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Citation: 2004TCC567
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Date: 20040819
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Dockets: 2003-4549(EI)
2003-4550(EI)
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BETWEEN:
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MURIELLE LATULIPPE,
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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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[OFFICIAL ENGLISH TRANSLATION]
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REASONS FOR JUDGMENT
Tardif J.
[1] These are two separate
appeals. The parties, however, have agreed to proceed on
common evidence for both dockets.
[2] The first appeal, Docket
2003-4549(EI), involves the period beginning August 7, 2000, and
ended November 23, 2001, during which time the Payor was
9073-6976 Québec Inc. ("Company 9073").
[3] The second appeal, Docket
2003-4550(EI), involves the period beginning November 18, 2002,
and ended February 1, 2003, during which time the Payor was
9116-8468 Québec Inc. ("Company 9116").
[4] During the first period at issue,
the voting shares in the Payor were held by the following people
in the proportions indicated:
According to the Payor's share register, the voting shares in
the Payor were held, during the following periods, by:
From January 6, 2000, to April 2, 2001:
- Nancy Latulippe, the Appellant's daughter, 33 1/3% of the
shares;
- The Appellant, 33 1/3% of the shares;
- Paul Gauthier, 33 1/3% of the shares.
From April 3 to June 1, 2001:
- Nancy Latulippe, 100% of the shares.
Since June 1, 2001:
- Nancy Latulippe, 25% of the shares;
- Nicolas Leblanc, the Appellant's spouse, 75% of the
shares;
[5] During the second period at issue,
all of the voting shares in the Payor were held by
Stéphane Turcotte, the spouse of the Appellant's
daughter.
[6] The Appellant, through her
counsel, made certain admissions regarding the facts assumed in
making the determinations under appeal.
· Docket
2003-4549(EI):
He admitted paragraphs 16 (a), (b), (c), (d) and paragraphs 17
(a), (b), (c), (d), and (e), up to the sentence that ends with
the word "invoicing."
16. The Appellant and the Payor are
related within the meaning of the Income Tax Act, because:
(a) The Payor
was incorporated on February 5, 1999;
(b) According to the Payor's share register, the
voting shares were held, during the following periods, by:
From January 6, 2000, to April 2, 2001:
- Nancy Latulippe, the Appellant's daughter, 33 1/3% of the
shares;
- The Appellant, 33 1/3% of the shares;
- Paul Gauthier, 33 1/3% of the shares.
From April 3 to June 1, 2001:
- Nancy Latulippe, 100% of the shares.
Since June 1, 2001:
- Nancy Latulippe, 25% of the shares;
- Nicolas Leblanc, the Appellant's spouse, 75% of the
shares.
(c) from January 6, 2000, to April 2, 2001, the
Appellant was a member of a related group that controlled the
Payor;
(d) since April 3, 2001, the Appellant has been related
to the person who controlled the Payor.
17. [...]
(a) the Payor operated a garage door sales and
maintenance business as Portes de Garages N. Leblanc et Fils;
(b) the Payor hired the Appellant as an office
clerk whose main duties included invoicing, preparing payroll and
submissions, answering the telephone, preparing deposits, and
running errands;
(c) the Appellant generally worked in the Payor's
offices, but she also worked from her residence;
(d) the Appellant's hours of work were not
recorded by the Payor;
(e) during the period at issue, the Payor hired
the following people, in addition to the Appellant, to perform
bookkeeping and accounting:
- an employee from
Raymond Chabot, once per month, to close out the month;
- beginning in June
2000, Nancy Latulippe as secretary, who handled sales marketing
and invoicing;
[...]
However, the Appellant denied or was unaware of paragraphs
17 (e) (last sentence), (f), (g), (h), (i), (j), (k), and
(l). These read as follows:
17. The
Minister determined that the Appellant and the Payor were not
dealing with each other at arm's length with respect to this
employment. The Minister was satisfied that it was not
reasonable to conclude that the Appellant and the Payor would
have concluded a substantially similar contract of employment
between them had they been dealing at arm's length, given the
following circumstances:
[...]
(e) beginning on February 10, 2001, Mr. Bertrand Lavoie
[worked] full-time as an accounting clerk;
(f) the Appellant claims that her employment
began on August 7, 2000, whereas her first paycheque was dated
May 19, 2000;
(g) during 2000, out of the 42 cheques issued by
the Payor to the Appellant, only 14 cheques were identified as
being paycheques; most of the other cheques issued to the
Appellant were for the reimbursement of expenses;
(h) the Appellant claims that she worked 40 hours
per week, for a fixed gross remuneration of $380, whereas in
2000, the net amount of her paycheques ranged from $260 to
$100;
(i) the Appellant claims that she continued to work 40
hours per week after Bertrand Lavoie was hired, whereas she
worked only a few hours per week, often from her home;
(j) the Appellant's minimal duties could not justify 40 hours
of work per week;
(k) on December 11, 2001, the Payor issued a
Record of Employment to the Appellant, showing that August 7,
2000, was the first day of work, and that November 23, 2001, was
the last day paid. It showed 1,120 insurable hours and
remuneration of $4,942.35 for the last 27 weeks of the
period;
(l) the Record of Employment issued by the
Payor to the Appellant does not accurately reflect the first day
of work, the true period during which the Appellant worked, or
the remuneration she earned.
· Docket
2003-4550(EI):
The Appellant admitted paragraphs 15 (a), (b), (c), and
(d) and paragraphs 16 (a), (b), (c), (d), (e), (f), (g), (h)
and (i) which read as follows:
15. The Appellant and the Payor are
related within the meaning of the Income Tax Act, because:
(a)
The Payor was incorporated on February 5, 1999;
(b) Mr. Stéphane Turcotte was the Payor's sole
shareholder;
(c) Mr. Turcotte was the spouse of Nancy Latulippe, the
Appellant's daughter;
(d) the Appellant was related to the person who controlled the
Payor.
16. (a) the Payor operates
a garage door maintenance and repair business;
(b) 9073-6976 Québec Inc. handled the
manufacturing and sale of garage doors;
(c) Mr. Nicolas Leblanc, the Appellant's spouse, managed
the two companies; he was the Payor's general manager;
(d) the Payor hired approximately eight people; three
people worked in the workshop, and the others worked in the
office and in sales;
(e) the Appellant claims that she was hired to help
Nancy Latulippe, her daughter, who worked for the Payor as
secretary and accounting clerk;
(f) the Appellant claims that her duties included
answering the telephone, sending faxes, and cleaning the office,
whereas the Payor claims that she was responsible for filing,
making trips to the post office, preparing submissions, and
cleaning the office;
(g) the Appellant's work hours were not recorded by the
Payor;
(h) the Payor claims that he required the services of
the Appellant for 20 hours per week for office work and that that
Appellant completed her 40 hours per week by cleaning the Payor's
office;
(i) on an undisclosed date, the Payor issued a
Record of Employment to the Appellant showing November 18, 2002,
as the first day of work, February 1, 2003, as the last paid day,
440 insurable hours, and $4,840 of total insurable
remuneration;
However, the Appellant denied or was unaware of paragraph 16
and 16 (j) which read as follows:
16. The Minister determined that
the Appellant and the Payor were not dealing with each other at
arm's length with respect to this employment. The Minister
was satisfied that it was not reasonable to conclude that the
Appellant and the Payor would have concluded a substantially
similar contract of employment between them had they been dealing
at arm's length, given the following circumstances:
(j) the
Appellant's minimal duties could not justify 40 hours of work per
week;
[7] The representatives of the
Payors-Mr. Nicolas Leblanc, Mr. Stéphane Turcotte, the
Appellant, and her daughter, Nancy Latulippe-testified for the
Appellant. Mr. Alain D'Amour, one of the investigators in
this case, testified for the Respondent.
[8] The Appellant's employment was
excluded from insurable employment owing to the non-arm's length
relationship that existed between her and the two Payors; after
exercising his discretion, the Respondent concluded that the
Appellant would not have performed the work in the same manner
and under the same terms and conditions had an arm's-length
relationship existed.
[9] To be successful in this case, it
is essential that the person appealing the decision establish
that, on the balance of probabilities, the Minister of National
Revenue (the "Minister") made one or more errors in examining the
facts. This person must demonstrate that some facts were
discarded in the analysis or that the Minister gave some facts
disproportionate importance, while he marginalized other
facts.
[10] The Appellant and her witnesses did
not, in any way, challenge the quality and objectivity of the
investigation and analysis carried out by the Respondent's
representatives. They essentially claimed and repeated that
the Appellant had, in fact, worked. They described her work
summarily. During the first period, the evidence shows that
the Appellant worked at filing, invoicing, compiling data entered
in the accounting records, and preparing paycheques. She
also answered the telephone, greeted clients, and ran
errands. During the second period, the Appellant's work was
divided into two categories: the first dealt with office work,
and the second involved cleaning and maintenance in the office
and the plant.
[11] In both cases, the description of the
Appellant's duties, the time spent at each duty, the frequency,
etc., was given in ambiguous, even confusing terms at
times. The evidence relating to the maintenance and
cleaning of the premises, which accounted for more than half of
the time entered on the second Record of Employment, was very
confusing and contradictory.
[12] All of the witnesses for the Appellant
testified as though they were dealing with two large
businesses. They spoke as though the two companies enjoyed
considerable patronage that required a mega organization.
In both cases, to explain the end of the activities, reference
was made to an excessively rapid growth. In describing the
size of the premises that required cleaning and maintenance work,
the witnesses mentioned a cafeteria. I asked them a number
of questions about this, and it was determined that it was no
more than a room used by a few of the employees.
[13] In both cases, the managers of the two
companies were insistent about the very high level of importance
of the office and accounting work. They alleged that the
Appellant, her daughter, an accountant who worked once per week
at one time and, subsequently, a person who worked on a full-time
basis to replace the person who came once per week, Mr. Bertrand
Lavoie, handled an enormous workload.
[14] It would have been interesting and
highly relevant to examine the financial statements for both
companies to determine whether the economic activities justified
or supported their human resources requirements. The
Appellant, however, did not find it necessary to file the
documents at issue, even though the two main managers of the
companies were present.
[15] The explanations offered to justify the
use of time and, particularly, the relevance of the Appellant's
work were ambiguous and confused. A number of responses
were worded as follows:
[TRANSLATION]
· "It's
vague, that was some time ago."
· "It's
possible that errors were made; errors are possible."
· "That was
surely an error."
· "It's
possible that I am mistaken."
· "I made a
mistake in the wording."
· "I don't
recall having said that."
· "I did not
think that was important."
· "I don't
remember."
[16] The Appellant and her witnesses signed
statutory declarations as part of the investigation. When
presented with their signed declarations, the witnesses claimed
that they could not remember signing them or that they had made
statements and signed the declarations to get them out of the
way, etc. Nevertheless, the statutory declarations were
signed. Murielle Latulippe, the Appellant, signed her
declaration on April 15, 2003, and Stéphane Turcotte and
Nancy Latulippe signed theirs on April 7, 2003.
[17] It appears that the witnesses' memories
were clearer and more detailed at the time of the hearing than
they were at the time they made the declarations, despite the
fact that the statutory declarations were made closer to the date
of the events. I feel it is relevant to quote some excerpts
from these statutory declarations:
Exhibit I-1, Tab 6, pp. 2-3 - Murielle Latulippe's declaration
dated April 15, 2003:
[TRANSLATION]
... I performed the same tasks for the company as I did
in 1999, such as filing, answering the telephone, and sending
faxes, but I also entered data into the Dynacom system. Ms.
Andrée Bouchard, from Raymond Chabot, came by every
week. Nancy did some accounting, but for the most part, she
handled the advertising.
Regarding Record of Employment A-72769364, issued to me by
9073-6976 Québec Inc., on December 11, 2001, I
acknowledge that the first day of work is false, because I
started working before August 7, 2000. I am aware of cheque
#000111, issued to me in the amount of $260.00, and that it
states that it covers my wages from May 12 to 19, 2000.
(Emphasis mine.)
[...]
For the period of employment shown on the Record of Employment
A-72769364, issued to me by 9073-6976 Québec Inc., I
worked my 40 hours per week from Monday to Friday. However,
sometimes I came in and did the cleaning in the evenings or on
Saturdays. I had no formal work schedule. I could
come in and clean in the evenings and on Saturdays, even though
the company was paying a company to do so...
(Emphasis mine.)
[18] Stéphane Turcotte, the
Appellant's son-in-law and, by far, the most articulate of the
witnesses, also made a statutory declaration. Although he
overstated considerably the time of the meeting following which
he made his statutory declaration, and he implied that he had not
read that declaration, Stéphane Turcotte mentioned the
following facts himself:
Exhibit I-2, Tab 4-Declaration of Stéphane Turcotte,
dated April 17, 2003:
[TRANSLATION]
...9116-8468 Québec... I started my business
in early August 2002 and, until late December 2002, I worked a
minimum of 3 days or more per week. After that, there
wasn't much work... From August 2002 to February 2003, my
spouse, Nancy Latulippe, handled my accounting 40 hours per week,
from Monday to Friday. Nancy was paid weekly. Ms.
Andrée Bouchard from Chabot would come by to close the
books at month end and she would sometimes come in to help
out...
...9116-8468 Québec Inc... Murielle
Latulippe, Nancy's mother, came to help Nancy and do some
cleaning after our contract with Atelier L.P. expired.
Murielle worked for a couple of months; if I remember correctly,
it was around the time that the business wound up...
Upon reading this declaration, if I remember correctly,
Murielle worked two or three months, about 10 to 12 weeks, but
I cannot certify the dates. Murielle did some filing, and
sent faxes; at that time, we were trying to save the
business, so there were a lot of faxes to send...
(Emphasis mine.)
[19] After providing many ambiguous and
confusing explanations, and despite extensive and compelling
documentary evidence, the Appellant refused to admit that she had
worked as a caregiver for her daughter and Stéphane
Turcotte, even though she acknowledged, in a signed document,
that she received over 30 payments of $100.00 each, as well as a
payment of $400.00 on August 30, 2002. Photocopies of
the individual receipts, clearly bearing the Appellant's
signature, corroborate this information.
[20] Overall, the evidence provided by the
Appellant was ambiguous, confused, and contradictory. A
number of explanations remain obscure; I am referring
specifically to the fact that the Appellant received a number of
cheques for "expenses," whereas, for a period spanning a number
of weeks, she was unable to produce a paycheque.
[21] Given that the two Payors had very
close ties (approximately the same vocation-one manufactured and
the other installed and maintained garage doors-similar company
names, same address, same location, most of the employees were
family members, etc.), it was extremely important to file
documented evidence (financial statements), supported by the
testimony of the third parties who worked on the premises and who
could have explained the exact nature and frequency of the
Appellant's work.
[22] On the one hand, this evidence was not
provided, and, on the other hand, the evidence provided was
supported by ambiguous, often confusing, and very incomplete
explanations. Moreover, the Appellant did not, in any way,
challenge or object to the investigation and analyses performed
by the people responsible for this case.
[23] The Appellant's position is very
simple: she claims that she worked, and she would like her work
to be deemed to be insurable.
[24] The Respondent had Mr. Alain D'Amour, a
co-investigator in the Appellant's case, testify. In his
brief testimony, Mr. D'Amour shed some light on the Appellant's
weak evidence and stated that the Appellant had not worked on the
premises as regularly as she had claimed.
[25] Mr. D'Amour made his statement on the
basis of two statutory declarations signed by two former
employees of the Payors. I feel it is important to
reproduce some excerpts from these declarations (Exhibits I-3 and
I-4). The declarations made by Robert Iza and Bertrand
Lavoie, signed on March 31, 2003, reveal the following:
(Exhibit I-3)
[TRANSLATION]
[...] near the end of May 2002, I met Nicolas Leblanc and
Stéphane Turcotte from "Portes de Garage N. Leblanc &
Fils," 9073-6976 Québec Inc. I was hired as a
salesperson.
[...]
Throughout the time I worked there, namely, from the end of
May 2002 to January 2003, I occasionally went to the office, and
at that time, Stéphane and his spouse, Nancy, worked
there. As for Murielle, Nicolas' spouse, she was not
there, I've never seen her there.
(Emphasis mine.)
Near the end, that is, in January 2003, I would go to the
office two or three times a day...
During a discussion I had with Stéphane near the end of
January 200[sic] (the business), Stéphane told me
that he understood why the business was closing, because Nicolas
paid himself a large salary, and he was also paying one to
Murielle, in addition to what he gave her for minding the
children. As far as I know that's what Stéphane
explained to me. Moreover, Nicolas paid for the lease on a
new Ford Explorer.
With respect to the accounting for the business, Nancy
Latulippe, Stéphane's spouse, filed invoices and did some
accounting. Robert Proulx from Chabot came by fairly often,
and I think he must have handled the balance sheets. I
noticed the presence of a lady, who I believe...also from
Chabot, came by to support Nancy and show her how to do the
accounting.
[...]
(Exhibit I-4)
[...] I acknowledge that I worked for Les Portes de Garage
Nicolas Leblanc from February 10, 2001, to April 20, 2002.
I had applied for the position of accountant...I worked from
Monday to Friday, from 8:00 a.m. to 5:00 p.m., and...when I
first started working, Ms. Murielle Leblanc helped me; she
explained to me how things worked and helped me with my duties
afterwards.
With respect to Murielle, Nicolas Leblanc's spouse, she
came to the office sporadically, but I had been ordered by Mr.
Nicolas Leblanc to enter her in the payroll register on a weekly
basis. The cheques issued to Murielle were issued on
the order of Nicolas Leblanc. I found it odd, but after
Murielle received CSST benefits, Nicolas told me to enter her
in the payroll register even though she no longer came to the
store. I acknowledge that Record of Employment number
A-72769364 that I completed for Murielle Latulippe contains false
information relating to her last day of work and the hours of
work. I believe that this was a result of the
business's financial difficulties.
(Emphasis mine.)
To my knowledge, Record of Employment A-72769364, issued to
Murielle Latulippe on December 11, 2001, is the only ROE that
contains false information.
Upon reading this declaration, I would like to make the
following correction: for Nancy, it's the same business, but
there was a change in shareholders in June 2001 (prior to June
2001, Nancy was the majority shareholder).
Beginning on August 26, 2001, Murielle's paycheques were
adjusted on the basis of her progressive return from the
CSST. Mr. Nicolas Leblanc told me to enter her in the
payroll register, even though she no longer worked for
9073-6976 Québec Inc., les portes de Garage
Nicolas Leblanc.
(Emphasis mine.)
I would say that Murielle Latulippe was present more often
during the period in which my employment began, namely February
10, 2001, until the time the migration was completed, near the
end of March 2001; during this period, she would be there between
twenty and thirty hours per week, from Monday to Thursday.
After that time, it was more sporadic, two or three hours per day
from Monday to Thursday, and she did not return after her
accident (lower back sprain while trying to lift a box of
photocopier paper). Ms. Latulippe's [payroll record]
showed 40 hours per week, even though she did not work all of
those hours. Ms. Andrée Bouchard from Raymond
Chabot handled the migration before I started my employment; I
know that Ms. Bouchard came by the business.
(Emphasis mine.)
[...]
[26] Mr. D'Amour also revealed that the
beginning of the Appellant's second period of work for the
company managed by her daughter's spouse coincided with the end
of her entitlement to employment insurance benefits.
[27] Although it is not decisive in itself,
this fact nonetheless confirms the perception given by the
evidence. The balance of probabilities certainly allows for
the conclusion that the two determinations under appeal are based
on an appropriate analysis, performed very judiciously.
[28] I have no doubt that the Appellant
worked for one of the two companies; that, however, is not
sufficient for me to conclude that this work is insurable.
[29] To benefit from the exception provided
for by Parliament, it is essential to demonstrate that, on the
balance of probabilities, the employment at issue was performed
in accordance with terms and conditions that show that the person
at issue did not receive benefits to which he or she was not
entitled or that he or she was not penalized or placed at a
disadvantage, in any way, owing to the non-arm's length
relationship.
[30] In this case, contrary to the claims of
the Appellant as expressed by her counsel, it was not sufficient
to provide evidence that she had worked. It was imperative
to demonstrate that a third party would also have performed this
work in circumstances and conditions that were comparable or
similar to the Appellant's.
[31] Evidence in which the majority of the
components were ambiguous, imprecise, confused, and incomplete is
obviously not the best way to discharge this burden of proof,
particularly where the opposing party provides credible,
irrefutable facts that support the opposite of what the Appellant
needed to demonstrate in order to be successful.
[32] For all of these reasons, the two
appeals are dismissed.
Signed at Ottawa, Canada, this 19th day of August
2004.
Tardif J.
Translation certified true
on this 28th day of February 2005.
Colette Dupuis-Beaulne, Translator
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