Alain Morel, o/a Motel Le Pèlerin v. M.N.R.

Alain Morel, o/a Motel Le Pèlerin v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-11-01 Neutral citation 2005 TCC 664 File numbers 2004-650(EI) Judges and Taxing Officers François M. Angers Subjects Canada Pension Plan Decision Content Docket: 2004-650(EI) BETWEEN: ALAIN MOREL, o/a MOTEL LE PÈLERIN, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on July 5, 2005, at Rivière-du-Loup, Quebec. Before: The Honourable Judge François Angers Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Jean Lavigne ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision by the Minister of National Revenue is confirmed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 1st day of November 2005. "François Angers " Angers J. Translation certified true on this 31st day of January 2006. John March, Translator Citation: 2005TCC664 Date: 20051101 Docket: 2004-650(EI) BETWEEN: ALAIN MOREL, o/a MOTEL LE PÈLERIN, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Angers J. [1] This is an appeal from a decision rendered by the Minister of National Revenue (the "Minister") on November 26, 2003, according to which Diane St-Pierre (the "worker") did not hold employment under a contract of service with the appellant during the period from June 1 to July 22, 2002. [2] In making his decision, the Minister relied on assumptions of fact, all of which were admitted by the appellant, except for three, to which I shall return below in these reasons. [3] In 1997, the appellant purchased a motel. He is its sole proprietor. The motel has only seven bedrooms and is operated from the end of May until the end of September of each year. To operate the motel, the appellant hired the worker as manager and chambermaid. Her duties were to take reservations, rent the rooms and do the housecleaning and laundry. During the period in issue in this case, the worker's remuneration was $440 a week. [4] The worker in question had held this employment since 1997. On December 12, 2001, the worker asked the Minister to determine whether she had held insurable employment, within the meaning of the Employment Insurance Act (the "Act") with the appellant during the periods from June 16 to November 8, 1997, from June 29 to September 18, 1998, from June 28 to September 10, 1999, from June 11 to September 15, 2000, and from June 14 to September 14, 2001. The appellant denied that the worker had made that request, alleging instead that he had done so. The question as to who made the request is irrelevant to the point at issue in the instant case. [5] It is thus admitted by the appellant that, on March 12, 2002, he and the worker were informed of the Minister's decision concerning the request of December 12, 2001. According to the Minister, the employment held from 1997 to 2001 was not insurable because it did not meet the requirements of a contract of service because there was no employer-employee relationship between the appellant and the worker. [6] The appellant admitted that, on April 3, 2002, the worker had appealed to the Court from the Minister's decision of March 12, 2002. The appellant did not appeal from the Minister's decision in appeal, but said that he had testified at the hearing of the worker's appeal before the Court. The appeal was heard on January 31, 2003, for the years from 1997 to 2001. In its decision rendered on March 19, 2003, the Court confirmed the Minister's decision, holding that the worker had not held insurable employment during those periods, since that employment did not meet the requirements of a contract of service within the meaning of the Act. No appeal was instituted from the decision. [7] During the investigation respecting the period concerned in the instant case, the appellant admitted that he and the worker had told an authorized official of the Canada Revenue Agency that the terms and conditions of the worker's employment, with the exception of her remuneration, had been the same in 2002 as during the years from 1997 to 2001. The appellant also admitted that, on September 13, 2002, after instituting an appeal in the Court for the period concerned in the instant case, he had asked the respondent to await the result of the worker's case before the Court. The appellant admitted that, on April 8, 2003, once the decision was rendered, he had told the respondent's agent that the instant case was identical to the one that had been the subject of the Court's decision. On August 26, 2003, he told the respondent's agent that he did not want a new investigation conducted and that he would provide no additional documents for 2002, since the case was similar to that for the years from 1997 to 2001. [8] The other two assumptions of fact denied by the appellant are that he had been the worker's boyfriend since 1995 and that, on March 4, 2002, he told the respondent's agent handling the worker's request that he had bought the business in order to create employment for the worker. He stated at the hearing that he was the worker's friend, not boyfriend. He provided no details at the hearing on the reason why he had purchased the business. [9] The appellant was the only person who testified. In his testimony, he discussed the difficulties that he had had with the Department of Human Resources Development Canada concerning the worker's employment and her entitlement to employment insurance benefits and the problems he had had with the Canada Customs and Revenue Agency. He filed in evidence a number of letters that concerned, in particular, the terms and conditions of employment and what those agencies suspected was an arrangement between the worker and the appellant. However, he brought no evidence that could rebut the Minister's assumption that there was an arrangement vitiating the contract of service. The appellant simply referred to one employee whom he had hired in 2002 and to another who had worked for his father from 1983 to 1988. In both cases, the employments had been considered insurable. However, he provided no details enabling the Court to compare the terms and conditions, duration, remuneration or any other aspect of those employments with that of the worker during the period in the instant case. [10] The respondent filed in evidence the appeals officer's report for the period in issue, the notes in the file confirming the correspondence and telephone interviews between the appeals officer and the appellant, as well as the appeals officer's report for the periods from 1997 to 2001 and the Court's decision concerning that period. That correspondence moreover contained the appellant's handwritten notes dated September 13, 2002, in which he asked that his appeal be postponed until the judge had rendered a decision in another case and that that decision applied to his case (Exhibit I-1, tab G). Later on, on September 29, 2003, he said he still wanted to file an appeal, but without the appeals officer conducting another investigation. He confirmed this last statement in a telephone conversation with the appeals officer on August 26, 2003. [11] In a telephone conversation on July 22, 2002, the appellant and the worker confirmed to the appeals officer that the working conditions in the two cases had been the same, except that the salary had been $440 a week in 2002. In another telephone conversation with the same officer on April 8, 2003, the appellant said that the instant case was identical to the one that had been the subject of the previous judgment by the Court. [12] The appeals officer therefore drafted his report based on the statements of fact and the findings of the appeals officer assigned to the case for the period from 1997 to 2001 and on the findings of fact in the Court's judgment. Despite a number of attempts, he was unable to reach the worker, and she was not called as a witness. [13] The burden is therefore on the appellant in the instant case to show on a balance of probabilities that the Minister's decision is incorrect and, in particular, that the facts on which he relied in making his decision are incorrect or were misinterpreted by him. That burden is often hard to reverse, all the more so when the appellant admits that the working conditions binding him to the worker are identical to those that have been the subject of a previous decision by the Minister that is unfavourable to the appellant and that the Court has in turn confirmed. However, it is my duty to analyze the evidence brought at trial and to make my own findings as to the validity of the Minister's decision in the instant case. [14] In this case, I can only rely on the facts that were revealed by the investigation conducted by the appeals officer for the periods from 1997 to 2001 and that the appellant and the worker stated were identical to those of the period in issue in the instant case. [15] The appeals officer's report that was filed in evidence shows that the motel in question had an operating loss every year. In addition, the worker's hourly wage was $7.00 in 1997, $7.42 in 1998, $8.00 in 1999, $13.58 in 2000 and $12.48 in 2001. [16] An analysis of the appellant's rental record book and the employment periods of the worker and the appellant enabled the insurance officer of Human Resources Development Canada to observe the following for each of those years. [TRANSLATION] · (a) For 1997, the appellant worked from June 16 to November 8. Motel rentals started on May 26 and stopped on October 16, 1997. There were no rentals after that date. Throughout the entire period, the payer made 273 motel rentals. The most active rental period was between July 6 and September 6, 1997. During that period, the payer made 190 motel rentals, which represented 70 percent of turnover. The payer was unemployed from May 25 to June 21 and from September 14 to November 8, 1997. "Tab f-97" · (b) For 1998, the appellant worked full time from June 29 to September 18 and part time from May 3 to June 27. Motel rentals started on May 15 and stopped on October 10, 1998. The payer made 318 motel rentals during the entire period. The most active rental period was between July 5 and August 22 of that year. During that period, the payer made 225 motel rentals, which represented 71 percent of turnover. The payer was unemployed during the following periods: from May 10 to May 16, from May 31 to June 21, from July 26 to September 5, and from September 13 to October 10, 1998. "Tab g-98" · (c) For 1999, the appellant worked full time from June 28 to September 10. Motel rentals started on May 14 and stopped on October 11, 1999. The payer made 346 motel rentals during the entire period. The most active rental period was between June 27 and September 4, 1999. During that period, the payer made 286 rentals, which represented 83 percent of turnover. The payer was unemployed from May 9 to October 16, 1999. "Tab h-99" · (d) For 2000, the appellant worked full time from June 11 to September 18. Motel rentals started on June 3 and stopped on October 10 of that year. The payer made 337 motel rentals during the entire period. The most active rental period was between June 25 and September 9, 2000. During that period, the payer made 286 motel rentals, which represented 85 percent of turnover. The payer was unemployed during the following periods: from June 4 to 17, from June 25 to July 25 and from August 20 to October 7, 2000. "Tab i-00" · (e) For 2001, the appellant worked full time from June 11 to September 14. Motel rentals started on May 16 and stopped on September 28. The payer made 358 motel rentals during the entire period. The most active rental period was between June 24 and September 1, 2001. During that period, the payer made 302 motel rentals, which represented 84 percent of turnover. The payer was unemployed from May 13 to September 29, 2001. "Tab j-01" [17] I have summarized certain facts that the investigation revealed as follows. 1. When customers went in to rent motel rooms, the worker asked them to write their name and address on a card provided for that purpose, which subsequently served as an invoice. Since 1997, the worker had prepared a number of invoices before and after her work period, and she did not deny that fact. Someone was needed to replace the appellant when he was not there, and she did the work on a volunteer basis. She also cleaned the rooms on a volunteer basis. 2. The worker occupied a room on the second floor of the building and had access to the ground floor, where the appellant lived. 3. For 1997, no rooms were rented during her last three weeks of work. The worker explained that that was her first year and that she had to learn and, consequently, had worked longer. 4. Again, for 1997, the appellant admitted that the worker had worked many more hours than in the following years because he knew that she needed 910 hours to qualify for benefits. The appellant did not say that the worker had accumulated exactly that number of hours of work, but that he had paid her nevertheless. 5. The number of hours worked was 552 in 1998; 500 in 1999, 560 in 2000 and 560 in 2001, slightly more than the minimum number of hours necessary to qualify for employment insurance benefits. 6. When it was pointed out to him that the worker's wages had doubled in the last years of the previous period, the appellant said that he had had to pay her well since he was often absent and she had had a lot of responsibilities. 7. The appellant admitted that, if the worker had not worked for him, he probably would not have bought that business. He did it both to create employment for the worker (his friend) and to make an investment. 8. The appellant and the worker admitted to the investigators that the worker had worked on a volunteer basis, and the documentation indicates that the worker attended to the motel even when her name was not on the payroll. The worker provided services before and after her periods of work. [18] The appellant did not try to explain or rebut this evidence. I therefore find it clear, in light of the facts, that the worker continued to render services to the appellant, even though she was not on the payroll, such that, to all intents and purposes, the worker provided services to him while she was receiving employment insurance benefits. Since the substantial wage increase in 2000 remained unexplained, the Court may well wonder whether the increase corresponded to the value of the services rendered and the responsibilities borne relative to previous years. [19] When the intended purpose of working conditions or of an agreement is to take advantage of the benefits provided by the Act, such as subsidizing one's business by paying labour with employment insurance benefits, the result is that the contract of service no longer meets the objectives of the Act. [20] In Thibeault v. Canada, [1998] T.C.J. No. 690, Tardif J. wrote as follows at paragraphs 26 and 29 of his decision, which moreover was confirmed by the Federal Court of Appeal: The unemployment insurance scheme is a social program whose aim is to support those who lose a real job. It is definitely not a scheme under which it suffices to pay premiums for a certain period of the year in order to have automatic entitlement to benefits. [...] Of course, it is neither illegal nor reprehensible to organize one's affairs so as to profit from the social program that is the unemployment insurance scheme, subject to the express condition that nothing be misrepresented, disguised or contrived and that the payment of benefits occur as a result of events over which the beneficiary has no control. Where the size of the salary bears no relation to the economic value of the services rendered, where the beginning and end of work periods coincide with the end and the beginning of the payment period and where the length of the work period also coincides with the number of weeks required to requalify, very serious doubts arise as to the legitimacy of the employment contract. Where the coincidences are numerous and improbable, there is a risk of giving rise to an inference that the parties agreed to an artificial arrangement to enable them to profit from the benefits. [21] The evidence also showed that the worker paid the appellant rent of $300 a month so that she was not indebted to him to such an extent that she felt obliged to render services to him on a volunteer basis. The appellant thus did not show on a balance of probabilities that the Minister's decision was unfounded. In view of this state of affairs and the fact that the appellant confirmed that this case is identical to those of the previous years, it is possible for me to conclude that the worker did not hold insurable employment during the period in issue, since there was an artificial arrangement between the parties to receive benefits. The contract was thus not a contract of service within the meaning of the Act. For these reasons, the appeal is dismissed, and the Minister's decision is confirmed. Signed at Ottawa, Canada, this 1st day of November 2005. "François Angers" Angers J. Translation certified true on this 31st day of January 2006. John March, Translator CITATION: 2005TCC664 COURT FILE NO.: 2004-650(EI) STYLE OF CAUSE: Alain Morel o/a Motel Le Pèlerin and M.N.R. PLACE OF HEARING: Rivière-du-Loup, Quebec DATE OF HEARING: July 5, 2005 REASONS FOR JUDGMENT BY: The Honourable Judge François Angers DATE OF JUDGMENT: November 1, 2005 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Jean Lavigne COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario