Citation: 2012 TCC 374
Date: 20121023
Docket: 2012-837(EI)
BETWEEN:
FRANCE MARTEL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Docket: 2012-840(EI)
BETWEEN:
CATHY LAVOIE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre, J.
[1]
The appellants are
appealing from a decision of the Minister of National Revenue (Minister)
in which it was determined that they did not hold insurable employment with
Camping Camp D'Accueil 2004 S.E.N.C. (payer) on the ground that they
were the payer's partners, each holding 25% of the shares and, accordingly,
there could not be an employee-employer relationship that could enable them to
receive benefits under the Employment Insurance Act (EIA).
[2]
The periods at issue
are as follows: for Cathy Lavoie: from May 25, 2011, to September 30, 2011; for
France Martel: from June 3, 2007, to October 6, 2007; from May 26, 2008, to
October 18, 2008; from May 25, 2009, to September 12, 2009; from May 24, 2010,
to September 11, 2010; and from May 25, 2011 to September 30, 2011.
[3]
The facts on which the Minister
relied are summarized at paragraph 5 of the Reply to Notice of Appeal of France
Martel and read as follows:
[Translation]
In
making his decision, the Minister relied on the following assumptions of fact:
(a)
The payer was registered on June 8, 2004,
adopting the juridical form of a general partnership;
(b)
At the time of registration, the partners were Marc-André
Lavoie, Monique Simard, Geneviève Lavoie, Fernando Lavoie, Doris Chalifour and
Cathy Lavoie;
(c)
During the periods at issue, the partners were Cathy
Lavoie, Fernando Lavoie, Marc-André Lavoie and France Martel;
(d)
Each of the partners holds 25% of the payer's shares;
(e)
Cathy Lavoie has held 25% of the payer's shares
since it was registered in 2004, while the appellant has held her 25% of the
payer's shares since 2007;
(f)
Cathy Lavoie is the daughter of Fernando Lavoie,
and the other partners are not related;
(g)
The appellant and Cathy Lavoie made a
non-monetary contribution to participate in the general partnership;
(h)
The payer's activities were renting out a
campground and RV parks;
(i)
The Municipality of Ferland-et-Boileau [sic] leases
the land from the MRC du Fjord and assumes the main costs;
(j)
The payer leases the land from the Municipality
of Ferland-et-Boileau [sic], which enables it to exercise its activities of
renting out 42 campsites and RV spaces and to provide hiking trails and ropes
courses;
(k)
The campground is semi-serviced; that is, there
is no electricity, only water;
(l)
The payer's period of activity is from the
beginning of June until after Labour Day in September;
(m)
The payer uses the services of two of its
partners, the appellant and Cathy Lavoie;
(n)
The two working partners, namely, the appellant
and Cathy Lavoie must cover the payer's hours of operation, which are from 7
a.m. to 11 p.m. that is, 90 hours per week;
(o)
The appellant and Cathy Lavoie's tasks consisted
in taking care of the grounds, welcoming customers, making reservations,
renting out campsites, performing cleaning and maintenance;
(p)
The appellant and Cathy Lavoie were paid minimum
wage by cheque every week;
(q)
During the periods at issue, the appellant was a
partner of the payer.
[4]
The appellants maintain
that their contract of employment with the payer had the characteristics of a
contract of service and that the payer was not in reality a general partnership
(GP) within the meaning of the Civil Code of Québec (CCQ),
but rather a non-profit organization registered under Division III of Quebec's Companies
Act (QCA), R.S.Q., c. C-38, or a cooperative.
Facts revealed
at the hearing
[5]
I heard the testimony
of Fernando Lavoie, Cathy Lavoie and France Martel. Their testimony shows that
about twenty residents of Ferland-et-Boilleau opposed the municipality's leasing
of a wilderness campground that had existed since 1972 to a group of
non-residents.
[6]
Two of these residents,
one of whom was Hervé Simard, accountant for commission scolaire de Jonquière, wanted
to set up a charter. They proposed to form a GP, and Fernando Lavoie and five
or six other residents including his daughter Cathy Lavoie became its
founders. Fernando Lavoie said that he had personally invested nothing but
that, for him, it was about preserving heritage and that this was very
important to him. He himself was the chair of a committee that obtained funding
for a building on the campground. He really did not want this land to be
managed by non-residents.
[7]
No partnership contract
setting out the partners' rights and obligations was drawn up. The objective
was not to make profits, but rather to preserve this heritage. There was
therefore no business plan. If there were losses during one year, they were carried
forward to the next year's budget.
[8]
The land belonged to
the MRC du Fjord-du-Saguenay, which leases it to the municipality. It pays for
all work over $1,500 (such as water supply, septic tanks and fixed assets). The
GP pays for maintenance, repairs and hiking trails. The buildings on the land
belong to the municipality.
[9]
During the period at
issue, the board of directors (board) of the GP was made up of four
people including Fernando Lavoie and the two appellants. The board met about
three times per year. Marc-André Lavoie was the president and Fernando Lavoie
was the secretary-treasurer. He drafted minutes at board meetings and prepared
financial statements (a copy of the minutes of meetings was filed as
Exhibit A‑2).
[10]
According to Fernando
Lavoie, since 2004, the GP has experienced deficits every year, except one year
when it had a surplus of $200. They tried to offset one year's deficit by
increasing revenue from campers. In 2011, they obtained a $5,000 grant to build
a bridge to access a waterfall, and that apparently explains a surplus of about
$4,000 that year, which absorbed the deficit of $3,000 from the previous year
(based on the statement of income and expenses filed, Exhibit I-1, tab 1 M). Fernando
Lavoie said that he had reported a profit of $500 in his income tax return for
2011. The evidence did not show whether he had reported income for the year in
which the GP had made a surplus of $200 in the past.
[11]
The appellants
participated in decisions made about admission fees and the organization of
camping activities, but when their remuneration was discussed, they would leave
the board meeting. Given that the campground's revenues were low, they were
paid only minimum wage to perform the various assigned tasks.
[12]
Mr. Lavoie stated that
he considered the GP to be more of a non-profit organization (NPO) and
that he was not familiar with the regulations governing the GP. He was aware of
the importance of being an NPO as it was the way to obtain funding. The four
board members attended meetings as volunteers.
[13]
Cathy Lavoie explained
that, at first, a group of 20 residents had planned the campground's operations
in order to present a project to the municipality. Ms. Lavoie has no actual
contract with the GP. The board, on which she does not sit when it discusses
her work, determined that she had to work 44 hours per week. Every week, she
reports to Mr. Lavoie on what has happened and on how much money was made. In
cross-examination, she said that decisions were made by consensus after
discussions and that she did not remember voting even though she appears to hold
25% of the shares in the GP.
[14]
She explained that she
derived no personal benefits as a seasonal user and that, to use the
campground, she paid the regular price just like everyone else. Her tasks were
to clean the campground, answer the telephone and answer customers' questions
in person, make repairs on the campground, and clean the beaches. She also
organized activities at the campground. She shared the work time with
France Martel, who worked the same number of hours as she per week. They
were asked only that the work be done in accordance with the number of hours
allotted.
[15]
A description of their
tasks can be found in a document filed as Exhibit A-1. It indicates, among
other things, that the employees report directly to the board and that they
must perform all other tasks considered necessary by the board.
[16]
Ms. Lavoie acknowledged
that she took part in the campground activity planning meetings, which took
place in February.
[17]
France Martel explained
that she had started working later and that no one had ever explained to her
what the GP was. She simply wanted to contribute to saving the campground. She
did not invest a cent and was therefore not expecting any return except for the
wages she was paid for her work. She did not know that she was a partner in the
GP.
Appellants' submissions
[18]
First, the appellants
argue that they are as much employees of the GP as they would have been of a
corporation. The case law is clear that a shareholder may be considered as an
employee under the control of the corporation in which he or she holds shares
(see Canada (Attorney General) v. Acier Inoxydable Fafard Inc., 2002 FCA
214).
[19]
Second, the appellants
maintain that no GP as such existed. They refer to the decision of Deputy
Justice Rowe of our Court in Sheppard v. Minister of National Revenue,
2009 TCC 97. In that decision, Justice Rowe determined that a partnership
within the meaning of sections 2 and 4 of British Columbia's Partnership Act
did not exist. Justice Rowe relied on the Supreme Court of Canada decisions in Continental
Bank Leasing Corp. v. Canada, [1998] 2 S.C.R. 298, Backman v.
Canada, [2001] 1 S.C.R. 367, and Spire Freezers Ltd. v. Canada,
[2001] 1 S.C.R. 391. The Supreme Court of Canada wrote the following at
paragraphs 21 to 24 of Backman:
21 In
determining whether a business is carried on "in common", it should
be kept in mind that partnerships arise out of contract. The common
purpose required for establishing a partnership will usually exist where the
parties entered into a valid partnership agreement setting out their respective
rights and obligations as partners. As was noted in Continental Bank,
supra, at paras. 34-35, a recognition of the authority of any partner to
bind the partnership is relevant, but the fact that the management of a
partnership rests with a single partner does not mandate the conclusion that
the business was not carried on in common. This is confirmed in Lindley
& Banks on Partnership (17th ed. 1995), at p. 9, where it is pointed
out that one or more parties may in fact run the business on behalf of
themselves and the others without jeopardizing the legal status of the
arrangement. It may be relevant if the parties held themselves out to
third parties as partners, but it is also relevant if the parties did not hold
themselves out to third parties as being partners. Other evidence
consistent with an intention to carry on business in common includes: the
contribution of skill, knowledge or assets to a common undertaking, a joint
property interest in the subject‑matter of the adventure, the sharing of
profits and losses, the filing of income tax returns as a partnership,
financial statements and joint bank accounts, as well as correspondence with
third parties: see Continental Bank, supra, at paras. 24 and 36.
22 A
determination of whether there exists a "view to profit" requires an
inquiry into the intentions of the parties entering into an alleged
partnership. At the outset, it is important to distinguish between
motivation and intention. Motivation is that which stimulates a person to
act, while intention is a person's objective or purpose in acting. This
Court has repeatedly held that a tax motivation does not derogate from the
validity of transactions for tax purposes: Shell Canada Ltd. v.
Canada, [1999] 3 S.C.R. 622; Canada v. Antosko, [1994] 2
S.C.R. 312; Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R.
536, at p. 540. Similarly, a tax motivation will not derogate from
the validity of a partnership where the essential ingredients of a partnership
are otherwise present: Continental Bank, supra, at paras.
50-52. The question at this stage is whether the taxpayer can
establish an intention to make a profit, whether or not he was motivated by tax
considerations. For further discussion, see D. Nathanson, "Tax
Motive Kills Partnership: Spire Freezers (cf. Continental Bank)" (1999), 7 Tax Litigation 458.
23 Moreover,
in Continental Bank, supra, this Court held that a taxpayer's
overriding intention is not determinative of whether the essential ingredient
of "view to profit" is present. It will be sufficient for a
taxpayer to show that there was an ancillary profit-making purpose. This
flows from the following observation made in Lindley & Banks on
Partnership, supra, at pp. 10‑11, and adopted in Continental
Bank, supra, at para. 43:
. . .
if a partnership is formed with some other predominant motive [other than the
acquisition of profit], e.g., tax avoidance, but there is also a real,
albeit ancillary, profit element, it may be permissible to infer that the
business is being carried on "with a view of profit." If,
however, it could be shown that the sole reason for the creation of a
partnership was to give a particular partner the "benefit" of, say, a
tax loss, when there was no contemplation in the parties' minds that a profit .
. . would be derived from carrying on the relevant business, the partnership
could not in any real sense be said to have been formed "with a view of
profit".
24 An ancillary purpose is by definition a lesser or subordinate purpose.
In determining whether there is a view to profit courts should not adopt or
employ a purely quantitative analysis. The amount of the expected profit
is only one of several factors to consider. The law of partnership does
not require a net gain over a determined period in order to establish that an
activity is with a view to profit. For example, a partnership may
incur initial losses during the start up phase of its enterprise. That does
not mean that the relationship is not one of partnership, so long as the
enterprise is carried on with a view to profit in the future. Therefore,
where a partnership is formed with the predominant motive of acquiring a tax
loss, it is not necessary to show an intention to profit by the amount
necessary to recoup the acquired losses or produce a net gain.
[20]
In Sheppard, Justice Rowe
found that a GP did not exist, relying on the following facts found at
paragraphs 22 et seq. of the decision: (1) the evidence did not support a finding
that one of the alleged partners acted as though he was a member of a legal
partnership as opposed to a willing participant in a venture; (2) the evidence
showed that the appellant in that case, Mr. Sheppard, who was also a partner,
according to the respondent, intended his participation to be that of a
colleague in a new education experiment, he did not turn his mind towards the
formation of a legal partnership as he was adamant that he receive an annual
salary and did not deal with any aspect of the finances; (3) nothing showed that the alleged partners
held themselves out as partners in the legal sense: there was no documentation
in the form of a valid partnership agreement nor was there any oral evidence
consistent with their intention to function as a business; (4) there is no
evidence of any intent expressed by two of the alleged partners, including
Mr. Sheppard, nor of any actions consistent with any such intent that
their services would be remunerated by receiving a share of the profits of the
company; (5) a review of the evidence discloses that there was no opportunity
for profit for the venture as structured nor was there any business plan in
place that could lead to a profit in the future; (6) it is clear Mr. Sheppard did
not see himself as other than a qualified teacher providing his services in
return for a monthly payment and did not intend to be involved as a partner in
a business with shared risks and profits.
[21]
The appellants submit
that they had no intent to form a GP. There was no contract defining their
rights and obligations. There was no intent to make profits or to take part in
them. The intent was to preserve heritage.
[22]
They argue that it was established
that the Unemployment Insurance Act, as it was then called, had to be
interpreted liberally and that any doubt arising from the difficulties of the
language should be resolved in favour of the claimants (Abrahams v. Attorney
General of Canada, [1983] 1 S.C.R. 2).
[23]
They claim that,
despite the registration of a GP in the Quebec's enterprise register (REQ)
indicating that they were partners in it (Exhibit I-1, tab G), it was in
reality an NPO. The founders were poorly advised when they registered a GP. In
their written submissions (page 4), the appellants also cite the comments of
André Poupart,
who states that [Translation] "the
fact that a declaration is public should not be considered as a way of proving
a company's existence. Such proof is governed by article 2860 CCQ, which
governs poof of juridical acts in general". Section 2860 CCQ reads as
follows:
2860. A juridical act set forth in a writing or the content of a writing shall
be proved by the production of the original or a copy which legally replaces
it.
However, where a party acting in good faith and with
dispatch is unable to produce the original of a writing or a copy which legally
replaces it, proof may be made by any other means.
In the case of technology-based documents, the
functions of the original are fulfilled by a document meeting the requirements
of section 12 of the Act to establish a legal framework for information
technology (chapter C-1.1) and the functions of the copy replacing the original
are fulfilled by a certified copy of the document meeting the requirements of
section 16 of that Act.
Respondent's submissions
[24]
The respondent argues
that there was a way to correct the situation if that had really been the
partners' intent, and this was not done. He refers to articles 2191 and 2195
CCQ, which read as follows:
2191. If the partnership discovers or is informed that its registration
declaration is incomplete, inaccurate or irregular, the declaration may be
corrected by filing an updating declaration in accordance with the Act
respecting the legal publicity of enterprises (chapter P-44.1).
2195. Declarations relating to a partnership may be set up against third
persons from the time the information they contain is recorded in the
enterprise register. They constitute proof of their content in favour of third
persons in good faith.
[25]
In addition, the Act
Respecting the Legal Publicity of Enterprises (ARLPE), R.S.Q., c.
P-44.1, section 98, states the following:
98. The following information relating to a registrant may be set up
against third persons from the time it is recorded in the statement of
information and is proof of its content for the benefit of third persons in
good faith:
(1)
the registrant's name and, if the registrant was previously registered, the
registrant's Québec business number;
(2)
any other name used by the registrant for identification in Québec;
(3)
the registrant's juridical form and the statute under which the registrant was
constituted;
(4)
the registrant's domicile;
(5)
the domicile elected by the registrant and the name of the person mandated by
the registrant to receive documents for the purposes of this Act;
(6)
the names and domiciles of the directors and the positions they hold or, if all
powers have been withdrawn from the board of directors by a unanimous
shareholder agreement entered into in accordance with the laws of Québec or a
Canadian jurisdiction other than Québec, the names and domiciles of the
shareholders or third persons having assumed those powers;
(7)
the date of entry into office and, if applicable, the date of cessation of
office of the persons referred to in subparagraphs 6 and 10;
(8)
the names and domiciles of the president, the secretary and the chief executive
officer, if they are not members of the board of directors, and the positions
they hold;
(9)
the name and address of the registrant's attorney;
(10)
the name, address and capacity of the person acting for the registrant as
administrator of the property of others;
(11)
the address of the registrant's establishments in Québec;
(12)
the name and domicile of each partner, the fact that no other person is a
member of the partnership and, in the case of a limited partnership, the name
and domicile of each general partner and the names and domiciles of the three
greatest contributors to the partnership among the special partners;
(13)
the object pursued by the partnership;
(14)
the name of the State, province or territory in which the registrant was
constituted and the date of constitution;
(15)
the name of the State, province or territory in which the amalgamation or
division that resulted in the formation of the registrant took place, the date
of the amalgamation or division and the name, domicile and Québec business
number of every legal person involved in the amalgamation or division; and
(16)
the date of the continuance or other transformation of the registrant.
Third
persons may submit any proof to refute information contained in a document
filed with the registrar or transferred under an agreement entered into under
section 117 or 118.
However,
a registrant whose registration has been cancelled ex officio by the registrar
may not dispute information declared by the registrant and contained in the
statement of information.
[26]
Once the appellants are
identified as partners in a GP in the enterprise register, this information becomes
proof of its contents in favour of third persons in good faith. The respondent
submits that he is a third person in good faith. If the conditions for the
existence of a GP are not met, this can have no impact on the respondent
because the payer is officially registered as a GP, not an NPO, and it has never
corrected this since 2004.
[27]
In addition, the
respondent notes that the appellants had their say in the management and activities
of the payer. They were both members of the board and participated in decisions
on how their tasks were managed. Their decisions had an impact on their methods
of work and of carrying out their tasks.
[28]
The respondent relied
on our Court's decision in Blais v. The Queen, 2005 TCC 417, 2006 DTC
2235, which follows the reasoning of the Quebec Court of Appeal in Charron
v. Drolet, [2005] Q.J. No. 4741 (QL), 2005 QCCA 430, to argue that a
partnership cannot hire one of its partners as an employee (Blais, para.
30).
[29]
In addition, in his
written submissions, the respondent relied mainly on Shell Canada Ltd. v.
Canada, [1999] 3 S.C.R. 622, to support his position that the juridical
form of the payer, as it officially appears, must be respected. More
specifically, the respondent cites the following excerpt from paragraph 40 of Shell
Canada:
. .
. it is well established in this Court's tax jurisprudence that a searching
inquiry for either the "economic realities" of a particular
transaction or the general object and spirit of the provision at issue can
never supplant a court's duty to apply an unambiguous provision of the Act to a
taxpayer's transaction.
[30]
Relying on this
excerpt, the respondent states that if the Court concluded that this was not in
reality a GP, a searching inquiry for the "economic realities" cannot
supplant a court's duty to apply unambiguous provisions, namely, article 2195
of the CCQ and section 98 of the ARLPE. The respondent notes that these two
provisions create a presumption that the information related to the juridical
form of a subject appearing in the REQ constitutes proof of its content in
favour of third persons in good faith, which would make it impossible to recharacterize
the legal relationships that exist between the appellants and the payer.
Analysis
[31]
First, it should be
recalled that the status of a shareholder in a joint-stock company is different
from that of a partner in a GP. As the Quebec Court of Appeal reminds us in Charron
v. Drolet, supra, referred to by the respondent, only a joint-stock
company is a legal person under article 2188 CCQ. Since the partners made the
choice to be legally bound as a GP rather than as a joint-stock company, this
choice is incompatible with the contract of employment defined in article 2085
CCQ as "a contract by which a person, the employee, undertakes for a limited
period to do work for remuneration, according to the instructions and under the
direction or control of another person, the employer".
[32]
Thus, the appellants
cannot rely on Acier Inoxydable Fafard Inc., supra, to argue that
they could be employed by the GP in which they were partners under a contract
of employment that rendered them insurable.
[33]
In addition, there is
the question of whether the partners had actually formed a GP or whether, as
the appellants claim, the real intent was to form an NPO or a cooperative to
which they rendered services under a contract of employment. If that were the
case, does the fact that the payer is registered as a GP in the REQ create an
irrefutable presumption under article 2195 CCQ and section 98 ARLPE on which
the respondent may rely?
[34]
In my view, the
registration in the REQ as a GP, which incidentally designates the appellants
as partners, although an indication of this, is not necessarily determinative
if it is proven that no GP existed legally in its real juridical form. Indeed,
it is always possible to correct documents noted by a public officer, private
writings or tax forms if they do not comply with the original agreement. Such a
request causes no prejudice to the Minister, who has no "right" to
assert for tax consequences of errors that had been made (Riopel v. Canada
Revenue Agency, 2011 QCCA 954, para. 25, application for leave to appeal
granted, 2011 S.C.C.A., No. 356). In addition, in Shell Canada, supra,
the Supreme Court of Canada also accepted that legal relationships can be
recharacterized only "if the label attached by the taxpayer to the
particular transaction does not properly reflect its actual legal effect"
(para. 39).
[35]
Our Court has ruled
that the presumption in section 98 ARLPE (formerly section 62 of the Act
respecting the legal publicity of sole proprietorships, partnerships and legal
persons, R.S.Q., c. P-45) is refutable, (Miklosi (The Estate of) v. The
Queen, 2004 TCC 253, at para. 24; Sandhu v. The Queen, 2009 TCC 175,
at para. 47). These decisions were rendered when the Court had to determine
whether taxpayers whose names appeared in the REQ as directors of their
corporations were actually directors in the context of directors' liability for
those corporations' tax debts. This may be explained by the fact that directors
are not personally responsible for erroneous registrations in the REQ because
it is the corporation that is responsible for registration. Can the same be
said for partners in a GP even though it does not have a separate legal
personality?
[36]
In any event, in my
view, the appellants, who are designated as partners in the REQ, have the
burden of proving not only that they were not partners but also that the payer
was not in reality a GP but an NPO governed by Division III of the QCA or a
cooperative.
[37]
As stated by the
Supreme Court of Canada in Backman, supra, at paragraph 17,
the legal status of an entity must be analyzed based on the law of the province
where the entity was created. Thus, the determination of the payer's legal
status must be preceded by a review of the various rules provided by Quebec
law.
[38]
Articles 2186 et seq.
of the CCQ govern the creation of companies in Quebec. The relevant provisions
read as follows:
2186. A contract of partnership is a contract by which the parties, in a spirit
of cooperation, agree to carry on an activity, including the operation of an
enterprise, to contribute thereto by combining property, knowledge or
activities and to share any resulting pecuniary profits.
A contract of association is a contract by which the
parties agree to pursue a common goal other than the making of pecuniary
profits to be shared between the members of the association.
2187. The partnership or association is created upon the formation of the
contract if no other date is indicated in the contract.
2188. Partnerships are either general partnerships, limited partnerships or
undeclared partnerships.
Partnerships may also be joint-stock companies, in
which case they are legal persons.
2189. A general or limited partnership is formed under a name that is common to
the partners.
It shall file a registration declaration in
accordance with the Act respecting the legal publicity of enterprises
(chapter P-44.1); otherwise, it is deemed to be an undeclared partnership, subject
to the rights of third persons in good faith.
. . .
2191. If the partnership discovers or is informed that
its registration declaration is incomplete, inaccurate or irregular, the
declaration may be corrected by filing an updating declaration in accordance
with the Act respecting the legal publicity of enterprises (chapter
P-44.1).
2192. A correction that would infringe upon the rights of the partners or
of third persons has no effect in their regard unless they consented to it or
unless the court, after hearing the persons concerned and, if necessary,
amending the proposed updating declaration, ordered that it be filed.
2193. The correction is deemed to be part of the registration declaration
and to have taken effect simultaneously with it unless a later date is provided
in the updating declaration or in the judgment.
2194. Any change to the content of the registration declaration of the
partnership shall be set forth in an updating declaration in accordance with
the Act respecting the legal publicity of enterprises (chapter P-44.1).
2195. Declarations relating to a partnership may be set up against third
persons from the time the information they contain is recorded in the
enterprise register. They constitute proof of their content in favour of third
persons in good faith.
Third persons may submit any proof to refute the
statements contained in a declaration.
2196. If the registration declaration of the partnership is incomplete,
inaccurate or irregular or if, although a change has been made in the
partnership, no updating declaration has been filed, the partners are liable
towards third persons for the resulting obligations of the partnership;
however, special partners who are not otherwise liable for the obligations of
the partnership are not liable under this article.
[39]
The formation of a
partnership requires three essential conditions to be met: (1) a spirit of
cooperation showing a common intent to form a partnership; (2) a combining of
property, knowledge or activities; and (3) a sharing of pecuniary profits
resulting from this combining (Cimon v. Arès, 2005 QCCA 9 (CanLII),
paras. 50 to 52).
[40]
At paragraph 25 of Backman,
supra, the Supreme Court of Canada specified that:
. .
. to ascertain the existence of a partnership the courts must inquire into
whether the objective, documentary evidence and the surrounding facts,
including what the parties actually did, are consistent with a subjective
intention to carry on business in common with a view to profit.
[41]
In this case, regarding
the spirit of cooperation or the common intent to form a partnership, in
addition to the declaration of registration in the REQ, the statement of income
and expenses and minutes of board meetings in which the appellants participated
that were filed in evidence are all indicia of objective documentary evidence
and concrete actions showing that the payer presented itself as a GP and that
the appellants were partners. Even though the appellants were absent from board
meetings when their remuneration was discussed, it can be presumed that they
participated in the payer's other financial decisions. It is also clear that
the creation of what was described as a GP was done with the goal of carrying
on a common activity, namely, the operation and preservation of a wilderness
campground. The contract that forms a partnership does not necessarily have to
be written. It may be verbal. What is important is the common intent to form a
partnership and the spirit of cooperation (see Audet, Daigle, Daoust &
Associés v. Lessard et Doyon, 2006 QCCS 990, paras. 35 to 38).
[42]
As for contributions,
the two appellants worked 44 hours per week for minimum wage remuneration during
the summer and participated in board meetings as volunteers, thus giving of
their time and knowledge to the organization.
[43]
As for the sharing of
pecuniary profits resulting from the combining, there does not seem to be a
business plan that is likely to generate profits in the future. The three
witnesses, however, argued that they had invested themselves in this venture
solely with a view to preserve heritage. Their testimony shows that the small
profits if they made any were used to absorb previous deficits, not to be distributed
among them. Fernando Lavoie said, however, that, in his income tax return for
2011, he had reported as a member a $500 profit, generated that year through a
special grant awarded for building a bridge. The evidence does not indicate
whether the appellants had also reported such an amount from sharing in the
payer's profits.
[44]
A partnership is formed
in order to make profits, which constitute the shared profits to be distributed
to the partners, based on their respective share (Cimon v. Arès, supra,
at para. 66). It is an element that is essential to the partnership's
existence. An ancillary profit-making purpose is sufficient, however (Backman,
supra, para. 23).
[45]
Given all of the
evidence, it is not clear that the partners actually understood that they were
forming a GP and that they actually wanted to form a GP. One element seems to
stand out to me, however: it was not necessarily planned to make profits in
order to distribute them to the partners.
[46]
However, despite the
lack of predominant intent to make a profit, the fact that Mr. Fernando acknowledged
including in his income a small profit in 2011 can constitute, in my opinion,
an indication of the existence of an ancillary purpose. In this context and
taking into account other evidence including the declaration of registration supporting
the existence of a GP, I consider that the appellants did not succeed in
proving to me that a GP did not exist and that they were not partners in it.
[47]
Another possibility is
that we could think that the payer was formed as an association within the
meaning of article 2186 CCQ whose members were persons registered in the REQ,
including the appellants during the periods at issue. A contract of association
is a contract by which the parties agree to pursue a common goal other than the
making of pecuniary profits to be shared between the members of the
association. However, as mentioned at page 1376 of volume 2 of the commentary
of the Minister of Justice, the Act does not grant juridical personality to
associations. It follows, under article 298 CCQ, a contrario, that an
association has no juridical personality that is whole and separate from that
of its members.
In this context and taking into account the principles stated in Charron v.
Drolet, supra, and in Blais v. The Queen, supra, para.
30, the legal structure of a member association, which is not a distinct legal
person, is just as incompatible as a GP with a contract of employment defined
in article 2085 CCQ, by which the employee must do work, according to the
instructions and under the direction or control of another person, the
employer, which in this case would be an association made up of members
including the appellants.
[48]
Finally, the appellants
stated that, in reality, they worked for an NPO. Division III of the QCA
governs the formation of these organizations as non-profit organizations. A
predominant condition of creating such an organization is the issuance of
letters patent by the registraire des entreprises du Québec (registrar).
In order to obtain them, applicants must make an application to the registrar complying
with the numerous conditions set out in section 219 of the QCA:
(1)
The applicants for such letters patent, who must be at least 18 years of age,
shall file with the enterprise registrar an application setting forth
(a)
the proposed name of the legal person;
(b)
the purposes for which constitution as a legal person is sought;
(c)
the place within Québec where its head office is to be situated;
(d)
the amount to which the immovable property which may be owned or held by the
legal person, or the revenue therefrom, is limited;
(e)
the name and the address and calling of each of the applicants, with special
mention of the names of not less than three of their number, who are to be the
first or provisional directors of the legal person.
(2)
The application and a memorandum of agreement shall be drawn up using a form
supplied for that purpose or authorized by the enterprise registrar.
(3)
In addition, the application must be accompanied with a research report on the
names of persons, partnerships or groups used and entered in the register.
[49]
The non-profit
organization is formed on the date of the letters patent. In the absence of
such letters patent, it is therefore impossible to retroactively conclude that
the payer was formed as a non-profit organization.
[50]
The appellants also raised
the possibility that the payer could be a cooperative. An entity can be
described as a cooperative only if the conditions set out in sections 3 and 4
of the Cooperatives Act, R.S.Q., c. C-67.2, are met. These provisions
read as follows:
3.
A cooperative is a legal person in which persons or partnerships having
economic, social and cultural needs in common unite for the prosecution of an
enterprise according to the rules of cooperative action to meet those
needs.
4.
The rules of cooperative action are as follows:
(1)
membership of the cooperative is subject to the member actually using the
services offered by the cooperative and to the cooperative's ability to provide
him with them;
(2)
no member is entitled to more than one vote, irrespective of the number of
shares held, or to vote by proxy;
(3)
the payment of interest on the capital stock must be limited;
(4)
a reserve must be established;
(5)
the surplus earnings or operating surplus must be allocated to the reserve and
to rebates to members in proportion to the business carried on between each of
them and the cooperative, or to other accessory purposes determined by law;
(6)
cooperation must be promoted among the members, between the members and the
cooperative and between the cooperative and other cooperative organizations;
(7)
the training of the members, directors, executive officers and employees of the
cooperative in the field of cooperation must be promoted and the public must be
informed of the nature and advantages of cooperation;
(8)
cooperatives must support development efforts in their community.
[Emphasis
added.]
[51]
No evidence was adduced
on this point, and it is therefore impossible to conclude that the organization
for which the appellants worked had the legal status of a cooperative.
[52]
I am of the view that the
appellants did not demonstrate that the payer did not have the legal status of
a GP or an association, in which they were partners or members. Accordingly, I
consider that, during the periods at issue, the appellants as partners or
members of the payer could not hold insurable employment.
[53]
The appeals are
dismissed.
Signed at Ottawa, Canada, this 23rd day of October
2012.
"Lucie Lamarre"
Translation certified true
on this 12th day of December 2012
Margarita Gorbounova, Translator
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