Citation: 2006TCC488
Date: 20061005
Docket: 2005-2518(EI)
BETWEEN:
LISE ALLARD O/A FRIGOLUK ENR.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
LUC BOUCHARD,
Intervener.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from a decision concerning the insurability of the work that Luc Bouchard did
for Lise Allard, o/a Frigoluk Enr., during the period from May 20 to
November 19, 2004.
[2] In making the
decision under appeal, the Minister of National Revenue
("the Minister") assumed the following facts:
[TRANSLATION]
(a) From 1995 to
2001, the worker independently operated various businesses specializing in air
conditioning and refrigeration.
(b) One of those
businesses operated under the name Frigoluk from March 17, 1995 to June 8, 2000.
(c) On May 18, 2000, his business incorporated under the name Frigoluk
Inc.
(d) The worker held
60% of the voting shares of the corporation and the Appellant, his spouse, held
40% of the shares.
(e) Frigoluk Inc.
was dissolved on March 2, 2004.
(f) On December 17, 2003, the Appellant registered the business name
Frigoluk Enr.
(g) The Appellant
was now using the business name Frigoluk Enr. and, with the administrative and
financial support of the worker, she operated a business specializing in the
installation and repair of air conditioning and refrigeration systems for heavy
machinery and forestry machinery.
(h) The Appellant's
business was seasonal and operated from the spring to the fall.
(i) In 2004, under
the terms of an oral agreement, the Appellant hired the worker on a full-time
basis (27 weeks) and hired Daniel Simard on an occasional basis.
(j) The worker
provided services as an air conditioning system installation and repair
technician for heavy machinery and forestry machinery.
(k) He had to cover
a vast territory, which included northern Lac St-Jean as well as Dolbeau, Chicoutimi, Girardville and Chibougamau.
(l) The worker
generally worked in the woods Mondays to Thursdays from 7 a.m. to 5 p.m., and on the payor's premises, or certain
customers' places of business, on Fridays.
(m) He worked 40
hours per week.
(n) He filled out
his own work sheets and submitted them to the Appellant.
(o) He received no
instructions from the Appellant, and he supervised his own work because he was
the one who had the knowledge needed to perform it.
(p) The worker
received fixed pay in the amount of $800 per week.
(q) The Appellant
had no idea of the value of her business. She had invested $15,000 to start it
up.
(r) This $15,000
investment came from a bank account held jointly by the Appellant and the
worker and from credit cards belonging to each of them.
(s) The worker also
lent the Appellant $6,000 without drafting documents in connection with the
loan.
(t) The worker
used a truck leased by the Appellant (at a cost of $968.32 per month) in the
performance of his work, and he was co-guarantor of the lease with the
Appellant.
(u) Along with the
Appellant, the worker personally guaranteed all the Appellant's loans and
incurred financial risks in the operation of the business.
(v) The worker was
the guiding spirit of the Appellant's business, and, given his mastery of the
business, the sort of dependent relationship necessary for the creation of a
true relationship of subordination between the parties could not have existed.
[3] The Appellant
admitted to the vast majority of the assumed facts, including the facts set out
in subparagraphs (a) to (f), (h) to (n), (p), (r), (t) and (u).
The Appellant denied subparagraphs (o), (s) and (v), claimed to have
no knowledge of subparagraph (g), and clarified subparagraph (q).
[4] Ms. Allard
explained that she is part of a family of entrepreneurs who know about
refrigeration. She first got involved as a businessperson in the field when her
spouse operated a corporation, as discussed in subparagraph (d), which it would
be helpful to reproduce:
[TRANSLATION]
(d) The worker held
60% of the voting shares of the corporation, and the Appellant, his spouse,
held 40% of the shares.
[5] The corporation
apparently fell on hard times, notably because it lost a large sum of money and
because the worker was not comfortable in the role of entrepreneur. The fact
that the couple is now married obviously has no bearing on this matter.
[6] During the period
in issue, the worker was Ms. Allard's common-law spouse.
[7] The Appellant, Ms.
Allard, said that her spouse did not have the temperament necessary to operate
a business; he was more comfortable as a worker than he was as a manager.
[8] She explained that
he did not have the skills required to manage a business, and that she noticed
that he was more comfortable as an employee.
[9] After the
corporation ceased its operations, the Appellant's spouse worked for the
Appellant's brother for two seasons, once again as an employee specializing in
refrigeration.
[10] The Appellant said
that, following a hiatus, she wanted to take up the challenge of
entrepreneurship by creating her own business in the field that her relatives —
that is to say, her brother and her father — were familiar with. Consequently,
she registered her business name and started up a refrigeration business.
[11] Since the bankers
knew little about her, she had to ask her spouse to help her borrow and invest
money and lease the truck in order to ensure that the business would run
smoothly.
[12] She described the
circumstances that led her to create the business, as well as her management
style.
[13] She also described
the nature of the business: most of its contracts involved working in the
forest, often very far away.
[14] Her spouse generally
did the work alone. He completed a work order setting out the duration and
nature of the work and the parts needed to carry it out. This was
submitted to his spouse, who looked after the invoicing.
[15] The Minister, for
his part, did not call the person or persons responsible for the Appellant's
file as witnesses. Essentially, he argued that the matter had been evaluated
carefully and unassailably by gathering and then analysing all the relevant
facts.
[16] His main argument
was that the contract in issue was not a contract of employment because the
worker did not perform the work as part of a relationship of subordination.
[17] In the Respondent's
submission, the main reason that there was no relationship of subordination was
that the Appellant did not generally go to the work sites, and had very little
technical knowledge about the way in which the work should be done.
[18] However, the
Minister identified certain facts that are much more relevant in determining
whether his findings were meritorious. These facts include the husband's
financial involvement in the activities of the business as a lender and
guarantor, and the fact that, at the beginning of his period of unemployment,
he agreed to wait before getting paid, which is something that a third party
would clearly never have agreed to, according to the Respondent.
[19] These were very
relevant findings of fact. Were they sufficient to justify the Minister's
conclusions?
[20] If the decision
depended solely on these considerations, then I would clearly have to dismiss
the appeal. However, the evidence also disclosed that the Appellant's spouse
essentially did the same work, at roughly the same rate of pay, for his brother‑in‑law
during the two previous seasons.
[21] The Respondent
submits that the Records of Employment requested by the Court are not relevant
because they pertain to a period other than the one in issue. However, it
appears that the Respondent's analysis fails to consider a very important
factor: whether the contract was similar to one that would have been made in an
entirely different context.
[22] In addition, I
believe that the analysis of this matter was skewed by the Respondent's
position that no relationship of subordination could have existed. Indeed, it
is completely inappropriate to conclude that there is no relationship of
subordination on the basis that the payor does not go to the work sites, or
that the work is specialized and that the payor is somewhat or wholly
unfamiliar with it.
[23] Such elements are
clearly present in several cases where the existence of a relationship of
subordination is not in doubt.
[24] It is quite possible
for a payor to know practically nothing about the way in which to perform the
work for which he or she is paying, and this is not a sufficient reason to conclude
that no relationship of subordination exists.
[25] Such a theory would
lead to numerous outlandish situations. One need only imagine a small or
medium-sized employer in a very specialized field that requires employees from
dozens of different specialties. If the employer did not have all the knowledge
associated with each of these specialties, would this prevent the work done by
all those salaried experts from being insurable? The mere mention of this
hypothesis is enough to establish that the argument cannot succeed.
[26] In the case at bar,
the Appellant could well claim that she had the power to control her spouse's
activities thanks to the detailed reports that he prepared at the work sites.
[27] The financial
contributions and support are a more serious, and, most importantly, a more
relevant aspect of this case, as is the work that was completed but remained
unpaid for days.
[28] Both of these facts
are attributable to the same cause: without her spouse's financial involvement,
the Appellant, being unknown to the banking community, would not have been able
to launch her business as she did. The delay in remuneration coincides with the
start-up period.
[29] However, I cannot
disregard the fact that this work was seasonal by nature, and that its
beginning and end dates depended on the weather.
[30] The Appellant's
spouse had the knowledge, expertise and experience needed to perform the work.
[31] His remuneration was
comparable to what he was paid during the two previous seasons when he worked
for his brother-in-law.
[32] The case at bar is
not one in which all the factors point to a single conclusion.
Certain facts deserved greater attention during the analysis that led to
the determination under appeal.
[33] In my view, these facts
include, inter alia, the fact that an outsider worked much longer than
the Appellant's spouse even though the Appellant's spouse was the person who
provided the skill that gave the business its credentials. This raises the
question whether the length of the period of employment was based on the number
of hours needed to qualify for employment insurance benefits.
[34] Were the facts and
explanations consistent with the financial statements? Did the Appellant's
spouse perform work outside the periods set out in the Records of Employment?
The answers to all of these questions could have led to a very different
determination from mine, so I am astonished that the person or persons
responsible for the investigation on which the decision was based did not testify.
[35] Since I must dispose
of the appeal on a balance of probabilities, I find that the evidence supports
the Appellant's position — not categorically, but, rather, on a balance of
probabilities.
[36] Consequently, I
allow the appeal and find that the work that Luc Bouchard did for Lise Allard,
o/a Frigoluk Enr., during the period from May 20 to
November 19, 2004, was under a genuine contract of service within the
meaning of paragraph 5(1)(a) and came within the exception stated in
paragraph 5(3)(b) because the employer and the employee would have
entered into a substantially similar contract if they had been dealing with
each other at arm's length.
Signed at Ottawa, Canada, this 5th day of October 2006.
"Alain Tardif"
Translation certified true
on this 19th day of July 2007.
Brian McCordick, Translator
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