Date: 19990511
Docket: A-376-98
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
VULCAIN ALARME INC.,
Plaintiff,
AND:
THE MINISTER OF NATIONAL REVENUE,
Defendant.
Hearing held at Montréal, Quebec, Monday and Tuesday, May 10 and 11, 1999.
Judgment from the bench at Montréal, Quebec, Tuesday, May 11, 1999.
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date: 19990511
Docket: A-376-98
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
VULCAIN ALARME INC.,
Plaintiff,
AND:
THE MINISTER OF NATIONAL REVENUE,
Defendant.
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec
on Tuesday, May 11, 1999)
LÉTOURNEAU J.A.
[1] We consider that the Tax Court of Canada deputy judge, in his discussion of the difference between a contract of service and a contract for services, properly relied on the tests developed by the courts on this point (control, ownership of tools, risk of loss, expectation of profit and integration into the business), but misunderstood their meaning and scope and accordingly misapplied them to the facts of the case at bar. In doing this he drew conclusions which are incorrect in law and which require our intervention. These tests derived from case law are important, but it should be remembered that they cannot be allowed to compromise the ultimate purpose of the exercise, to establish in general the relationship between the parties.[1] This exercise involves determining whether a relationship of subordination exists between the parties such that the Court must conclude that there was a contract of employment within the meaning of art. 2085 of the Civil Code of Quebec, or whether instead there was between them the degree of independence which characterises a contract of enterprise or for services, mentioned in art. 2098 of the said Code. As Beetz J. said in Desgagnés v. Fabrique de la Paroisse de St-Philippe d'Arvida,[2] an appellate court, or court of review as in the case at bar, which intervenes in such circumstances does not substitute its view of the evidence for that of the trial judge but draws different conclusions in law based on the facts which he himself has established.
When an appellate court accepts all the conclusions of fact as such made by the trial judge . . . it is in as good a position as he is to characterize those facts.[3]
[2] Further, as we shall see, we consider that the deputy judge failed to take relevant evidence into account, which if he had kept it in mind, would inevitably have altered his conclusions of law.
Control
[3] In connection with the control which characterizes master-servant relations in a contract of employment, and thus the relationship of subordination required between the employer and employee, the Tax Court of Canada deputy judge considered inter alia the following facts:
(a) Mr. Blouin, operating under the trade name Service Électronique Enr., had since 1965 done inspection work and the gauging of toxic substance detectors for the plaintiff with the latter's customers and served not his own customers but those of the plaintiff;
(b) Mr. Blouin had to report to the plaintiff's business once a month to get the list of customers requiring service;
(c) Mr. Blouin enjoyed flexible hours but the services had to be provided to the plaintiff's customers within 30 days;
(d) Mr. Blouin was entitled to do work for other businesses, but had to give the plaintiff priority in carrying out the work given to him by the latter;
(e) Mr. Blouin worked exclusively for the plaintiff although he was not subject to such a requirement; and
(f) Mr. Blouin had to submit his time sheets and expense reports to be paid by the hour at a rate determined by the plaintiff, and the plaintiff accordingly exercised control over him through this billing system.
[4] In our opinion, all these points of fact are also consistent with a contract of enterprise. A contractor who, for example, works on site on a subcontract does not serve his customers but those of the payer, that is the general contractor who has retained his services. The fact that Mr. Blouin had to report to the plaintiff's premises once a month to get his service sheets and so to learn the list of customers requiring service, and consequently the places where his services would be provided, does not make him an employee. A contractor performing work for a business has to know the places where services are required and their frequency just as an employee does under a contract of employment. Priority in performance of the work required of a worker is not the apanage of a contract of employment. Contractors or subcontractors are also often approached by various influential customers who force them to set priorities in providing their services or to comply with the customers' requirements.
[5] As regards remuneration and the billing system, it is worth repeating the comments of my brother Hugessen J.A. in Canada (Attorney General) v. Rousselle et al.[4] where he concluded that the judge had clearly not understood the meaning of the word "control":
Fixing the amount of remuneration or defining the purpose of the exercise is not controlling work. These aspects exist in a contract for services as much as in a contract of service. It is still more the case that control does not lie in the act of payment, whether by cheque or otherwise.
[6] The same is true, of course, of reimbursement for expenses and the inevitable billing system associated with it.
[7] In the case at bar the evidence did not disclose that the plaintiff controlled Mr. Blouin by giving him orders and instructions in the way his work was to be done. On the contrary, the latter was complete master of the way in which he provided his services, except that they had to be done within 30 days.[5] No one imposed any control on him or exercised any supervision over his provision of the services, and Mr. Blouin set his own schedule. We will also return to this concept of control in the following analysis of the concept of ownership of tools.
Ownership of tools
[8] The trial judge recognized that Mr. Blouin travelled from one site to another with his own truck to provide the inspection services required but took as an indication of a contract of employment the fact that he was reimbursed for his expenses by the plaintiff and that the inspection of detectors done by Mr. Blouin was done using a special detector provided by the plaintiff.
[9] We have already discussed the reimbursement of expenses and the fact that this could not serve as the basis for a relationship of subordination. Additionally, the evidence showed that Mr. Blouin's truck was equipped with tools a contractor would have, but that the inspection of the detectors as such required few tools.[6] There was no question that for security reasons the equipment or modules found on inspection to be defective were repaired at the plant, never on the spot.[7] Mr. Blouin was not qualified for this kind of work, never repaired them and never worked in the plaintiff's workshop where technicians were assigned to these duties.[8] On the other hand, so far as tools owned by Mr. Blouin were concerned, the latter owned and himself provided the voltmeters required to measure the equipment inspected.[9]
[10] There remains the question of the special detection equipment supplied by the plaintiff. Two comments should be made in this connection. First, this special equipment is not available on the market and Mr. Blouin could not obtain it for himself.[10] Second, in view of the question of "security" involved and the fact that the plaintiff would have been liable in the event of a breakdown, the latter wanted to have strict control over the special detection equipment to ensure that it was reliable and to comply with the regulatory standards applicable to it. In such circumstances there is certainly nothing strange about the plaintiff requiring in its contract of enterprise that the contractors whose services it employs use a specialized tool which it supplies them. This single specification or requirement by the plaintiff does not have the effect of transforming a contract of enterprise into a contract of employment. We adopt on this point the following remarks by our brother Décary J.A. in Charbonneau v. Canada (Minister of National Revenue - M.N.R.):[11]
It is indeed rare for a person to give out work and not to ensure that the work is performed in accordance with his or her requirements and at the locations agreed upon. Monitoring the result must not be confused with controlling the worker.
[11] In other words, controlling the quality of work is not the same thing as controlling its performance by the worker hired to do it.
[12] The trial judge appears to this Court to have lost sight of the fact that Service Électronique Enr., operated by Mr. Blouin, existed before the plaintiff was in business and that Mr. Blouin repaired television sets and electronic equipment under that trade name on his own behalf.[12] That is why he had such a quantity of equipment. In our view, all these facts relating to the ownership of tools or equipment tend to show the existence of a contract of enterprise far more than a contract of employment.
Degree of integration
[13] On this point the trial judge relied primarily on the fact that Mr. Blouin had chosen to work exclusively for the plaintiff, that customers' complaints were addressed to the latter and that the service provided to customers was a significant part of the plaintiff's commercial activities (20% of turnover).
[14] We do not feel that the fact that Service Électronique Enr. and Mr. Blouin chose to perform contracts exclusively for the plaintiff made Mr. Blouin the latter's employee. Undoubtedly, Société Électronique Enr. and Mr. Blouin had by choice become dependent contractors by imposing an economic subordination on themselves. However, they were not legally bound by an exclusive contract and had not ceased to be contractors. Mr. Blouin was not working in the plaintiff's offices or workshops.[13] Further, his comings and goings, his work hours and days were in no way integrated into or coordinated with the plaintiff's operations.[14]
[15] Although, as the Tax Court of Canada deputy judge mentioned, customer service represented 20% of the plaintiff's turnover, he seems to have forgotten that the plaintiff had an internal technical section consisting of a manager and about fifteen technicians, and Mr. Blouin was not part of that.[15] In fact, the services rendered by the Société Électronique Enr. and Mr. Blouin accounted for only a small part of this turnover.[16] In any case, we do not see how this point becomes an indication that Mr. Blouin was integrated into the plaintiff's business. There is nothing to prevent a business assigning all or part of its customer services to one or more independent contractors.
[16] Finally, proof of integration is not provided by the fact that customers' complaints were directed to the plaintiff, and not to Société Électronique Enr. They were customers of the plaintiff who were being served by an independent contractor: it is quite natural that they would complain to the plaintiff of the quality of its product or the after-sale service offered.
Risk of loss and expectation of profit
[17] The Tax Court of Canada deputy judge concluded on the basis of the following three facts that Mr. Blouin and Service Électronique Enr. suffered no loss:
(a) they were reimbursed for their travel expenses even if the customer to be served was not present when they called;
(b) Mr. Blouin received remuneration in the form of a salary at a rate set by the plaintiff; and
(c) the plaintiff had obtained liability insurance to protect itself against mistakes by Mr. Blouin.
[18] With respect, we do not feel that these facts are conclusive as to the analysis of risk of loss or expectation of profit by Mr. Blouin and his company. Although Mr. Blouin's income was calculated on an hourly basis, the number of hours of work were determined by the number of service sheets he received from the plaintiff. Mr. Blouin and his company thus had no guaranteed income. Unlike the technicians working as employees within the plaintiff's business, whose weekly salary was constant, Mr. Blouin's income fluctuated with the service calls. In fact, towards the end of his contract with the plaintiff Mr. Blouin was no longer doing the equivalent of forty hours a month as he was receiving few service sheets.[17]
[19] Further, Mr. Blouin, who used his own vehicle for work, had to pay the losses resulting from an accident in which he was involved and obtain another vehicle.[18]
[20] In our view, the first two points noted by the trial judge in this connection indicate the existence of a contract of enterprise between the plaintiff and Service Électronique Enr. and Mr. Blouin.
[21] On the third point, the trial judge could have concluded as he did from the evidence that the liability insurance taken out by the plaintiff covered mistakes by Mr. Blouin and his company. However, the plaintiff's president testified that it was his company which was responsible to its customers under contracts of service which it signed with them and that it was obliged to obtain $3 million insurance per event, which covered both the product sold and services rendered.[19] In the circumstances, Mr. Blouin and his company decided that it was not necessary for them to obtain further liability insurance.
[22] The wisdom of such a decision may be questioned, especially in the event of fault by them which could result in a subrogatory action by the plaintiff's insurers. However, in the general context of the relations between the parties we do not feel that this third point can by itself change the nature of the contract of enterprise which in our view existed between them.
[23] For these reasons, we consider that the employment held by Mr. Blouin was not insurable employment within the meaning of the Unemployment Insurance Act during the periods at issue. The Court accordingly considers that the application for judicial review should be allowed with costs, the judgment by the Tax Court of Canada set aside and the matter referred back to it to be again decided on the basis that the employment held by Mr. Blouin in 1993, 1994, 1995 and 196 was not insurable employment.
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Gilles Létourneau
J.A. |
Certified true translation
Bernard Olivier, LL. B.
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Federal Court of Appeal
Date: 19990511
Docket: A-376-98
Between:
VULCAIN ALARME INC.,
Plaintiff,
and
THE MINISTER OF NATIONAL REVENUE,
Defendant.
REASONS FOR JUDGMENT
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FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE No.: A-376-98
STYLE OF CAUSE: VULCAIN ALARME INC.,
Plaintiff,
AND:
THE MINISTER OF NATIONAL REVENUE,
Defendant.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: May 10 and 11, 1999
REASONS FOR JUDGMENT OF THE COURT (DESJARDINS, LETOURNEAU AND NOËL JJ.A.)
READ FROM THE BENCH BY: Létourneau J.A.
DATED: May 11, 1999
APPEARANCES:
Jean-François Bilodeau for the plaintiff
Marie-Andrée Legault for the defendant
SOLICITORS OF RECORD:
Sproule, Castonguay, Pollack for the plaintiff
Montréal, Quebec
Morris Rosenberg for the defendant
Deputy Attorney General of Canada
Ottawa, Ontario
[1] Ranger v. Canada (Minister of National Revenue - M.N.R.), [1997] F.C.J. No. 891 1, at 2, per Desjardins J.A. citing Décary J.A. in Charbonneau v. Canada (Minister of National Revenue - M.N.R.), [1996] F.C.J. No. 1337 1, at 2.
[2] [1984] 1 S.C.R. 19.
[3] Id., at 31.
[4] (1990) 124 N.R. 339, at 344.
[5] Plaintiff's record, at 18.
[6] Ibid., at 64.
[7] Ibid., at 45.
[8] Ibid., at 22 and 29.
[9] Ibid., at 44 and 64.
[10] Ibid., at 41.
[11] [1996] F.C.J. No. 1337 1, at 2.
[12] Plaintiff's record, at 16 and 48.
[13] Ibid., at 28.
[14] This point was regarded as important and noted by this Court in Canada (Attorney General) v. Rousselle et al. (1990), 124 N.R. 339, at 348.
[15] Ibid., at 13 to 15 and 22.
[16] Ibid., at 25. It appeared from the evidence that the money paid to Service Électronique Enr. never exceeded $28,000 a year.
[17] Ibid., at 65.
[18] Ibid. See also Canada (Attorney General) v. Rousselle et al. (1990), 124 N.R. 339, at 346, in which the costs of repairing a skidder assumed by the workers were regarded by this Court as a significant element of risk consistent with a contract of enterprise, not a contract of employment.
[19] Ibid., at 33 to 36 and 54.