Fiera Foods Company v. The King

Fiera Foods Company v. The King
Court (s) Database
Tax Court of Canada Judgments
Date
2023-09-20
Neutral citation
2023 TCC 140
File numbers
2018-1078(GST)G
Judges and Taxing Officers
John R. Owen
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2018-1078(GST)G
BETWEEN:
FIERA FOODS COMPANY,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
Appeal heard on October 31, 2022, November 1 to 3, 2022, November 7 to 10, 2022, November 14 to 16, 2022 and January 20, 2023, at Toronto, Ontario
Before: The Honourable Justice John R. Owen
Appearances:
Counsel for the Appellant:
Al Meghji, Alexander Cobb
Mark Sheeley and
Alexandra McLennan Brown
Counsel for the Respondent:
Jack Warren, Dan Daniels
and Albert Brunelle
JUDGMENT
UPON hearing the evidence and submissions of counsel for the Appellant and counsel for the Respondent;
IN ACCORDANCE with the attached Reasons for Judgment (the “Reasons”), the appeal from the reassessments under Part IX of the Excise Tax Act that denied the deduction of input tax credits claimed by the Appellant in computing net tax for each of the 37 monthly reporting periods ending in the period from January 1, 2011 to and including January 31, 2014 is allowed with costs to the Appellant and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to the ITCs as defined in paragraph 4 of the Reasons.
The parties shall have 60 days from the date of this judgment to agree on costs. If no agreement is reached the Appellant shall have a further 30 days to submit written submissions on costs. The Respondent shall have a further 30 days to provide written submissions in response to the Appellant’s submissions. The written submissions of each party are not to exceed ten pages.
Signed at Ottawa, Canada, this 20th day of September 2023.
“J.R. Owen”
Owen J.
Citation: 2023 TCC 140
Date: 20230920
Docket: 2018-1078(GST)G
BETWEEN:
FIERA FOODS COMPANY,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
REASONS FOR JUDGMENT
Owen J.
I. Introduction [1] Fiera Foods Company (the “Appellant”) appeals reassessments (the “Reassessments”) by the Minister of National Revenue (the “Minister”) under Part IX of the Excise Tax Act, RSC 1985, c E-15 (the “ETA”)[1] of the 37 monthly reporting periods (collectively, the “Reporting Periods”) ending in the period from January 1, 2011 to and including January 31, 2014 (the “Relevant Period”). The Reassessments denied the deduction of a total of $5,758,469.46 of input tax credits claimed by the Appellant in computing net tax for the Reporting Periods and assessed penalties under section 285.
[2] The Appellant claimed the input tax credits in respect of harmonized sales tax (“HST”) paid by the Appellant to 13 payees that the Appellant says provided taxable supplies to the Appellant during the Relevant Period. The names of the 13 payees (individually, an “Agency” and collectively, the “Agencies”) and the details regarding the disallowed input tax credits are set out in the following chart, which is appended as Schedule “A” to the Reply:
[3] In its written argument, the Appellant concedes that it is not entitled to input tax credits in respect of amounts paid to Alpha Logistics Services Inc (“Alpha”) for the weeks ending December 8, 2012 to August 10, 2013 because it did not have an HST registration number for that Agency at the time it filed the corresponding HST returns.
[4] The Appellant’s concession reduces the input tax credits claimed by the Appellant in respect of Alpha from $455,401.38 to $180,595.42 and reduces the total input tax credits claimed by the Appellant from $5,758,469.46 to $5,483,663.50. I will refer to the total amount of input tax credits remaining in dispute as the “ITCs”.
[5] The Respondent admits that the Appellant paid the amounts in respect of which it calculated the ITCs but denies that the payments by the Appellant were for taxable supplies. The Respondent contends that the Agencies were not capable of providing the services paid for by the Appellant. In the alternative, the Respondent submits that the Appellant has not satisfied the documentary requirements in subsection 169(4) and in the Input Tax Credit Information (GST/HST) Regulations, SOR/91-45 (the “Information Regulations”).
[6] Consequently, the issues raised by the Appellant’s appeal of the Reassessments are as follows:
Is the Appellant entitled to the ITCs under subsection 169(1)?
If the answer to the first question is yes, is the Appellant precluded from claiming the ITCs because of paragraph 169(4)(a) and the Information Regulations?
If the answer to the first question is no, is the Appellant entitled to a rebate for tax paid in error under section 261 and subsection 296(2.1)?
Is the Appellant liable for the penalties assessed by the Minister under section 285?
II. The Evidence A. The Witnesses [7] The Appellant called 11 witnesses, all of whom were employees of the Appellant or of a corporation related to the Appellant. Some of these employees had started as non-employee workers and subsequently became full-time employees of the Appellant. I will refer to an individual who worked for the Appellant but who was not an employee of the Appellant at the relevant time as a “temporary worker” or a “TW”. I note that the legal character of the relationship between the Appellant and the TWs is not in issue.
[8] The Appellant’s witnesses were as follows:
Mr. Mahendra Bungaroo, the chief financial officer and chief administrative officer of the Appellant and the chief financial officer of several other corporations related to the Appellant.
Mr. Zorik Ochakovsky, the director of manufacturing of the Appellant.
Ms. Nataliya Seleznova, formerly a temporary worker (circa 2000–2001) and currently the payroll manager of the Appellant. Ms. Seleznova was a payroll supervisor of the Appellant from 2011 to 2018.
Ms. Zinaida Kissin, a time and attendance clerk of the Appellant.
Mr. Kennet Ojo, formerly a temporary worker and currently a production supervisor of the Appellant.
Ms. Lanie Manabat, formerly a temporary worker and currently an employee who works in the packaging department of the Appellant.
Mr. Admoon Aadam, formerly a temporary worker and currently an employee who works in the packaging department of the Appellant.
Ms. Tetyana Taranenko, formerly a temporary worker and currently an employee who works in the packaging department of the Appellant.
Mr. David Mandel, formerly a temporary worker and currently an employee who works in the packaging department of the Appellant.
Mr. Abhishek Khosla, an information technology (“IT”) manager of Ryan Consulting Corporation (“RCC”), a corporation related to the Appellant. RCC provides IT services to the Appellant and corporations related to the Appellant.
11.Ms. Malgorzata Magda Gawedzka, a production manager at the Appellant who was a production supervisor at the Appellant during the Relevant Period.
[9] The Respondent called 17 witnesses, three of whom were Canada Revenue Agency (“CRA”) auditors at the time of the audit of the Relevant Period and 14 of whom were former temporary workers who testified under subpoena.[2] Two of the former temporary workers are current employees of the Appellant[3] and two were employees of the Appellant for a period of time.[4]
[10] The three CRA auditors are as follows:
Mr. Chris Li, an auditor with the CRA who does GST/HST audits.
Mr. Raminder Kooner, an auditor with the CRA who does GST/HST audits.
Ms. Kathleen Servilla, an auditor with the CRA who does GST/HST audits.
B. The Credibility and Reliability of the Witnesses [11] The credibility of a witness refers to the honesty of the witness or the readiness of the witness to tell the truth. A finding that a witness is not credible is a finding that the evidence of the witness cannot be trusted because the witness is deliberately not telling the truth.
[12] The reliability of a witness refers to the ability of the witness to recount facts accurately. If a witness is credible, reliability addresses the kinds of things that can cause even an honest witness to be mistaken. A finding that the evidence of a witness is not reliable goes to the weight to be accorded to that evidence.
[13] Reliability may be affected by any number of factors, including the passage of time. In R v Norman, [1993] OJ No 2802 (QL), 68 OAC 22, the Ontario Court of Appeal explained the importance of reliability at paragraph 47:
. . . The issue is not merely whether the complainant sincerely believes her evidence to be true; it is also whether this evidence is reliable. Accordingly, her demeanour and credibility are not the only issues. The reliability of the evidence is what is paramount. . . .
[14] In this case, reliability is a particular concern because at the time of the hearing, the Relevant Period had commenced nearly 12 years prior and many of the subpoenaed witnesses worked at the Appellant’s premises for only a short period of time.
[15] With respect to each fact witness, I have considered all relevant factors[5] and I have concluded that each fact witness is credible.[6] I will address issues of reliability in the context of the evidence.
C. Summary of the Evidence (1) Introduction
[16] The resolution of the issues raised in this appeal will turn in large part on my findings of fact. As there is no agreement between the parties as to the facts, I am required to parse the evidence in considerable detail to ensure that, to the best of my ability, my findings of fact are correct. As a result, these reasons will be longer than might be the case where the facts are either straightforward or substantially agreed.
(2) The Business of the Appellant
[17] The Appellant is in the business of producing frozen bakery products for retailers such as supermarkets and fast-food chains located in Canada and in the United States. The frozen products are in the form of either raw dough or pre‑baked items depending on the needs of the retailer. The Appellant has carried on its bakery business since 1987.
[18] The Appellant operates from two plants in the Toronto area: one located at 50 Marmora Street (“Marmora”), comprising approximately 250,000 to 300,000 square feet on four floors, and one located at 220 Norelco Drive (“Norelco”), comprising approximately 55,000 square feet. The Marmora and Norelco plants operate five to six days per week depending on demand, with two 12-hour or three 8‑hour shifts per day.
[19] At Marmora, the Appellant produces several products in different areas of the plant, including bagels, bread, croissants, pastries and sometimes cookies and muffins. At Norelco, the Appellant produces croissants and some pastry products.
[20] During the Relevant Period, the Appellant had annual revenues of between $195 million and $300 million from the sale of between 8 million and 10 million cases of products. A small portion of these products were produced at the facility of a corporation related to the Appellant called Upper Crust.[7]
[21] Only a small percentage of the Appellant’s sales are made under long‑term contracts. Most sales are from ad hoc orders received from customers, and those types of orders typically have a turnaround of less than ten days. On occasion, the turnaround may be as short as one day.[8]
[22] The prices for the Appellant’s products are negotiated with customers.[9] The Appellant is a relatively small player in the frozen baked goods market, so it has little leverage when it comes to passing on cost increases to customers. If a customer will not accept a price increase, the Appellant has to decide whether to stop doing business with the customer.[10]
[23] The profit margins for the Appellant’s business are low and the Appellant relies on high sales volumes to earn a profit. Consequently, the profitability of the Appellant is sensitive to the cost of inputs such as raw materials and labour.[11] The direct labour costs of the Appellant for 2011, 2012 and 2013 were stated in the financial statements of the Appellant to be $32,634,072, $35,409,549 and $41,071,078, respectively.[12] Mr. Bungaroo testified that the direct labour figure represented the labour cost for full-time employees of the Appellant and TWs.[13]
(3) The Use of TWs by the Appellant
[24] During the Relevant Period, the workforce of the Appellant comprised between 1,100 and 1,200 individuals. Approximately 35 to 40 percent of the workers were employees of the Appellant and the remainder were provided to the Appellant by agencies. Approximately 200–250 individuals worked at the Appellant’s plants “per shift” (see line 19 of page 35 of the October 31, 2022 transcript.)[14]
[25] Mr. Bungaroo testified that the Appellant used agencies to obtain TWs because it did not have the internal resources to source TWs.[15] The Appellant used the Agencies because they were consistently able to provide TWs on very short notice while other agencies were not.[16] Although the TWs provided by the Agencies sometimes gave rise to personnel issues, the Appellant continued to work with the Agencies because they were always able to provide TWs on very short notice.[17]
[26] The turnover of TWs was high and therefore the Appellant had to source TWs daily.[18] The availability of TWs sometimes on very short notice was critical to the Appellant’s business.[19]
[27] Ms. Kissin testified that during the Relevant Period, she contacted the Agencies for TWs except in urgent situations, where a production supervisor of the Appellant could contact the Agencies directly for TWs to avoid his or her production line shutting down.[20]
[28] The testimony of the TWs (I will refer to the TWs who testified as the “witness TWs”) indicates that they were attracted by advertising or, in a few cases, by word of mouth (i.e., a friend or relative). In cross-examination, Mr. Bungaroo testified that the Appellant advertised in community publications to attract employees but not to attract TWs. However, these advertisements would generate calls from agencies and resulted in a lot of agencies knowing that the Appellant used TWs.[21]
[29] On the basis of the testimony of the witness TWs, the advertising appears to have been targeted at specific communities through local publications such as community-oriented newspapers, and the TWs who responded to the advertising were often recent immigrants to Canada.
[30] The Appellant did not treat the TWs as employees and paid amounts to the agencies for the TWs. All but one of the witness TWs[22] stated that they were paid weekly in cash.[23] Two witness TWs testified that they were initially paid in cash but subsequently obtained a debit card that was provided by a person other than the Appellant.[24] One of these two witness TWs testified that they were required to give a $20 deposit to obtain the debit card.[25]
[31] On the basis of the testimony of the witness TWs, TWs could obtain their pay for the week on either Friday or Saturday of that week. The payments in cash were made in one of three ways: (1) pick up cash at a specific location, which was a Money Mart or a location adjoining a Western Union; (2) receive, on the Appellant’s premises, an envelope of cash from an Agency representative; or, (3) receive, on the Appellant’s premises, an envelope of cash from a production supervisor of the Appellant. The procedure for obtaining payment varied but typically a TW had to sign something to obtain payment of his or her weekly wages.
[32] Ms. Gawedzka testified that for a period of time, the Appellant allowed representatives of the Agencies to distribute envelopes in a parking lot of the Appellant. Following a robbery, the Appellant allowed its production supervisors, who at the time included Ms. Gawedzka, to distribute envelopes of cash to TWs on the Appellant’s premises.
[33] Ms. Gawedzka testified that the envelopes of cash distributed to TWs by production supervisors were delivered to the Appellant’s premises by individuals who were representatives of the Agencies. Ms. Gawedzka stated that the names of two of the individuals who delivered envelopes were Souren and Rosemary.[26]
[34] The Agencies changed during the Relevant Period. The way in which each change was accomplished is described under a heading that appears later on in these reasons and that reads as follows: “(7) The Replacement of an Agency with a New Agency”.
[35] Exhibit A-9 consists of 12 letter agreements, which show the following execution dates:
Name of Agency
Date of Agreement
SN Rush Services Ltd (“SN Rush”)
December 20, 2009
Teamco Staffing Inc (“Teamco”)
November 11, 2010
Savex Consulting Inc (“Savex”)
August 18, 2011
VM Balance (“VM Balance”)
September 16, 2011
APAC Group (“APAC”)
March 29, 2012
EDACA
September 5, 2012
Unicorn Management (“Unicorn”)
October 15, 2012
Alpha
December 6, 2012
1886758 Ontario Inc./Proxor Group (“Proxor”)
January 5, 2013
Westlake Consulting (“Westlake”)
September 2, 2013
Vista Group (“Vista”)
November 26, 2013
V-Star Consulting (“V-Star”)
No Date
[36] The Appellant could not locate a letter agreement for Right Way Optimum (“Right Way”).[27]
[37] Mr. Bungaroo testified that the Appellant did not strictly enforce the letter agreements because the agreements were written for the benefit of the Appellant to protect the Appellant.[28] The Appellant did not inspect the business premises of the Agencies because the Appellant knew whether the TWs provided by the Agencies were showing up for work.[29]
[38] Mr. Bungaroo testified that the Appellant checked to ensure that each Agency had a Workplace Safety and Insurance Board (“WSIB”) certificate but did not make inquiries regarding the shareholders and directors of the Agencies.[30]
(4) The Representatives of the Agencies
[39] Mr. Bungaroo testified that three individuals were collectively the points of contact for all the Agencies: Mr. Souren Sarkissov, Mr. Igor Morozov and Mr. Alex Zeinalov (individually, a “Representative” and, collectively, the “Representatives”).[31] The Appellant stopped working with Souren Sarkissov in 2014, Igor Morozov in 2016 or 2017 and Alex Zeinalov in 2018.[32]
[40] Mr. Bungaroo testified that he communicated with Souren Sarkissov by e‑mail and telephone[33] and infrequently met with Mr. Sarkissov in his office.[34] Mr. Bungaroo also stated that he met and communicated with Igor Morozov and Alex Zeinalov.[35]
[41] Exhibit A-10 is an e-mail chain in which Mr. Bungaroo and Mr. Ochakovsky each sent e-mails to “[email protected]”, which start “Suren” and “Dear Suren and Naum”, respectively. The record indicates that the correct spelling of Mr. Sarkissov’s first name is “Souren”.
[42] Counsel for the Respondent pointed out in his cross-examination of Ms. Seleznova that Exhibit A-37, which is an e-mail from her to several of the Agencies, did not identify specific individuals, only the names of the Agencies.[36]
[43] After counsel for the Respondent provided Ms. Seleznova with the document to refresh her memory, Ms. Seleznova identified her contacts at the Agencies as follows:
1.Alpha: Igor
2.SN Rush: Igor
3.APAC: Alex
4.Proxor: Alex
5.Vista: Alex
6.VM Balance: Souren
7.EDACA: Souren
8.Right Way: Souren
9.Savex: Souren
10.Teamco: Souren
11.Unicorn: Souren
12.V-Star: Souren
13.Westlake: Souren[37]
(5) The Appellant’s Time and Attendance System (TraceTime)
[44] The Appellant issued each employee of the Appellant and each TW a swipe card–also frequently referred to by the witnesses as a punch card–that identified the individual by a bar code.
[45] The Appellant had punch clocks that were supplied and maintained by a third party located throughout its plants. A TW would swipe the card and the clock would recognize the bar code and log the time. The punch clocks had a button so a TW could choose whether the in and out time was for the shift or for a break (e.g., lunch) during the shift. The punch clocks were programmed with a list of valid bar codes. If a bar code was not used for six months, it was deactivated, but it was possible to have it reactivated.[38]
[46] All employees and TWs had to use the punch clocks. However, because it would take a few days to issue a swipe card to a new TW, the hours of a new TW would be recorded by the TW’s production supervisor until a swipe card was issued to the TW.[39]
[47] In cross-examination, Mr. Bungaroo testified that during the Relevant Period, the Appellant had a requirement that the identification of new TWs be checked the first time a TW entered a plant. Once a TW started working at a plant, the TW’s production supervisor would be able to identify the TW.[40] In 2014, a photograph of the card holder was added to the swipe cards.[41]
[48] Most of the witness TWs testified that they reported to security when they arrived at the Appellant’s premises for the first time. With one exception,[42] the witness TWs either did not mention being asked for identification (“ID”) when they arrived at the Appellant’s premises for the first time, or, if asked by counsel, stated that they did not recall being asked for ID, that they believed or thought that they were not asked for ID, or, in a couple of instances, that they were not asked for ID.
[49] The Appellant used a time and attendance system called TraceTime to keep track of the hours worked by all employees and TWs and to assign schedules to employees and TWs. TraceTime aggregated all punch-in and punch‑out information from the punch clocks in the Appellant’s plants, and all time entered manually into TraceTime. The information available to a person using TraceTime would depend on the role of the person.[43]
[50] Programs called “policies” were applied to the raw information to adjust times for various reasons such as to remove 30 minutes to account for a lunch break and to limit total time to the length of the shift.[44] In cross-examination, Mr. Khosla testified that a unique policy that sets various attributes was also associated with each Agency’s ID number, which in turn was associated with an Agency name.[45] However, an Agency did not have attributes, only the policy.[46]
[51] In cross-examination, Mr. Khosla testified that the only way to determine whether time was from a punch clock or from a manual entry was to compare the raw data from the clocks (the clock table) with the work time database, which included all clock times and manually entered times. Mr. Khosla agreed that the raw clock table and the raw work time database had not been entered into evidence but stated that the information in evidence did come from the work time database.[47]
[52] During the Relevant Period, Ms. Seleznova and Ms. Kissin were responsible for entering TWs into TraceTime and obtaining swipe cards for TWs.[48] To do this, they needed the TW’s name, the name of the agency with which the TW was associated, the department in which the TW would work and the rate to be paid to the agency.[49] Ms. Kissin testified that she did not rely on the agencies for information about TWs. Instead, she relied on the Appellant’s production supervisors for such information.[50]
[53] Most of the time, new TWs were assigned one of two pay rates. The rate was determined by the physical difficulty of the work to be performed by the TW. Occasionally, a special rate would be approved by management.[51]
(6) The Payments by the Appellant to the Agencies
[54] Mr. Bungaroo identified Exhibits A-11, A-12, A-13 and A-14 as the invoices in the names of the Agencies received by the Appellant. Exhibits A‑11, A‑12, A‑13 and A‑14 contain copies of all invoices showing the name of an Agency that were received by the Appellant for 2011, 2012, 2013 and January 2014, respectively. Each invoice is accompanied by a form of agency payments report (“APR”) printed by the Appellant from TraceTime and a payment slip showing information regarding the cheque or cheques issued by the Appellant to pay the invoice.[52] The payment slips indicate that all payments by the Appellant were to the Agency named in the accompanying invoice.
[55] Exhibits A-11 to A-14 contain invoices for the following periods:
Name of Agency
Period
Teamco
January 2, 2011 to August 13, 2011
SN Rush
January 2, 2011 to December 1, 2012
Right Way
February 6, 2011 to September 10, 2011
Savex
September 11, 2011 to October 13, 2012
VM Balance
September 11, 2011 to September 1, 2012
APAC
March 25, 2012 to February 16, 2013
EDACA
September 2, 2012 to October 5, 2013
Unicorn
October 14, 2012 to August 31, 2013
Alpha
December 2, 2012 to February 1, 2014
Proxor
February 17, 2013 to November 23, 2013
Westlake
September 1, 2013 to February 1, 2014
Vista
November 24, 2013 to February 1, 2014
V-Star
October 6, 2013 to February 1, 2014
[56] Mr. Bungaroo testified that the APRs in Exhibits A-11 to A-14 were prepared by the Appellant weekly for each Agency using the information in TraceTime. TraceTime had the name of the Agency associated with each TW, the TW’s “employee” number, the rate payable to the Agency for that TW and the hours worked by the TW.[53]
[57] Ms. Seleznova testified that every Tuesday she printed two types of APRs from TraceTime for every Agency that had provided TWs to the Appellant during the previous week. Ms. Seleznova identified the documents in Exhibit A-32 as representative of the APRs she printed weekly.[54] I will refer to the two types of APRs printed by Ms. Seleznova as “purchase-summary-APRs” and “hours-APRs”.
[58] The purchase-summary-APRs state the name of the Appellant’s plant (e.g., Marmora or Norelco), the name of the Agency, the week to which the report applies, and the total dollar amount payable to the Agency broken down by department (e.g., packaging department, bagel department).
[59] The hours-APRs state the name of the Appellant’s plant, the name of the Agency, the week to which the report applies, the name of the TWs associated with the Agency who had worked for the Appellant during the week, and the total hours worked for the Appellant by each such TW during the week. As with the purchase‑summary‑APR, the hours-APR is organized by department.
[60] Collectively, the purchase‑summary‑APR and the hours-APR for a particular week allow for the determination of the average hourly rate paid by the Appellant for TWs working in a particular department of the Appellant during that week.
[61] Ms. Seleznova testified that on Tuesdays she sent a purchase-summary-APR and an hours-APR to each Agency that provided TWs for the week covered by the APR and would expect to receive an invoice from the Agencies by noon on Wednesdays.[55]
[62] Ms. Seleznova would check each invoice received from an Agency against her purchase-summary-APR and, if the invoice was correct, she would enter the invoice into ACCPAC—the Appellant’s accounting system—for payment. Ms. Seleznova would then print a cheque and would give it to her manager for approval.[56]
[63] Ms. Seleznova testified that there were very rarely errors in invoices, andshe could not recall any one in particular.[57]
[64] Occasionally an Agency would dispute the hours worked by a TW. If hours were disputed, Ms. Seleznova would ask the relevant production supervisor to check and confirm the hours. If this was not done quickly enough to include any additional amount owed in the payment to the Agency for the week, then the amount would be added to the following week’s payment.[58]
[65] Ms. Seleznova testified that cheques issued to the Agencies were either mailed to the Agency or picked up by a representative of the Agency. Ms. Seleznova identified the representatives of the Agencies as Alex, Souren, and Igor. Ms. Seleznova did not recall any other representative picking up cheques.[59]
[66] In his cross-examination of Mr. Bungaroo, counsel for the Respondent pointed out several relatively small discrepancies (when comparing the totals) between the amounts stated in an hours-APR printed in 2019 for a particular Agency and week and the invoice for the same Agency and week. Mr. Bungaroo explained that the correct numbers were found in the contemporaneous APRs and that APRs printed later contained discrepancies because of changes in the status of TWs, such as becoming inactive or changing Agencies.[60]
[67] Mr. Khosla testified that the Appellant has three databases, which he identified as the bill of materials database, the time and attendance database (i.e., TraceTime) and the accounting software database.
[68] The Appellant backs up all three databases on tape drives.[61] The time and attendance and the accounting databases are backed up daily and the bill of materials database is backed up every two hours.[62] The backups were stored off‑site so that they would be available if there was a disaster at Marmora. Only the IT group had access to the backups.[63]
[69] In cross-examination, Mr. Khosla testified that the tape drives were kept for eight to ten years and were not overwritten.[64] In re-examination, Mr. Khosla clarified that the Appellant still had the backups for the Relevant Period.[65]
[70] Mr. Khosla testified that in 2015, the Appellant discovered issues with APRs printed from the then current TraceTime database. Specifically, the numbers in an APR printed from the current database did not match the numbers on historical documents, such as purchase-summary-APRs printed by Ms. Seleznova.[66] This resulted in relatively minor discrepancies.[67]
[71] Once discovered, the issues[68] were fixed going forward but to obtain accurate information for APRs for a period prior to the fix, the APR had to be printed from the backup of the database that was as close as possible to the date on which the original APR would have been printed,[69] which was typically the Tuesday after the week that the APR addressed. In cross-examination, Mr. Khosla agreed with counsel for the Respondent that it was not possible to tell from a document whether it was printed from a backup.[70]
[72] Ms. Kissin testified that during the Relevant Period, she was employed as a time and attendance clerk with the Appellant. Ms. Kissin summarized her duties during the Relevant Period as follows:
I received a request or orders from supervisors. I called agencies and made arrangements so they will send us people and when those workers showed up, I set up files for each worker based on the order I was provided by supervisors. And then just recorded working hours which I received from supervisors.[71]
[73] Ms. Kissin testified that a record of a new TW’s time would be kept by the TW’s production supervisor until a swipe card was issued to the new TW, which would take about one week. Ms. Kissin would manually enter the time recorded by the production supervisor into TraceTime.[72]
[74] Ms. Kissin would enter the following information in TraceTime: the first and last name of the TW, the hours worked, the department of the Appellant in which the TW worked, the referring agency and the rate. The rate was provided to Ms. Kissin by her supervisor.[73]
[75] Ms. Kissin would enter a TW into TraceTime only after the TW’s production supervisor had provided her with the hours worked by the TW on his or her first day.[74] Ms. Kissin recalled that heavy lifting positions had a higher rate of pay.[75]
[76] Ms. Kissin testified that production supervisors would advise her of their personnel needs mainly by telephone but sometimes by e-mail. Ms. Kissin would then call Agencies to see if they had TWs available. If an Agency had TWs available, she would e-mail to confirm the request for TWs. Ms. Kissin stated that she sent an e-mail because there had been instances when an Agency had sent more TWs or fewer TWs than requested.[76]
[77] Ms. Kissin identified 31 e-mails, or e-mail chains, to or from Agencies and/or about TWs.[77] Most of the e-mails were to Ms. Kissin from Unicorn, Savex, Vista, EDACA, Westlake, Proxor or Teamco. In a few instances, Ms. Kissin had forwarded an e-mail to someone else who worked at the Appellant or had responded to an e-mail from an Agency.
[78] The topics of the 31 e-mails are as follows: an Agency providing Ms. Kissin with the name(s) of TW(s) from the Agency,[78] an Agency providing Ms. Kissin with the name(s) of TW(s) from the Agency who are replacing other TW(s) from the Agency,[79] a request by an Agency to check for missing hours or to increase the rate for a TW provided by that Agency,[80] Ms. Kissin forwarding to an Agency an internal e-mail identifying issues with TWs from an Agency,[81] and an e-mail from Savex to Ms. Kissin attaching a “name list of our employees for Nov 11 2011”[82].
[79] In response to a question from counsel for the Appellant as to why an Agency would send an e-mail regarding replacement TWs, Ms. Kissin explained:
A. Well, when temporary employees got sick or unable to show up at work they were supposed to report it to their agency and then the agency ask us whether we needed the replacement.
Q. Why were they supposed to report it to the agency?
A. Because they are employees of the agency.[83]
[80] Ms. Kissin testified that over time she learned which agencies she could rely on to provide TWs and which agencies she could not rely on. Ms. Kissin stated that she had a whole list of agencies with names of individuals to contact. When asked for the names of people she called she said that she remembered some information, but she was “not quite sure in which year are all these agencies on the list”.[84]
[81] In cross-examination, Ms. Kissin agreed with counsel for the Respondent that the only documents she received from Agencies were the e‑mails, that she received the hours from the production supervisors but there were no documents in evidence to that effect, that she did not meet with or collect documents from new TWs, and that she did not review the IDs of new TWs.[85]
(7) The Replacement of an Agency with a New Agency
[82] The dates that invoices in a particular Agency name ceased and commenced, combined with the dates of the letters of understanding, indicate that during the Relevant Period Teamco and Right Way were replaced by Savex and VM Balance, respectively, SN Rush was replaced by Alpha, Savex was replaced by Unicorn, VM Balance was replaced by EDACA, APAC was replaced by Proxor, EDACA was replaced by V-Star and Proxor was replaced by Vista.
[83] The invoices issued for the last week of January 2014 are in the names of Vista, V-Star, Westlake and Alpha, indicating that these Agencies were the only ones dealing with the Appellant at the end of the Relevant Period.
[84] The Appellant’s counsel asked Mr. Bungaroo why three individuals represented 13 Agencies. Mr. Bungaroo stated:
A. Some agencies will stop working and those contact[s] will come to us and say we have stopped with those agencies and they’re working with different agencies now. And they’re representing a different agency.[86]
[85] Mr. Bungaroo testified that when a Representative advised the Appellant that he was working with a new Agency, the TWs associated with the prior Agency would be given the opportunity to move to the new Agency.[87] The Appellant facilitated the transfer by providing to the new Agency an office in the basement of the plant.[88] Ms. Seleznova did not recall any TW complaining about changing Agencies.[89]
[86] For the Appellant, the change in Agencies was accomplished by adding the new Agency to TraceTime and moving the TWs associated with the prior Agency to the new Agency.[90] The new Agency was also set up in ACCPAC.[91]
[87] In cross-examination, Mr. Khosla testified that it was possible to accomplish a change in Agency by changing the name of the Agency in TraceTime only if the Appellant knew at the time of the change that all the TWs associated with the former Agency were moving over to the replacement Agency and that except for the name change everything was staying the same.[92]
[88] Ms. Seleznova testified that prior to adding the new Agency in TraceTime and ACCPAC, she would require the owner or director of the new Agency to sign a letter of understanding. Ms. Seleznova would also obtain a WSIB certificate for the new Agency.[93] Ms. Seleznova had online tools available to ensure that a new Agency had a WSIB certificate.[94]
[89] In re-examination, Ms. Seleznova testified that when a Representative changed Agencies, she would simply change the name of the Agency in TraceTime so that all the TWs associated with the old Agency in TraceTime would become associated with the new Agency in TraceTime. She would also set up the new Agency in ACCPAC.[95]
[90] In cross-examination, Ms. Seleznova testified that she did not confirm with the new Agency that the TWs of the former Agency were employed by the new Agency because the same Representative was representing the new Agency.[96] Ms. Seleznova and counsel for the Respondent had the following exchange:
Q. By representing Alpha did you take this to mean that the workers provided by Alpha were Igor’s workers?
A. Igor was representing Alpha, yes.
Q. Did you take that to mean the workers that Igor supplied that went to Alpha when it came to SN Rush was the workers that Igor was providing you?
A. Yes, as a representative, yes.
Q. And the same thing would apply when Souren or Alex changed agencies?
A. Correct.[97]
[91] In cross-examination, counsel for the Respondent asked Ms. Seleznova if there was any documentation relating to a change in Agency and she stated that there was only a verbal agreement and that nothing was done by the Appellant to verify the transfer of the TWs to the new Agency.[98]
[92] In cross-examination, Ms. Seleznova testified that Agency invoices were sent to the Appellant by fax or e-mail. Ms. Seleznova agreed with counsel for the Respondent that the sample in tab 2A of Exhibit A-11 did not have a fax cover sheet or an e-mail showing that the invoice was an attachment.
[93] Counsel for the Respondent asked Ms. Seleznova about a correction to the invoice at tab 2A of Exhibit A-11 that added $960 for a TW. Ms. Seleznova stated that she did not recall the timing but acknowledged that the invoice from the Agency showed the corrected amount and had the same January 18, 2011 date as the APR.[99]
[94] Counsel for the Respondent took Ms. Seleznova to tabs 48B and 49D of Exhibit A-12, which include invoices from SN Rush and Alpha Logistics, respectively. Ms. Seleznova agreed with counsel that the layout of the two invoices is similar, that the invoices show the same telephone and fax numbers in the address line and that they both say “Established since 1998”. Ms. Seleznova confirmed that Igor represented both Agencies. The dates of the two invoices indicate that SN Rush was replaced by Alpha after the week ending December 1, 2012.[100]
[95] Counsel for the Respondent took Ms. Seleznova through the same exercise with the invoices at tabs 35A, 37B, 32C and 37C of Exhibit A-11 and at tabs 7A, 8A, 47A and 48A of Exhibit A-13 to much the same effect.[101]
[96] Counsel for the Respondent took Ms. Seleznova to Exhibit A-32 and asked if many of the TWs shown in the detailed APRs for SN Rush at page 4 of tab 32 and page 10 of tab 33, respectively, were the same. Ms. Seleznova agreed that they were and that someone would have changed the duplicate TWs from SN Rush to Alpha in the Appellant’s system.[102]
[97] Counsel for the Respondent took Ms. Seleznova to an employee information audit report (an “EIA report”) for a TW (Exhibit R-33) and compared that report to APRs for Savex, EDACA and V-Star (Exhibits R-34, R-35 and R-36). Ms. Seleznova agreed with counsel that Exhibit R-33 did not reflect the last change in Agency to V-Star, which was reflected in Exhibit R-36.[103] Counsel undertook a similar exercise with 15 other TWs to the same effect.[104] Ms. Seleznova stated repeatedly that she used EIA reports for a limited purpose and that she knew that they existed but was not “really” familiar with that type of report.[105]
[98] In examination in chief and in cros