Molaison v. M.N.R., docket 97-736-UI

Date: 19980623

Docket: 97-736-UI

BETWEEN:

HENRI-PAUL MOLAISON,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Pierre Archambault, J.T.C.C.

[1] Mr. Molaison is contesting a decision by the Minister of National Revenue ("the Minister") pursuant to the Unemployment Insurance Act ("the Act"). The Minister concluded that Mr. Molaison's employment with École de Plein Air Sans Frontières Inc. ("Plein Air") was not insurable employment during the period from July 16 to October 29, 1994 ("the relevant period"). The Minister gave two reasons: first, Mr. Molaison controlled over 40 percent of Plein Air's voting shares; and second, his employment was not held under a contract of service. Mr. Molaison admits that he did not hold insurable employment during the relevant period except for three weeks, that of August 13, 1994 and those between September 17 and September 30, 1994 ("the relevant weeks").

[2] In arriving at his decision the Minister relied inter alia on the following facts:

[TRANSLATION]

(a) the payer, "École de Plein Air Sans Frontière [sic] Inc.", was incorporated on February 7, 1992;

(b) the payer was a business that offered cycling and sea kayak excursions;

(c) the payer's capital stock was distributed as follows:

(i) appellant 33.33%;

(ii) Jean-Yves Huard 33.33%;

(iii) Marie-Josée Bourget 33.33%;

(d) the payer's head office was at 681 Montée Sandy-Beach in Gaspé;

(e) the appellant was the only paid employee of the payer in 1994;

(f) the appellant held the position of guide-instructor for cycling and sea kayak excursions;

(g) the appellant rendered full-time services to the payer from mid-July to late October 1994;

(h) by agreement with the other shareholder, Jean-Yves Huard, the appellant was paid for his work on excursions only, that is for three weeks, and for the rest of the time he worked without pay;

(i) the appellant was the only specialist in renting kayaks and in kayak excursions;

(j) after the appellant left the payer shut down its activities;

(k) in 1994 the appellant and Jean-Yves Huard alone stood surety for a loan from a financial institution to the payer totalling $10,000;

(l) the third shareholder, Marie-Josée Bourget, was no longer participating in the financial management of the payer in 1994;

(m) on September 28, 1994 the payer issued the appellant a record of employment indicating three weeks' work, whereas he in fact worked for the payer throughout the period from mid-July to late October; and

(n) no true contract of service existed during the period at issue.

[3] Mr. Molaison admitted all these facts except for those set out in paragraphs (g), (i), (j), (m) and (n). Additionally, the Minister withdrew the argument that Mr. Molaison controlled over 40 percent of Plein Air's voting shares.

[4] Only Mr. Molaison testified at the hearing. He explained that Plein Air did not have sufficient resources to pay him throughout the relevant period. It was only in the three relevant weeks, when he was working as a guide, that Mr. Molaison was paid. However, he admitted to having occasionally worked as an unpaid guide during the relevant period. For the first relevant week Mr. Molaison received $100 a day for each day of a cycling excursion with a group of about six young people. For the other two relevant weeks, Mr. Molaison worked as a guide on kayak excursions and received $500 a week in pay.

[5] Administrative duties, including equipment purchases and making bank deposits, were performed by himself and by Mr. Huard, the other shareholder in Plein Air.

[6] During his unpaid weeks Mr. Molaison's work included delivering kayaks to places indicated by Plein Air customers. If the kayaks were rented for half a day, he remained there. If they were rented for the whole day, he went back to pick them up at the end of the day. Mr. Molaison used his own truck for this work and was reimbursed for the cost of using it. Clearly, the time during which Mr. Molaison rendered his services depended on the requirements of Plein Air's customers.

Analysis

[7] The only argument made by the Minister in support of his decision was that Mr. Molaison did not render his services under a contract of service. Relying on Wiebe Door Services Ltd. v. Minister of National Revenue, [1986] 3 F.C. 553, counsel for the Minister argued that Plein Air exercised no control over Mr. Molaison's activities, since he decided himself how he would use his time. Additionally, Mr. Molaison was the owner of a tool he used in the course of his duties, namely the truck. It was also he who assumed the greatest risk. Plein Air had only limited financial resources. It was not in a position to guarantee the repayment of money owed to Mr. Molaison.

[8] According to the integration test as interpreted by counsel for the Minister Mr. Molaison could not have been an employee since he was the only one who provided services to Plein Air. Furthermore, when he left the company closed down its operations.

[9] In my view, counsel for the Minister erred in law. He misinterpreted Wiebe Door. The rules set out in that judgment are not a statement of conditions essential for a contract of service to exist, but serve rather to distinguish the contract of service from the contract for services. Wiebe Door sought to answer the following question: did a given person work as an employee or as a contractor (or self-employed person)? The answer to this question greatly depends on the answer to the following question: whose business is it?

[10] The answer given by MacGuigan J.A. at p. 562 of Wiebe Door was that the courts should apply the following four tests stated by Lord Wright in the well-known case of Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161 (P.C.), at pp. 169-70:

1. control;

2. ownership of the tools;

3. chance of profit; and

4. risk of loss.

Lord Wright had added the following inMontreal Locomotive:

In many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. In this way it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior.

[11] The first test, that of control, is one which may establish the existence of a contract of service. The other three, namely ownership of the tools, chance of profit and risk of loss, are all indications of the existence of an independent business.

[12] The test of integration is sometimes added to the four mentioned above. MacGuigan J.A. noted that it is important to use this test properly. He stated the following at p. 563:

Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer," because it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity. We must keep in mind that it was with respect to the business of the employee that Lord Wright addressed the question "Whose business is it?"

[13] In my experience, a good indication that counsel have not understood Wiebe Door can be obtained by asking this question: "If the services rendered by the appellant were not rendered under a contract of service, under what type of contract were they rendered?" If counsel are unable to answer this question, it is in all likelihood because they have not understood Wiebe Door, as if they did understand it they would reply that the appellant rendered them under a contract for services. In the instant case counsel for the Minister has not understood Wiebe Door.

[14] To answer the question asked in Wiebe Door, it is necessary to determine whether Mr. Molaison rendered his services on Plein Air's behalf or was really acting on his own behalf. It can be seen from the evidence that the rental activities were carried on in Plein Air's name. The receipts filed by counsel for the Minister confirm this. It can also be seen from the evidence that it was Plein Air which owned the kayaks rented to its customers. Mr. Molaison confirmed that he was acting on Plein Air's behalf and that he occasionally served as a guide as a Plein Air employee. Moreover, it was during the weeks in which he worked throughout as a guide that he was paid.

[15] It is true that Mr. Molaison used his own truck to deliver kayaks to places indicated by customers. However, Plein Air reimbursed the expenses occasioned by this use. If Mr. Molaison had been self-employed, Plein Air would not have reimbursed his travel costs. It seems clear, therefore, that it was Plein Air which was operating the kayak rental and guide service business. Mr. Molaison was only an employee working for Plein Air. In the circumstances of this appeal, it is easy to infer that a relationship of subordination existed between Plein Air and Mr. Molaison.

[16] The fact that Mr. Molaison stood surety for a $10,000 loan is not an indication that he was operating the Plein Air business. Mr. Molaison stood surety for this loan as a shareholder, which is not inconsistent with the existence of a contract of service between Mr. Molaison and Plein Air. It is true that by standing surety Mr. Molaison ran a financial risk, but it was not as a contractor but as an investor in Plein Air that he did so.

[17] Of course, if the true owner of the Plein Air business were Mr. Molaison and Plein Air were only serving as his agent, the fact that Mr. Molaison stood surety for the loan could have supported the conclusion that the business was owned by Mr. Molaison rather than Plein Air. As MacGuigan J.A. noted in Wiebe Door, the Court must analyse the combined force of the whole scheme of operations to determine whether a contract of service existed between Mr. Molaison and Plein Air.

[18] Finally, if the integration test is applied, it is impossible not to conclude that it supports the existence of a contract of service. As MacGuigan J.A. said in Wiebe Door, the integration test must be approached from the persona of the employee, not from that of the employer. From Mr. Molaison's standpoint, the only customer he had was Plein Air. It is clear that from his standpoint his activities were integrated into those of Plein Air.

[19] On the basis of the facts as a whole, I conclude that a contract of service existed between Mr. Molaison and Plein Air in the three relevant weeks. In the other weeks of the relevant period the services Mr. Molaison provided were provided without charge. Accordingly, no contract of service could have existed in those other weeks.

[20] For these reasons, the appeal is allowed and the Minister's decision varied on the basis that Mr. Molaison held insurable employment during the week of August 13, 1994 and during those between September 17 and 30, 1994.

Signed at Ottawa, Canada, June 23, 1998.

"Pierre Archambault"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 26th day of November 1998.

Stephen Balogh, revisor