TAX COURT OF CANADA
IN RE: The Income tax Act
2007-926(CPP), 2007-925(EI),
2007-928(CPP), 2007-927(EI),
BETWEEN:
JIM F. MOORE, ANTOINETTE (ARYA) MOORE
Appellant;
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent.
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Held before Mr. Justice Paris at the Provincial Courthouse in Nelson, B.C., on Wednesday, August 15, 2007.
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APPEARANCES:
Mr. J. Moore, For the Appellants;
Mr. M. Matas, For the Respondent.
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THE REGISTRAR: L. Giles
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Allwest Reporting Ltd.
#1200 - 1125 Howe Street
Vancouver, B.C.
V6Z 2K8
Per: H.H. Bemister
REASONS FOR JUDGMENT
(Delivered Orally in Nelson, B.C. on August 15, 2007)
(PROCEEDINGS COMMENCE AT 9:38 A.M.)
JUSTICE: These appeals which were heard on common evidence are from the determinations made by the Minister of National Revenue that both appellants were not employed in insurable or pensionable employment as defined in the Employment Insurance Act and the Canada Pension Plan by the intervenors, Ms. Ann Gover and Mr. W.D. Main. For Ms. Moore, the period covered by the determinations was from September 1st, 2004 to September 28th, 2005 and for Mr. Moore, the period covered is December 1st, 2004 to September 28th, 2005.
The appellants contend that throughout the relevant periods they were employed by the intervenors under contracts of service. The respondent and the intervenors maintain that the appellants were independent contractors engaged by the intervenors under contracts for services. The intervenors are married and were the owners of an apartment complex in Nelson, B.C. During the relevant periods, the appellants worked for the intervenors, Ms. Moore, as a property manager of the complex, and Mr. Moore, as maintenance person, and later on as property manager as well.
The intervenors acquired the apartment complex in June 2004, and in July 2004 the appellants approached the intervenors to work as property managers when they were visiting Nelson. The intervenors contacted the appellants after they had returned home to Victoria and after an exchange of e-mail messages, on July 30th, 2004, the intervenors offered Ms. Moore employment as the resident property manager, starting September 1st, 2004. Ms. Moore's intended status as an employee was confirmed in follow-up e-mails from Ms. Gover in August 2004. Ms. Moore's salary was set at $2,000 a month with work above the regular duties of the resident property manager to be paid at $15 an hour.
Mr. Main testified that in August 2004 he told Ms. Gover that he did not want to hire Mr. and Ms. Moore as employees and that he wanted them to be independent contractors. This information was apparently not communicated to the appellants until late October 2004, after they had moved with their family to Nelson and into the apartment complex and begun, in Ms. Moore's case, her duties as resident property manager.
In a letter she wrote to the intervenors at the time, Ms. Moore said that this change left her without EI protection, which was a serious concern to her, but otherwise did not refuse the change. Eventually on December 15th, 2004 a written contract entitled "Management and Basic Cleaning Contract" was entered into by the intervenors and Ms. Moore, who was shown as doing business as Expect Moore Property Management. The contract purportedly was effective from September 1st, 2004 to August 31st, 2005.
Mr. Moore did not have a written contract with the intervenors, although a proposed draught of a maintenance contract dated October 24th, 2004 was put into evidence. It showed a term from September 1st, 2004 to August 31st, 2005. However, Mr. Moore said that he did not perform any paid maintenance work for the intervenors until after November 2004. This coincides roughly with the period of work covered by the Minister's determination which started December 1st, 2004. Mr. Moore's evidence that he did not work for, or get paid by the intervenors prior to December 1st, 2004 was not seriously challenged and I accept that his work started at that point.
Finally, a new contract entitled "Management and Basic Cleaning Contract" was entered into July 29th, 2005 between the intervenors and both Mr. and Ms. Moore doing business as Expect Moore Property Management for the period September 1st, 2005 to August 31st, 2006. However, in mid-September 2005 the intervenors terminated the contract and the appellants and their family vacated their two apartments at the complex.
The contracts themselves will form appendices to these reasons.
I'll deal separately with the question of whether the work done by Mr. and Mrs. Moore for the intervenors was done under a contract of service, or a contract for services. The relevant considerations in making this determination are set out by the Supreme Court of Canada in the Sagaz decision cited by counsel for the respondent at paragraph 47. And I read:
"The central question is whether the person who has been engaged to perform the services has performed them as a person in business on his own account. In making this determination, the level of control the employer has over the worker's activities will always be a factor. However other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks."
The terms and conditions of the work performed by Ms. Moore for the intervenors from September 1st, 2004 to August 31st, 2005 is set out in Exhibit A-1. The following points, in my view, indicate the existence of a level of control by the intervenors over her work that is more consistent with a contract of service than a contract for services.
Firstly, Ms. Moore was required to personally perform all the management and cleaning duties listed in the appendices to the contract, except that she was permitted to use a relief manager for weekends and for a two-week holiday period. Even in the case of weekend relief, Ms. Moore was only permitted to have Mr. Moore perform the service.
While the evidence showed that Ms. Moore may have used others to do some of the work required by her contract, under the terms of the contract, the intervenors had the power to require her to do the work personally. It is the right to control, rather than the exercise of the right that is material.
Secondly, Ms. Moore was required to reside on site and be available to take emergency calls from the tenants, and to be available to show suites to perspective tenants from 9:00 a.m. until 8:00 p.m. seven days a week. The requirement of Ms. Moore's presence on site is a further indicia of control by the intervenors.
Thirdly, the details of Ms. Moore's work are set out in relatively precise terms in the appendices to the agreement and set out specific procedures that must be followed for many tasks, including the provision of rent rolls, preparation of petty cash reports, the filing of forms, and following procedures when tenants vacated the property, and the use of specific filing systems and forms, and meetings with the bookkeeper and evictions. The cleaning schedule is also set out in detail. These requirements, in effect, amounted to control over the manner in which Ms. Moore did the work.
Fourthly, the contract required Ms. Moore to meet with the intervenors' bookkeeper Beryl Knight in the first ten days of each month to view vacant apartments. It appears that this was intended as a means of control or supervision of the work to be done, or actually done, by Ms. Moore, cleaning the vacant apartments. This was confirmed by the evidence of Mr. Main who said it was his and Ms. Gover's expectation that Ms. Knight would periodically inspect Ms. Moore's work. This, though, did not work out.
In any event, it is not material whether the intervenors exercised this right of inspection of the suites. It is sufficient to say that they had the right to do so under the contract.
It is somewhat difficult to determine the level of actual supervision and control exercised by the intervenors over matters not covered in the contract. It is apparent that there were frequent communications between the Moores and Main and Gover, because of the many problems presented by the complex. Also Mr. Main was staying at the complex on an average of ten nights per month during the year, and he admitted, he could have left notes for Ms. Moore about things that he felt needed to be done or that were not being properly done, at least in the fall of 2004 until he became involved in a major renovation of the complex with CMHC funding.
Ms. Gover also provided specific instruction on occasion by e-mail. It seems that the Moores wished to keep Mr. Main and Ms. Gover informed about what was going on, and Mr. Main and Ms. Gover were appreciative of their input and suggestions, and responded with directions when asked. Overall, however, given the particular terms of the written contract, I am satisfied that Mr. Main and Ms. Gover retained a degree of control over Ms. Moore's work that points to the existence of a contract of service.
With respect to the ownership of tools required for the job, the evidence shows that Ms. Moore provided a vehicle, a computer and a filing cabinet, while all other equipment and supplies were furnished by the intervenors including a phone. Ms. Moore was reimbursed for gas for the vehicle. It is not clear how much use was made of it, or of the computer, or the cost of these items. Ms. Moore used part of her apartment, as well, as an office, but paid a reduced rent for it. This test does not point strongly in either direction.
The next factor is the degree of financial risk undertaken by Ms. Moore. She had no financial risk or responsibility for investment and no real chance of profit or risk loss from her work for the intervenors. Under the first contract she had a fixed salary, or hourly rate with extra work, and was not permitted to subcontract her work except in very limited circumstances as mentioned above. Also the contract, by its terms, indemnifies Ms. Moore from any loss arising from carrying out the contract. I refer to paragraph 12 thereof. This factor tends to show Ms. Moore was an employee rather than in independent contractor.
Another consideration is the intentions of the parties to the contract. The evidence in this regard, again is somewhat problematic. It appears that for the first months of the contract the parties considered Ms. Moore to be an employee. However, by late October 2004 the intervenors let Ms. Moore know they wished her to be an independent contractor instead. With some reluctance, she agreed. However, there is no evidence that any of the terms of her contract changed after October 2004, therefore this appears to be a case where the parties, or at least the intervenors, believed that they can control the nature of their legal relationship simply by virtue of the name they give to it. However, as stated by the Federal Court of Appeal in the Royal Winnipeg Ballet v. the Queen case, at paragraph 56:
"There is ample authority for the proposition that parties to a contract cannot change the legal nature of that contract merely by asserting that it is something else. The elements of the contract must be examined to determine whether the parties did, in fact, create the relationship they intended."
For the reason already noted above, I am of the view that the relationship created by the contract between Ms. Moore and the intervenors for the period September 1st, 2004 to August 31st, 2005 was a contract of service and that Ms. Moore was not in business on her own account. The insertion of the business name was a device intended to create the impression that she was running her own business, while the terms of the contract did not support that conclusions.
The second contract, dated July 29th, 2005 contains two material differences from the first contract. It is between both the appellants and the intervenors without specifying which tasks are to be done by Mr. or Ms. Moore. Next the rate of pay has been changed to a percentage of gross rents with a minimum salary. This introduces a chance of profit that was not present in the first contract. However, the contract still required personal service and that the appellants live on site. The duties of the appellant are set out in the same terms, and the situation regarding the ownership of tools, provision of supplies is still the same. Overall, in my view, this contract is also one of service rather than a contract for services for both appellants.
Finally, it remains to be determined whether Mr. Moore was an employee or independent contractor from December 1st, 2004 to August 31st, 2004. No written contact was executed between the parties. The draft contract is of little assistance in determining the rights and obligations of Mr. Moore and the intervenors since it was never signed by Mr. Moore. Mr. Moore's statement that it was verbally binding is not accepted, because if he had accepted the contract, there would have been no reason not to sign it. Furthermore, such an allegation was never put to Mr. Main or Ms. Gover for confirmation.
The evidence produced at the hearing showed that Mr. Moore carried out small repairs and minor renovations at the apartment complex for $15 an hour. There was no evidence that he was paid by the intervenors for any property management work done during that period. Mr. Moore's evidence was that Ms. Moore was responsible for the property management work set out in her contract, except for weekend relief work, but he wasn't paid by the intervenors for that.
Mr. Moore invoiced for his work and no deductions were taken from the payments he received. The Minister assumed, in determining that Mr. Moore was an independent contractor, that he set his own schedule, priorities and timelines for completing the repairs and renovations. Mr. Moore alleged that the e-mails from Ms. Gover demonstrate control and supervision over his work. The only e-mails that deal with Mr. Moore's work, however, is Exhibit A-25 written or sent on June 18th, 2005 instructing Mr. Moore not to do certain things in light of the CMHC renovations being planned and carried out.
With respect to set work times, Mr. Moore said he had to work when units were vacated. Some members of Mr. Moore's family assisted him with the work, but they were paid directly by the intervenors and most tools and equipment were supplied by the intervenors. Mr. Moore used his van to pick up supplies and was paid for gas. Mr. Main said Mr. Moore was much more experienced than himself and that he could not tell Mr. Moore how to do the work required. He also said that he did not supervise Mr. Moore because he was busy with the CMHC renovations.
In cross-examination Mr. Main was only able to recall one instance where he had shown Mr. Moore how he wanted a particular job, some window repairs, done. Mr. Moore gave two other examples where Mr. Main had input in the way a particular job was done, once in the type of paint that was to be used, and once regarding the removal of an asbestos tile floor. On the basis of the evidence that was presented, I'm satisfied that neither intervenor exercised any significant control, correction, or supervision over the work done by Mr. Moore. The few examples cited by him appear insignificant in light of the amount of work done by him over the period.
Also, given Mr. Moore's experience, and Mr. Main's occupation with other matters, it is much more likely that Mr. Main did not direct or supervise Mr. Moore when he was at the complex.
I'm also satisfied that Mr. Moore did not work fixed hours but worked when needed and set his own job priorities in order to look after the complex. On the other hand, the tools were supplied mostly by the intervenors, except for the appellant's fan, and the wages of helpers for Mr. Moore were paid by the intervenors.
No evidence was led about who was responsible for the cost of redoing any work that was not properly done. No other risk of loss was shown to have been incurred by Mr. Moore and no investment of capital was required. There did not seem to be any restrictions placed on Mr. Moore that would have prevented him from working for others during this time, but Mr. Moore said he was kept too busy at the complex to work elsewhere.
Finally, with respect to the intention of the parties, it is clear that the intervenors, from mid-October 2004 on made it clear to both Mr. and Ms. Moore that they wished to engage them as independent contractors rather than employees. Mr. Moore would have been aware of that when he began working on December 1st, 2004. There was no evidence that he objected to this arrangement, or to the fact that no deductions were taken from his pay. I read into this contract an acceptance by Mr. Moore of the status as independent contractor.
In light of the absence of control and supervision, and the absence of any other factor which would counter the common intention that Mr. Moore performed his services from December 1st to August 31st, 2005 for the intervenors as an independent contractor, I find that he was, in fact, an independent contractor at the material times, rather than an employee of the intervenors.
For all of these reasons, therefore, the appeals of Ms. Moore are allowed, and the appeals of Mr. Moore are allowed only to the extent that the period from September 1st, 2005 to September 28, 2005 was worked as an employee rather than an independent contractor.
Thank you.
(PROCEEDING CONCLUDED AT 9:58 A.M.)