Mathieu v. M.N.R.

Mathieu v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-05-05 Neutral citation 2005 TCC 276 File numbers 2004-833(EI) Judges and Taxing Officers Sylvio J. Savoie Subjects Employment Insurance Act Decision Content Docket: 2004-833(EI) BETWEEN: ANDRÉ MATHIEU, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ___________________________________________________________________ Appeal heard on March 7, 2005, at Montreal, Quebec Before: The Honourable Deputy Judge S.J. Savoie Appearances: Counsel for the Appellant: Nathalie Ratthé Counsel for the Respondent: Emmanuelle Faulkner ___________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment. Signed at Grand-Barachois, New Brunswick, this 5th day of May, 2005. "S.J. Savoie" Deputy Judge Savoie Translation certified true on this 28th day of February, 2006. Garth McLeod, Translator Citation: 2005TCC276 Date: 20050505 Docket: 2004-833(EI) BETWEEN: ANDRÉ MATHIEU, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Savoie D.J. [1] This appeal was heard at Montreal, Quebec on March 7, 2005. [2] This case concerns the insurability of the employment of the Appellant while in the service of 9022-2795 Québec Inc., the Payor, from January 1 to December 31, 2002, the period at issue. On February 5, 2004, the Minister of National Revenue (the "Minister") informed the Payor and the Appellant of his decision according to which the Appellant held insurable employment. [3] The Minister based his decision on the following presumptions of fact: (a) The Payor, which was incorporated on June 21, 1995, operates a business reproducing documents, shipping parcels and renting mailboxes. (denied) (b) The Payor was a sub-contractor for Fedex and rented mailboxes over the Internet for clients residing abroad to whom he forwarded their mail. (denied) (c) The voting shares in the Payor's business were held by: - Robin Boudreault, with 60% of the shares; - Claire Delisle, the spouse of Robin Boudreault, with 30% of the shares; - the Appellant, with 10% of the shares. (admitted) (d) The Appellant is not related to the other two shareholders of the Payor. (admitted) (e) The premises of the Payor are located in Laval, but its customers, including both individuals and businesses, are located throughout the world. (denied) (f) The Payor employs three people (the three shareholders) and operates its business from Monday to Friday, 8 am to 5:30 pm. (denied) (g) The Appellant provided services to the Payor for the past four or five years. He looked after customer relations who rented mailboxes. (denied) (h) The Appellant provided his services to the Payor on the latter's premises, on the road or, occasionally, at home. (admitted with clarifications) (i) The Payor had a WATS (1-800) line. (admitted) (j) The Appellant was responsible for answering incoming calls on this line. (denied) (k) He was responsible for answering this line from 8 am to 11 pm, 7 days a week. (admitted with clarifications) (l) The Appellant was not required to work a fixed schedule, but he did work at least 40 hours, and often 50 hours, a week. (admitted) (m) The Payor claims that the work of the Appellant was not supervised, whereas the Appellant was supposed to provide him with sales reports and the Payor could supervise the work of the Appellant. (denied) (n) The Payor provided the Appellant with an office, a cellular telephone and a computer. (admitted with clarifications) (o) When the Appellant was called upon to travel for his work, the Payor reimbursed him for the costs of his vehicle, meals and hotel. (admitted) (p) The Appellant was entitled to two weeks' vacation and to paid sick leave. (denied) (q) The Appellant received a fixed salary of $840 per week. (denied) (r) The duties of the Appellant formed an integral part of the activities of the Payor and the customers were customers of the Payor and not of the Appellant. (denied) [4] The Appellant, in his testimony, stated that the Payor was not a sub-contractor of Fedex, but provided Fedex services in the same way as a drug store provides a number of Canada Post services. It was shown that, beyond the duties of the Appellant that were acknowledged by the Minister, must be added doing the accounting for the Payor, negotiating agreements with the Canon and Konica corporations, providing service for local and international customers and rental contracts. The Appellant stated at the hearing that they, himself and Robin Boudreault, were both called upon to do everything in the company. He added, however, that he had no fixed work schedule. It was stated in clarification that the task of responding to incoming telephone calls on the WATS line was the responsibility of three shareholders who, in turn, handled the service using their cellular telephones. For example, the Appellant claimed at the hearing that he did not report to the Payor. He regards himself as a shareholder, he is part of the Payor and he accordingly sees himself as under no constraints with regard to this obligation, to which an ordinary employee would be subject. He identifies himself to some extent with the business. The Appellant stated, furthermore, that he takes his vacations when he wants to, that they are paid, as is his sick leave. With regard to his remuneration, he stated that this was not a fixed salary, but was instead adjusted depending on the profits from the business. He stated in his testimony that he notified the others if he was absent. The evidence established that the Appellant, as well as Robin Boudreault, had sole signing authority over business cheques, regardless of the amount, and that he was able to hire employees. [5] The shareholders' meetings were informal and occurred following receipt of the accounting reports, which all three of them reviewed together. The Appellant began working for the Payor in 1995, while he was still at school. When he finished his education, he became a shareholder in the business. [6] The burden of proof rests with the Appellant. The Appellant admitted a considerable number of the facts presumed by the Minister, as indicated; he clarified the nuances in some of them, without adding any elements that would contradict either their meaning or their scope. In his testimony, he brought in a number of elements of proof that he stressed and which, to some extent, constitute the position that he wished to assert as grounds for appeal. [7] The Appellant stated quite categorically that he was not supervised in any way; that he had no work schedule; and that nobody had any supervisory authority over him. He stated, moreover, that he took his vacations when he wanted to. Furthermore, he clarified that his salary was not set at $840 a week, as the Minister claims, but that it was linked to the profits. [8] It should be noted that the testimony of the Appellant was the only oral evidence heard during the trial. The Payor provided no corroboration of the facts stated by the Appellant regarding supervision by the latter, his schedule, his vacations or his salary. In fact, the salary of the Appellant was not documented or accounted for in any way, since no pay register was produced. The Appellant did admit, however, that his duties formed an integral part of the activities of the Payor. [9] The Minister determined that the Appellant held insurable employment under a contract of service within the meaning of paragraph 5(1)(a) of the Employment Insurance Act, and that he accordingly held insurable employment during the period at issue. [10] The wording of the Act on which the Minister based his ruling is as follows: INSURABLE EMPLOYMENT 5.(1) Subject to subsection (2), insurable employment 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; [Y] [11] The way in which this provision is applied in a case such as this has been established in the caselaw, which has formulated a number of criteria from it. These are set out in Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161 at pages 169 and 170: 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 is has been suggested that a four-fold 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 ship owner 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. [...] [12] It necessary to analyze the employment of the Appellant in light of the criteria set out above. 1. CONTROL [13] The Appellant worked for the Payor as a shareholder, with duties as described above. He began in 1996, while he was a student. He became a shareholder when he finished his education. It was established that he had a free hand. He knew his job, had several years of experience and was trusted. His status in the company placed him in the ranks of managers whose tasks did not require regular supervision by his superiors. He was, however, only a 10% shareholder. As such, he did not have the power to participate in the major decisions of the company. Although he did not feel that he was controlled or supervised in the performance of his role, his duties or his tasks, there is nothing in the evidence to indicate that the Payor, through its board of directors, renounced its power of control or authority over him. The Payor does not lose his power of control because he does not exercise it. This is the principle that emerges from Gallant v. The Minister of National Revenue, [1986] F.C.J. No 330. [14] Tardif J. of this Court, who was presented with a similar situation, resolved it as follows in Roxboro Excavation Inc. v. Canada (Minister of National Revenue B M.N.R.), [1999] T.C.J. No 32, the facts and the outcome of which are summarized below: & 8 It was shown that each of the Théorêt brothers had specific, defined responsibilities within Roxboro. Each of them devoted most of his available time to that company, although they were each also marginally involved in ensuring the efficient operation of the other companies. & 9 In exercising their respective responsibilities, the Théorêt brothers had a fair degree of independence and managed their own areas of activity quite freely. They did not have to ask for permission when deciding when to take vacations; they could be absent without having to give anyone an explanation. They each received more or less the same salary, part of which was paid through consecutive weekly cheques for the same amount, the other part of their remuneration was paid on the form of a bonus whose amount varied based on the financial performance of Roxboro and/or the other companies. [...] & 18 The key issue in this case is basically whether there was in 1996 a relationship of subordination between the company paying the remuneration and the interveners. In other words, did the company have the power to control and influence the work done by the Théorêt brothers? & 19 In this regard, I consider it important to point out that the courts have often said that it is not mandatory or necessary that the power to control actually be exercised; in other words, the fact that an employer does not exercise its right to control does not mean that it loses that power, which is absolutely essential to a contract of service. & 20 The power to control or the right to influence the performance of work is the main component of the relationship of subordination that lies behind a genuine contract of service. [...] & 22 In such cases, it is essential to draw a very clear distinction between what is done as a shareholder and/or director and what is done as a worker or non-management employee. In the case at bar, that distinction is especially important. & 23 Although the courts have identified four tests to help in characterizing a contract of employment, the test relating to the power to control is the most important; indeed, it is essential. [...] & 25 The power to control the performance of work is what lies behind the relationship of subordination that is absolutely fundamental to the existence of a contract of service within the meaning of the Unemployment Insurance Act. [...] & 28 Was there a relationship of subordination between the interveners and the company in and as regards the performance of the work they did within the scope of their respective roles? I believe that the company, which oversaw the work done by the Théorêt brothers, had the full right and power to influence that work. The fact that the company did not exercise that power to control and that those who performed the work did not think they were subject to such a power or feel that were subordinate in performing their work does not have the effect of eliminating, reducing or limiting the power to influence their work. [...] & 30 I do not think that it is objectively reasonable to require a total, absolute separation between the responsibilities that result from shareholder status and those that result from worker status. The wearing of both hats normally B and this is perfectly legitimate B creates greater tolerance and flexibility in the relations arising out of the two roles. However, combing the two roles produces effects that are often contrary to the requirements of a genuine contract of service. & 31 In the case at bar, the fact that authority did not seem to be exercisable against the Théorêt brothers and that decisions concerning the company were made by consensus and collegially does not mean that the company was deprived of its authority over the work done by the interveners. The evidence did not show that the company had waived its power to influence their work or that its right to do so was reduced, limited or revoked. [15] The same principle was formulated by the Federal Court of Appeal in Groupe Desmarais Pinsonneault & Avard Inc. v. Canada(Minister of National Revenue BM.N.R.), [2002] F.C.J. No 572, where Noël J. expressed himself as follows: & 4 In concluding that there was no relationship of subordination between the workers and the defendant, the Trial Judge does not appear to have taken into account the well-settled rule that a company has a separate legal personality from that of its shareholders and that consequently the workers were subject to the defendant's power of supervision. & 5 The question the Trial Judge should have asked was whether the company had the power to control the way the workers did their work, not whether the company actually exercised such control. The fact that the company did not exercise the control or that the workers did not feel subject to it in doing their work did not have the effect of removing, reducing or limiting the power the company had to intervene through its board of directors. 2. OWNERSHIP OF TOOLS [16] The Appellant admitted that the Payor had provided the tools he required for his work, while specifying that these tools were also provided to all the other employees that worked for the company. 3. RISK OF LOSS AND CHANCE OF PROFIT [17] In his testimony, the Appellant maintained that his salary was linked to profits. He offered no other evidence to that effect. However, the Minister has identified the salary of the Appellant, which he established at $840 a week. The Appellant provided no pay books in support of his claim that his salary had been adjusted based on profits for four or five years. Thus, no evidence, except for the statement of the Appellant, was submitted at trial establishing that he ran the risk of loss or benefited from the chance of profit. 4. INTEGRATION [18] The Appellant admitted that his duties were integrated into those of the Payor. This is the criterion of integration. Major J., in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 wrote at paragraph 44: & 44 According to MacGuigan J.A., the best synthesis found in the authorities is that of Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.), at p. 737-738 (followed by the Privy Council in Lee Ting Sang v. Chung Chi-Keung, [1990] 2 A.C. 374, per Lord Griffiths, at p. 382) :  The observations of LORD WRIGHT, of DENNING, .J. and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?". If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no", then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor, and that factors, which may be of importance, are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. [19] The burden of proof was on the Appellant to prove that the presumptions made by the Minister were false and that the conclusion was wrong. He did not do so. [20] This Court, on the contrary, is persuaded that this decision is well-founded on the Employment Insurance Act, at paragraph 5(1)(a) and on a consistent body of case law, as cited above. [21] The appeal is consequently dismissed and the decision of the Minister is confirmed. Signed at Grand-Barachois, New Brunswick, this 5th day of May 2005. "S.J. Savoie" Deputy Judge Savoie T.c. true on this 28th day of February, 2006. Garth McLeod, Translator CITATION: 2005TCC276 DOCKET NO: 2004-833(EI) STYLE OF CAUSE: ANDRÉ MATHIEU AND M.N.R. PLACE OF HEARING: Montreal, Quebec DATE OF HEARING: March 7, 2005 REASONS FOR JUDGMENT: The Honourable Deputy Judge S.J. Savoie DATE OF JUDGMENT: May 5, 2005 APPEARANCES: Counsel for the Appellant: Nathalie Ratthé Counsel for the Respondent: Emmanuelle Faulkner SOLICITOR OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario