Citation: 2008TCC122
Date: 20080304
Docket: 2007-3293(EI)
BETWEEN:
ROBIN LESSARD,
Appellant,
and
MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from a determination relating to the insurability of the work done by the
Appellant during the period from May 29 to November 4, 2006, for the
company 9163‑5102 Québec Inc.
[2] In making his
determination, the Respondent relied on the following assumptions of fact:
[TRANSLATION]
5. ...
(a) Lili Maltais was the sole shareholder
of the payor; (admitted)
(b) the Appellant is the spouse of Lili
Maltais; (admitted)
(c) the Appellant is related to a person
who controls the payor. (admitted)
6. ...
(a) the
payor, which was incorporated on December 7, 2005,
operates a restaurant under the business name Restaurant Desbiens-Venue; (admitted)
(b) the restaurant is a
snack bar with 35 seats and has a glassed-in area that seats 20 more in summer; (admitted)
(c) the restaurant was
generally open from 8:00 a.m. to 10:00 p.m., seven days
a week; (admitted)
(d) before the payor was
incorporated, the Appellant operated the same restaurant under the business
name Restaurant Desbiens-Venue; (admitted)
(e) the Appellant
operated the restaurant for about 10 years as sole proprietor; (admitted)
(f) the payor employed
only the Appellant and Lili Maltais, but it also employed an assistant cook
from July 23 to September 21, 2006; (admitted)
(g) Ms. Maltais claims
that she operated the payor only from the end of May to the end of October,
while previously the Appellant operated the restaurant year‑round; (admitted)
(h) the building housing
the payor's restaurant is owned by the Appellant, who allegedly rented it to
the payor for $600 a month; (admitted)
(i) the Appellant's main
job consisted in serving customers at the tables; he occasionally helped in the
kitchen and helped clean the restaurant; (admitted)
(j) although the
Appellant told the rulings officer that his hours varied and that they were not
recorded, Ms. Maltais said that the Appellant worked 60 hours a week and that
his hours were recorded on a time sheet; (admitted)
(k) the Appellant
received fixed remuneration of $750 per week: $540 in regular wages and $210 in
tips; (admitted)
(l) the Appellant was
paid by cheque every week; (admitted)
(m) before
the payor was incorporated, the roles of Ms. Maltais and the Appellant were
reversed, and Ms. Maltais received earnings of only $300 per week for 45
hours of work, for doing the same job as the Appellant; (admitted)
(n) while the assistant
cook was employed, she worked 50 hours a week and earned $7.75 an hour; (admitted)
...
(p) although the payor
claimed not to have started operations until May 29, 2006, the income reported by the payor for
GST shows that the restaurant was operated, without interruption, from the time
the payor was incorporated, in December 2005; (admitted)
(q) the Appellant said
that his hours of work varied, depending on when it was busy, while his time
sheets show that he always worked 60 hours a week, throughout the period
in issue; (admitted)
(r) the Appellant said he
received $600 a month from the payor, in cash, as rent for the building,
while Ms. Maltais said that the payor did not pay the Appellant rent
because the business was not profitable enough; (admitted)
(s) in spite of that
contradiction, the payor sent the Respondent rent receipts showing that since
January 2006 the payor had paid the Appellant $600 a month in cash; (admitted)
(t) in addition, as at
June 30, 2006, the payor identified the rent paid as $1,000 a month,
recorded by the payor as "owed to shareholder", when Ms. Maltais
is officially the payor's sole shareholder; (denied)
(u) Ms. Maltais claimed
she had invested $15,000 cash in the business when it was incorporated, while the
payor's external accountant said that it was the Appellant who invested almost
all of that money in the company. (admitted)
(v) the accountant said
that the payor paid Ms. Maltais a $5,000 dividend in 2006, although
Ms. Maltais did not report any dividend in 2006 and the Appellant reported
a taxable dividend of $6,290 ($5,000 times 1.25), although allegedly he was not
a shareholder in the payor; (denied)
(w) the Appellant is the only worker who received
tips and the payor allegedly always paid him the same amount in tips every
week, regardless of the volume of sales, which were much higher during the two
summer months; (admitted)
(x) all of the facts and
documents obtained tend to show that the Appellant has always been very
involved in the operation of the payor’s business and his conditions of
employment could not be the same as those of a person unrelated to the payor. (denied)
[3] After being sworn,
the Appellant admitted to almost all of the assumptions of fact:
paragraphs 5(a) through (c) and 6(a) through (n), (p) through (s), (u) and
(w). The Appellant denied paragraphs (t), (v) and (x).
[4] The Appellant first
described the history of the small business. He said that had it not been for
his spouse, he would have stopped operating the restaurant. However, his spouse
proposed to continue operating the business, but on certain conditions, to
which he agreed.
[5] He said that things
were extremely difficult, financially, outside the summer months, except when
new businesses opened or major construction sites were in operation.
[6] He said that his
spouse and he employed as few people as possible, other than a cook during the
period in question, preferring to work up to 90 hours a week to make up
for the dead season.
[7] The Appellant
stated very candidly in his testimony that the employment insurance benefits
were absolutely essential if the business was to continue operating, and this
is probably an accurate reflection of the reality.
[8] The Appellant's
spouse, Lili Maltais, also testified. She confirmed her spouse's testimony, and
added that they had to put all their efforts into the business during the
summer, since there were almost no customers in the spring, fall and winter
months.
[9] She also said that
over a dozen restaurants in the area had closed because they had hired too many
people; in Ms. Maltais' opinion, a restaurant like theirs cannot afford the
cost of employing people at the usual pay rates.
[10] Lili Maltais and the
Appellant testified frankly; the evidence presented to the Court is consistent
with the facts collected in the investigation. The only difference between the
Appellant's position and the Respondent's is their interpretation of those
facts.
[11] The Court certainly
feels sympathy for the Appellant, and the future of the business certainly may
depend on the decision the Court must make.
[12] Unfortunately, I
cannot allow myself to be influenced or give free rein to my sympathy.
Essentially, I must rely on the parameters laid down by Parliament.
[13] Paragraph 5(2)(i)
of the Act provides that any employment where the parties have entered into a
contract of employment and are not dealing with each other at arm's length is
excluded from insurable employment.
[14] However, Parliament
has provided an exception: the parties are deemed to deal with each other at
arm's length if the analysis shows that the work was done on terms and
conditions, for remuneration and for a duration that is comparable to what they
would have been if the parties had been dealing with each other at arm's
length. The provision in which the parameters are set out reads as follows:
(3) For the
purposes of paragraph (2)(i),
(a) the
question of whether persons are not dealing with each other at arm’s length
shall be determined in accordance with the Income Tax Act; and
(b) if
the employer is, within the meaning of that Act, related to the employee, they
are deemed to deal with each other at arm’s length if the Minister of National
Revenue is satisfied that, having regard to all the circumstances of the
employment, including the remuneration paid, the terms and conditions, the
duration and the nature and importance of the work performed, it is reasonable to
conclude that they would have entered into a substantially similar contract of
employment if they had been dealing with each other at arm’s length.
[15] In this case, I
could have found that the determination was correct immediately after
completing the exercise with the Appellant regarding his admission to the
Respondent's factual assumptions.
[16] Indeed, the
Appellant admitted to many of the assumptions; he provided certain details and
nuances, but clearly admitted that there was very little probability that he
could have found a third party who would have agreed to do the same work on the
same conditions and for the same remuneration.
[17] The Appellant also
admitted that the restaurant did not close down completely outside the summer months,
and that he sometimes helped his spouse, particularly when there were
reservations.
[18] It is entirely to be
expected that people will help out in a small family business. Family members
are more flexible, more generous and more prepared to lend a hand than employees
of a business who have no family connection with the owner or are dealing with
the owner at arm's length.
[19] However, that
willingness to help out, generosity and flexibility must not lead the Court to
find that it is obvious that a third party would never have agreed to the same
conditions. Some inconsequential services may be provided on a voluntary basis,
but when the voluntary assistance is significant, the Court is entitled to find
that a third party would not have agreed to the situation, and in particular to
the many hours of unpaid work, the many hours of overtime worked, and so on.
[20] In this case, the
Appellant and his spouse put all of their efforts into their small business so
that they could earn a living from their restaurant.
[21] In conclusion, there
is nothing to criticize in the quality or the analysis of the facts collected
in the investigation. Those facts are in all respects consistent with the
essential elements of the evidence submitted by the Appellant and his spouse, Lili
Maltais. There is therefore no need for the Court to make any findings of fact.
[22] In the
circumstances, the appeal must be dismissed.
Signed at Ottawa, Canada, this 4th day of March 2008.
"Alain Tardif"
Translation certified
true
on this 16th day
of April 2008.
Brian McCordick,
Translator
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