Construction Denis Ouellet Inc. v. M.N.R.

Construction Denis Ouellet Inc. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-05-30 Neutral citation 2005 TCC 349 File numbers 2004-3190(EI) Judges and Taxing Officers François M. Angers Subjects Employment Insurance Act Decision Content Docket: 2004-3190(EI) BETWEEN: CONSTRUCTION DENIS OUELLET INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on April 13, 2005, at Montréal, Quebec Before: The Honourable Justice François Angers Appearances: Agent for the Appellant: Denis Ouellet Counsel for the Respondent: Simon Petit ____________________________________________________________________ JUDGMENT The appeal is allowed, and the decision by the Minister of National Revenue is vacated, in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 30th day of May 2005. "François Angers" Angers J. Translation certified true on this 7th day of February, 2006. Garth McLeod, Translator Citation: 2005TCC349 Date: 20050530 Docket: 2004-3190(EI) BETWEEN: CONSTRUCTION DENIS OUELLET INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Angers J. [1] This is an appeal from a determination made by the Minister of National Revenue (the "Minister") on April 27, 2004, confirming the assessments against the Appellant for the years 2000, 2001, 2002 and 2003, concerning unpaid Employment Insurance premiums for Gérard Loiselle (the worker). The Minister contends that the worker held insurable employment under a contract of service within the meaning of paragraph 5(1)(a) of the Employment Insurance Act (the "Act"). [2] The Appellant was incorporated some 20 years ago. It operates a commercial, institutional and industrial office building maintenance and renovation business and also offers a work supervision service. Its activities are concentrated in the Montreal region and in the Laurentians. Its main clients are the Université de Montréal and Imperial Tobacco. It obtains its contracts by word of mouth and through an advertisement in the yellow pages of the telephone directory. [3] Denis Ouellet is the principal shareholder of the Appellant. He holds 80 percent of the shares and his wife 20 percent. The worker holds a building contractor's licence issued by the Régie du bâtiment du Québec on October 20, 1994. However, the licence filed in evidence shows that it was valid only until October 19, 1994, and no renewal certificate was filed. Mr. Ouellet explained that, without a licence, it is impossible for anyone to work on a construction site as a contractor. The worker does business under a trade name duly registered on March 10, 1993. He thus does business under the trade name "Entreprises Gérard Loiselle Enr.", and his area of activity is described as commercial building maintenance and interior and exterior building maintenance. [4] During the years in issue, the Appellant obtained contracts from the Université de Montréal. These were construction and project supervision contracts. The work to be performed under the construction contracts, that is renovation and alteration work, was to be performed by carpenters, and the carpenters hired by the Appellant were employees. With respect to the project supervision contracts, the Appellant explained that four parties performed the supervision: the Appellant itself, through Denis Ouellet, and the three subcontractors - two corporations and the worker, Gérard Loiselle. Mr. Loiselle has been doing this kind of work for the Appellant for some 20 years. [5] The Appellant's duties under the contract with the Université de Montréal could be summarized as follows: (a) opening and closing the doors; (b) supervising all workers so that employees working on the site did not disturb the students; (c) ensuring that the building under construction or renovation was secure and clean; (d) monitoring the comings and goings of people occupying the building where the work was performed; (e) monitoring the quality of the work. [6] Very close supervision thus had to be provided because the premises saw frequent comings and goings by students and the public. During the years in issue, the worker was assigned mainly to supervise air conditioning work in the classrooms. He was also assigned other minor projects. The university hired the workers, and the worker supervised and coordinated their work. [7] Under its contract with the university, the Appellant was paid at a rate of $35 an hour. In return, it paid the worker $28 an hour. The university provided the worker with an office, a pager and all the necessary tools. The university's project authority was responsible for planning the worker's work and established completion deadlines. The worker did not have a fixed work schedule. Although he was not required to do so, he informed the university's project authority of his comings and goings. He could be absent and he had the power to ask the project authority to close the work site's doors. The worker was never absent at a critical time, and Denis Ouellet could have replaced him if he had been sick. The Appellant paid the CSST premiums of its employees, not those of the worker or of the other subcontractors. [8] Every week, the worker was to inform the university's project authority of the status of the work. That was done in meetings at the site, and each week was planned. The worker kept an assignment sheet and a record of his hours, which were also recorded by an officer of the university. The worker subsequently submitted an invoice to the Appellant for his work on which he had added the two taxes. [9] Thus, based on the facts in the instant case, the point for determination is whether, in the years in question, the worker was employed under a contract of service within the meaning of paragraph 5(1)(a) of the Act and whether he therefore held insurable employment. [10] In order to answer this question, it is important to refer to the established case law tests found in Wiebe Door Services Ltd. v. The Minister of National Revenue, [1986] 3 F.C. 55, and restated by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983. The state of the law is summed up as follows at paragraphs 47 and 48: Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan J.A. that a persuasive approach to the issue is that taken by Cooke J. in Market Investigations, supra. The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this determination, the level of control the employer has over the worker's activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks. It bears repeating that the above factors constitute a non-exhaustive list, and there is no set formula as to their application. The relative weight of each will depend on the particular facts and circumstances of the case. [11] Létourneau J.A. reiterated these principles in paragraph 18 of his decision in Le Livreur Plus Inc. v. Canada, [2004] F.C.J. No. 267, as follows: In these circumstances, the tests mentioned in Wiebe Door Services Ltd. v. M.N.R., 87 D.T.C. 5025, namely the degree of control, ownership of the work tools, the chance of profit and risk of loss, and finally integration, are only points of reference: Charbonneau v. Canada(Minister of National Revenue - M.N.R.) (1996), 207 N.R. 299, paragraph 3. Where a real contract exists, the Court must determine whether there is between the parties a relationship of subordination which is characteristic of a contract of employment, or whether there is instead a degree of independence which indicates a contract of enterprise: ibid. [12] Articles 2085, 2098 and 2099 of the Civil Code of Quebec define a contract of employment and a contract of enterprise or for services as follows: 2085. A contract of employment is a contract by which a person, the employee, undertakes for a limited period to do work for remuneration, according to the instructions and under the direction or control of another person, the employer. 2098. A contract of enterprise or for services is a contract by which a person, the contractor or the provider of services, as the case may be, undertakes to carry out physical or intellectual work for another person, the client or to provide a service, for a price which the client binds himself to pay. 2099. The contractor or the provider of services is free to choose the means of performing the contract and no relationship of subordination exists between the contractor or the provider of services and the client in respect of such performance. [13] First, I wish to point out that one of the assumptions of fact admitted by the Appellant is that the Appellant had the power to control the worker's work and had the power to dismiss him. I emphasize this admission because it acknowledges the Appellant's power to control the worker and tends to favour the contract of service argument. On the other hand, I am not convinced that the agent for the Appellant understood the scope of his admission. If he had understood what that admission meant, the question that would arise would be: why has he appealed from the Minister's decision? In my view, the issue must therefore be decided on the basis of all the facts presented at the hearing, rather than on a mere unsubstantiated admission. [14] In the instant case, the intent of the parties, expressed in their agreement in particular, clearly determines the nature of their relationship. The Appellant performed construction and renovation work, relying in particular on carpenters who were in its service as employees. The Appellant also offered work supervision services, which were performed by employees other than its own, in this instance employees of the Université de Montréal. For projects that it could not supervise on its own, the Appellant contracted out to two corporations and the worker. Like the other two subcontractors, the worker had to hold a licence issued by the Régie du bâtiment du Québec in order to work on a construction site. It was therefore essential that he receive a licence from the Régie, which thereby recognized that he had the necessary skills to supervise such projects. The worker operated his own business under a trade name. He kept a record of his own hours and billed the Appellant on the basis of his hours of work, which were approved by the university. The parties therefore entered into a contract of service in which the worker undertook to render his services for an hourly wage. The worker's intent to enter into such an arrangement was confirmed by his subsequent refusal to enter into other subcontracts with the Appellant after the Minister had made his determination. [15] In Ambulance St-Jean v. Canada, [2004] FCA 345, Létourneau J.A. made the following comment on the intent of the parties and the importance that should be attached to it: Although the stated intent of the parties or their mutual understanding are not necessarily determinative of the nature of their relationship, they are, however, entitled to considerable weight in the absence of evidence to the contrary, such as a behaviour which betrays or contradicts the said intent or understanding. Where the parties "have freely elected to come together in separate business arrangements rather than one side arbitrarily and artificially imposing that upon the other, so that in fact it is a sham, parties should be left to their choice and that choice should be respected by the authorities". We agree with this statement of Porter D.T. C.J. in Krakiwsky v. Canada(Minister of National Revenue - M.N.R.), 2003 T.C.J. No. 364. [16] In the instant case, are there any factors enabling me to disregard the parties' intent to operate under a contract of enterprise or for services or as independent subcontractors? Did the Appellant have a power to control the manner in which the worker performed his duties? In my view, the answer to both these questions should be no. [17] The worker held all the required qualifications and a licence enabling him to perform this kind of work. His business had a duly registered trade name and was duly registered for the purposes of the provincial sales tax and the goods and services tax. Like the two aforementioned corporations, the worker entered into project monitoring subcontracts with the Appellant. In the circumstances, the Appellant was not responsible for paying the worker's CSST premiums. [18] The worker's work did not consist in supervising work done by the Appellant or its employees. His task was to supervise and coordinate work done at the university by various trades people. The duties imposed on the Appellant by the university were assigned to the worker under a subcontract, with the consent of the university, since its project authority dealt directly with the worker. The project authority met with the worker on a weekly basis to plan the week and to enable the worker to report on the status of the work. The university provided the worker with the necessary tools, a pager and an office. His work was planned by the university's project authority, and it was the project authority, not the Appellant, who established completion deadlines. The worker kept a record of his hours of work, which the university approved, and worked without a fixed schedule. These factors make it virtually impossible to conclude that the Appellant exercised control over the worker. The work to be performed was planned by the university's project authority, and the Appellant assigned the worker the duties imposed on it by the university on a contract basis. His schedule was based on the university's needs, and his hours of work were approved by the university, such that the university did not have any control to exercise in that regard. The Appellant in turn used the record of the worker's hours of work in order to bill the university. All these facts show that the worker had a degree of independence that tends to establish that there was not a relationship of subordination between him and the Appellant. They also show that it would be difficult to conclude that the work was part of the Appellant's activities. [19] It is important in the instant case to give great weight to the characterization that the parties have placed on their relationship, as Noël J.A. of the Federal Court of Appeal emphasized in Wolf v. Canada, [2002] FCA 96, at paragraph 122, which I cite below: 122 [...] I too would allow the appeal. In my view, this is a case where the characterization which the parties have placed on their relationship ought to be given great weight. I acknowledge that the manner in which parties choose to describe their relationship is not usually determinative particularly where the applicable legal tests point in the other direction. But in a close case such as the present one, where the relevant factors point in both directions with equal force, the parties' contractual intent, and in particular their mutual understanding of the relationship cannot be disregarded. [20] The facts and circumstances in the instant case thus enable me to conclude that the worker did not hold employment under a contract of service within the meaning of paragraph 5(1)(a) of the Act. In view of these reasons, it is not necessary for me to address the issue of the time bar raised under subsection 85(3) of the Act with respect to the assessment. [21] The appeal is allowed, and the Employment Insurance assessments made by the Minister are vacated. Signed at Ottawa, Canada, this 30th day of May 2005. "François Angers" Angers J. Translation certified true on this 7th day of February, 2006. Garth McLeod, Translator CITATION: 2005TCC349 COURT FILE NO.: 2004-3190(EI) STYLE OF CAUSE: Construction Denis Ouellet Inc. and M.N.R. PLACE OF HEARING: Montréal, Quebec DATE OF HEARING: April 13, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice François Angers DATE OF JUDGMENT: May 30, 2005 APPEARANCES: Agent for the Appellant: Denis Ouellet Counsel for the Respondent: Simon Petit COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario