Groppini v. MNR

Groppini v. MNR Court (s) Database Tax Court of Canada Judgments Date 2003-04-17 Neutral citation 2003 TCC 137 File numbers 2002-2708(EI) Judges and Taxing Officers Jerome F. Somers Subjects Employment Insurance Act Decision Content Docket: 2002-2708(EI) BETWEEN: GIOVANNI GROPPINI, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and 3477126 CANADA INC., Intervener. [OFFICIAL ENGLISH TRANSLATION] Appeal heard on February 26, 2003, at Montréal, Quebec Before: The Honourable Deputy Judge J.F. Somers Appearances: For the Appellant: The Appellant himself Agent of the Respondent: Emmanuelle Faulkner (Student-at-law) Counsel for the Intervener: Marc Benoît JUDGMENT The appeal is allowed and the decision rendered by the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 17th day of April 2003. "J.F. Somers" D.J.T.C.C. Translation certified true on this 3rd day of February 2004. John March, Translator Citation: 2003TCC137 Date: 20030417 Docket: 2002-2708(EI) BETWEEN: GIOVANNI GROPPINI, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and 3477126 CANADA INC., Intervener. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Somers, D.J.T.C.C. [1] This appeal was heard at Montréal, Quebec, on February 26, 2003. [2] The appellant institutes an appeal from the decision by the Minister of National Revenue (the "Minister") according to which the employment held with Assen International, the payer, during the period in issue, from May 5 to October 4, 2001, was not insurable on the ground that there was no employer-employee relationship between him and the payer. [3] Subsection 5(1) of the Employment Insurance Act (the "Act") reads in part as follows: 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; [...] [4] The burden of proof is on the appellant. He has to show on a preponderance of proof that the Minister's decision is ill-founded in fact and in law. Each case stands on its own merits. [5] In making his decision, the Minister relied on the following assumptions of fact stated in paragraph 21 of the Reply to the Notice of Appeal, which were admitted or denied by the appellant: [TRANSLATION] (a) The shareholders of the payer were Johanne Vallée, France Vallée and Huguette Bastien, with 30 percent of the shares each, and Yves Martel and Jocelyn Caron, with five percent of the shares each; (admitted) (b) The payer operated an industrial chemical cleaning products distribution business; (denied) (c) During the period in issue, the appellant worked for the payer as a commission salesman; (denied) (d) The appellant's remuneration amounted to 10 percent of sales made; (denied) (e) The payer paid the appellant advances on future commissions; (denied) (f) The appellant was reimbursed for expenses incurred as part of his work; (admitted) (g) The appellant was not required to render services solely to the payer and could promote sales of other products to his clientele; (denied) (h) During the period in issue, the appellant received $9,610 from the payer; (denied) (i) The appellant had no work schedule to meet or any established area; (denied) (j) The appellant worked from his residence; he had no office at the payer's place of business; (denied) (k) The appellant was not controlled by the payer in the performance of his work. (denied) [6] The payer operated an industrial chemical cleaning products distribution business. The shareholders, mainly the members of a single family, were Johanne Vallée, France Vallée and Huguette Bastien, each of whom held 30 percent of the shares, and Yves Martel and Jocelyn Caron, with five percent of the shares each. [7] Business relations were established between the appellant and the payer during the period in issue. The appellant states that he was an employee, whereas the payer's witnesses say he was a self-employed worker. [8] The appellant's spouse, Brigitte Cailloux, stated in her testimony that the appellant had received a salary plus a commission on sales. She said that the appellant did not work from his residence since it was located in a residential neighbourhood and, according a municipal by-law, an owner did not have the right to carry on a profession or business there. [9] According to the witness, the appellant left the family residence every morning and went to pick up Johanne Vallée to go the payer's place of business. [10] Brigitte Cailloux said that she had telephoned the appellant at the payer's place of business two or three times a day. She went to deposit cheques at the bank every week. The signature of the appellant's spouse appears on the back of some of the cheques filed in evidence as Exhibit A-1 and dated between May 17 and September 21, 2001. On those cheques issued by the payer, the amounts of which vary, appear the notations "commissions", "advances", "travelling expenses", "travel advances" and "sales expenses". [11] Sixteen of those cheques bearing the notations "sales expenses" and "advance" are for $700; the others, the amounts of which vary between $40.25 and $14,000, bear the notations "sales expenses", "cellular expenses" and "travelling and entertainment expenses". [12] The appellant's spouse testified that Johanne Vallée had told her that the appellant received a salary of $700 a week, plus a five-percent sales commission. She added that the appellant had worked solely for the payer. [13] In cross-examination, the appellant's spouse admitted that the appellant had been a self-employed worker in 2000. The notation "self-employed worker" appears in the appellant's 2000 return of income. [14] The appellant testified that he had worked for the payer during the period in issue. He said that, under the agreement between the payer and him, his remuneration had been $700 a week, plus a five-percent commission on sales, but he said he had never received any commission. He admitted that, under the first agreement entered into by the payer and him, he had worked as a self-employed worker until December 2000, which is confirmed by his return of income prepared by Jocelyn Caron, a shareholder of the payer, in which he is referred to as a self-employed worker. [15] In explaining the notation "advance" on most of the cheques (Exhibit A-1) and "salary" on certain others, the appellant stated that he had borrowed $300 from the payer and that the latter had made a deduction from his $700 salary. He also said that the notation "advance" had been added by the payer on the cheques when they were returned to him. [16] Under a second oral agreement, the appellant was paid $700 a week. Starting in January 2001, he received cheques from the payer of varying amounts, that is $200, $500, $300, $900 and $1,050. [17] The appellant admitted that the clients whose names appear at pages 8 and 9 of a letter dated June 26, 2002, that he had sent to Human Resources Development Canada were not those of the payer and added that, as a salesman, he had had a right to contact clients. [18] The appellant admitted that he went to Orlando, Florida at the payer's expense from October 15 to 20, 2001, that is after the period in issue. [19] Richard Blouin, a witness for the appellant party, said that he had made deliveries to the payer's place of business during 2001 and that he had seen the appellant there on at least 13 occasions. He stated that the appellant had called him to make deliveries and that the payer had paid for the services. The payer had its place of business in three different locations: the office was first located on Rue St-Denis, then moved to Rue Christophe Colomb and, ultimately, to Boulevard Tricentenaire in Montréal. [20] Johanne Vallée testified that she was the vice-president of the payer. She said that she was an employee of the payer, with her mother and her sister. [21] The witness said that the payer had contacted the appellant as a salesman; the latter had his own clients. [22] The appellant purportedly requested advances under the agreement because, according to the witness, the appellant was paid on commission. The payer had no control over the appellant. The appellant did not have a fixed schedule and was not supervised. [23] The appellant was granted advances at his request because he had financial problems. [24] The appellant was considered a manufacturing agent, and Johanne Vallée said that he had set the prices of the products himself. [25] In cross-examination, Johanne Vallée admitted that cheques for $700 had been issued in the appellant's name at his request. She admitted that the notation "advance" had been written on the cheques after they were returned to the payer for accounting reasons. [26] She stated that there were no other employees besides the shareholders. This witness said that, in August 2000, the payer entered into an agreement with the appellant that he would be paid on commission. She added that there were no subsequent agreements. [27] France Vallée, a shareholder of the company, did the accounting of the business. She said that the agreement entered into by the payer and the appellant when the latter was hired was that he would receive 10 percent of sales made. She added that that agreement had been reached at the appellant's suggestion. France Vallée admitted that advances had been made to the appellant and that the sales did not cover the amount of the advances. [28] In cross-examination, France Vallée mentioned that the products were in stock in April 2000, but that they were put on the market in June 2001, after the company had received subsidies. [29] France Vallée knew that the appellant was the president of his own company and that he was a manufacturing agent. The payer made advances to the appellant based on trust; those advances, according to France Vallée, were made at the appellant's request. [30] France Vallée acknowledged the business's draft business plan, which was filed in evidence as Exhibit A-9. At page 3 of that document, under the heading "Interveners' Presentation of the Draft", appear the names of the appellant, Giovanni Groppini, and France Vallée, Johanne Vallée, Huguette Bastien, Yves Martel and Jocelyn Caron. At page 4 of that same document, under the heading "Allocation of Duties", the appellant is shown as a "major accounts representative". At pages 14 and 15, it is stated that the payer set the selling prices of the "single dose" products. Despite what is stated in that document with respect to prices, France Vallée said that the appellant had set the prices with the clients, which was denied by the appellant. [31] The witness admitted that the business card filed in evidence as Exhibit A-10 had been issued by the payer and that the names of Johnny Groppini and Assen International, Montréal, Quebec, appeared thereon, but added that it had been printed at the appellant's request. [32] She acknowledged her signature on the letter dated November 12, 2001, addressed to all clients of Assen International (Exhibit A-6), informing them of the following: "Please be advised that, as of October 22 last, Johnny Groppini is no longer an employee of our company...". [33] In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] S.C.J. No. 61, 2001 SCC 59, Major J. of the Supreme Court of Canada writes as follows at paragraphs 46, 47 and 48 of his decision: 46 In my opinion, there is no one conclusive test which can be universally applied to determine whether a person is an employee or an independent contractor ... Further, I agree with MacGuigan J.A. in Wiebe Door, at p. 563, citing Atiyah, supra, at p. 38, that what must always occur is a search for the total relationship of the parties: [I]t is exceedingly doubtful whether the search for a formula in the nature of a single test for identifying a contract of service any longer serves a useful purpose.....The most that can profitably be done is to examine all the possible factors which have been referred to in these cases as bearing on the nature of the relationship between the parties concerned. Clearly not all of these factors will be relevant in all cases, or have the same weight in all cases. Equally clearly no magic formula can be propounded for determining which factors should, in any given case, be treated as the determining ones. 47 Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan 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. 48. 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. [34] In the case under consideration, the evidence clearly shows that there was a contractual relationship between the appellant and the payer. [35] It must therefore be determined whether the appellant was a self-employed worker or an employee of the payer during the period in issue. [36] The appellant and his spouse quite openly admitted that the appellant was a self-employed worker when he provided services on the payer's premises in 2000 and added that he had previously been in business for himself. [37] The parties were bound by an oral contract. The appellant stated that he had been an employee in 2001, whereas the payer asserts that he was a self-employed worker; the evidence is therefore contradictory. [38] The burden of proof was on the appellant; he had to show on a preponderance of proof that the Minister's decision was ill-founded in fact and in law. [39] Since there was a binding oral agreement between the parties, it is harder to establish the nature of the relations between the appellant and the payer. [40] The appellant denied all allegations appearing in the Reply to the Notice of Appeal, except subparagraphs 21(a) and (f). [41] The evidence was not brought in a very consistent or complete manner; however, it was possible to determine the positions of the parties, even though they were contradictory. [42] The appellant and his spouse asserted that the appellant had not worked at home, but rather at the payer's place of business. [43] According to the appellant's submission, he drove Johanne Vallée to the office every morning, which the latter denied, stating instead that the appellant had driven her to the office on only two occasions. [44] Richard Blouin, the appellant's witness, asserted that he had made deliveries to the payer's place of business on a number of occasions and that he had seen the appellant in an office at the payer's place of business at least 13 times. His testimony on this aspect of the evidence corroborates that of the appellant and his spouse. [45] The payer's witnesses did not corroborate the statement that the appellant had worked from his residence. [46] Since there is contradictory evidence as to the nature of the agreement, the documentary evidence must be relied upon. [47] Cheques for $700 each were regularly issued in the appellant's name during the period in issue. France Vallée, who did the accounting, admitted that fact, but said that they were for advances. [48] Cheques for various amounts bearing the notation "travelling expenses" or "sales expenses" were also issued. On August 16, 2001, a cheque for $700 was issued in the appellant's name bearing the notation "salary advance" and the cheque of August 31, 2001, for the same amount bore the notation "salary/commission advance". [49] Those notations on the cheques corroborate the testimony of the appellant and his spouse that the appellant's income was based on salary and commission. [50] The payer's witnesses denied the appellant's claims regarding the basis of his income. The payer filed no accounting or other documents to establish the sources of income or expenses of the business. Those witnesses stated that the shareholders were the only employees. The pay list was not filed in evidence. [51] The business plan prepared by the payer and filed in evidence as Exhibit A-9 reads as follows under the heading "Interveners' Presentation": [TRANSLATION] The Assen team is represented by the following interveners: France Vallée, Johanne Vallée, Huguette Bastien, Yves Martel, Jocelyn Caron and [Johnny] Giovanni Groppini. (It should be noted that the name Johnny in this document is struck out and replaced by Giovanni.) [52] Under the heading "Allocation of Duties" on page 4 of that same draft, the name Johnny Groppini appears as the major accounts representative. The duties of the shareholders are also described there. [53] The payer sent all its clients a notice dated November 19, 2001, (Exhibit A-6) which reads in part as follows: [TRANSLATION] PLEASE BE ADVISED THAT, AS OF OCTOBER 22 LAST, JOHNNY GROPPINI IS NO LONGER AN EMPLOYEE OF OUR COMPANY AND HAS NO AUTHORIZATION TO PRESENT HIMSELF AS SUCH... It should be noted that that notice is addressed to the payer's clients, not those of the appellant. [54] Business cards prepared by the payer identifying the appellant with the payer's operations were filed in evidence as Exhibits A-7 and A-10. [55] It is possible that the appellant had had his clients since he had been in business prior to 2001, but the payer had its own, as witnessed by the letter sent to them (Exhibit A-6). There is no evidence that the appellant worked for any employer other than the payer during the period in issue. [56] The tools belonged to the payer, not the appellant. It was established by the testimony of an independent witness that the appellant was present at the payer's place of business. There is no evidence that the appellant worked from his residence. Johanne Vallée admitted that the appellant had driven her to the payer's place of business on at least two occasions. [57] There is no evidence that the appellant had a schedule to meet or area to cover, which could explain why the appellant, as a salesman, had to travel. Travelling expenses were moreover paid by the payer. [58] The Court cannot find on the evidence that the appellant had a chance of profit or risk of loss; he regularly received cheques for $700 in respect of advances or salary. [59] The appellant was integrated into the payer's operations; it was the payer's business, not that of the appellant. The appellant, who was recognized for his abilities as a salesman, had clients, but the payer admitted that it also had its own clients, as witnessed by the notice sent to its clients announcing that the appellant was no longer employed by it. [60] The evidence showed that the payer had some control over the appellant's activities. It was normal for the appellant, as a salesman, to be frequently absent from the office and for him not to have a fixed schedule. The payer determined the prices of the products, as indicated at pages 14 and 15 of the draft (Exhibit A- ). In determining the product prices, the payer exercised a certain control over the appellant. The appellant's duties were established in the said draft prepared by the payer (Exhibit A-9). [61] To distinguish a contract of service from a contract for services, it is necessary to consider the whole of the various elements that constitute the relationship between the parties, that is (a) the degree of control, (b) ownership of the tools, (c) chance of profit or risk of loss and (d) the degree of integration (Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553). [62] We may conclude on the whole of the evidence, including the elements it comprises, that there was an employer-employee relationship between the parties. [63] Having regard to all the circumstances, the Court finds that the appellant's employment was insurable within the meaning of the Act during this period, since the appellant was bound to the payer by a contract of service under paragraph 5(1)(a) of the Act. [64] The appeal is allowed, and the Minister's decision is vacated. Signed at Ottawa, Canada, this 17th day of April 2003. "J.F. Somers" D.J.T.C.C. Translation certified true on this 3rd day of February 2004. John March, Translator