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Employment Insurance


Distinction to be drawn between deference and control

Appeal by taxpayer from assessment for unpaid 2008 Employment Insurance premiums and Canada Pension Plan contributions with respect to worker. Taxpayer’s business involved testing and evaluating persons for potential learning disabilities. In 2008, taxpayer’s co-owner engaged post-graduate educational assessment student (“worker”) under written independent consultant contract as educational assessor. After co-owner screened test subjects, worker administered tests at taxpayer’s premises before scoring tests, discussing results with co-owner, and agreeing upon diagnosis. Worker then prepared draft report based on co-owner’s and own input, final version of which was signed by co-owner. Appeal allowed. Worker was independent contractor and not employee. Control factor supported worker’s status as independent contractor. Taxpayer had only limited control over manner in which work was done. Reports given to clients were joint work product of two professionals, co-owner and worker. Assessors knew they were represented as joint authors of reports and had professional responsibility to ensure that they agreed with evaluation, so it would conflict with worker’s professional responsibilities as assessor to consider worker to be under taxpayer’s control. While this worker was in learning phase and deferred to co-owner’s opinions, worker still had professional responsibility as assessor, and distinction was to be drawn between deference and control. Despite worker’s belief due to suggestions for preparing reports that she was under co-owner’s control, these were merely suggestions, and co-owner did not dictate how reports were to be written. Fact that reports had to be prepared at taxpayer’s premises arose from fact that reports were confidential and had to be written on computers with enhanced security features. Loose work arrangement and assessors’ ability to accept or decline work assignments and to work elsewhere strongly supported worker’s status as independent contractor. Taxpayer provided all tools but that was not important factor. Assessors had some control over profit, but neither chance of profit nor risk of loss were significant factors. Worker’s signing of contract and knowledge that there would be no source deductions suggested worker knew she was entering into independent consultant relationship and was not employee. While taxpayer should have given worker better explanation of status, parties’ intentions supported that this was independent contractor relationship.

Worldwide School Search and Relocation Services Inc. v. M.N.R. (Apr. 26, 2012, T.C.C., Woods J., File No. 2011-593(CPP); 2011-597(EI)) 215 A.C.W.S. (3d) 243 (8 pp.).

Employment Insurance


Services of worker integral to employer’s core function

Appeals by employer from assessments under Income Tax Act (Can.). Employer was small non-profit charitable organization. Ruling was made that worker was employed in pensionable employment within meaning of s. 6(1)(a) of Canada Pension Plan (“CPP”) and Employment Insurable (“EI”) within meaning of s. 5(1)(a) of Employment Insurance Act (Can.). CRA confirmed determination. CPP and EI assessments were made in 2007 and 2009 for years 2006 and 2007 and income tax source deductions assessment was issued in 2009 for 2007 taxation year. Employer terminated worker’s service in August 2008. Appeals dismissed. During period at issue, worker was employee and not independent contractor working on his own account. Minister did not err in determining that worker was providing services pursuant to contract of service, and thus, held insurable and pensionable employment. Stated intention of each party and control factor were not conclusive. Worker genuinely had no chance of profit or risk of loss. This factor favoured existence of employer-employee relationship. Non-profit organizations could not seek to abuse workers by claiming that lack of funds to pay benefits, and worker’s acceptance of that, was basis to avoid categorizing workers as employees. Employer received funding from government organizations and funding agreements stipulated that employer was responsible for any and all deductions required to be made from employee’s income and for any payments to employees. Business was clearly employers and it was employer, not worker, who ultimately was responsible and accountable to donors with regard to how funds were spent by him. Services of worker were integral to employer’s core function rather than being merely ancillary to its operations. Integration test favoured employee status.

M.A.P. (Mentorship, Aftercare, Presence) v. M.N.R. (Mar. 2, 2012, T.C.C., Lamarre J., File No. 2010-1560(EI); 2010-1562(CPP); 2010-3719(CPP); 2010-3720(EI); 2010-3404(IT)I) 213 A.C.W.S. (3d) 794 (23 pp.).



Registrant had attitude of indifference or negligence toward tax obligations

Application by registrant for order that request for extension be deemed valid. Registrant was status Indian who operated convenience store and gas station on reserve. Mother of registrant operated facility. Registrant did not file quarterly returns for provincial sales tax and GST as required. Auditor for Revenu Quebec sent requirement to provide documents in 2009. Revenu Quebec began assessment proceedings in 2009. Garnishment orders were issued. Registrant sought to become involved in existing proceedings in Quebec Superior Court regarding liability for taxes by persons in similar circumstances. In May 2010, registrant brought application to extend time to file objection to notice of assessment, which was rejected. Application dismissed. Aboriginal rights of registrant were not violated. Excise Tax Act (Can.), only required collection and remittance of GST and did not impose tax on those with Indian status. Section 87 of Indian Act (Can.), does not release individuals with Indian status from obligation to collect and remit GST when they are selling goods in commercial mainstream to non-Indian consumers. Illness did not prevent registrant and mother from filing objection. Business still operated during relevant period. Attempt to join proceedings in Quebec Superior Court did not show bona fide intention to object to assessment in current proceedings, and were not undertaken within 90 days of notice of assessment. Registrant’s reaction was prompted by demands for payment and garnishment orders. Registrant had attitude of indifference or negligence towards legal tax obligations.

Diome v. Canada (Feb. 15, 2012, T.C.C., Angers J., File No. 2011-307(GST)APP) 212 A.C.W.S. (3d) 1059 (11 pp.).



Relationship was not consistent with intention expressed in contract

Appeal by payer from decision by Minister determining that employee was engaged in insurable and pensionable employment for purposes of Employment Insurance Act (Can.), and Canada Pension Plan. Payor was in business of providing direct sales services for large organizations. Worker was engaged by company for door-to-door sales for business and was paid on commission basis. Worker signed standard form contract which stated that he was engaged as independent distributor and did not qualify for benefits such as minimum wage, worker’s compensation or employment insurance. Contract described that worker was independent businessperson, with opportunity for profit and risk of loss, and with control over place, time and method by which products were offered for sale. Contract stated that worker was not assigned routes, could select his own days and hours of work and was not required to ask for time off. Appeal dismissed. Based on contract, parties intended that worker carry on business on his own account. Worker willingly signed contract and by that action he intended to accept contract’s terms. Worker’s experience was different than that suggested by written contract. Terms of written contract were not being respected by payor. Payor considered that it could exercise significant control over most aspects of how worker’s work was performed. Control factor strongly pointed to employment relationship. Lack of reimbursement for expenses supported company’s position but was not significant factor. Other factors tended to be neutral. After considering factors as whole, relationship was not consistent with intention expressed in contract. Worker was engaged as employee.

Intergranuity Marketing Ltd. v. M.N.R.
(Jan. 4, 2012, T.C.C., Woods J., File No. 2011-2056(EI); 2011-2057(CPP)) 212 A.C.W.S. (3d) 284 (7 pp.).



Minister merely carrying on fishing expedition

Motion by Minister for order granting leave to examine representative of accounting firm or former partner of law firm, pursuant to Rule 99 of Tax Court of Canada Rules (General Procedure). Motion dismissed. Stringent requirements of Rule 99 were not met. Minister failed to establish that it had been unable to obtain information from either former partner or firm, and what information was missing from these disclosures. Further examination sought would cause undue delay and unreasonable expenses. Taxpayer failed to establish that either firm or former partner had information that was relevant to material issue in appeal. Crown could easily perform review of documents itself without discovery it sought. There was nothing to indicate that anyone currently associated with firm had any independent knowledge of audits of joint venture in issue except that which was reflected in records already provided. Minister was merely carrying on fishing expedition.

McLarty v. Canada
(Mar. 8, 2012, T.C.C., Margeson J., File No. 98-1659(IT)G) 211 A.C.W.S. (3d) 727 (8 pp.).

Employment Insurance


Working contract was merely fiction

Appellant sought revision of decision affirming she was not entitled to employment insurance. Minister affirmed that applicant was married for 32 years with payer and declaration produced was not reliable. Appellant worked for husband voluntarily before and declaration on hours worked had sole purpose to entitle appellant to employment insurance. Appeal not allowed. Circumstances presented by appellant were unreliable and contradictory leading to belief that working contract was merely fiction.

Gauthier v. M.N.R. (Oct. 18, 2011, T.C.C., Tardif J., File No. 2010-1263(EI)) Reasons in French. 208 A.C.W.S. (3d) 731(17 pp.).



Rebates received by appellant were shareholder benefits and were taxable

Appellant worked for company belonging to his father. Appellant and his brothers were sole directors and shareholders of company. During taxation years at issue company purchased life insurance for father of appellant as well as for appellant and his three brothers. Appellant received cheque by insurance company in 2000 for amount of $15,000 representing insurance rebate. Appellant did not claim amount of $15,000 on his income tax return. Appellant also received cheques from insurance company in 2002 for amounts of $8,430 and $34,630. Minister reassessed appellant and added to appellant’s income for 2000 and 2002 taxation year’s amounts of $15,000 and $43,060, respectively. Minister also assessed penalties in amounts of $1,816 and $4,972 for 2000 and 2002 taxation years. Appellant appealed. Appeal dismissed. Rebates received by appellant were shareholder benefits and were taxable. Rebates were too important to be considered a gift. There was gross negligence on part of appellant and penalties were justified in the circumstances.

Lapalme v. Canada (Aug. 25, 2011, T.C.C., Favreau J., File No. 2008-4008(IT)G) Reasons in French. 206 A.C.W.S. (3d) 628 (22 pp.).
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