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.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.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.J.T.C.C.
Translation
certified true
on this 22nd
day of July 2002.
Stephen
Balogh, Revisor
Email this Content