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Citation: 2004TCC236
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Date: 20040322
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Docket: 2003-1849(EI)
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BETWEEN:
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TIP INVESTMENT ADVISORS LTD.,
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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]
REASONS FOR JUDGMENT
Lamarre
Proulx, J.
[1] This
is an appeal from a decision of the Minister of National Revenue (the “Minister”)
dated March, 7, 2003, to the effect that the employment of Mr. Jean‑Charles Dubois
with the Appellant was insurable employment from January 1, 2002 to August 26,
2002, within the meaning of the Employment Insurance Act (the “Act”).
[2] The
Minister’s decision was based on the facts described in paragraph 5 of the
Reply to the Notice of Appeal (the “Reply”) which read as follows:
a) the Appellant
was incorporated on April 23, 1990;
b) the Appellant
ran an investment fund advisory firm;
c) the worker
was hired as vice-president of operations and the data processing system;
d) the worker’s
annual salary when he was hired was $72,000 and he had four weeks of vacation a
year;
e) the worker’s
work schedule was from 9:00 a.m. to 5:00 p.m., Monday to Friday;
f) the worker
worked in the payer’s offices;
g) the worker’s
comings and goings as well as the number of hours he worked were controlled by
the payer;
h) the payer
gave the worker specific instructions and objectives to achieve;
i) the payer
provided the worker with all the equipment required as well as a computer and a
cellular telephone;
j) the worker
was paid $6,000 a month;
k) the worker
was entitled to sick leave;
l) the payer
reimbursed the worker’s travelling expenses;
m) the worker did
not have chance of profit or risk of loss in the course of his duties with the
payer;
n) the worker’s
duties were fully integrated into the payer’s activities.
[3] The
following facts are provided in the notice of appeal:
RELEVANT
FACTS
Mr. Jean‑Charles Dubois was a
director at TIP INVESTMENT ADVISORS LTD (“TIP ADVISORS”) and at the public
investment fund company TIP FUNDS CANADA LTD (“TIP FUNDS”) and his role was to
complete the transfer of the electronic fund management system (back‑office)
and the electronic pricing system (pricing).
TIP FUNDS CANADA LTD is a public
entity, which means that pursuant to the Quebec Securities Act it is an
issuer required to rigorously comply with this Act. Consequently, in order to
hold the position Mr. Dubois held, under the Act, the candidate must be an
executive or director of the company, not an employee. Although Mr. Dubois
held this position, he in fact managed his own computer consulting firm, ARISKA
INC, and he was hired as a consultant. Mr. Dubois’ main occupation was
President of ARISKA Inc., an information technology management consultancy firm
specializing in risk management strategy and decision-making. This information
is available in public documents and on SEDAR (on-going disclosure service for public
companies).
During the period at issue, Mr.
Dubois was required under the Act to be a director, which he was. Mr. Dubois
also acted as a consultant on behalf of his firm in the back-office and pricing
transfer. Mr. Dubois was asked to carry out the specified transfer to the best
of his abilities. As a computer professional, TIP ADVISORS gave him the
freedom to manage his own time and he was not required to work a mandatory
schedule set by TIP ADVISORS. Further, since Mr. Dubois owned his own
firm, which had other clients, his sole income was not from TIP ADVISORS.
GROUND
OF APPEAL
Based on the foregoing relevant
facts, the Minister of Revenue’s decision is erroneous because there is no
subordinate relationship between TIP ADVISORS and Jean‑Charles Dubois.
The latter was hired by TIP ADVISORS as a consultant for the specific purpose
of managing the computer system and carrying out the back-office and pricing
transfer. He managed his own firm; TIP ADVISORS did not dictate his hours of
work; and above all, he was not required to work on TIP premises because he
could do the work from his home. Further, he had his own clients and there was
no economic dependency between him and TIP ADVISORS. Finally, for the time he
spent managing the computer system, Mr Dubois acted not only as a
consultant but also as a director of TIP ADVISORS and TIP FUNDS.
[4] Mr.
Paul Gagné, President and principal shareholder of the Appellant,
testified on the Appellant’s behalf. Paragraphs 5 (a) and 5 (b) were
accepted. Paragraphs 5 (c), 5(f), 5(h), 5 (i) and 5(l) were
denied as written. Paragraphs 5 (d), 5 (e), 5 (g), 5(j),
5 (k), 5 (m) and 5 (n) were denied.
[5] Mr.
Gagné explained that the Appellant is a portfolio management firm or an advisor
with unrestricted practice pursuant to the Quebec Securities Act. Mr.
Gagné explained the Appellant’s activities in more detail, but since these
activities are neither essential nor required for determining the outcome of
this appeal, I will not provide a description that would not be accurate.
[6] Mr.
Gagné has known Mr. Dubois since 1998. In May 2001, he asked him to join the
Appellant corporation as a director on the board of directors. He also retained
the services of Ariska, a corporation controlled by Mr. Dubois. This corporation
had been hired to do the Appellant’s bookkeeping and to develop a computer
system.
[7] Mr.
Gagné explained that toward the end of September or early October of 2001, Mr.
Dubois told him that he had not received other contracts and would be interested
in becoming a full-time employee of the Appellant. At that point, he was
allegedly hired as the Appellant’s operations manager.
[8] Exhibit
A‑2 contains an unsigned contract dated October 10, 2001, which confirms
the fact that Mr. Dubois was hired as operations manager and that he
continued to hold his director position on the board of directors. Mention is
made in this document that the salary would be paid the consulting firm as
professional fees. Mr. Gagné said that Mr. Dubois asked to continue to work
as a consultant until the end of 2001.
[9] In
December 2001, Mr. Gagné said that he suggested he pay Mr. Dubois about $6,000
a month the next year. He did not find this proposal, despite the fact that he
looked everywhere for it. Nevertheless, starting in January 2002,
Mr. Dubois was paid directly, not his corporation.
[10] However, in mid-January, the Appellant’s lawyers pointed out that
pursuant to the Quebec Securities Act, two of the three directors of the
Appellant, in its capacity as funds manager, were required to be to some extent
independent. They could not be the Appellant’s employees. The three directors
were Messrs. Gagné, Antoine Dagher and Dubois.
[11] Mr. Gagné told Mr. Dubois in late January or early February that it
would be better if Mr. Dubois’ corporation were paid instead of Mr. Dubois
himself. However, Mr. Dubois told him he would rather be paid personally and
he wanted the Appellant to make source deductions. The Appellant’s accountant
allegedly told Mr. Gagné that he would issue Mr. Dubois a T4A instead of a T4
which would mean that he was a self-employed worker, not an employee. No
documents were provided in this regard.
[12] Mr. Gagné entered a few documents as Exhibit A‑3 in connection
with an employee’s request for certification in order to be entitled to the
partial tax exemption for employees of international financial centres. Mr.
Gagné stated that Mr. Dubois never obtained this confirmation because the
Appellant never applied for it for him. The Appellant therefore did not
consider him an employee.
[13] Mr. Gagné stated that Mr. Dubois set his own work schedule. His hours
were not controlled. Mr. Gagné also stated that Mr. Dubois was not entitled to
any vacation. He had allegedly not worked during the month of July after his
father died, and then took a few weeks of vacation.
[14] In the office, Mr. Dubois had a workstation equipped with a computer.
When he travelled, the Appellant provided him with a laptop computer. The
Appellant reimbursed his traveling expenses. Mr. Dubois had his own equipment
at home. He had access to the office server. The software belonged to the
Appellant. The Appellant provided his high-speed Internet access.
[15] Mr. Dubois is still paid $6,000 a month, less source deductions.
[16] A meeting was held in February with Mr. Dubois, Mr. Gagné and the
other director, Mr. Antoine Dagher. Messrs Gagné and Dagher allegedly
explained to Mr. Dubois that he could be a consultant, but not the Appellant’s
employee. He was given a letter to this effect dated February 12, 2002 at this
meeting (Exhibit A‑4).
[17] Exhibit A‑5 contains documents provided to the securities
commission which Mr. Dubois signed in his capacity as director of the
Appellant’s board of directors.
[18] A bundle of documents was entered as Exhibit A‑6; one of these
documents is a photocopy of a letter handwritten by Mr. Dubois to Mr. Gagné
dated August 8, 2002. This letter reads as follows:
I would hereby like to confirm my
resignation from my position at Tip Investment Advisors Ltd.
I would also like to confirm my
resignation as director of Tip Funds Canada Ltd. and from Tip Investment
Advisors Ltd.
These resignations are effective
today.
[19] Mr. Gagné responded to Mr. Dubois in a letter dated August 13, 2002
(Exhibit A-6), which reads as follows:
As discussed recently, we do not
accept your letter of resignation dated August 8. You have not completed your
current contract or allowed an employee to replace you to be properly trained.
I feel that this will take
approximately 10 to 15 business days, after which time your resignation
may be accepted.
We also discussed our surprise at
your decision. I strongly suggest that you consult accounting and legal
advisors, after which we should schedule a meeting to identify the cause of
your hasty decision.
[20] Mr. Dubois wrote another letter dated August 30 (Exhibit A-6)
which he typed. It reads as follows:
Further to your letter of August 13
last, I am writing to confirm my resignation as an employee and a director of
the above-mentioned corporations. This resignation is effective August 8, 2002
as indicated in my original letter of resignation dated August 8.
As discussed, by departure was made
necessary following the discovery of a number of irregularities in the
management and administration of TIP funds.
After a discussion, I agreed, for
the good of the above-mentioned corporations and their shareholders, to
continue to work as an employee solely for TIP INVESTMENT ADVISORS LTD until
August 29. This should be in no way interpreted as an extension of my
employment or my functions as a director, but solely to delay my departure and
allow for a seamless transition. Notwithstanding this undertaking, you asked
me on August 26 to leave the office immediately and I did.
Consequently, I consider my
relationship with the above-mentioned corporations to be terminated and I await
the amounts and shares I am owed.
[21] In the cross-examination phase, counsel for the Respondent entered
Exhibit I‑1, a photocopy of an e-mail message dated March 20, 2002,
which reads as follows:
As discussed, your employment will
be maintained at Tip Advisors. This includes four weeks of paid vacation. The
base salary is $72,000 per annum plus benefits, such as profit sharing, etc.
Paul Gagné
[22] Mr. Gagné stated that he never sent this e-mail message, that it is a
forgery.
[23] He said that the worker worked where he wanted in order to carry out
his mandate. He admitted that the Appellant had given Mr. Dubois a cellular
telephone, but it was so that he could be reached at any time.
[24] During his testimony, Mr. Dubois stated that Exhibit I‑1, the
e-mail message received from Mr. Paul Gagné, is authentic. He said he
worked from 9:00 a.m. to 5:00 p.m. He sometimes worked in the evening or on
weekends in crisis situations, but usually worked regular office hours. He
explained that it was practically impossible to do the work at home; a few
minor tasks occasionally when he was sick, but he normally worked at the office.
Because of the work involved, he had to have a computer with specialized
software which was only on the computer in the office.
[25] When he started working as an employee in January 2002, he was paid
$6,000 a month, $72,000 a year. His paycheque was made out to him personally,
not his corporation.
[26] He entered as Exhibit I‑2 a computer printout of his bank
account which shows the monthly deposits received from the Appellant. Exhibit
I‑3 contains information on source deductions. From Mr. Dubois’ $6,000
monthly salary, the Appellant deducted $892.45 in federal taxes, $131.95 for
the employee’s share of employment insurance, $510.52 in Quebec income tax, and
$134.62 for the Quebec pension plan, for a total net paycheque
of $4,330.46. The employer’s share of employment insurance was $79.51 and for
the Quebec pension plan, $134.62. When he received
his cheques, no stubs were attached.
[27] He was entitled to four weeks of vacation. He took three weeks of
vacation which, in fact, coincided with the death of his father.
[28] A copy of Mr. Dubois’ business card was entered as Exhibit I‑5.
This was the card that the Appellant gave him. Mention is made on it that Mr.
Dubois is the Vice-President of Systems and Operations.
[29] He received the certificate for employees of international financial
centres. It was one of the reasons he wanted to be a permanent employee of the
organization. The manager registered the candidates and he was still waiting
for this confirmation, which in the end he never received. However, we noted
that among the deductions, the provincial salary deduction takes into account
50% of the tax reduction, so he thought he had indeed been registered.
[30] Mr. Dubois said that when he received the A‑4 letter, he went
away for a few weeks, but then reiterated to Mr. Gagné that he wanted to be an
employee, which was confirmed by Exhibit I‑1, the e-mail message he was
sent dated March 20, 2002.
[31] Mr. Antoine Dagher testified. He sat on the Appellant’s board of
directors. He attended a meeting with Mr. Dubois and Mr. Gagné in early
February 2002. The purpose of this meeting was to inform Mr. Dubois that they
no longer wanted him to be an employee. He could stay on as a consultant and
complete his mandate, but he could no longer be an employee. Mr. Gagné
allegedly did not suggest Mr. Dubois be an employee without consulting him
in this regard. According to the witness, the letter dated February 12, 2002,
was provided at that meeting.
[32] Counsel for the Appellant referred to Groupe Yoga Adhara inc. c. La
coopérative de travail Le Collège de Saint‑Césaire, [1998] J.Q.
No 4780 (Q.L.), a Quebec Superior Court decision dated July 15,
1998. He referred to paragraph 23 of that decision:
[Translation]
With regard to the last two
criteria specified in Article 2099, it must first be noted that the
plaintiff herself admitted that she was free to choose the means of performing
the contract, which excludes a relationship of subordination. Further, the
fact that the pupils, schedule and premises were provided by the respondent
could not, in the opinion of the Court, be recognized as a criterion in
assessing a relationship of subordination, since the plaintiff undertook in
fact, in the contract, to provide the R.E.M. program to the Collège pupils from
Monday to Thursday every week and the respondent undertook in consideration to
provide proper premises. The plaintiff, the client, establishes the result and
retains the right to ensure that the services rendered are in compliance with
the contract. There does not have to be an absolute arm’s length
relationship between the client and the provider of services.
[33] Counsel for the Appellant also cited Canada (Attorney General) v. Rousselle (F.C.A.), a Federal Court decision, [1990] F.C.J.
No 990 (Q.L.), at page 3:
In my view, it is clear that the judge did not understand the meaning of
the word "control". Fixing the amount of remuneration or
defining the purpose of the exercise is not controlling work. These
aspects exist in a contract for services as much as in a contract of
service. It is still more the case that control does not lie in the
act of payment, whether by cheque or otherwise.
Finally, the fact of giving instructions on the type of wood to be cut and
checking it when it is measured does not in itself create a relationship of
subordination like that which exists between an employer and an employee.
[34] Counsel for the Respondent cited the Federal Court of Appeal decision
in Groupe Desmarais Pinsonneault & Avard Inc. v. Canada (Minister of National Revenue), [2002] F.C.J. No 572 (Q.L.), at
paragraphs 4 to 6:
4] In concluding
that there was no relationship of subordination between the workers and the
defendant, the trial judge does not appear to have taken into account the
well-settled rule that a company has a separate legal personality from that of
its shareholders and that consequently the workers were subject to the
defendant's power of supervision.
5] The question
the trial judge should have asked was whether the company had the power to
control the way the workers did their work, not whether the company actually
exercised such control. The fact that the 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.
6] We would add
that the trial judge could not conclude there was no relationship of
subordination between the defendant and the workers simply because they
performed their daily duties independently and without supervision.
[35] The evidence was proven in all of the facts described in the Reply.
However, I feel that the statements in paragraphs 5(g) and 5(h) may not be as
absolute as they are in the document. These statements are merely the comings
and goings of the worker, the number of the hours worked that were controlled
by the payer, and the fact that the payer gave the worker specific instructions
and objectives to be achieved. The Appellant had confidence in Mr. Dubois’s
professionalism. His hours did not seem to be closely monitored. At any rate,
this control over hours does not seem to be a bone of contention between the
parties. I feel, however, that he went in to the office as he indicated from 9
a.m. to 5 p.m. The software he used was in the office.
[36] In 2001, Mr. Dubois may, as a self-employed worker for his corporation
Ariska Inc., have carried out duties very similar to those carried out in 2002.
It is possible that they may have been duties that can be carried out by
sub-contractors or by employees.
[37] They are, then, working conditions that are rather neutral. Under
these circumstances, based on the recent Federal Court of Appeal ruling, the
mutual intention of the parties must be examined. See Wolf v. Canada, [2002] F.C.J. No. 375 (Q.L.), Poulin v.
Canada (Minister of National Revenue), [2003] F.C.J. No. 141
(Q.L.) and D & J Driveway Inc. v. Canada (Minister of National Revenue), [2003] F.C.J. No. 1784 (Q.L.).
[38] The parties’ mutual intention here is unclear. One party wanted to
have employee status and the other wanted him to have consultant or
self-employed worker status.
[39] What I can, however, see from the evidence is that Mr. Dubois
always asked that he carry out his duties as an employee and that the Appellant
let him believe by its actions that such was the case. As of January 2002, Mr.
Dubois was paid personally. The source deductions were made, including employment
insurance. The T4A slip mentioned in paragraph 11 of these Reasons was not
provided. It is a prescribed form. I can therefore refer to it. On the front
of the form itself, there is no box for employment insurance deductions, but
there is one on the T4 slip for employment income. The federal tax deducted
was twice the amount of the provincial tax deduction, which indicated to Mr.
Dubois that he was an employee for whom the Appellant had requested an
exemption for an employee of an international financial centre.
[40] He was provided with a computer and software at the office. The
Appellant also provided him with a laptop computer when he traveled. He was
also given a cellular telephone.
[41] Mr. Dubois did not have any other duties than those he carried out for
the Appellant. He did not have any employees and he was not replaced by anyone
else. He had duties to carry out and he did so at the office, during office
hours. The evidence did not show any entrepreneurial activities on the worker’s
part.
[42] The worker’s work terms, conditions and circumstances as accepted by
the Appellant to obtain services from the worker were normal for an employee.
I must therefore conclude that during the period at issue, Mr. Dubois was the
Appellant’s employee.
[43] The appeal is therefore dismissed.
Signed at Ottawa, Canada, this 22nd day of March
2004.
Lamarre
Proulx, J.
Translation
certified true
on this 6th
day of January 2005.
Wendy Blagdon,
Translator
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