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Citation: 2003TCC456
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Date: 20030708
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Docket: 2002‑4777(EI)
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BETWEEN:
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PATRICK MARION,
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Appellant,
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and
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THE MINISTER OF
NATIONAL REVENUE,
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Respondent,
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AND
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Docket: 2002‑4778(EI)
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RENÉ MARION O/A
POLICAM P.R.M. ENR.,
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Appellant,
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and
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THE MINISTER OF
NATIONAL REVENUE,
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Respondent.
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[OFFICIAL ENGLISH
TRANSLATION]
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REASONS FOR JUDGMENT
Somers, D.J.T.C.C
[1] These appeals were
heard on common evidence at Montréal, Quebec, on April 22, 2003.
[2] The appellants
appeal from the decision of the Minister of National Revenue (the
"Minister") according to which the employment held by
Patrick Marion, the worker, with the appellant René Marion o/a
Policam P.R.M. Enr. during the period in issue, from June 1 to
October 25, 2001, was not insurable because it did not meet the
requirements of a contract of service; he was not an employee of the appellant.
[3] Subsection 5(1) of the Employment Insurance
Act (the "Act") reads in part as follows:
5.(1) 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;
[...]
[4] The burden of
proof is on the appellants. They must show on a preponderance of proof that the
Minister’s decision 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, which were
admitted or denied:
[TRANSLATION]
(a) The appellant and the worker registered a trade name on
April 13, 1999; (denied)
(b) under the terms of the registered trade name, the appellant and
the worker are partners; (denied)
(c) they operated an aluminum truck parts polishing business;
(denied)
(d) they operated the business under the trade name "Policam
P.R.M."; (denied)
(e) the appellant is the worker's father; (admitted)
(f) the worker worked as a polisher; (admitted)
(g) the worker's duties were to strip and polish truck parts;
(admitted)
(h) the worker drew $540 a week; (denied)
(i) the worker took a weekly drawing even if there was no work;
(denied)
(j) the worker worked for his own business. (denied)
[6] The appellant and
the worker registered the trade name of "Policam P.R.M."
April 13, 1999, as attested to by a document from the Inspecteur général
des institutions financières (Exhibit I‑2). Under the terms of that
trade name, the appellant, René Marion, and his son, the worker, are
partners.
[7] The appellant and
the worker operated a truck tank polishing business. The worker worked as a
polisher and his duties were to strip and polish the truck parts.
[8] The appellant
said that he, not the worker, had purchased the equipment of the business.
Although the worker's name appears on the corporation's certificate, the
appellant considered him an employee.
[9] The appellant
decided on the work schedule and the worker had to meet it. The worker worked
irregular hours, from 30 to 42 hours a week, depending when the customers
of the business were available.
[10] The appellant
stated that he had checked the quality of the work performed by his son. The
appellant and his spouse had authority to sign the cheques to suppliers.
[11] The worker was
paid at an hourly rate of $13.50; the number of hours worked varied with the
needs of the business, and the remuneration was thus not fixed.
[12] René Marion
admitted that a declaration of "raison sociale" had been registered
on April 13, 1999, and that the two partners were he and his son Patrick,
the worker. He added that the trade name "P.R.M." represented the
initials of their two given names and their family name.
[13] René Marion
stated in his testimony that he was the boss of the business, that Patrick was
his employee and that the latter had not invested money in the business.
[14] In
cross-examination, René Marion admitted that he had signed a statutory
declaration dated July 16, 2001, which reads in part as follows:
[TRANSLATION]
...I
asked him how much he needed to get by. We agreed on $400 net a week. I try to
give it to him regardless of the number of hours of work done in his week. I
make no deductions, except that I withhold $150 for taxes. He'll report his
amount to the tax authorities and make arrangements to pay the tax payable out
of the money withheld from his pay. The income from the Policam PRM business
goes just to me. I state the gross and net amounts in my tax return; you can
see them. His name is on the registration document, but that's all…
[15] At the hearing of
this appeal, René Marion stated that the worker had received the same
wages regardless of the number of hours worked. He admitted that he had made no
source deductions and that the worker had worked on a full-time basis during
the period in issue.
[16] René Marion
admitted that the business had operated at a loss starting in August ‑
business had slowed down ‑ and that the worker had not worked after
October 25, 2001.
[17] In a declaration
of registration (Exhibit I‑4), René Marion stated that he was
the natural person operating an individual business under the style Policam
Enr., whose main activities were truck aluminum polishing.
[18] At the hearing,
the worker corroborated the testimony of his father, René Marion. He stated
in his testimony that, during the period in issue, he had operated the business
with his father as a partner, as stated in the document of the Inspecteur
général des institutions financières (Exhibit I‑2). He added that he
had previously started up his own business, but that it had not worked. He
further declared that he had accompanied his father at the time of the
declaration of deregistration of the business dated October 31, 2001
(Exhibit I‑3).
[19] The worker stated
that he and his father had agreed on the weekly salary of $540 that he would
receive for his work in the business.
[20] It must be decided
whether a person may be employed by his own business. The evidence showed that
the appellant and the worker signed a partnership declaration in order to form
Policam P.R.M.
[21] In Québec
(Ville) c. Cie d'immeubles Allard Ltée, [1996] A.Q. No. 1517, the
Quebec Court of Appeal, per Brossard J.A., wrote as follows:
...Upon
reviewing the Civil Code of Lower Canada, I must state, for my part and with due
regard to the opposite view, that I disagree. I do not think that the Quebec
Code implicitly makes partnerships persons. On the contrary, as explained
above, it seems to me that its provisions actually confirm that a partnership
is not a person and cannot own property.
[22] In Lasalle v.
Canada (Minister of National Revenue ‑ M.N.R.), [1995] T.C.J.
No. 130, Judge Lamarre of this Court held as follows:
...Thus,
settled case law has established the rule that, to be effective with respect to
third parties, a dissolution of partnership must be evidenced by a declaration
duly registered and signed by all the partners. By third parties is meant all
those who are not included in the partnership agreement.
[...]
In
my view, the evidence does not support the appellants' claim that they did not
want to constitute a partnership. Taking into account the existence of the
declaration of partnership, the onus was on them to show that such a
partnership agreement never in fact existed. However, in the first year of the
business's operation, Marcel Lasalle indicated in his income tax return
that he was a partner in Marcel & Fils Enrg. He deducted 70% of the loss in
that year. It is true that the appellants made no mention of their interest in
the partnership in their income tax returns. However, they admitted having
signed the declaration (A‑1) by their own consent. They also agreed to
sign a document in which they stated that they owned 25% of the shares in
Marcel & Fils Enrg. It may be that they did not understand the actual
consequences of the partnership agreement, but, in my view, they did not prove
that they never intended to associate with their father. Furthermore, it may
also be that the father decided to operate in business alone with the
subsequent consent of his sons. In this case, they had to register a new
declaration to that effect. Not having done so, they had to live with the
consequences of their acts. With respect to the sharing of profits, they drew
them out in the form of wages. As to their contributions to the partnership,
those contributions need not necessarily take the form of monetary
contributions.
For
all these reasons, I conclude that the appellants worked for a partnership in
which they were partners during the periods in issue. A partner may not
lawfully be an employee of, or hired pursuant to a contract of service by the
partnership in which he is at the same time a partner.
[23] In Parent v.
Canada (Minister of National Revenue ‑ M.N.R.), [1999] T.C.J.
No. 83, Judge Archambault of this Court wrote as follows:
...In
other words, can a contract of employment exist between a partner and his or
her partnership? The Civil Code of Québec defines "contract of
employment" as follows:
ART. 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.
...In
my view, the $500 he received was a non‑recoverable advance on the profits
that the DN partnership might make.
...Unlike
a joint-stock company, a partnership is not considered to be a person separate
from its partners. The partnership’s business is that of the partners. The
partnership’s assets belong to the partners. François Parent was thus working
for himself. His work was therefore not done according to the instructions and
under the direction or control of another person as required by
article 2085 of the C.C.Q. Accordingly, there was no contract of
employment between Mr. Parent and the DN partnership.
[24] In the instant
cases, the appellant and the worker signed a declaration of partnership in
1999. That partnership existed until October 31, 2001, on which date it
was deregistered; the partnership thus existed during the period in issue.
Although René Marion stated that he was the boss and that Patrick was his
employee, the partnership existed with respect to third parties.
[25] It is well-settled
case law that partners may not have an identity separate from that of their
partnership. Being a partner in the partnership for which he worked,
Patrick Marion, the worker, could not be employed by his own business.
[26] For these reasons,
the appeals are dismissed and the Minister's decision is confirmed.
Signed at Ottawa, Canada, this 8th day of
July 2003.
Deputy Judge Somers
CASES CONSIDERED
L'Espérance
(c.o.b. Conrad l'Espérance et Fils Enr.) v. Canada (Minister of National
Revenue ‑ M.N.R.),
[2001] T.C.J. No. 115;
Wiebe
Door Services Ltd. v. Canada (Minister of National Revenue ‑ M.N.R.), [1986] 3 F.C. 553;
Marchand
v. Canada (Minister of National Revenue ‑ M.N.R.), [2000] T.C.J. No. 781;
Brady‑Charette
c. M.R.N.,
[1990] A.C.I. no 1106;
Carpentier
v. Canada (Minister of National Revenue ‑ M.N.R.), [1996] T.C.J. No. 502;
Martin
v. Canada (Minister of National Revenue ‑ M.N.R.), [2000] T.C.J. No. 334.
Translation certified true
on this 3rd day of February 2004.
John March,
Translator
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