Date: 19981123
Dockets: 98-264-UI; 98-265-UI; 98-266-UI; 98-267-UI; 98-268-UI; 98-269-UI; 98-270-UI; 98-271-UI; 98-272-UI; 98-273-UI; 98-274-UI
BETWEEN:
CLAUDE BELLAVANCE, RAYMOND BERGERON, PATRICE COULOMBE, LOUIS COURTY, ARMAND DUCLOS, ESTATE OF AURÈLE JOUBERT REPRESENTED BY LAURETTE SAVOIE JOUBERT, ALLAIN LEBEL, PATRICE LEBEL, ALLAIN PAQUET, YVON PATENAUDE, ROMAIN PELLETIER,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Cuddihy, D.J.T.C.C.
[1] These appeals were heard on common evidence at Campbellton, New Brunswick, on October 19, 1998.
I- The Appeals
[2] The appellants are instituting appeals from 11 decisions by the Minister of National Revenue (the "Minister") dated February 19 and 23, 1998 according to which the employment of Claude Bellavance from July 10, 1995 to March 7, 1996 and from June 17, 1996 to February 28, 1997, the employment of Raymond Bergeron from June 23 to November 2, 1995 and from November 28, 1995 to March 7, 1996, the employment of Patrice Coulombe from July 10, 1995 to March 7, 1996 and from June 17 to October 23, 1996, the employment of Louis Courty from June 23, 1995 to March 8, 1996, the employment of Armand Duclos from November 21, 1994 to February 10, 1995, from July 10, 1995 to March 9, 1996 and from June 17, 1996 to February 28, 1997, the employment of Aurèle Joubert from July 10 to November 7, 1995, from November 22, 1995 to March 7, 1996, from June 17 to October 23, 1996 and from November 18, 1996 to February 28, 1997, the employment of Allain Lebel from November 18, 1996 to February 28, 1997, the employment of Patrice Lebel from June 7, 1995 to March 7, 1996, the employment of Allain Paquet from July 10, 1995 to March 7, 1996, from June 17 to October 23, 1996 and from November 18, 1996 to February 27, 1997, the employment of Yvon Patenaude from July 10, 1995 to March 7, 1996 and from June 17 to October 23, 1996, the employment of Romain Pelletier from July 10, 1995 to March 7, 1996 and from June 17 to October 23, 1996 with Camionneurs de Restigouche Ouest Inc. (the "payer") were not insurable within the meaning of the Unemployment Insurance Act (the "Act") — now the Employment Insurance Act — since there existed between the appellants and the payer, during those periods, no contract of service within the meaning of paragraph 3(1)(a) of the old Act and paragraph 5(1)(a) of the new Act.
II- Summary of Facts
[3] In paragraph 4 of his Replies to the Notices of Appeal, the respondent set out the facts on which he based his decisions. Those facts form part of this judgment as though herein cited at length.
[4] Louis Courty, Allain Paquet, Patrice Lebel and Allain Lebel testified in support of the appeals. It was admitted that if Claude Bellavance, Raymond Bergeron, Patrice Coulombe, Armand Duclos, Laurette Joubert, Yvon Patenaude and Romain Pelletier had been heard as witnesses, their testimony would have been similar to that of those who did testify.
[5] The appellants are all truck drivers and owned their trucks, either individually or through a corporation in which they were either majority or minority shareholders.
[6] Deniso Lebel Inc. ("Groupe Lebel") is a company which has operated a lumber mill in Kedgwick, New Brunswick, since 1991.
[7] When Groupe Lebel took over the operation of the Kedgwick mill in 1991, it did not want to do business with the appellants individually with respect to the transport of timber, but rather wanted to negotiate with a single entity. Labour relations were difficult from 1991 until November 9, 1993, when a collective agreement was signed between Groupe Lebel and the Communications, Energy and Paperworkers Union of Canada, Local 108N (Exhibit A-1).
[8] On October 28, 1993, the payer was incorporated in the province of New Brunswick and its shareholders were all the appellants except for Allain Lebel. Creating the payer enabled the appellants to obtain a timber transportation contract with Groupe Lebel.
[9] The work obtained by the appellants through the payer was to transport rough timber, logs and pulp from forest sites to the mill in Kedgwick for Groupe Lebel.
[10] The payer first negotiated a timber transportation contract with Groupe Lebel. Two examples of this type of contract were submitted to the Court (Exhibits A-3 and A-4). In those contracts, the payer is described as a contractor. The contracts set out the parties' obligations.
[11] Once a year, the payer negotiated with Groupe Lebel the price for transporting timber from the forest to the Kedgwick mill. The price was determined on the basis of the distance travelled and the number of cubic meters of timber delivered to the mill by the appellants (see Exhibit A-3, Schedule A). In addition to this amount, for the 1995-1996 year (Exhibit A-3), for example, the payer received $0.20 per cubic meter for its administrative expenses and the appellants' fringe benefits.
[12] The payer's administrative expenses were for the accountant who kept the payroll, recorded the truck drivers' hours, saw that the money was distributed to the appellants, prepared the financial statements and filed the income tax returns (Exhibit I-1).
[13] The appellants' fringe benefits included union dues, disability insurance premiums, unemployment insurance premiums, health and group insurance premiums and contributions to a retirement savings plan and to the Canada Pension Plan.
[14] The payer then negotiated with each appellant individually a rental contract for the truck driven by him. For the purposes of this judgment, the contract between the payer and the appellant Louis Courty was entered in evidence (Exhibit A-6). This document forms part of this judgment as though cited at length herein. The contract set no rental.
[15] In short, Groupe Lebel remitted to the payer all the money from the deliveries made by each appellant truck driver. The payer subsequently issued two cheques for each appellant: one was for the hours worked by the truck driver multiplied by the hourly rate provided for in the collective agreement (Exhibit A-1) and the other represented the balance owed to the owner truck drivers for the use of their trucks.
[16] The owner truck drivers were responsible for all expenses associated with the use of their trucks such as gasoline, repairs, depreciation, liability insurance and so on.
[17] The payer owned no trucks or other timber transportation equipment.
[18] The payer issued all the appellants' records of employment.
[19] III - The Law and Analysis
(i) Definitions from the Unemployment Insurance Act
"employment"
"employment" means the act of employing or the state of being employed.
"insurable employment "
3(1) Insurable employment is employment that is not included in excepted employment and is
(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;
. . .
[20] The burden of proof is on the appellants.
[21] In Sylvie Desroches v. M.N.R. (A-1470-92), the Federal Court of Appeal indicated the function of a Tax Court of Canada judge, and I quote:
. . . However, in the final analysis, as this Court held in Attorney General of Canada v. Jacques Doucet, it is the Minister's determination which is at issue, namely that the employment was not insurable because the applicant and the payer were not bound by a contract of service. The function of the Tax Court of Canada judge extended to considering the record and the evidence in its entirety. Accordingly Marceau J.A., speaking for the Court, said the following in Doucet:
The judge had the power and duty to consider any point of fact or law that had to be decided in order for him to rule on the validity of that determination. This is assumed by s. 70(2) of the Act and s. 71(1) of the Act so provides immediately afterwards . . .
The trial judge could go as far as deciding that there was no contract between the parties.
[22] If there is any doubt as to the proper interpretation, the benefit of that doubt must go to the taxpayer and there is nothing to prevent a taxpayer from taking advantage of a social measure as long as the requirements of the Act are met. In Attorney General of Canada v. Ludger Rousselle, 124 N.R. 339, a decision dated October 31, 1990, Hugessen J.A. stated at pages 340-41:
I do not think it is an exaggeration to say, in light of these facts, that if the respondents did hold employment this was clearly "convenience" employment, the sole purpose of which was to enable them to qualify for unemployment insurance benefits. These circumstances certainly do not necessarily prevent the employment from being insurable, but they imposed on the Tax Court of Canada a duty to look at the contracts in question with particular care; it is apparent that the motivation of the respondents was the desire to take advantage of the provisions of social legislation rather than to participate in the ordinary operation of the economic forces of the market place.
[My emphasis.]
[23] Is the contract a contract of service or a contract for services?
[24] In Hennick[1], Desjardins J.A. of the Federal Court of Appeal wrote as follows, and I quote:
While this test is well known, it might be useful at the outset to emphasize that in his analysis of both Lord Wright's fourfold test (control, ownership of the tools, chance of profit, risk of loss) and of Lord Denning's organization or integration test, MacGuigan J.A. in Wiebe Door Services Ltd., stressed all along that what remains of the essence is the search for the total relationship of the parties. He first quoted at length Lord Wright in Montreal v. Montreal Locomotive Works Ltd.[2]
In earlier cases a single test, such as the presence or absence of control, was often relied on to determine whether the case was one of master and servant, mostly in order to decide issues of tortious liability on the part of the master or superior. In the more complex conditions of modern industry, more complicated tests have often to be applied. It has been suggested that a fourfold test would in some cases be more appropriate, a complex involving (1) control; (2) ownership of the tools; (3) chance of profit; (4) risk of loss. Control in itself is not always conclusive. Thus the master of a chartered vessel is generally the employee of the shipowner though the charterer can direct the employment of the vessel. Again the law often limits the employer's right to interfere with the employee's conduct, as also do trade union regulations. In many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. In this way it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior.
[Emphasis in text.]
[25] MacGuigan J.A. then added the following:[3]
. . . I interpret Lord Wright's test not as the fourfold one it is often described as being but rather as a four-in-one test, with emphasis always retained on what Lord Wright, supra, calls "the combined force of the whole scheme of operations," even while the usefulness of the four subordinate criteria is acknowledged.
. . .
What must always remain of the essence is the search for the total relationship of the parties. . . .
Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer", because it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity. We must keep in mind that it was with respect to the business of the employee that Lord Wright addressed the question "Whose business is it?"
[Emphasis in text.]
[26] What was the total relationship of the parties? What was the combined force of the whole scheme of operations?
[27] The criteria to be considered were reiterated by the Federal Court of Appeal in Attorney General of Canada v. Normand Charbonneau (A-831-95), a decision dated September 20, 1996. Décary J.A. wrote as follows at page 2 in particular:
The tests laid down by this Court in Wiebe Door Services Ltd. v. M.N.R.[4]— on the one hand, the degree of control, the ownership of the tools of work, the chance of profit and risk of loss, and on the other, integration — are not the ingredients of a magic formula. They are guidelines which it will generally be useful to consider, but not to the point of jeopardizing the ultimate objective of the exercise, which is to determine the overall relationship between the parties. The issue is always, once it has been determined that there is a genuine contract, whether there is a relationship of subordination between the parties such that there is a contract of employment (art. 2085 of the Civil Code of Québec) or, whether there is not, rather, such a degree of autonomy that there is a contract of enterprise or for services (art. 2098 of the Code). In other words, we must not pay so much attention to the trees that we lose sight of the forest — a particularly apt image in this case. The parts must give way to the whole.
[28] Each case stands on its own merits. The appellants had to show on the balance of evidence that the Minister's decisions were incorrect. Subsections 70(2) and 71(1) of the Unemployment Insurance Act confer broad remedial powers on the Tax Court of Canada. These powers enable the Tax Court of Canada to decide any case on the facts and to reverse, affirm or vary the Minister's determination.[5]
Analysis
[29] It must be determined whether the appellants provided their services as employees of the payer or as contractors with Groupe Lebel. Four criteria are to be considered for the purpose of distinguishing between a contract of employment and a contract for services.
Chance of profit and risk of loss
[30] According to the evidence, the payer represented the appellants and negotiated with Groupe Lebel (Exhibits A-3 and A-4) the delivery cost per cubic meter of timber and an additional amount of $0.20 or $0.22 per cubic meter to cover the payer's administrative expenses and the appellants' fringe benefits. Each truck owner was paid on the basis of the number of cubic meters of timber delivered. In actual fact, the appellants negotiated a transportation contract with Groupe Lebel through the payer. Revenue was mainly based on the number of trips and the number of cubic meters of timber delivered. It is agreed that the appellants spent many hours transporting the timber, but revenue was mainly determined by the quantity delivered and the number of trips. If no deliveries were made, the payer was paid nothing.
[31] The truck driver owners thus did not know their actual incomes until the end of the season. The appellants furthermore did not receive their first income payment until they had transported timber for two weeks without remuneration, which was characterized at the hearing as "two weeks of back time". Groupe Lebel sent the money for the first week of deliveries to the payer at the end of the third week of work. The revenue from two weeks of deliveries was thus withheld by Groupe Lebel and remitted to the payer at the end of the transportation period with all the agreed-upon adjustments having been made.
[32] The appellants submitted their hours to the payer so that their accountant could prepare the two pay cheques. One of the cheques represented the number of hours worked multiplied by the hourly rate agreed upon in the collective agreement, while the second was to pay for the use of the driver's truck.
[33] The appellants' remuneration was split, which shows that all profits and losses were the truck drivers'. Neither the payer nor Groupe Lebel bore for the appellants the costliest risks under the overall agreement set out in the contracts. The profit lay in the total remuneration paid to the owner truck drivers by means of the two cheques.
Control
[34] Groupe Lebel's needs were dictated by the necessity of having at its disposal the owners' trucks and qualified drivers to operate them.
[35] The truck drivers had an obligation to take part in the delivery of timber under the contract between the payer and Groupe Lebel (Exhibits A-3 and A-4), but the operation of the trucks was controlled solely by the drivers. It is agreed that Groupe Lebel's foreman indicated the places where the wood was to be loaded and to which it was to be transported. It is also agreed that the truck drivers had an obligation to act in Groupe Lebel's best interests and, in keeping with the practice and rules of their profession, to ensure that the service provided was in accordance with the contract. These express or implied obligations arising from the contract do not identify it as a contract of service, but demonstrate the mutual dependence of the parties resulting from the contract's very existence (Exhibits A-3 and A-4).
Ownership of the tools
[36] Under the contracts between the payer and the truck drivers (Exhibit A-6), the drivers were responsible for all their vehicle expenses and no rental was set.
[37] All the appellants except Allain Lebel owned their trucks either individually or through a corporation of which they were the shareholders. Allain Lebel was the only minority shareholder, and he held 23 percent of Yellow Work Ltd./Ltée., which owned the truck he drove. Allain Lebel was thus, strictly speaking, able to share in that company's profits and losses.
[38] The payer owned no trucks or other pieces of equipment.
Integration
[39] The truck drivers' work was indirectly integrated into the payer's business in that the payer was created to enable the appellants to work with their trucks, thus ensuring that Groupe Lebel did not have to own trucks or handle the administration of the truck drivers' incomes. The truck drivers' work in transporting timber to the mill was indirectly integrated into Groupe Lebel's operations.
Conclusion
[40] The payer was a corporation which negotiated with Groupe Lebel on the appellants' behalf in order to obtain and set the conditions of the timber transportation contract. Each appellant negotiated a truck leasing contract with the payer without determining a specific rental. Groupe Lebel remitted all money from the truck drivers' work to the payer, which distributed it to the appellants. There was no real relationship of subordination between the payer and the appellants. The appellants were thus not the payer's employees, but rather performed a transportation contract which had been entered into with Groupe Lebel. All these circumstances show that there was no employer-employee relationship between the payer and the appellants.
[41] In closing, I appreciated the determination demonstrated by the appellants, who presented their viewpoint in a sensible, frank and dignified manner. I unfortunately cannot accept their arguments.
IV- Decision
[42] The appeals are dismissed and the Minister's decisions are affirmed.
Signed at Dorval, Quebec, this 23rd day of November 1998.
"S. Cuddihy"
D.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 30th day of June 1999.
Erich Klein, Revisor