Dumont v. M.N.R.

Dumont v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-10-04 Neutral citation 2005 TCC 618 File numbers 2004-4264(EI) Judges and Taxing Officers Sylvio J. Savoie Subjects Employment Insurance Act Decision Content Docket: 2004-4264(EI) BETWEEN: ROMAIN DUMONT, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on July 26, 2005, at Québec, Quebec Before: The Honourable Deputy Justice S.J. Savoie Appearances: Counsel for the Appellant: Takioullah Eidda Counsel for the Respondent: Sylvain Ouimet ____________________________________________________________________ JUDGMENT The appeal is dismissed and the Minister's decision is affirmed in accordance with the Attached Reasons for Judgment. Signed at Grand-Barachois, New Brunswick, this 4th day of October 2005. "S.J. Savoie" Savoie D.J. Translation certified true on this 31st day of January 2006 Aveta Graham, Translator Citation: 2005TCC618 Date: 20051004 Docket: 2004-4264(EI) BETWEEN: ROMAIN DUMONT, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Savoie D.J. [1] This appeal was heard at Québec, Quebec on July 26, 2005. [2] This appeal deals with the insurability of the Appellant's employment while working for 9022-6903 Québec inc., the "Payor," from August 14 to December 15, 2001, from February 11 to December 28, 2002, and from June 9 to October 24, 2003, the periods at issue. [3] On October 27, 2004, the Minister of National Revenue (the "Minister") informed the Appellant of his decision that the Appellant had not held insurable employment during the periods at issue. In rendering his decision, the Minister relied on the following assumptions of fact set out in paragraph 5 of the Reply to the Notice of Appeal: 5(a) Sonia Tremblay holds all the Payor's voting shares; (admitted) (b) the Appellant is Sonia Tremblay's husband; (admitted) (c) the Appellant is related to the person who controls the Payor. (admitted) [4] The Minister determined that the Appellant and the Payor were not dealing with each other at arm's length with respect to the employment. In fact, the Minister was satisfied that it was not reasonable to conclude that the Appellant and the Payor would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length, having regard to the following circumstances as set out in paragraph 6 of the Reply to the Notice of Appeal: 6(a) The Payor, incorporated on July 3, 1995, has been operating a business under the company name Fabrico Nat. (since February 1999); (admitted) (b) the Payor provides cabinet-making and renovation services and sells hardware; (c) the Payor has a hardware store and a cabinet-making shop; (admitted with clarifications) (d) the Payor operated its business year-round with a more active period during the summer season; (admitted) (e) the Appellant's main duties consisted in doing cabinet-making work such as stripping furniture and making stairs and cupboards, renovation work and preparing bids for renovation contracts; (denied) (f) for the renovation work, the Payor employed the Appellant and Simon Charron, and it occasionally used a few additional workers; (admitted) (g) in 2001, the Appellant was entered on the Payor's payroll, between June 23 and December 15, for 26 consecutive weeks; (admitted) (h) during that period he received $14.75 per hour for the first 8 weeks and $8.00 per hour for the other weeks, for 40 hours of work per week; (admitted) (i) in 2002, the Appellant was entered on the Payor's payroll for one week in mid-February, one week at the end of February and one week in June before being entered on the payroll for 11 consecutive weeks from mid-October to December 22; (denied) (j) during that year, he was usually paid $12.00 per hour; (admitted) (k) in 2003, the Appellant was entered on the Payor's payroll for one week in January, two weeks in June, three weeks in July, two weeks in August, two weeks in September and five weeks in October; (admitted) (l) in 2003, he was paid $15.00 per hour; (admitted) (m) the Payor did not record the Appellant's hours of work; (denied) (n) the Appellant's pay varied according to the Payor's ability to pay and not based on the tasks done; (denied) (o) during the years at issue, the Appellant rendered a number of services for the Payor outside of the weeks or periods where he was entered on the Payor's payroll, and did so without pay; (denied) (p) the Appellant's periods of work do not correspond with the Payor's most active periods nor to the periods actually worked by the Appellant. (denied) [5] The evidence gathered at the hearing supported the Minister's assumptions of fact set out in subparagraphs 6(e), (i) and (m). In fact, the documents in the insurability file showed that the Appellant had worked continuously, 26 weeks from the week finishing on June 23, 2001, to the week of December 15, at $14.75 per hour for the first eight weeks and then $8.00 per hour for 40 hours a week. Furthermore, those documents established that the payroll for 2002 indicated that the Appellant had only worked for one week in mid-February, one week at the end of February and one week in June before working 11 consecutive weeks from mid-October to December 22, at $12.00 per hour mostly. [6] In addition, the payroll for 2003 indicates that the Appellant worked the same number of weeks as the worker Simon Charron, namely 14. However, still based on the payroll, the periods of employment of the Appellant and Simon Charron are not the same although, it should be noted, some renovation work was to have been performed with a worker with a competency card, which Simon Charron had and the Appellant did not. [7] The evidence showed that the Appellant stated at an interview with an appeals officer from the Canada Customs and Revenue Agency on October 6, 2004, that the Payor did not record the hours worked because his wife and the shareholder, Sonia Tremblay, knew when he worked because she was at the business most of the time to deal with clients and answer the telephone and sometimes she helped him when necessary. [8] The Appellant also denied the Minister's assumptions of fact in subparagraphs 6(n), (o) and (p). However, the investigators gathered certain facts taken from the statutory declarations signed by the Payor and the Appellant at their interviews. [9] It is appropriate to reproduce a few excerpts from those declarations noted in the report on an appeal, dated October 27, 2004, prepared by the appeals officer (Exhibit A-9): [translation] . . . 9. I am not always paid for what I do. For example, I prepare bids because Sonia does not have the expertise to do it. Since that does not benefit the company, I am not paid for it. 10. Since I stopped working in October, I have come in to clean up the shop, clean the tools, install shelves in the company truck. I will not be paid for that. 11. Concerning my salary, it varies depending on the company's financial capacity. It does not help me any to have a big paycheque that I cannot cash. . . . 25. Romain Dumont has already performed services without pay but not often, such as making a bid, making commissions, accepting deliveries at the house (that happens regularly) when the business is closed because it is delivered to the garage. . . . 30. The Payor's most active period begins from the summer until October or November, while from November to April it is quieter except for last-minute jobs. . . . 38. In 2003 Simon was on the payroll before Romain because Romain prepared several bids that summer and he was not paid for that. 39. Since both of us are shareholders, each of us must do our share of unpaid work. So, he takes out the quantity of materials required for the bid and I do the calculations. 40. Romain's wages vary during the year because his wages are determined in accordance with the business' income, as well as the type of work to be done. For example, he is paid a little less when he works in the cabinet-making shop. . . . 46. When give him a paycheque in a given week, it is because he did some hours in that week. I do not accumulate hours either. However, Romain may work without being paid some weeks, but not when full time. (occasionally at the house to prepare bids). . . . 75. The number of monthly invoices for the purchase of materials and supplies signed by the Appellant when he was not on the payroll for the years 2002 and 2003 is the following: (Tabs K, K.1) Month 2002 2003 January 11 11 February 9 5 March 20 13 April 16 13 May 17 19 June 14 6 July 19 20 August 18 7 September 17 5 October 10 3 November 17 December 2 Total 153 119 [10]The issue is whether the Appellant held insurable employment for the purposes of the Employment Insurance Act (the "Act"). The relevant provision is paragraph 5(1)(a), which reads as follows: 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; . . . [11]The above-cited paragraph contains the definition of an insurable contract. It is one held under a contract of service, namely an employment contract. However, the Act does not define such a contract. In the case at bar, there is no written contract, but at the hearing, testimonial and documentary evidence was given as to the parties' intention, which became clear during the periods at issue. Upon analysis of the facts presented at the hearing, the Court will be able to establish the type of contract to which the parties are bound. [12]The contract of service is a civil law concept found in the Civil Code of Québec. It is therefore under the relevant provisions of the Civil Code that the nature of this contract will be determined. Below are the relevant provisions of the Civil Code of Québec: Contract of employment 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. 2086 A contract of employment is for a fixed term or an indeterminate term. Contract of enterprise of for services 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] Analysis of the facts in light of the provisions reproduced above lead me to determine that there was, between the Appellant and the Payor, a genuine contract of service, i.e. an employment contract. [14] It was established that the parties to the employment contract were related pursuant to the relevant provisions of the Employment Insurance Act. It therefore remains to be determined whether the Appellant's employment is excluded under subsection 5(2) of the Act because of that relationship. In this regard, here are the relevant provisions of the Act: (2) Insurable employment does not include . . . (i) employment if the employer and employee are not dealing with each other at arm's length. . . . (3) For the purposes of paragraph (2)(i), . . . (b) if the employer is, within the meaning of that Act, related to the employee, they are deemed to deal with each other at arm's length if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. [15] Therefore, the Minister had to carry out the mandate given to him by Parliament under paragraph 5(3)(b) of the Act and determined that the parties would not have been bound by a substantially similar contract if they had been dealing with each other at arm's length. [16] In carrying out his mandate, the Minister conducted an analysis of the Appellant's employment based on the criteria set out in paragraph 5(3)(b) of the Act and based on the following facts noted in the report on an appeal (Exhibit A-9) and drawn from the documents included in the insurability file: [translation] Remuneration: During 2001, the Appellant was paid at an hourly rate of $14.75 for 6 weeks while for the following 20 weeks he was paid at an hourly rate of $8.00. During 2002 the Appellant was paid at an hourly rate of $8.00 for 4 weeks while for the following 13 weeks (June, October to December) he was paid at an hourly rate of $12.00 whereas the employee Simon Charron received either $12.00, $15.00 or $26.46 per hour. During 2003, Romain Dumont received $15.00 per hour whereas the worker Simon Charron received either $15.00 or $27.25 depending on the periods of work. It should be noted that, according to the Guide des salaires selon les professions au Québec, Emploi-Québec, the average wages paid to a carpenter in 2002 were $18.95 per hour and the average wages paid to a cabinet-maker were $13.61 per hour, whereas the Appellant received less than that. Also, the two shareholders admitted that the Appellant was not always paid when he worked (facts #9, 10, 25 and 46), that each of them had to do their share of unpaid work (fact #39). As for the shareholder Sonia Tremblay, although she worked year-round for the Payor she did not take wages in order to give the company a chance. Furthermore, the Appellant even added that his wages varied depending on the business's financial capacity (fact #11) and that he was fine with lower wages but that it was impossible for a stranger (fact #13). Moreover, during several work periods in 2002 and 2003, the worker Simon Charron received a higher hourly rate than the Appellant. Lastly, the Appellant was paid by cheque for the weeks worked; they were collected normally. However, for the year 2001 all the cheque numbers were successive whereas in 2002 and 2003 there were several. Therefore, the above-mentioned facts confirm that a stranger would not have agreed to wages that vary depending on the Payor's financial capacity and would have been paid the normal hourly rate. Duration of employment: The Appellant did not work year-round whereas the Payor declared year-round sales (except in December 2003). Moreover, during certain work periods, the Payor preferred to have Martin Rodrigue (2001), Claude Bérubé (2002) and Simon Charron (2002-2003) work instead of the Appellant. In 2001, the Appellant worked consecutively for 26 weeks from mid-June to December 9, whereas in 2002 he only worked one week in February, March and June and then again worked consecutively for 11 weeks mid-October to the end of December. In 2003, he only worked five consecutive weeks from June 8 to July 10, three weeks in August and six consecutive weeks from September 14 to October 23. Terms and conditions of employment: Romain Dumont worked either as a cabinet-maker in a workshop at the business or doing renovations at the clients', and on that occasion he happened to be working at the same time as Simon Charron who had his licence and who was surety for the Payor. Romain Dumont did not record any of his hours of work because the other shareholder knew when he worked. His work schedule was normally from Monday to Friday from 8:00 a.m. to 5:00 p.m. totalling 40 hours per week. Romain Dumont had invested more than $30,000 in personal tools in the company and all the carpentry materials and equipment used by the Appellant belonged to the Payor. Romain Dumont performed unpaid services outside his periods of work, which a stranger would not do. Also, we have noted several invoices on which the Appellant's name appears even though he was no longer employed by the Payor and even though the Payor declared revenue, namely 141 invoices (except for the weeks of February 10, March 3, June 23 where the Appellant worked). In 2003, from January to the beginning of June, the Appellant did not work and he signed 61 invoices, in July he only worked for one week and signed 20, while in November he did not work and signed 17. Nature and importance of the work: The Appellant's duties were necessary for the success of the Payor's business. [17] The Court's analysis must focus on the methodology used by the Minister in carrying out his mandate under paragraph 5(3)(b) of the Act. In this task, the Court is guided by the principle established by the Federal Court of Appeal in Légaré v. Canada(Minister of National Revenue - M.N.R.) [1999] (F.C.J.) No. 878, where Marceau J. stated as follows: The Act requires the Minister to make a determination based on his own conviction drawn from a review of the file. The wording used introduces a form of subjective element, and while this has been called a discretionary power of the Minister, this characterization should not obscure the fact that the exercise of this power must clearly be completely and exclusively based on an objective appreciation of known or inferred facts. And the Minister's determination is subject to review. In fact, the Act confers the power of review on the Tax Court of Canada on the basis of what is discovered in an inquiry carried out in the presence of all interested parties. The Court is not mandated to make the same kind of determination as the Minister and thus cannot purely and simply substitute its assessment for that of the Minister: that falls under the Minister's so-called discretionary power. However, the Court must verify whether the facts inferred or relied on by the Minister are real and were correctly assessed having regard to the context in which they occurred, and after doing so, it must decide whether the conclusion with which the Minister was "satisfied" still seems reasonable. [18] In terms of this exercise, I must conclude that the facts inferred or relied on by the Minister are real and were correctly assessed having regard to the context in which they occurred. [19] Consequently, the conclusion with which the Minister was satisfied still seems reasonable, given the facts revealed at the hearing. [20] The evidence adduced at the hearing by the Appellant did not reveal any new facts. However, the testimonies of the Appellant and his wife, Sonia Tremblay, the sole holder of the Payor's voting shares, contradicted their statutory declarations made to Daniel Michaud, an investigation officer with Human Resources Development Canada, on a number of important points in this dispute. [21] They also tried to discredit the role played by Officer Michaud in his investigation. Here are a few examples; Sonia Tremblay, talking about her declaration, testified as follows at the hearing: [translation] I did not have the time to give further information. There was one question after the other. I did not have enough time. The investigator wrote what he wanted. I was nervous, I was given answers not questions. Ms. Tremblay was questioned at the hearing about the declaration made by the Appellant concerning the unpaid work he did in preparing bids for the Payor in 2003. At the hearing she stated: [translation] I do not understand why it is . . . I was not able to explain myself as I would have liked to . . . The unpaid work, that is false . . . Romain's wages . . . it is false that it is based on the Payor's capacity, it is based on the contract . . . I signed a declaration . . . I read it yes, but . . . I do not remember having read it. She was asked to explain the statement she made in her declaration that, due to the sometimes precarious financial situation of the Payor, she and the Appellant both had to do their share of unpaid work. She merely stated that this declaration was false. She added that she was nervous during the interview with the investigator. [22] For his part, the Appellant stated that he felt pressured in the presence of the investigator and that the part of his declaration referring to unpaid work was false. However, he stated that he signed the declaration even though he did not understand certain terms. He added that he had asked for explanations from Investigator Michaud. [23] The investigation officer Daniel Michaud testified at the hearing. He confirmed that he had indeed drafted the declaration signed by the Appellant. He explained that before the Appellant signed his declaration, he gave him the choice between re-reading it himself or having it read back to him. The Appellant chose to read it. He then asked the Appellant if he wanted to make any changes or additions to it. That is when the Appellant asked him to provide clarifications on certain points, which led the officer to amend the declaration in accordance with his request. The testimony of investigation officer Michaud at the hearing revealed that those were the circumstances surrounding the making of the statutory declaration signed by the Appellant. [24] The witnesses Romain Dumont and Sonia Tremblay said that they were nervous in front of the investigation officer. They said that the officer's questions came rapidly one after another and that they did not really have the chance to explain themselves. [25] Yet, on cross-examination at the hearing, they did not seem unduly nervous despite the rigour of the examination. [26] The Appellant had the burden of proving the falsity of the Minister's assumptions. He did not do so. In his attempt, he, in my opinion, unjustly questioned the integrity of the investigation officer. Investigator Michaud had the opportunity to explain to the Court the procedure that he followed during his investigation. His testimony is clearly credible and I accept it as such. [27] For all of these reasons, this Court sees no basis to intervene in the decision made by the Minister who, in my opinion, carried out his mandate as prescribed by Parliament. [28] Therefore, the appeal is dismissed and the Minister's decision is affirmed. Signed at Grand-Barachois, New Brunswick, this 4th day of October 2005. "S.J. Savoie" Savoie D.J. Translation certified true on this 31st day of January Aveta Graham, Translator CITATION: 2005TCC618 COURT FILE NO.: 2004-4264(EI) STYLE OF CAUSE: Romain Dumont and M.N.R. PLACE OF HEARING: Québec, Quebec DATE OF HEARING: July 26, 2005 REASONS FOR JUDGMENT BY: The Honourable S.J. Savoie, Deputy Justice DATE OF JUDGMENT: October 4, 2005 APPEARANCES: Counsel for the Appellant: Takioullah Eidda Counsel for the Respondent: Sylvain Ouimet COUNSEL OF RECORD: For the Appellant: Name: Takioullah Tidda Firm: Eidda et Boudreau Québec, Quebec For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario