[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre A.C.J.
[1]
The appellant is appealing from a decision by
the Minister of National Revenue (Minister) that he was not employed in
insurable employment within the meaning of paragraph 5(1)(a) of the
Employment Insurance Act (EIA) with Experis Manpower Group, a
division of Services Manpower Canada Ltd. (Manpower), for the period
from July 9, 2012, to March 15, 2013 (period in question).
[2]
The evidence shows that the appellant
incorporated a company in January 2010, under the name 7307101 Canada Inc. (corporation),
of which he is the sole shareholder and director. This corporation operates a
business that provides information technology consultation services.
[3]
On July 3, 2012, the corporation, represented by
the appellant, signed a contractual agreement ("Independent Contractor Agreement")
with Experis (a division of Manpower) under which the corporation agreed to
render services to any person designated by Experis, at an hourly rate set out
in the agreement (Exhibit I‑1, tab 2). Experis provides the
services of specialized consultants in information technology, finance and
accounting, and engineering.
[4]
Under this agreement, the corporation made a
commitment to Experis that services would be rendered by the appellant—who is referred
to as the "Service Delivery Consultant"—to the client (HP) during the
period in question (Exhibit I‑1, tab 2, paragraphs 2 and 4).
[5]
The appellant described Experis as a placement
agency that provided his services to HP. He said he was recruited to work for
HP because he was bilingual and had technical experience. He was responsible
for the networking systems of an HP client (CIBC). He said he followed a
specific work schedule and recorded his hours in a computer system developed
for this purpose.
[6]
Manpower paid the corporation's fees by direct
deposit to a bank account in the corporation's name. Sales tax was paid in
addition to the fees.
[7]
The hours of work could vary from one week to
another, as could the fees paid to the corporation (Exhibit I‑1, tab 6).
The appellant noted that he could take leave as needed, for personal reasons.
The agreement signed with Experis did not prevent the appellant from working
elsewhere. The appellant did, however, mention that after he started working at
HP, HP made him sign a contract that prevented him from working elsewhere. This
contract was not submitted in evidence.
[8]
The appellant submits that Experis required that
the contractual agreement be signed with the corporation, otherwise he would
not have been hired. He referred to a woman named Lisa Balks, but she was not
called to testify.
[9]
This was contradicted by Nadia Ciani, Vice
President of Human Resources at Manpower, who testified at the request of the
respondent. She stated that Manpower signed contracts with both individuals and
companies. She noted that Manpower had informatics employees and the appellant
did not dispute this. She noted that if the contract was signed by the
appellant's corporation, it must have been with the appellant's consent.
[10]
Additionally, the appellant submits that he
obtained a decision from the Ontario Ministry of Labour allegedly confirming
that he held employment with HP during the period in question. However, only one
of the documents submitted as Exhibit A-1 (moreover, this document was
unsigned) indicates that the appellant submitted a claim for amounts related to
his work for HP. No decision regarding his claim was produced. The appellant
enclosed an email Ms. Ciani sent him on August 23, 2013, regarding a $3,750
deposit, in which she mentions that she received a "release" with the
appellant's signature. However, this email does not refer to the claim the
appellant allegedly submitted for his work with HP and the deposit does not
correspond to the amount claimed. Ms. Ciani was not asked any questions about
this subject either.
[11]
The appellant also called Éric Michel Menie
to testify regarding an alleged complaint he submitted that was successful
(Exhibit A‑3). However, it is not related to the appellant's case.
Additionally, Mr. Menie testified that he had also been contacted by Manpower. He
stated that it was suggested he set up a corporation, but he did not confirm
whether it was a requirement to work with them.
[12]
The respondent submits that the appellant was
fully aware that he was agreeing to render services through his corporation,
according to a contractual agreement, at the time the agreement was signed. By
signing this agreement, he knew and agreed that he would render services not as
an employee but as a self-employed worker.
[13]
The respondent submits that the services were
rendered by the appellant's corporation and therefore, he was not hired under a
contract of service either by Manpower or his own corporation.
[14]
A person cannot be employed in insurable
employment by a corporation if that person controls more than 40% of the shares
(paragraph 5(2)(b) EIA):
Types of insurable employment
5. …
Excluded employment
(2) Insurable
employment does not include:
…
(b) the employment of a person by a corporation if the person
controls more than 40% of the voting shares of the corporation.
[15]
Moreover, the respondent notes that the
appellant could not be considered an employee of the placement agency under the
terms of paragraph 6(g) of the Employment Insurance Regulations (Regulations)
because the agreement with the placement agency Manpower was not signed by him,
but by the corporation. Paragraph 6(g) states the following:
6. Employment in any of the following employments, unless it
is excluded from insurable employment by any provision of these Regulations, is
included in insurable employment:
…
(g) employment of a person who is
placed in that employment by a placement or employment agency to perform
services for and under the direction and control of a client of the agency,
where that person is remunerated by the agency for the performance of those
services.
[16]
The respondent also submits that the appellant
wished to ignore his corporation and conclude that since he was the one to
render the services, it was he who held insurable employment. However, the
corporation's existence cannot simply be ignored.
[17]
The respondent referred to The Queen v. Jennings,
Federal Court of Appeal, A‑113‑93, June 15, 1994, [1994] F.C.J. No. 953
(QL) and cited the following passage:
2 Ironically, it is
not the Minister who seeks to pierce the so-called "corporate veil"
but rather the taxpayer. The applicant maintains that the respondent and his
corporation are separate legal entities and that "the normal rule of a
corporation being a separate and distinct legal entity from its shareholders
[should apply in the case at bar]"; per Iacobucci C.J. (as he then was) in
The Queen v. MerBan Capital Corporation Limited, 89 DTC 5404 at 5410 (F.C.A.).
On this issue, the decision of the Supreme Court of Canada in Kosmopoulos v.
Constitution Insurance Co., [1987] 1 S.C.R. 2, is instructive. Writing for the
majority (McIntyre J. concurring), Wilson J. observed at pages 10-11:
The law on when a court may disregard [the principle
of separate corporate entities] by "lifting the corporate veil" and
regarding the company as a mere "agent" or "puppet" of its
controlling shareholder or parent corporation follows no consistent principle. The
best that can be said is that the "separate entities" principle is
not enforced when it would yield a result "too flagrantly opposed to
justice, convenience or the interests of the Revenue"....
There is a persuasive argument that "those who
have chosen the
benefits of incorporation must bear the corresponding burdens, so that if the
veil is to be lifted at all that should only be done in the interests of third
parties who would otherwise suffer as a result of that choice".... Mr.
Kosmopoulos was advised by a competent solicitor to incorporate his business in
order to protect his personal assets and there is nothing in the evidence to
indicate that his decision to secure the benefits of incorporation was not a genuine
one. Having chosen to receive the benefits of incorporation, he should not
be allowed to escape its burden. He should not be permitted to "blow hot
and cold" at the same.
[Emphasis
added.]
3 Having regard to the
meagre evidence adduced below and the limited arguments tendered by the
respondent (who is unrepresented), we are all of the view that the Tax Court
judge erred in law in permitting the losses of one legal entity to be used to
offset the income of another. Only in the clearest of cases, and in compelling
circumstances and after thorough legal analysis could the "normal
rule" be displaced…
[18]
Moreover, the respondent cited Meredith v.
Canada, 2002 FCA 258, [2002] F.C.J. No. 1007 (QL):
11 In my analysis, the Judge committed several errors in the disposition
of this case. First of all, the Judge "pierced the corporate veil"
insofar as he looked beyond the corporate entity itself to assess the
applicant's actions. Examples are sprinkled thought the reasons for judgment.
For instance, he held that, notwithstanding the contractual relationship
between the third parties and Stem, that it was "obvious that Roeslein and
Ball were hiring [Meredith's] expertise and not retaining the Company as such
in that it had no other workers." He also stated that "it is apparent
that [Meredith] controls the Company and uses it for his own benefit from time
to time when it is convenient. The Company does not use him." Further, he
also made reference to the methods by which Meredith was paid by Stem, as well
as arrangements Stem had with its bank, including personal guarantees provided
by Meredith.
12 Lifting the corporate veil is contrary to long-established
principles of corporate law. Absent an allegation that the corporation
constitutes a "sham" or a vehicle for wrongdoing on the part of
putative shareholders, or statutory authorisation to do so, a court must
respect the legal relationships created by a taxpayer (see Salomon v. Salomon & Co., [1897]
A.C. 22; Kosmopoulos v. Constitution Insurance Co.
of Canada, [1987] 1 S.C.R. 2). A court cannot
re-characterize the bona fide relationships on the basis of what it deems to be the economic
realities underlying those relationships (see Continental
Bank Leasing Corp. v. The Queen, [1998] 2 S.C.R.
298; Shell Canada Ltd. v. The Queen, [1999] 3 S.C.R. 622; Ludco Enterprises
Limited v. the Queen, 2001 SCC 62 at para. 51)…
Analysis
[19]
In 1392644 Ontario Inc. (o/a Connor
Homes) v. Canada, 2013 FCA 85, [2013] F.C.J. No. 327 (QL), which involved
determining whether the workers were employees or independent contractors, the
Federal Court of Appeal stated that the first step was to establish the
subjective intent of each party to the relationship (paragraph 39). Here,
I consider that the appellant failed to show that he did not intend to sign a
contractual agreement with Experis on behalf of his corporation. It was the
corporation, which he incorporated two years earlier, that was remunerated for
the services rendered and it collected the goods and services tax. Moreover,
considering the testimony of Manpower's representative, which was not
contradicted in cross-examination or by the testimony given by Mr. Menie, who
was called to the stand by the appellant, I cannot conclude that Manpower
required the contract to be signed by the appellant's corporation.
[20]
Additionally, the second step is to establish whether
the objective reality confirms the relationship of client to contractor-representative
in the contractual agreement (Connor Homes, paragraph 40).
[21]
Again, I do not feel that the appellant provided
evidence that the contractual agreement did not reflect the legal reality
between the parties. As noted above, I am not convinced, considering the
evidence provided, that the appellant signed the agreement on behalf of his
corporation because he was required to. He rendered services to his own
corporation, which in turn, rendered services to clients designated by Experis.
[22]
It was the corporation that collected the fees
from Experis and collected taxes on the fees. By rendering services to his own
corporation, the appellant could not hold insurable employment (paragraph 5(2)(b)
EIA). He could also not be deemed to be holding insurable employment under
section 6 of the Regulations because he was not hired by the placement agency
(Experis), his corporation was, and it was paid for the services rendered to
Experis's client (HP).
[23]
Moreover, the evidence provided does not
establish that the Ministry of Labour considered the appellant to be an
employee of Manpower during the period in question.
[24]
For all these reasons, the appeal is dismissed.
Signed at
Ottawa, Canada, this 2nd day of December 2015.
"Lucie
Lamarre"
Translation certified true
on this 14th day
of January 2016.
Elizabeth Tan, Translator
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