http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/66847/index.do 
G & J Muirhead Ltd. v. The Queen[1] (February 13, 2014) is an example of a fairly straight forward appeal against an assessment as carrying on a “personal services business”:
[1] G & J Muirhead Holdings Ltd. (“Muirhead Holdings”) is a corporation owned by Gordon Muirhead and his wife Judy Muirhead. In the year in question, 2008, Muirhead Holdings’ only employee was Gordon Muirhead. In earlier years, going back to when it was established in 2002, Judy Muirhead had also been employed in an administrative/office management function.
[2] In 2008, Muirhead Holdings was under contract to Harvest Operations Corp. (“Harvest”) to provide certain oil well site and facilities services. Muirhead Holdings had no other clients even though exclusivity was not required by Harvest. Muirhead Holdings first contracted to provide contract operator well services at the particular wells/facilities in 2003 when they were owned by Grand Petroleums Inc. When Harvest took over from Grand Petroleums in 2007, Muirhead Holdings continued to provide these services under contract to Harvest. Throughout this time all of the services were provided by Gordon Muirhead working full time for Muirhead Holdings to do so. Harvest also had employees doing this same type of work. The Court was not told if there were any other non-employees performing such services apart from Mr. Muirhead or, if so, whether they were also one-man companies working full-time similar to Muirhead Holdings and Mr. Muirhead.
[3] Muirhead Holdings has been reassessed on the basis that it carried on a “personal services business” and that it was entitled to only the limited deductions available to its so called “incorporated employee”. The specific issue to be decided therefore is whether Gordon Muirhead “would reasonably be regarded as an … employee of [Harvest] but for the existence of [Muirhead Holdings]”.
The court reviewed the classic factors in such cases: control, tools, chance of profit and risk of loss. Counsel for the appellant also vigorously argued the “intention” of the parties. Ultimately, the court concluded that the appellant’s case was a weak one and dismissed the appeal:
[35] The Appellant’s case was weak in law. The evidence relating to the terms and conditions of employment of those Harvest employees doing the same work as Mr. Muirhead was not put before the Court. This may be telling. I need not make any adverse inference in this regard as it is the Appellant who bears the onus of proof which it has not been able to otherwise discharge. The argument that intention is as relevant and helpful in a personal services business case as an employee versus an independent contractor case should not have been made as forcefully as it was, if at all, unless counsel could distinguish the earlier cases on the point or explain why they were incorrect, which was not done.
[36] The only conclusion available to me on the facts presented in this case is that, if the existence of Muirhead Holdings is ignored and Mr. Muirhead were working directly for Harvest, Mr. Muirhead or anyone else performing those services could only reasonably be considered to be Harvest’s employee. Most significantly telling are the factors addressed under the headings Control and Chance of Profit and Risk of Loss. All of Mr. Muirhead’s available working hours were spent on regular daily activity controlled by Harvest, and which was integral to Harvest’s business and which permitted Harvest to continue in its business. He would not reasonably be considered to be in a business of his own.
[37] The appeal is dismissed.
Comment: Probably the most interesting aspect of this decision is the court’s criticism of counsel for relying so heavily on the alleged intention of the parties:
[4] Counsel for the Appellant sought to rely heavily on the intention of the parties, specifically the intention of the parties to the Contract Wells/Facility Operating Agreement – Harvest and Muirhead Holdings. Intention of the parties is not of particular help or relevance in a personal services business case. This Court has said and explained that clearly in 1166787 Ontario Limited v. The Queen, 2008 TCC 93, 609309 Alberta Ltd. v. The Queen, 2010 TCC 166, and most recently in Gomez Consulting Ltd. v. The Queen
, 2013 TCC 135. Given the wording used to define personal services business there is frankly no possible merit to the contrary position in a case such as this. The Appellant was represented by an experienced and very capable tax law firm and I was surprised to hear more than passing reference to the parties’ intentions, unless it was to argue that this Court was wrong in the decided jurisprudence which counsel neither advanced nor explained. This Court’s position is that in any personal services business situation, the agreement between the actual third party purchasing services (Harvest in this case) and the corporation owned by the alleged/assumed incorporated employee (Muirhead Holdings and Gordon Muirhead, respectively) will always be a contract for services as a corporation can never be an employee under a contract of service. Therefore, the intention of those two parties should always have been to enter into a contract for services with each other.
While “intention” has become more important in recent years in the employee/independent contractor area this case again points out that it is essentially irrelevant in a “personal services business” appeal since the definition does not require that the “personal services” be carried on by an employee:
[5] The alleged assumed incorporated employee may be an employee or an independent contractor to his corporation given the wording of the definition of “personal services business” in the Income Tax Act (the “Act”).
The decision is a cautionary example of the dangers of attempting to impose a concept from one area of the jurisprudence onto another area where it perhaps has little or no application.
[1] 2014 TCC 49.