Canada (Attorney General) v. Tremblay, 2004 FCA 175

Date: 20040503

Docket: A-571-02

Citation: 2004 FCA 175

CORAM :       DESJARDINS J.A.

LÉTOURNEAU J.A.

NADON J.A.

BETWEEN:

                                             ATTORNEY GENERAL OF CANADA

                                                                                                                                            Applicant

                                                                           and

                                                           RÉJEAN TREMBLAY

                                                                                                                                        Respondent

                                     Hearing held at Québec, Quebec, on March 31, 2004.

                                   Judgment rendered at Ottawa, Ontario, on May 3, 2004.

REASONS FOR JUDGMENT:                                                                           LÉTOURNEAU J.A.

CONCURRED IN BY:                                                                                          DESJARDINS J.A.

                                                                                                                                      NADON J.A.

Date: 20040503

Docket: A-571-02

Citation: 2004 FCA 175

CORAM :       DESJARDINS J.A.

LÉTOURNEAU J.A.

NADON J.A.

BETWEEN:

                                             ATTORNEY GENERAL OF CANADA

                                                                                                                                            Applicant

                                                                           and

                                                           RÉJEAN TREMBLAY

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

LÉTOURNEAU J.A.

[1]                Was the employment of the respondents Réjean Tremblay, Bertrand Simard, Denis Simard and Yvan Coudé insurable employment within the meaning of the Employment Insurance Act, S.C. 1996, c. 23, or the Unemployment Insurance Act, R.S.C. 1985, c. U-1, in the periods at issue? I refer to both statutes because the periods at issue overlapped them both, but this has no consequences since the applicable provisions are the same.

[2]                In a 226-paragraph judgment characterized by an often repetitious litany, generally disconcerting and distracting, of facts in more or less necessary detail, a deputy judge of the Tax Court of Canada (the judge) wrongly reached an affirmative conclusion. Of those 226 paragraphs, perhaps only 10 contain material, very briefly stated, analysing the point at issue. I will therefore deal with those paragraphs; first, however, some facts.

Facts

[3]                It was admitted by the parties that the judge confused a number of facts by applying them to the respondents Tremblay, Simard and Simard, whereas the facts related to owners of woodlots who were doing clearing work or woodcutting on their own lots. Only the respondent Coudé was in this position for the short period from October 13 to 17, 1997: see paragraphs 86 and 104 of the decision. Additionally, in dealing with the insurability of that period, the judge did not take into account the fact that the respondent Coudé was doing work that differed from that of the other respondents, in fact bush clearance on his own lot with his own equipment. In other words, for that period there was a confusion of duties and of the applicable legal principles.

[4]                The respondents Simard, Tremblay, Coudé and Simard argued that they held insurable employment with the Société Sylvicole du Saguenay (the payer) for the periods for which the parties recognized the parameters, and which it is not necessary to list at this stage.

1.         The payer

[5]                The payer operated a business managing forest working plans. It included owners of woodlots who, under a management agreement, entrusted their lots to it for operation and development.

[6]                The payer visited the private woodlots of its members and drew up management plans which then had to be approved by the Quebec Ministère des ressources naturelles (the Ministère). The forestry activities could consist of land clearing, reafforestation, maintenance of plantations, pre-commercial work such as loosening, commercial cutting and clear cutting: see testimony of Léon Simard, applicant's record, vol. 1, pages 78 to 80. The Ministère made grants for forestry work and the amounts of grants were determined by the number of hectares of woodlots being developed. However, the making of the grants was conditional on compliance with standards set by the Ministère for the performance of forestry work. At the same time, bush logging had to be self-financing: see applicant's record, vol. 1, at pages 82 and 188, testimony of Léon Simard.

2.         Respondents

A.        Réjean Tremblay

[7]                Mr. Tremblay did work for the payer involving windrowing and spraying of plantations, to eliminate hardwood and weeds. The windrowing work was done using a skidder (and sloven) which he owned with his father and had purchased for the sum of $40,000: see his examination,

applicant's record, vol. 1, page 233. The spraying work was also done with the skidder, to which a 500-gallon reservoir had been added along with spray lines to permit spraying over a 45-foot distance: ibid., at page 235.

[8]                The provision of services was governed by a verbal agreement. According to Mr. Tremblay, he rented his heavy machinery to the payer under a verbal rental contract and received a weekly salary of $640 from the latter as operator of the machinery. However, in cross-examination he had to admit he was paid by the hectare for the skidder ($160 to $180) and for the spraying ($80 to $90 a hectare) and this amount included the cost of the operator.

B.         Denis Simard

[9]                Like Mr. Tremblay, Mr. Simard's services were retained, with his skidder, under a verbal agreement. His work involved doing the collection of alders to make windrows: see Mr. Simard's admission at pages 354-355 of the applicant's record, vol. II. However, for the period at issue relating to 1999, relations between Mr. Simard and the payer were governed by a written contract providing for rental of the skidder owned by Mr. Simard, the purchase price of which was $11,000: see pages 24 to 32 of the respondents' record.

[10]            According to Mr. Simard, he received a weekly salary of $700 for operating his machinery. However, the evidence showed that he also was paid by the hectare for windrowing ($180 a hectare) and that this payment included the cost of the operator.

C.        Bertrand Simard

[11]            Bertrand Simard's working conditions were similar to those of the two respondents described above. They were also the result of a verbal agreement. He too was owner of the skidder, purchased for $8,500, with which the services were provided. According to his testimony, his salary was $800 a week.

D.        Yvan Coudé

[12]            Mr. Coudé transported wood cut in the woodlots worked by the payer. He unloaded cut wood using heavy machinery, the purchase price of which, and the repairs it required, totalled $25,000 at that time. It was the property of the Ecoforêt company, in which Mr. Coudé was a 50 % shareholder. He also operated a second conveyor leased by Ecoforêt to replace the first machinery. According to what he said, his weekly salary was $700 and the payment was made in the following circumstances.

[13]            The Ecoforêt company did work for the payer with its heavy machinery and received $12 a cubic metre for unloaded wood. It supplied the machinery and the operator. The price of $12 a cubic metre charged by Ecoforêt included the cost of the machinery operator. According to Mr. Coudé, Ecoforêt paid him his weekly salary from the amounts so received.

[14]            For the week of October 13 to 17, 1997, Mr. Coudé did bush clearance on his own lot specified under the payer's development instructions. He was paid by the hectare and supplied his own equipment, namely a slasher, a stripper and other equipment of the type required for doing the work.

[15]            I will mention more specific facts when I proceed to analyse the judge's decision and the parties' arguments.

Analysis of decision

1.         Respondents Tremblay, B. Simard and D. Simard

A.        Denis Simard's written rental contract for 1999 and insurability of that period

[16]            The respondents filed before the judge hearing the case Coverage Bulletin 97-1 dealing with the coverage of operator-owners of forestry machinery, and issued by the Minister of National Revenue. The purpose of that Bulletin is to clarify Revenue Canada's policy on workers in the forestry industry who, in addition to providing services to a contractor, lease their heavy machinery to the same contractor. The purpose is to facilitate determining the insurability of the employment and lessen the requests for rulings on insurability sent to Revenue Canada with regard to such workers.

[17]            In a word, the Bulletin, which I set out below, enables an operator-owner of heavy machinery to conclude two separate contracts with a contractor: a contract to rent the machinery and a contract of employment, which the Bulletin calls a contract of service. In principle, the separate agreements must be in writing although verbal agreements are also accepted, but applications based on verbal agreements are subject to special review by Revenue Canada: see also the addendum to Coverage Bulletin No. 97-1 on insurance policy, which confirms this. The rental contract and the employment contract must comply with strict conditions, otherwise the employment insurability application will be denied:

Although not conclusive, this Bulletin is still relevant in analysing the parties' intentions as to their contractual and business relationships.

[18]            Denis Simard signed a rental contract with the payer for 1999, and he said he entered into a verbal contract of employment for his services. The judge made no analysis of the rental contract. Certain clauses in that written contract are indicative of the actual relationship existing between the respondent and the payer.

[19]            In rental contracts the Coverage Bulletin properly requires that certain clauses in the contract should indicate that lessee takes control of the machinery for the duration of the agreement. The contract of employment must be separate from the rental contract. Additionally, the services of the operator-owner must not be directly and exclusively linked to the operation of the machinery and the employer must be responsible for damages or injuries caused by the operator as part of his or her duties.

[20]            Most of the clauses in the rental contract, whether involving maintenance of equipment, loss of income resulting from non-use or delays, losses of or damage to equipment or the daily expenses of using and operating the equipment, indicate that it is the lessor, not the lessee, who remains in control of the equipment for the duration of the contract and who assumes all risks. Are these not actually the features of a contract of enterprise in which, for an agreed price, the contractor provides his work and the tools necessary to do the work at his own expense?

[21]            Similarly, and this is a significant departure in the contract of employment, where in such a contract the employer defends the interests of his employee, the rental contract provided at clauses 5.1 and 5.5 that the lessor relieved the lessee of all civil liability resulting from the possession, use, transportation or condition of the equipment:

[TRANSLATION]

5. Insurance and indemnification:

5.1                           The Lessor shall obtain and keep in effect, at his own cost, throughout the period of the lease, an insurance policy for a minimum of $1,000,000 covering the civil liability of the Lessee and Lessor.

5.2                           The Lessor shall provide the Lessee with a certificate from his insurers stating that such a policy has been issued and that it includes a clause covering the said equipment for any time that it is leased to a third party.

5.3                           Further, this certificate shall also contain a clause stating that the insurer will not alter the policy without giving the Lessee thirty days' written notice.

5.4                           The Lessor shall save the Lessee harmless at all times from any claim, expense or liability whatever, by court action or otherwise, resulting from bodily injury, including death, suffered by any person, except the Lessee's employees, and material damage, including loss, to the property of any person, including the Lessee, when such injury or damage is directly or indirectly attributable to the possession, use or transportation of the said equipment.

5.5                           The Lessor hereby relieves the Lessee of any liability for any injury, loss or damage he may sustain, directly or indirectly, as a result of the use or condition of the equipment.

Here again, this is a basic feature of a contract of enterprise, in which the contractor, here the owner operating his own machinery, is responsible for the risks created and damage caused by his undertaking.

[22]            With respect, I believe that this written contract, referred to as a "rental" contract, and said to be accompanied by a verbal contract of employment, is in fact a contract of enterprise in which the owner of heavy machinery, in return for remuneration by volume, performs work requested and supplies his expertise and the equipment needed to do the work, with risks of loss and chance of profit, as appears in the written contract. Consequently, the work done by Denis Simard for the period covered by this contract, from May 10 to December 31, 1999, was not insurable employment under the Employment Insurance Act.

[23]            It now remains to consider the insurability of the following periods for the three respondents:

Tremblay            August 8 to September 9, 1994

November 12 to 25, 1994

Denis Simard      October 16, 1995 to February 16, 1996

November 18, 1996 to January 3, 1997

September 22 to November 7, 1997

B. Simard            October 16 to November 10, 1995

November 11 to December 6, 1996

September 22 to November 7, 1997

The three respondents alleged that two separate verbal agreements existed for these periods: a rental contract for the heavy machinery and a contract of employment. According to this argument, the former generated a machine salary and the latter a worker salary.

B.         Verbal contracts for machinery rental and employment of respondents Tremblay, Simard and Simard

[24]            The judge considered the three respondents' arguments based on the test developed in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 (F.C.A.), and concluded that two contracts existed governing the relations between the parties: a rental contract and a contract of employment. With respect, that conclusion was wrong, as the judge misunderstood the true and real nature of the contractual relationship between the parties as well as the concepts of control, integration, ownership of work tools and risk of loss and chance of profit.

[25]            In Le Livreur Plus Inc. v. M.N.R., 2004 FCA 68, this Court reviewed at paragraphs 16 to 21 the following rules applicable to determining the insurability of employment:

I do not think there is any need to restate some of the legal rules which apply to the question of insurability of employment. A decision on that question involves a decision on the nature of the contractual relationship of the parties.

What the parties stipulate as to the nature of their contractual relations is not necessarily conclusive, and the Court may arrive at a different conclusion based on the evidence before it: D & J Driveway Inc. v. The Minister of National Revenue, 2003 FCA 453. However, if there is no ambiguous evidence to the contrary, the Court should duly take the parties' stated intention into account: Mayne Nickless Transport Inc. v. The Minister of National Revenue, 97-1416-UI, February 26, 1999 (T.C.C.). Essentially, the question is as to the true nature of the relations between the parties. Thus, their sincerely expressed intention is still an important point to consider in determining the actual overall relationship the parties have had between themselves in a constantly changing working world: see Wolf v. Canada, [2002] 4 F.C. 396 (F.C.A.); Attorney General of Canada v. Les Productions Bibi et Zoé Inc., 2004 FCA 54.

In these circumstances, the tests mentioned in Wiebe Door Services Ltd. v. M.N.R., 87 D.T.C. 5025, namely the degree of control, ownership of the work tools, the chance of profit and risk of loss, and finally integration, are only points of reference: Charbonneau v. Canada (Minister of National Revenue - M.N.R.) (1996), 207 N.R. 299, paragraph 3. Where a real contract exists, the Court must determine whether there is between the parties a relationship of subordination which is characteristic of a contract of employment, or whether there is instead a degree of independence which indicates a contract of enterprise: ibid.

Having said that, in terms of control the Court should not confuse control over the result or quality of the work with control over its performance by the worker responsible for doing it: Vulcain Alarme Inc. v. The Minister of National Revenue, A-376-98, May 11, 1999, paragraph 10, (F.C.A.); D & J Driveway Inc. v. The Minister of National Revenue, supra, at paragraph 9. As our colleague Décary J.A. said in Charbonneau v. Canada (Minister of National Revenue M.N.R.), supra, followd in Jaillet v. Canada (Minister of National Revenue M.N.R.), 2002 F.C.A. 394, "it is indeed rare for a person to give out work and not to ensure that the work is performed in accordance with his or her requirements and at the locations agreed upon. Monitoring the result must not be confused with controlling the worker".

. . . A subcontractor is not a person who is free from all restraint, working as he likes, doing as he pleases, without the slightest concern for his fellow contractors and third parties. He is not a dilettante with a cavalier, or even disrespectful, willful or irresponsible, attitude. He works within a defined framework but does so independently and outside of the business of the general contractor. The subcontract often assumes a rigid stance dictated by the general contractor's obligations: a person may take it or leave it. However, its nature is not thereby altered, and the general contractor does not lose his right of monitoring the results and the quality of the work, since he is wholly and solely responsible to his customers.

Finally, determining the value of the remuneration, defining the purpose sought or making payment for work by cheque or otherwise does not amount to controlling work, since these features exist both in a contract of enterprise and in a contract of employment: Canada (Attorney General) v. Rousselle et al. (1990), 124 N.R. 339 (F.C.A.).

(a)        Degree of integration of respondents into payer's business

[26]            The question of rental of the equipment was a relevant fact in analysing the parties' intent as to the nature of their contractual relationships. The judge did not deal with it in that context. In fact, on this point he simply said, at paragraph 212 of his decision:

[TRANSLATION]

The appellants had leased their heavy machinery to the payer. The Payor used the machinery even though the Appellants operated it. It must therefore be concluded that based on this criteria, the Appellants were the payer's employees.

                                                                                                                                      (My emphasis)

He was then undoubtedly referring to the integration test, since in the previous paragraph he wrote:

[TRANSLATION]

The Appellants were integrated into the payer's operation. They participated on a regular basis. Their work was an integral part of the payer's business. The Payor could not have operated the business without the support of the Appellants and the other union or non-union employees.

I will return to the question of rental when I discuss that of "chance of profit and risk of loss".

[27]            The judge apparently assessed integration from the standpoint of the payer's business. This is a mistake for, as this Court said in Le Livreur Plus Inc., supra, at paragraph 38, assessing integration "from the standpoint of the business nearly always leads unavoidably to the conclusion that the workers' activities were organized and programmed to suit the principal and overriding activity of the business. In other words, the workers' activities will always appear to be integrated into the business". Accordingly, the Court must assess the services the workers provide from their standpoint and consider whether the workers were acting on their own behalf.

[28]            As I said earlier, the payer operated a business managing forest working plans which were a basis for government grants. This business was created in 1973 to meet government requirements which were becoming increasingly technical and more and more difficult to attain for persons who had no training in forestry technology. It informs and advises owners of lots on forestry work to be done on the lots: applicant's record, vol. I, page 73. It also undertakes to do the said work: see clause 4(a) of the agreement signed between the company and a woodlot owner, respondents' record, page 5.

[29]            For their part, the respondents were the owners of skidders. Each one operated a small forestry business, the principal operations of which were windrowing and spraying. These businesses took no part either in managing the working plans undertaken by the payer's business or in the application for and obtaining of government grants. They were obviously useful to the Payor in carrying out the work which the latter had undertaken to do. However, none of these small businesses was linked exclusively to the payer, and they in fact worked for other forestry cooperatives: see the testimony of Mr. Tremblay, B. Simard and D. Simard at pages 273-274, 302 and 334 of the applicant's record, vol. I.

[30]            In my opinion, all these facts tend to show that the respondents had the status of autonomous and independent contractors.

(b)        Concept of control

[31]            The passages relating to the concept of control are to be found in paragraphs 204 to 210 of the decision, which I set out below:

[TRANSLATION]

[204]              In spite of the workers' experience and expertise, the foremen determined the hours and days of work, on behalf of the payer. Due to the scope of the work and the size of the territory, the payer had to co-ordinate operations by issuing instructions to the Appellant-workers on a daily basis with regard to the hours, days and locations of work.

[205]              For certain tasks, including spraying, the foreman or technicians chose the time period, locations, as well as the spraying procedure. According to the explanation that was given, this work required some expertise.

[206]              The general foreman verified the work on a daily basis. The foreman took the initiative every morning to decide whether or not spraying should be done, based on the weather forecast. Spraying should not be done in the rain or if the humidity was over 40%.

[207]              The payer needed to ensure the workers' compliance with the location plans and restrictions. In order to do this, adequate supervision was required.

[208]              If the heavy machinery broke down, the operators (Appellants) were assigned other duties while it was being repaired.

[209]              Case law recognized that it was not necessary to constantly supervise workers; rather, it was the right to exercise this control over the workers that was important.

[210]              In the cases under review, the payer had the power to exercise such control, and what is more, it exercised adequate control over the workers.

[32]            Paragraphs 204, 205, 206 and 207 refer to facts that are all just as consistent with a contract of enterprise as with a contract of employment. I cannot really see how a contractor would lose his status as an independent contractor and become an employee simply because the party giving him the work indicates the locations or time where the work should be done. In fact, is it conceivable, as paragraphs 205 and 206 of the decision appear to indicate, that due to the concept of control the respondents were or became employees because the payer's foreperson asked them not to spray for the next two days because it was going to rain? I think merely asking the question provides the answer. An electrical subcontractor, for example, does not lose his status as an independent contractor because the general contractor asks him to delay his work for a week or two as the ventilation subcontractor has not yet finished his work.

[33]            Further, the evidence was that the payer's forepersons had no control over the workers' working hours. The payer's representative, Léon Simard, in reply to a question on control of working hours, stated at page 148 of the applicant's record, vol. I:

[TRANSLATION

Q.                 Same question. How did the company control working hours?

A.                 Well, there was no exact control of working hours, that is certain, it is . . . well, the forepersons went there quite regularly, I would even say regularly, but there was no control, the foreperson was not there at 8 am to see whether the fellow was working, and he stopped at 5 pm, it was impossible over all the area for four forepersons to cover the entire Saguenay, it was impossible for the foreperson to make a daily check on all those workers.

[34]            The respondent Denis Simard said, for his part, that he [TRANSLATION] "was responsible for managing his time so that it was done within a given period", namely from early October until the snow, that the hours were not checked, but the contract had to be done: ibid., vol. III, at pages 357, 361 and 362.

[35]            In fact, the four forepersons who were responsible for the payer for all the area managed by the payer, taking in 20 municipalities, went to the premises to check the quality of the work and ensure that it was in accordance with the environmental standards applicable. At pages 379 and 381 of the applicant's record, vol. II, the foreperson Jean-Pierre Gagné said:

[TRANSLATION]

We were on private property, so there were fences. There are people who have animals, there are culverts. There are . . . There are many conditions apart from . . . apart from departmental standards for entitlement to grants, so I had several instructions to give them for doing this work.

. . . . .

I went there every two days to check on the quality of the work, if the windrowing was properly done, if the instructions I had given him on streams, taping, the tapes which had been put on the edge of fences or the . . . everything that had anything to do with the work he had to do, I went to check whether it was properly done.

[36]            This testimony by the foreperson is to some extent corroborated by the statutory declaration of the respondent Tremblay, made to the Commission's investigators and to be found at page 633 of the applicant's record, vol. III:

[TRANSLATION]

We were responsible for time and days of work for the SSS [Société sylvicole du Saguenay]. I was responsible but someone from the SSS came from time to time to check on my work and give me other work areas.

[37]            In short, when the judge concluded at paragraph 210 of his decision that the payer "exercised adequate control over the workers", this must be understood to refer to adequate control over compliance with governmental standards and the quality and result of the work. Control of the quality and result of work is not the same thing as control of its performance by the worker responsible for doing it: see Vulcain Alarme Inc., supra, paragraph 10.

[38]            The only remaining, but very brief, material dealing with the concept of control is to be found at paragraph 208 of the decision, where the judge noted that if the heavy machinery broke down the respondents were assigned other duties while repairs were done. That conclusion is not supported by the evidence. In his testimony Mr. Tremblay stated that it was he who repaired his skidder 99 % of the time if there was a breakdown: see applicant's record, vol. I, at pages 267-268. The other respondents did not testify on the point, except for Mr. Coudé, who as we will see below was employed by the Ecoforêt company and not the payer.

[39]            Finally, on the concept of control I would add that the respondents were owners of their heavy machinery and were its only operators: see the testimony, for example, of B. Simard and D. Simard at pages 305, 316, 325 and 329 of the applicant's record, vol. I. The payer had no control over choosing the operator of the machinery owned by the respondents. At most it had a right of oversight or veto on the choice of a replacement if a respondent wished to be away. This right is understandable since the payer, who had given the Ministère an undertaking to comply with the conditions it laid down, was anxious to honour its commitments and receive the grants. It is also explained by the fact that for spraying the operator had to have special competence cards obtained after a course on herbicides: ibid., at pages 238 and 239.

[40]            In short, although it was stated that the heavy machinery was rented by the payer, the evidence was that it was the respondents who operated it exclusively and independently, without the sort of control that characterizes a contract of employment and produces the relationship of subordination necessary to the status of an employee.

(c)        Ownership of work tools

[41]            It was admitted by the parties that the respondents were the owners of the skidders and the sloven used for windrowing. Similarly, it was not disputed that the payer supplied a 500-gallon reservoir for spraying and spray lines to allow spreading. In terms of investment, however, this test of the ownership of work tools tilts the balance toward a contract of enterprise, as the reservoir and spreading lines are only incidental to heavy machinery, which is much more costly and necessary for performance of the work.

(d)        Chance of profit and risk of loss

[42]            As already mentioned, the judge concluded that there were two contracts, one for the rental of heavy machinery producing a machine-salary, and the other for employment producing a man-salary. From this he deduced, at paragraph 213 of his decision, that there was no chance of profit or risk of loss for the man-salary. With respect, that conclusion is contradicted by the evidence.

[43]            First, there was absolutely no physical evidence of the payment of a weekly salary to the respondents. The remuneration for the services provided was by hectare and so depended on the volume of production, as in Charbonneau v. Canada (Minister of National Revenue - M.N.R.), [1996] F.C.A. No. 1337, where in connection with the workers' risk of loss this Court concluded, at paragraph 12, that "the mere fact that his skidder had broken down would be sufficient for him to find himself with nothing": see also Canada (Attorney General v. Vaillancourt, [1992] F.C.A. No. 447; Canada (Attorney General) v. Rousselle, [1990] F.C.A. No. 990; Vulcain Alarme Inc. v. Canada (Minister of National Revenue - M.N.R.), supra.

[44]            In his testimony Mr. Tremblay admitted that in the event of a major breakdown of his machinery, he would have received a cut in the machine-salary and man-salary: applicant's record, vol. I, pages 315-316. It is clear that the man-salary and the amount of that salary depended on the machine-salary and the volume of the latter's production. Mr. Tremblay also admitted that if the work was badly done he would have to do it over at his cost, which certainly is not the feature of an employer-employee relationship: ibid., at page 313.

[45]            Further, the respondents were solely responsible for all maintenance and repair costs on their skidders, and such costs could create a risk of loss. In fact, Denis Simard claimed business losses for 1995 and Bertrand Simard for 1996 and 1997.

[46]            Finally, it was the respondents who as a general rule paid the costs relating to the transportation of their heavy machinery by flatbed semi-trailers from one work site to another. These costs were $75 to $80 an hour. Here again, the obligation is clearly more consistent with what is found in a contract of enterprise than with the obligations of a contract of employment. The respondents had no right to leave and no vacation pay. They had to pay the payer administration costs and were responsible for the cost of fringe benefits relating to the man-salary which they said they received, including the employers' contributions: applicant's record, page 95. These terms are difficult to reconcile with the status of an employee.

[47]            In short, if the judge had properly assessed and applied the tests for analysing the contractual relationship between the parties and the evidence in the record he could not have done otherwise than conclude that, for the periods at issue, each of the respondents was responsibly and independently operating a business that was his own, subject like any other business of an independent contractor to control of quality, result and compliance with environmental standards. Consequently, he would have concluded that the legal situation was not as described by the respondents and that the latter did not hold insurable employment within the meaning of the Employment Insurance Act or the Unemployment Insurance Act.

2.         Respondent Coudé

[48]            Mr. Coudé's factual and legal position differs from that of the other three respondents in that the first period at issue was governed by a rental contract concluded between the payer and the Ecoforêt company, while the second concerned his own lot.

A.        Period from June 10 to October 4, 1996

[49]            The judge's conclusion, which also served as an analysis of the question, is found at paragraph 223 of the decision. It reads as follows:

There is no evidence that Ecoforêt paid the appellant Yvan Coudé a salary during the periods at issue. It must therefore be concluded that Yvan Coudé worked for the Payor as an employee during the periods at issue, that is, from June 10 to October 4, 1996, and from October 13 to October 17, 1997.

This conclusion is wrong in fact and in law.

[50]            The employment contract, consisting of cutting of timber and unloading, was concluded between the payer and the Ecoforêt company which owned the conveyor used in doing the work. The payer paid Ecoforêt $12 a cubic metre of unloaded wood for rental of the conveyor: see applicant's record, vol. II, at pages 466 and 467. Initially no salary was paid to Mr. Coudé, Mr. Gagné (Mr. Coudé's co-shareholder in Ecoforêt), his father-in-law or his brother-in-law, who all operated the machine to get the Ecoforêt business going at the start: ibid., at pages 408 to 410. It was only thereafter that Mr. Coudé received his salary, still paid from the $12 a cubic metre received by Ecoforêt: ibid., at pages 453 and 454. Clearly, this salary came from Ecoforêt since the price per cubic metre paid by the payer remained the same, whether Ecoforêt paid the machine operator a salary or not.

[51]            The evidence further showed that the Ecoforêt company hired companies on subcontract to help it cut the timber. It was that company, and not the payer, which paid them from the amounts received from the payer: ibid., at pages 409 to 411. The source and procedure for making payments to these companies was the same as for Mr. Coudé. In the circumstances, there is nothing in the evidence to suggest, let alone support a conclusion, that Mr. Coudé's salary was paid by the payer rather than by the Ecoforêt company, in which he was both an employee and a holder of more than 40% of the shares.

[52]            The facts, circumstances and conditions relating to Mr. Coudé's employment are for all practical purposes the same as those encountered in Michel Simard v. The Attorney General of Canada, 2003 FCA 410, in which this Court concluded that the Tax Court of Canada had made no error in finding that the applicant was actually an employee of his company rather than of the logging business with which his company had concluded the contract.

[53]            I will end by noting the artificial nature of the determination of the amount of Mr. Coudé's salary and that of the other respondents. Léon Simard, who was the accountant employed by the payer, admitted in cross-examination, thus confirming his initial statement to the investigators, that it was the respondents who set the amount of the salary they needed to live, and the number of unemployment stamps they had to have to qualify for employment insurance benefits: see applicant's record, vol. I, at pages 125 to 130. I note in passing that, while it is permissible to organize and arrange one's work so as to benefit from employment insurance benefits if possible (see Canada (Attorney General) v. Rousselle, [1990] F.C.A. No. 990), the tolerance does not extend to allowing insured persons to increase their benefit rate by arbitrarily and artificially setting their salaries.

[54]            In his examination-in-chief Léon Simard emphasized the fact that the skidder operators had to have considerable experience and that was why the payer insisted on the respondents doing the work themselves: ibid., at page 98. I note in passing that at page 263 of the same volume, to demonstrate the scope of the payer's control over the work so as to establish the existence of a relationship of subordination, and hence of a contract of employment, Mr. Tremblay, whose services were allegedly retained as an operator because of his experience, said: [TRANSLATION] "I really don't know how to operate a skidder". Mr. Coudé, who was a stripper, had never operated a conveyor before, and lacking experience he received a weekly salary of $700, that is more than the respondents Tremblay ($640) and Denis Simard ($650), who were said to be experienced as skidder operators: ibid., at pages 471 and 472.

[55]            In short, for the period from June 10 to October 4, 1996 Mr. Coudé was the employee of the Ecoforêt company. As a holder of more than 40% of the shares in that company, his employment was excluded from insurable employment pursuant to paragraphs 5(2)(b) of the Employment Insurance Act or 3(2)(b) of the Unemployment Insurance Act.

B.         Period from October 13 to 17, 1997

[56]            The judge analysed the insurability of this period with that of the other respondents, applying the same principles to it. The respondent was in a different situation. In fact, the work done involved stripping and not "skidding". Thus, the respondent did not provide heavy machinery as the other respondents did, so that Coverage Bulletin 97-1 did not apply. There was accordingly no rental contract for heavy machinery by an owner-operator or machine-salary. The respondent supplied his own work tools, namely a chain saw and stripper.

[57]            Though scanty with regard to this period, the evidence was that the respondent was paid by the payer by the hectare: applicant's record, vol. II, page 464. He had just finished his work for another forestry cooperative and his services were retained by the payer.

[58]            There was no proof of integration into the payer's business in the record. Income was subject to fluctuation as it was tied to production volume. The respondent assumed the risk of loss. Based on this evidence, it is not possible to conclude that he held insurable employment during the period in question.

Conclusion

[59]            I undertook a re-analysis of the record and of the evidence at the request of the parties, the respondents having informed the Court by a letter from their counsel dated April 5, 2004 that, on reflection, because of the cost and difficulties they would have testifying again on periods going back to 1994, they preferred this solution, if it were possible, to returning the case to the Tax Court of Canada.

[60]            I believe it is not unreasonable to say that the periods at issue (1994 to 1997) correspond as regards the insurability of employment to a period of fluctuation and transition as to the status of forestry workers operating heavy machinery owned by them. Coverage Bulletin 97-1 was meant as an effort to clarify the legal principles applicable to the insurability of such employment, the principles which Revenue Canada intended to follow.

[61]            As is often the case with the law itself, the Coverage Bulletin is an epiphenomenon. It applied after a practice had been created and installed by which forestry workers sought a method of both laboriously earning their living during periods of forestry activity and ensuring they had income from employment insurance during forced periods of inactivity. I think the judge was sympathetic to this particular situation and the Coverage Bulletin greatly influenced him in arriving to the conclusion to which he came.

[62]            I understand that the position of forestry workers is now clarified and somewhat regularized, at least for the respondents. The addendum to Coverage Bulletin No. 97-1 indicates the efforts made by employers and workers in the forestry industry and by Revenue Canada and Human Resources Development Canada so the former may adapt to Revenue Canada's policy and the latter will be more sensitive to the situations encountered by forestry workers: see addendum, respondents' record, pages 43 and 44.

[63]            In the case at bar, Mr. Tremblay benefited from a special program with a grant for one year's unemployment to improve his organization as a contractor: see his testimony in the applicant's record, vol. I, page 232. In view of the nature and content of the arrangements made by the respondents with the payer, it was not possible to conclude that there was an employer-employee relationship without ignoring or disregarding the legal principles applicable to contracts of employment. However, in view of the period of fluctuation and uncertainty in which the respondents were, I think it is only fair not to impose on them the costs of these applications for judicial review.

[64]            For the reasons stated, I would allow the application for judicial review without costs, I would quash the decision of the Tax Court of Canada deputy judge and I would refer the matter back to the Chief Justice of that Court, or to a judge designated by him, to be again decided on the basis that the respondent did not hold insurable employment during the periods at issue.

[65]            A copy of these reasons will be filed in cases A-572-02, A-573-02 and A-574-02 in support of the judgments rendered therein.

"I concur in these reasons

Alice Desjardins J.A."

"I concur in these reasons

Marc Nadon J.A".

Certified true translation

Suzanne M. Gauthier, C Tr, LLL

                                                  FEDERAL COURT OF APPEAL

                                                      SOLICITORS OF RECORD

DOCKET:                                                A-571-02

STYLE OF CAUSE:                                ATTORNEY GENERAL OF CANADA v.

RÉJEAN TREMBLAY

PLACE OF HEARING:                          QUÉBEC, QUEBEC

DATE OF HEARING:                            MARCH 31, 2004

REASONS FOR JUDGMENT:             LÉTOURNEAU J.A.

CONCURRED IN BY:                           DESJARDINS J.A.

NADON J.A.

DATE OF REASONS:                            MAY 3, 2004

APPEARANCES:

Nathalie Lessard/Dany Leduc                     FOR THE APPLICANT

André Tremblay/Pierre Parent                    FOR THE RESPONDENT

SOLICITORS OF RECORD:

Department of Justice Canada                    FOR THE APPLICANT

Montréal, Quebec

Cain, Lamarre, Wells                                  FOR THE RESPONDENT

Chicoutimi, Quebec