Ambulances 33-33 Inc. v. M.N.R., docket 97-1207-UI

Date: 19990114

Docket: 97-1207-UI; 97-1208-UI

BETWEEN:

GUYLAINE BOURGEOIS,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

AMBULANCE 33-33 INC.,

Intervener,

AND

AMBULANCE 33-33 INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Charron, D.J.T.C.C.

[1] These appeals were heard on common evidence at Shawinigan on November 3, 1998, for the purpose of determining whether the employment of the appellant Guylaine Bourgeois with Ambulance 33-33 Inc., the payer, from August 13, 1993 to March 24, 1994, from June 3, 1994 to June 15, 1995 and from November 21, 1995 to June 13, 1996, was insurable within the meaning of the Unemployment Insurance Act.

[2] By letter dated May 1, 1997, the respondent informed the appellants that this employment was not insurable because the payer and the appellant Guylaine Bourgeois were not dealing with each other at arm’s length.

The facts

[3] The facts on which the respondent relied in making his determination are set out in paragraph 5 of the Reply to the Notice of Appeal as follows:

[TRANSLATION]

(a) the payer was incorporated in 1988; (admitted)

(b) Serge Lacoursière was the payer’s sole shareholder; (admitted)

(c) beginning in 1992, the appellant was the de facto spouse of Mr. Lacoursière; (admitted)

(d) the couple had a child in April 1994; (admitted)

(e) the payer’s head office was located in the couple’s residence; (admitted)

(f) only one signature was needed for the payer’s cheques; (admitted)

(g) the appellant had a power of attorney for signing the payer’s cheques; (admitted)

(h) the payer’s fiscal year ended on March 31; (admitted)

(i) from 1993 to 1996, the payer’s revenue was as follows:

1993    1994     1995    1996

$289,000 $288,000    $286,000    $310,000

(admitted)

(j) the payer’s primary activity was providing ambulance service, and it was also involved in communications and dispatch; (admitted)

(k) the payer’s business was constant throughout the year; (admitted)

(l) the payer used the services of 4 full-time ambulance driver/attendants, including Mr. Lacoursière, and employed 3 others on a part-time basis; (admitted)

(m) the driver/attendants worked 7 24-hour days in a row and then were off for the next 7 days; (admitted)

(n) each driver/attendant had to be on the job 50 hours a week at the payer’s premises; (admitted)

(o) the payer did about 50 ambulance trips a month, each trip being an average of 40 kilometres; (admitted)

(p) in addition to working as an ambulance driver, M. Lacoursière handled, among other things, the office work, billing, deposits and accounts payable; (denied as written)

(q) the appellant’s duties included answering the telephone and doing dispatch work, doing the monthly bank reconciliations, reconciling the various reports filed with the Régie régionale every 3 months, preparing and making deposits, doing the payroll, making remittances to the government, closing the payer’s books at month-end, billing customers, and entering and paying the accounts payable; (admitted)

(r) the appellant began working for the payer in 1989; (admitted)

(s) the appellant worked from home; (admitted)

(t) the payer did not require her to follow any schedule; (admitted)

(u) her hours of work were not recorded; (admitted)

(v) she was free to care for their child at the same time as she did her work; (denied as written)

(w) during the periods in issue, her gross pay was fixed at $1,000 every 2 weeks; (admitted)

(x) that pay took into account the fact that she performed services for the payer without pay outside the periods in issue; (denied as written)

(y) between January 1, 1992 and February 11, 1993, the appellant’s pay rose from $600 every 2 weeks to $700 every 2 weeks; (admitted)

(z) the appellant determined her own periods of employment; (denied)

(aa) the appellant’s alleged periods of employment do not correspond with the payer’s needs; (denied)

(ab) the appellant and the payer are not dealing with each other at arm’s length within the meaning of the Income Tax Act; (denied)

(ac) the payer would never have hired an unrelated person on conditions substantially similar to those offered the appellant, particularly for such periods as those in question. (denied)

[4] The appellants admitted all the subparagraphs of paragraph 5 of the Reply to the Notice of Appeal except for those they denied, as shown in parentheses at the end of each subparagraph.

Testimony of Serge Lacoursière

[5] Mr. Lacoursière is an ambulance driver and both a shareholder in and the president of the payer. In 1988 he hired Guylaine Bourgeois as secretary in his business, on a part-time basis, to do the bookkeeping. Starting in 1992 the appellant also took on the job of dispatcher for the payer. She had to be available 24 hours a day, but she did only about 3 hours of work. With the addition of the municipalities of St-Séverin, St-Tite and Hérouxville, her workload rose steadily. Practically at the same time, in 1992, Serge Lacoursière and Guylaine Bourgeois started having a more intimate relationship and began to live together. The couple had a child on April 25, 1994. Two other people have done the same work in the past: Suzie Mailloux and Danielle Perron. Between January 1, 1992 and February 11, 1993, Guylaine Bourgeois’s earnings rose from $600 to $700 every 2 weeks. After that, her salary rose progressively, having reached $1,000 every 2 weeks when the spouses separated in April 1996. She was still employed by the payer for 40 hours per week, at an hourly rate of $12.50, for about six months in 1998. Since 1989, the appellant has applied for unemployment insurance benefits every year. In addition to her employment with the payer, Guylaine holds a job at the Caisse populaire de St-Tite. The payer employs four full-time attendants, two part-time attendants and two other people year-round. During periods when the appellant is not working, Serge Lacoursière does her work relating to the payroll, the making of source deductions and the remitting of payments to the various levels of government. Mr. Lacoursière left school after completing his fifth year of secondary school. He decided to lay Guylaine off every year on about March 31, based on the payer’s cash flow—but technically could have done it anytime during the year—because work fell off by 25% in the summer. In any event, he alleged that the layoff was caused by a shortage of work. The payer did not have the resources to keep a secretary on twelve months a year: it had to cut expenses so that it could pay for the driver/attendants’ vacation. Turnover was about $275,000 per year. Starting in 1992, the payer began to cut the salaries of Suzie Mailloux and Danielle Perron, and ultimately replaced them with Guylaine Bourgeois, [TRANSLATION] “because she started being my spouse”, Serge Lacoursière said. After that, the appellant did the dispatch work and accounting. The accounting alone took up 80-90% of her time. She received only one or two emergency calls a day, or about 50 a month. This allowed Guylaine to care for her baby and do her household chores. In 1994-95, however, she was able to get a babysitter, but only three times a week, while her workweek was 40 hours. In fact, Guylaine never worked 40 hours a week, but the payer paid her as if she did, taking into account hours that she accumulated in other weeks. The payer was completely unable to estimate the time worked by the appellant in a given month: any answer to that question was approximate only.

Testimony of Guylaine Bourgeois

[6] Ms. Bourgeois lived with Serge Lacoursière from 1992 to 1998. In April 1996, she began working for the Caisse populaire de St-Tite. She put in 10 to 20 hours a week at the Caisse and 10 to 40 hours a week for the payer, depending on how long she worked at the Caisse. The payer paid for her services at the rate of $12.50 an hour. Guylaine has a diploma in administration. In 1990, Serge Lacoursière proposed to Guylaine an arrangement that could provide her with unemployment benefits four or five months a year. She said: [TRANSLATION] “Myself, from an accounting and administration standpoint, I am able to delay certain things.” They delayed certain accounting documents. Ms. Bourgeois had no work schedule (p. 116 of the transcript), but put in between six and eight hours a day. In addition, her job required her to be at home 24 hours a day. She could only leave if she hauled the radio along with her, since they did not yet have a cellular phone. This was almost a form of bondage, unless a babysitter was there all the time to look after the child. After giving birth, the appellant applied for unemployment benefits for the number of weeks she was entitled to by law, but she did not take her maternity leave. She performed her duties at the office that the payer provided her with, between 9:00 a.m. and 4:00 or 5:00 p.m. After office hours, she was still on duty to answer the telephone as part of her dispatch work: there were telephones throughout the house. The only thing done exclusively in the office was the accounting, which took about 40 hours a week.

[7] After the municipal dispatch contracts were awarded, the workload increased considerably: ambulance services, fire services, first response and also sterilization of sheets. Guylaine said that she would have entered into the same employment contract with the payer, even if she had been dealing with it at arm’s length (page 128 of the transcript), except that she would not have been on the payer's premises 24 hours a day. Despite the fact that Ms. Bourgeois’s last day of work was June 13 in 1996, Serge Lacoursière issued three cheques to her: cheque No. 002193 for $711.44 on June 21, 1996, cheque No. 002373 for $752.54 on November 27, 1996 and cheque No. 002383 for $730.40 on December 19, 1996.

[8] Ms. Bourgeois admitted that she sometimes performed services for the payer during periods when she was unemployed. She still has to this day a power of attorney today to sign the payer’s cheques, although she is no longer his spouse.

Testimony of Marc Tremblay

[9] Mr. Tremblay, an appeals officer with Revenue Canada, contacted Guylaine Bourgeois on February 21, 1997, Serge Lacoursière on February 7 and 19 and also March 5, 1997, and Claude Nadeau of Human Resources Development in April 1997. He consulted Ms. Bourgeois’s records of employment, her applications for unemployment insurance benefits, her paycheques and her earnings record for the years in issue. Ms. Bourgeois had a babysitter for her child three days a week, and looked after the child herself on the other two days, in addition to putting in her 40 hours of work. The father also looked after the child. Given that she had to take calls outside normal working hours, the payer raised her pay to $1,000 every 2 weeks. Serge Lacoursière said that, starting in 1996, after she was laid off Ms. Bourgeois was not replaced, for the good reason that she helped him out, sporadically and on a volunteer basis. Yet, the evidence shows that he gave her three cheques dated June, 21, November 27 and December 19, 1996 (Exhibit I-1). The payer had asked others in the business what a person doing the same work as Ms. Bourgeois was paid. The answer was that the work commanded a wage of $12.00 per hour for 40 hours of work per week. Ms. Bourgeois did not really have a fixed and rigid schedule; rather, she could work from 10:00 a.m. until sometime in the afternoon, and finish in the evening at home, if she had not completed her work. The hours of work were not recorded, but she worked an estimated 40 hours per week.

[10] Mr. Tremblay contacted Claude Nadeau of Human Resources Development, and Mr. Nadeau informed him that Ms. Bourgeois qualified for unemployment insurance benefits by virtue of 40 weeks of employment in 1993. That enabled her to qualify for 50 weeks of benefits, but she collected for only 37 weeks. In 1994, she qualified for 48 weeks of benefits on the basis of a record of employment showing 26 weeks; she drew benefits for only 42. In 1995, she qualified for 31 weeks of benefits based on a record of employment showing 22 weeks, and she took them all. The practical conclusion is that Guylaine Bourgeois did not necessarily use up all her benefits before making a new claim.

[11] Lastly, Mr. Tremblay made a recommendation to the Minister that the employment be excepted under paragraph 3(2)(c) of the Unemployment Insurance Act, because Ms. Bourgeois was receiving pay equivalent to what was paid to the payer in grants by the Régie régionale for the dispatch work, based on the payer’s revenue, because the payer had failed to pay Ms. Bourgeois for a few weeks of employment shown on the payroll, and also because between December 1992 and August 1993 Ms. Bourgeois’s gross earnings rose from $600 every two weeks to $1,000. In the space of one year, she had received a raise of $400 per fortnight.

[12] On the question of the terms and conditions of employment, Ms. Bourgeois was able to take care of her child, even when she was at work; she decided herself when she should perform services for the payer; she provided services for the payer on a volunteer basis; she was not replaced after she left; and she worked at home.

Analysis of the facts in light of the law

[13] The respondent admitted that there was a contract of service between Ms. Bourgeois and the employer. For that reason, he relied solely on the fact that they were not dealing with each other at arm’s length in support of his Reply to the Notice of Appeal. It must therefore now be asked whether Ms. Bourgeois would have received such favourable treatment if she had been dealing with the employer at arm’s length.

[14] Did the respondent act properly in exercising the power conferred on him by subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act?

[15] Subsection 3(2) of the Unemployment Insurance Act reads in part as follows:

(2) Excepted employment is:

. . .

(c) subject to paragraph (d), employment where the employer and employee are not dealing with each other at arm’s length and, for the purposes of this paragraph,

(i) the question of whether persons are not dealing with each other at arm’s length shall be determined in accordance with the provisions of the Income Tax Act, and

(ii) where the employer is, within the meaning of that Act, related to the employee, they shall be deemed to deal with each other at arm’s length if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length;

. . .

[16] Under paragraphs 251(1)(a) and (2)(b) of the Income Tax Act, related persons are deemed not to deal with each other at arm’s length. When persons are related, there can be no insurable employment unless the Minister of National Revenue is satisfied otherwise in accordance with subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act, cited above.

[17] The Federal Court of Appeal has rendered numerous important decisions concerning the application of paragraph 3(2)(c) of the Unemployment Insurance Act.

[18] In the first decision, Tignish Auto Parts Inc. v. M.N.R., 185 N.R. 73, dated July 25, 1994, that court quoted counsel for the respondent, whose opinion it shared:

Under the authority of Minister of National Revenue v. Wrights' Canadian Ropes Ltd., contends the respondent, unless the Minister has not had regard to all the circumstances of the employment (as required by subparagraph 3(2)(c)(ii) of the Act), has considered irrelevant factors, or has acted in contravention of some principle of law, the Court may not interfere. Moreover, the Court is entitled to examine the facts which are shown by evidence to have been before the Minister when he reached his conclusion so as to determine if these facts are proven. But if there is sufficient material to support the Minister's conclusion, the Court is not at liberty to overrule it merely because it would have come to a different conclusion. If, however, those facts are, in the opinion of the Court, insufficient in law to support the conclusion arrived at by the Minister, his determination cannot stand and the Court is justified in intervening

[19] There are thus four tests that the Tax Court of Canada may apply in order to decide whether it can intervene:

(1) whether the Minister of National Revenue failed to have regard to all the circumstances of the employment;

(2) whether he considered irrelevant factors;

(3) whether he acted in contravention of some principle of law;

(4) whether he based his determination on insufficient facts.

[20] In Ferme Émile Richard et Fils Inc., 178 N.R. 361, December 1, 1994, the Federal Court of Appeal summarized Tignish Auto Parts Inc. as follows:

. . . As this court recently noted in Tignish Auto Parts Inc. v. Minister of National Revenue, . . . an appeal to the Tax Court of Canada in a case involving the application of s. 3(2)(c)(ii) is not an appeal in the strict sense of the word and more closely resembles an application for judicial review. In other words, the court does not have to consider whether the Minister's decision was correct: what it must consider is whether the Minister's decision resulted from the proper exercise of his discretionary authority. It is only where the court concludes that the Minister made an improper use of his discretion that the discussion before it is transformed into an appeal de novo and the court is empowered to decide whether, taking all the circumstances into account, such a contract of employment would have been concluded between the employer and employee if they had been dealing at arm's length.

[21] The appellants argued that the respondent had not considered all of the circumstances when he excepted Guylaine Bourgeois’s employment from insurable employment.

[22] On this point, Mr. Justice Isaac of the Federal Court of Appeal, writing for that court in Attorney General of Canada v. Jencan Ltd. (1997), 215 N.R. 352, stated:

The Deputy Tax Court Judge, however, erred in law in concluding that, because some of the assumptions of fact relied upon by the Minister had been disproved at trial, he was automatically entitled to review the merits of the determination made by the Minister. Having found that certain assumptions relied upon by the Minister were disproved at trial, the Deputy Tax Court Judge should have then asked whether the remaining facts which were proved at trial were sufficient in law to support the Minister's determination that the parties would not have entered into a substantially similar contract of service if they had been at arm's length. If there is sufficient material to support the Minister's determination, the Deputy Tax Court Judge is not at liberty to overrule the Minister merely because one or more of the Minister's assumptions were disproved at trial and the judge would have come to a different conclusion on the balance of probabilities. In other words, it is only where the Minister's determination lacks a reasonable evidentiary foundation that the Tax Court's intervention is warranted. An assumption of fact that is disproved at trial may, but does not necessarily, constitute a defect which renders a determination by the Minister contrary to law.

[23] The question that now arises is whether, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that the parties would have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length.

[24] That question can be answered as follows:

(a) Suzie Mailloux and Danielle Perron did the work in question before Ms. Bourgeois was hired;

(b) between January 1 and February 11, 1993, Guylaine’s pay rose from $600 every two weeks to $700;

(c) after that time, Guylaine’s salary rose progressively to $1,000 every two weeks;

(d) in April 1996, the spouses separated and Guylaine Bourgeois continued to work for Serge at a wage of $12.50 per hour, despite their having broken up;

(e) her employment with the payer required that Ms. Bourgeois be available 24 hours a day;

(f) in itself, this kind of arrangement amounts to veritable bondage;

(g) after the municipal dispatch and first response contracts were awarded, the appellant’s duties increased considerably;

(h) nonetheless, Ms. Bourgeois insists that she would have entered into the same contract with the payer if they had been dealing with each other at arm’s length, and despite their having broken up;

(i) Ms. Bourgeois still has a power of attorney to sign the payer’s cheques;

(j) the payer asked others in the business what a person doing the same work as Ms. Bourgeois was paid, and they told him $12 an hour, perhaps a little more, for 40 hours’ work. Ms. Bourgeois is currently earning $12.50 an hour;

(k) despite being entitled to 50 weeks of benefits in 1993, 48 weeks in 1994 and 31 in 1995, Ms. Bourgeois took only 37 weeks in 1993, 42 in 1994 and 31 in 1995, contrary to general practice.

[25] All these facts were before the Minister of National Revenue at the time he made his determination.

[26] In view of the evidence presented and the documents filed by the parties, and given the terms and conditions of Ms. Bourgeois’s employment as a whole—such as the duration of her employment, her remuneration and the other circumstance—I am of the opinion that a substantially similar contract could have been entered into between her and a payer with which she was dealing at arm’s length.

[27] For these reasons, the appeals are allowed and Ms. Bourgeois’s employment during the periods in question is insurable.

Signed at Ottawa, Canada, this 14th day of January 1999.

“G. Charron”

D.J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 7th day of September 1999.

Erich Klein, Revisor