Létourneau v. M.N.R.

Létourneau v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2004-02-10 Neutral citation 2004 TCC 81 File numbers 2003-1179(EI) Judges and Taxing Officers François M. Angers Subjects Employment Insurance Act Decision Content Docket: 2003-1179(EI) BETWEEN: MARCEL LÉTOURNEAU, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on November 26, 2003, at Rivière-du-Loup, Quebec Before: The Honourable Judge François Angers Appearances: Counsel for the Appellant: Nancy Lajoie Counsel for the Respondent: Julie David ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister of National Revenue is confirmed, in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 10th day of February 2004. "François Angers" Angers J. Translation certified true on this 5th day of January 2005. Colette Dupuis-Beaulne, Translator Citation: 2004TCC81 Date: 20040210 Docket: 2003-1179(EI) BETWEEN: MARCEL LÉTOURNEAU, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT François Angers J. [1] The Appellant is appealing from a decision made by the Minister of National Revenue (the "Minister") on March 14, 2003, in which the employment of the Appellant during the period beginning May 6, 2000, and ended May 5, 2001, while employed by 9080-1473 Québec Inc. (the "Payor"), was not an insurable employment within the meaning of the Employment Insurance Act (the "EIA"). The Minister concluded that the Appellant's employment did not meet the requirements of a genuine contract of service. An employer-employee relationship did not exist between the Payor and the Appellant. [2] In making his decision, the Minister relied on the following assumptions of fact, which were admitted or denied as indicated below: (a) the Payor was incorporated on July 27, 1999; [Appellant has no knowledge] (b) the Payor was part of a group of companies controlled by Paul-Émile Dubé; [admitted] (c) the Appellant was the sole shareholder of Distribution Gina Rivière-du-Loup (1989) Inc. (hereinafter "Distribution"); [admitted] (d) Distribution was a grocery wholesaler and operated a food products transportation business; [denied] (e) on March 28, 2000, the Payor and Distribution signed a purchase agreement whereby Distribution sold its inventory of goods, goodwill, and various aspects of its distribution and transportation activities; [denied] (f) under the terms of this agreement, the Appellant was to contribute to the transfer of clients and the continuation of the business' dealings; [denied] (g) under the terms of this agreement, the Appellant agreed to contribute actively to the transfer of clients and to the continuation of the business' dealings for a six-month term, which was renewable for another six months, and then, support the Payor in operating his business; [denied] (h) under the terms of this agreement, the Appellant's involvement for the first six months was a maximum of two and a half days per week; [denied] (i) under the terms of this agreement, the Appellant's involvement for the next six months was on an occasional basis; [denied] (j) under the terms of this agreement, in consideration of his services, the Payor paid the sum of $42,000 in remuneration, payable on a weekly basis; [denied] (k) the sale took place on April 30, 2000; [admitted] (l) the Payor did not purchase Distribution's fleet of trucks; [admitted] (m) from May 1 to December 31, 2000, Distribution performed long-haul carriage; [denied] (n) during the period at issue, the Appellant worked in Distribution's office in Rivière-du-Loup; he had refused to work in the Payor's offices in Trois-Pistoles; [denied] (o) the Payor did not pay rent to Distribution for the use of the office; [denied] (p) the Appellant's duties were to refer to the Payor, when the opportunity arose, clients who came to or who called the office; [denied] (q) during the period at issue, the Appellant continued to work for Distribution; [denied] (r) the Appellant continued to supervise Distribution's employees until December 2000; [denied] (s) Distribution sold its four trucks to Transport Gina Inc. on December 31, 2000; [admitted] (t) the Appellant started rendering services to Transport Gina Inc. on December 31, 2000; [denied] (u) throughout the period at issue, the Appellant was a consultant for Aliments Alpha Inc., a company in which he and his son were shareholders; [denied] (v) the Appellant did not work exclusively for the Payor; [denied] (w) during the period at issue, the Appellant performed work for the Payor, Distribution, Transport Gina Inc., and Aliments Alpha Inc.; [denied] (x) the Payor had no control over the Appellant's time or schedule; [denied] (y) the Appellant was free to oversee Distribution's remaining activities while performing services for the Payor; [denied] (z) the Payor did not provide the Appellant with any equipment; [admitted] (aa) the Appellant incurred telephone, travel, and office expenses; [denied] (bb) the Appellant was acting in accordance with a specific mandate. [denied] [3] The Appellant is a businessperson who, until early May 2000, was the sole shareholder of Distribution Gina Rivière-du-Loup (1989) Inc. ("Distribution"). This company was a food products wholesaler and provided transportation of food products. [4] Early in 2000, the Appellant held meetings and discussions with Félix Jean of Groupe Paul-Émile Dubé ("Groupe Dubé"). Groupe Dubé owns five or six businesses, some of which sell and distribute food products. Groupe Dubé was expanding and seeking a higher volume of business. The purpose of these meetings with the Appellant was to discuss the potential acquisition of Distribution by Groupe Dubé. [5] On March 12, 2000, Distribution and Groupe Dubé signed an initial memorandum of understanding respecting this acquisition. In this agreement, the Appellant agreed to personally and actively contribute to the transfer of Distribution's clients and business to Groupe Dubé for a period of six months. Moreover, the Appellant agreed to support Groupe Dubé, at its request, in operating Distribution's business for an additional six months. In consideration for these twelve months of service, he was to be paid $42,000 during this period, on a weekly basis. A hand-written note on the document stated that the involvement expected of the Appellant would not be more than two and a half days per week during the first six months, and on an occasional basis thereafter. [6] On March 28, 2000, Distribution and Distributions Paul-Émile Dubé Ltée or any other company of the Paul-Émile Dubé group signed a purchase agreement for the purchase of inventory, distribution, and goodwill. The established date of sale was April 30, 2000. A service agreement between the Appellant and the purchaser formed a part of this purchase agreement and stipulated that the Appellant agreed to provide services to the purchaser for a period of twelve months. The terms are similar to the ones set out in the memorandum of understanding. [7] In his testimony, Mr. Félix Jean, the purchaser's Vice-President of Finance, confirmed the reasons for hiring the Appellant. The Appellant was to support the sales team in order to transfer the clients seamlessly. Given the date on which Distribution was acquired, he wanted to ensure that the Appellant would be available, because early in the summer, a number of clients would be resuming their seasonal activities and Groupe Dubé wanted to avoid losing clients. The sale took place on April 30, 2000, yet the contract was dated May 8, 2000. This was for the purchase of assets, including goods, goodwill, trademarks, etc., but excluding Distribution's fleet of trucks. [8] According to Mr. Jean, there was never any question about the Appellant working from their Mont-Joli premises or working on a full-time basis. He wanted the Appellant to be near Distribution's telephone so that clients, specifically seasonal clients, could maintain the same routine. The purpose of this exercise had nothing to do with the Appellant's expected performance; it was to ensure customer support and provide some assistance. The first six-month period was very important, whereas the last six-month period was more or less a security measure. According to Mr. Jean, the Appellant had no decision-making authority. The Appellant communicated with the Director of Groupe Dubé in Mont-Joli and the staff working in operations. The Appellant was to provide no other service than that which was required by the demand. The Appellant was paid by a Groupe Dubé management company, the Payor, 9080-1473 Québec Inc. [9] The Appellant rendered services to the Payor from the Rivière-du-Loup offices of Distribution. The Payor did not pay rent for the use of an office on Distribution's premises. Mr. Jean acknowledged that the Appellant was free to work elsewhere, as long as he worked his two and a half days. He acknowledged that the availability of the Appellant was more important than the result obtained and that the Appellant's mandate was to ensure the transition. The Payor did not have control over the Appellant's work schedule, and the Appellant could oversee Distribution's transport at the same time. He acknowledged that the Appellant paid for the expenses for office and telephone that he used at Distribution to render the services he owed the Payor. According to him, the Appellant's wages could have been higher at the outset and decreased at a later time, rather than being paid out as they were. From early May to mid-September, the Appellant devoted 60% to 70% of his time to the Payor. His involvement decreased thereafter, then increased again more intensively following fire damage incurred at Groupe Dubé's warehouse in Mont-Joli. Distribution leased its warehouse and freezing plant to Groupe Dubé to tide them over. [10] Beginning in mid-July, the Appellant handled Distribution to assist a potential buyer; he handled payroll for five employees and invoicing. [11] The Appellant holds 20% of the capital stock in Aliments Alpha Inc. This company prepares and distributes pizza sauce, dough, and spice mixes. He worked for Aliments Alpha Inc. starting in June 2002 only, and he worked for a very short period of time. [12] In Wiebe Door Services Ltd. v. Minister of National Revenue, [1986] 3 F.C. 553, the Federal Court of Appeal provided useful guidelines for making a distinction between a contract of service and a contract for services. In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, the Supreme Court of Canada endorsed these guidelines, summarizing the state of the law as follows: 47 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. 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. [13] In Gallant v. M.N.R., [1986] F.C.J. No. 330, the Federal Court of Appeal recalls that the indicator of a contract of service is not the control that the employer actually exercises over his employee, but rather the employer's power to control the way in which the employee carries out his duties. [14] In this case, a service agreement negotiated within the context of the purchase of a business's assets and goodwill exists. The Appellant's services were retained for the purpose of ensuring the transfer of clients from the vendor to the purchaser. According to Mr. Jean, the Payor had very little control because the purpose had nothing to do with the Appellant's performance, but rather, the Payor was ensuring that the Appellant would be available to help out and provide support to Distribution's clients during the transition period. The Appellant was not required to provide any service other than that required by the demand. A work schedule was not set out, and it was not specified when the services were to be rendered, except for the first six-month period in which the Appellant was to work two and a half days per week. The service agreement gave the Appellant great flexibility. He was free to work for others, because the Payor did not have exclusive rights to his services. The Payor was reassured regarding the Appellant's performance by the Payor's employees, who communicated with it. There was no formal supervision. The Payor occupied its former offices and was solely responsible for expenses relating to contacts and meetings with clients. The Appellant did not receive instructions on how to fulfil his mandate, which was to ensure a smooth transition. There is no doubt that the Appellant performed his work as agreed on, but the facts in this case and the context in which the Payor set out the terms and conditions of employment do not correspond with the supervision required by the control criterion. Even though this work was appropriate for the Appellant because of his specific knowledge of his former clients, it is my opinion that Payor exercised nearly no control. [15] Ownership of tools is a criterion which, in this case, does not lend itself to the conclusion that a contract of service was created. The Appellant needed his own office. He alone incurred the expenses relating to maintenance, heating, and telephone service, including long-distance calls. He was not reimbursed for travel. Although it was preferable that he remain on-site to ensure the smooth transition, travel expenses are a type of expense that is usually incurred by a Payor in the case of a contract of service. [16] The chance of profit and risk of loss was entirely the Appellant's. All of the expenses incurred and the steps taken by the Appellant to ensure the smooth transition were based on his own judgment. As mentioned earlier, he provided his own office space and paid for telephone and travel expenses. This criterion tends to indicate that a contract for services existed, rather than a contract of service. [17] Regarding integration, the facts in this case lead me to conclude that the Appellant's services were not an integral part of the Payor's business. They were only significant during the transition period, in the acquisition of the goodwill. The Appellant worked from his former place of business rather than on the Payor's premises. His involvement following the fire, and the leasing of his premises and freezing plant, were not a part of his initial contract, and had to do more with the fact that, specifically, he leased his buildings. Although his work was performed for the Payor, this work was performed on an occasional basis only. [18] Overall, these criteria do not enable me to conclude that, in this case, a contract of service existed. The Payor did not integrate the Appellant in his business in the same way as he did his other employees and under the same terms and conditions. The Appellant worked from his own office and was not reimbursed for expenses. His work schedule provided him with great flexibility, and he was free to work for other employers. His performance was assessed on the basis of his availability, rather than results. His wages were distributed over one year, even though the first six months demanded more of his time than the last six months, which implies that, in this case, there was a lump-sum payment rather than annual remuneration payable on a weekly basis. [19] In Laverdière v. Canada, [1999] T.C.J. No. 124, at paragraph 45 of his reasons, Tardif J. explains a genuine contract of service as follows: [...] First of all, only a genuine contract of employment can meet the requirements for being characterized as a contract of service; a genuine contract of service must have certain essential components, including the performance of work; that performance must come under the authority of the person paying the remuneration, which remuneration must be based on the quantity and quality of the work done. [20] In this case, the aspects to be considered lead me to conclude that the Appellant was not in an insurable employment, because his employment does not meet the requirements of a genuine contract of service. Consequently, the appeal is dismissed. Signed at Ottawa, Canada, this 10th day of February 2004. Angers J. Translation certified true on this 5th day of January 2005. Colette Dupuis-Beaulne, Translator