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Citation: 2004TCC620
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Date: 20040919
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Docket: 2004-422(EI)
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BETWEEN:
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GESTION VILLAGE PLEIN AIR,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
and
DENISE LIZOTTE,
Intervener.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Paris J.
[1] The Appellant, Gestion Village Plein Air, a limited
partnership, is appealing from a decision made by the Minister of National
Revenue (the “Minister”) according to which Denise Lizotte had insurable
employment with the Appellant from July 26 to November 22, 2002. The Minister
decided that Ms. Lizotte’s services were rendered under a contract of service.
[2] Jean-Guy Pronovost, the Appellant’s
administrator, testified for the Appellant, and Ms. Lizotte for the Respondent.
[3] Mr. Pronovost registered the Appellant, a
limited partnership, to run an outdoor vacation centre that he had bought at
the end of 2001, at Lac Édouard. The centre was an old hospital, built to care
for people with tuberculosis. It had a main building and many small
outbuildings. After the hospital was closed, the property became a resort. The
centre could accommodate up to 150 people. However, it seems that when Mr.
Pronovost purchased it, the facilities were in need of repairs and cleaning
before it could be operational.
[4] In the summer of
2002, the Appellant was looking for someone to work at the centre and get it
operational. Mr. Pronovost
stated that the Appellant wanted to hire another company to do this and to
promote and develop the centre. Part of the profits would go to this company.
He already had other companies to manage and he did not have the time to become
further involved in operating the outdoor vacation centre.
[5] Mr. Pronovost met Ms. Lizotte when she was
applying for a job with another one of his companies. He suggested that she and
her husband work at the outdoor vacation centre and they accepted. They started
near the end of July 2002. The Appellant provided them with a residence at the
centre. Mr. Pronovost said that he and Ms. Lizotte agreed that she and her
husband would start up a company to work contractually with the Appellant to
run the centre. To do so, Ms. Lizotte and her husband registered a company
under the name Gestion Libro, on September 20, 2002.
[6] Mr. Pronovost presented the Court with contracts
concluded between the Appellant and Gestion Libro, each for a two-week period.
The first was signed on September 1, 2002, and the second, November 14, 2002.
The terms of the contracts are identical, with the most relevant being:
[translation]
Mandate
Effectively organize the Village Plein
Air’s activities in order to receive and serve tourists. More specifically, the
service provider is responsible for food services and maintaining the Village
Plein Air’s buildings. These are the conditions of the agreement.
...
Description of services:
(a) The service provider agrees to
ensure the proper operation of the Village Plein Air’s cafeteria. To this end,
a cook must be hired. It is understood that it is the provider’s responsibility
to prepare and serve the food and to maintain the cafeteria’s facilities and
instruments in good condition. The provider must also provide all the tools
necessary for food preparation. However, Gestion Village Plein Air agrees to
cover the cost of the food required for meal preparations. Gestion Village
Plein Air will also allow the provider to use the Village Plein Air cafeteria
for restaurant purposes.
(b) It is the provider’s mandate to
welcome clients, prepare the rooms and ensure that they are clean. The service
provider shall use all reasonable means to ensure that the client’s stay is as
pleasant as possible.
(c) The service provider is
responsible for maintaining the property and the buildings. It is also
responsible for repairing and renovating the buildings as needed. The provider
shall operate in accordance with Gestion Village Plein Air’s recommendations.
The provider shall supply all the required tools for carrying out its work.
However, Gestion Village Plein Air will pay for the material required for the
work.
(d) The provider shall monitor the
comings and goings on the Village Plein Air property.
Freedom:
The provider has the freedom to choose the
means to carry out the work. However, the product of this work must meet the
requirements of this contract.
[7] Mr. Pronovost claimed that Ms. Lizotte and
her husband had complete freedom in carrying out the work required by the
contracts with the Appellant. Their only mandate was to make the business
profitable. According to Mr. Pronovost, at the beginning of the period in
question, he went to the property once a week, but the visits became less
frequent over time. He did not tell them what to do and did not check their
hours of work. He was in occasional contact with Ms. Lizotte by phone, when she
needed to talk to him.
[8] According to Mr. Pronovost, Ms. Lizotte and her husband
were free to set the price of the rooms and meals at their discretion, and they
were responsible for taking reservations and collecting the fees from the
clients. The Appellant paid for the food used in the meals served at the
cafeteria, but Ms. Lizotte chose the menu.
[9] Mr. Pronovost confirmed that the Appellant
provided most of the tools required for the work, but specified that Ms.
Lizotte and her husband provided some tools from their own kitchen and some
maintenance tools. The Appellant paid for all the material required for repairs
and renovations.
[10] The Appellant also
hired three workers to help with the repairs and maintenance on the property,
under Ms. Lizotte and her husband’s supervision. This only lasted a few days
because the workers did not get along with Ms. Lizotte.
[11] Mr. Pronovost stated that he was not
satisfied with Ms. Lizotte and her husband’s efforts, saying they were
incompetent. He said that on one occasion, with a group of over 100 visitors
staying at the vacation centre, he had to send cooks to help Ms. Lizotte
at the cafeteria because she had trouble serving breakfast. Overall, he saw few
positive results from their work. According to Mr. Pronovost, Ms. Lizotte and
her husband left the centre before the end of their last contract in November
2002.
[12] Mr. Pronovost explained that after that,
Ms. Lizotte filed a complaint against the Appellant with the Commission des
normes du travail regarding unpaid wages, and the Commission found in favour of
Ms. Lizotte. Mr. Pronovost said that he was not advised of the complaint and
that the decision was made by default. His motion to withdraw the decision was
allowed by the Commission and the case is still pending.
[13] As for Ms. Lizotte, she stated that Mr. Pronovost
hired her and her husband, to take care of the cafeteria, and clean and
maintain the property of the outdoor vacation centre. She claimed that there
was a lot of work to do to prepare the rooms since there were so many, and that
they often worked over 60 hours a week. Aside from two groups, there were few
clients—perhaps thirty, at most, during the time she worked. Mr. Pronovost took
the reservations, set the prices and made all the decisions required to make
the business function properly. He went to the camp at least twice a week and
communicated with Ms. Lizotte by phone almost every day. Ms. Lizotte and her
husband’s presence at the camp was necessary seven days a week, and they had to
ask permission to leave the site.
[14] Ms. Lizotte claimed
that Mr. Pronovost provided food and all the equipment except for a few
articles that she had at home and some of her husband’s tools. She also claimed
that Mr. Pronovost and his wife decided on the menus and were there to greet
the two groups mentioned above that came to the outdoor vacation centre.
[15] Ms. Lizotte admitted that she registered a limited
partnership, Gestion Libro, by sending an application to the Inspecteur général
des institutions financières (IGIF), but claimed that Mr. Pronovost insisted
that she and her husband do so, and she thought they would lose their jobs if
they did not. Mr. Pronovost even allegedly paid the registration fees.
According to her, the company was a fake company and Mr. Pronovost knew
this.
[16] Ms. Lizotte claimed that she promoted the
Appellant’s outdoor vacation centre by operating a kiosk as an outdoors show
that was held one weekend in September 2002, in La Tuque. The Appellant
reimbursed her registration fees.
[17] She also admitted
that her husband worked elsewhere in October, for at least two weeks, while Gestion Libro was bound by contract to the
Appellant.
Analysis
[18] Counsel for the
Appellant claimed that Ms. Lizotte could not have had insurable employment with the Appellant because the Appellant
had hired Gestion Libro to perform the work in question. He said that Ms.
Lizotte may have been employed by Gestion Libro, but claimed that this did not
affect the Appellant.
[19] Counsel for the
Respondent stated that Ms. Lizotte and her husband did not really intend on
creating a limited partnership and they were not aware of the consequences of
creating such a company. Therefore, the Court should find that Gestion Libro and the contracts between the
Appellant and Gestion Libro were deceptions and should be considered
nonexistent. This would result in the work contract in question being between
Ms. Lizotte and her husband on one hand and the Appellant on the other.
[20] In my opinion, the
evidence shows that Ms. Lizotte
did, in fact, intend to create the limited partnership Gestion Libro with her
husband and that they took the necessary measures to do so, even though the
idea came from Mr. Pronovost.
[21] A limited
partnership is governed by the general provisions regarding contracts of
partnership, namely articles
2186 to 2197 of the Civil Code of Québec. Article 2186 of
the Civil Code of Québec defines a contract of partnership as “a
contract by which the parties, in a spirit of cooperation, agree to carry on an
activity, including the operation of an enterprise, to contribute thereto by
combining property, knowledge or activities and to share any resulting
pecuniary profits.” In this case, Ms. Lizotte and her husband cooperated to
carry out the activities set out in the contracts concluded with the Appellant.
They each contributed knowledge and labour, and shared the amounts received by
the Appellant. Based on these facts, I conclude that they agreed to do so when
they filled in the Gestion Libro registration declaration that they filed
with the IGIF, and that the company was validly formed.
[22] Moreover, it seems that when Ms. Lizotte and her
husband went to sign their first written contract with the Appellant on
September 1, 2002, they presented themselves as representatives of a company
called Gestion Libro; this is the same day Ms. Lizotte sent the registration
declaration for the company Gestion Libro to the IGIF. According to the Civil
Code, a limited partnership is deemed to be an undeclared partnership until it
makes a declaration with the IGIF, and for the same reasons I gave earlier, I
find that the company Gestion Libro was validly formed as of September 1, 2002.
For this reason, Ms. Lizotte did not have a job under the terms of a contract
of service starting that day.
[23] However, for the
period of July 26 to August 31, 2002, I cannot conclude that there was a
company made up of Ms. Lizotte and her husband for the purposes of carrying out
work for the Appellant. The evidence shows that at the beginning of this
period, Ms. Lizotte agreed with Mr. Pronovost that she and her husband would
found a company at a later date. Mr. Pronovost helped them do so in September
2002. Ms. Lizotte and her husband did not present themselves as members of a
partnership before September 1, 2002.
[24] It remains to be
determined whether Ms. Lizotte
had insurable employment under a contract of services, existing between her and
the Appellant, from July 26 to August 31, 2002.
[25] The case law shows
that a four-in-one test should be used to determine whether a worker is an
employee or an independent contractor. The four components are: control,
ownership of tools, chance of profit and risk of loss. The examination of all
these components allows for the central question to be answered. This question
is “whether the person who has
been engaged to perform the services is performing them as a person in business
on his own account.”
[26] First, as for the
issue of control, Mr. Pronovost’s testimony was that Ms. Lizotte and her
husband were completely free to decide how to carry out their duties. He said
that at first he went once a week to see how things were going, but then later
went only rarely. Ms. Lizotte, on the other hand, said that Mr. Pronovost went
to the outdoor centre at least twice a week and asked her to call frequently to
report on the company’s activities.
[27] Counsel for the
Appellant claimed that Ms. Lizotte was not a credible witness because of
certain criminal acts for which she had previously been convicted. However, Ms.
Lizotte admitted to these convictions, saying that at the time she was a
substance abuser and that the problem had been resolved for nearly fifteen
years and that she had no other convictions. For the purposes of this decision
I am not going to reject Ms. Lizotte’s testimony because of her criminal
record. The fact that she has no recent convictions supports her claim that she
has changed for the better and her testimony is credible.
[28] However, it seems
that Ms. Lizotte and her husband were not under strict supervision by the
Appellant and that they were the ones who decided how and when to do their
work. Even if Mr. Pronovost went to the outdoor vacation centre and spoke with
Ms. Lizotte on the phone, she did not mention that he directed the work on
these occasions. I admit that Mr. Pronovost did have control as to the result
or quality of the work, but I find that he did not have control over the
execution of the work. In Charbonneau
v. Canada (Minister of National Revenue - M.N.R.), Décary J.A. of the
Federal Court of Appeal stated:
It is indeed rare for a person to give out
work and not to ensure that the work is performed in accordance with his or her
requirements and at the locations agreed upon. Monitoring the result
must not be confused with controlling the worker.
The evidence did not show that elements existed that
would support the Respondent’s claim that the Appellant reserved the right to
control Ms. Lizotte and her husband’s work.
[29] It was not contested
that the Appellant provided almost all of the necessary tools and that the ones
belonging to Ms. Lizotte and her husband were less important.
[30] Moreover, it is
obvious that Ms. Lizotte and her husband did not have any risk of loss. The
Appellant paid for the groceries and reimbursed expenses such as those related
to the promotion of the outdoor centre at the outdoors show in La Tuque.
The Appellant even hired other workers to help with maintenance on the
property, at its own expense.
[31] From what I can see,
Ms. Lizotte and her husband did not have any opportunities for profit either,
because their salary was set at $200 each per week. Mr. Pronovost spoke of the
possibility of sharing the business’ profits, but there was never any formal
agreement on this subject. Mr. Pronovost mentioned that Ms. Lizotte and
her husband could earn wages from a contract with Environment Canada for
meteorological samples taken at a weather station at the outdoor vacation
centre. He also said that because of this, they had the chance for profit;
however, this profit, whatever the amount, did not come from the employment
contract with the Appellant and was not relevant to the determination I am to
make in this case.
[32] In short, certain
elements of the employment contract in question favoured the Respondent’s
position, while the element of control would tend to indicate a contract of
service. In my opinion, the absence of control by the Appellant over Ms.
Lizotte and her husband’s work is a determining factor in this case and clearly
shows that there was no real relationship of subordination between the parties
to the contract. Therefore, Ms. Lizotte’s work during the period of
July 26 to November 22, 2002, was not performed under a contract of
service concluded with the Appellant.
[33] The appeal is
allowed and the decision of the Minister is vacated.
Signed at Ottawa, Canada, this 19th day of
September 2004.
Paris
J.
Translation
certified true
on this 15th day of
December 2004.
Elizabeth Tan,
Translator
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