[OFFICIAL ENGLISH TRANSLATION]
1999-3411(EI)
BETWEEN:
JOSÉE GIRARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Mario Tremblay (1999-3412(EI)) at Québec, Quebec, on November 23, 2000, by
the Honourable Deputy Judge G. Charron
Appearances
Counsel for the Appellant: Michel Poulin
Counsel for the Respondent: Ninette Singoye
JUDGMENT
The appeal is dismissed and the Minister's decision is confirmed in accordance with the Reasons for Judgment.
Signed at Ottawa, Canada, this 29th day of January 2001.
|
"G. Charron" |
D.J.T.C.C.
Translation certified true
on this 25th day of February 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-3412(EI)
BETWEEN:
MARIO TREMBLAY,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Josée Girard (1999-3411(EI)) at Québec, Quebec, on November 23, 2000, by
the Honourable Deputy Judge G. Charron
Appearances
Counsel for the Appellant: Michel Poulin
Counsel for the Respondent: Ninette Singoye
JUDGMENT
This appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 29th day of January 2001.
|
"G. Charron" |
D.J.T.C.C.
Translation certified true
on this 25th day of February 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20010129
Docket: 1999-3411(EI)
BETWEEN:
JOSÉE GIRARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
Docket: 1999-3412(EI)
MARIO TREMBLAY,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Charron, D.J.T.C.C.
[1] These appeals were heard on common evidence at Québec, Quebec, on November 23, 2000, to determine whether the appellants held insurable employment within the meaning of the Unemployment Insurance Act and the Employment Insurance Act¾in the case of Josée Girard¾from May 6 to August 2, 1991, from September 3 to November 8, 1991, from March 26, 1992, to June 11, 1993, and from March 15, 1995, to March 15, 1996, and¾in the case of Mario Tremblay¾from August 20, 1990, to July 24, 1992, from August 2, 1993, to February 11, 1994, from June 12, 1994, to December 29, 1995, from April 15 to December 10, 1996, and from January 6 to February 7, 1997, when they were both employed with Gertrex R.S.I. Inc., the payer.
[2] In a letter dated May 19, 1999, the Minister of National Revenue (the "Minister") informed the appellant, Josée Girard, that her employment during the periods at issue was not insurable because, in his opinion, she would not have entered into a similar contract of service with the payer had they been dealing at arm's length.
[3] In a letter dated May 19, 1999, the Minister informed the appellant, Mario Tremblay, that his employment was insurable from August 20 to November 17, 1990. However, the employment from November 18, 1990, to June 29, 1996, and from June 30, 1996, to February 7, 1997, was not insurable because, in his opinion, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, the appellant would not have entered into a similar contract of service with the payer if they had been dealing with each other at arm's length.
Statement of facts
[4] The facts on which the Minister relied in making his decision are stated in paragraphs 5 of the Replies to the Notices of Appeal as follows:
Josée Girard (1999-3411(EI))
[TRANSLATION]
(a) The payer, incorporated on November 12, 1986, operates a renovation and interior decoration business for commercial and industrial buildings. (admitted)
(b) Pauline Tremblay, the appellant's mother-in-law, was the sole shareholder of the payer. (admitted)
(c) Gilles A. Tremblay, the spouse of Pauline Tremblay and the father-in-law of the appellant, was the director of the payer; it was he who qualified the company with the Régie de la Construction du Québec. (admitted)
(d) The company owns the building where it is located and in which it leases six other commercial spaces. (admitted)
(e) The appellant worked for many years in the payer's head office as a secretary and receptionist. (admitted)
(f) During the periods at issue, the appellant apparently made a $7,000 interest-free loan to the payer. (denied)
(g) The appellant alleges that her hours of work were compiled by the payer, whereas Gilles A. Tremblay, the sole director of the payer, did not know the appellant's hours of work. (denied as written)
(h) The appellant claims that she worked from 8:30 a.m. to 4:30 p.m., from Monday to Friday, during the periods at issue, whereas she only worked a few hours a week during weeks when she was receiving unemployment/employment insurance benefits. (denied as written)
(i) When she was entered on the payroll full-time, the appellant received a fixed remuneration of $500 a week and this (admitted) was without taking into account the hours actually worked. (admitted with an explanation)
(j) During the periods at issue, the appellant received from the payer $4,700 in 1993 and $2,000 in 1995, in addition to her remuneration (denied)
(k) The appellant is entered on the payroll when her spouse is not and is not entered on the payroll when her spouse is entered full-time. (denied)
(l) The appellant rendered services to the payer throughout the year; there was an arrangement between her and the payer to let her qualify for unemployment/employment insurance benefits between her alleged periods of work. (denied)
(m) The records of employment submitted by the appellant do not reflect the reality as to the periods worked and the remuneration earned. (denied)
Mario Tremblay (1999-3412(EI))
[TRANSLATION]
(a) The payer, incorporated on November 12, 1986, operates a renovation and interior decoration business for commercial and industrial buildings. (admitted)
(b) Pauline Tremblay, the appellant's mother, was the sole shareholder of the payer. (admitted)
(c) Gilles A. Tremblay, the spouse of Pauline Tremblay and the appellant's father, was the director of the payer; it was he who qualified the company with the Régie de la Construction du Québec. (admitted)
(d) The company owns the building where it is located and in which it leases six other commercial spaces. (admitted)
(e) Gilles A. Tremblay has little involvement in the business and entrusts its management to the appellant and his spouse. (denied)
(f) The appellant is not a member of the board of directors but could sign the payer's contracts and sign cheques on the payer's behalf. (admitted)
(g) The appellant has worked for the payer since 1986 and his chief duties may be summarized as follows: consulting plans, making bids, meeting clients, signing and carrying out contracts, supervising the work and working with employees on the job sites. (admitted with an explanation)
(h) The appellant had a free hand over all the payer's activities; without his contribution, the company would not have been in business. (denied as written)
(i) The appellant worked anywhere between 20 and 60 hours and sometimes as much as 80 hours a week, depending on the contracts obtained by the payer. (admitted)
(j) The appellant was the directing mind of the payer, which was in operation throughout the year, even though he claims he was without work for long periods of time during the periods at issue. (denied)
(k) The appellant claims that he received a fixed remuneration that did not reflect the hours actually worked, even though he received from the payer approximately $4,350 in 1993, $18,356 in 1994, $10,000 in 1995, $26,000 in 1996 and $2,540 in 1997 over and above his remuneration. (denied)
(l) During the periods at issue, the appellant made cash advances to the payer, he guaranteed loans and, on several occasions, he mortgaged his own residence for the payer. (denied)
(m) The appellant's alleged periods of work did not correspond with the payer's periods of activities. (denied)
(n) The appellant rendered services to the payer throughout the year; there was an arrangement between him and the payer to let him qualify for unemployment/employment insurance benefits between his alleged periods of work. (denied)
(o) The records of employment submitted by the appellant do not reflect the reality as to the periods worked and the remuneration earned. (denied)
[5] The appellants admitted all of the facts alleged in the subparagraphs of paragraphs 5 of the Replies to the Notices of Appeal, except those they denied, as indicated in parentheses at the end of each subparagraph.
Testimony of Mario Tremblay
[6] Mr. Tremblay has been an estimator-installer of interior systems for the payer's company since 1986. His father, Gilles Tremblay, is the one who qualified the payer until 1997. Mario's duties consisted of meeting clients, making bids and estimates and acting as the payer's foreman. He produced in evidence as Exhibit A-1 various contracts carried out from 1990 to 1996. The payer installed drywall, suspended ceilings and insulation under Mario's control. In 1991, the payer did approximately $13,000 - $14,000 worth of business. When the payer obtained contracts, it had them carried out by subcontractors (Exhibit I-1).
Testimony of Josée Girard
[7] Ms. Girard is the payer's secretary and her duties are to answer the telephone, take care of the bookkeeping and accounts receivable, pay suppliers, make bank deposits, type bids, make source deductions, prepare pay cheques, collect rents and the accounts receivable. She was paid $500 a week by cheque but had no fixed schedule. During periods of unemployment, Josée Girard received $100 a week to do small jobs that could not be put off. She reported her salary to unemployment insurance and her status as the spouse of Mario Tremblay and daughter-in-law of Ms. Tremblay (Exhibit A-3). Revenue Canada considered that her work was insurable and paid her unemployment benefits until 1995.
Testimony of Linda Bousquet
[8] Ms. Bousquet, a collections officer, reviewed the appellant's file and ruled on its insurability. She discovered that Josée Girard received amounts totalling $4,700 in 1993 and $2,000 in 1995, in five separate payments. Her husband received $4,350 in 1993, $18,356 in 1994, $10,000 in 1995, $26,000 in 1996 and $2,450 in 1997. These amounts are not salaries but rather advances on the payer's income.
New testimony of Mario Tremblay
[9] The amounts Mario Tremblay received from the payer are not remuneration but merely the reimbursement of amounts he lent to the payer's company.
Analysis of the facts in light of the law
[10] It must now be determined whether the activity carried on by the appellants is included in the concept of insurable employment, that is, whether there was a contract of service and, second, whether the appellants would have received such generous salaries if they had been dealing with the payer at arm's length. I will first deal with the existence of the contract of service and then with the non-arm's length relationship.
[11] The case law has laid down four essential tests for identifying a contract of employment. The leading case is Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161. Those tests are: (1) control, (2) ownership of the tools, (3) chance of profit and (4) risk of loss. The Federal Court of Appeal added thereto the "degree of integration" in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553, but this list is not exhaustive.
[12] The evidence did show that the work performed by the appellants was done under the payer's supervision and that there was a relationship of subordination between the appellants and the payer. It was the payer that owned the business necessary for carrying out its activities. The payer alone could make profits or incur losses in operating its business, not the appellants, who merely received a fixed salary. The tools of work belong to the payer. Finally, the appellants performed their work on the payer's job site and were well integrated into its business. I therefore find that the payer was operating a business and that the appellants were employed by it, subject to what follows.
[13] The issue now is the non-arm's length relationship. Did the respondent act properly in exercising his discretion under subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act, now paragraph 5(3)(b) of the Employment Insurance Act?
[14] Subsection 3(2) of the Unemployment Insurance Act reads in part as follows:
3(2) Excepted employment is
...
(c) subject to paragraph (d), employment where the employer and employee are not dealing with each other at arm's length and, for the purposes of this paragraph,
(i) the question of whether persons are not dealing with each other at arm's length shall be determined in accordance with the provisions of the Income Tax Act, and
(ii) where the employer is, within the meaning of that Act, related to the employee, they shall be deemed to deal with each other at arm's length if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length.
...
[15] Under section 251 of the Income Tax Act, related persons are deemed not to deal with each other at arm's length. Where persons are related to each other, there cannot be insurable employment unless the Minister of National Revenue is satisfied otherwise in accordance with subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act, now subparagraph 5(3)(b) of the Employment Insurance Act.
[16] The Federal Court of Appeal has rendered a number of important decisions respecting the application of paragraph 3(2)(c) of the Unemployment Insurance Act, now subparagraph 5(2)(i) of the Employment Insurance Act.
[17] In the first of these decisions, Tignish Auto Parts Inc. v. M.N.R. (185 N.R. 73), dated July 25, 1994, the Federal Court of Appeal cited counsel for the respondent, in whose opinion it concurred:
Under the authority of Minister of National Revenue v. Wrights' Canadian Ropes Ltd., contends the respondent, unless the Minister has not had regard to all the circumstances of the employment (as required by subparagraph 3(2)(c)(ii) of the Act), has considered irrelevant factors, or has acted in contravention of some principle of law, the court may not interfere. Moreover, the court is entitled to examine the facts which are shown by evidence to have been before the Minister when he reached his conclusion so as to determine if these facts are proven. But if there is sufficient material to support the Minister's conclusion, the court is not at liberty to overrule it merely because it would have come to a different conclusion. If, however, those facts are, in the opinion of the court, insufficient in law to support the conclusion arrived at by the Minister, his determination cannot stand and the court is justified in intervening.
[18] There are thus four tests that the Tax Court of Canada can apply in deciding whether it is justified in intervening:
the Minister of National Revenue
(1) has not had regard to all the circumstances;
(2) has considered irrelevant factors;
(3) has acted in contravention of some principle of law; or
(4) has based his decision on insufficient facts.
[19] InFerme Émile Richard et Fils Inc. (178 N.R. 361) dated December 1, 1994, the Federal Court of Appeal summarized Tignish Auto Parts Inc. as follows:
. . . As this court recently noted in Tignish Auto Parts Inc. v. Minister of National Revenue, July 25, 1994, A-555-93, F.C.A., not reported, an appeal to the Tax Court of Canada in a case involving the application of s. 3(2)(c)(ii) is not an appeal in the strict sense of the word and more closely resembles an application for judicial review. In other words, the court does not have to consider whether the Minister's decision was correct: what it must consider is whether the Minister's decision resulted from the proper exercise of his discretionary authority. It is only where the court concludes that the Minister made an improper use of his discretion that the discussion before it is transformed into an appeal de novo and the court is empowered to decide whether, taking all the circumstances into account, such a contract of employment would have been concluded between the employer and employee if they had been dealing at arm's length.
[20] On this point, in Attorney General of Canada v. Jencan Ltd. (1997), 215 N.R. 352, Isaac, C.J. of the Federal Court of Appeal, writing for the Court, held as follows:
The Deputy Tax Court Judge, however, erred in law in concluding that, because some of the assumptions of fact relied upon by the Minister had been disproved at trial, he was automatically entitled to review the merits of the determination made by the Minister. Having found that certain assumptions relied upon by the Minister were disproved at trial, the Deputy Tax Court Judge should have then asked whether the remaining facts which were proved at trial were sufficient in law to support the Minister's determination that the parties would not have entered into a substantially similar contract of service if they had been at arm's length. If there is sufficient material to support the Minister's determination, the Deputy Tax Court Judge is not at liberty to overrule the Minister merely because one or more of the Minister's assumptions were disproved at trial and the judge would have come to a different conclusion on the balance of probabilities. In other words, it is only where the Minister's determination lacks a reasonable evidentiary foundation that the Tax Court's intervention is warranted . . . . An assumption of fact that is disproved at trial may, but does not necessarily, constitute a defect which renders a determination by the Minister contrary to law.
[21] It seems clear from the evidence adduced and the documents filed by the parties that the Minister had regard to all the circumstances, ruled out irrelevant factors, acted in accordance with the recognized principles of law and based his decision on sufficient facts; in view of the many contradictions found in the evidence and considering that the rest of the evidence is sufficient to justify the Minister's decision that the parties would not have entered into a similar contract if they had been dealing with each other at arm's length, the appeals are dismissed and the Minister's decisions are confirmed.
Signed at Ottawa, Canada, this 29th day of January 2001.
|
"G. Charron" |
D.J.T.C.C.
Translation certified true
on this 25th day of February 2003.
Sophie Debbané, Revisor