Latulippe c. M.R.N.

Latulippe c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-08-19 Neutral citation 2004 TCC 567 File numbers 2003-4549(EI) Judges and Taxing Officers Alain Tardif Subjects Canada Pension Plan Decision Content Dockets: 2003-4549(EI) 2003-4550(EI) BETWEEN: MURIELLE LATULIPPE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] _______________________________________________________________ Appeals heard on common evidence on August 6, 2004, at Quebec City, Quebec. Before: The Honourable Judge Alain Tardif Appearances: Counsel for the Appellant: Pierre W. Morin Counsel for the Respondent: Antonia Paraherakis _______________________________________________________________ JUDGMENT The appeals made pursuant to subsection 103(1) of the Employment Insurance Act are 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 19th day of August 2004. "Alain Tardif" Tardif J. Translation certified true on this 28th day of February 2005. Colette Dupuis-Beaulne, Translator Citation: 2004TCC567 Date: 20040819 Dockets: 2003-4549(EI) 2003-4550(EI) BETWEEN: MURIELLE LATULIPPE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Tardif J. [1] These are two separate appeals. The parties, however, have agreed to proceed on common evidence for both dockets. [2] The first appeal, Docket 2003-4549(EI), involves the period beginning August 7, 2000, and ended November 23, 2001, during which time the Payor was 9073-6976 Québec Inc. ("Company 9073"). [3] The second appeal, Docket 2003-4550(EI), involves the period beginning November 18, 2002, and ended February 1, 2003, during which time the Payor was 9116-8468 Québec Inc. ("Company 9116"). [4] During the first period at issue, the voting shares in the Payor were held by the following people in the proportions indicated: According to the Payor's share register, the voting shares in the Payor were held, during the following periods, by: From January 6, 2000, to April 2, 2001: - Nancy Latulippe, the Appellant's daughter, 33 1/3% of the shares; - The Appellant, 33 1/3% of the shares; - Paul Gauthier, 33 1/3% of the shares. From April 3 to June 1, 2001: - Nancy Latulippe, 100% of the shares. Since June 1, 2001: - Nancy Latulippe, 25% of the shares; - Nicolas Leblanc, the Appellant's spouse, 75% of the shares; [5] During the second period at issue, all of the voting shares in the Payor were held by Stéphane Turcotte, the spouse of the Appellant's daughter. [6] The Appellant, through her counsel, made certain admissions regarding the facts assumed in making the determinations under appeal. · Docket 2003-4549(EI): He admitted paragraphs 16 (a), (b), (c), (d) and paragraphs 17 (a), (b), (c), (d), and (e), up to the sentence that ends with the word "invoicing." 16. The Appellant and the Payor are related within the meaning of the Income Tax Act, because: (a) The Payor was incorporated on February 5, 1999; (b) According to the Payor's share register, the voting shares were held, during the following periods, by: From January 6, 2000, to April 2, 2001: - Nancy Latulippe, the Appellant's daughter, 33 1/3% of the shares; - The Appellant, 33 1/3% of the shares; - Paul Gauthier, 33 1/3% of the shares. From April 3 to June 1, 2001: - Nancy Latulippe, 100% of the shares. Since June 1, 2001: - Nancy Latulippe, 25% of the shares; - Nicolas Leblanc, the Appellant's spouse, 75% of the shares. (c) from January 6, 2000, to April 2, 2001, the Appellant was a member of a related group that controlled the Payor; (d) since April 3, 2001, the Appellant has been related to the person who controlled the Payor. 17. [...] (a) the Payor operated a garage door sales and maintenance business as Portes de Garages N. Leblanc et Fils; (b) the Payor hired the Appellant as an office clerk whose main duties included invoicing, preparing payroll and submissions, answering the telephone, preparing deposits, and running errands; (c) the Appellant generally worked in the Payor's offices, but she also worked from her residence; (d) the Appellant's hours of work were not recorded by the Payor; (e) during the period at issue, the Payor hired the following people, in addition to the Appellant, to perform bookkeeping and accounting: - an employee from Raymond Chabot, once per month, to close out the month; - beginning in June 2000, Nancy Latulippe as secretary, who handled sales marketing and invoicing; [...] However, the Appellant denied or was unaware of paragraphs 17 (e) (last sentence), (f), (g), (h), (i), (j), (k), and (l). These read as follows: 17. The Minister determined that the Appellant and the Payor were not dealing with each other at arm's length with respect to this employment. The Minister was satisfied that it was not reasonable to conclude that the Appellant and the Payor would have concluded a substantially similar contract of employment between them had they been dealing at arm's length, given the following circumstances: [...] (e) beginning on February 10, 2001, Mr. Bertrand Lavoie [worked] full-time as an accounting clerk; (f) the Appellant claims that her employment began on August 7, 2000, whereas her first paycheque was dated May 19, 2000; (g) during 2000, out of the 42 cheques issued by the Payor to the Appellant, only 14 cheques were identified as being paycheques; most of the other cheques issued to the Appellant were for the reimbursement of expenses; (h) the Appellant claims that she worked 40 hours per week, for a fixed gross remuneration of $380, whereas in 2000, the net amount of her paycheques ranged from $260 to $100; (i) the Appellant claims that she continued to work 40 hours per week after Bertrand Lavoie was hired, whereas she worked only a few hours per week, often from her home; (j) the Appellant's minimal duties could not justify 40 hours of work per week; (k) on December 11, 2001, the Payor issued a Record of Employment to the Appellant, showing that August 7, 2000, was the first day of work, and that November 23, 2001, was the last day paid. It showed 1,120 insurable hours and remuneration of $4,942.35 for the last 27 weeks of the period; (l) the Record of Employment issued by the Payor to the Appellant does not accurately reflect the first day of work, the true period during which the Appellant worked, or the remuneration she earned. · Docket 2003-4550(EI): The Appellant admitted paragraphs 15 (a), (b), (c), and (d) and paragraphs 16 (a), (b), (c), (d), (e), (f), (g), (h) and (i) which read as follows: 15. The Appellant and the Payor are related within the meaning of the Income Tax Act, because: (a) The Payor was incorporated on February 5, 1999; (b) Mr. Stéphane Turcotte was the Payor's sole shareholder; (c) Mr. Turcotte was the spouse of Nancy Latulippe, the Appellant's daughter; (d) the Appellant was related to the person who controlled the Payor. 16. (a) the Payor operates a garage door maintenance and repair business; (b) 9073-6976 Québec Inc. handled the manufacturing and sale of garage doors; (c) Mr. Nicolas Leblanc, the Appellant's spouse, managed the two companies; he was the Payor's general manager; (d) the Payor hired approximately eight people; three people worked in the workshop, and the others worked in the office and in sales; (e) the Appellant claims that she was hired to help Nancy Latulippe, her daughter, who worked for the Payor as secretary and accounting clerk; (f) the Appellant claims that her duties included answering the telephone, sending faxes, and cleaning the office, whereas the Payor claims that she was responsible for filing, making trips to the post office, preparing submissions, and cleaning the office; (g) the Appellant's work hours were not recorded by the Payor; (h) the Payor claims that he required the services of the Appellant for 20 hours per week for office work and that that Appellant completed her 40 hours per week by cleaning the Payor's office; (i) on an undisclosed date, the Payor issued a Record of Employment to the Appellant showing November 18, 2002, as the first day of work, February 1, 2003, as the last paid day, 440 insurable hours, and $4,840 of total insurable remuneration; However, the Appellant denied or was unaware of paragraph 16 and 16 (j) which read as follows: 16. The Minister determined that the Appellant and the Payor were not dealing with each other at arm's length with respect to this employment. The Minister was satisfied that it was not reasonable to conclude that the Appellant and the Payor would have concluded a substantially similar contract of employment between them had they been dealing at arm's length, given the following circumstances: (j) the Appellant's minimal duties could not justify 40 hours of work per week; [7] The representatives of the Payors-Mr. Nicolas Leblanc, Mr. Stéphane Turcotte, the Appellant, and her daughter, Nancy Latulippe-testified for the Appellant. Mr. Alain D'Amour, one of the investigators in this case, testified for the Respondent. [8] The Appellant's employment was excluded from insurable employment owing to the non-arm's length relationship that existed between her and the two Payors; after exercising his discretion, the Respondent concluded that the Appellant would not have performed the work in the same manner and under the same terms and conditions had an arm's-length relationship existed. [9] To be successful in this case, it is essential that the person appealing the decision establish that, on the balance of probabilities, the Minister of National Revenue (the "Minister") made one or more errors in examining the facts. This person must demonstrate that some facts were discarded in the analysis or that the Minister gave some facts disproportionate importance, while he marginalized other facts. [10] The Appellant and her witnesses did not, in any way, challenge the quality and objectivity of the investigation and analysis carried out by the Respondent's representatives. They essentially claimed and repeated that the Appellant had, in fact, worked. They described her work summarily. During the first period, the evidence shows that the Appellant worked at filing, invoicing, compiling data entered in the accounting records, and preparing paycheques. She also answered the telephone, greeted clients, and ran errands. During the second period, the Appellant's work was divided into two categories: the first dealt with office work, and the second involved cleaning and maintenance in the office and the plant. [11] In both cases, the description of the Appellant's duties, the time spent at each duty, the frequency, etc., was given in ambiguous, even confusing terms at times. The evidence relating to the maintenance and cleaning of the premises, which accounted for more than half of the time entered on the second Record of Employment, was very confusing and contradictory. [12] All of the witnesses for the Appellant testified as though they were dealing with two large businesses. They spoke as though the two companies enjoyed considerable patronage that required a mega organization. In both cases, to explain the end of the activities, reference was made to an excessively rapid growth. In describing the size of the premises that required cleaning and maintenance work, the witnesses mentioned a cafeteria. I asked them a number of questions about this, and it was determined that it was no more than a room used by a few of the employees. [13] In both cases, the managers of the two companies were insistent about the very high level of importance of the office and accounting work. They alleged that the Appellant, her daughter, an accountant who worked once per week at one time and, subsequently, a person who worked on a full-time basis to replace the person who came once per week, Mr. Bertrand Lavoie, handled an enormous workload. [14] It would have been interesting and highly relevant to examine the financial statements for both companies to determine whether the economic activities justified or supported their human resources requirements. The Appellant, however, did not find it necessary to file the documents at issue, even though the two main managers of the companies were present. [15] The explanations offered to justify the use of time and, particularly, the relevance of the Appellant's work were ambiguous and confused. A number of responses were worded as follows: [TRANSLATION] · "It's vague, that was some time ago." · "It's possible that errors were made; errors are possible." · "That was surely an error." · "It's possible that I am mistaken." · "I made a mistake in the wording." · "I don't recall having said that." · "I did not think that was important." · "I don't remember." [16] The Appellant and her witnesses signed statutory declarations as part of the investigation. When presented with their signed declarations, the witnesses claimed that they could not remember signing them or that they had made statements and signed the declarations to get them out of the way, etc. Nevertheless, the statutory declarations were signed. Murielle Latulippe, the Appellant, signed her declaration on April 15, 2003, and Stéphane Turcotte and Nancy Latulippe signed theirs on April 7, 2003. [17] It appears that the witnesses' memories were clearer and more detailed at the time of the hearing than they were at the time they made the declarations, despite the fact that the statutory declarations were made closer to the date of the events. I feel it is relevant to quote some excerpts from these statutory declarations: Exhibit I-1, Tab 6, pp. 2-3 - Murielle Latulippe's declaration dated April 15, 2003: [TRANSLATION] ... I performed the same tasks for the company as I did in 1999, such as filing, answering the telephone, and sending faxes, but I also entered data into the Dynacom system. Ms. Andrée Bouchard, from Raymond Chabot, came by every week. Nancy did some accounting, but for the most part, she handled the advertising. Regarding Record of Employment A-72769364, issued to me by 9073-6976 Québec Inc., on December 11, 2001, I acknowledge that the first day of work is false, because I started working before August 7, 2000. I am aware of cheque #000111, issued to me in the amount of $260.00, and that it states that it covers my wages from May 12 to 19, 2000. (Emphasis mine.) [...] For the period of employment shown on the Record of Employment A-72769364, issued to me by 9073-6976 Québec Inc., I worked my 40 hours per week from Monday to Friday. However, sometimes I came in and did the cleaning in the evenings or on Saturdays. I had no formal work schedule. I could come in and clean in the evenings and on Saturdays, even though the company was paying a company to do so... (Emphasis mine.) [18] Stéphane Turcotte, the Appellant's son-in-law and, by far, the most articulate of the witnesses, also made a statutory declaration. Although he overstated considerably the time of the meeting following which he made his statutory declaration, and he implied that he had not read that declaration, Stéphane Turcotte mentioned the following facts himself: Exhibit I-2, Tab 4-Declaration of Stéphane Turcotte, dated April 17, 2003: [TRANSLATION] ...9116-8468 Québec... I started my business in early August 2002 and, until late December 2002, I worked a minimum of 3 days or more per week. After that, there wasn't much work... From August 2002 to February 2003, my spouse, Nancy Latulippe, handled my accounting 40 hours per week, from Monday to Friday. Nancy was paid weekly. Ms. Andrée Bouchard from Chabot would come by to close the books at month end and she would sometimes come in to help out... ...9116-8468 Québec Inc... Murielle Latulippe, Nancy's mother, came to help Nancy and do some cleaning after our contract with Atelier L.P. expired. Murielle worked for a couple of months; if I remember correctly, it was around the time that the business wound up... Upon reading this declaration, if I remember correctly, Murielle worked two or three months, about 10 to 12 weeks, but I cannot certify the dates. Murielle did some filing, and sent faxes; at that time, we were trying to save the business, so there were a lot of faxes to send... (Emphasis mine.) [19] After providing many ambiguous and confusing explanations, and despite extensive and compelling documentary evidence, the Appellant refused to admit that she had worked as a caregiver for her daughter and Stéphane Turcotte, even though she acknowledged, in a signed document, that she received over 30 payments of $100.00 each, as well as a payment of $400.00 on August 30, 2002. Photocopies of the individual receipts, clearly bearing the Appellant's signature, corroborate this information. [20] Overall, the evidence provided by the Appellant was ambiguous, confused, and contradictory. A number of explanations remain obscure; I am referring specifically to the fact that the Appellant received a number of cheques for "expenses," whereas, for a period spanning a number of weeks, she was unable to produce a paycheque. [21] Given that the two Payors had very close ties (approximately the same vocation-one manufactured and the other installed and maintained garage doors-similar company names, same address, same location, most of the employees were family members, etc.), it was extremely important to file documented evidence (financial statements), supported by the testimony of the third parties who worked on the premises and who could have explained the exact nature and frequency of the Appellant's work. [22] On the one hand, this evidence was not provided, and, on the other hand, the evidence provided was supported by ambiguous, often confusing, and very incomplete explanations. Moreover, the Appellant did not, in any way, challenge or object to the investigation and analyses performed by the people responsible for this case. [23] The Appellant's position is very simple: she claims that she worked, and she would like her work to be deemed to be insurable. [24] The Respondent had Mr. Alain D'Amour, a co-investigator in the Appellant's case, testify. In his brief testimony, Mr. D'Amour shed some light on the Appellant's weak evidence and stated that the Appellant had not worked on the premises as regularly as she had claimed. [25] Mr. D'Amour made his statement on the basis of two statutory declarations signed by two former employees of the Payors. I feel it is important to reproduce some excerpts from these declarations (Exhibits I-3 and I-4). The declarations made by Robert Iza and Bertrand Lavoie, signed on March 31, 2003, reveal the following: (Exhibit I-3) [TRANSLATION] [...] near the end of May 2002, I met Nicolas Leblanc and Stéphane Turcotte from "Portes de Garage N. Leblanc & Fils," 9073-6976 Québec Inc. I was hired as a salesperson. [...] Throughout the time I worked there, namely, from the end of May 2002 to January 2003, I occasionally went to the office, and at that time, Stéphane and his spouse, Nancy, worked there. As for Murielle, Nicolas' spouse, she was not there, I've never seen her there. (Emphasis mine.) Near the end, that is, in January 2003, I would go to the office two or three times a day... During a discussion I had with Stéphane near the end of January 200[sic] (the business), Stéphane told me that he understood why the business was closing, because Nicolas paid himself a large salary, and he was also paying one to Murielle, in addition to what he gave her for minding the children. As far as I know that's what Stéphane explained to me. Moreover, Nicolas paid for the lease on a new Ford Explorer. With respect to the accounting for the business, Nancy Latulippe, Stéphane's spouse, filed invoices and did some accounting. Robert Proulx from Chabot came by fairly often, and I think he must have handled the balance sheets. I noticed the presence of a lady, who I believe...also from Chabot, came by to support Nancy and show her how to do the accounting. [...] (Exhibit I-4) [...] I acknowledge that I worked for Les Portes de Garage Nicolas Leblanc from February 10, 2001, to April 20, 2002. I had applied for the position of accountant...I worked from Monday to Friday, from 8:00 a.m. to 5:00 p.m., and...when I first started working, Ms. Murielle Leblanc helped me; she explained to me how things worked and helped me with my duties afterwards. With respect to Murielle, Nicolas Leblanc's spouse, she came to the office sporadically, but I had been ordered by Mr. Nicolas Leblanc to enter her in the payroll register on a weekly basis. The cheques issued to Murielle were issued on the order of Nicolas Leblanc. I found it odd, but after Murielle received CSST benefits, Nicolas told me to enter her in the payroll register even though she no longer came to the store. I acknowledge that Record of Employment number A-72769364 that I completed for Murielle Latulippe contains false information relating to her last day of work and the hours of work. I believe that this was a result of the business's financial difficulties. (Emphasis mine.) To my knowledge, Record of Employment A-72769364, issued to Murielle Latulippe on December 11, 2001, is the only ROE that contains false information. Upon reading this declaration, I would like to make the following correction: for Nancy, it's the same business, but there was a change in shareholders in June 2001 (prior to June 2001, Nancy was the majority shareholder). Beginning on August 26, 2001, Murielle's paycheques were adjusted on the basis of her progressive return from the CSST. Mr. Nicolas Leblanc told me to enter her in the payroll register, even though she no longer worked for 9073-6976 Québec Inc., les portes de Garage Nicolas Leblanc. (Emphasis mine.) I would say that Murielle Latulippe was present more often during the period in which my employment began, namely February 10, 2001, until the time the migration was completed, near the end of March 2001; during this period, she would be there between twenty and thirty hours per week, from Monday to Thursday. After that time, it was more sporadic, two or three hours per day from Monday to Thursday, and she did not return after her accident (lower back sprain while trying to lift a box of photocopier paper). Ms. Latulippe's [payroll record] showed 40 hours per week, even though she did not work all of those hours. Ms. Andrée Bouchard from Raymond Chabot handled the migration before I started my employment; I know that Ms. Bouchard came by the business. (Emphasis mine.) [...] [26] Mr. D'Amour also revealed that the beginning of the Appellant's second period of work for the company managed by her daughter's spouse coincided with the end of her entitlement to employment insurance benefits. [27] Although it is not decisive in itself, this fact nonetheless confirms the perception given by the evidence. The balance of probabilities certainly allows for the conclusion that the two determinations under appeal are based on an appropriate analysis, performed very judiciously. [28] I have no doubt that the Appellant worked for one of the two companies; that, however, is not sufficient for me to conclude that this work is insurable. [29] To benefit from the exception provided for by Parliament, it is essential to demonstrate that, on the balance of probabilities, the employment at issue was performed in accordance with terms and conditions that show that the person at issue did not receive benefits to which he or she was not entitled or that he or she was not penalized or placed at a disadvantage, in any way, owing to the non-arm's length relationship. [30] In this case, contrary to the claims of the Appellant as expressed by her counsel, it was not sufficient to provide evidence that she had worked. It was imperative to demonstrate that a third party would also have performed this work in circumstances and conditions that were comparable or similar to the Appellant's. [31] Evidence in which the majority of the components were ambiguous, imprecise, confused, and incomplete is obviously not the best way to discharge this burden of proof, particularly where the opposing party provides credible, irrefutable facts that support the opposite of what the Appellant needed to demonstrate in order to be successful. [32] For all of these reasons, the two appeals are dismissed. Signed at Ottawa, Canada, this 19th day of August 2004. "Alain Tardif" Tardif J. Translation certified true on this 28th day of February 2005. Colette Dupuis-Beaulne, Translator CITATION: 2004TCC567 COURT FILE Nos.: 2003-4549(EI), 2003-4550(EI) STYLE OF CAUSE: Murielle Latulippe and the Minister of National Revenue PLACE OF HEARING: Quebec City, Quebec DATE OF HEARING: August 6, 2004 REASONS FOR JUDGMENT BY: The Honourable Judge Alain Tardif DATE OF JUDGMENT: August 19, 2004 APPEARANCES: Counsel for the Appellant: Pierre W. Morin Counsel for the Respondent: Antonia Paraherakis COUNSEL OF RECORD: For the Appellant: Name: Firm: City: Pierre W. Morin Morin, Pépin & Morin, avocats St- Georges de Beauce, Quebec For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada