Date: 20001222
Docket: 1999-3270-EI
BETWEEN:
GROUPE DESMARAIS PINSONNEAULT & AVARD INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Watson, D.J.T.C.C.
[1] This appeal was heard at Montréal, Quebec, on December 13, 2000.
[2] The issue is whether the appellant is correct in contending that the workers, Claude Desmarais, André Desmarais, Yvon Pinsonneault and André Avard, held insurable employment within the meaning of the Employment Insurance Act while working for it during the period in issue, from November 4, 1997 to November 6, 1998.
[3] It must be determined whether the workers' work meets the test set out in well-settled case law that takes into account "the whole of the various elements which constitute the relationship between the parties", that is, control exercised by the appellant, ownership of the tools, chance of profit or risk of loss and integration of the workers into the appellant's business. These factors are not exhaustive, and the weight to be attached to them varies from case to case.
[4] The burden of proof is on the appellant. It has to show on a balance of evidence that the decision of the Minister of National Revenue (the "Minister") dated May 4, 1999, is unfounded 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:
[TRANSLATION]
(a) The appellant was incorporated on July 1, 1995, as a result of a merger between Groupe Desmarais Inc. and Assurances Pinsonneault, Avard, Paré Inc.;
(b) The appellant's capital stock is distributed as follows:
- Gestion A.C.D. Inc. holds 60% of the voting shares;
- Yvon Pinsonneault holds 20% of the said shares; and
- Martin Avard holds 20% of the said shares;
(c) The capital stock of Gestion A.C.D. Inc. is held in equal shares by André and Claude Desmarais;
(d) An agreement between the appellant's shareholders stipulates that each of the workers has one vote on the board of directors, and decisions concerning the appellant are made by majority vote;
(e) The appellant's board of directors consists of the four workers, but three constitute a quorum;
(f) The board of directors meets every week;
(g) The subjects discussed are varied and relate to the proper operation of the business, and they could include unsatisfactory performance on the part of one of the directors/workers;
(h) The appellant operates a general and personal insurance brokerage and financial services business;
(i) The duties of the four workers relate to sales, customer service, after-sales follow-up and renewal of insurance contracts;
(j) In addition to these duties, each worker holds a management position within the business;
(k) Claude Desmarais is director of the appellant's administration, finance and human resources department;
(l) André Desmarais is director of the personal insurance and financial services, special risks, general insurance and group plans department;
(m) Yvon Pinsonneault is director of the sales, marketing and customer service department;
(n) Martin Avard is director of the individual insurance, technology, organization and methods department;
(o) All customers belong to the appellant;
(p) The four workers have personally guaranteed the appellant's debt;
(q) Although the four workers are responsible for specific sectors of the appellant, the appellant's board of directors has to give its consent on all important decisions;
(r) The four workers are limited as regards the expenses they can incur on the appellant's behalf;
(s) The four workers have to work for the appellant full-time and on an exclusive basis;
(t) Pagers, cellular telephones and voice mailboxes are provided by the appellant;
(u) The four workers receive paid annual vacations;
(v) When one of the four workers is absent for three consecutive days, he has to explain his absence to the other directors;
(w) The four workers are paid a fixed annual salary of $52,000;
(x) The four workers do not have to assume any expenses in the performance of their duties;
(y) Revenue and expenditures generated in the course of the operation of the appellant's business belong to the appellant;
(z) Since the appellant's incorporation, the four workers have reported their income from the appellant as employment income in their income tax returns.
[6] At the hearing, counsel for the appellant admitted the allegations in subparagraphs a) to c), h) to m), n) as amended, p), r), u) and w) to z) and denied the allegations in subparagraphs d) to g), o), q), s) and v).
[7] The appellant was incorporated in 1995 as a result of the merger of two existing insurance businesses which belonged to the four workers; the shares of the payer were distributed among the two Desmarais brothers, each of whom held 30 percent of its shares, and Yvon Pinsonneault and Martin Avard, who owned 20 percent each.
[8] Following the appellant's incorporation, the workers performed their everyday duties without supervision as equal partners, each specializing in the areas stated in the above-quoted subparagraphs (k), (l), (m) and (n). The workers had no fixed work schedule, but met informally as necessary to make important decisions on the appellant's behalf, such as those pertaining to the appellant's expenditures and policies. Each performed his everyday duties independently. If one of them was absent from work over an extended period, he made informal arrangements for one of the other three to serve his clients in his absence. Each of the four workers received a fixed annual salary of $52,000; if the appellant made a profit at the end of the year, the workers met to decide on the appropriate amounts for dividends to be declared or bonuses to be paid. Each worker was personally responsible for any losses incurred by the appellant and for every bank loan or liability of the appellant.
[9] Having regard to all the circumstances of the instant case, in particular the testimony, admissions and documentary evidence, and in light of the well-settled case law, the Court is satisfied that the appellant has discharged its burden to show on a balance of evidence that a genuine contract of service resulting in an employer-employee relationship did not exist between it and the four workers during the period in issue. Instead, the four workers were partners who worked independently without a relationship of subordination with the payer.
[10] In Fournier v. Canada (Department of National Revenue), [1997] F.C.J. No. 211, Hugessen J.A. of the Federal Court of Appeal wrote as follows:
The tests set out in Wiebe Door can be used as a guide only in cases where the Court has to decide whether the relationship between a payer and a worker is governed by a contract of service or a contract for services. However, in many cases, including the case at bar, the Court's first task is not to distinguish between these two types of contracts, but rather to determine whether there was really a contractual relationship between the parties. In other words, there is no need to find that there was a contract for services in order to rule out the existence of a contract of service and an employer-employee relationship.
[11] Therefore, the appeal is allowed and the Minister's decision vacated.
Signed at Ottawa, Canada, this 22nd day of December 2000.
|
"D.R. Watson" |
D.J.T.C.C.
Translation certified true
on this 22nd day of July 2002.
Stephen Balogh, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-3270(EI)
BETWEEN:
GROUPE DESMARAIS PINSONNEAULT & AVARD INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on December 13, 2000, at Montréal, Quebec, by
the Honourable Deputy Judge D.R. Watson
Appearances
Counsel for the Appellant: Rock Guertin
Counsel for the Respondent: Dany Leduc
AMENDED JUDGMENT
WHEREAS the Federal Court of Appeal stated the following in a judgment dated April 18, 2002:
The application for judicial review is allowed with costs, the Tax Court of Canada decision reversed and the matter referred back to be again decided on the basis that the workers in question held insurable employment within the meaning of s. 5(1)(a) of the Employment Insurance Act during the relevant period.
Therefore, the appeal is dismissed and the Minister's decision confirmed in accordance with the decision of the Federal Court of Appeal.
Signed at Ottawa, Canada, this 8th day of May 2002.
|
"D.R. Watson" |
D.J.T.C.C.
Translation certified true
on this 22nd day of July 2002.
Stephen Balogh, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-3270(EI)
BETWEEN:
GROUPE DESMARAIS PINSONNEAULT & AVARD INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on December 13, 2000, at Montréal, Quebec, by
the Honourable Deputy Judge D.R. Watson
Appearances
Counsel for the Appellant: Rock Guertin
Counsel for the Respondent: Dany Leduc
JUDGMENT
The appeal is allowed and the Minister's decision vacated in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 22nd day of December 2000.
|
"D.R. Watson" |
D.J.T.C.C.
Translation certified true
on this 22nd day of July 2002.
Stephen Balogh, Revisor
[OFFICIAL ENGLISH TRANSLATION]