Citation: 2012 TCC 389
Date: 20121107
Dockets: 2009-1223(EI),
2009-1222(EI), 2009-1213(EI)
BETWEEN:
ALINE LÉVESQUE,
EVELYNE OUELLET,
MONIQUE THIBAULT,
Appellants
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
The appellants
are appealing a decision of the Minister of National Revenue (the Minister)
concerning the insurability of their employment with the same employer, namely,
the numbered company 6502695 Canada Inc. (the payer), during the following
periods:
Aline Lévesque: June 12
to October 27, 2006;
Evelyne Ouellet: September 4
to December 9, 2006;
Monique Thibault: May 15
to September 29, 2006.
[2]
These
appeals were heard on common evidence, and according to the Minister's
decision, none of the appellants held insurable employment with the payer
during the periods in question because they were not employed under a contract
of service, given that they did not work for the payer. In the alternative, the
Minister concluded that their employment was not insurable because they had a
non-arm's-length relationship with the payer under paragraph 5(2)(i)
of the Employment Insurance Act (the Act), more specifically, a de facto
non-arm's-length relationship under paragraph 251(1)(c) of the Income
Tax Ac (ITA).
[3]
Counsel
for appellant Aline Lévesque informed the Court at the beginning of the hearing
that his client would not be attending and would not be testifying. He also
informed the Court that appellant Monique Thibault would not be attending
either, also owing to illness, but he said that he nevertheless intended to
proceed. However, Robert Coulombe, Ms. Thibault's common-law spouse, did
testify. Ms. Ouellet is the only appellant who testified.
[4]
In
making his decision, the respondent relied on the following assumptions of
fact, which may be found in paragraphs 6 and 8 of the Replies to the
Notice of Appeal and which I have reproduced below:
[translation]
(a) the payer was incorporated on
January 9, 2006, under the laws of New Brunswick;
(b) the sole shareholder and director
of the payer was Jean-Louis
Martel (the shareholder);
(c) the payer's declared activity was
the operation of a forestry business (the business);
(d) the payer was part of a group of
corporations that was the subject of a major investigation by the Employment
Insurance Commission;
(e) the major investigation showed
that these corporations, including the payer, were involved in schemes, with
individuals such as the appellant, designed to provide the individuals with
false Records of Employment so that they could qualify for Employment Insurance
benefits to which they were not entitled;
(f) the payer issued Records of
Employment to 53 individuals for the period from April 3, 2006, to
March 16, 2007, for a total of $642,685 in wages allegedly paid;
(g) most of the Records of Employment issued
show 14 weeks of work;
(h) two of these individuals admitted
that they had bought their Records of Employment from the payer and had never
worked for it;
(i) during the year 2006, the payer earned
$316,177.07 from logging;
(j) however, more than seventy
percent (70%) of the sales of wood took place before even a single employee
appeared on the payer's payroll, that is, before April 3, 2006;
(k) indeed, of the 220 shipments
of wood that the payer sold to the Syndicat des producteurs de bois de la
Gaspésie, only 59 occurred during the period covered by the dates in the
Records of Employment issued by the payer;
(l) these 59 shipments
represented a total volume of 1,180 cords of wood;
(m) a logger with a chainsaw can cut
25 cords of wood a week, on average;
(n) the 1,180 cords of wood cut
during the period covered by the Records of Employment could not have been cut
by more than three or four loggers with saws (1,180 cords of wood ÷
25 cords of wood per week ÷ 14 weeks of work per logger = 3.37 loggers);
(o) the payer did not keep a ledger
of its income and expenses;
(p) the payer had no licence to
operate its business;
(q) the payer signed no contracts for
stumpage rights;
(r) the payer never filed a tax
return;
(s) the payer never remitted source
deductions to the Minister of National Revenue (the Minister);
(t) on April 2 and 10, 2007, the
payer's shareholder told officers of the Employment Insurance Commission during
his interviews that
(i) the payer did not have any machinery,
(ii) there were no
supervisors on the work sites,
(iii)
he did not know who
measured the wood cut,
(iv)
the loggers marked
their wood with paint,
(v)
he did not know who
loaded the wood on the trucks because he was rarely in the forest, and
(vi)
he did not know the
names of the owners of the woodlots where the wood had been cut;
(u) during the period at issue,
neither the payer nor the appellant carried out any reforestation;
(v) during the period at issue, the appellant
did not perform any services for the payer; and
(w) the appellant received no earnings
from the payer.
8. Regarding the de facto non-arm's-length
relationship, the respondent made the following assumptions of fact:
(a) all of the facts set out at paragraph 6;
(b) the appellant received a Record
of Employment from the payer, bearing serial number A80845782, which stated
that 700 hours had been worked and that $10,920 in earnings had been paid;
(c) this Record of Employment dated
December 11, 2006, is fake; and
(d) the appellant and the shareholder,
on behalf of the payer, agreed on a scheme to enable the appellant to qualify
for Employment Insurance benefits to which she was not entitled.
[5]
However,
it should be noted that the Records of Employment, the earnings and the hours
worked, like the period of work, are different for each of the appellants. The
assumptions of fact reproduced above are from the file of appellant Evelyne Ouellet.
In the case of appellant Aline Lévesque, the Record of Employment bears the
serial number A81054338, states that 1,000 hours had been worked and $11,440
in earnings had been paid, and is dated November 3, 2006. The Record of
Employment of appellant Monique Thibault bears the serial number A81054337, states
that 1,000 hours had been worked and $11,000 in earnings had been paid, and
is dated October 6, 2006.
[6]
In
light of the assumptions of fact set out above and of the evidence filed by the
respondent at the hearing, the issue to be determined is whether the three
appellants did in fact work for the payer during the periods in question and
for the hours and earnings stated in their respective Records of Employment. As
was mentioned above, the appellants had two witnesses testify at the hearing: appellant
Evelyne Ouellet and the common-law spouse of appellant Monique Thibault.
[7]
Ms. Ouellet
testified that it was through Mélissa Gallant that she learned that Jean‑Louis
Martel, the payer's sole shareholder and director, was hiring. She said that
she had met with Mr. Martel in person and that her work consisted of stacking
firewood and separating the pine from the spruce by marking them with paint.
She allegedly was paid $15 an hour and worked 10 hours a day from Monday to
Friday, for a total of $750 a week. She said that she worked from
September 4 to December 9, 2006, on three different lots in the
Kedgwick and Saint‑Quentin areas of New Brunswick. She does not know who
owns the lots in question.
[8]
She arranged
her own transportation to the work sites and was accompanied by Mélissa Gallant,
with whom she worked during the period at issue. Jean‑Louis Martel often
stopped by to see them during the week, particularly on Friday afternoons, when
he gave them their pay. She was paid in cash and had to sign a document;
however, she did not file an example of this document. She tried to show that
she deposited part of her money into an account at the Bank of Nova Scotia to
cover her mortgage payments. However, no connection could be made between her
pay and the deposits, particularly since the account statement she filed was
from the Caisse populaire, not the Bank of Nova Scotia.
[9]
In
her testimony, she said that the pine and the spruce were cut into eight-foot
logs. Later in her testimony, she described the wood as [translation] "floating logs".
[10]
The
firewood she was stacking was cut by other people into short lengths. She spent
about a month or a month and a half on the same lot.
[11]
During
the investigation, Ms. Ouellet was asked to fill out various
questionnaires given to her by the respondents' investigators and to attend an
interview. All the questionnaires and an interview report were filed in
evidence. She testified that she had received her Record of Employment in the
mail. The Record of Employment was dated December 11, 2006, and her
Employment Insurance benefits claim was dated December 12, 2006.
[12]
In
the questionnaire she filled out on March 14, 2007, Exhibit I‑3,
Ms. Ouellet stated that she had worked from September 10 to
December 9, 2006. She also stated that she had worked on privately owned lots
in Saint‑Jean‑Baptiste. According to Exhibit A-1, a map of the
area, Saint‑Jean‑Baptiste is far from the area where Ms. Ouellet
marked a yellow "X" indicating where she had worked. She stated that
she had also worked at places called Maltais and St-André, which are very far
from the place indicated in Exhibit A-1. Regarding the frequency of Jean‑Louis
Martel's visits, she answered that he came by on Fridays to pay them and to
tell them where to go. Contrary to what she said in her testimony, namely, that
Mélissa Gallant was the only other person with whom she had worked, she stated
in this questionnaire that there were five women in all, including a woman
named Monica, from Campbellton; a woman with the last name Thibault; and
another whom she did not know. I find it odd that someone could work with
another person and not know her name. She stated in the questionnaire that she
earned $780 a week, that her shift was from 8:00 a.m. to 6:00 p.m.
and that she was not given any time off for lunch. One has to wonder how it is
that, according to this questionnaire, she was earning $30 more a week than she
said in her testimony.
[13]
In
the report of the interview held on December 12, 2007 (Exhibit I-1),
she stated that she had worked alone, apart from the loggers and the machine
operators, and that Mélissa had worked for the same 13 weeks as her on the
same lots. Her shift was from 7:00 a.m. to 5:00 p.m., and she never
missed a day. She said that the wood was simply delimbed, not cut, so we are no
longer talking about eight- or four-foot logs. She did not know who collected
the cut wood. She stated that she had earned $744.66 a week, gross. When asked
how the payer came to hire her, she stated that [translation] "Jean‑Louis is a guy from Kedgwick.
I know him well. I went to see him and talked to him. I asked him for a
job".
[14]
In
the questionnaire dated December 29, 2008, submitted to the appeals
officer, Ms. Ouellet answered Question 8, which
asked whether she had known Jean‑Louis Martel before she started working
for the payer, by saying [translation] "not
personally. I saw him briefly once or twice". She stated that he (Jean‑Louis)
sometimes came round to see if the work was being done and came by Fridays to
pay them. In response to the questions on how often Jean‑Louis Martel visited
and what he did during his visits, she stated that on Fridays, Jean‑Louis
told them what work would have to be done the next week (Questions 16 and
16(a)). In response to the question on where she had worked (Question 17(a)),
she answered that she had worked [translation]
"on the lots in range 9 and range 10, the lot next to it,
and a lot in Maltais". However, she testified that she had worked on three
different lots for about a month or a month and a half in each case and that
she had always performed the same work. Her gross wages were $744.66, and her
hourly rate was $14.75 an hour for 50 hours a week, she stated. Her gross
wages should therefore be $737.50, not $744.66. Furthermore, in her answer to Question 28(a),
she stated this time that she had been paid in cash, but only after having
endorsed a cheque for the same amount, and that she had signed a paper each
time.
[15]
The Record
of Employment (Exhibit A-2) shows a total of 700 insurable hours and
total insurable earnings of $10,920. This gives an hourly rate of $15.60. Given
this contradiction and all the others, there is no way of knowing with
certainty what the working conditions of appellant Evelyne Ouellet really were
after all.
[16]
The
spouse of appellant Monique Thibault was not sure how long she had worked for
the payer. He stated that her work had consisted of planting saplings and that
she had worked 50 hours a week, from 6:00 a.m. to 6:00 p.m., in
the Saint‑Quentin area. She had been supervised by Jean‑Louis
Martel and had worked with appellant Aline Lévesque and another person, named Brenda Lemaître.
She had been paid in the same manner as the other appellants, that is, in cash
on Friday afternoons, and she had had to sign a receipt. He filed as
Exhibit A-5 the document she had signed, but it was later proved that this
was a copy and not the document that appellant Monique Thibault had in fact
signed every Friday.
[17]
The
appeals officer, Manon McGraw, filed a table (Exhibit I-23) detailing the
many contradictions in Monique Thibault’s answers in the various questionnaires
she had been given at different stages of the investigations. As was the case with
appellant Evelyne Ouellet, there is no way of knowing with certainty what the terms
of the employment contract of appellant Monique Thibault were. The
contradictions concern the duties performed, the areas where she worked, the
persons she worked with, her work schedule, her equipment and the persons she
travelled with to get to work, to give just a few examples.
[18]
The
respondent, meanwhile, filed evidence showing that the payer had been the
subject of a major investigation because the Records of Employment given to 53
of its workers in 2006 were not supported by documents establishing that the payer
had in fact carried out logging operations. The payer allegedly did not sell
any of the wood it claims to have paid its workers for, or sold only a
minuscule amount, and the dates of sale did not match the dates of employment. Clearly,
the payer's operations could not warrant the number of workers it hired, which
suggests that the Records of Employment are fakes.
[19]
The
onus is on the appellants to prove, on a balance of probabilities, that each of
them did indeed work for the payer during the entire period in question for the
number of hours stated in the Records of Employment and was paid earnings
matching that number of hours.
[20]
In the
case of appellant Evelyne Ouellet, I have already noted the contradictions in
the answers to the various questionnaires and in her testimony. At this time,
it is difficult to determine whether she was employed and, if so, what the
conditions of that employment were. The payer's representative, Jean‑Louis
Martel, was not called as a witness, nor was Mélissa Gallant, who worked with
Ms. Ouellet. The other employees who cut wood near the place of work could
easily have confirmed Ms. Ouellet's statements. I was told that Jean‑Louis
Martel could not be located, which comes as no surprise to me. As for the
others, I can only infer that their testimony would not have been favourable to
the appellant.
[21]
I
therefore give little weight to the testimony of Ms. Ouellet. I find it
implausible that a person would work 14 weeks in a row for 10 hours a
day in every kind of weather imaginable up to December 9, 2006, without
missing a single hour of work. It would also appear that there were no lunch
breaks, and the work was limited to separating the pine from the spruce and
marking them with paint. Moreover, Ms. Ouellet was not sure how long the
cut wood was and stacked firewood in the middle of the forest, 10 hours a day
for 14 weeks in a row.
[22]
The
documentary evidence also shows that the Records of Employment were sent to the
appellants by mail. The claim for Employment Insurance benefits bears the same
date as the Record of Employment in the case of appellant Aline Lévesque, the next day's date in the case of appellant Evelyne Ouellet, and the date
of the day after that in the case of appellant Monique Thibault. How could
someone have the Record of Employment in their possession the same day it was
mailed?
[23]
Regarding
appellant Monique Thibault, even if she had a valid reason not to attend the
hearing, her absence suggests that her testimony would not have been any more
plausible or consistent than the answers she gave during the investigations. No
application for an adjournment was made, nor was any request to testify in an
alternative manner made in her case. It was her counsel's choice to proceed
this way. The payer's representative did not testify, for reasons already
explained, and Ms. Thibault's co-workers did not testify either. I
therefore conclude that their testimonies would not have been favourable to
Ms. Thibault.
[24]
Regarding
appellant Aline Lévesque, she did not appear at the hearing of her case, and I
conclude from this that she had no evidence to present that could have
supported her position.
[25]
Given
the state of affairs described above, I conclude that none of the appellants
worked for the payer during the periods stated in each of their Records of
Employment and that, if they did in fact render services of some kind to the payer,
they did not do so during the times and for the pay stated in their Records of
Employment. In other words, their Records of Employment do not reflect reality
and are the product of a made-up arrangement between the payer and the
appellants.
[26]
The
appeals are therefore dismissed.
Signed
at Ottawa, Canada, this 7th day of November 2012.
"François Angers"
on
this 20th day of December 2012
Michael Palles,
Translator/Language Adviser
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