Citation: 2005TCC284
Date: 20050524
Docket: 2004-3288(EI)
BETWEEN:
JEAN-LUC CARON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
[1] The appeal involves
determining whether the Appellant, Jean-Luc Caron, ("Jean-Luc") was
employed in insurable employment, under subsections 5(1) and 5(3) and paragraph
5(2)(i) of the Employment Insurance Act (the "Act"),
for the periods from May 15, 2000, to October 27, 2000, and from May 15, 2001,
to October 12, 2001, when working for 9049-3214 Québec Inc. (the
"Payor"). The Appellant claims he was employed in insurable
employment during these periods. Canada Customs and Revenue Agency
("CCRA") determined that his employment was not insurable because
Jean-Luc Caron was not dealing at arms length with the Payor: paragraph 5(2)(i)
of the Act.
[2] There is no dispute
that during the periods in issue Martin Caron ("Martin"), the brother
of Jean‑Luc, was the sole shareholder of the Payor. Therefore, for
purposes of this appeal, the Appellant is related to the person who controls
the Payor and the Payor and the Appellant do not deal with each other at arm's
length.
[3] The Payor operated
a business providing landscaping and snow clearance services in the winter
under the corporate name "Paysagiste Nord Est."
[4] The Appellant was
the sole shareholder of the Payor when the Payor was incorporated on April 22,
1997. Unfortunately, the Appellant declared bankruptcy on February 16, 1999.
Nevertheless, his brother Martin had purchased the Payor's assets from the
trustee including a tractor and two old pickups. Martin also became the sole
shareholder of the Payor.
[5] Jean-Luc agreed
that he worked for the Payor doing landscaping. He was remunerated for the
work. He was one of three employees and he supervised other employees. He
explained that his brother was employed as a teacher and required someone whom
he could trust to work for the Payor. He, himself, could not own the Payor. He
referred to a contract with the Ville de Mirabel which stated that in
the event the contractor committed an act of bankruptcy, made a proposal in
bankruptcy or became insolvent, the contract would be cancelled. He also
complained that he received employment insurance benefits in an earlier year
and queried why the government changed its mind for the periods in issue.
[6] The Appellant
declared that the Minister of National Revenue erred; he did not use a F-350
truck owned by the Payor to clear snow; he said he used the truck only during
the summer when he worked for the Payor, never during the winter. He also
denied that he cleared snow for the Payor. He was not paid during the winter.
[7] The Appellant
acknowledged that he maintained the Payor's books of account and made bank
deposits on behalf of the Payor. However, he explained, this took up only one
or two hours a week. He also stated that he frequently helped out his brother
for no remuneration, "a decent thing to do" for one's brother.
[8] Finally, Jean‑Luc
testified that when he worked during the summer, he worked 40 hours per week
and had no advantages other employees of the Payor did not have.
[9] Respondent's
counsel questioned the Appellant concerning a declaration he made to an
employee of the Department of Human Resources Development Canada on September
11, 2003. He declared, among other things, that
[translation]
My brother did not work for the company.
He was only a backer. In fact, I was the one who had managed this business from
its opening . . . I am the one who kept the books, made the bank deposits. My
brother wrote the cheques because I was not entitled to sign until about 2
years after my bankruptcy . . . .
[10] At trial, the
Appellant said he was intimidated into signing the declaration and eventually
refused to sign any other documents. The Respondent also produced copies of
snow clearing contracts, some of which were renewals, for the winter 2000-2001
which were signed by Jean‑Luc on behalf of the Payor.
[11] Martin testified on
behalf of his brother. He is a school teacher. In 1999, he stated, he was not a
permanent teacher and thought he could operate a small business in his spare
time. He therefore acquired the business from the trustee in bankruptcy. He
said that during the winter he cleared snow himself for about four to five
hours, when necessary, and used only one truck.
[12] Martin was also
asked by HRDC officials to make a declaration. Guy Dion of HRDC
transcribed Martin's purported declaration but Martin refused to sign; he, too,
said he was intimidated, he felt like a suspect, he recalled.
[13] Mr. Dion, who also
testified, is an investigator with HRDC. He said he met with Jean‑Luc on
two occasions and with Martin. He insisted that there was no intimidation; people
are free to leave the office at HRDC.
[14] Sylvain Archimbault
of HRDC was present with Mr. Dion at the time Martin purported to make his
declaration. He said there was a good exchange between the two parties and that
although Martin did not sign the declaration he did say that he agreed with its
contents.
[15] According to Mr.
Dion's draft of Martin's declaration, Martin worked full‑time, 40 hours
per week, as a teacher. He stated he had no employees during the winter, that
Jean‑Luc kept the Payor's F‑350 truck at his home and that
Jean‑Luc had possession of the company's cell phone. At trial, Martin
said there was a relationship between the company's customers and his brother
which was maintained after the latter's bankruptcy.
[16] Mr. Dion prepared a
spreadsheet showing deposits of cheques by Jean‑Luc and cheques paid by
customers for snow clearance and landscaping from January 1999 to April
2002. These cheques indicate that the Payor was active throughout the year and
that Jean‑Luc was working for the Payor during the winter as well as the
summer.
[17] Mr. Dion also
produced copies of service station receipts showing that the Payor was
operating with at least two trucks during February 2001. For example, a truck
was filled with gasoline at 20:41 hours on February 19 and then again at 21:33
hours. This does not agree with Martin's evidence that only one truck was used
by the Payor to clear snow. CCRA assumed Jean‑Luc was using the second
truck and I believe the assumption was correct.
[18] Also, all orders or
receipts for trucks, or towing equipment repairs or purchases were signed by
Jean‑Luc. Jean‑Luc appears to have been responsible for the
maintenance of the trucks and machinery owned by the Payor.
[19] On April 30, 2002,
Martin transferred all the shares of the Payor to Jean‑Luc without
valuable consideration.
[20] In exercising his
discretion under paragraph 5(3)(b) of the Act, the Minister considered
that during the periods in issue, in addition to his work for
the Payor, the Appellant was the sole owner a landscaping business that he
operated under the corporate name "Multi-Services des Moulins" and he
subcontracted contracts signed by Multi-Services des Moulins to the Payor.
There was no evidence to the contrary.
[21] The Appellant says that
he did not work during the winter and therefore was not paid during the winter.
I note that the winter months are not included in the periods under appeal. The
Respondent states that Jean-Luc performed services for the Payor during the
winter without being on the Payor's payroll.
[22] The Minister
concluded that persons not related to the Payor would not have worked for the
Payor during the winter for no pay.
[23] On November 8, 2000,
the Payor gave the Appellant a record of employment that listed the first day
of work as May 15, 2000, and the last day of work as October 29, 2000, and
indicated 960 insurable hours and $10,800 in insurable earnings. On October 19,
2001, the Payor gave the Appellant a record of employment that listed the first
day of work as May 15, 2001, and the last day of work as October 12, 2001, and
indicated 1,040 insurable hours and $11,566 in insurable earnings. The
Respondent states that the hours did not correspond to the hours actually
worked.
[24] The Minister
determined that an unrelated person would not have received the same pay, conditions
of employment or period of employment as the appellant received.
[25] I agree with the
decision of the Minister that Jean‑Luc was an employee of the Payor
during the periods in issue but that his relationship with the Payor was not
that of an employee who dealt with the Payor at arm's length as contemplated by
paragraph 5(3)(b) of the Act.
[26] I observed both Jean‑Luc
and Martin. I doubt whether Jean‑Luc would be intimidated by any government
official. I question his interpretation of events; his evidence was at odds
with documents produced at trial. In truth, he ran the company and he
controlled the business operations of the company. He determined when he would
work, how he would work, when he would get paid and when he would not get paid.
Indeed, except for the change of the registered shareholder of the company's
shares, nothing, it appears, was different from before Jean‑Luc's
bankruptcy. Indeed, while this is not relevant to this appeal, the attitude of
Jean‑Luc suggests that Martin was only a "prête‑nom" for
Jean‑Luc, so that Jean‑Luc could continue to operate the business
after he became bankrupt. That Martin transferred the shares of the company to
Jean‑Luc for no consideration strongly indicates this to be the case.
[27] There is no credible
evidence that the Minister did not properly exercise his discretion under
paragraph 5(3)(b) or that his conclusion in the exercise of his
discretion was wrong.
[28] The appeal is
dismissed.
Signed at Ottawa, Canada, this 24th day of May 2005.
"Gerald J. Rip"
Translation certified true
on this 10th day of May 2005
Aveta Graham, Translator
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