Date: 20000202
Dockets: 98-1051-UI; 98-1052-UI
BETWEEN:
DANIEL PAQUETTE,NORMAND PAQUETTE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
TRANSPORT DE LAIT PAQUETTE INC.,
Intervener.
________________________________________________
Agent for the Appelants: Marcel Bergeron
Counsel for the Respondent: Yanick Houle
Agent for the Intervener: Marcel Bergeron
________________________________________________
Reasons for Judgment
(Delivered at the close of the hearing at Drummondville,
Quebec, on August 16, 1999)
Garon, A.C.J.T.C.C.
[1] These are appeals by the two appellants, Daniel Paquette
and Normand Paquette, from decisions of the Minister of National
Revenue (the "Minister") that both
appellants' employment is insurable.
[2] In the case of the appellant Daniel Paquette, the agent
for the appellants admitted at the hearing all the subparagraphs
in paragraph 5 of the Reply to the Notice of Appeal, with the
exception of subparagraph (m) and a portion of subparagraph (o),
and, with respect to certain other subparagraphs, subject to
additional evidence which was to be provided when the appeals
were heard.
[3] In the case of the appellant Normand Paquette, the Reply
to the Notice of Appeal and, in particular, paragraph 5, is to a
great extent similar to paragraph 5 of the Reply to the Notice of
Appeal in the case of the appellant Daniel Paquette.
[4] At the hearing, both appellants testified on their own
behalf. The appellants' father, Marcel Paquette, also
testified. For the respondent, I heard the deposition of
Jean-Claude Roy, an appeals officer with Revenue Canada.
[5] Two questions are raised in the pleadings.
[6] The first question relates to the issue of control over
the shares. On this matter, the agent for the appellants
acknowledged that they admitted the Minister of National
Revenue's assertion that the appellants did not control more
than 40% of the shares. It now remains for me to dispose of the
second question.
[7] The second question may be formulated as follows: are the
terms and conditions of the contract entered into with each
appellant substantially similar to those that would have been
found in a contract between unrelated persons?
[8] I have come to the conclusion that this question must be
answered in the negative for the following reasons:
1. I noted that each of the two appellants received a fixed
wage regardless of the number of hours worked in a given week.
The evidence has established that the number of hours worked
could vary according to circumstances and especially according to
the requirements of the payer's business. For instance, the
appellants might be required to spend several hours on a Saturday
or Sunday making repairs to the trucks used for milk delivery.
With respect to this first point, the appellants' wages were
not determined by the number of hours of work, as one would
normally have expected in this type of business if the appellants
were dealing with the payer at arm's length.
2. With respect to the remuneration received by the appellants
for the duties they performed, I felt that the appellants were
probably underpaid. In this regard, when the respondent tried to
establish the average wage of individuals performing more or less
the same duties as the appellants in 1997, the year at issue, he
did not, in my view, take sufficient account of the fact that the
appellants were not only truck drivers, but also performed two
other types of duties, i.e., they had to repair the trucks as
needed. So they had to be mechanics and in addition the two
appellants performed managerial duties that varied depending on
whether the appellant Daniel Paquette or the appellant Normand
Paquette was involved. Their managerial duties were relatively
important, less important, I think, in terms of time, than their
duties as truck drivers, but these managerial duties had to be
performed on the payer's behalf and were in fact so performed
by the two appellants during 1997.
[9] Taking into account the various facets of the duties of
each of the appellants, the weight of the evidence seems to me to
show that they were not paid enough. I was particularly impressed
by the fact that in 1997 one of the appellants, Normand Paquette,
worked for another company, with which he had an arm's length
relationship, for a wage of $13.45 and also received certain
fringe benefits from that company.
[10] All in all, then, on the question of remuneration, the
weight of the evidence indicates that the appellants were not
paid market rates. I also noted significant fluctuations in the
appellants' remuneration during the period in question. Such
fluctuations, as the agent for the appellants rightly stressed in
my opinion, are rarely seen in a context where the parties are
dealing with one another at arm's length.
[11] With respect to remuneration, I noted as well that,
although the evidence was perhaps not completely clear on this
point, it was established on the basis of the business's
profitability.
[12] I also took into account the fact that both appellants
were required on many occasions to do overtime and were not paid
for such overtime at a special rate. I also noted that the
appellants, under their contract with the payer, had not taken
any vacation, which is another unusual element.
[13] It was said, at one point, that some employees in the
field of bulk milk transport chose to have someone replace them
on occasion so that they could take a vacation. This is not what
was done here, however, and, furthermore, the appellants'
contract of service did not provide for their being able to take
vacations. At least, it was not argued or the evidence did not
show that the oral contract they had entered into with the payer
allowed them to take a certain number of days of vacation during
1997.
[14] In the case of the appellant Normand Paquette, the
Minister did not seem to be aware of the fact that he had
performed work for the payer for a period of nearly two months
without being paid. This two-month period began sometime towards
mid-October and ended on December 9, 1997.
[15] In my opinion, if the Minister had exercised his
discretion objectively, he should have considered the additional
factors that I have just pointed out. These factors taken as a
whole allow me to conclude that the Minister exercised his
discretion improperly by not taking into account all of the
special features of the contract of service between the payer and
each appellant.
[16] Accordingly, as the case law has clearly established,
since the Minister exercised his discretion improperly, I am
entitled to examine all of the facts and to reach my own
conclusion on the merits, or lack thereof, of the appellants'
appeals.
[17] For the reasons that I have given and taking all of the
facts into account, I have come to the conclusion that the
employment of the two appellants was not insurable during the
period at issue.
Signed at Ottawa, Canada, this 2nd day of February 2000.
"Alban Garon"
A.C.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 13th day of December
2000.
Erich Klein, Revisor