Bourgeois c. M.R.N.

Bourgeois c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-09-01 Neutral citation 2004 TCC 577 File numbers 2004-21(EI) Judges and Taxing Officers Brent Paris Subjects Employment Insurance Act Decision Content [OFFICIAL ENGLISH TRANSLATION] Docket: 2004-21(EI) BETWEEN: RÉAL BOURGEOIS, Appellant, And THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on July 15, 2004, at Sherbrooke, Quebec Before: The Honourable Judge B. Paris Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Emmanuelle Faulkner ____________________________________________________________________ JUDGMENT The appeal is allowed, and the decision by the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 1st day of September 2004. "B. Paris" Paris J. Certified true translation Colette Dupuis-Beaulne [OFFICIAL ENGLISH TRANSLATION] Citation: 2004TCC577 Date: 20040901 Docket: 2004-21(EI) BETWEEN: RÉAL BOURGEOIS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Paris J. [1] Réal Bourgeois has appealed from the decision of the Minister of National Revenue (the "Minister") that Mr. Bourgeois did not hold insurable employment with Bois Francs Notre-Dame Inc. (the "payer") from October 7, 2002, to January 10, 2003. According to the Minister, Mr. Bourgeois' services were not rendered under a contract of service. In making the decision here in appeal, the Minister made the following assumptions of fact stated in paragraph 5 of the Reply to the Notice of Appeal: [TRANSLATION] (a) The payer, which was incorporated on June 18, 2001, operated a hardwood flooring sales and wood-drying business; (b) during the period in issue, the payer's sole shareholder was 3034534 Canada Inc.; (c) Jacques McLean was the sole shareholder of the payer; (d) contrary to the information provided by the Inspector General of Financial Institutions, the Appellant was never a director and never held shares in the payer; (e) the Appellant claims that he served as a nominee for the payer to enable it to obtain a small business loan because Mr. McLean was insolvent; (f) the Appellant states that the information provided to the Inspector General of Financial Institutions concerning him is false; (g) the Appellant worked for the payer as a controller and accountant; (h) the Appellant worked at the payer's place of business from Monday to Friday; (i) the Appellant guaranteed a $215,000 loan granted to the payer by CIBC; (j) the Appellant also provided guarantees for the payer's line of credit and a few loans; (k) the Appellant claims that, in return for his guarantees for the payer, he was to obtain shares of the payer, but that he never obtained or held any shares of the payer; (l) during the period in issue, the Appellant generally represented himself as a co-owner of the payer, both to the payer's employees and to its customers; (m) during the period in issue, the Appellant incurred significant financial risks due to the fact that he had guaranteed the payer's loans. [2] Mr. Bourgeois testified that he had known Jacques McLean for a number of years and that he had worked for him in 1998. In 2002, Mr. McLean hired him again to work at the payer as a controller and accountant. At that time, Mr. McLean was having trouble obtaining bank loans, and he offered Mr. Bourgeois shares in the payer if he would stand as a guarantor for him. Thus, in exchange for his guarantee of a small business loan of $215,000 and a $10,000 line of credit, Mr. Bourgeois and Mr. McLean entered into an agreement under which Mr. Bourgeois would receive 30 percent of the payer's shares. However, Mr. Bourgeois never received them as a result of a conflict with Mr. McLean that began in late 2002. On January 10, 2003, Mr. Bourgeois resigned from his position with the payer and withdrew the guarantees he had given. [3] Mr. Bourgeois says he provided the guarantees so that he could become a shareholder of the payer. He knew the financial situations of the payer and Mr. McLean and was persuaded that the guarantees entailed very little risk. Although Mr. McLean had no credit, he owned immovable property worth $3,000,000 that could satisfy any request for payment made by the bank. Furthermore, because the principal loan was a small business loan, Mr. Bourgeois' maximum liability was approximately $30,000 to $40,000. [4] Mr. Bourgeois said he had never represented himself as a shareholder of the payer but admitted that he had told other workers that he was going to become a co-owner of the business. It appears that the payer had made certain statements to the Inspector General of Financial Institutions to the effect that Mr. Bourgeois was a shareholder, but Mr. Bourgeois says he was in no way responsible for the statements in question. [5] With respect to the work he did for the payer, Mr. Bourgeois says that he was an employee and that Mr. McLean, as president of the corporation, "made all the decisions". Mr. Bourgeois worked from Monday to Friday and received a fixed salary. He says that the conditions of his employment were those that would be observed in the case of any employee. [6] According to the Minister's initial decision concerning the insurability of Mr. Bourgeois' employment, that employment was held pursuant to a contract of service, but, pursuant to paragraph 5(2)(b) of the Employment Insurance Act (the "Act"), was not insurable because Mr. Bourgeois controlled more than 40 percent of the payer's shares. [7] Mr. Bourgeois challenged that decision, and the Appeals Office of the Canada Customs and Revenue Agency determined that Mr. Bourgeois was not a shareholder of the payer, but concluded that his employment was nevertheless not insurable because it did not meet the requirements of a contract of service. That decision is the subject of the instant appeal. Analysis [8] In concluding that Mr. Bourgeois was not employed by the payer pursuant to a contract of service, the Minister appears to have considered only one aspect of the relationship between Mr. Bourgeois and the payer, namely the worker's risk of loss in relation to his work. None of the assumptions of fact made by the Minister concerns the other aspects of their relationship. [9] It is case law that a single four-part test must be applied to determine whether a worker is an employee or an independent contractor. The four parts of that test are: control, ownership of the tools, chance of profit and risk of loss. A consideration of all those parts serves as a basis for an answer to the central question, which is "whether the person who has been engaged to perform the services is performing them as a person in business on his own account."[1] [10] In the instant case, I find that the facts assumed by the Minister formed an insufficient basis for his conclusion that Mr. Bourgeois was an independent contractor vis-à-vis the payer. None of the four elements referred to above is decisive, and all the aspects of the relationship of the parties must be examined in order to rule on the question. The burden of proof as to the facts to be established and those assumed in support of the Respondent's position is on the Respondent. [11] The evidence brought before the Court shows that Mr. Bourgeois was, to a certain degree, subject to the payer's control and that he worked fixed hours on the payer's premises for a specified salary. It also appears that he did not supply his own tools. [12] The evidence further shows that Mr. Bourgeois guaranteed the payer's debts in exchange for a promise that he would receive shares. The guarantees were not attributable to the fact that Mr. Bourgeois worked for the payer, and the risk of losing money as a result of those guarantees did not arise from his contract of employment. The guarantees were related to Mr. Bourgeois' wish to become a shareholder. A distinction must be drawn between two statuses, that of worker and that of shareholder, in an analysis of the aspects of the work performed by Mr. Bourgeois for the payer. [13] Considering all the elements of the contract of employment between Mr. Bourgeois and the payer, I find that Mr. Bourgeois was not an independent contractor. It therefore follows that he held insurable employment during the relevant period, and his appeal is allowed. Signed at Ottawa, Canada, this 1st day of September 2004. "B. Paris" Paris J. Certified true translation Colette Dupuis-Beaulne CITATION: 2004TCC577 COURT FILE NUMBER: 2004-21(EI) STYLE OF CAUSE: Réal Bourgeois and M.N.R. PLACE OF HEARING: Sherbrooke, Quebec DATE OF HEARING: July 15, 2004 REASONS FOR JUDGMENT BY: The Honourable Judge B. Paris DATE OF JUDGMENT: September 1, 2004 APPEARANCES: For the Appellant: The Appellant himself For the Respondent: Emmanuelle Faulkner COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada [1] 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, paragraph 47.