Axios Inc. v. M.N.R.

Axios Inc. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2003-06-10 Neutral citation 2003 TCC 320 File numbers 2002-4023(EI) Judges and Taxing Officers Jerome F. Somers Subjects Canada Pension Plan Employment Insurance Act Decision Content Docket: 2002-4023(EI) BETWEEN: AXIOS INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JUDITH BÉLANGER, Intervenor. ____________________________________________________________________ Appeal heard on April 1st, 2003, at Montreal, Quebec, Before: The Honourable Deputy Judge J.F. Somers Appearances: Agent for the Appellant: Philippe Sebag Counsel for the Respondent: Annick Provencher For the Intervenor: The Intervenor herself ____________________________________________________________________ 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 10th day of June 2003. "J.F. Somers" D.J.T.C.C. Citation: 2003TCC320 Date:20030610 Docket: 2002-4023(EI) BETWEEN: AXIOS INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JUDITH BÉLANGER, Intervenor. REASONS FOR JUDGMENT Somers, D.J.T.C.C. [1] This appeal was heard on April 1st, 2003 at Montreal, Quebec. [2] The Appellant is appealing from a decision by the Minister of National Revenue (the "Minister") that the employment of Judith Bélanger, the Worker, with the Appellant during the period at issue, from May 14 to October 26, 2001, was insurable because she was working under a contract of service. Furthermore, the Worker's insurable hours were established at 442 and the insurable earnings at $11,690. [3] Paragraph 5(1)(a) of the Employment Insurance Act (the "Act") reads as follows: (a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise; [4] The burden of proof is on the Appellant. It must show on the balance of probabilities that the Minister erred in fact and in law in his decision. Each case stands on its own merits. [5] In reaching his decision, the Minister relied on the following assumptions of fact which were admitted or denied: 7.a) the Appellant was incorporated on May 24, 2000; (admitted) b) the shareholders of the Appellant during the disputed period were: (admitted) Marc Lacombe 20% of voting shares Guy Crasnier 20$ Philippe Sebag 20% Joseph Marra 20% Roland Schultz 20% c) the Appellant was engaged in the production and marketing of computer software products; (denied) d) the Worker was engaged on May 14, 2001 by the Appellant; (denied) e) the Worker was engaged for software development and the marketing and the sales of computer software products; (denied) f) the Worker was obliged to be present every day at the Appellant's office; (denied) g) the Worker was paid every two weeks on an hourly basis of $25 decided by the Appellant; (denied) h) the Appellant refused to put the Worker in the employees' payroll register; (denied) i) the Worker had to present an invoice to the Appellant to get paid; (denied) j) the Worker was working in the office of the Appellant; (denied) k) the Worker used the office equipment of the Appellant; (denied) l) the Worker was reimbursed for her expenses by the Appellant; (denied) m) the Worker had no risk of loss or chance of profit; (denied) n) the Worker's tasks were integrated in the Appellant's business; (denied) o) during the disputed period, the Worker worked during 442 hours; (denied) p) during the disputed period, the Appellant paid to the Worker $7,025.00 on an hourly basis and $640.00 of commissions; (denied) q) the Worker filed a complaint to the "Commission des normes du travail" for an amount of $4,025.00 for unpaid salary. (admitted) [6] The Appellant was incorporated on May 24, 2000 and, according to Philippe Sebag, one of the shareholders and agent for the Appellant at this hearing, was a holding company of Axios Software Inc. involved in the production and marketing of computer software products. [7] Philippe Sebag testified that the Worker was a shareholder of 45% of the shares held by her father, on her behalf, in Axios Software Inc. Philippe Sebag was part of Axios Software Inc. [8] The shareholders of the Appellant during the period at issue were Marc Lacombe, Guy Crasnier, Philippe Sebag, Joseph Marra and Roland Schultz with 20% each of the voting shares. [9] Philippe Sebag stated that the Worker was an employee of Axios Software Inc. and her duties involved the development and pre-marketing of software products; no sales were made because the development of the software was not finalized. He explained that the Worker did not have to be at the office every day; she had the privilege of coming and going as she pleased. He further stated that the Worker was paid sporadically advances of different amounts on future earnings. The Appellant did not consider the Worker as an employee and, therefore, the usual deductions at source were not made. The Worker was asked to remit invoices to the Appellant for the company records. [10] As to subparagraph 7(j) above, Philippe Sebag stated that the Worker was provided office space at the premises of the Appellant but that she worked mostly from her home. According to this witness, the Worker, when working at the Appellant's place of business, brought in her own computer and that the only company equipment she used, apart from the office space, was a desk. [11] Some of the Worker's expenses, such as client entertainment, were reimbursed by the Appellant. The Worker's contribution to the Appellant was her expertise and resources in developing software products. [12] During his testimony, Philippe Sebag could not give an account of the Workers' hours as they were not compiled. He admitted that the Appellant paid the Worker the amount of $7,025 plus $640 based on salary or commissions. [13] The foregoing is a summary of Philippe Sebag's testimony, the only witness called on behalf of the Appellant. [14] Judith Bélanger, the Worker and Intervenor, gave her version of the relationship that existed between her and the Appellant. She testified that she worked for the Appellant and not Axios Software Inc. which was incorporated in August 2001. She stated that she had been hired by the Appellant in April 2001 to develop software for future sales. However, only three sales were made in advance of the completion of the software. [15] According to the Worker, she presented herself at the place of business of the Appellant, where she was provided office space, Monday through Friday and was working from 9:00 a.m. to 6:00 p.m. She stated that she was paid by cheque every two weeks at a salary of $550-$600 per week drawn on the Appellant's bank account. She denied that she had refused to be put on the payroll; in fact she had requested it and, instead, she was presented with a type of invoice (Exhibit I-1) that she was asked to fill in and remit to the Appellant. [16] The Worker mentioned that she used an office at the Appellant's place of business and that the latter provided her with a desk, a telephone and a computer. She produced in evidence electronic mail messages (Int-2) she had sent to clients. It is to be noted that the e-mails were sent in October 2001 and the sender's address is identified as "axioscorporation.com". [17] The Worker stated that her expenses, such as travel and entertainment, were paid by the Appellant. She denied investing money in the purchase of the 45% of the shares bought by her father in the Axios software company. [18] The Worker stated her only employment during the period at issue was with the Appellant during which she has accumulated 1,283 hours (Exhibit Int-4). She further stated that during her employment with the Appellant she had to report on her work to Philippe Sebag, Roland Schultz and Marc Lalonde. [19] Roland Schultz, who is no longer a shareholder of the Appellant since January 2002, was called as a witness at the request of the Worker. He stated that the Worker was at the Appellant's office regularly during office hours. He also stated that the Appellant supplied the Worker with the necessary facilities to perform her function properly and that it was impossible for her to work elsewhere during her employment. The number of hours worked, as indicated in Exhibit Int-4, seems reasonable. Her employment was terminated due to lack of funds without the software being completed. [20] Roland Schultz added that the Worker held shares in Axios Software Inc. but that they were in her father's name. Neither Philippe Sebag nor Roland Schultz produced in evidence any document (i.e. Letters Patent) constituting the two companies, Axios Inc. and Axios Software Inc. The Worker, in her testimony, denied she owned shares in Axios Software Inc. [21] Françoise Bienvenue, Appeals Officer at Canada Customs and Revenue Agency, summarized, in her report on an appeal (Exhibit I-2), the telephone conversations she had with the Worker on February 20, 2002 and with Philippe Sebag on April 3, 2002. [22] During her telephone conversation with Philippe Sebag, he mentioned that the Appellant was a holding company having different entities and different shareholders. Françoise Bienvenue, in calculating the hours worked by the Worker, took into account the sum of $11,690 paid to the latter as well as the invoices submitted by her to the Appellant during the period at issue. He admitted that cheques had been issued to the Worker by the Appellant during the period at issue and explained that the purpose for the Appellant to issue the cheques instead of Axios Software Inc. was to simplify the process. [23] In her report, Françoise Bienvenue noted that the Worker had provided her with a copy of her agenda showing that she had started to work for the Appellant on May 21, 2001. Any further information given to the Appeals Officer does not add to the evidence at this hearing. [24] In the case of Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025, the Federal Court of Appeal enumerated a series of tests to determine whether a contract is one of service or for the provision of services: (a) the degree or absence of control exercised by the alleged employer; (b) ownership of tools; (c) chance of profit and risk of loss; and (d) integration of the alleged employee's work into the alleged employer's business. (a) The degree or absence of control [25] The Worker performed her duties mainly at the office of the Appellant. She was under the supervision of two of the shareholders. According to Roland Schultz, the Worker was in the office working several hours a day, five days a week. Invoices were submitted to the Appellant accounting for her time worked at the office. (b) Ownership of tools [26] The evidence has shown that all equipment in the office belonged to the Appellant except for the Worker's briefcase. (c) Chance of profit and risk of loss [27] The Worker was paid regularly by the Appellant for the work performed. There was no chance of profit and no risk of loss for the Worker who was paid for services rendered as well as for her expenses. (d) Integration [28] The Worker was integrated in the operations of the Appellant. She worked exclusively for the Appellant in an office provided and equipped by the latter. [29] Considering all of the evidence and applying the four tests above, the Worker was working for the Appellant under a contract of service. The Appellant did not prove, by documentation or otherwise, that the Worker controlled more than 40% of its voting shares or of Axios Software Inc. if and when it existed. [30] Philippe Sebag did not appear to contest the amounts paid to the Worker as they appear in the report of the Appeals Officer (Exhibit I-2) nor the process by which the said hours were calculated. [31] Consequently, the Court finds that during the period at issue the Worker was engaged in insurable employment with the Appellant pursuant to paragraph 5(1)(a) of the Act and that her insurable hours are established at 442 and her insurable earnings at $11,690. [32] The appeal is dismissed. Signed at Ottawa, Canada, this 10th day of June 2003. "J.F. Somers" D.J.T.C.C. CITATION: 2003TCC320 COURT FILE NO.: 2002-4023(EI) STYLE OF CAUSE: Axios Inc. and M.N.R. and Judith Bélanger PLACE OF HEARING: Montréal, Quebec DATE OF HEARING: April 1st, 2003 REASONS FOR JUDGMENT BY: Honourable Deputy Judge J.F. Somers DATE OF JUDGMENT: June 10, 2003 APPEARANCES: Agent for the Appellant: Philippe Sebag Counsel for the Respondent: Annick Provencher For the Intervenor: The Intervenor herself COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada For the Intervenor: Name: Firm: