[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2004TCC577
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Date: 20040901
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Docket: 2004-21(EI)
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BETWEEN:
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RÉAL BOURGEOIS,
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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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REASONS FOR JUDGMENT
Paris J.
[1] Réal Bourgeois has
appealed from the decision of the Minister of National Revenue
(the "Minister") that Mr. Bourgeois did not hold
insurable employment with Bois Francs Notre-Dame Inc. (the
"payer") from October 7, 2002, to January 10,
2003. According to the Minister, Mr. Bourgeois' services
were not rendered under a contract of service. In making the
decision here in appeal, the Minister made the following
assumptions of fact stated in paragraph 5 of the Reply to
the Notice of Appeal:
[TRANSLATION]
(a) The payer, which
was incorporated on June 18, 2001, operated a hardwood
flooring sales and wood-drying business;
(b) during the
period in issue, the payer's sole shareholder was
3034534 Canada Inc.;
(c)
Jacques McLean was the sole shareholder of the payer;
(d) contrary to the
information provided by the Inspector General of Financial
Institutions, the Appellant was never a director and never held
shares in the payer;
(e) the Appellant
claims that he served as a nominee for the payer to enable it to
obtain a small business loan because Mr. McLean was
insolvent;
(f) the
Appellant states that the information provided to the Inspector
General of Financial Institutions concerning him is false;
(g) the Appellant
worked for the payer as a controller and accountant;
(h) the Appellant
worked at the payer's place of business from Monday to
Friday;
(i) the
Appellant guaranteed a $215,000 loan granted to the payer by
CIBC;
(j) the
Appellant also provided guarantees for the payer's line of
credit and a few loans;
(k) the Appellant
claims that, in return for his guarantees for the payer, he was
to obtain shares of the payer, but that he never obtained or held
any shares of the payer;
(l) during the
period in issue, the Appellant generally represented himself as a
co-owner of the payer, both to the payer's employees
and to its customers;
(m) during the period in
issue, the Appellant incurred significant financial risks due to
the fact that he had guaranteed the payer's loans.
[2] Mr. Bourgeois testified that
he had known Jacques McLean for a number of years and that
he had worked for him in 1998. In 2002, Mr. McLean hired him
again to work at the payer as a controller and accountant. At
that time, Mr. McLean was having trouble obtaining bank
loans, and he offered Mr. Bourgeois shares in the payer if
he would stand as a guarantor for him. Thus, in exchange for his
guarantee of a small business loan of $215,000 and a $10,000 line
of credit, Mr. Bourgeois and Mr. McLean entered into an
agreement under which Mr. Bourgeois would receive
30 percent of the payer's shares. However,
Mr. Bourgeois never received them as a result of a conflict
with Mr. McLean that began in late 2002. On January 10,
2003, Mr. Bourgeois resigned from his position with the
payer and withdrew the guarantees he had given.
[3] Mr. Bourgeois says he
provided the guarantees so that he could become a shareholder of
the payer. He knew the financial situations of the payer and
Mr. McLean and was persuaded that the guarantees entailed
very little risk. Although Mr. McLean had no credit, he
owned immovable property worth $3,000,000 that could satisfy any
request for payment made by the bank. Furthermore, because the
principal loan was a small business loan, Mr. Bourgeois'
maximum liability was approximately $30,000 to $40,000.
[4] Mr. Bourgeois said he had
never represented himself as a shareholder of the payer but
admitted that he had told other workers that he was going to
become a co-owner of the business. It appears that the
payer had made certain statements to the Inspector General of
Financial Institutions to the effect that Mr. Bourgeois was
a shareholder, but Mr. Bourgeois says he was in no way
responsible for the statements in question.
[5] With respect to the work he did
for the payer, Mr. Bourgeois says that he was an employee
and that Mr. McLean, as president of the corporation,
"made all the decisions". Mr. Bourgeois worked
from Monday to Friday and received a fixed salary. He says that
the conditions of his employment were those that would be
observed in the case of any employee.
[6] According to the Minister's
initial decision concerning the insurability of
Mr. Bourgeois' employment, that employment was held
pursuant to a contract of service, but, pursuant to
paragraph 5(2)(b) of the Employment Insurance
Act (the "Act"), was not insurable because
Mr. Bourgeois controlled more than 40 percent of the
payer's shares.
[7] Mr. Bourgeois challenged that
decision, and the Appeals Office of the Canada Customs and
Revenue Agency determined that Mr. Bourgeois was not a
shareholder of the payer, but concluded that his employment was
nevertheless not insurable because it did not meet the
requirements of a contract of service. That decision is the
subject of the instant appeal.
Analysis
[8] In concluding that
Mr. Bourgeois was not employed by the payer pursuant to a
contract of service, the Minister appears to have considered only
one aspect of the relationship between Mr. Bourgeois and the
payer, namely the worker's risk of loss in relation to his
work. None of the assumptions of fact made by the Minister
concerns the other aspects of their relationship.
[9] It is case law that a single
four-part test must be applied to determine whether a worker is
an employee or an independent contractor. The four parts of that
test are: control, ownership of the tools, chance of profit and
risk of loss. A consideration of all those parts serves as a
basis for an answer to the central question, which is
"whether the person who has been engaged to perform the
services is performing them as a person in business on his own
account."[1]
[10] In the instant case, I find that the
facts assumed by the Minister formed an insufficient basis for
his conclusion that Mr. Bourgeois was an independent
contractor vis-à-vis the payer. None of the four elements
referred to above is decisive, and all the aspects of the
relationship of the parties must be examined in order to rule on
the question. The burden of proof as to the facts to be
established and those assumed in support of the Respondent's
position is on the Respondent.
[11] The evidence brought before the Court
shows that Mr. Bourgeois was, to a certain degree, subject
to the payer's control and that he worked fixed hours on the
payer's premises for a specified salary. It also appears that
he did not supply his own tools.
[12] The evidence further shows that
Mr. Bourgeois guaranteed the payer's debts in exchange
for a promise that he would receive shares. The guarantees were
not attributable to the fact that Mr. Bourgeois worked for
the payer, and the risk of losing money as a result of those
guarantees did not arise from his contract of employment. The
guarantees were related to Mr. Bourgeois' wish to become
a shareholder. A distinction must be drawn between two statuses,
that of worker and that of shareholder, in an analysis of the
aspects of the work performed by Mr. Bourgeois for the
payer.
[13] Considering all the elements of the
contract of employment between Mr. Bourgeois and the payer,
I find that Mr. Bourgeois was not an independent contractor.
It therefore follows that he held insurable employment during the
relevant period, and his appeal is allowed.
Signed at Ottawa, Canada, this 1st day of September 2004.
Paris J.
Certified true translation
Colette Dupuis-Beaulne
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