Citation: 2007TCC473
Date: 20070904
Docket: 2006-1071(EI)
BETWEEN:
JOSÉE LAVOIE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
9153‑6037 QUÉBEC INC.,
Intervener.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from a decision under paragraph
5(2)(i), subsection 5(3) and sections 91 and 93 of the Employment
Insurance Act (the “Act”), dated February
14, 2006, according to which the work performed by the Appellant from April 10 to
October 8, 2005, was not insurable employment.
[2] The Minister of
National Revenue (the “Minister”) based his decision on the following
assumptions of fact:
[TRANSLATION]
The Appellant and the payor are related
within the meaning of the Income Tax Act because
(a) the voting
shares of the payor were held by
- Martin
Munger, with 75% of the shares; (admitted)
- the
Appellant, with 25% of the shares; (admitted)
(b) Martin
Munger is the Appellant’s spouse; (admitted)
(c) the Appellant is
related to a person who controls the payor. (admitted)
. . .
(a) the payor
operates the restaurant Le Grillon situated in L'Anse St-Jean; (admitted)
(b) the restaurant serves fast food and offers
a “special of the day” on a daily basis; (admitted)
(c) the restaurant is situated next to a
campground; it has 34 indoor seats with table service and a few outdoor
seats; (admitted)
(d) the Appellant acquired the restaurant in
2003 and personally operated it during the 2003 and 2004 seasons; (admitted)
(e) after
renovating the inside and outside of the restaurant, the Appellant and her
spouse incorporated, on April 1, 2005, 9153‑6037 Québec Inc. to continue
operating the restaurant Le Grillon; (admitted)
(f) although the
building and the equipment remained the property of the Appellant, the payor
pays her rent for their use; (admitted)
(g) the payor has
annual revenues of approximately $80,000; (admitted)
(h) the payor
operates the restaurant from April to October but its peak season is from June
to Labour Day; (admitted)
(i) during the
peak season, the payor opens the restaurant seven days a week, from 7 a.m.
until about midnight; (admitted)
(j) in addition to
the Appellant, the payor hired three other people;
(admitted)
(k) the
Appellant acted as the restaurant’s manager and her main duties consisted of
-
working in the kitchen,
-
managing staff
-
doing the bookkeeping,
-
serving tables,
-
overseeing orders and inventory,
-
hiring staff and establishing work schedules;
(admitted)
(l) the Appellant
signed the majority of cheques on behalf of the payor; only one signature was
required; (admitted)
(m) the Appellant worked almost always at the
restaurant but she did the bookkeeping at her home; (admitted)
(n) during the period at issue,
Martin Munger was employed full-time with Bell Canada; (admitted)
(o) he occasionally rendered services to the
payor, in the evenings and on weekends, but was never paid by the payor; (admitted)
(p) at the beginning of the season, the
Appellant was paid $7.55 per hour, from May to mid‑June, she was
paid $8.00 per hour and then her hourly rate increased to $12.00; (admitted)
(q) at the beginning of the season, the
Appellant was paid for 20 to 30 hours per week and then, she was paid
based on 40 hours per week; (admitted)
(r) the Appellant could work up to
14 hours per day, on average 70 hours per week, while only getting
paid for 40 hours per week; (admitted)
(s) between the period during which she
operated the restaurant herself (seasons 2003 and 2004) and the period
during which the restaurant was operated by the payor, the Appellant’s duties
remained the same; (admitted)
(t) on January 26, 2006, during a telephone
conversation with an officer of the Respondent, Mr. Munger mentioned that they
would have had to hire two people to do the Appellant’s job and that, according
to him, no one other than the Appellant would have agreed to do that much work
if he or she were not the owner; (admitted)
(u) on January 25 and 26, 2006, during
telephone conversations with an officer of the Respondent, the Appellant
mentioned that a stranger would have never been able to fill a similar position
as a stranger would have never agreed to put in so much volunteer work for the
company. (admitted)
[3] Martin Munger,
holder of 75% of the shares of the intervener company, testified, as did the
Appellant.
[4] Before the
Appellant and her spouse testified, I explained the procedure to them at
length, as well as the nature of the evidence they needed to submit in order to
succeed. I particularly stressed that the evidence had to demonstrate that the
contract of employment and terms and conditions of employment were similar to
those that would have existed had the employee been dealing with the employer
at arm’s length.
[5] I also stressed
that the decision with which the Appellant disagreed was one which resulted
from the exercise of a discretionary power; it was therefore important that the
Appellant prove that the investigation and analysis were incomplete or marred
by mistakes and flaws. In other words, the Appellant had to demonstrate that
certain facts were overlooked, forgotten or underestimated during the analysis.
[6] Considering the
complexity of these concepts, I even took the initiative to provide examples to
illustrate the importance of proving that the employment at issue would have
had similar terms and conditions had the employer and payor been dealing with
each other at arm’s length.
[7] Despite the
explanations and warnings, after being sworn in, the Appellant admitted all the
assumptions of fact on which the decision was made.
[8] The following
admitted paragraphs are particularly detrimental to the conclusions sought by
the Appellant:
(l) the Appellant
signed the majority of cheques on behalf of the payor; only one signature was
required;
(m) the Appellant worked almost always at the
restaurant but she did the bookkeeping at her home;
. . .
(p) at the beginning of the season, the
Appellant was paid $7.55 per hour, from May to mid‑June, she was
paid $8.00 per hour and then her hourly rate increased to $12.00;
(q) at the beginning of the season, the
Appellant was paid for 20 to 30 hours per week and then, she was paid
based on 40 hours per week;
(r) the Appellant could work up to
14 hours per day, on average 70 hours per weeks, while only getting
paid for 40 hours per week;
. . .
(t) on January 26, 2006, during a telephone
conversation with an officer of the Respondent, Mr. Munger mentioned that they
would have had to hire two people to do the Appellant’s job and that, according
to him, no one other than the Appellant would have agreed to do so if he or she
were not the owner;
(u) on January 25 and 26, 2006, during
telephone conversations with an officer of the Respondent, the Appellant
mentioned that a stranger would have never been able to fill a similar position
as a stranger would have never agreed to put in so much volunteer work for the
company.
[9] Very surprised by
the admissions, I again indicated to the Appellant and her spouse that I had to
deal with the appeal based on the evidence they would submit.
[10] Neither the
Appellant nor her spouse added anything relevant. They obviously stated that
they told the truth and that they were fundamentally honest, which the Court
unhesitatingly recognizes.
[11] The determining
factors of the evidence result from the unequivocal admissions by the
Appellant, also confirmed by her spouse. The admissions fully confirm and
justify the merits of the decision under appeal; moreover, the evidence
submitted did not reveal any facts or elements likely to discredit the merits
of the decision leading to this appeal.
[12] There is no doubt that a person dealing at arm's length would have never agreed to do the same work
under the same conditions. Despite the division of shares, the Appellant
participated in the management of the company of which her spouse held 75% of
the shares just as if she were the sole shareholder.
[13] In order to succeed, the Appellant had to
demonstrate that the decision giving rise to the appeal was patently unfounded
and that the work at issue was performed in a manner similar to that which
would have been performed by a third party.
[14] Since the Appellant did not submit the required
evidence, the appeal must be dismissed.
Signed at Ottawa, Canada, this 4th day of September
2007.
“Alain Tardif”
Translation
certified true
on this 26th day of
September 2007.
Daniela Possamai,
Translator
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