Citation: 2008 TCC 484
Date: 20080925
Docket: 2007-3963(EI)
BETWEEN:
PEINTURES CYCLONES INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an appeal by Peintures
Cyclone Inc. concerning the work done by Isabelle Duval, Nicole Tremblay
and Pascal Bien ("the Workers") from January 1, 2006, to
February 28, 2007.
[2]
We reproduce below the
facts set out in the Reply to the Notice of Appeal, with notations as to
whether they are admitted or denied by the Appellant:
[TRANSLATION]
5. (a) The Appellant was incorporated on July 30, 1992. (admitted)
(b) The Appellant's place of business is in Valcourt and is
owned by the Appellant. (admitted)
(c) The Appellant operates a painting plant that applies liquid
coatings (metal and plastic) to industrial parts. (admitted)
(d) The Appellant operates year-round and generally, on no fixed
date, experiences two peak periods. (admitted)
(e) The Appellant employs between 20 and 25 employees, all
full-time. (admitted)
(f) The Appellant's business hours are from Monday to Thursday,
7:30 a.m. to 5:00 p.m., and the plant employees are on call on Fridays from
7:30 a.m. to 12:00 noon to finish contracts. (admitted)
(g) The Appellant's employees work between 36 and 40 hours per
week. (admitted)
(h) In 2006, the Appellant had sales of about $1,100,000. (admitted)
(i) The Workers involved performed services for the Appellant
under an oral agreement and a contract of service. (admitted)
ISABELLE DUVAL
(j) Isabelle Duval (the Worker) began working for the Appellant
as a student in the summer of 1995, and became full-time production manager in 1998.
(admitted)
(k) During the period in issue, the Worker performed services as
manager of production, operations and quality. (admitted)
(l) As production manager, she planned production, hired
personnel, contacted customers and handled the Appellant's customer relations. (admitted)
(m) As quality manager, she managed the ISO system in accordance
with ISO standards. (admitted)
(n) As operations manager, she did customer prospecting,
prepared bids, did market development work and wrote research and development
reports. (admitted)
(o) On occasion, during peak periods, the Worker did labour at
the plant. (admitted)
(p) The Worker performed services at the Appellant's plant, and
on occasion in the evenings and on weekends at her home, to finish her
administrative work. (denied)
(q) The Worker generally worked Monday to Friday, from 7:30 a.m.
to 5:00 p.m., an average of 50 hours per week, including evenings and weekends.
(denied)
(r) The Worker had to be present in the office during the
appellant's business hours. (denied)
(s) The Worker's hours were not recorded by the Appellant. (admitted)
(t) As was the case for all of the Appellant's employees, the Worker
was covered by a group insurance policy that covered wage insurance, drugs and
illness. (admitted)
(u) The Worker also got four weeks' paid vacation. (admitted)
(v) In addition, the Worker received a weekly bonus from the
Appellant for her work as quality manager. (admitted)
(w) During the period in issue, the Worker received fixed gross remuneration
of $731.50 per week and a gross bonus of $222.15 per week, for a total of
$953.65 gross per week. (admitted)
(x) As was the case for all the other employees, she was paid by
direct deposit. (admitted)
(y) In order for operations to run smoothly, the Worker had to
inform the Appellant if she was going to be absent. (denied)
(z)
To do her work, the Worker used the Appellant's
equipment and materials and occasionally its vehicle. (denied)
(aa)
In the course of her work for the Appellant, the
Worker did not have to incur any expenses. (denied)
(bb)
During the period in issue, the Worker was
required to perform services personally for the Appellant. (admitted)
(cc)
The Worker did not share in the chance of profit
and risk of loss of the Appellant's business. (denied)
(dd) The Worker was a member of the Appellant's management board,
and in that capacity she participated in weekly meetings; however, she held no
shares, position or office in the Appellant's business. (admitted)
PASCAL
BRIEN
(ee) Pascal Brien (the Worker) started working for the Appellant
in 1992, when it opened. (admitted)
(ff)
During the period in issue, the Worker held the
position of foreperson/supervisor. (admitted)
(gg)
The Worker's primary job was to supervise seven
or eight employees in the plastics department. (admitted)
(hh)
The Worker directed the employees based on the
work to be done, checked the work done against the ISO standard, calculated the
employees' times and attended weekly meetings. (admitted)
(ii)
The Worker also worked as a painter to replace
painters who were absent. (admitted)
(jj) The Worker performed services solely at the Appellant's
plant. (admitted)
(kk)
The Worker worked from Monday to Friday, between
7:30 a.m. and 5:00 p.m., and about three evenings a week from
5:00 p.m. to 7:00 p.m.. (denied)
(ll)
The Worker claimed that he did not have to keep
to any timetable, but had to be present during the Appellant's business hours. (admitted)
(mm) The Worker's hours of work were not recorded by the Appellant. (admitted)
(nn)As was the case for all the Appellant's
employees, the Worker was covered by a group insurance policy that covered wage
insurance, drugs and illness. (admitted)
(oo)
The Worker also received four weeks' paid
vacation.
(pp)
During the period in issue, the Worker received
fixed gross remuneration of $700 per week. (admitted)
(qq)
As was the case for all the other employees, he
was paid by direct deposit.
(rr)
To do his work, the Worker used the Appellant's
equipment and materials. (admitted)
(ss)
During the period in issue, the Worker was
required to perform services personally for the Appellant. (admitted)
(tt)
The Worker did not share in the chance of profit
and risk of loss of the Appellant's business. (denied)
(uu)
In the course of his work for the Appellant, the
Worker did not have to incur any expenses. (denied)
(vv) The Worker was a member of the Appellant's management board,
and in that capacity he participated in weekly meetings; however, he held no
shares, position or office in the Appellant's business. (admitted)
NICOLE
TREMBLAY
(ww) Nicole Tremblay (the Worker) started with the Appellant's
business on February 10, 2004. (admitted)
(xx)
The Worker held the position of administrative
assistant. (admitted)
(yy)
The Worker's duties consisted mainly in doing
the accounting, keeping the books using a computer program, and acting as
assistant supervisor on the plastics side. (admitted)
(zz)
The Worker also handled government remittances,
group insurance and the CSST, and placed orders with suppliers. (admitted)
(aaa) In addition, the Worker performed various tasks in the plant,
such as supervising employees, inspecting and packing. (admitted)
(bbb) The Worker did her work in the Appellant's office and
occasionally in the plant and at home. (denied)
(ccc) The Worker generally worked Monday to Friday, from 7:45 a.m. to 5:00
p.m.. (denied)
(ddd) Although she had spoken of working 38.5 hours a week, she said
that in fact she always worked between 50 and 55 hours a week. (admitted)
(eee) The Worker had to be present in the office during the
Appellant's business hours. (denied)
(fff) The Worker's hours were not recorded by the Appellant. (admitted)
(ggg) As was the case for all the Appellant's employees, the Worker
was covered by a group insurance policy that covered wage insurance, drugs and
illness. (admitted)
(hhh) The Worker also received four weeks' paid vacation. (admitted)
(iii) During the period in issue, the Worker received fixed gross
remuneration of $654 per week. (admitted)
(jjj) As was the case for all the other employees, she was paid
by direct deposit. (admitted)
(kkk) In order for operations to run smoothly, the Worker had to
inform the Appellant if she was going to be absent. (denied)
(lll) To do her work, the Worker used the Appellant's equipment
and materials and occasionally its vehicle. (admitted)
(mmm) In the course of her work for the Appellant, the Worker did
not have to incur any expenses. (denied)
(nnn)The Worker claimed that no one supervised her work, but she had
to report to the Appellant on her work. (denied)
(ooo) During the period in issue, the Worker was required to perform
services personally for the Appellant. (admitted)
(ppp) The Worker did not share in the chance of profit and risk of
loss of the Appellant's business. (denied)
(qqq) The Worker was a member of the Appellant's management board,
and in that capacity she participated in weekly meetings; however, she held no
shares, position or office in the Appellant's business. (admitted)
6. (a) André Brien
was the sole shareholder of the Appellant. (admitted)
(b) Nicole Tremblay is the spouse of André
Brien. (admitted)
(c) Pascal Brien is the son of André Brien.
(admitted)
(d) Isabelle Duval is
the spouse of Pascal Brien and daughter-in-law of André Brien. (admitted)
(e) Nicole Tremblay, Isabelle Brien and Pascal Brien are related to
a person who controls the Appellant. (admitted)
Isabelle Duval
7. (a) Because of her experience, her on-the-job training and
the work she did, Isabelle Duval did not need a high degree of
supervision, but the Appellant could have exercised that right at any time. (denied)
(b) In spite of her supposedly flexible schedule as production
manager, Ms. Duval had to work at the Appellant's premises, during the
Appellant's business hours and as determined by the Appellant's needs. (denied)
(c) As was the case for the Appellant's other workers, Ms. Duval
did not have any expenses and did not have to supply tools or equipment in the
course of her work. (denied)
(d) Ms. Duval received fixed weekly remuneration comparable to the
median annual salary paid to a plant manager in the Estrie region. (denied)
(e) During the period in issue, the times when Ms. Duval was employed
corresponded to the Appellant's actual needs, as would have been the case for
an unrelated person. (denied)
(f)
The Appellant's business operated year-round and
Ms. Duval's duties were directly related to the Appellant's activities,
demonstrating the importance of and need for that position within the business
in order for it to operate smoothly. (admitted)
Pascal Brien
(g) Because of his experience, his on-the-job training and the work he
did, Pascal Brien did not need a high degree of supervision, but the
Appellant could have exercised that right at any time, and André Brien, the
sole shareholder in the Appellant, stated that he had the power to supervise
and he had final decision-making authority. (denied)
(h) In spite of his supposedly flexible schedule as
foreperson/supervisor, Mr. Brien had to work at the Appellant's premises,
during the Appellant's business hours and as determined by the Appellant's needs.
(denied)
(i)
The Appellant employed another
foreperson/supervisor who was not related to the Appellant in the metals
department. That employee performed duties similar to Mr. Brien's, working
between 36 and 40 hours a week and being covered by the same benefit plan as
all of the plant employees. (denied)
(j)
As was the case for the Appellant's other
workers, Mr. Brien did not have any expenses and did not have to supply tools
or equipment in the course of his work. (denied)
(k) Mr. Brien received fixed weekly remuneration comparable to the
median annual salary paid to a supervisor in a metal products plant in the
Estrie region. (denied)
(l)
The foreperson/supervisor who was not related to
the Appellant received total remuneration of $34,785 in 2006, while working
fewer hours than Mr. Brien (who received $39,558). (admitted)
(m) During the period in issue, the times when Mr. Brien was
employed corresponded to the Appellant's actual needs, as would have been the
case for an unrelated person. (denied)
Nicole
Tremblay
(n) Because of her experience, her on-the-job training and the work she
did, Nicole Tremblay did not need a high degree of supervision, but the
Appellant could have exercised that right at any time, and André Brien, the
sole shareholder in the Appellant, stated that Ms. Tremblay kept him up to
date on the financial situation at each weekly meeting, and that she had to
inform him about major purchases. (denied)
(o) In spite of her flexible schedule as administrative assistant and
assistant supervisor, Ms. Tremblay had to work at the Appellant's
premises, during the Appellant's business hours and as determined by the
Appellant's needs. (denied)
(p) As was the case for the Appellant's other workers, Ms. Tremblay did
not have any expenses and did not have to supply tools or equipment in the
course of her work. (denied)
(q) Ms. Duval received fixed weekly remuneration comparable to the
median annual salary paid to an administrative support worker in the Estrie
region. (denied)
(r)
During the period in issue, the times when Ms.
Tremblay was employed corresponded to the Appellant's actual needs, as would
have been the case for an unrelated person. (denied)
(s) The Appellant's business operated year-round and Ms. Tremblay's
duties were directly related to the Appellant's activities, demonstrating the
importance of and need for that position within the business in order for it to
operate smoothly. (admitted)
[3]
The persons concerned
in this appeal testified in the following order: André Brien, sole owner of all
of the shares in the Appellant; Isabelle Duval and Nicole Tremblay; and Pascal
Brien. They are the three Workers whose work is the subject of the decision
under appeal.
[4]
In finding that these
were contracts of insurable employment, the Respondent had regard, inter
alia, to the facts set out in Exhibit A‑1: the CPT‑100
form, numbered 1 to 98; those facts were collected by the person responsible
for the appeal during the investigation and are the basis on which the decision
under appeal was made.
[5]
The facts admitted form
a backdrop that gives a relatively good description of the kind of business and
the manner in which the work in question was done. The issue relates to the
interpretation of certain facts, but also to the weight or relevance of the
explanations given to the analyst at the time of the review, which were
reiterated at the hearing. The Respondent argued that the testimony of the Workers
and the sole shareholder essentially just restated the facts set out by the
appeals officer in Exhibit A-1 and that there were no grounds to justify
reviewing the decision.
[6]
When the Appellant had
completed its evidence, I told the parties that I found that the witnesses had
testified credibly; the Respondent immediately, and rightly, argued that the
decision in a case of this nature should not be based solely on credibility.
[7]
However, once I was satisfied
that the witnesses' explanations were credible, I then found on that basis that
the way that certain facts were interpreted in the analysis was dubious and that
the person responsible for the case treated them as being of only secondary
importance.
[8]
Collecting all the
facts is one thing, but not having regard to nuances, of which there were many
in this case, can bias the conclusion or make it unreasonable or inappropriate.
[9]
The exercise of
discretion calls for the ability and desire to have regard to numerous details
that have a significant effect on the conclusion to be drawn from them.
[10]
If this were not the
case, we would need only install some good software and press a button to get
the conclusion; there would be no more need for discretion, it would be an
operation. The Larousse dictionary defines the word discrétion as
follows: "[TRANSLATION] 1. Attitude taken by s.o. who does not wish
to intrude. 2. Trait of not attracting attention. … 3. Ability to
remain silent." The Petit Robert says: [TRANSLATION]
"discernment, ability to discern."
[11]
In this case, numerous
details were disregarded in the analysis, with the consequence that the
conclusion reached was patently unreasonable. Some of the evidence that has
been established on a marked balance of probabilities discredits the analysis
on which the determination is based.
[12]
I think it is important
that some of that evidence be listed here:
·
Completely unreasonable
salary, in view of the numerous secondary duties added to the primary duties,
so that the appeals officer was able to make comparisons using a computer
program;
·
Salary reductions that
affected only the Workers involved in this appeal;
·
Complete absence of
compensation for the Workers' enthusiasm, dedication and eagerness, to which
third parties would never have agreed;
·
Isabelle Duval rejected
an offer for a salary double her own pay, in exchange for a lighter workload,
to which a third party dealing at arm's length would obviously not have agreed;
·
Obvious influence
exerted by Isabelle Duval over the sole shareholder regarding the business.
Nicole Tremblay also enjoyed the esteem and respect of the sole shareholder,
which enabled her to exert influence that a third party dealing at arm's length
could not have done.
·
Remuneration was
determined on the basis of what were essentially family considerations.
·
Isabelle Duval received
a performance bonus that was revised because of her tax burden and that she
shared with her spouse.
·
Nicole Tremblay
stated (and I reiterate that the Respondent admitted that credibility was not
in issue but added that there were issues other than credibility):
[TRANSLATION] "Certainly I enjoyed special status because I was the spouse
of André Brien, the owner of all the shares in the business."
·
Nicole Tremblay said
that her status as spouse of the principal shareholder gave her benefits, but
also involved drawbacks; she referred to the fact that her work hours were a
reflection of her spouse's: if he left work, she followed him, and so on.
·
On numerous occasions
it was alleged that the persons concerned in the appeal were all concerned with
the success of the business, to the detriment of their quality of life.
·
Isabelle Duval turned
down an offer that would have doubled her salary (again, credibility is not in
issue). The reason for rejecting it was that the business was her passion, she
wanted to see it develop. I would note that the person who rejected the offer
was not a shareholder and had no guarantee that she would be able to become
one.
[13]
Conduct of this nature
can be explained if the persons in question are shareholders or if they are
sure to become shareholders eventually, and in this instance that was not the
case.
[14]
In this case, the
business was operated within a family context where trust prevailed and there
was no room for rigidity.
[15]
The work was primarily
supervised via the family relationships, to the point that some of the normal
features of the business world were completely absent.
[16]
The facts and evidence
that could support the conclusion arrived at were stated or alleged as if they
were reliable and indisputable information.
[17]
However, when the
appeals officer addressed facts that could cast doubt on the conclusion that
was plainly preferred, she used expressions like [TRANLATION] "he or she
said", "according to Mr. or Ms. so-and-so", "she or he
stated", thus suggesting that what was said might have been a half-truth
or a biased or dubious interpretation. Paragraph 13 of the transcript in
CPT‑110 is very informative in this regard. It reads as follows:
13. [TRANSLATION] Isabelle Duval started with
the business as a student in the summer of 1995. In 1998 she started full-time
as production manager. After that, as she gained experience, her duties evolved
and she became manager of production, operations and quality. According to
Isabelle Duval, her position was the linchpin of the business.
[Emphasis
added.]
[18]
The evidence shows,
conclusively and unequivocally, that Isabelle Duval was the linchpin of the
business. This was not in any way a subjective, biased or dubious
interpretation.
[19]
The appeals officer
reiterated her scepticism at paragraph 14 of the Notice, where she stated:
14. [TRANSLATION] For the period in issue, her
work was as follows: as production manager, she planned production, hired
personnel, contacted customers and handled customer relations with the company.
As quality manager, she managed the ISO system in accordance with ISO
standards; and as operations manager, she did prospecting for customers and
handled bids, market development and research and development. The Worker also
did manual labour in the plant during peak periods. According to Isabelle Duval,
her work consisted in keeping the business going. She still holds that position
and is doing the same work at present.
[Emphasis added.]
[20]
This manner of
presenting the facts is certainly revealing in terms of the mindset that
existed at the time the report of the various telephone conversations was
written.
[21]
In addition to this
entirely inappropriate approach, I also noted a number of misinterpretations
and false statements. In particular, I noted the following assertion:
9. [TRANSLATION] André Bien, the president
and sole shareholder of the company, manages the business in conjunction with
assistants. Accordingly, the major operational decisions are made in consultation,
at the weekly meeting, but final approval is given by André Brien. Management
of the business's day‑to‑day operations is handled by the manager
of production, operations and quality.
[Emphasis added.]
[22]
The evidence is that no
formalities were followed at the management meetings, and the sole shareholder
did not operate by consultation; rather, he relied on his spouse and son, in
whom he had complete confidence, to the point that it could be said that Isabelle Duval
was the directing mind of the business.
[23]
At paragraph 15 of
the Notice, she wrote: [TRANSLATION] "On occasion she does work at home in
the evening and on weekends, to complete her administrative work, such as
planning the work, completing bids and preparing reports." The evidence in
fact established, however, that these were not occasional things, they were
very common.
[24]
At paragraph 16 of
the Notice, it says: [TRANSLATION] "She works an average of 50 hours …
." That assertion is not supported by the evidence, however.
[25]
At paragraph 17 of
the Notice, she again used the expression [TRANSLATION] "on occasion"
when, again, the evidence established a fact that occurred very frequently.
[26]
At paragraph 19 of
the Notice, it says that all expenses incurred are refunded. That assertion is
contradicted by the evidence.
[27]
At paragraph 20 of
the Notice, it says: [TRANSLATION] "… She has never performed services
without being paid." That assertion is a complete falsehood.
[28]
The content of
paragraphs 23, 24, 28, 30 and 31 is not consistent with the evidence
submitted to the Court.
[29]
That is sufficient to
conclude that the analysis done before the determination was made was tainted
by a biased and patently unreasonable approach, in the circumstances, and this
vitiates the determination.
[30]
This case illustrates
remarkably well how the fact that parties are not dealing with each other at
arm's length can have a determining effect on how work is done. Parliament
could have been thinking of this case when it enacted paragraph 5(2)(i)
of the Act.
[31]
Third parties do not
generally agree to work without remuneration, to work during their vacation,
not to be reimbursed for expenses incurred, to be available seven days a week
or to work after normal hours regularly without appropriate remuneration,
without some formal guarantee that one day their efforts will be rewarded.
[32]
This case is a good
illustration of how a family business can operate under special rules that have
nothing in common with the business world, where people doing business with
each other are ordinarily dealing with each other at arm's length.
[33]
This case is also a
very good illustration of the extent to which analyses are often shaped with
the obvious goal of favouring the collection of employment insurance premiums.
[34]
In addition, it is
surprising to see how elastic the criteria for the analysis are, when they are
quite precise when the issue is paying benefits. In fact, there are times when
the decision in a case with similar facts is the complete reverse.
[35]
In this case, it has
been proved on a balance of probabilities that the conclusion arrived at was
patently unreasonable and plainly arose out of the obvious desire to justify a
determination that had already been made.
[36]
Accordingly, the
determination must be set aside and the work done by the persons concerned –
Isabelle Duval, Nicole Tremblay and Pascal Bien – must be found to be excluded
from insurable employment under the provisions set out in
paragraph (5)(2)(i) of the Act.
[37]
The appeal is allowed.
Signed at Ottawa, Canada, this 25th day of September
2008.
"Alain Tardif"
Translation
certified true
on this 8th day of
January 2009.
Brian McCordick,
Translator
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