Lavergne v. M.N.R., docket 98-379-UI

Date: 19990908

Docket: 98-379-UI

BETWEEN:

LISE LAVERGNE,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1] This is an appeal from a determination by the respondent dated March 12, 1998 that the work the appellant performed for Les Entreprises Dalin Services Inc. during the periods from September 28, 1992 to April 2, 1993, from October 18, 1993 to April 22, 1994 and from September 26, 1994 to April 14, 1995 was not insurable because there was a non-arm's-length relationship between the appellant and the payer company.

[2] The respondent decided that the circumstances and terms and conditions of the work performed by the appellant for the payer company had been influenced by the non-arm's-length relationship. In other words, the respondent ruled that the contract of employment was not comparable or similar to one into which third parties would have entered in a similar situation.

[3] The facts assumed in support of the determination were set out in paragraph 5 of the Reply to the Notice of Appeal and it is appropriate to reproduce them here:

[TRANSLATION]

(a) The payer, which was incorporated in 1986, operates a business providing a periodical monitoring service for heating systems in the commercial and industrial sector; it also maintains, repairs and cleans steam heating systems.

(b) From its incorporation and until 1994, the payer's shareholders were:

Alain Lavergne, the appellant's brother-in-law, with 33 1/3% of the shares;

Daniel Lavergne, the appellant's spouse, with 33 1/3% of the shares;

Henri Lavergne, the appellant's father-in-law, with 33 1/3% of the shares.

(c) Henri Lavergne died in 1994 and Royal Lapointe purchased his shares.

(d) The payer operated year-round, but its busy period was between mid-October and mid-April of each year.

(e) The payer generally hired two persons to perform contracts and one person for the office.

(f) The payer's head office was located in the home of Daniel Lavergne and the appellant.

(g) During the periods in issue, the appellant was hired by the payer to do secretarial work and bookkeeping.

(h) More specifically, the appellant had to perform the following duties: prepare the pay and the various government returns, compute and remit source deductions, do the bookkeeping and billing, make the deposits and answer the telephone.

(i) The appellant worked alone in the payer's office which was fitted up in her home.

(j) The appellant had no work schedule to meet; she generally worked during the day and occasionally in the evenings and on weekends.

(k) The appellant says that she did not work continuously and that she worked 16 weeks during the first period, 15 weeks during the second and 15 weeks during the third.

(l) The appellant claims that she did not have an hour-bank arrangement with respect to her hours worked but rather accumulated her work in order to be able to work full weeks.

(m) The payer exercised no control over the hours actually worked by the appellant or over the work which she performed; it was interested only in the finished product.

(n) During the periods in issue, the appellant received remuneration based on an hourly rate varying between $7 and $8.50.

(o) The payer's hours of work devoted to secretarial duties declined from 920 hours in 1994 to 462 hours in 1995 and 282 hours in 1996, while the payer's turnover remained appreciably the same during those years.

(p) For a number of months during the periods in issue, more hours were devoted to secretarial work than to monitoring work for the payer's clients.

(q) The very nature of the appellant's work required weekly and even daily involvement by her (she had to be available to answer the telephone).

(r) The appellant rendered services to the payer without being paid outside the periods in issue.

(s) The appellant lost her employment when her spouse withdrew from the payer's management and when the payer's business office was moved from her residence to that of Alain Lavergne.

[4] Except for 5(k), 5(m), 5(o) and 5(r), the appellant admitted all the subparagraphs but reserved the right to supplement and clarify them by means of testimony and documentary evidence.

[5] Since the determination resulted from the exercise of the discretion provided for by the Unemployment Insurance Act (the "Act"), the Court must first decide whether that discretion was properly exercised.

[6] The appellant testified, explaining that she had worked for Les Entreprises Dalin Services Inc. since its inception in 1986. Her work consisted in performing administrative duties such as preparing the pay and the various government returns and doing the bookkeeping and the billing. She was also responsible for computing and remitting source deductions as well as making the deposits and answering the telephone. She prepared the work schedules and performed the clerical work related to those duties. She was also responsible for and involved in promotional initiatives the purpose of which was to identify and solicit new customers and retain existing customers, of whom the appellant said there were approximately 12. In performing this specific duty, she sent out letters and followed them up with telephone calls.

[7] The appellant explained that, given the nature of the company, by far most of its activities took place during the winter, although she admitted that activities were being carried on year-round.

[8] The appellant never managed to explain how or why the payroll entries concerning her were not consistent with certain duties performed outside the periods in issue. First she stated that some invoices might have been antedated so that the 30-day period for payment of accounts was shortened. However, this explanation was proved incorrect by evidence to the contrary in the form of other invoices whose dates penalized the company in that a long period of time had elapsed between the completion of work and the billing date.

[9] She was unable to answer important, specific questions concerning the significance of her duties, the duration of their performance and, in particular, how everything was supervised. She repeated the same vague and unclear answers and was given to long hesitations. Her answers were often preceded by lengthy silences. She frequently used the expressions: [TRANSLATION] "that may have happened", [TRANSLATION] "I don't remember", [TRANSLATION] "that's possible" and [TRANSLATION] "I may have". She also explained that the arrival of a new shareholder caused tension and disagreement over the value and relevance of her work.

[10] When the new shareholder arrived on the scene, her job description was questioned given the company's financial difficulties. The appellant ultimately lost her job when the company's office was moved to the residence of another shareholder.

[11] Alain Lavergne's testimony proved to be revealing on this point. First he indicated that the company had five or six customers, half the number referred to by the appellant. Second, although he explained the appellant's lay-off as being the result of the company's financial difficulties, he testified that the company nevertheless immediately hired another person, one Caro, also the spouse of a shareholder, at a higher salary than the appellant had received.

[12] The appellant's testimony was generally evasive. A number of explanations provided were unclear and many questions were followed by long silences succeeded by muddled and unconvincing answers. The time elapsed since the periods in issue could of course explain why she found it hard to remember clearly. However, the questions concerned specific, basic matters pertaining to the very content of her description of duties, which, it should be pointed out, she had allegedly performed repeatedly from the company's inception.

[13] Forgetting or not remembering certain details may be explained and understood, but not being able to describe the constituent parts of her contract of employment raises serious doubts as to the likelihood that there was a real and genuine contract of service.

[14] The respondent on the other hand called Marc Tremblay as a witness. Mr. Tremblay explained how the appellant's file was processed. He communicated with everyone who could provide him with relevant information and he obtained the documents relating to the work performed by the appellant. He conducted a serious, careful and full analysis of the available information and completed his review of the case with various tables illustrating, for a better understanding, the different information contained in the documents provided by the appellant, including the company's payroll, financial statements and invoices.

[15] These tables totally discredit a number of aspects and elements of the appellant's testimony, in particular regarding the periods actually worked, the importance of the work performed, the appropriateness of the salary paid and the correspondence between the time during which the work was performed and the company's operations.

[16] The Court is entirely convinced that the appellant grossly inflated and exaggerated the amount of advertising and promotional work she did. This conclusion is obvious given the few details provided concerning these activities, the very weak documentary evidence filed in support, the appellant's numerous hesitations and the formal admission by the witness Lavergne that the initiatives in question had no effect on the growth of the company's operations.

[17] Repeated assertions that she sent daybooks and also certain circulars out to potential clients does not confer a fundamental nature on an activity that was, in objective terms, very marginal and secondary.

[18] It is important to bear in mind that the company operated in a highly specialized field with a very limited potential clientele. Lavergne clearly stated that the company served at most six or seven customers, thus contradicting the appellant's testimony on a fairly important point, particularly for a person who claims that she was responsible for all the clerical work made necessary by the company's operations.

[19] On the matter of the assessment of the time required for the publicity and promotional work, the Court finds no fault with the way in which the respondent considered or assessed this aspect of the appellant's work. On the contrary, the evidence clearly showed that the respondent correctly understood that work and properly assessed its objective value in the overall context.

[20] The main grievance against the manner in which the discretion was exercised is that the respondent did not attach enough importance to the marketing aspect or to the company's [TRANSLATION] "clientele prospecting" and promotional activities, for which the appellant was responsible.

[21] The appellant often repeated and emphasized this component of her job description and very frequently reiterated in her testimony that she had sent out daybooks, taken part in various documentation activities and done some annual mailings. However, the documentary evidence filed in support of this aspect of her duties was not very convincing or decisive. Furthermore, the many questions asked in order to determine such details as time, duration, frequency, quantity and so on remained unanswered.

[22] In addition, the importance of a duty should not be assessed on the basis of the verbal repetition and subjective assessment of the person who performs it, but essentially on its content, the time required to perform it and its impact, necessity, importance and consequences for the payer. In the instant case, the company had very few customers, approximately 12 according to the appellant and six or seven according to one of the shareholders who owned one-third of the capital stock. Moreover, the company operated in a highly specialized industry, thus limiting its possibilities of developing a mass clientele.

[23] It was shown on a balance of evidence that the respondent very judiciously exercised his discretion by considering all the relevant elements and facts enabling him to arrive at a conclusion. That conclusion was furthermore appropriate, reasonable, lawful and consistent with all the facts revealed by the evidence. The evidence essentially supported the analysis conducted by the person responsible for the case.

[24] Consequently, the grievances or alleged failures, in particular the fact that the advertising duties were not properly assessed, are not at all supported by the evidence, the burden of proof being on the appellant. The grievances are

furthermore quite simply bizarre and in no way supported by the evidence. There is consequently no reason to intervene and the appeal is dismissed.

Signed at Ottawa, Canada, this 8th day of September 1999.

"Alain Tardif"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 28th day of July 2000.

Erich Klein, Revisor