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Citation: 2003TCC207
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Date: 20030414
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Dockets: 2000-21(EI)
2000-22(EI)
2000-25(EI)
2000-26(EI)
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BETWEEN:
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LIONEL ARSENEAULT,
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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 dockets:
2000-30(EI)
2000-31(EI)
2000-35(EI)
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BETWEEN:
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ESTATE OF
MR. LÉON ARSENEAULT,
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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
Angers, J.T.C.C.
[1] Before
the Court are seven appeals, heard on common evidence at Sept‑Îles,
Quebec, on October 21, 2002. The appellants have appealed to this Court
from decisions by the Minister of National Revenue ("the Minister")
that their employment during certain periods was not insurable on the ground
that during those periods they were employed, not by "Nico Pêche
Internationale Inc." (hereinafter "the buyer Nico") or by
"Poséidon, Poissons and Crustacés Inc." (hereinafter "the buyer
Poséidon"), but by "2430-8256 Québec Inc." (hereinafter "the
payor") with the result that the appellants could not take advantage of
the provisions set out in the regulations applicable to fishermen made under
the Unemployment Insurance Act and now the Employment Insurance Act
("the Act") during the years at issue.
[2] In
all these appeals, the Minister's decision is dated October 1, 1999. In
docket 2000-21(EI), the periods at issue are from April 26 to
October 25, 1992, from May 27 to October 2, 1993, from
May 19 to September 25, 1994 and from June 3 to September 5,
1995. This docket involves the buyer Nico.
[3] In
docket 2000-22(EI), the period is from May 13 to November 1, 1997;
this docket involves the buyer Poséidon. In docket 2000-25(EI), the periods are
from June 26 to October 7, 1994 and from June 3 to November 3,
1995; this docket involves the buyer Poséidon. Docket 2000-22(EI) covers the
periods from September 23 to October 2, 1993 and from August 30
to November 2, 1996 and involves the buyer Poséidon.
[4] Docket
2000-35(EI), in which the appellant is the Estate of Mr. Léon
Arseneault, covers the periods from May 3 to November 14, 1992,
from May 27 to October 2, 1993, from May 19 to
September 25, 1994 and from June 3 to September 5, 1995 and
involves the buyer Nico. Docket 2000-31(EI) covers the period from May 13
to November 1, 1997 and involves the buyer Poséidon. The last docket,
2000-30(EI), covers the periods from September 26 to October 20,
1993, from October 15 to October 29, 1994, from September 16 to
November 3, 1995 and from April 30 to November 2, 1996 and involves the buyer Poséidon.
[5] At
the hearing, all except the last of the assumptions of fact on which the
Minister relied in reaching his decision were admitted. In the four appeals by Lionel
Arseneault, with the exception of the identity of the buyer of the catches
the facts are identical and read as follows:
(a) The payor,
incorporated on March 9, 1987, owns a fishing vessel, the
"Wilson", used to fish scallops in the Natashquan, Îles d'Anticosti
and Betchouan sectors. (admitted)
(b) Since
December 18, 1991, the appellant and his brother, Léon Arseneault, have
been the sole shareholders in the payor; the appellant held
49 per cent of the shares and Léon held 51 per cent of the
shares. (admitted)
(c) On
August 31, 1992, Léon sold 2 per cent of his shares to the
appellant; since that date, the appellant has held 51 per cent of the
shares in the payor and Léon has held 49 per cent of the shares in
the payor. (admitted)
(d) As at
December 31, 1992, the payor's financial statements indicated that it
owned a vessel valued at $110,028 and fishing gear valued at $65,033. (admitted)
(e) During the
periods at issue, the appellant worked aboard the payor's vessel as captain. (admitted)
(f) Depending on
the year, the fishing season runs from May to late October or early
November. (admitted)
(g) During the
periods at issue, the appellant fished with, as regular crew members: Léon
Arseneault, André Arseneault, Robert Arseneault, Yves Arseneault, Wilson
Arseneault and occasionally Francine Nadeau. (admitted)
(h) André, Robert
and Yves Arseneault are the brothers of the appellant and of Léon Arseneault.
Wilson is the son of Léon Arseneault and Francine Nadeau is the spouse of the
appellant. (admitted)
(i) In 1992, the
payor sold its catches exclusively to the buyer. (admitted)
(j) In 1993,
1994, 1995 and 1996, the payor sold its catches to the buyer and to
"Poséidon, Poissons et Crustacés Inc." (admitted)
(k) The appellant
holds a fishing licence issued by Fisheries and Oceans for one or more
given sectors; this type of licence may not be issued to a corporation. (admitted)
(l) During the
periods at issue, the payor paid all the costs related to the appellant's
licence, paid all the operating expenses of the vessel, and received the
proceeds of the sale of the fish. (admitted)
(m) The appellant
paid no expenditures related to the vessel. (admitted)
(n) In 1992, the
appellant was paid on the basis of the gross catches. (admitted)
(o) From 1993 to
1996, the appellant received from the buyer weekly earnings and, in return, T4
or T4F slips. (admitted)
(p) The Records
of Employment issued by the buyer in the appellant's name are all false
concerning the number of weeks worked. (denied)
[6] In
the appeals by the Estate of Mr. Léon Arseneault as well, with the
exception of the identity of the buyer of the catches the facts are identical
to those in the appeals by Lionel Arseneault. The facts assumed by the
Minister and admitted by the appellants show that the appellants received
weekly wages during all the years at issue, except in 1992 when the wages were
based on a percentage of the catches.
(a) The payor,
incorporated on March 9, 1987, owns a fishing vessel, the
"Wilson", used to fish scallops in the Natashquan, Îles d'Anticosti
and Betchouan sectors. (admitted)
(b) Starting on
December 18, 1991, the worker and his brother, Lionel Arseneault, were the
sole shareholders in the payor; Lionel Arseneault held 49 per cent of
the shares and the worker held 51 per cent of the shares. (admitted)
(c) On August 31,
1992, the worker sold 2 per cent of his shares to his brother Lionel;
starting on that date, Lionel held 51 per cent of the shares in the
payor and the worker held 49 per cent of the shares in the payor. (admitted)
(d) As at
December 31, 1992, the payor's financial statements indicated that it
owned a vessel valued at $110,028 and fishing gear valued at $65,033. (admitted)
(e) During the
periods at issue, the worker worked aboard the payor's vessel. (admitted)
(f) Depending on
the year, the fishing season runs from May to late October or early
November. (admitted)
(g) During the
periods at issue, the worker fished with, as regular crew members: Lionel
Arseneault, André Arseneault, Robert Arseneault, Yves Arseneault, Wilson
Arseneault and occasionally Francine Nadeau. (admitted)
(h) André, Robert
and Yves Arseneault are the brothers of the worker and of Lionel Arseneault.
Wilson is the son of the worker and Francine Nadeau is the spouse of Lionel
Arseneault. (admitted)
(i) In 1993,
1994, 1995 and 1996, the payor sold its catches to the buyer and to "Nico
Pêche Internationale Inc." (admitted)
(j) The worker
held a fishing licence issued by Fisheries and Oceans for one or more
given sectors; this type of licence may not be issued to a corporation. (admitted)
(k) During the
periods at issue, the payor paid all the costs related to the worker's licence,
paid all the operating expenses of the vessel, and received the proceeds of the
sale of the fish. (admitted)
(l) The worker
paid no expenditures related to the vessel. (admitted)
(m) From 1993 to
1995, the worker received from the buyer weekly earnings and, in return, T4 or
T4F slips. (admitted)
(n) The Records
of Employment issued by the buyer in the worker's name are all false concerning
the number of weeks worked. (denied)
[7] At
issue in these appeals is whether the appellants' employment during the periods
at issue is insurable under the Act (the Employment Insurance Act
and the Unemployment Insurance Act) and specifically the regulations
applicable to fishermen made under the old Act and the Employment
Insurance (Fishing) Regulations made under the new Act. In other
words, are the appellants fishers under the two statutes and their respective
regulations?
[8] The
appellants called as a witness Omer Rail, who has been president, chief
executive officer and owner of the buyer Poséidon for 14 years. Mr. Rail
stated that his corporation purchased the catches of approximately
40 fishers. He noted that, four or five years after starting up his
business, he had certain difficulties concerning unemployment insurance and the
insurability of the fishers' employment. This witness explained that, after
receiving instructions from a Revenue Canada employee, his corporation always
paid the employer's contribution to the Employment Insurance/Unemployment
Insurance premiums, but only for the captains who owned their vessels, since
his corporation was deemed to be their employer. Where the fishers' helpers
were concerned, the fishing corporation was responsible for paying the
employer's contribution. Mr. Rail adduced in evidence a copy of a pay slip
confirming his statements, and stated that he had followed this procedure
concerning the two appellants. He concluded by stating that he did not invoice
administrative costs to the fishing corporations, and that all the plants and
businesses like his own followed a similar procedure. In the case of his
corporation, the appellants received fixed weekly wages.
[9] Denis
Hamel, an appeals officer at Revenue Canada, explained that it is normal for
the corporations that buy fish to pay the employer's contribution because they
are deemed to be the employer under the regulations made pursuant to the Act.
In practice, some buyers invoice this expense to the captains, some include it
in their administrative costs, and some also invoice it as a payroll expense
that they pay to the fishing corporation.
[10] Louise Dessureault, the insurability officer, explained that in this
case the catches from the "Wilson" belonged to its owner, that is,
the corporation 2430‑8256 Québec Inc. The wages of the two appellants are
taken from the proceeds of the catch. If the corporation 2430-8256 Québec Inc. did not exist, the two appellants would be deemed to be
self-employed workers and, under the regulations, the buyer would be deemed to
be their employer.
[11] We must therefore ask ourselves if the fact that the appellants set up
a corporation jeopardizes the fishers' rights to income security provided by
the Unemployment Insurance/Employment Insurance program. Does the existence of
a corporation stand in the way of the application of the regulations applicable
to fishers made under the Act?
[12] We must recall that the regulations governing benefits for fishers are
quite specific since they allow independent and self-employed fishers to be
insured as if their buyers were their employers. These regulations are
therefore an exception to the general rule since they make it possible to
insure self-employed or independent workers, that is, workers who are not bound
by a contract of service.
[13] The regulations made under the Unemployment Insurance Act
define "fisherman" as follows:
74.(1)
"fisherman" means a self-employed person engaged in fishing and
includes a person engaged, other than under a contract of service or for his
own or some other person's sport,
(a) in making a catch,
(b) in any work incidental to
making or handling a catch, whether such work consists of loading, unloading,
transporting or curing the catch made by the crew of which he is a member or of
preparing, repairing, dismantling or laying-up the fishing vessel or fishing
gear used in making or handling the catch by that crew if the person engaged in
any such incidental work is also engaged in making the actual catch, or
(c) in the construction of a
fishing vessel for use by himself or by a crew of which he is a member in
making a catch;
[14] As well, sections 75 and 76 provide as follows:
75. Any person who is a
fisherman shall be included as an insured person and, subject to this Part, the
Act and any regulations made under the Act apply to that person with such
modifications as the circumstances require.
76.(1) For all purposes of
the Act and any regulation made thereunder, the employer of a fisherman shall
be the person determined as such in accordance with this section.
(2) Where a catch is delivered
in Canada to a buyer or to a buyer’s agent by a member of the crew that made
the catch and, in a declaration made pursuant to section 82, the members of
that crew are declared to share in the returns from the sale of the catch, the
buyer shall be regarded as the employer of all fishermen who are members of
that crew and who share in such returns.
[. . .]
[15] Section 78 of these regulations has to do with how a fisherman's
earnings are determined. I reproduce here only subsections (1) and (2):
78.(1) The determination of
the earnings of a fisherman shall be made only as provided in this section.
(2) The earnings of a
fisherman shall, subject to subsection (4), be the amount paid or payable
to him in respect of a catch, after deducting the value of any portion of the
catch not caught by the crew of which he is a member, and in accordance with
the share arrangement as declared pursuant to section 82.
[...]
[16] The regulations made under the Employment Insurance Act define
the term "fisher" as follows:
"fisher" means a self-employed
person engaged in fishing and includes a person engaged, other than under a
contract of service or for their own or another person's sport,
(a) in making a catch;
(b) in any work incidental to making
or handling a catch, whether the work consists of loading, unloading,
transporting or curing the catch made by the crew of which the person is a
member, or of preparing, repairing, dismantling or laying-up the fishing vessel
or fishing gear used by that crew in making or handling the catch, where the
person engaged in any such incidental work is also engaged in making the catch;
or
(c) in the construction of a fishing vessel for
their own use or for the use of a crew of which the person is a member in
making a catch.
[17] The determination of the employer is the subject of section 3. I
reproduce here subsections (1) and (2):
3.(1) For the purposes of the Act and any regulations
made under the Act, the employer of a fisher shall be any person included as
such by this section.
(2) Where a catch is delivered in Canada to a
buyer or to a buyer's agent by a member of the crew that made the catch, the
buyer shall be considered to be the employer of all fishers who are members of
that crew and who share in the proceeds from the sale of the catch.
[...]
[18] Earnings are determined in accordance with section 5; I reproduce
here subsections 5(1) and 5(2):
5.(1) The earnings of a fisher shall be determined as
provided by this section.
(2) The earnings of a fisher are the amount paid
or payable to the fisher in respect of a catch, in accordance with the share
arrangement, after deducting the value of any portion of the catch not caught
by the crew of which the fisher is a member.
[...]
[19] The characteristics that allow a fisher to qualify for Unemployment
Insurance/Employment Insurance are first and foremost to be a self-employed
worker who is engaged in fishing in accordance with the definition set out in
the regulations, with the exception of a person bound by a contract of service.
[20] The facts admitted by the appellants indicate that 2430-8256 Québec
Inc. has been incorporated since 1987 and that the appellants are the two sole
shareholders. The corporation owns the vessel and the fishing gear, and the two
appellants worked aboard the vessel with a crew. The corporation concerned
owned the catches and sold them to the buyers. It also paid all the costs
related to the appellants' licence and the operating expenses of the vessel.
The appellants paid no expenditure related to the vessel. They received fixed
wages, except in 1992 when they received a percentage of the income from the
gross catches. This information was sent to the buyers, which paid the
appellants accordingly. After all the expenses are calculated, the net amount
from the catch is paid to the corporation. When there is no corporation, the
catches belong to the captain, who pays the costs and the operating expenses
and to whom the net amount from the catch belongs.
[21] Counsel for the respondent has argued that the appellants may not be
considered self-employed workers since they do not met the requirements
established by the case law for being self-employed workers. In applying the
tests established in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C.
553, which were recently ratified by the Supreme Court of Canada in Sagaz
Industries Canada Inc. et al. v. 671122 Ontario Limited, [2001] 2
S.C.R. 983, the respondent has argued that the two appellants were subject to
the control of the corporation notwithstanding the fact that they themselves
were the shareholders in the corporation and regardless of whether that control
was exercised, because there is a legal entity separate from the appellant
shareholders. This counsel added that the appellants assume no risk of loss
because the corporation assumes that risk, and the appellants have no right to
any profit since the net catch belongs to the corporation and the appellants receive
wages. The ownership of the tools is the corporation's, which means that the
appellants in this case are employees, not self-employed workers, according to
the definition of the term "fisher".
[22] On the other hand, counsel for the appellants has called for a broad
interpretation of the regulations applicable to fishers in order to respect the
objective of these regulations, which is to provide fishers with Unemployment
Insurance/Employment Insurance benefits. This counsel has argued that the existence
of a corporation does not stand in the way of the application of the
regulations in this case and that here there is no contract of service between
the corporation and the appellants.
[23] In my opinion, it is impossible to ignore the existence of a duly
incorporated entity. The main feature of such an entity is that it has all the
characteristics of a legal person; it is set up in response to a need of the
shareholders at the time of incorporation. That said, the disadvantages caused
by the existence of the corporation must be accepted along with the benefits
and advantages it brings. The reasons that led the appellants to set up the
corporation 2430‑8256 Québec Inc. were not presented at the hearing, and
I do not believe they are relevant to the settlement of this dispute.
[24] I must therefore determine the legal relationship that existed between
the appellants and the corporation 2430-8256 Québec Inc., that is, whether
there was between them a contract of service or a contract for services during
the periods at issue. Given the facts admitted and applying the above-mentioned
tests set out in Wiebe Door, I consider that the appellants were bound
to 2430-8256 Québec Inc. by a contract of service. The corporation exercised
control over the way these employees performed their duties. In Groupe
Desmarais Pinsonneault & Avard Inc. v. Canada (Minister of National Revenue
- M.N.R.), [2002] F.C.J. No. 572 (F.C.A.), Noël J. wrote as
follows concerning the control test, at paragraph 5:
[...] 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.
The force that directed the fishing
activities was the corporation's board of directors since the corporation could
in fact intervene and did direct the appellants' activities.
[25] The test of chance of profit and risk of loss points only to the
corporation. Except in 1992, the appellants received wages, which left the
corporation with the risk of loss and the chance of making a profit. The net
income from the catch belonged to the corporation even though in 1992 the
appellants were paid a percentage of the income. As well, the appellants paid
no expenses. The tests of ownership of the tools and integration point to the
existence of a contract of service. The vessel and the gear belong to the
corporation, and the appellants are clearly integrated into the corporation and
have a great interest in it since they are the shareholders in it. In my
opinion, all the tests point to a contract of service between the appellants
and the corporation.
[26] Counsel for the appellants has asked me to give the applicable
regulations a broad interpretation. Our Court has already ruled on this issue,
repeatedly reiterating the comments by Marceau J.T.C.C. in Gaston
Desmarais v. M.N.R. (May 19, 1978), NR 218, at page 2:
“It is
clearly the Fishermen’s Regulations ss 191 and seq of the Unemployment
Insurance Regulations that are involved. These are very special regulations
adopted in order to extend the benefits of the Unemployment Insurance Act to
fishermen even under conditions that would normally exclude an ordinary
complainant from any benefit. For this reason I think that these Regulations
should be applied strictly, and that the claimant should show that he clearly
satisfied the conditions provided. [...]
[27] In my opinion, the definition of the term "fisherman" or
"fisher" in the regulations made under both the Unemployment
Insurance Act and the Employment Insurance Act clearly indicates
that, in order to qualify for the benefits that the regulations make available,
one must be an independent worker or a person not bound by a contract of service
who, among other things, engages in fishing or in making a catch. In this case,
the appellants do not satisfy the terms of this definition for all the periods
at issue because, in my opinion, they are bound by a contract of service to
their corporation. Consequently, they may not be considered employees of by
Nico or of Poséidon during the periods at issue. For these reasons, the appeals
are dismissed and the Minister's decisions are confirmed.
Signed
at Ottawa, Canada, this 14th day of April 2003.
J.T.C.C.
Translation
certified true
on this 21st day of
January 2004.
Carol Edgar,
Translator
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