[OFFICIAL ENGLISH TRANSLATION]
2000-987(EI)
BETWEEN:
FRANCE POTVIN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
PAPETERIE A. ET D. INC.,
Intervenor.
Appeal heard on August 10, 2001, at Chicoutimi, Quebec, by
the Honourable Deputy Judge J. F. Somers
Appearances
Counsel for the Appellant: Paul Guimond
Counsel for the Respondent: Marie-Aimée Cantin
Counsel for the Intervenor: Paul Guimond
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 15th day of November 2001.
|
"J. F. Somers" |
D.J.T.C.C.
Translation certified true
on this 13th day of February 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20011115
Docket: 2000-987(EI)
BETWEEN:
FRANCE POTVIN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
PAPETERIE A. ET D. INC.,
Intervenor.
REASONS FOR JUDGMENT
Somers, J.T.C.C.
[1] This appeal was heard at Chicoutimi, Quebec, on August 10, 2001.
[2] In a letter dated December 8, 1999, the Minister of National Revenue (the "Minister") informed the appellant of his decision according to which the employment that she had held during the period at issue, that is, from October 10, 1992, to February 2, 1998, with Papeterie A. et D. Inc., the payer, was not insurable because she controlled more than 40 per cent of the voting shares of the payer.
[3] By Notice of Appeal filed on February 24, 2000, the appellant appealed before this Court from the decision of the Minister, dated December 8, 1999, relating to the period from January 1 to February 3, 1998.
[4] Subsection 5(2) of the Employment Insurance Act reads in part as follows:
(2) Insurable employment does not include
...
(b) the employment of a person by a corporation if the person controls more than 40 % of the voting shares of the corporation;
...
[5] The burden of proof is on the appellant. She has to show on the balance of evidence that the Minister's decision is unfounded in fact and in law. Each case stands on its own merits.
[6] In making his decision, the Minister relied on the following assumptions of fact, which were either admitted or denied by the appellant:
[TRANSLATION]
(a) the payer operated an office supplies and furnishings business; (admitted)
(b) from September 1, 1995, to February 3, 1998, the shareholders of the payer were:
Denis Brassard 51% of the voting shares
The appellant 49% of the voting shares (denied)
(c) Denis Brassard was the spouse of the appellant; (admitted)
(d) Denis Brassard and the appellant were directors of the payer; (admitted)
(e) the business employed 10 people, including the appellant; (admitted)
(f) the appellant's duties consisted of handling customer service and placing orders; (admitted)
(g) a resolution of the payer's board of directors, dated February 3, 1998, authorized the appellant to transfer her shares to numbered company 2740-0787 Québec Inc.; (denied)
(h) in the payer's register of shareholders, the appellant was listed as a shareholder until February 3, 1998; (denied)
(i) according to the register of transfers, signed by the appellant on February 3, 1998, the appellant sold, assigned and transferred the 49 shares of the payer that she owned to 2740-0787 Québec Inc.; (denied)
(j) in the payer's register of directors, the appellant was listed as director until February 3, 1998; (denied)
(k) on February 4, 1998, the appellant and Denis Brassard sold almost all of the shares of 2740-0787 Québec Inc. owned by them to Procure de Jonquière Inc., with the sale taking effect between the parties as of January 6, 1998; (denied)
(l) from January 1, 1998, to February 3, 1998, the appellant was a shareholder of the payer. (denied)
[7] The only two witnesses heard at the hearing of this appeal were the appellant and Arthur Gobeil, a chartered accountant.
[8] The payer operated an office supplies and furnishings business. According to the appellant, she was a sales clerk for the payer from 1992 to January 6, 1998. Before January 6, 1998, the shareholders of the payer were Denis Brassard, the appellant's spouse, and the appellant, owning respectively 51 per cent and 49 per cent of the voting shares.
[9] Denis Brassard and the appellant managed the business and employed 10 people, including the appellant.
[10] On January 6, 1998, Procure de Jonquière Inc, acting and represented by Henri-Paul Brassard, signed an offer to purchase the shares of the appellant and of Denis Brassard. The offer to purchase was signed by the parties in the presence of a notary, since deceased (Exhibit A-1). The purchase price offered was in the amount of $575,000,00, of which $175,000.00 was payable in cash at the time of the signing of the deed of sale.
[11] Clause 11.00 of the offer to purchase reads in part as follows:
[TRANSLATION]
However, because of the exceptional circumstances of this offer, the parties hereto agree that possession of the business shall be taken on January 6, 1998, by the OFFEROR and Denis BRASSARD, who shall administer the assets of the company jointly until the date of closing under the working conditions stipulated in the agreement between the parties hereto.
[12] On February 4, 1998, Denis Brassard and the appellant signed a deed of sale in the presence of a notary by which they transferred their shares to Procure de Jonquière Inc. (Exhibit A-2).
[13] Some of the clauses of the deed of sale read as follows:
[TRANSLATION]
0.01.04 Date of closing
means February 4, 1998, or any other date fixed by mutual agreement of the parties for the signing of the documents required to execute the transaction that is the subject matter hereof.
0.01.05 Effective date
means January 6, 1998, or any other date fixed by mutual agreement of the parties, from which time the Purchaser shall be entitled to receive all income generated by the business and shall have the concomitant obligation to assume the payment of all operating expenses relating to the business.
12.00 COMING INTO FORCE
This agreement shall come into force on the date on which it is signed and shall be binding on the parties as of January 6, 1998.
[14] The appellant asserts that she ended her duties as director on January 6, 1998. However, she continued to work for the payer, paying her employment insurance premiums until June 1999.
[15] According to a resolution of the board of directors, adopted on November 27, 1997, (Exhibit I-1), Denis Brassard and the appellant acted as directors of the payer: Denis Brassard as chairman and the appellant as secretary.
[16] According to another resolution of the board of directors, dated February 3, 1998, (Exhibit I-1), Denis Brassard and the appellant transferred 51 and 49 Class A shares respectively to 2740-0787 Québec Inc.
[17] On February 3, 1998, the appellant sent a letter to the payer informing it that she was resigning from her position as director and secretary of the company (Exhibit I-1). On the same day, that is, February 3, 1998, a document entitled [TRANSLATION] "transfer and power of attorney" (Exhibit I-2) was signed by the appellant by which she sold, assigned and transferred for valuable consideration 49 shares to 2740-0787 Québec Inc.
[18] The register of shareholders (Exhibit I-3) shows that the appellant was a shareholder of 2740-0787 Québec Inc. from September 1, 1995, to February 3, 1998. The register of directors (Exhibit I-4) shows that the appellant was a director of the payer from January 6, 1996, to February 3, 1998.
[19] A share certificate dated February 3, 1998, (Exhibit I-5) certifies that 2740-0787 Québec Inc. is the holder of 100 Class A shares of the company.
[20] Arthur Gobeil, a chartered accountant and adviser to Henri-Paul Brassard, the new purchaser of the shares of the appellant and her spouse, Denis Brassard, asserts that he participated actively, as of October 1997, in the negotiations that led to the sale of the shares. The final negotiations that resulted in the signing of the offer to purchase, dated January 6, 1998, took place in December 1997.
[21] On January 6, 1998, Henri-Paul Brassard took control of the company for all practical purposes and was authorized to sign cheques.
Analysis of the evidence
[22] Exhibit I-2 filed by the intervenor in the record discloses the following facts:
- in the payer's share register, the appellant had been listed as the holder of 49 Class A shares since September 1, 1995;
- in the payer's register of shareholders, the appellant was listed as a shareholder from September 1, 1995, to February 3, 1998;
- in the payer's register of directors, the appellant was listed as a director until February 3, 1998;
- the payer's share transfer register records the transfer of 49 shares from the appellant to numbered company 2740-0787 Québec Inc. on February 3, 1998. The information found in the payer's share register and in the share transfer documents is to the same effect.
[23] Based on the above-mentioned documents, it may be concluded that, during the period at issue, the appellant had de jure control over more than 40 per cent of the voting shares until February 3, 1998.
[24] Exhibit I-1, filed in the record, discloses the following facts:
- a resolution of the payer's board of directors, dated November 27, 1997, establishes that the appellant and her spouse were [TRANSLATION] "all the directors of the Company eligible to vote";
- another resolution of the board of directors, of the same date, indicates that the appellant and her spouse were elected as directors of the company;
- a third resolution of the board of directors, of the same date, shows
that the appellant and her spouse were elected as officers of the company;
- by resolution dated February 3, 1998, the payer's board of directors authorized the appellant to transfer the 49 Class A shares held by her to
2740-0787 Québec Inc. That resolution was signed by the appellant and her spouse in their capacity as [TRANSLATION] "all the directors of the Company eligible to vote";
- by the same resolution, the appellant resigned from her position as director and secretary of the company; and
- lastly, by a resolution adopted on February 4, 1998, the new directors and officers of the company were elected.
[25] The above-mentioned documents show that, for the period from January 6 to February 3, 1998, the appellant fully exercised her rights in the administration of the company by voting, electing directors and being elected as director of the company. Thus, for the period at issue, the appellant had de facto control of more than 40 per cent of the voting shares and enjoyed the full exercise of the rights attached thereto.
[26] It should be noted that paragraph 5(2)(b) of the Act does not refer to control of the corporation but rather to control of the shares. That Henri-Paul Brassard took control of the administration of the company is of no consequence; the fact remains that, during the period at issue, the appellant continued to exercise the rights of the shares held by her.
[27] For the period at issue, the employment held by the appellant is excluded from insurable employment, within the meaning of paragraph 5(2)(b) of the Act, because she controlled more than 40 per cent of the voting shares of the payer.
[28] The appeal is dismissed and the Minister's decision is confirmed.
Signed at Ottawa, Canada, this 15th day of November 2001.
|
"J. F. Somers" |
D.J.T.C.C.
Translation certified true
on this 13th day of February 2003.
Sophie Debbané, Revisor