Citation: 2009 TCC 94
Date: 20090223
Docket: 2008-1316(EI)
BETWEEN:
PATRICK BOISVERT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
The Appellant is
appealing from a decision of the Minister of National Revenue (the Minister)
under the Employment Insurance Act (the Act). The Minister
decided that Patrick Boisvert (the worker) was not employed in insurable
employment when working for 9164-0367 Québec Inc. (the Payor).
This decision was based on his determination that the employment was
excluded because a similar contract would not have been entered into if the worker
and the Payor had been dealing with each other at arm's length. The relevant
employment period was from January 6 to July 29, 2006.
[2]
In making his decision,
the Minister relied on the following assumptions of fact, set out in paragraphs
5 and 6 of the Reply to the Notice of Appeal:
[translation]
5. The Appellant and the Payor are related persons
within the meaning of the Income Tax Act because
(a) the Payor's shareholders were
-
Pierre-Luc Boulé-Orichefqui, with 50% of the
voting shares, [admitted]
-
Karine Boulé-Orichefqui with 50% of the voting
shares, and [admitted]
-
Michel Orichefqui with 63 000 non-voting
shares; [denied]
(b) Pierre-Luc and Karine are Michel Orichefqui's children; [admitted]
(c) the Appellant was Karine Orichefqui's spouse; and [admitted]
(d) the Appellant was related to a group of persons
that controlled the Payor. [neither admitted or denied]
6. The Minister determined that the Appellant and
the Payor were not dealing with each other at arm's length in connection with
the employment. Indeed, the Minister was satisfied that it was reasonable to
conclude that the Appellant and the Payor would not 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:
(a) The Payor was incorporated on January 20, 2006; [neither
admitted nor denied]
(b) The Payor operated a restaurant/bar in Lac‑Mégantic
under the business name Resto-Pub Le Kaméléon from February 1 to
September 30, 2006. [neither admitted nor denied]
(c) The Payor commenced operations by renting the
dining room and all the equipment of Motel sur le lac in Frontenac for 12 months.
[admitted]
(d) The contract for the lease of the dining room
and bar included a purchase option clause and was signed by the Payor's three
shareholders and by the Appellant. [admitted]
(e) The Payor's restaurant had 80 seats and a liquor
licence. There were daily menus, and, during the weekend, fixed-price theme
menus. [admitted]
(f) The Payor hired as many as 15 people, including
the shareholders. [admitted]
(g) Together with his spouse Karine
Boulé-Orichefqui, the Appellant launched the project to operate a restaurant
because he had a lot of experience in the field. [neither admitted nor
denied]
(h) Even though he was the person who initiated
the project and had experience in the field, the Appellant never held any
shares in the Payor's business because he had a criminal record. [underlined
words denied]
(i) Karine Boulé-Orichefqui stated that the
Appellant attended all meetings of the Payor's board of directors (the three
shareholders) whereas the Appellant stated the contrary. [denied]
(j) The Appellant was apparently hired under the
terms of a written contract the existence of which is disputed by the Payor and
the signing parties. [admitted]
(k) The Appellant was hired to start up the business
and work there as executive chef, manager and head chef for approximately six
months. [admitted]
(l) As executive chef, the Appellant had the
following duties: prepare the business plans and start up the restaurant, develop
the menus, order the missing equipment and supplies, purchase the products,
hire the staff, prepare the work schedules and pay the suppliers. [admitted]
(m) As manager, the Appellant was responsible for
training the employees and following up on them by supervising their work and
controlling their hours of work. [admitted]
(n) The Appellant, like the Payor's other three
shareholders, was authorized to sign the Payor's cheques; he was initially
permitted to sign them alone, but, as of March 2006, two signatures,
including that of Michel Orichefqui, were required. [admitted]
(o) Unlike all the Payor's employees, the Appellant
had no work schedule to comply with and the Payor did not keep track of his
hours. [denied]
(p) The Appellant claims that he worked seven days a
week and 80-90 hours per week except toward the end of the period when he
worked slightly fewer hours. [admitted]
(q) According to the Appellant's version of the
facts, the Appellant made an agreement with the Payor under which he would
receive $2,500 weekly (gross) payable as follows: $700 in cash, $800 by cheque,
and the balance of $1000 to be withheld by the Payor to cover provincial and
federal income tax, QPP, and EI. [admitted]
(r) According to the Payor's version of the facts,
the Payor was to pay a net salary of $1,000 per week for the couple, that is to
say, for the services of the Appellant and of his spouse Karine
Boulé-Orichefqui. [denied]
(s) The Appellant claims that he received $700 in
cash per week, whereas the Payor claims that it did not pay any cash amounts to
the Appellant. [admitted]
(t) The paycheques issued by the Payor disclose
that no cheques were issued prior to February 9, 2006, and that the
first 15 paycheques were issued to Karine Boulé-Orichefqui. [admitted]
(u) Moreover, the last cheque issued to the
Appellant was in the amount of $600 and was dated August 4, 2006. [admitted]
(v) We were unable to confirm the Appellant's true
remuneration during the period in issue. [neither admitted nor denied]
(w) The Appellant apparently ceased working after the
Payor's sales decreased and after he separated from his spouse. [denied]
(x) Following the closing of the Payor's business,
the holders of the Payor's voting shares went personally bankrupt and Michel Orichefqui lost his investment in
the business (roughly $60,000). [admitted]
(y) As for the Appellant, on August 26, 2006, he
signed an acknowledgment of debt with Michel Orichefqui, in which he agreed to
repay, inter alia, the sum of $27,000, representing part of the loss
incurred by the Payor's restaurant. [denied]
. . .
(aa) The period in issue only began on
January 6, 2006, when the Appellant had supposedly prepared the business
plan, in all likelihood prior to opening the restaurant and the bar. [admitted]
[3]
The worker testified. Bianca
Dubois, the worker's common-law spouse, also testified in support of the worker's
position. In addition, Michel Orichefqui, and Francine Deschesnes, the
appeals officer responsible for reviewing the initial decision, testified in
support of the Minister's decision.
The worker's testimony
[4]
The worker's testimony
discloses, inter alia, as follows:
(i)
He and the Payor
entered into a written employment contract (Exhibit A‑3) on
January 5, 2006. I would immediately note that Michel Orichefqui
testified that there was no written contract between the two, and that the
signature on the contract adduced as Exhibit A‑3 was not his
signature.
(ii)
In 2005,which is
outside the relevant period, he devoted roughly 300 unpaid hours to finding
premises for a restaurant, preparing the business plan for the Payor,
developing menus, negotiating the lease, ordering materials, finding food
suppliers, negotiating the prices with those suppliers, and, lastly, hiring
qualified staff. In this regard, the worker explained that it was precisely
because the worker had not been paid for those 300 hours that the remuneration
agreed upon with the Payor was $2,500 per week.
(iii)
The worker signed the
lease adduced as Exhibit I-1 in his capacity as co-tenant of the premises in
which the restaurant was operated during the relevant period.
(iv)
The worker attended
half the meetings of the Payor's board of directors. I should note that the worker
told Ms. Deschesnes that he did not attend any such meetings.
(v)
The worker had a
schedule to comply with. He added that his hours of work were tabulated by
Michel or Karine Orichefqui. I should note that the worker told
Ms. Deschesnes that he [translation]
"filled out a time sheet by hand, like all the other employees". In addition, I
should note that Michel Orichefqui told Ms. Deschesnes that the worker had
no schedule to comply with and never filled out any time sheets.
(vi)
The worker never signed
the acknowledgment of debt which was adduced as Exhibit I‑3 and
under which he supposedly promised, inter alia, to reimburse the
sum of $27,000, representing part of the restaurant's operating loss incurred
by the Payor. In this regard, the worker explained that he instituted
litigation with a view to showing that his signature had been forged.
(vii)
He did not quit his job
because the Payor's sales had diminished and he had separated from his spouse,
but, rather, because the Payor's shareholders used the Payor's funds for
personal purposes.
The worker's remuneration
[5]
With respect to the
worker's remuneration, I would note that the employment contract adduced as
Exhibit A‑3 provided that the Payor agreed to pay the worker [translation] "$2,500 per week,
gross, and, by agreement with the employee, that his take-home pay be $1,500 so
that the source deduction refund is higher and Mr. Boisvert does not have
to pay anything at the end of the fiscal year . . ."
In this regard, the worker explained that the $2,500 weekly gross pay was
given to him as follows: $700 in cash, $800 by cheque payable to him or his
common-law spouse Karine B. Orichefqui, and the remaining $1,000 was
withheld by the Payor to cover his income and payroll taxes. The worker
explained that he occasionally instructed the Payor to write the cheques to his
common-law spouse Karine B. Orichefqui because she was able to cash them more
quickly at her bank. The worker added that his spouse always gave him the
proceeds from the cheques, which he then quickly deposited into his bank
account in order to cover outstanding cheques or pre‑authorized payments.
It should be noted that the worker could have adduced his bank statements to
show that he deposited $1,500 in cash for 29 weeks in 2006. He was in
a position to provide such evidence, but he did not. The inference that I draw
from this is that such evidence would have been unfavourable to him. The statements
made by Michel Orichefqui and his daughter Karine to Ms. Deschesnes (whose
credibility cannot be impeached) in respect of the worker's remuneration are
worth immediately quoting:
[translation]
47. Karine Boulé-Orichefqui's role was to wait tables
and tend bar, and Pierre-Luc Boulé-Orichefqui helped out on weekends as a maître
d'. Neither of them was responsible for management until Patrick Boisvert left.
48. Together, they all determined the salary to be
paid to Patrick Boisvert and Karine Boulé-Orichefqui.
49. The Payor determined a salary for the couple:
$1,000 net per week, or, in other words, $500 net per week for Karine
Boulé-Orichefqui and $500 net per week for Patrick Boisvert. Each person was
responsible for income tax at year-end. There was never any agreement to
pay Patrick Boisvert $2,500 per week.
Note: The worker says that two
signatures were always required.
50. The company paid the couple $1,000 for the
first three weeks, and then paid them $800 per week as cash flow permitted. In
many cases, only one cheque was issued for the couple. The Payor says that it
never made a weekly cash payment of $700.
Note: The worker says that he received
$700 in cash per week at all times.
57. Michel Orichefqui claims never to have
prepared a T4 for Patrick Boisvert or to have handed him one.
Note: The worker says otherwise.
68. Karine Boulé-Orichefqui stated, and I quote: [translation] "We issued ourselves
cheques for $800 net per week, and those cheques were for us both. He and I
decided what our salary would be. Sometimes the cheque was payable to me, and
sometimes it was payable to him. When the cheque had my name on it, I cashed it
and gave him $400."
I would note that, in his testimony concerning the worker's
remuneration, Michel Orichefqui essentially reiterated the statements that
he had made to Ms. Deschesnes. In addition, based on my analysis of the
cheques (Exhibit I‑2) issued by the Payor to the worker and his
spouse from February 9 to May 19, 2006,
(1)
the amount of the
cheques ranges from $150 to $1,600,
(2)
the amount on 18 of the
29 cheques is $800, and
(3)
the cheques issued from
February 9 to May 19, 2006, were payable to Karine
Boulé-Orichefqui.
[6]
In addition, I would
note that the first T4 slip tendered in evidence by the Appellant
(Exhibit A‑2) states that the worker received $43,500 in
remuneration from the Payor in 2006. As we have seen, Mr. Orichefqui told
Ms. Deschesnes that the Payor never produced any forms concerning the
remuneration that it paid the worker and Karine B. Orichefqui. In addition, Ms.
Deschesnes testified that the Canada Revenue Agency (CRA) received
the T4 in question on November 20, 2007. Lastly, I would point out
that the amended T4, tendered in evidence by the Appellant as Exhibit A‑4,
states that the Appellant received $72,500, not $43,500, in remuneration
from the Payor in 2006. Ms. Deschesnes testified that the CRA received
that amended T4 on May 7, 2008. She added that she was unable to
identify the person who sent these T4s to her. Lastly, my analysis of the
Payor's payroll journal discloses that the worker's name and that of his spouse
Karine are not in the journal.
The testimony of Bianca Dubois
[7]
The testimony of Bianca
Dubois, which, in my opinion, must be considered with a great deal of caution since
she is currently the worker's common-law spouse, would yield fairly little
information in any event, other than that she witnessed the signing of the
document constituting Exhibit A‑5 by Mr. Orichefqui, and the
payment Mr. Orichefqui of a cash amount to the worker.
The testimony of Ms. Deschesnes
[8]
According to Ms.
Deschesnes' testimony, the Emploi‑Québec Web site indicates that, in
2006, the hourly wage of a chef in the Eastern Townships ranged from $10 to
$15.99. Ms. Deschesnes concluded that the worker's hourly wage of
$31.25 was markedly unreasonable in view of the fact that the worker's business
was a start-up. In this regard, she noted that the Payor's gross revenues totalled
$185,483 in 2006.
Analysis and conclusion
[9]
It should be noted that
the Respondent determined that the employment was not insurable in view of
paragraph 5(2)(i) and subsection 5(3) of the Act, because he was
satisfied that it was not reasonable to conclude, having regard to all the
circumstances, 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.
[10]
The Federal Court of
Appeal has repeatedly defined the role conferred on Tax Court of Canada
judges by the Act. That role does not allow such judges to substitute their
discretion for that of the Minister, but it carries with it the obligation to
"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 . . . decide whether the conclusion with
which the Minister was "satisfied" still seems reasonable."
[11]
In other words, before
deciding that the conclusion with which the Minister was satisfied still seems
reasonable, I must, in light of the evidence before me, verify whether the
Minister's allegations are valid, having regard to the factors set out in
paragraph 5(3)(b) of the Act. Thus, it should be asked whether
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.
[12]
The Appellant had the
burden of proving that the Minister did not exercise his discretion in
accordance with the applicable principles, that is to say, the burden of
showing, for example, that he did not examine all the relevant facts, or that
he did not take account of facts that were relevant.
[13]
In light of the
evidence before me, after considering the factors set out in paragraph 5(3)(a)
of the Act (including, in particular, the remuneration paid and the duration
and importance of the work performed) and verifying the merits of the
allegations and conclusions with which the Minister was satisfied, I find those
allegations and conclusions to be reasonable. Consequently, it is my opinion
that the employment in issue did not constitute insurable employment.
[14]
Indeed, no person at
arm's length from the Payor would have agreed not to be remunerated for 300
hours of work carried out in the performance of his or her duties. Moreover, it
is clear that no Payor operating what was, as we have seen, a very small
start-up business, would have agreed to pay an unrelated employee such high
hourly remuneration. According to the worker's account, he received $72,500 in
remuneration in exchange for 2,465 hours of work (20 weeks at an average of
85 hours per week) during the relevant period. Consequently, by his own
admission, the worker's hourly wage would have been $29.41, which is markedly
higher than the highest hourly wage paid elsewhere to a chef in the Eastern
Townships in 2006. I should note that the worker did not prove that the
statistics on which the Minister relied were erroneous. I should also note that
the worker did not show that he was a well-known chef. Even if I had to assume
that his $72,500 in remuneration included the 300 hours worked outside the
relevant period, my finding would be the same, because an hourly remuneration
of $26.22 would still be unreasonable in the case at bar.
[15]
For these reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this 23rd day of February 2009.
"Paul Bédard"
Translation certified true
On this 6th day of April 2009
Monica Chamberlain, Reviser
Email this Content