T-3708-77
Reginald Hibbert Boardman (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Collier J.—Edmonton, February 1;
Ottawa, February 21, 1979.
Income tax — Determination of plaintiffs fiscal year —
Plaintiff working as psychiatrist under contract for services
with Alberta Government — Income reported on year ending
January 31 rather than calendar year — Whether or not
income derived from employment or from business under a
contract for services — Income Tax Act, S.C. 1970-71-72, c.
63, s. 248(1) — The Public Service Act, R.S.A. 1970, c. 298,
ss. 20, 46.
This is an appeal by the taxpayer from a decision of the Tax
Review Board. Plaintiff, a psychiatrist, reported his income on
a calendar year basis during the period he had been an
employee of the Saskatchewan Government. On August 1,
1972, plaintiff entered into a contract with the Province of
Alberta and on its termination renegotiated the contract. Plain
tiff considered his income received under those documents to be
"income from a business as a sole proprietorship" and adopted
January 31 as the date on which the fiscal period of his
proprietorship terminated. The Minister reassessed plaintiffs
income on a calendar year basis. Plaintiff argued before the
Tax Review Board that he was engaged by the Province of
Alberta under a contract for services while the Minister con
tended that plaintiffs taxable income was earned from employ
ment. The Board upheld the Minister's argument.
Held, the appeal is dismissed. The Province of Alberta and
the plaintiff obviously intended the plaintiff should be in the
position of contractor rather than employee. But the test is not
what the parties intended but what they accomplished. They
created an employer-employee relationship. The contract falls
within section 46 of The Public Service Act of Alberta.
Morren v. Swinton and Pendlebury Borough Council
[1965] 2 All E.R. 349, referred to. Alexander v. Minister
of National Revenue [1970] Ex.C.R. 138, referred to.
INCOME tax appeal.
COUNSEL:
H. G. Wolff for plaintiff.
W. A. Ruskin for defendant.
SOLICITORS:
Wolff Elgert & Budnitsky, Edmonton, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
COLLIER J.: This is an appeal by the taxpayer
from a decision of the Tax Review Board.'
The plaintiff is a psychiatrist. Until July 31,
1972 he was an employee of the Province of Sas-
katchewan. Up to that date, because his income
was from an "office or employment" he had
reported it on a calendar year basis. Effective
August 1, 1972 he entered into a contract with the
Province of Alberta. He was engaged as a clinical
psychiatrist for the Alberta Hospital, Ponoka,
Alberta. The contract terminated on January 31,
1973. A new contract was then negotiated. It ran
from February 1, 1973 to January 31, 1975.
The plaintiff considered his income received
under those documents was "income from a busi
ness as a sole proprietorship ...."z He adopted
January 31 as the date on which the fiscal period
of his proprietorship terminated. For 1972, the
plaintiff reported only his income up to July 31,
1972. For 1973, he reported the income for his
alleged fiscal year of August 1, 1972 to January
31, 1973.
The Minister of National Revenue reassessed.
For 1972, the Minister included in income what
the plaintiff earned from the Provinces of Sas-
katchewan and Alberta during that calendar year.
For 1973, he included in income what the plaintiff
earned from the Province of Alberta in that calen
dar year.
The Minister's view was that the plaintiff's tax
able income was earned from "employment", not
from a proprietorship, and therefore reportable on
a calendar year basis. The plaintiffs view was that
he was engaged by the Province of Alberta under a
contract for services, not a contract of service, and
' [1977] C.T.C. 2293.
2 See paragraph 4 of the statement of claim. See, also,
sections 9(1) and 11 of the "new" Income Tax Act, S.C.
1970-71-72, c. 63, as amended.
therefore his income was reportable on a fiscal
year basis.
The Minister's view was upheld by the Tax
Review Board. This appeal followed.
There is here no matter of high principle, assert
ed by either Revenue or the taxpayer. I am told
there are not, from either vantage, any real tax
dollars involved. The plaintiff did not, nor was he
seeking to, gain some saving by putting some
taxable income into another year or years. The tax
gatherer, no matter which way the returns were
filed, ultimately obtained his maximum harvest.
Having said all that, I add this. The plaintiff,
and the department of government to which he is
attached, made it clear to me they feel strongly
that the plaintiff and certain others like him are
not "employees", as the defendant suggests.
The issue resolves itself into the thorny question:
was there a contract of service or a contract for
services? Those are usually difficult cases, depend
ing on their particular facts. This case is no
exception.
Put in income tax terms, has the plaintiff
brought himself within the term "business"
(defined in section 248(1) of the statute)?
In the nineteen sixties and early seventies there
had been criticism of the Province of Alberta's
mental health services. One criticism was in
respect of the qualifications of its employee doc
tors. At that time the departmental psychiatrists
were full time civil servants, on salary, with pen
sion rights, and other benefits.
The department decided to try and upgrade the
staff. The idea of contracting with well qualified
people was conceived. The concept saw these prac
titioners as contractors, not employees. They could
individually negotiate their own salary. The aim
was to pay them at the same level as psychiatrists
in private practice. The department did not want
them labelled as government employees. It was felt
doctors of that status were looked on as inferior to
those in private practice. Under the previous
system, the department had trouble attracting well
qualified people.
Improvements took place. Well qualified doctors
applied and contracts were signed. There are now
40 such doctors.
Other civil servants were hired through a per
sonnel department. They joined public service
unions. Their pay raises were negotiated for them,
and were, generally speaking, applicable to classes.
Dismissal could be appealed. Each new employee
took the oath prescribed by section 20 of The
Public Service Act. 3 Most public service
employees were subject, generally speaking, to The
Public Service Pension Act. 4 There was, and is,
compulsory contribution to a pension fund by
those employees.
Psychiatrists, such as the plaintiff, were not
engaged through a civil service personnel depart
ment. Nor were they recruited through competi
tions pursuant to The Public Service Act. These
applicants, as I have earlier said, negotiated their
own contracts. There was no probationary period.
But the first contract was usually for six months
only. I shall later set out the termination provisions
in respect of these engagements. The plaintiff and
his counterparts knew they would be paid more
than the existing "employee" psychiatrists. They
knew also they would not have any pension rights,
nor certain other fringe benefits given to
"employee" doctors. They entered into their con
tracts on that basis. The plaintiff said, at trial, he
knew he would not be a civil servant; he regarded
himself as self-employed.
The plaintiff went on the staff of the Alberta
Hospital at Ponoka. There, he and others, are
allocated, by the senior doctor, to various pro
grams. Those allocations can be changed, usually
by agreement or request. How the programs are
carried out by the individual doctor is largely left
to him. The plaintiff was, at first, in charge of the
3 R.S.A. 1970, c. 298 and amendments.
4 R.S.A. 1970, c. 299 and amendments.
forensic ward. He is now in charge of acute admis
sions. Part of his time was, and is, spent in commu
nity services at Ponoka, Wetaskawin, and Rimbey.
The plaintiff organizes his own schedule to fit in,
as far as possible, with hospital routine, as well as
to provide out-patient service at the communities
mentioned.
Counsel for the defendant, in argument, agreed
that the concept of "control", as determining
whether the engagement was one of service or for
services, is of relatively small weight here. It was
conceded the Province of Alberta, on the evidence,
had relatively little "control" as to how the plain
tiff carried out his duties.
In respect of the test of control, Lord Parker
C.J., in Morren v. Swinton and Pendlebury Bor
ough Council, said: 5
As the many cases before the courts have shown, it is not
always easy to determine what the correct legal relationship is.
It depends primarily on the true interpretation of the contract.
Sometimes it is said quite generally that the test is whether the
master can order or require what is to be done, where the true
contract is one for services, or whether the master can order or
require not only what is to be done, but how it shall be done, in
which case it is a contract of service. That perhaps is an
over-simplification, and in Short v. J. & W. Henderson, Ltd.
([1946] S.C. (H.L.) 24 at p. 33) LORD THANKERTON dealt
with what he called the four indicia of a contract of service.
These are, and he quoted the Lord Justice-Clerk (LORD
COOPER):
(a) The master's power of selection of his servant; (b) the
payment of wages or other remuneration; (c) the master's
right to control the method of doing the work; and (d) the
master's right of suspension or dismissal.
LORD THANKERTON went on:
The learned judge adds that a contract of service may still
exist if some of those elements are absent altogether, or
present only in an unusual form, and that the principal
requirement of a contract of service is the right of the master
in some reasonable sense to control the method of doing the
work, and that this factor of superintendence and control has
frequently been treated as critical and decisive of the legal
quality of the relationship.
The cases have over and over again stressed the importance of
the factor of superintendence and control, but that it is not the
determining test is quite clear. In Cassidy v. Minister of Health
([1951] 1 All E.R. 574; [1951] 2 K.B. 343), SOMERVELL, L.J.,
referred to this matter, and instanced, as did DENNING, L.J., in
the later case of Stevenson, Jordan & Harrison, Ltd. v. Mac-
Donald & Evans ([1952] 1 T.L.R. 101), that clearly superin
tendence and control cannot be the decisive test when one is
5 [1965] 2 All E.R. 349 at 351.
dealing with a professional man, or a man of some particular
skill and experience. Instances of that have been given in the
form of the master of a ship, an engine driver, a professional
architect or, as in this case, a consulting engineer. In such cases
there can be no question of the employer telling him how to do
work; therefore, the absence of control and direction in that
sense can be of little, if any, use as a test.
The key to the problem in this case is, to my
mind, the contracts (Ex. 1) entered into between
the plaintiff and the Province. The two agreements
are substantially similar. I shall refer to the second
contract.
The plaintiff, in the agreement, was described as
a contractor. In paragraph 1 he was hired as a
clinical psychiatrist for the hospital at Ponoka. His
powers and duties were those fixed by the appro
priate deputy minister. His duties were to be
"supervised by the Director of Clinical Services for
the said Department".
The plaintiff was to be paid $2,916 per month.
Paragraph 3 was as follows:
The term of employment shall be from the 1st day of
February, 1973, for a term of two years, terminating on the
31st day of January, 1975, unless terminated at an earlier date
in accordance with the terms of the Agreement. The terms of
the contract may be renegotiated at the end of the first year.
Paragraph 4 read:
The Contractor shall devote his best efforts to advance the
interests of the Minister, shall perform his duties to the best of
his ability and shall be entitled to three weeks' holiday with pay
per annum plus optional unpaid leave by agreement and one
week's paid study leave per annum.
The holiday provision was similar to the holidays
granted the employee doctors.
Paragraph 5 set out call back pay rates.
Paragraph 6 was as follows:
The Contractor will be entitled to 1 1 / 2 days' sick leave per
month, cumulative to a maximum of 36 days per duration of
contract, but shall not be entitled to benefits under The Public
Service Pension Act or to any of the other rights or privileges
afforded to a member of the Civil Service. Six days' cumulative
sick leave shall be transferred into this contract.
The sick leave provisions were similar to those
applicable to other employees.
Paragraphs 9, 10 and 11 are as follows:
The Minister agrees that the Contractor may obtain a part-
time appointment at a university in the Province of Alberta but
the Contractor agrees that he will not conduct a private prac
tice of psychiatry during the term of the contract.
All medicare coverage, pension holdings and Canada Pension
are to be the responsibility of the Contractor.
Income tax will be deducted at source unless the Contractor
provides an exemption form from the Federal Government.
The plaintiff was paid subsistence and travelling
allowance at the same rate as employees of the
public service (paragraph 12).
I set out paragraphs 13, 14, 15 and 17:
This Agreement may be terminated by the Minister by
giving the Contractor six months' notice in writing of intention
to terminate the contract without any reason and without
giving reason therefor, or by giving to the Contractor salary in
lieu of notice.
This Agreement may be terminated by the Contractor by
giving to the Minister six months' notice in writing of intention
to terminate the contract without any reason and without
giving reason therefor.
Notwithstanding clauses 13 and 14 herein, this Agreement
may be mutually terminated by the Minister and the Contrac
tor at any time.
This Agreement may be renewed from time to time for such
further periods of time as may be agreed upon the same terms
and conditions as are contained in this Agreement, or upon
such other terms and conditions as the Minister and the
Contractor may agree upon, by the Minister giving the Con
tractor three months' notice in writing of his intention to renew
the contract.
Construing this agreement as a whole, I con
clude it is more consistent with a contract of
service than a contract for services.
As Jackett P., now C.J., said in Alexander v.
M.N.R. 6 :
Counsel for both parties made very helpful and extensive
references to the authorities on the distinction between a con
tract of service and a contract for services. I do not think that I
need to review the authorities as a preliminary to reaching a
conclusion. It seems evident that what is an appropriate
approach to solving the problem in one type of case is frequent
ly not a helpful approach in another type. On the one hand, a
contract of service is a contract under which one party, the
servant or employee, agrees, for either a period of time or
indefinitely, and either full time or part time, to work for the
other party, the master or the employer. On the other hand, a
6 [1970] Ex.C.R. 139 at 153-155.
contract for services is a contract under which the one party
agrees that certain specified work will be done for the other. A
contract of service does not normally envisage the accomplish
ment of a specified amount of work but does normally contem
plate the servant putting his personal services at the disposal of
the master during some period of time. A contract for services
does normally envisage the accomplishment of a specified job
or task and normally does not require that the contractor do
anything personally. ...
The problem arises in these cases because, in fact, there can
be a contract of service that has features ordinarily found in a
contract for services and there can be a contract for services
that has features ordinarily found in a contract of service. A
servant can be employed on terms that he is paid on a basis
related to the volume of work and that he himself hires and
pays help that is required. Compare the postmistress in Refer
ence as to the Applicability of the Minimum Wage Act of
Saskatchewan to an employee of a Revenue Post Office. So,
also, while a person who contracts to do a job ordinarily has his
own place where he works and has his own plant and equipment
with which he works, and supplies the materials required to do
the job, nevertheless any one or more of these features can be
eliminated by special agreement without changing the charac
ter of the contract as a contract for services. Here I am faced
with a contract that can be analyzed either as a contract of
service with deviations from the normal, or a contract for
services with deviations from the normal. I must, therefore,
seek some basis for a conclusion as to what is the correct
character to assign to it.
I was referred to a number of other decisions.'
They were helpful, but not conclusive.
The plaintiff was, to my mind, during the years
in question under contracts of service. He was, as a
matter of business and economic reality, an
employee.
The Minister's assessment is confirmed, as is the
decision of the Tax Review Board.
I have come to this conclusion without hesita
tion, but with regret. The Province of Alberta and
' Stevenson Jordan and Harrison, Ltd. v. Macdonald and
Evans [1952] 1 The Times L.R. 101 (C.A.). City of Montreal
v. Montreal Locomotive Works Ltd. [1946] 3 W.W.R. 748
(P.C.). Morren v. Swinton and Pendlebury Borough Council
[1965] 2 All E.R. 349 (Q.B.D.). Alexander v. M.N.R. [1970]
Ex.C.R. 138 (Ex. Court). Ready Mixed Concrete (South East),
Ltd. v. Minister of Pensions and National Insurance [1968] 1
All E.R. 433 (MacKenna J.). The Board of the Kerrobert
School Unit No. 44 of Saskatchewan v. M.N.R. Canadian
Employment Benefits and Pension Guide, vol. 2, (C.C.H.)
6312 (Pension Appeals Board).
the plaintiff obviously intended the plaintiff should
be in the position of contractor rather than
employee. But the test is, unfortunately, not what
the parties intended but what they accomplished.
In this case they created, as I see it, an employer-
employee relationship. The contract falls, I think,
within section 46 of The Public Service Act of
Alberta.
I do not know why Revenue chose to reassess
here. That action merely engenders bewilderment
and chagrin in taxpayers such as the plaintiff. As a
citizen and taxpayer in Alberta, he is for Alberta
purposes (including exclusion from pension rights)
treated as a contractor.
The Minister of National Revenue, however, for
purposes of a federal statute, and regardless of
conflict, chooses to treat him as an employee.
The purpose of this reassessment here does not,
as I see it, further, in the interests of Canadian
taxpayers, the administration and enforcement of
the Income Tax Act. The most that can be said,
from the evidence and explanations put before me,
is that for some reason, someone in the Revenue
Department felt there should be, in the case of this
taxpayer, tidy housekeeping.
The plaintiff's action (appeal) is dismissed. The
defendant is entitled to costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.