to operate the vehicles. They were not sold, therefore it was not provided by way of sale under the definition of "supply" or "sale". The word "transfer" is not defined. In the case at bar the license was vested in Vanex and in no other person.

[116] The word "barter" is defined in Black's Law Dictionary and under that definition there was no exchange of the license in the case at bar. It always vested in Vanex. Further, there was no exchange as it is defined. Vanex did not part with, transfer or give the license or any equivalent, the licenses were always in Vanex's name and it could not re license the owner-operators. This power rested in the province alone.

[117] There was no disposition in this case. Vanex did not do any of these acts with respect to the motor vehicle license.

[118] Vanex was the registered owner of all tractors and trailers. The documents show that there was a taxable transaction at the time of the original purchase by the owner-operator. Then the transfer forms were completed by the owner-operators. This effected the transfer of ownership from the owner to Vanex. Vanex was the legal owner after the transfer. This transfer form showed no purchase price for the transaction. The transfer was for licensing and insurance purposes only. This was a mere administrative act by the tax authorities to enable the owner-operators to have access to the insurance policy. This allowed the transfer of ownership for all purposes other than sales tax. The relevant authorities chose not to collect tax on these matters. It was a policy decision by the government.

[119] In the case of Technogold Imports Inc. v. The Queen, [1998] 2868 ETC, (TCC), Bowman J. found that the true owner was the registered owner. (see paragraph 8 page 4) In the case of Seawest Financial Corp. v. Town Centre Chevrolet Oldsmobile Ltd., [1984] B.C.J. No. 1301 (B.C.S.C.), [Q.L.] the transfer had not been registered but the Court found that the owner was still the person named in the document. Registration is not necessary to complete transfer.

[120] In the case at bar there was a transfer form completed in every case. Vanex was the registered owner. In this case we had a transfer document completed plus a registration. In Westbrook v. Arlent, [1994] B.C.J. No. 1728 (B.C.S.C.), the Court decided that the registered owner was the real owner. In this case the Court decided that the real owner and the beneficial owner was the registered owner.

[121] Counsel argued that the owner-operators had a valid reason to transfer the vehicle into Vanex's name because they received a cheaper rate on the insurance in the range of 20%. However, Kilrich did not transfer his vehicle to Vanex and paid his own rate of insurance. Further, it was beneficial for the owner-operators to transfer in order to have access to the pro-rate plates. A transfer form was signed. This was the equivalent of a bill of sale. Vanex signed the transfer form and obtained the insurance policy to cover the vehicle listed in the equipment list. All of this equipment was covered by Vanex's insurance policy. Vanex received a motor vehicle license for each tractor and trailer. They obtained a license, paid the fee and received an ownership certificate.

[122] It is true that the original purchaser's name was shown but this was only to indicate that he had paid the social services tax. If and when the vehicle went back to the owner-operator it would be tax exempt. For all purposes except for the social services tax Vanex was the real owner. Each unit had a fleet number. Also Vanex had its name imprinted on the side of each vehicle.

[123] It was agreed by the parties that the motor carrier license fee was exempt from GST when it was sold to Vanex. (However, the Minister argued that this was an original fee but the transfer to the owner-operator was not exempt.)

[124] The license was issued under the Commercial Transport Act. Section 3 of that Act included a section of the Motor Vehicle Act in particular sections 79 to 81 wherein the term "commercial vehicle" was substituted for the term "motor vehicle". Section 5 provided for registration and licensing. Under this section Vanex was the legal and registered owner and it obtained the license to operate the vehicle on any highway. This license was not assignable or transferable. Even if the owner-operators paid any fee they received no right to a license. They received only the right to act for Vanex.

[125] Under section 79 of the Motor Vehicle Act Vanex could be held vicariously liable for any damages caused by its vehicle being operated by the owner-operators. This liability was in the Commercial Transportation Act by reference. Under section 81, if a driver committed an offence, Vanex could be held liable for it. This was also in the Commercial Transportation Act by reference. Vanex was the licensee. The license never vested in the owner-operator. At the very best he operated on Vanex's behalf. Therefore, under any definition of supply, Vanex did not supply licenses. They vested in Vanex at all times.

[126] Further, in the matter of insurance, counsel referred to the Minister's Reply in subparagraphs (h) and (i) and said that this assumption had been rebutted because it was clear from the evidence that the insurance was not from I.C.B.C. Under M.N.R. v. Pillsbury Holdings Ltd., 64 DTC 5184 (Exch. Ct.), there was no provision of insurance.

[127] There was an insurance policy in effect. It was obtained by Vanex based on an estimate taking into account various factors such as the amount of business income, the loss experience, etc. Vanex paid the premiums. If the owner-operators delivered for any one other than Vanex this delivery was not covered. There was no premium paid for such delivery either. Vanex was the insured. The policy was not assigned or transferred. No owner-operator was an insured under the policy. It was a fleet policy and covered all vehicles owned by Vanex and if each had been registered separately the premiums would have been 20% higher.

[128] Further, counsel pointed out that many coverages were included under the policy and many of these would not have been needed by most of the owner-operators. This insurance policy was far more than a collision policy to indemnify the owner of the vehicle. Vanex paid the premium.

[129] It was submitted that even if the Court should disregard Pillsbury (supra) and consider the insurance policy that was in effect, the Court should find that Vanex did not supply it to the owner-operators. There was no other allegation in the pleadings that insurance was supplied. There was no obligation on behalf of the insurance company to pay the money under the insurance policy to the owner-operators, but if they decided to do that, it was not a taxable supply, because it was not property. It was not a service because it was other than property or money. GST applies only to the supply of services or property. Therefore, if they turned money over to the owner-operators under the insurance policy it was not a good or service.

[130] As can be seen by the exhibits there was no insurance policy issued to the owner-operators by Vanex. The owner-operators had no right to be indemnified under the policy.

[131] Section 165 is the charging section under he Act. Under section 165, the recipient of the supply is the person liable to pay. Recipient is defined. In the case at bar Vanex was liable to pay the consideration for the supply and did so. It was a zero-rated supply, therefore (b) and (c) do not apply.

[132] With respect to the licenses, where there is an agreement for the supply, the recipient is responsible to pay the premiums and Vanex must pay that consideration.

[133] Under the provisions of the Act, with respect to collection of tax, the supplier must collect a tax. If the recipient is Vanex it is not the supplier and therefore it need not collect. There was only one person liable to make the payment of the premium, and that was Vanex, according to the evidence. If the owner-operators were responsible to make the payments there would be a provision in the Collective Agreement. There is nothing in the Agreement that requires the owner-operators to pay anything except the short term and long term insurance. If anything is suggested to the contrary in the statements then the statements are wrong.

[134] With respect to the fuel and oil that was allegedly supplied by the Appellant to the owner-operators the evidence showed that Vanex applied to the oil companies to obtain the card lock cards in the name of Vanex. Each card had an account number, each card had a PIN number, but the Agreement provided that Vanex was the customer. These cards were obtained under a bulk fuel agreement. Vanex was liable to pay for the fuel under the Agreement which was obtained by the use of these cards. The Agreement said that "the customer shall pay".

[135] Under clause 10 of the Agreement the benefit could not be assigned without the vendor's consent. It was not assigned or transferred in this case.

[136] With respect to the oil and lubricants, these also were obtained at a discount. Vanex was the recipient of the supply from the suppliers. The owner-operators were not purchasing fuel. Vanex was responsible and paid for the fuel. They claimed an input tax credit. Vanex incurred the liability for this commercial activity. Vanex invoiced the customers for GST and computed the net tax owing and sent that amount in.

[137] With respect to Mr. Cleland, in spite of his evidence, it is clear that he did not bear the risk for the fuel. The same applied to every other owner-operator. However, Mr. Kilrich bought his own fuel and he was liable for the fuel bill. He bore the risk for buying the fuel.

[138] The evidence of Ruth Hall was that the fuel could be used only to deliver Vanex's goods. In the event that an owner-operator used the fuel for purposes other than that he could be dismissed. He was not covered under the licenses nor under the insurance if he delivered goods for anyone else other than the customers of Vanex. Regular employees were under the same compulsion.

[139] In the case at bar Vanex was the legal and the beneficial owner of all vehicles. The only way they could recover their costs was from billing their customers. The fuel was put into the vehicles of Vanex. Possession of the fuel was in Vanex, not in the owner-operators. The owner-operators had merely "a limited use" of the fuel.

[140] The employees were paid only for labour. The owner-operators were paid for labour and a return on their investment. Counsel referred to the case of Imperial Drywall Contracting Ltd. v. The Queen, [1997] ETC 2951 (T.C.C.). He argued that this case was on all fours with the case at bar. As in the case at bar no supply was made due to the fact that the use made by the employees of the material was a "limited use". If there was a supply it was taxed at a zero-rate. In the case at bar the owner-operators had a choice. If they bought their own fuel they received no discount. If they did not they obtained a discount through the bulk sales agreement.

[141] Kilrich was an independent contractor because he incurred the cost himself. The owner-operators made a choice. They obtained a beneficial insurance rate, the benefit under the bulk fuel discount, they were better off than they would have been if they acted as Mr. Kilrich did. In the case at bar the owner-operators were paid only for their labour and a return on their investment. They were contracted to do work of the Appellant who had in turn a contract with the customers for that work.

[142] Counsel argued that the facts in the case at bar are identical with those in Imperial Drywall (supra). The fuel that was used by the owner-operators was used only for the purpose of delivering the goods of Vanex. The licenses were held by Vanex as were the insurance policies. Vanex never alienated the right under the insurance policy or the licenses.

[143] Counsel admitted that the question with respect to the fuel was somewhat different but the fuel did have a limited use, even if the owner-operators were actually burning it.

[144] With respect to the accounting records counsel took the position that the invoices were issued in error. The only evidence that the owner-operators paid anything to Vanex were the statements of account. However, they are only statements of account and they stand for nothing more than that. In the case at bar fuel was shown as a deduction but there was nothing to set it off against. Even if the Court accepts that the statements are accurate, there was still no tax payable because the fuel was for a limited use and there was no supply of licenses and insurance.

[145] There were no mutual debts here. There was no legal liability on Vanex to pay the percentage rate to the owner-operators nor any obligation on the owner-operators to pay Vanex. Vanex could not convey the rights that they possessed and therefore even if the owner-operators undertook to pay consideration for them the owner-operators did not receive fuel, licenses and insurance from Vanex. Vanex never alienated their rights to these articles.

[146] Counsel referred to the case of David Robinson v. M.N.R., 93 DTC 254 (T.C.C.) arguing that in the case at bar, as there, that was no alienation of the rights of the taxpayer to the owner-operators.

[147] There never was a mutual debt here and therefore nothing could be off set. There were no deductions. The figures used in the statement were only one step in the calculations of the owner-operator's pay. See also Ed Sinclair Construction & Supplies Ltd. et al. v. M.N.R., 92 DTC 1163 (T.C.C.) at page 9.

[148] In summary, counsel argued that licenses were never supplied. The licenses always rested in Vanex and were never assigned or transferred. The same thing applied to the motor vehicle permits. Vanex was the legal and beneficial owner of the vehicles. The owner-operators were not licensees. They had no rights of their own to operate. Vanex paid all fees and were the recipients of an exempt supply, the licenses. Vanex could not convey the rights that they obtained under the licenses and therefore could not have supplied the rights to any other owner-operator.

[149] With respect to the insurance item counsel again said that this allegation in the Reply had already been rebutted since I.C.B.C. did not provide any insurance policy to Vanex. If there was other evidence with respect to the issuance of another insurance policy, the Court must consider that Vanex was also the recipient of the supply and not the owner-operators.

[150] The owner-operators obtained no rights under the policy and there was no policy issued to them. Even if the owner-operators had a right to be paid for the damages to their vehicle this is not a right that was pleaded.

[151] With respect to the fuel and lubricants, the Imperial Drywall case (supra) is a complete answer to the Respondent's argument on these items. Because the workers in that case gained access to the account it did not mean that the articles were supplied to them. Again counsel took the position that the invoices that were issued by Vanex to the owner-operators were incorrect.

[152] The appeal should be allowed with costs.

Argument on behalf of the Respondent

[153] In written and oral argument counsel said that the Appellant is a British Columbia company based in Prince George which carries on a freight transportation business. The Appellant owned its own fleet of tractors, trailers and other transportation equipment and employed its own drivers to haul its customers goods. However, the Appellant also had owner-operators driving their own vehicles. At issue in this appeal is not any potential civil liability as to who owned the tractors but whether goods and services tax applies to the deductions from the gross revenue of these owner-operators for the cost of the fuel, licenses and insurance supplied by the Appellant to them.

[154] Regarding licensing, Vanex paid a yearly fee to obtain a pro-rate license to allow trucks to travel to other jurisdictions. I.C.B.C. collects the fees for the other jurisdictions and distributes them. To be included in Vanex's pro-rate license the vehicle has to be registered in Vanex's name for licensing and insurance purposes only. The policy is issued in the name of Vanex. The insurance proceeds would also be paid to Vanex in the event of a claim against the policy. Vanex cannot transfer or assign a license. By obtaining a fleet policy the purchaser obtained a bigger discount than he might if he bought a single insurance policy. I.C.B.C. approved of the registering of vehicles in the name of the trucking company. There is no prohibition against a trucking company passing the cost of the pro-rate license and fleet insurance on to the owner-operators.

[155] If an owner-operator wished to purchase his or her own motor vehicle license he or she could do so and still operate under Vanex's umbrella. If they did Vanex's costs would not have been allocated to the owner-operator in completing his pay. Vanex used truck drivers who are regular employees and owner-operators as well. Of 28 trucks, six were purchased by Vanex and 22 were transferred into Vanex's name by owner-operators for insurance and licensing purposes. These owner-operators drove under Vanex's motor carrier licenses and insurance.

Fuel

[156] If a regular employee driver paid for his fuel he was reimbursed by Vanex. The drivers used card lock cards that had individual PIN numbers. Each card is exclusive to a particular driver and tagged to a particular tractor. Vanex obtained a discount rate based on volume purchases. The statement from Shell set out the fuel, oil and GST cost. Owner-operators could not obtain the same rates unless they had the same volume. Vanex bought the fuel from a supplier and was able to negotiate lower than regular retail costs and then made available those savings in costs to the owner-operators.

[157] The owner-operators did not pay Shell or Petro Canada directly relying on the Vanex's account. The owner-operators could purchase their own fuel or use a Vanex fuel card. If they had purchased their own fuel then Vanex's costs would not have been allocated out in computing the owner-operators pay. Separate statements relative to each drivers card was printed out each month by the fuel company. The fuel bills were issued to the owner-operators by Vanex attaching them to the monthly pay statements.

[158] The fuel was always the responsibility of the owner-operators even if there was nothing written in the Collective Agreement. Miss Hall suggested that the owner-operators could end up owing Vanex money if they were heavy on the gas pedal and had a high fuel bill for the month. This is indicative of the costs being those of the owner. The use of fuel differed from trip to trip and one could not determine in advance what the cost would be. That is why the owner-operators wanted to know what they would be paid for a trip before they made it. Otherwise the drivers would not care how much fuel they burned because Vanex would be paying for it. This was clear from the evidence of Mr. Cleland who was very up front about this point. He said that there was a difference between purchasing and paying for the fuel.

[159] If Mr. Cleland, one of the owner-operators, had used his own fuel card and Vanex was in financial difficulty, Mr. Cleland would lose the money he paid for the fuel and he would not be paid for the trip that he drove that month for Vanex. If Mr. Cleland used Vanex's card and Vanex got into financial difficulties and Mr. Cleland was not paid for the trip, then he would not lose the cost of the fuel. In that way the use of Vanex's card by Mr. Cleland was a form of self-interest.

[160] It was clear from the evidence that the owner-operators received a copy of the fuel bills for the month as they were the ones paying for the fuel, according to the evidence of Mr. Cleland. He said that he was paying for the fuel no differently than if he was buying the fuel at Shell or any other place. Even though he did not have an agreement in place with Shell to provide him with fuel at the reduced cost, he had a verbal agreement with Vanex. The owner-operators could use the card-lock card to buy fuel for personal consumption as well and were not restricted to purchasing the fuel for Vanex's use only as they had to pay for in the end any way. There was no control by Vanex placed upon the owner-operators as to how much fuel they purchased from Shell.

[161] The evidence showed that all the GST charged to Vanex by Shell and Petro Canada was claimed as input tax credits by Vanex for the period in issue.

[162] Ruth Hall, who testified on behalf of Vanex, knew that the owner-operators were claiming an input tax credit for the GST on the fuel as they asked her to separate the GST in the fuel statements. Vanex passed on the GST to the owner-operators. This was clear from the evidence of Mr. Cleland.

Insurance

[163] Vanex bought an umbrella insurance policy through Laurentian/Axa Pacific Insurance Company. I.C.B.C. coverage could be opted out if I.C.B.C. was satisfied that there was proper coverage in place otherwise. I.C.B.C. collected the pro-rate license fees. It was possible for Vanex to obtain a gross revenue premium if they had five or more vehicles registered in their name. The rate was based upon an estimate of the volume of business. The policies were in Vanex's name. Vanex provided a list of equipment for Axa, listing its own vehicles, the owner-operators vehicles were listed separately. Vanex was not licensed to carry on an insurance business in British Columbia. The rate of 4.25% of Vanex's monthly revenue was charged to the owner-operators for their insurance coverage each month. The owner-operators did not pay Axa but paid the insurance premiums directly to Vanex.

[164] The evidence indicated that the insurance company would pay any loss cheque to Vanex. However, if Axa settled with Vanex regarding an owner-operator's truck the insurance proceeds for the damage to the truck would be paid to the owner-operator. Axa does not care who is the eventual recipient of the money. Vanex could direct that the money be paid to anyone, including the owner-operators, and Axa would do it. This can be seen from the evidence of Mr. Cleland who said that he saw a cheque for an accident by one owner-operator Ken Shallard, where the cheque was made payable to Ken Shallard and Vanex.

[165] If an owner-operator wished to take advantage of Vanex's rate on licenses and insurance he had to transfer his vehicle into Vanex's name. The insurance premiums were not marked up by Vanex. The owner-operators could buy their own insurance as long as they had the proper coverage. If they did "Vanex's costs" would not have been allocated to the owner-operators in computing their pay.

[166] The owner-operator was responsible for the insurance deductible if his tractor was in an accident. According to the evidence of Mr. Cleland the owner-operators set up an accident fund to help them with this deductible. It was the owner-operator's responsibility to deal with the insurance company for any claim under the insurance policy relating to his tractor, as it was he who was paying even if Vanex was doing it for him. No one from Vanex was going to deal with the insurance agent on such a claim. The owner-operator bought his insurance through Vanex. He was charged 4.25% of whatever general revenue his tractor generated.

Terms of agreement with owner-operators

[167] Vanex was owned by the Jexes before the Dunkleys bought it. The terms at that time were that a regular employee received the mileage rate and an hourly rate and all the benefits were paid. At the relevant time the terms for an owner-operator were that he received 70% of the revenue generated by his tractor and the costs of operating the tractor were the responsibility of the owner-operator. There was no written agreement as to rates and deductions. Ms. Hall was not sure how the rate was determined as it was in place when she started to work for Vanex. She was not part of the negotiations leading to that figure. She was told what the rates were. She did not know the basis for the figures, just what the figures were.

[168] According to Mr. Cleland the terms of the old agreement remained the same when the Dunkleys bought out the Jexes. Mr. Cleland testified that he specifically asked Dwayne Dunkley if the agreement would be the same.

[169] The Collective Agreement with CLAC was signed by Dwayne Dunkley on behalf of Vanex. This agreement covered all of the employees including owner-operators. Vanex was required to deduct union dues, medical and disability from the cheques of regular employees and owner-operators. The compensation rate for regular employees was set out in this collective agreement. The regular employees also had income tax, Canada Pension Plan (CPP) and Employment Insurance (EI) deducted from their cheques. The owner-operators had their pay calculated according to the mileage and percentage rate. They did not get an hourly rate like regular employees. What Ms. Hall termed as "Vanex's expenses" were deducted from the gross percentage of the owner-operator. The only deductions authorised from the owner-operators' pay under the Collective Agreement were union dues and disability insurance coverage. It is irrelevant that there was nothing in the Collective Agreement about deductions.

[170] The 1991 Collective Agreement did not address the issue of the owner-operators' responsibility for the cost of operating his vehicle as it was simply presumed that the provision of the truck, the maintenance of the truck, the fuel to operate the truck and all the attendant costs were the responsibility of the owner-operator.

[171] After the Dunkleys bought Vanex the owner-operators received 75% of the revenue for a trip, depending on the type of trip and trailer. An example of such deduction from Cleland's revenue on the 75% or mileage rate, were discussed in the evidence of Mr. Cleland and in the evidence of Ruth Hall.

[172] It is obvious that the 25% deductions were what the owner-operators paid to run under Vanex's licences. Vanex supplied trailers, licences and collected the money from the customers to pay for the trips which were driven by the owner-operators. The 25% or 13%, depending on the situation, was used to cover the dispatch fees and the cost of the trailer if they used Vanex's trailers.

[173] In the Collective Agreement with CLAC, it was set out that the employee compensation was as per current practice unless both parties agreed to a change. This was also confirmed by Mr. Cleland as well as Mr. Kooger. The current practice in 1991 was that the fuel, license and insurance were not surcharged. The owner-operator was responsible for maintaining his equipment but an employee is not, according to Mr. Cleland. The owner-operator was supplying more than labour, he was supplying his tractor and therefore he received more money.

Ownership of trucks not purchased for value by Vanex

[174] Exhibit R-26, tab 32 at page 2 shows that the capital assets listed by Vanex did not include the owner-operators' tractors. At page 5 the depreciation was not taken on the owner-operator tractors. According to the evidence of Mr. Cleland, part of the sale from the Jexes to the Dunkleys included the undertaking that the trucks in the company name belonged to the owner-operators. According to Mr. Cleland he had a legal document to state that the tractor was his even though he left it registered in Vanex's name. Vanex took the tractor payment from his cheque.

[175] The owner-operators were responsible for the insurance deductible if their tractors were in an accident. They were responsible for this as they were the owner-operators' trucks. This was the direct evidence from Mr. Cleland. The owner-operators set up an accident fund to help the owner-operators with these deductibles as indicated earlier in this argument. If a tractor needed new tires the owner-operator was responsible for purchasing them as it was his vehicle. There was no real sale, it was just for licensing purposes.

[176] Mr. Cleland testified that in 1994 Vanex rented his tractor from him and paid him $1,000.00 per month. If it was their vehicle, why would they pay him for it? The same question was raised by Mr. Cleland in his evidence.

[177] The payments for the tractor were deducted from the revenue of Cleland, even though Vanex was either the borrower or the co-signee for the tractor loan, and alternative financing was the responsibility of Mr. Cleland if he left Vanex. Why would Mr. Cleland be responsible for this if it were not his vehicle? In the evidence of Ruth Hall she referred to one Norm Ferris, another owner-operator, as a beneficial owner. Mr. Cleland said that when Norm Ferris stopped driving for Vanex his truck was transferred back to his name from that of Vanex.

[178] Whose expenses are they? The evidence shows that the expenses for tires and repairs for vehicles operated by an employee were paid by Vanex. However, the owner-operator was responsible for his own cost of operating his tractor, according to Mr. Cleland. The owner-operator had an option to either use the company's account or pay for his own expenses directly. The expenses are those of the owner-operators, even if Vanex's accounts were used, as these expenses were deducted from the monthly cheque of the owner-operator.

[179] The owner-operator did not want to be caught for the expenses personally in case a company such as Vanex failed, in which case the owner-operator would not receive his revenue, but he would still not have to pay the cost of the fuel etc., which was used for performing work for Vanex. If otherwise, the owner-operator could be left owing for the fuel and yet not be paid for his trip. Consequently, he decided to use Vanex's card as a form of partial protection for himself. It can be seen from the statements that the expenses were not deducted from the gross revenue earned by the tractor for a month but from the portion of the gross revenue allotted to the owner-operator. This was clear from the evidence of Mr. Cleland.

[180] According to the evidence of Ruth Hall there was no agreement that expenses could be taken off. The owner-operator was expected to pay out of his percentage of gross revenue or mileage compensation all of his costs, such as insurance, fuel, plates or anything related to driving the vehicle. All of these items a company driver was not expected to pay.

[181] Mr. Cleland gave evidence clearly and directly that his revenue was at 75% of the gross revenue for his tractor. The net cheque that he received was after all the deductions were taken. All of the payments were taken off of his account. The bottom line was not what the vehicle earned.

[182] When the Dunkleys bought Vanex it was agreed that the terms would stay the same, i.e. a percentage of the revenue would be paid to the owner-operators but some of the rates increased due to the type of trailers being pulled. This was clear from the evidence of Mr. Cleland. Further, Mr. Cleland testified that he added up the revenue line on his pay statement for his gross business income for income tax purposes and then deducted the expenses such as the cost of the fuel, insurance and licenses from his pay statement to come up with a net income. To do this he said that he used the top line or the revenue line as his income.

[183] Exhibit A-7 was an example of the first page of a pay statement for Bob Cleland for February 1993. The pay statement was separated into two portions. The top portion set out the revenue as $14,365.41 and the medical was $140.00 for a total of $14,505.41. The deductions from this gross revenue are set out and itemized on the pay statement. Among the expenses are the charges for the fuel and insurance. These were the expenses of the owner-operator that he owed to Vanex as well as deductions such as child support and union dues that he had authorised to be deducted from his gross revenue. Exhibit R-33 was a detailed version with attachment of A-7. A detailed explanation of each deduction was given by Mr. Cleland. Cleland claimed meals and travel expenses while on the road in his tax return. This was an indication that he was not an employee.

[184] Mr. Cleland testified that when he worked as a dispatcher for Vanex for one year he received $1,000.00 rental for his tractor and Vanex paid all of the tractor expenses such as fuel and truck payments. He did not receive monthly pay statements for that year. This was because he was an employee and not an owner-operator.

[185] With respect to Kilrich it was shown that he owned his own tractor and trailer, he used his own license and insurance, as well as having his own fuel account, so that he received the full 87% without any deductions from his percentage pay. The reason Kilrich received the 87% was that he paid for everything himself. According to Ruth Hall if Cleland had purchased his own fuel, his own license, his insurance and had paid for his repairs, his pay statement would have been the same as Kilrich's pay statement. Cleland then would have received the full amount allotted to the tractor if there were no expenses paid by Vanex. Cleland would have received the full 75% if he had provided his own fuel, licenses and insurance. Just because Cleland purchased the items from Vanex does not mean that they were not his expenses.

[186] Ruth Hall was not certain as to who set up the format of the pay statement for the owner-operators as it had been set up in this format for years. She started to work for Vanex in July 1992.

[187] Exhibit A-7 was one page of Exhibit R-33 and was the pay statement for February for Bob Cleland. This statement showed that the Shell fuel bill was $3,728.57, which included GST of $243.91, and the total Petro Canada fuel bill was $772.86, which included GST, for a total fuel bill of $4,501.43, including GST, because Vanex had deducted that amount from the revenue of Bob Cleland for this month. An input tax credit was claimed by Vanex for this GST included in the fuel statement and deducted from the revenue of Cleland. Cleland testified that he spoke to Revenue Canada about not using the gross revenue figure for the requirement to pay, and allowing it be calculated after his fuel and insurance expenses were deducted, so that he could pay off his indebtedness more easily. It is clear that Revenue Canada considered the top figure as Bob Cleland's.

[188] Ruth Hall was responsible for providing accounting figures to the accountants of Vanex for financial statement preparation purposes. In the financial statements (Exhibit R-26, tab 32) the employees and owner-operators were dealt with separately. The direct cost of the fuel for the employees was a specific entry on page 3 but the fuel cost for the owner-operators was subsumed in the entry for sub-contractors. The witness was unable to give any explanation for some of the entries in the financial statement and did not have the general ledger with her. She could not say if the $60,000,00 figure was only for employee drivers and could not point out where the 4.25% of insurance cost was dealt with in the financial statement. She agreed that the $2,779,437.00 figure at the top of page 3 of the financial statements in Exhibit R-26 at tab 22 was a total of all of the revenue lines on all of the pay statements for the owner-operators for the year dealt with in Exhibit R-26. Vanex considered all of these as their expenses. This was taken from the top line in all the pay statements.

[189] When Ruth Hall looked at the pay statement for Cleland she testified that Vanex's share had come off before the revenue figure was entered. Although Exhibit A-7 was entitled "Pay Statement for February 1993 for Bob Cleland number 004", Miss Hall testified that that was the income for the tractor, not for Cleland. However, she acknowledged that the expenses deducted were Cleland's and not the tractor's. Mr. Cleland testified that Exhibits R-33 and R-34 were his pay statements.

[190] An owner-operator could end up owing money to Vanex after a number of trips in a month because the expenses incurred to obtain that revenue might be greater than the revenue earned. That would not be so if the driver were an employee. One could only end up owing the company money if the expenses were those of the drivers and not those of the company.

[191] One must keep in mind that the intent of the GST provisions is to provide that all supplies are taxable unless they are specifically exempt or zero-rated. The obligation to collect GST falls on the person providing the taxable supply, in this case Vanex. In the case at bar the requirement was on Vanex to collect the GST for the re-supply because at this point in time they were no longer zero-rated or exempt.

[192] Section 123 defines a supply as "the provision of property or a service in any matter, including sale, transfer, barter, exchange, license, rental, lease, gift or disposition". The Respondent's position was that Vanex either supplied the fuel, license and insurance by sale, transfer or disposition to the owner-operators, or provided a service. Section 178 of the Act states that "where in making a supply of a service a person incurred an expense for which the person is reimbursed by the recipient of the supply, the reimbursement shall be deemed to be part of the consideration for the supply of the service, except to the extent that it was incurred by the person as an agent of the recipient". In the case at bar Vanex incurred expenses providing the service of a license, fuel and insurance to the owner-operators but was reimbursed for such service by the deduction from the gross revenue of the owner-operators for the cost of the license, fuel and insurance.

[193] In the case of Customs and Excises Commissioners v. Oliver, [1980] All E.R. 353 (Q.B.) a supply is defined as "the passing of possession of goods pursuant to an agreement whereunder the supplier agrees to part with and the recipient agrees to take possession. By 'possession' is meant in this context, control over the goods, in the sense of having the immediate facility for their use. This may or may not involve the physical removal of the goods".

[194] Counsel for the Appellant was suggesting that no possession was given over to the owner-operators. But the owner-operators received the gas and a statement showing what they had purchased. They had enough possession for the Court to conclude that they had been "supplied with these goods".

[195] In Imperial Drywall Contracting Inc. v. The Queen (supra) the Court dealt with the issue of what constituted a supply. However, this case is distinguishable as there was no evidence called by the Respondent in that case. It would be like the situation in the case at bar if the only evidence was that called by the Appellant. The conclusion reached in Imperial Drywall (supra) might have been different if any evidence had been presented on behalf of the sub-contractors to show their position as to the effect of the deductions and on the issue of whose expenses these were. That case is not on all fours with the present case. It was a one-sided case.

[196] The suggestion of counsel for the Appellant that the supply was for a limited use only and cannot therefore be a supply is indeed a novel one. The term "supply" includes rental which is a limited use but it is still a supply. Again there was no evidence in Imperial Drywall (supra), as to how limited the use of the materials were by the sub-contractors, unlike the case at bar. In this case there was evidence by Mr. Cleland as to what his rights were.

[197] In this case there was evidence that the owner-operators paid for the supplies. In Imperial Drywall (supra) they would keep track of the supplies and estimate their costs. The evidence from Bob Cleland was quite clear that the amount of fuel needed to do a specific job varied from day to day and could not be estimated. That is why Vanex charged the fuel used to the owner-operators. It was an incentive for them to be careful in fuel consumption. Vanex was not worried about the cost because they knew that the owner-operators received only 75% of the revenue and paid for the fuel.

[198] Counsel asked the question: If the cost of the fuel was truly Vanex's, why were personal PIN numbers given to the owner-operators and copies of the statements provided to them? The answer must be so that they would know exactly what they had used and could verify that they were being charged the correct amount.

[199] Counsel asked a further question: Why was the entire cost of the fuel taken from the portion allotted to the owner-operator if it is an expense of Vanex? Should it not have been calculated on the full payment from the customer for the job in question and not just on the portion allotted to the owner-operator? This treatment shows that the expense was that of the owner-operator. If he received $100.00 as his allotted share of the monthly work he could choose to either buy the fuel from an independent or from Vanex. The bottom line is that the $100.00 belonged to him. If it were Vanex's, the cost should come off of the total amount of income to the truck and not just off of the owner-operator's share.

[200] Counsel took the position that none of these re-supplies were either exempt or zero-rated. No evidence was called by the Appellant to show that these supplies fall into these two categories. Thus, if the Court decides that there was a taxable re-supply, then GST should have been collected and remitted.

[201] Vanex arranged a method of buying the fuel, obtaining insurance and licenses and then was either reimbursed for the service in the case of the license and insurance, or in the case of the fuel, re-supplied it to the owner-operators. The consideration for the re-supply was the reimbursement of Vanex for the expenditures in acquiring fuel, licenses and insurance at a better rate then the individual owner-operator could obtain. It was clear from the evidence that the individual owner-operators could have acquired these three items for themselves and Vanex could not then have charged them for them. The owner-operators would simply have paid a third party for them. The owner-operators chose to buy these items through Vanex and pay Vanex for them instead of paying the individual suppliers. GST should have been collected by Vanex on these re-supplies.

[202] According to the evidence of Mr. Cleland he would not drive for a company that did not supply the fuel. This was not because the provision of fuel was Vanex's responsibility or cost but because it sheltered him economically from the risk of the trucking industry. Trucking companies obtained running rights and licenses. Again this is industry practice but, except for their own vehicles, it is not Vanex's cost but is the cost of the owner-operator whose responsibility it is to provide a tractor, ready to haul, to the trucking company in exchange for his 75% or mileage rate. If the expenses of the owner-operators are truly those of Vanex, why are there two separate sets of rates for hauling? The owner-operators receive more than the regular employee drivers and that is because they have to pay their own costs relating to their tractor while the regular employee-drivers do not. These expenses of the owner-operators came off of the owner-operators' 75%.

[203] Counsel asked the question: If there is not a cost component built into this allotted portion and the costs are truly those of Vanex, why are they considered at all? Why not just add on a certain percentage to compensate the owner-operator for his investment. The cost should not be an issue at all if you are only attempting to compensate the owner-operator for his investment.

[204] The clear and unequivocal evidence of Bob Cleland, supported by that of Mr. Kooger, was that the owner-operators were paid 75% of the gross revenue for a trip and any deductions from that gross revenue were on account of expenses that were the responsibility of the owner-operators. There was a monthly accounting pay statement provided to each owner-operator which included his deductions from the gross revenue for the fuel, license and insurance cost.

[205] Counsel referred to the case of Carlton Lodge Club v. Customs and Excises Commissioners, [1974] All E.R. 798 (Q.B.) which dealt with the question of what constituted a supply, particularly at pages 800 and 801.

[206] She pointed out that none of the Dunkleys were called to give evidence as to the terms of any agreement with the owner-operators and Miss Hall's evidence was that she was not party to the agreement or to the terms of the agreement. She simply did the accounting for the pay statements for the owner-operators in the manner in which they had been done before she joined Vanex as a bookkeeper. Thus, the evidence before the Court as to the terms of the other agreement is the testimony of Bob Cleland and Mr. Kooger.

[207] Again counsel asked the question: If these were truly the expenses of Vanex why were they not calculated on the total gross revenue for each owner-operator for each month instead of being calculated on the gross revenue allotted to each owner-operator for each month?

[208] It would only be possible to escape the requirement to pay GST if the supplies were zero-rated or exempt, and they were not in the case at bar.

[209] In addition, the fuel bill attached to the pay statements entered as Exhibits R-33 and R-34 showed that GST was included in the cost of the fuel that was deducted from the gross revenue of the owner-operators. The amount of this included GST should have been remitted by Vanex for each of these re-supplies. It is important to know that not only did Vanex claim the input tax credit for these supplies but so did the owner-operators. Thus, here, while the end user paid the GST relating to this fuel to Vanex, Vanex did not remit the GST and thus the Minister, after not receiving any GST, paid out the input tax credit to both Vanex and the owner-operators. Had Vanex actually remitted the portion of the GST payable on the fuel bills to Revenue Canada, they were perfectly entitled to claim input tax credits, but they did not do it.

[210] Although the initial supply of the licenses and insurance from the government or insurance company to Vanex was exempt or zero-rated pursuant to schedule 5, part 6 of schedule 6 of the Excise Tax Act, they were not exempt or zero-rated when Vanex charged the owner-operators for the cost of these items. Vanex did not claim and was not entitled to input tax credits with respect to the insurance and licenses as they did not pay any for them and because they were either zero-rated or exempt from either the insurance company or the government body to Vanex.

[211] Part 6 schedule 5, paragraph 20(c) exempts supplies made by a government body. Vanex was not a government body and thus could not supply a license to the owner-operators and be exempt or zero-rated. Vanex was not the agent of the owner-operators as the evidence showed that the owner-operators were legally responsible for the initial supply to them of the insurance, fuel and license and thus they were not acting in an agency capacity. No evidence was put forward by Vanex to suggest that Vanex was acting as agent for the owner-operators in acquiring any of these supplies. If Vanex was purchasing as agent for the owner-operators they would be exempt, but the evidence of the owner-operators was that they were responsible and that Vanex was not their agent.

[212] Counsel referred to the case of Parkland Crane Service Ltd. v. The Queen, [1994] G.S.T.C. 58 (T.C.C.) which dealt with travel permits for cranes. In that case Parkland obtained these permits and then charged their customers for their permits but did not add GST to the charge. The Court held that Parkland was not an agent for the customers as set out in Section 178 and thus could not re-supply those services exempt of GST. Vanex was not the agent of the owner-operators who were not risk free on these transactions and they did receive benefits from the obtaining of these services, in that they were able to run their business by using these services but they also paid for them. The owner-operators could have obtained these same services outside of Vanex.

[213] In National Transit Insurance Co. Ltd. v. Customs and Excises Commissioners, [1975] 1 All E.R. 303 (Q.B.) it was held that the sum involved was not for the reimbursing of an agent. Likewise there is no agency involved in this case. It was not a reimbursement as an agent.

[214] Vanex was not an insurance company and therefore could not supply the insurance at an exempt of zero rate. They had to charge and remit the 7% GST applicable to the supply. In Stobbe Construction Ltd. v. The Queen, [1996] G.S.T.C. 41 (T.C.C.) the Court held that the re-supply of insurance, property taxes and utilities, although GST free when acquired, were not GST free when supplied and charged back to the tenant. It does not matter that the company supplied them. They were billed back.

[215] Counsel referred to the argument put forward by counsel for the Appellant that parts of the insurance were for Vanex's benefit and not for the benefit of the owner-operators. Yet the entire insurance cost was charged to the portion of the revenues for a month or job that was allotted to the owner-operator as his gross revenue. It does not appear that any of it was paid from the 25% or 13% of the revenues kept by Vanex.

[216] Counsel admitted that subparagraph (h) of the Respondent's pleadings was incorrect when it referred specifically to the insurance policy of I.C.B.C. but argued that the balance of the paragraph was correct and was relied on. It was her position that there was sufficient evidence presented to the Court for it to conclude that the actual insurer was initially Laurentian and then changed its name to Axa Pacific Insurance. There was also evidence to support the balance of the assumption of the Minister that the insurance obtained covered both the tractors driven by the regular employee drivers and the owner-operators.

[217] Likewise, subparagraph (i) of the pleadings was incorrect when it specifically referred to a small mark-up being charged to the owner-operators, but the assumption that a proportion of that share was charged to each owner-operator is supported by the evidence, and each owner-operator was charged 4.25% of the monthly gross revenue for insurance. Therefore, the entire assumption is not rebutted because there was still an insurance company involved and the cost was charged back to the owner-operators. The burden of the Appellant was not met in showing that the assessment was incorrect.

[218] Just because the Appellant may have rebutted some portion of the assumptions, it is not enough for the Appellant to meet the burden of proving that the assessment was wrongly made because there was sufficient evidence before the Court to prove that the underlying premise of the assumptions was indeed correct.

[219] The evidence of both Ruth Hall and Bob Cleland was that if the owner-operator chose to purchase their fuel, insurance and license elsewhere they received the full revenue line on the monthly pay statement. How they obtained these items, as long as they had them appeared to have been irrelevant. If the owner-operator provided them he received a full allotted share of the monthly revenue generated by his tractor. If he purchased part of his fuel elsewhere it did not affect Vanex, it simply meant that the owner-operator had fuel deductions from his gross revenue.

[220] Because the owner-operator chose to obtain the fuel, insurance and license through Vanex at a saving, this does not convert these items to Vanex's expenses. They were still the responsibility of the owner-operators and that is clear from the evidence of Bob Cleland and Mr. Kooger.

[221] When Vanex chose to obtain these services and then re-supply them to the owner-operators they, as would any other supplier that was not a licensed insurance dealer or government agent, had an obligation to charge, collect and remit the applicable 7% GST on these re-supplies.

[222] The evidence of Bob Cleland clearly indicated that this was not insurance for Vanex but was insurance for the owner-operators. They were the ones to pay the deductible, they dealt with the insurance company and paid Vanex through monthly deductions for the cost of the insurance. The reason for the insurance being obtained through Vanex and not directly was the cost. It was clear that although the tractors were registered in Vanex's name the owner-operators were still the beneficial owners of the tractors. If they were truly Vanex's vehicles, Vanex would have had the obligation of insuring them and this cost would not have come from the owner-operators gross revenue portion but would have been a cost to Vanex.

[223] Again, with respect to the cost of fuel, the purchase of this fuel through Vanex was only a matter of convenience and savings for the owner-operators. The evidence of Ruth Hall and Bob Cleland was that the owner-operators could buy the fuel elsewhere with their own account and not be charged for it by Vanex. Bob Cleland indicated that he viewed having Vanex's card as some small protection for himself. His evidence was that he would not be paid for January until the end of February. If he had paid initially for the fuel over January and never received his gross revenue for this month then he would be out of pocket for this revenue and the money paid for the fuel. This way he did not have to pay for the fuel and received the total revenue for the month. That fuel was consumed.

[224] With respect to the pro-rate licenses obtained by Vanex for the running rights for the different jurisdictions, the evidence of Miss Leung was that there was no policy in place prohibiting the costs for the pro-rate licenses and insurance being passed on to the owner-operators. That is what Vanex has done in the situation at bar. Once again the motivating factor for the owner-operators was that the pro-rate license could be obtained through Vanex at a discount over the cost for an individual owner-operator. Vanex had an obligation to charge 7% GST for this re-supply role as Vanex was not a government body and therefore could not re-supply this as an exempt or zero rated supply.

[225] The only evidence with respect to the oral terms existing between Vanex and the owner-operators came from Bob Cleland and Mr. Kooger. Miss Hall was not part of negotiations and was not conversant with the actual terms of the agreement. It was clear from the evidence given on this issue that 75% of the revenue line on the pay statement was the amount of the monthly revenue generated by each tractor that was allotted to the owner-operator. Any deductions from that revenue relate to the expenses of the owner-operator in operating his tractor or were specifically authorized deductions, either by the collective agreement or deductions of the owner-operator himself which he had authorized Vanex to deduct, such as child support payments.

[226] The assertion by Ruth Hall that these expenses were Vanex's expenses simply does not hold up as it is not based on her specific knowledge but only on her understanding of the bookkeeping practice. When met by the cogent and critical evidence of Bob Cleland, supported by Mr. Kooger, that these were the expenses of the owner-operator from his gross revenue, her evidence is not acceptable.

[227] The suggestion by counsel for the Appellant that the pay statements are in error because they do not reflect Miss Hall's understanding of the terms of the oral agreement is without foundation. She indicated in her testimony that she did not know the basis for these figures, she just did it that way. How is this support for the argument that the pay statements were erroneous? There was ample evidence from Mr. Cleland that they were in accord with the standard practice and the ongoing agreements between him and the predecessor of the Dunkleys themselves.

[228] The actions of Bob Cleland in reporting the gross revenue figures on these pay statements as his gross income for tax purposes and deducting the expenses of running his tractor, show that he was very clear as to what was his money and what were his expenses.

[229] The financial statements at tab 22, entered into evidence as Exhibit R-26, support the contention that these were the expenses of the owner-operators. There was no specific charge in the financial statement for the portion of the fuel, license and insurance payable relative to the tractors of the owner-operators. Just the regular employee driven tractors. Instead, it can be seen at page 3 that there was an overall direct cost to Vanex for the sub-contractors, the owner-operators, being the total of all of the gross revenue figures on all of the pay statements for all of the owner-operators.

[230] In addition, the evidence was clear that the general maintenance, such as repairs, tires and meals while on the road were borne by the owner-operators and not by Vanex. In general, an employee is not responsible for the general operating cost of the business. In the case at bar, the usual deductions such as income tax and CPP were not taken from the owner-operators but only from the regular employee drivers. Clearly the owner-operators, whether they are referred to as employees in the Collective Agreement, for the purpose of the Collective Agreement, they were not employees for any other purposes, but were independent contractors.

[231] In the case of Fedderly Transportation Ltd. v. The Queen, [1998] G.S.T.C. 77 (T.C.C.) which was a trucking case, minimal evidence was called. The Court decided that the fuel was GST taxable but that the insurance and licensees were not as the reimbursement was part of the consideration for the brokerage service. However, in the case at bar there was no evidence of a brokerage service and thus all of the charges back to the owner-operators here were taxable. This decision was akin to the agency argument. Therefore the findings in that case are not binding on this Court.

[232] Finally, there was a legal fiction in place in this case that the tractors of the owner-operators were really those of Vanex but that does not affect who had to pay the GST. Vanex was not an interliner with respect to the services here and the waiver of the sales tax on the transfer over to Vanex does not affect the situation here.

[233] The Appellant has not met the burden imposed on it of showing that the assessment of the Minister was wrong. The appeal should be dismissed with costs and the Minister's assessment confirmed.

Rebuttal

[234] In rebuttal, counsel for the Appellant said that Fedderly (supra) is distinguishable because the assessment in that case was under Section 178 and Section 175 deems the reimbursement to be taxable in the same way as the service. In Fedderly (supra) the Minister alleged that there was a service but in the case at bar the Minister is alleging that there was a supply. There is no allegation in the case at bar that there was a service provided. Therefore, the Minister here cannot rely upon Section 178. Counsel referred to Her Majesty The Queen v. Continental Bank of Canada, 98 DTC 6501 (S.C.C.) to suppport this proposition. The argument of counsel was that the Minister cannot rely upon a section that he has not pleaded on the basis of that case.

[235] Counsel argued that the Income Tax Act has been amended to affect a change in allowing the Minister to rely upon a section of the Act even though he has not pleaded it, but the GST provisions have not been amended. Insofar as counsel was concerned the Continental Bank case (supra) "upsets the apple cart", where it was earlier believed that it is the assessment that is under appeal and not the reasons for it. The Minister in the case at bar has made an assessment based upon a certain section and he cannot now amend it.

[236] The evidence of Ruth Hall was that the company provided no service, and if the Minister wishes to rely on section 178, there is no basis for it in the evidence. Further, Mr. Kooger said that he did not know what the current practice was although the Minister is arguing that his evidence supports his position that the current practice of paying the percentage rate to the owner-operators was in force.

[237] With respect to the financial statements, one cannot draw any inferences from the financial statements in that Vanex did not draw any revenue from the alleged services in question. Vanex was in the business of hauling freight, not providing services of insurance, gas, oil, etc. These amounts were set out in the balance sheet but this means nothing because there was no cost to Vanex.

[238] Even if the Court should conclude that the evidence of Mr. Cleland was credible and that his agreement with Vanex was as he said, there was no evidence that the other owner-operators operated under the same agreement and Ruth Hall's evidence was completely in disagreement with that of Mr. Cleland.

[239] If Vanex received an input tax credit on the GST, then that was something between Vanex and the owner-operators. It was not something that the Minister should be concerned about.

[240] Counsel also referred to the evidence of Mr. Cleland where he claimed meals and travel expenses on an employee form for tax purposes.

[241] Further, none of the owner-operators did any filing for fuel tax purposes, Vanex did it. If the owner-operators were purchasing fuel from Vanex they should have reported it.

[242] Again counsel reiterated that the facts in Imperial Drywall, (supra) were on all fours with this case. He took issue with the argument of counsel for the Respondent in saying that there was no evidence in Imperial Drywall (supra) as to the limited use of the materials. The fact was that the materials became part of the real property when used. In Parkland Crane Service Ltd. (supra) the company also charged the cost of the permit as a separate item on the invoice. They referred to it as a re-supply but there is no such term in the Act. This was referred to by counsel for the Appellant as "Crown jargon". In that case they were not supplying the customers with the permits, none of them moved the cranes. The crane service supply was taxable but the permit cost was not considered to be part of the consideration for the service that was taxable.

[243] In Stobbe Construction Ltd. (supra) there was no real analysis of the issues. If the Court had analyzed the issues and the facts it would have decided that the taxes were not property or services. In any event the utilities in that case had no limitation as to their use.

[244] Counsel disputed the argument of counsel for the Respondent that the costs were recovered from the owner-operators. He said that this was not correct. All that the owner-operator received was the cost of the labour plus some consideration for their investment which was the same as in Imperial Drywall (supra).

[245] He reiterated his position that the statements and invoices in the case at bar were not correct.

[246] Further, the United Kingdom cases are not germane to the case at bar because here there was no divestiture of the goods. The only use the owner-operators had of the goods was a limited use. GST deals only with commercial leases and provincial leases are exempt.

Surrebbuttal

[247] In surrebbuttal counsel for the Respondent said that the term supply includes services according to the Act. The Minister pleaded that there was a supply. This pleading creates no problem for the Respondent here.

[248] The evidence shows that the statement of the other owner-operators as shown in Exhibits R-12 and R-21 were set up the same way as Mr. Cleland’s. There was no difference between them. There was no evidence that Mr. Cleland was paid for his investment and Ruth Hall's evidence indicated otherwise.

Analysis and Decision

[249] A number of issues arise in this case upon which there is conflicting evidence when the Court considers the evidence of Mr. Bob Cleland, one of the owner-operators in comparison to the evidence of Ruth Hall who referred to herself as a controller of the Appellant. There could be no doubt that she was involved in other aspects of the company business including cash flow, accounting methods, personnel, payroll and to some extent in filing tax returns and reporting to agencies on behalf of the company. She also said that she assisted in making decisions in the company. However, when she was pressed for an explanation on these figures, her answers were confusing and in some cases she said that she did not know. Likewise, she did not know who set up the format of the pay statement for the owner-operators.

[250] In questioning by the Respondent, she was unable to give explanations for some of the entries in the financial statements and she did not have a general ledger with her. She could not say if the $60,000.00 figure was only for employee drivers and could not point out where the 4.25% of the insurance cost was dealt with in the financial statements, as requested by counsel for the Respondent and referred to in her argument.

[251] When referred to the pay statements for Bob Cleland she confirmed that Vanex's share comes off before the revenue figure is entered although the exhibit was referred to as a pay statement for the month of February for Bob Cleland regarding unit number 004. She acknowledged that the expenses deducted were Cleland's and not those of the tractors.

[252] This witness was not completely forthright in her evidence. She was either being deliberately evasive or did not know what some of the figures represented. Consequently, her statement that the company provided no services to the owner-operators or that the expenses in issue were those of Vanex rather than those of the owner-operators, without anything further to substantiate those statements, is not to be given much weight by this Court.

[253] It would seem to this Court that it would have been a simple matter for some of the serious issues in this case to have been cleared up by the evidence of some knowledgeable representative of the company, who could have explained why these statements sent to the owner-operators, were represented as they were, from the history of the statements and perhaps have given some support to the contention of counsel for the Appellant, that the statements were indeed in error and did not mean what they appeared to say.

[254] The Appellant decided to rely upon the evidence of Miss Hall in support of its position, which in many instances was contradicted by the evidence of Mr. Kooger and Mr. Bob Cleland in particular. This evidence demanded that further explanations be provided with respect to these contentious matters.

[255] In contrast to that evidence, the evidence of Bob Cleland was straight-forward and complete. This witness was very knowledgeable of the trucking operation of the Appellant and of the trucking industry in the area in which the Appellant operated. He had been an employee of the Appellant, had leased his vehicle at one time to the Appellant and received generous consideration for it. He was knowledgeable of how the insurance claims were processed; what his rights were with respect to the unit which he operated and which he referred to as his own. He gave no quarter when pressed on a number of issues by counsel for the Appellant.

[256] There can be no doubt from his evidence that he considered himself to be an independent contractor, that the vehicle that he used, although temporarily transferred over to Vanex was his own and that as soon as he finished working for Vanex he would be entitled to have the vehicle back into his own name. The expenses, he maintained, were his own responsibility. He was entitled to claim income tax credits with respect to these expenses and did so in his income tax returns. What he received was on the basis of 75% of the gross revenue figure. In spite of the fact that he said there was nothing in the agreement about his expenses, he pointed out that if Vanex was purchasing the fuel then the drivers would not care what the costs were and they would not be charged for them. Likewise. he claimed an income tax credit for the fuel for the years 1991 to 1994. When he received it he believed that he was entitled to it. Likewise, he asked Miss Hall to separate the GST on the statements from the fuel companies so that he could make his claim.

[257] The evidence of Miss Hall was also, to some extent, at odds with the evidence of Frank Kooger and he confirmed that owner-operators were to have a 75/25 split for the truck only and a 90/10 split for truck and trailer. He said that the costs of operating an owner-operator vehicle were not addressed in the agreement specifically but it was understood that all of those costs were to be borne by the owner-operator. To him the term "independent contractor" and "owner-operator" were the same thing. He said that it was not possible that Vanex could have calculated the pay of the owner-operators on the basis of their expenses. He was aware that Vanex operators received 75% of the gross revenue and Vanex received 25%.

[258] The Court finds that the evidence of Bob Cleland and Frank Kooger is preferable and more credible than the evidence of Ruth Hall on any crucial issue and it accepts their evidence over hers where there is conflict.

[259] It is also interesting to note that Bob Cleland was the only owner-operator who was called to give evidence. If there was any issue with respect to the position of the owner-operators, as expressed by Bob Cleland, surely it was open to the Appellant to call any one or more of these operators to show that the Appellant’s position was incorrect. This was not done. Consequently, his evidence was the only evidence of any knowledgeable operative as to what the practice was at Vanex with respect to the various matters in issue. He certainly did not consider that what he received from Vanex was a return on his investment as argued by counsel for the Appellant.

[260] Counsel for the Appellant argued that Vanex did not supply licenses to the owner-operators, because Vanex was a licencee under both and these licenses were not transferrable or assignable and none were transferred or assigned. Likewise, Vanex did not supply insurance to the owner-operators because Vanex was the insured under the policies and they were not transferrable or assignable, nor were they transferred of assigned. However, the Court is satisfied that in order for there to have been a supply of the license and the insurance to the owner-operators there need not have been a transfer or assignment of the policy in issue. In essence, the license permits Vanex to operate its vehicles on the highway and the insurance policy covers the vehicles for liability which they might incur as a result of operating on the highways. The same benefits were enjoyed by the owner-operators once they transferred over their vehicles, for purposes of insurance and licenses only to Vanex because then they operated the vehicles themselves under the protection of the insurance policy and on the basis of the licenses which were obtained by Vanex. Surely it was the provision of the protection offered by the insurance policy provided by Vanex and the right of the owner-operators to operate their vehicles under the permits and licenses obtained by Vanex, which was the essence of the supply by Vanex to the owner-operators.

[261] As counsel for the Respondent pointed out, and as it was clear from the evidence, these policies were in Vanex's name. Vanex provided a list of equipment for Axa, listing its own vehicles and the owner-operators vehicles separately. However, once the owner-operators fell under the umbrella of Vanex's insurance policy even though they may not have received exactly the same coverage as that provided under the fleet policy to Vanex, nonetheless, they were receiving insurance coverage. Further, the evidence is clear that a rate of 4.25% of Vanex's monthly revenue was charged to the owner-operators for their insurance coverage each month. The owner-operators did not pay Axa but nonetheless they were paying for insurance coverage on their vehicles.

[262] It is not determinative of the issues in this case as to how the insurance company would pay any loss on a claim, be it to Vanex or the owner-operators. However, it is clear from the evidence of Mr. Cleland from his own personal knowledge that if damage occured to an owner-operator's vehicle while he was supplying the services to Vanex and while he was covered under their insurance policy, damages for that truck ultimely would be paid to the owner-operator. So long as Vanex directed the insurance company to pay the money to the owner-operators, that could and would be done. Further, the owner-operators were clearly responsible for their insurance deductible in the event that their tractor was involved in an accident and indeed Mr. Cleland indicated that the owner-operators set up an accident fund to help them with these deductibles. Further, it was the owner-operators responsibility to deal with the insurance company for any claim under the insurance policy relating to his tractor.

[263] Likewise, with respect to the licenses, it is clear that Vanex paid a yearly fee to obtain a pro-rate license to allow trucks to travel to other jurisdiction. In order for a vehicle to be included in Vanex’s pro-rate license, the vehicle had to be registered in Vanex's name for license and insurance purposes only. If an owner-operator wished to purchase his or her own motor vehicle license he or she could do so and still operate under Vanex's umbrella. However, the owner-operators could not operate their vehicles if they did not have such a license in their own name or if they were not operating under the umbrella of Vanex's license. Consequently what Vanex supplied to the Appellants was the ability to operate on the highways by making use of the licenses of Vanex and they paid for the use of that motor vehicle license.

[264] Counsel argued that if the licenses, insurance, fuel and lubricants were supplied to the owner-operators, they paid no consideration for those items. The Court rejects this argument outright because it is clear from the evidence, as indicated above that they did pay for the insurance, they did pay for the use of the licenses and they were billed each month by way of deduction, for the cost of the fuel and lubricants which were purchased on the credit of the Appellant, deducted from the moneys owing to the lease operators each month and this whole matter was set out on a pay statement sent to each owner-operator by Vanex.

[265] It may very well be that Vanex was responsible to the suppliers because Vanex was the credit card holder. However, that does not change the fact that at the end of the day it was the lease-operators who paid for the product that they used, fully accepted the fact that the products were their own, that they had purchased them, that they were entitled to claim input tax credit on them and that the only reason they purchased them through Vanex was so that they could obtain a better rate.

[266] The Court rejects outright the argument of counsel for the Appellant that all that Vanex paid the owner-operators was for their labor only and a "return on their investment".

[267] The Court is satisfied that any reasonable interpretation of the evidence dictates that the Court should conclude that the owner-operators were entitled to the percentage rate.

[268] In spite of the fact that the collective agreement did not specify that the expenses were to be deducted from the pay of the owner-operators, it is clear from the evidence that this is indeed what happened in spite of the indication of Ruth Hall that Vanex did not have to pay the owner-operators the percentage rate unless they paid their own expenses. This conclusion cannot reasonably be reached from the evidence presented in this case.

[269] The Court is satisfied that the result in this case should not be determined by a consideration of any potential civil liability as to who owned the tractors but whether goods and services tax applies to the deductions from the gross revenue of the owner-operators for the cost of the fuel, licenses and insurance allegedly supplied by the Appellant to them. As indicated earlier, the case does not turn on who was the registered owner of the tractors and trailors. It is true that transfer of ownership from the owners of the tractors and trailors to Vanex for limited purposes, was accepted by provincial authorities and apparently is a common practice in the trucking industry. However, it is clear that the owner-operators had every right to obtain their vehicle back when they ceased to provide services to Vanex and they had a legal interest in those vehicles in spite of any terminology used to describe their interest. Consequently, the Court finds that the cases referred to by counsel for the Appellant which dealt with the issue of ownership, are not determinative of the issues in this case.

[270] The Court is satisfied that with respect to the insurance the Appellant company was a supplier to the owner-operators of insurance coverage under its fleet policy. It is true that Vanex was responsible to the insurance company for the payment of the premium but it is also true and obvious that Vanex collected premiums from the owner-operators for the coverage which they had obtained through the fleet policy and which coverage it passed on to the owner-operators. It is not material, but there was nothing specific in the agreement that required the owner-operators to pay for anything except the short term and long term insurance. The evidence was clear that they were required to pay for this coverage and indeed did so each month.

[271] With respect to fuel, oil and lubricants these were again purchased under an agreement with the fuel companies. It is true that under the clauses of the agreement with the fuel companies the benefit could not be assigned without the vendor's consent. There was no assignment of the rights under the agreement but that does not change the fact that Vanex made available these goods to the owner-operators which it had obtained under its bulk purchase agreements and charged the owner-operators for their cost. These goods were obtained under the agreement by the owner-operators themselves, used by the owner-operators and paid for by the owner-operators. There is no merit in the argument of the Appellant that the operators were not purchasing the fuel, the oil or the lubricants. Again, the fact that Vanex was responsible for paying for these goods to the fuel company does not change the fact that they in turn sold them to the owner-operators and were paid for them. This was so even though neither Mr. Cleland nor the other owner-operators assumed the risk to the fuel companies for the fuel which they obtained on the cards which they received from Vanex. They were nonetheless responsible to Vanex for paying for these supplies and indeed were billed for them and paid them.

[272] Even if it were possible to dismiss an owner-operator for using the fuel for purposes other than delivering Vanex's goods, as Ruth Hall suggested, that does not change the fact that the owner-operators were the purchasers of the goods from Vanex. The evidence of Mr. Cleland was to the effect that he and the owner-operators could use the fuel for any purposes other than that of providing services for other competitors of Vanex.

[273] The Court rejects the argument of counsel for the Appellant that the fuel was not in the possession of the owner-operators but in the possession of Vanex. The Court does not accept the argument that the owner-operators had merely "a limited use" of the fuel. It is clear from the evidence that the owner-operators possessed the fuel from the time they obtained it until it was used up. They put it into their own vehicles and were free to use that fuel as they pleased, subject to the above referred to limitation, and that use was anything but limited.

[274] Counsel for the Appellant argued that the owner-operators were paid for labor and a return on their investment, as earlier referred to. In support of this position he relied upon Imperial Drywall (supra) and argued that this case was on all fours with the case at bar. In that case, McArthur, J.T.C.C. accepted the submission on behalf of the Appellant that the subtrades did not receive title to the materials. He accepted the fact that their right was limited to the use of the materials in installing drywall or insulation for the Appellant's customers. He found that this right did not constitute a supply and consequently since there was no supply, there was no GST chargeable thereon. He also accepted the submission that the subtrades never received the legal or beneficial ownership of the materials nor did the subtrades have the right to sell the materials or use them on the job for a customer other than the Appellant. The Court found that the Appellant was paying a subtrade solely for his or her work and labour.

[275] Counsel for the Respondent argued that Imperial Drywall (supra) case can be distinguished from the case at bar in that there was no evidence presented in that case by the Respondent. In the case at bar if the only evidence called was that of the Appellant, things might be different. Counsel argued that if any evidence had been presented on behalf of the subcontractors to show their position as to the effect of the deductions on the issue of whose expenses these were, then the result might have been different.

[276] This Court is satisfied that Imperial Drywall (supra) can be distinguished from the case at bar but not on the basis of the argument put forward by Counsel for the Respondent. In the case at bar the Court is satisfied that the right of the owner-operators to the materials supplied was not so limited as the materials supplied in Imperial Drywall (supra). This Court is satisfied that the owner-operators owned the supplies once they were obtained and put into their vehicles despite the fact that they might have been obtained on the credit of Vanex, that they would not have to pay for them until their cost was deducted from their pay when they were sent their monthly statement, and in spite of the fact that Vanex did place some limitation on the use of the supplies as indicated above. This Court finds that the use made of the goods by the owner-operators did constitute ownership of those goods and their use of them was not inconsistent with there having been a supply of materials from the Appellant to the owner-operators.

[277] It is interesting to note the editorial comment by David Sherman, following the reporting of the above case referred to found in [1997] G.S.T.C. 81. In his comment Mr. Sherman points out:

"Unfortunately, the appellant issued an invoice, or something that looked very much like an invoice, to the subcontractor. If the subcontractor had been GST registered, it would have been no problem to add GST to the amount shown, since the subcontractor would claim an input tax credit. However, most subcontractors were not registered and would not be able to claim the credit. The appellant did not add GST on these "invoices"."

That factual situation is similar to the facts in the case at bar where the Appellant is arguing that the invoices issued were in error.

[278] Mr. Sherman referred to the fact that the Appellant's counsel was up to the task of convincing the Trial Judge that the materials were never "sold" to the subcontractors. They were "provided" to them, but only in the context of being used on the Appellant's drywall jobs. A key point was that the Appellant did not "relinquish legal ownership" over the materials. In that case there was also the argument of double taxation. This the Trial Judge accepted as well. Lastly, even though the materials were physically provided to subcontractors, the Court ruled that they were not supplied to them, within the definition of "supply" in subsection 123(1).

[279] Mr. Sherman opined that the judges’ reference to "commercial reality" constituted the application of a "substance over form" test to the charges for materials and that in the past the Courts have been most reluctant to allow a taxpayer to argue "substance over form" to override the written form of a contract to which that taxpayer was a party.

[280] It was noted by the Tax Court in Stafford v. Canada [1993] 1 C.T.C. 2284 at 2289:

"...Persons who seek to achieve a certain result and who, for that reason, arrange their legal relationships in a certain way bear a considerable burden when they assert that the relationships are to be ignored for other purposes. It is not enough to say “I was only fooling"."

[281] If the argument of Counsel for the Appellant is correct, that the facts in Imperial Drywall (supra) are on all fours with the facts in the present case, then this Court would have difficulty in accepting the "ratio decidinda" in that case.

[282] Counsel for the Appellant took the position that the accounting records were issued in error, but in any event, they are only statements of account and they stand for nothing more than that. The Court cannot accept that argument because the evidence makes it clear that the statements of account were set up for some considerable period of time, they were prepared by officials of the Appellant, were sent to each and every owner-operator, who relied upon them, and indeed used these documents in preparing their own income tax returns. It is difficult for the Court to find any sympathy for the Appellant if the very document it produces leads to the reasonable conclusion that they mean exactly what they say even though the result may not be that which was intended by those who prepared them.

[283] This Court does not find that a reasonable interpretation of Continental Bank (supra) supports the contention of Counsel for the Appellant that that case "upsets the Applecart”, and decides that what was earlier believed, that it is the assessment that is under appeal and not the reasons for it, is an incorrect view. Counsel for the Appellant here says that the Minister made an assessment based upon a certain section and he cannot now amend it. This Court is satisfied that the essence of the decision in Continental Bank (supra) was that the Minister is not permitted to substitute its original reassessment with an assessment on a different basis. As the Court indicated, “the taxpayers must know the basis under which they are being assessed so that they may advance the proper evidence to challenge that assessment. Here, it is not clear that there is the proper factual basis to support a reassessment on the basis proposed by the Appellant”, but that is not what happened in the case at bar.

[284] To acede to the interpretation put forward by counsel for the Appellant would be tantamount to concluding that in making an assessment the Minister must set forth every possible basis or reason for the assessment and that if he does not do so he cannot argue it at the time of the appeal.

[285] Counsel for the Appellant argued that the evidence of Ruth Hall was that the company provided no service and if the Minister wished to rely on section 178, there is no basis for it in the evidence. The Court is satisfied that there is a basis for the Minister to rely upon section 178 and that the evidence of Ruth Hall does not prevent the Minister from doing so.

[286] Section 123 defines a “supply” as "the provision” of property or a service in any manner, including sale, transfer, barter, exchange, license, rental, lease, gift or disposition". In Court counsel for the Respondent argued that the term supply includes the term service and that does not amount to a problem for the Minister's position.

[287] Counsel for the Appellant raised several questions with respect to the pleadings. The Minister had pleaded that there was a mark-up being charged to the owner-operators for the insurance and this was incorrect. Therefore the assumption has been rebutted. However, the Court is satisfied that there was sufficient evidence for it to conclude that there was an insurance company involved providing insurance coverage under the fleet policy and that this cost was charged back to the owner-operators. Consequently, the Appellant has not shown that the assessment with respect to the insurance was incorrect.

[288] The argument of counsel for the Respondent that because the Appellant may have rebutted some portion of the presumptions, it is not enough to meet the burden of proving that the assessment was wrongly made, is well taken. The Court is satisfied that there was sufficient evidence before it to prove that the underlying premise of the assumptions was correct. Likewise, despite the fact that the presumption in the reply was that the umbrella insurance policy was through the Insurance Corporation of British Columbia and the evidence was clear that the insurance policy was obtained through Axa, that incorrect presumption is not fatal to the Respondent's position. Further the Court is satisfied that although Vanex was the recipient of the supply, the owner-operators were also the recipient of the insurance coverage as well which was a supply.

[289] The Court accepts the argument of counsel for the Respondent in her surrebuttal that the term “supply” includes “services” under the Act. The Minister pleaded that there was a supply and the pleading creates no problem for the Respondent's position.

[290] In the end result the Court is satisfied that the Appellant has not proven on a balance of probabilities that the Minister's assessment was incorrect. Indeed the Court is satisfied that the Appellant is liable for GST as assessed on the basis that it made supplies of insurance, fuel, oil and licenses to the owner-operators and did not collect and remit the relevant GST for the supplies. Further, the Court is satisfied that the supplies in issue here, were not zero rated or exempt supplies.

[291] The appeal is dismissed, with costs and the Minister's assessment is confirmed.

Signed at Ottawa, Canada, this 12^th day of November 1999.

"T.E. Margeson"

J.T.C.C.