[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2004TCC4
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Date: 20040105
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Docket: 2002-4365(EI)
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BETWEEN:
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MICHEL TROTTIER ENTREPRENEUR
ÉLECTRICIEN INC.,
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Appellant,
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And
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
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And
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SIMON TROTTIER,
FRANÇOIS TROTTIER,
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Interveners.
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REASONS FOR JUDGMENT
Angers J.
[1] This is an appeal from decisions
of the Minister of National Revenue (the "Minister")
dated December 28, 2001, to the effect that the employment of the
interveners François and Simon Trottier when they were
working for the appellant was insurable employment performed
under a contract of service, in accordance with
paragraph 5(1)a) of the Employment Insurance
Act (the "Act"). According to these decisions, the
employment was not excluded from insurable employment, despite
the fact that the appellant and the interveners were not dealing
with each other at arm's length since, having regard to all
the circumstances, a substantially similar employment contract
would have been entered into between them if they had been
dealing with each other at arm's length within the meaning of
paragraph 5(2)i) and 5(3)b) of the Act. The period
of employment in respect of which the appeal was brought is from
January 1, 2001, to December 28, 2001, in the case of both
interveners.
[2] The appellant alleges in his
Notice of Appeal that the interveners' jobs while working for
the appellant company were not insurable employment because each
of them held more than 40% of the voting shares of this company
during the period at issue, such that the provisions of paragraph
5(2)b) of the Act apply. Contrary to the position taken by
the Minister, the appellant maintains that there was no true
contract of service between the appellant and the interveners and
that, had there been, the conditions of employment, among other
things, were not similar to those that would otherwise have
existed by virtue of the fact that they were not dealing with
each other at arm's length, in accordance with the provisions
of paragraphs 5(1)a) and 5(2)i) and sub-section
5(3) of the Act.
[3] The respondent based his decision
on the following assumptions of fact, which were admitted or
denied by the appellant, as shown below:
a) the
appellant was incorporated on September 24, 1997; (admitted)
b) during the
period at issue, the shareholders of the appellant were:
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Francine Désilets
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30% of the voting shares
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François Trottier
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35% of the voting shares
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Simon Trottier
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35% of the voting shares (denied)
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c) Francine
Désilets is the mother of François Trottier and
Simon Trottier; (admitted)
d) the
appellant was an electrical contractor in the residential and
commercial sectors; (admitted)
e) in 2001,
the appellant hired between 6 and 8 workers; (admitted)
f) these
workers were subject to the collective agreement in force in the
construction industry; (admitted)
g) in 2001,
the appellant had a turnover of approximately $450,000;
(admitted)
h) the
business was in operation from Monday to Friday from 7 am to 6
pm; (denied)
i) the
appellant's major decisions were taken by the appellant's
board; (admitted)
j)
following the death of Michel Trottier on November 17, 2000, one
of the appellant's employees, Lucien Gingras, qualified the
appellant to obtain his licence as an electrical contractor with
La Commission de la Construction du Québec (hereinafter
called the C.C.Q.); (admitted)
FRANÇOIS TROTTIER
k) the worker
FT was an apprentice electrician; (admitted)
l) the
worker FT was in charge of the appellant's administration;
(admitted)
m) the duties of the
worker FT consisted of preparing bids, checking the inventory,
supervising staff, preparing schedules, looking after purchases,
looking after vehicle maintenance (4 to 5 trucks) and looking
after customer service; (admitted)
n) the
majority of the services performed by the worker FT were done at
the office of the appellant; (denied)
o) the worker
FT worked year-round for the appellant; (admitted)
p) the worker
FT was always entered for 40-hour work weeks in the
appellant's pay register, except for 8 weeks of 32 hours and
2 weeks of vacation in July; (denied)
q) the worker
FT was paid a weekly salary of $697.20 from January 1 to August
25, 2001 and of $846.80 from August 27 to December 31;
(admitted)
r) the
pay of the worker FT was based on the hourly rate established by
the collective agreement; (admitted)
s) the worker
FT was paid by cheque each week; (admitted)
t) the
worker FT was the beneficiary of a pension fund managed by the
C.C.Q.; (admitted)
u) the
appellant paid the C.S.S.T. insurance premiums for the worker FT;
(denied)
v) all the
worker FT's expenditures for meals and fuel were paid by the
appellant; (admitted)
w) the appellant
supplied a truck to the worker FT; (admitted)
x) the worker
FT had given no personal security or guarantee in favour of the
appellant; (admitted)
y) the worker
FT had no risk of loss or chance of profit; (denied)
z) all the
tools and equipment which the worker FT used belonged to the
appellant; (admitted)
aa) the services performed
by the worker FT formed an integral part of the payer's
activities; (denied)
SIMON TROTTIER
bb) the worker ST was an
apprentice electrician; (admitted)
cc) the worker ST worked
primarily on the sites of the appellant's customers;
(denied)
dd) the worker ST required
supervision by an electrician at all times; (denied)
ee) the duties of the
worker ST consisted of preparing bids with the help of Lucien
Gingras, in hiring or firing staff and working on the sites;
(denied)
ff) in 2001,
the worker ST worked for the appellant from July 3 to December
31; (denied)
gg) the worker ST was
entered for 40-hour work weeks in the appellant's pay
register, with the exception of three 32-hour weeks and two weeks
of vacation in July; (admitted)
hh) the worker ST was paid
a weekly salary of $697.20 from July 3 to December 31;
(admitted)
ii) the salary
of the worker ST was based on the hourly rate established by the
collective agreement; (admitted)
jj) the worker
ST was paid by cheque weekly; (admitted)
kk) the worker ST was a
member of a pension fund administered by the C.C.Q.;
(admitted)
ll) the
appellant paid the C.S.S.T. insurance premiums for the worker ST;
(denied)
mm) all the expenses for meals and
fuel of the worker ST were paid by the appellant; (admitted)
nn) the appellant supplied
the worker ST with a truck; (admitted)
oo) the worker ST had
given no guarantees or personal security in favour of the
appellant; (admitted)
pp) the worker ST had no
risk of loss or chance of profit; (denied)
qq) all the tools and
equipment used by the worker ST belonged to the appellant;
(admitted)
rr) the services
performed by the worker ST formed an integral part of the
appellant's activities; (denied)
[4] Ms. Francine Désilets
testified that her husband Michel Trottier and herself
established the appellant's business in October 1997. The
certificate of incorporation certifies that 9054-8447
Québec Inc. was incorporated and subsequently became
Michel Trottier Entrepreneur Électricien Inc. (the
appellant). A third person, Pierre Lavigne, became a shareholder
at the time of incorporation. In fact, the class "A"
shares were the only ones issued and were held in the following
proportions: 79 for Michel Trottier, 20 for Pierre Lavigne and
one for Ms. Désilets. Ms. Désilets and her husband
did not become the sole shareholders in the appellant until March
1999, holding 20 and 80% respectively of the 100 class
"A" shares. No other shares have been issued to
date.
[5] Michel Trottier died in November
2000, as a result of which Ms. Désilets became the sole
owner of the 100 class "A" shares issued by the
appellant. It was at this point that she decided, after
consultation, to transfer her shares to her two sons (the
interveners). She explained that, following her husband's
death, each of the interveners received 35% of the share capital,
i.e., 35 class "A" shares. Without specifying the
date, she testified that it was subsequently decided that a
larger number of shares should be transferred. She recognized
that on December 20, 2001, Directors' Resolutions caused the
shares to be distributed in the proportions agreed after the
death of her husband, namely 35 class "A" shares for
each intervener and 30 for herself. These resolutions were
forwarded to the Appeals Officer, Mr. Martin Croteau.
[6] The transfer of shares in
accordance with the resolution of December 20, 2001, was,
however, not recorded in the appropriate register of the company.
In fact, the only share transfers that were registered following
the death of Michel Trottier are those that occurred after it had
been decided that 35 shares for each of the interveners was not
sufficient. The register of shareholders and the number of shares
held by each indicates that, on October 1, 2001, Francine
Désilets held 18 class "A" shares and each
intervener held 41 class "A" shares, all new shares. As
far as the 100 class "A" shares held by Francine
Désilets on that date are concerned, she transferred them
all to Gestion Francine Désilets Inc.
[7] In addition, also on that date,
Ms. Désilets subscribed for 1000 class "C"
shares of the appellant's share capital. All this took place
almost two months prior to the resolution of December 20, 2001,
which allocates the shares quite differently. It is impossible to
claim, according to Ms. Désilets and the interveners, that
the decision to allocate 35 shares to each intervener was taken
prior to December 20, 2001. In addition, the resolutions of
December 20, 2001, were sent to the Appeals Officer on June 19,
2002, but none of the documents dated October 1, 2001,
accompanied them and no mention of the changes was made to the
officer.
[8] It is clear to me that Ms.
Désilets relied completely on the advice of her
consultants and did not ask much in the way of questions.
Furthermore, she testified that she did not know why she held
1000 class "C" shares and said that she was unaware
that these shares involved voting rights.
[9] With regard to the operations of
the appellant, Ms. Désilets was obliged, following the
death of her husband, to rely on the services of her two sons
(the interveners). Since both of them were apprentice
electricians in the fourth year of their apprenticeship, they
were obliged to assume the role that their father had played in
the business. Ms. Désilets told the Court how the two
interveners were at the office at 6.30 am, some 20 minutes before
the other employees arrived, and that François Trottier
was there from 6 am to late in the evening, while Simon Trottier
answered all the weekend emergency calls. Each of the interveners
was paid on the basis of a 40-hour week at the hourly rate
established by the agreement of the C.C.Q., notwithstanding the
fact that they worked more hours than that each week. The other
employees who worked extra hours were paid in accordance with the
agreement. Ms. Désilets for her part took care of the
office work, did the pay, and answered the telephone on weekends,
as the company office was in her house. She worked more than 40
hours a week.
[10] The interveners testified regarding
their new responsibilities in the business following their
father's death. François Trottier has been employed by
the business since 1997, the year in which he was hired as an
apprentice electrician. He accordingly had to be accompanied by a
qualified electrician when doing electrical work. After the death
of his father, his responsibilities within the company increased
considerably. He was assigned responsibility for meeting with
customers and evaluating their needs. He supervised the other
employees in the business, telling them what work needed to be
done and taking care of the billing. He arrived earlier in the
morning than the others to organize the company day and to
allocate the tasks.
[11] He declared that, during peak periods
in the company, he was on call seven days a week and that he had
not had a single free Saturday during the summer. Despite his new
responsibilities, he continued to draw a salary based on a
40-hour work week at the hourly rate specified in the agreement.
He agreed that this was not the case for the other employees, as
they did not work on Saturdays, and if they had to do so they
were paid for the extra hours in accordance with the agreement.
He added that his brother Simon also worked more than the 40
hours a week for which he was paid. Simon responded to all the
emergency calls on weekends, in addition to assuming
responsibility for the company's stock.
[12] According to François Trottier,
he has held 41% of the company shares since the death of his
father. He was nevertheless not able to specify when this
percentage was reached. He is aware of the fact that resolutions
were voted by the board in December 2001, resolutions whereby the
percentage of the stock he held was only 35%. He recognized, as
did his mother, that this was beyond his understanding and said
that the notary and the accountant were responsible for looking
after it, and that he trusted them.
[13] Simon Trottier's responsibilities
also increased after the death of his father. He confirmed his
brother's testimony on this point. Simon Trottier was now
working 50 to 60 hours a week and was being paid only for 40. He
ordered the stock and supervised the employees. In order to
economize with the company finances, he responded to emergency
calls on evenings and weekends. Like his brother, he thought that
he had 41% of the shares but acknowledges that the resolutions of
December 20, 2001, gave him only 35%.
[14] With regard to the premiums payable to
the C.S.S.T., Ms. Désilets stated that her two sons and
herself were not covered by the C.S.S.T.'s insurance scheme.
François Trottier maintained that he and the company paid
the premiums, but Simon Trottier knew nothing about it.
[15] Counsel for the respondent filed the
report on the appeal prepared by the Appeals Officer, Martin
Croteau. Mr. Croteau was responsible for determining whether the
interveners' employment was insurable and examined the
determination made by the Insurability Officer. He contacted the
interveners by telephone, as well as their mother and Alain
Grenier, the tax accountant whose services the family used. He
also consulted the documentation provided by Ms. Désilets
and the appellant with a view to analyzing it. These documents
included the pay registry, the minutes of the appellant company,
the loan files, cheques and bank statements.
[16] During all the time that he was working
on this file, Mr. Croteau was never informed about a share
transfer, as a result of which each intervener became the owner
of 41% of the voting shares in the appellant company. His report
shows that, in a telephone call to the tax accountant, Alain
Grenier, on July 2, 2002, Mr. Grenier had spoken of an estate
freeze and said that the new shareholders had to be a management
company, Ms. Francine Désilets and the two interveners,
with the latter each holding 35 class "A" shares. His
analysis of the shares based on the company shareholders'
register that he received indicates that Michel Trottier was the
owner of 80 class "A" shares, and that Francine
Désilets was the owner of 20 class "A" shares.
The resolutions of December 2001 changed the ownership of the
class "A" shares so as to assign each of the
interveners 35 class "A" shares and to Francine
Désilets 30 class "A" shares and 1000 class
"C" shares.
[17] Mr. Croteau summarized the analysis
that he had made in order to determine whether a contract of
service existed. He accordingly reviewed the criteria applicable
in such a determination and briefly explained the facts on which
he had based his conclusions. I shall return to these elements
later in my analysis.
[18] His testimony also covered the analysis
that he had made in light of the provisions of paragraph
5(2)i) of the Act. In terms of remuneration, Mr. Croteau
confirmed that the interveners were paid for 40 hours a week,
whereas they actually worked 60 to 70 hours a week. Their hourly
rate was that specified by the agreement and they received their
pay regularly.
[19] Under the heading "conditions of
employment" Mr. Croteau noted that the two interveners had
no fixed work schedule and that they worked overtime without
being paid. The hours worked for customers were the only ones
that were counted for billing purposes. With regard to the
intervener François Trottier, he had the use of a vehicle
belonging to the appellant to meet with customers and for his own
use, whereas the intervener Simon Trottier used a vehicle only
for the needs of the appellant.
[20] With regard to the duration of the
employment, the report shows that François Trottier worked
throughout the entire period at issue, while Simon Trottier
worked from July 3 to December 28, 2001. Simon Trottier in fact
worked through the year and this is the period to which the
appeal refers.
[21] With regard to the nature and
importance of the work performed by the interveners in addition
to their administrative duties, supervision and preparation of
bids, these were tasks that were essential to the smooth running
of the business. According to the report, a person dealing at
arm's length with the business could have carried out the
same duties.
[22] Mr. Croteau testified that he had
considered the fact that the extra hours worked by the
interveners would ultimately be paid to them in the form of a
dividend declared by the company or by assigning them a greater
percentage of ownership in the business. He also recognized that
the interveners' salaries were not governed by the agreement
and that this was used only as a guide. He concluded that the
mere fact that the interveners worked hours for which they were
not paid did not justify the exclusion of their employment
because of their status as shareholders.
[23] The position of the respondent is that
the employment of the two interveners during the period at issue
was insurable employment because the requirements of a contract
of service were met. They are not excluded by virtue of the fact
that the interveners did not own more than 41% of the voting
shares of the appellant, who had hired them, nor by the fact that
they were not dealing with the appellant at arm's length, as
the employment contracts between themselves and the appellant are
substantially similar to contracts that would have been entered
into had there not been such a relationship, with the result that
they are deemed to be dealing at arm's length, even though
the interveners and the appellant are related within the meaning
of the Income Tax Act.
[24] Responsibility rests with the appellant
and the interveners to produce evidence based on the balance of
probabilities that would allow this Court to rescind the decision
of the Minister or to intervene in exercising his discretionary
authority pursuant to paragraph 5(3)a) of the Act.
[25] With regard to the issue of whether, in
the case at bar, the employment contracts that the interveners
had with the appellant were contracts of service, I have reviewed
the criteria established by the case law, such as control,
ownership of tools, chance of profit and risk of loss, and
integration. It seems to me clear that, when one applies the
criteria of the ownership of tools, the opportunity for and the
risk of loss, and integration, the facts in the case can
demonstrate none other than the existence of a contract of
service. The tools, such as office equipment, motor vehicles and
the equipment needed to carry out the work, belonged to the
appellant and were provided by the appellant. Since the
interveners were paid regularly by the appellant, the appellant
is the one who enjoyed the chance of profit and who ran the risk
of loss. It is their capacity as shareholders and not the fact of
being employees that determines the opportunity for the
interveners to profit from their investment. With regard to the
integration criterion, their work was an integral part of the
appellant's activities.
[26] With regard to the control criterion,
it seems to me evident at first sight that each of the
interveners did his work autonomously and without supervision, in
particular with regard to the management of the business. On the
other hand, when working with electricity, the interveners had to
be accompanied on the sites by an electrician who had his
competency card. The appellant was obliged to use the business
licence of one of its employees in order to continue its
activities following the death of Michel Trottier. Even though
the interveners appeared to direct the destiny of the appellant
without any outside intervention, they nonetheless were obliged
to account for their work to the board of the appellant and their
respective duties were determined by the decisions of the board.
Noël J. of the Federal Court of Appeal in Groupe
Desmarais Pinsonneault & Avard Inc. v. Canada, [2002]
F.C.J. No. 572 (Q.L.), underlined the importance of the existence
of the power of supervision when he said that the fact that a
company did not exercise the control or that the workers did not
feel subject to it in doing their work did not have the effect of
removing, reducing, or limiting the power the company had to
intervene through its board of directors. In my view a contract
of service accordingly did exist between the interveners and the
appellant.
[27] Were the two jobs at issue insurable
employment by virtue of the fact that each of interveners
controlled more than 40% of the appellant's voting shares? My
answer to this question is no. The testimony of the interveners
and of Ms. Désilets, according to which each of the
interveners had always owned 41 voting shares in the appellant
following the death of Michel Trottier, is not confirmed by the
resolutions of December 20, 2001, which they sent to the Appeals
Officer on June 19, 2002. The register of shareholders filed by
the appellant indicates transactions dated October 1, 2001; this
shows that as of this date each of the interveners held 41% of
the voting shares. It is nonetheless clear, in my view, that this
was an attempt to make retroactive a decision that was not taken
until after July 2, 2002. I mention this date, as this is the
date on which the appellant's tax accountant and the Appeals
Officer had a telephone conversation in which it was confirmed
that the shares had been divided, giving 35 class "A"
shares to each of the interveners and 30 to Ms. Désilets.
I conclude from this that, during the period at issue, the
interveners did not control more than 40% of the voting shares, a
situation that would make their employment non-insurable pursuant
to paragraph 5(2)b).
[28] This now leads us to the issue of
whether the employment is excluded because they were not dealing
at arm's length. The interveners and the appellant are
related persons within the meaning of the Income Tax Act
and this is admitted by the appellant and the interveners. The
Minister nonetheless concluded that they were dealing at
arm's length in this case because the employment contracts
are substantially similar to contracts that would have been
entered into had they been dealing with each other at arm's
length, and that this employment is accordingly insurable. This
finding by the Minister constitutes the exercise of the
discretionary power conferred by paragraph 5(3)b) of the
Act.
[29] The task of the appellant in this case
is to establish, based on the balance of probabilities, that the
Minister exercised his discretion inappropriately in deciding
that, having regard to all the circumstances, the interveners and
the appellant would not have entered into a substantially similar
contract of employment if they had been dealing with each other
at arm's length. According to the Federal Court of Appeal in
Canada v. Jencan Ltd., [1997] F.C.J. 876 (Q.L.), [1998] 1
F.C. 187, the appellant must show, depending on the case, that
the Minister acted in bad faith or for an improper purpose or
motive, that he failed to take account of the relevant
circumstances, as is expressly required by paragraph
5(3)b) of the Employment Insurance Act, or that he
took into account a non-relevant factor.
[30] The role played by the Minister and the
role that the Court should play have been set out by the Federal
Court of Appeal in Légaré v. Canada, [1999]
F.C.J. No. 878 (Q.L.). Marceau J. summarized the issue in the
following terms at paragraph 4:
The Act requires the Minister to make a determination based on
his own conviction drawn from a review of the file. The wording
used introduces a form of subjective element, and while this is
being called a discretionary power of the Minister, this
characterization should not obscure the fact that the exercise of
this power must clearly be completely and exclusively based on an
objective appropriation of the known or inferred facts. And the
Minister's determination is subject to review. In fact the
Act confers the power of review on the Tax Court of Canada on the
basis of what is discovered in an enquiry carried out in the
presence of all interested parties. The Court is not mandated to
make the same kind of determination as the Minister and, thus,
cannot purely and simply substitute its assessment for that of
the Minister: that falls under the Minister's so-called
discretionary power. However, the Court must 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, it must decide whether the
conclusion with which the Minister was "satisfied"
still seems reasonable.
[31] The Federal Court of Appeal, moreover,
reiterated its position in Pérusse v. Canada,
[2000] F.C.J. No. 310 (Q.L.). Marceau J., referring to the
passage from Légaré cited above, added the
following at paragraph 15:
The function of an appellate Judge is thus not simply to
consider whether the Minister was right in concluding as he did
based on the factual information which Commission inspectors were
able to obtain and the interpretation he or his officers may have
given to it. The Judge's function is to investigate all the
facts with the parties and witnesses called to testify under oath
for the first time and to consider whether the Minister's
conclusion, in this new light, still seems "reasonable"
(the word used by Parliament). The Act requires the Judge to show
some deference towards the Minister's initial assessment and,
as I was saying, directs him not simply to substitute his own
opinion for that of the Minister when there are not new facts and
there is nothing to indicate that the known facts were
misunderstood. However, simply referring to the Minister's
discretion is misleading.
[32] In exercising his discretion, the
Minister appears to have justified the lack of remuneration of
the interveners for all the extra hours they worked, 20 or 30 a
week, for the appellant by the fact that they were going, at a
certain point, to derive a benefit from it in the form of a
dividend because they were shareholders. In fact, as I mentioned
earlier, the Minister judged that the fact of not being paid for
the extra hours was not sufficient reason to exclude the
employment of the interveners from insurable employment, because
they were shareholders. It seems to me that the mere fact of
being both a shareholder and an employee of a company is not of
itself a guarantee of being paid that would justify a person
working there as an employee and not being paid. The general rule
is that a person who acquires the shares in a company is normally
interested in the performance that their investment will generate
for them. The employee's concern, on the other hand, is to be
paid for the hours devoted to his employment. Concluding that an
employee can work 20 to 30 hours per week without being paid
would appear to banalize the principle that the employee should
be paid for the services he gives to his employer. It must be
remembered that a distinction is drawn between a shareholder and
an employee. As a general rule, someone does not become an
employee in the company in which they hold shares because they
are a shareholder. In small companies, on the other hand, it is
common for someone to become an employee precisely because they
are a shareholder, and in such cases it is normal that the
employee who is also a shareholder may obtain favoured treatment
that is not given to other employees and that might accordingly
render the employment of the employee-shareholder non-insurable
if they are not dealing at arm's length or if they hold more
than 40% of the voting shares.
[33] The Minister in the instant case did
not take into consideration the fact that, since the death of
their father, the two respondents have become the directing minds
of the company. They have both shared their father's
responsibilities and have invested their time and expended their
energies to make the business a success. They have participated
with their mother in taking decisions that have enabled the
business to function. They agreed to give their services free of
charge so that the business could save money, without having
received any promises of performance bonuses or other benefits,
and without knowing whether the business would make a profit.
These are conditions of employment for which acceptance by other
employees would be almost impossible to achieve, and these are,
in my view, economic considerations which the Minister failed to
take into account.
[34] It is clear to me that the Minister did
not take into account the fact that the situation in which two
apprentice electricians suddenly found themselves in managerial
positions, with increased responsibilities, at a time when
neither of them yet had their competency cards as electricians
nor electrical contractors' permits, would probably not have
occurred had they been dealing with the appellant at arm's
length. This relationship between the interveners and the
appellant, following the death of their father, was clearly
different from that which the appellant would have had with an
employee with whom it dealt at arm's length.
[35] After examining all these factors,
which I consider important and relevant and which emerge from the
evidence produced during the trial, I have concluded that, if the
Minister had considered them, he would not have reached the
decision he reached, having regard for the law and for an
objective, reasonable point of view.
[36] For these reasons, I consider that it
is possible to move on to the second stage of the appeal process
and to determine whether, having regard to all the evidence, the
parties to the employment contracts would have entered into
substantially similar employment contracts had they been dealing
with each other at arm's length, in light of all the
circumstances, including those set out at paragraph 5(3)b) of the
Act.
[37] It is true that in terms of the
remuneration paid, the hourly rate of the interveners was similar
to that provided for in the agreement of the C.C.Q., even though
the appellant was not bound by the terms of this agreement.
However, the interveners took on additional managerial
responsibilities, which required them to be present and to work
an additional 20 to 30 hours a week, for which they were not
paid.
[38] It is not impossible for managers to
invest time in their work without being paid for it, when their
conditions of employment include performance bonuses or other
similar benefits. However, there is nothing in this case to
indicate that the interveners were entitled to such bonuses. The
possibility of receiving dividends by virtue of their being
shareholders has nothing to do with the fact that they are
employees, for any holder of shares of the class for which a
dividend is declared is entitled to that, whether or not they are
an employee.
[39] When one considers the specific context
of the relationship that exists between the appellant and the
interveners, it is easy to understand that they had no separate
economic interests, a situation that is often found in family
businesses. This produces the result that the remuneration paid
and even the conditions of employment are not those that are
found between a stranger and an employer, in other words, between
persons dealing at arm's length.
[40] None of the interveners had a set work
schedule and, as managers, they were not supervised. They both
acted as head of the company, having, according to the evidence
submitted, assumed the responsibilities of their father after his
death. Would a person dealing at arm's length with the
appellant have assumed and performed these duties with all the
conviction that the facts have revealed in this case?
[41] In my view, it is possible to conclude,
as Rowe J. did in Crawford v. Canada, [1996] T.C.J. No. 70
(Q.L.), that the economic interests of the interveners were so
closely linked to those of the company that it could not be said
to have acted independently. In the arrangements that pertained
in the instant case, there was not the type of genuine
negotiation that there would have been regarding a contract
between persons who were strangers. There was not, with regard to
the company and the two interveners, the type of independence of
mind or independence in terms of objectives that would warrant
the assertion that they were dealing with each other at arm's
length.
[42] I accordingly find that, in this case,
it is reasonable to conclude that a similar contract would not
have been entered into if the parties to the contracts had been
dealing with each other at arm's length. For these reasons,
the employment held by the two interveners while working for the
appellant is not insurable employment.
Signed at Edmundston, New Brunswick, this 5th day of January,
2004.
Angers J.
Certified true translation
Colette Beaulne
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