Citation: 2007TCC566
Date: 20070928
Docket: 2007-1620(EI)
BETWEEN:
RAYMOND TRAVERSY,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REAONS FOR JUDGMENT
Lamarre Proulx J.
[1] This is an appeal
from a decision of the Minister of National Revenue (the Minister) that
the Appellant was not employed in insurable employment from February 7, 2005,
to January 7, 2006, by Transport Week N Inc. That decision was
rendered on January 5, 2007.
[2] The worker and
employer are related within the meaning of the Income Tax Act.
The payor’s sole shareholder, Dany Traversy, is the son of the worker,
Raymond Traversy, the Appellant. The legal situation of related persons is
not being challenged by the Appellant.
[3] The Minister
rendered his decision on the basis that it was reasonable to conclude that the
Appellant and the payor would not have entered into a substantially similar contract of
employment if they had been dealing with each other at arm’s length. The
circumstances of the facts on which the Minister relied to reach that
conclusion are set out at paragraph 6 of the Reply to the Notice
of Appeal (the Reply):
(a) the payor,
incorporated on June 25, 2002, operates a lumber transport business;
(b) at the
beginning of the period in issue, the payor had five trucks and only two
at the end of the period;
(c) the payor hired
the Appellant to perform truck maintenance;
(d) the Appellant’s
main duties were as follows:
− wash and clean trucks;
− conduct visual inspections
for prevention;
− change oil and tires;
− perform minor repairs;
(e) the Appellant
could also clean the payor’s garage which was also used by two other companies:
9152‑0213 Québec Inc., of which the sole shareholder was
Yan Traversy, Appellant’s son, and Transport
Mario Traversy Inc., of which the sole shareholder was
Mario Traversy, Appellant’s son;
(f) the Appellant
claims that he recorded his hours of work and submitted them to Yan Traversy,
who was in charge of the payor’s payroll, whereas Yan Traversy stated that the
Appellant was on a fixed salary, regardless of the hours actually worked;
(g) at the
beginning of the period, the Appellant received $260 net per week and, after about
four months, he was paid $160 net per week;
(h) according to
the Appellant, he worked between 20 and 40 hours per week whereas
according to the payor’s version, he worked between 10 and 20 hours per
week;
(i) according to
the versions obtained, the Appellant could work for $17 per hour, which was too
much considering the payor’s financial situation, or for as little as $4.25,
which is less than minimum wage in Quebec;
(j) neither the
payor nor the Appellant could not confirm the number of actual hours worked by
the Appellant during the period in issue;
(k) the Appellant
rendered numerous services to the payor and accepted a 40% pay reduction as the
payor was experiencing financial difficulties;
(l) during the
period in issue, the Appellant rendered services to the payor and to two other
companies, to which he is related, without really taking into account the hours
worked for each company;
(m) the Appellant
worked for the payor for 11 months; before and after that period, it was
the payor who performed his duties.
[4] Counsel for the
Appellant, on his behalf, admitted paragraphs (a) to (e) and (m), stated
that he was unaware of paragraphs (f), (h), (i) and (j) and denied
paragraphs (g), (k) and (l).
[5] The Appellant’s
witness was Dany Traversy, President of Transport Week N
inc. Monsieur Traversy stated that he started a lumber transport business in
June 2002. He had one truck at the time. He then rented a few more trucks. At
the beginning of 2005, the company had five trucks. He also had more employees.
In 2006, the business went bankrupt.
[6] From October 2004
to April 2005, the company leased a garage. After April 2005, the company
leased a barn or storage building to park the trucks. Around May 2005, the
company got rid of one or two trucks.
[7] Two other brothers
of Dany Traversy were in the same type of business, Yan Traversy, who
owned 9152‑0213 Québec Inc. in St‑Cyrville de Wendover, and
Mario Traversy, who owned Transport Mario Traversy Inc. in St‑Nicéphore.
Yan Traversy was responsible for the employer’s company accounting.
[8] Dany Traversy
explains that he recruited the services of his father when the company acquired
some five trucks, at the beginning of 2005. Before that, he was the one who
performed truck maintenance but the task became too much for him and since he
knew that his father was looking for work, he recruited his services for $170
per week.
[9] The company’s
payroll journal was produced as Exhibit A‑2 and the invoices for the
services Raymond Traversy lent to Transport Mario Traversy Inc. were
produced as Exhibit A‑1. Those invoices are dated from March 31,
2005, to May 5, 2005. The lending of services to another company explains
the increase in the salary of Raymond Traversy from March 31, 2005, to
April 30, 2005. In fact, according to the payroll journals, that salary went
from $170 to $278 to $170 again, the original salary.
[10] Raymond Traversy
testified at the Respondent’s request. He presented himself as being without
work. He explained that shortly before he was employed by his son’s company,
Transport Week N Inc., he went to see a group, which he called Coalition.
The purpose of the group was to help people aged 45 and over write their
curriculum vitae. He is now 61 years old. He explained that he studied
mechanics and welding but that he rather worked in the lumber sector during his
active employment life. He is however familiar with mechanics and welding as
they have always interested him. That allowed him to render adequate services
to his son’s company. It was he who not only washed and cleaned the trucks but
also lubricated the axles, changed the oil and inspected the engines to prevent
breakage. Furthermore, his daily service provision allowed him to supervise the
company’s premises and equipment.
[11] Counsel for the
Appellant argues that he did perform work. His work ended when the company
ceased its activities. The salary was reasonable as it was not paid on an
hourly basis but on service provision.
[12] Counsel for the
Respondent admits that work was performed. However, she argues that the
remuneration paid and the terms and conditions were not reasonably similar to
those that would have been granted to a non-related person. It was not normal,
according to her, that the Appellant’s employment status remained the same when
the number of trucks had decreased. Dany Traversy admitted that he did not
control the Appellant’s hours.
[13] In response, Counsel
for the Appellant argues that he had no specific control over the hours because
the employer trusted his employee and knew that the work was being performed.
As for the decrease in the number of trucks, it does not necessarily entail a
correlative decrease in work duties. The person must still attend the workplace
and perform his or her duties.
Analysis and conclusion
[14] I understand that
when there is employment between related persons, there is always some doubt as
to the authenticity of the employment and its usefulness. There is also doubt
as to the normalcy of the terms and conditions of the employment. They may be
more favourable and sometimes less favourable than between non-related persons.
[15] In this case, I see
no systematic plan to use or abuse the employment insurance system, which
brings me to attach more credibility to the testimonies of the worker and
employer.
[16] The Appellant’s
services were required when the number of trucks used by the company was at its
peak. The Appellant is not a young worker who would normally ask to be paid by
the hour. He is retired or semi-retired. He accepted to be paid for services he
provided on a regular basis, correctly but at his pace. The work was performed
and performed well, which is what the employer wanted and needed. He did not
dismiss the employee when he had fewer trucks, as he still needed someone’s
services to oversee the maintenance of the trucks and exercise some supervision
over the company’s automotive equipment and other. Could the employer have
obtained the same type of service and at the same price from another non-related
retired or semi-retired person? The Respondent did not provide me with any
specific evidence that this was an out-of-the-ordinary situation for this
category of employees.
[17] The Minister based
his conclusion on a normal hourly rate, on the absence of control over the
hours and on the fact that the worker accepted a 40% reduction in his pay. At
the hearing, this last point was explained and not retained by the Respondent.
[18] What remains is the
hourly rate and the absence of control over the hours. As I have already
mentioned, we are dealing with a situation where the person is of a certain
age. It is with regard to that category that one must consider what is normal.
[19] There is no question
that the service was rendered, that the Appellant worked at least the minimum
hours stated, that is, 20 hours per week, and that the work was useful and
necessary. I am of the opinion that in the circumstances of this case, there
was no evidence of an out-of-the-ordinary situation. The decision of the
Minister must therefore be vacated.
[20] Accordingly, the
appeal is allowed.
Signed at Ottawa, Canada, this 28th day of
September 2007.
“Louise Lamarre Proulx”
Translation certified true
on this 15th day of October 2007.
Daniela Possamai,
Translator
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