Date: 19971124
Docket: 97-833-UI
BETWEEN:
RÉAL AUCLAIR,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Prévost, D.J.T.C.C.
[1] This appeal was heard at Rimouski, Quebec on October 28, 1997.
[2] It is an appeal from a decision of the Minister of National Revenue ("the Minister") dated April 22, 1997 that the appellant's employment with Coop des Travailleurs Associés en Construction de Rimouski (CTACR), the payer, from August 14 to October 13, 1995 was not insurable because it did not meet the requirements of a contract of service.
[3] Paragraph 5 of the Reply to the Notice of Appeal reads as follows:
[TRANSLATION]
5. In arriving at his decision the respondent Minister of National Revenue relied inter alia on the following facts:
(a) the payer is governed by the Cooperatives Act; (A)
(b) the payer was incorporated on June 8, 1995; (A)
(c) the payer operates a business to give its members work in construction, renovation and all other related spheres of activity; (A)
(d) the appellant transferred the contract for the St-Narcisse school to the payer; (D)
(e) the appellant received a payment of $5,520.02 as professional fees in consideration for the St-Narcisse school contract; (D)
(f) the appellant transferred equipment worth $20,000 to the payer; (DAD)
(g) the appellant received two payments totalling $3,680 in consideration for part of the equipment; (D)
(h) in addition to the aforementioned payments the appellant received payments for his salary and to reimburse expenses; (D)
(i) the board of directors consisted of five directors; (A)
(j) the appellant was the chairman and was also a member of the bidding committee; (A)
(k) although the directors were not paid the appellant received part of his pay as president and another part as a worker; (D)
(l) the appellant provided services chiefly at the St-Narcisse school site; (DAD)
(m) the appellant was in charge of the St-Narcisse school site; (ASA)
(n) the payer did not supervise the hours of workers on this site; (D)
(o) the appellant had special status in the cooperative; (NK)
(p) the board of directors controlled the result of the work done; (A)
(q) the appellant:
- brought the St-Narcisse school contract with him when he came to the payer;
- brought $20,000 in assets, out of a total of $30,000, with him when he came to the payer;
- was chairman of the payer's board of directors;
- was a member of the bidding committee; and
- arranged to be paid as a director or as a worker as he saw fit; (D)
(r) no contract of service existed between the appellant and the payer during the period at issue. (D)
[4] In the preceding extract from the Reply to the Notice of Appeal the Court has indicated as follows, in parentheses after each subparagraph, the comments made by counsel for the appellant at the start of the hearing:
(A) = admitted
(D) = denied
(ASA) = admitted subject to amplification
(NK) = no knowledge
(DAD) = denied as drafted
Hearing
Appellant's evidence
According to his testimony
[5] It was in a newspaper that he saw that painters and other construction workers were getting together to form a cooperative and when he contacted them he learned that this cooperative had already been created by articles (Exhibit A-1) dated June 8, 1995: its purpose was [TRANSLATION] "to operate a business to give its members work in construction, renovation and all other related spheres of activity".
[6] This cooperative has by-laws of internal management (Exhibit A-2).
[7] He was elected its president and Guy Tremblay became the general manager.
[8] One of the purposes of this cooperative was to curb clandestine work.
[9] Each member contributed work to the group: there was a bidding committee which met to decide on bids.
[10] However, he alone could sign bid forms at the Bureau des soumissions déposées du Québec (B.S.D.Q.).
[11] Members could only work if they had their competency cards.
[12] Members found work by checking sites at various places.
[13] His previous employer, 2968-1210 Québec Inc., doing business under the trade name "Peinture Nord Est", had obtained a subcontract (Exhibit A-3) for painting work at the St-Narcisse school: it was in the amount of $18,767 plus taxes, but he renegotiated it upwards by $7,000 because of a surplus of work. The work was done by the Coop and it was he who was responsible for the performance of the contract: he worked on it himself with two other painters. He received no compensation for transferring this subcontract, however.
[14] In order to be paid his salary he took his hours to the Coop secretary using a time sheet he filled out each week.
[15] Moreover, it was not the only place he worked for his employer.
[16] On June 8, 1995 he signed an agreement with the Coop (Exhibit A-4) reading as follows:
[TRANSLATION]
The CTACR acknowledges a debt without interest to member Réal Auclair for 50 percent of the value of the painting tools described below:
- 2 1,500 Ultra greco guns
- 1 1,000 Ultra greco gun
- 1 air gun with hose
- 1 hood for sandblasting
- 1 air and sandblasting hose
- 1 six-inch pole gun
- 1 four-inch pole gun
- 1 three-step scaffold
- 2 four-foot rolling scaffolds
- 1 small six-foot rolling scaffold
- 20 planks
- 5 step ladders
- 1 stucco machine
This debt shall be payable as long as the Cooperative remains in good financial health.
A joint valuation by three persons shall be required to determine the value of the tools.
[17] Under this contract he received money two or three times for a total of approximately $8,000; if new the equipment might be worth about $28,000.
[18] When he left the Coop he took part of this equipment with him, namely an ultra greco gun, the three-step scaffold, the small scaffold, the planks and the stucco machine, for the balance owed to him.
[19] He was not paid as president: he always received only his salary and a reimbursement of his expenses, including board and lodging when he travelled outside the area.
[20] Another subcontract of his previous employer was also transferred to the Coop, namely an agreement with Constructions BSL Inc.; he was also responsible for it on the payer's behalf and painted under it with the same workers as at the St-Narcisse school.
[21] On May 24, 1995 he obtained a receipt for $100 (Exhibit I-1) from the Coop for [TRANSLATION] "common shares".
[22] When a member began working on a contract he could not be [TRANSLATION] "let go" so as to bring in someone else in his place.
[23] Peinture Nord Est transferred the St-Narcisse school painting subcontract to the cooperative by means of a written contract (Exhibit I-2) in which he signed for both parties and Guy Tremblay co-signed for the Coop.
[24] When he left the Coop he left behind, without compensation, office equipment which he had allowed it to use: he has no idea of the value of the furniture in question.
[25] At some point unemployment insurance benefits were no longer paid to members who had been laid off: he was [TRANSLATION] "pushed aside", his presence at the Coop was no longer desired and he ceased working there.
[26] On all sites it was the Coop which guaranteed performance of the work.
Respondent's evidence
According to Lise Lortie, appeals officer
[27] It is true that at one point she had several cooperative members under investigation and that seven workers appealed: five of them had their employment ruled insurable, as did the sixth, although only in part.
[28] In the instant case the appellant's employment is not insurable because, since he had contributed equipment, the employer did not as in the case of the other workers withhold five percent for cooperative expenses.
[29] The appellant told Ms. Lortie that his contribution was worth $20,000 out of a total of $30,000: this means that most of the Coop's assets came from him.
[30] The cooperative had two payrolls: one for employees governed by the Commission de la construction du Québec (C.C.Q.) and another for those not governed by it.
[31] The appellant received two paycheques for work not governed by the C.C.Q., namely for fees for administration and bid preparation, and five for work governed by the C.C.Q.
[32] The net pay was of course higher in the first case.
[33] When the appellant was laid off the St-Narcisse school site had already been largely completed.
[34] Guy Tremblay told Ms. Lortie that although there was no formal contract stipulating this, on the sites it was really the foreman who was in charge.
[35] He also told Ms. Lortie that the payment of $5,520.02 mentioned in subparagraph (e) above was a bonus to the appellant for bringing in contracts and managing sites without being paid for doing so.
[36] The general manager also told her that there were three people on the bidding committee, including the appellant, and that they all received fees for their work on the committee.
[37] He added that the appellant had special status in the Coop, did what he liked and did not really understand the cooperative spirit.
[38] Ms. Lortie also spoke with the owner of Construction 4 Saisons, the general contractor at the St-Narcisse school, and he told her he did not learn of the existence of the Coop until the painting work at that location was almost complete.
[39] She obtained the cash book from the Coop in 1995 and saw that the appellant had received three expense reimbursement cheques, one for $312.93 in August, one for $335.92 in October and another for $17.66 in December.
Argument
According to counsel for the appellant
[40] In Robert Brisson v. M.N.R. (84-425(UI)), Deputy Judge Potvin of this Court wrote:
When it is a question of a contract of service and when it is not so specified in any written or verbal contract, we must consider the criteria mentioned in Montreal v Montreal Locomotive Works Ltd, [1947] 1 DLR 161, in order to determine whether there was a contract of service, namely control of the employee's work by the employer; ownership of the tools; the chances for profit and the risk of loss; and integration of the employee's work into the employer's business.
[41] In terms of supervision, her client had to account for his hours each week on his time sheet.
[42] The hours he worked were the same as those of the other members whose employment has been found insurable.
[43] As regards work tools, the agreement (Exhibit A-4) is there and speaks for itself.
[44] The appellant was on salary and could have no expectation of profit or risk of loss.
[45] In Ranjit Darbhanga v. M.N.R. (A-259-94), Pratte J.A. wrote for the Federal Court of Appeal (at pp. 1-2):
The decision of the Tax Court of Canada to the effect that the applicant did not hold insurable employment seems to be based on the assumption that, as her alleged employer was sick when she worked for him and could not, for that reason, supervise her work, it necessarily followed that her work had been done under a contract for services rather than under a contract of service. That is an error. A contract may be a contract of service even though the employer does not supervise the work of the employee if he actually has that right.
According to counsel for the respondent
[46] The Coop was incorporated on June 8, 1995 and the appellant had paid for his shares on the preceding May 24.
[47] The appellant transferred painting contracts from his former employer as if they were his personal possessions.
[48] At the Coop, only foremen really controlled the workers and that is precisely the capacity in which the appellant acted, in addition to being president.
[49] He was not paid for all his work tools and had to take some back to pay off the balance owed to him when he left the employment.
[50] In providing such equipment the appellant obviously assumed a risk of loss in the case of breakage.
[51] In Brian K. Byers v. M.N.R., 94-524(UI), Deputy Judge Watson of this Court wrote (at p. 6):
Mr. Hennessey made submissions on behalf of the Intervenor, Argenta. He claimed that the payor acted as a temporary employment agency pursuant to paragraph 12(g) of the Unemployment Insurance Regulation [sic]. This is difficult to accept since there was no evidence that Argenta negotiated the placement of the Appellant with Mr. Brinkman or Mr. Snyder for the work done by the Appellant. Also, there was no evidence that Argenta’s customers had directed or supervised the Appellant in the performance of his work. The “customers” chose the Appellant to do the work, not Argenta as an employment agency.
According to counsel for the appellant in reply
[52] The six other members won their cases wholly or in part and the cases are similar.
Analysis
[53] The appellant's case is not similar to that of the other six members: on the evidence, only the appellant transferred to the Coop two painting subcontracts held initially by his previous employer, Peinture Nord Est.
[54] The appellant denied receiving the sum of $5,520.02 mentioned in subparagraph (e), but Guy Tremblay confirmed this to the appeals officer: the appellant had the burden of proof and did not discharge it as he did not submit the relevant accounting records of the Coop.
[55] The same is true for the payments referred to in subparagraph (g).
[56] On the evidence, only the appellant transferred as much equipment to the payer. If there had been a true contract of service the agreement (Exhibit A-4) would certainly not have been concluded on a basis of only 50 percent; moreover, it would surely have included a payment date.
[57] The appellant was the Coop’s president and so its chief administrator, which was also not true of the other members.
[58] Guy Tremblay did tell the appeals officer that the appellant had special status, did what he liked and did not really understand the cooperative spirit.
[59] He received money for administrative tasks and for preparing bids and the evidence does not disclose that this was true of the other six members who appealed in other cases.
[60] As foreman the appellant supervised his employees' working hours, but no one really supervised his own: he may well have filled out a time sheet, but he alone decided what to write on it.
[61] While it is true that he claimed to have no knowledge of subparagraph (o), it is clear from the evidence that what the subparagraph says is true.
[62] He admitted that the board of directors controlled the result of the work done and in his case this clearly establishes that there was no true contract of service.
[63] Although subparagraph (q) was denied, the evidence as a whole shows that he arranged to be paid as a director or as a worker as he saw fit.
[64] He alone could sign B.S.D.Q. bid forms, which means that the other six members could not do so.
[65] In another case (97-832(UI)), he also appealed a decision by the respondent on his employment with Peinture Nord Est.
[66] The agreement (Exhibit A-4) did not bear interest and this also suggests that there was no true contract of service.
[67] The appellant denied receiving two payments totalling $3,680 on account of his equipment; at the hearing he stated that he had actually received two or three payments totalling approximately $8,000, but here again he did not produce the Coop's books to bring out the truth.
[68] The valuation mentioned in the agreement (Exhibit A-4) does not appear to have been made and it is impossible to know whether he really took the equipment back for the balance owed to him.
[69] The appellant stated he was not paid as president, but the evidence is to the contrary as he was paid for his administrative expenses.
[70] No conclusion can be drawn from the fact that the receipt (Exhibit I-1) is dated May 24, 1995 as money may be paid on future shares when a cooperative is being organized.
[71] Nor can any conclusion be drawn from the fact that the appellant left his office equipment with the Coop, especially as he had no idea of its value.
[72] The circumstances in which he [TRANSLATION] "left" the cooperative have no bearing on the outcome of this case.
[73] The appellant did not have to pay five percent for cooperative fees as the other six members did, which clearly confirms that he had a very special status with the payer.
[74] He did not see fit to call Guy Tremblay even though the burden of proof was his.
[75] It is quite surprising that the appellant did not inform Construction 4 Saisons of the transfer of the painting subcontract when it was signed.
[76] The appellant received cheques for expenses and did not establish exactly why even though the burden of proof was his.
[77] The tests set out in Brisson are well known and the appellant does not meet them all: he was not supervised, but supervised himself; he provided the payer with two thirds of the work tools, on unusual terms to say the least; and he definitely had a risk of loss if these very valuable tools were broken.
[78] The appellant's working hours could not be the same as those of other workers as he was also paid for administrative tasks and for preparing bids.
[79] Unlike the situation in Darbhanga, the Coop does not appear to have had even a power of control over the appellant's work, as he did what he liked.
[80] It seems clear that the appellant transferred two painting subcontracts to the Coop as if they were his personal possessions and, for the purposes of the decision below, this clearly shows he was not simply an employee of the payer paid on an hourly basis.
[81] As in Byers, in the two contracts in question the customers had initially chosen to give the work to Peinture Nord Est and not to the Coop as a business established to provide work for its members.
[82] For all these reasons, the appeal must be dismissed and the subject decision affirmed.
"A. Prévost"
D.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 8th day of September 1998.
Stephen Balogh, revisor