Citation: 2008TCC107
Date: 20080222
Dockets: 2006-3747(EI),
2006-3750(EI)
BETWEEN:
MARTIN SAVARD,
PIERRE GÉLINAS,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Jorré J.
[1] Mr. Savard and Mr. Gélinas
are appealing from a decision of the Minister of National Revenue ("the Minister")
concerning the insurability of their employment with 9140-5803 Québec Inc. ("the
Payor") for the periods from July 19, 2004, to
February 4, 2005, and from February 21, 2005, to
November 25, 2005. The Appellants submit that they held
insurable employment.
[2] The two matters
were heard on common evidence.
[3] In order to make
these reasons easier to read, I will designate the numbered companies as
follows:
- 9140-5803
Québec Inc. will be called "the Payor",
- 9067-6347
Québec Inc. will be called "Diamantex", and
- 9024-8626
Québec Inc. will be called "Forage Béton".
The companies were engaged in the
business of concrete drilling and sawing.
[4] It should be noted
that "Diamantex S.E.N.C." is a different entity from
"Diamantex". Diamantex S.E.N.C. was registered on April 18, 2004, and struck off the
register on April 18, 2006.
[5] The Notice of Appeal
is very short and states as follows with respect to the disputed points:
[TRANSLATION]
We submit that this decision is not in
accordance with the Employment Insurance Act or Regulations.
This is because there was a true contract
of service between the Payor and the Appellant for the period in issue.
[6] Paragraph [8] of
these reasons reproduces the Minister's assumptions of fact in the matter of
Martin Savard. After each assumption, I have added the Appellant's position in
italics, within parentheses. I have also added the text that is in italics
within square brackets.
[7] There are no
important differences between the Minister's assumptions of fact in both cases.
Subparagraph (m) is different, as stated below. It should also be noted that,
at subparagraphs (cc) and (dd) of the Minister's assumptions of fact, the
number of insurable hours and the amounts of money differ slightly, depending
on which appellant is involved. This has no bearing on the result.
[8] In making his
decision, the Minister assumed the following facts:
[TRANSLATION]
(a) The Payor was
incorporated on March 29,
2004. (admitted)
(b) The Payor operated
a concrete drilling and asphalt sawing business. (admitted)
(c) According
to the Registrar of Businesses, CIDREQ registration number 1162137278, the
Payor's first shareholder is Yvon Savard, the second shareholder is Gilles
Gélinas and the third shareholder is Marc Lavoie. (admitted)
(d) Yvon Savard is the
Appellant's father and Gilles Gélinas is the father of Pierre Gélinas, an
appellant in matters related to this appeal. (admitted)
(e) The Payor had no
corporate life; there were never any shareholders' meetings. (denied)
(f) On October 24,
2006, the Appellant's representative notified the Respondent's representative that
he would not cooperate with the investigation and a decision should be made
based on the file as it existed at the time. (denied)
(g) Starting in 1998, the
Appellant and Pierre Gélinas each held 50% of the shares of 9067-6347 Québec
Inc., which operated a concrete drilling and sawing business under the name Diamantex.
(admitted)
(h) Starting in 1995, the
Appellant and Pierre Gélinas each held 50% of the shares of 9024-8626 Québec
Inc., which operated a concrete drilling and sawing business under various
names, including "Forage Béton P.M." (admitted)
(i) 9067-6347 Québec
Inc. [Diamantex] declared bankruptcy on June 11, 2004. (admitted)
(j) In 2004,
9024-8626 Québec Inc. [Forage Béton] made a bankruptcy proposal to its
creditors, and it was accepted. (admitted)
(k) The Payor was
created in an attempt to rescue 9024‑8626 Québec Inc. [Forage Béton]
financially, following consultation with an accountant specialized in business
recovery. (denied)
(l) The Appellant and
Pierre Gélinas were managers of the Payor. (denied)
(m) The Appellant's
duties consisted in making bids, hiring and laying off employees, verifying the
performance of contracts, receiving cheques and making deposits. (denied)
[In Pierre
Gélinas' Reply to the Notice of Appeal, subparagraph (m) states: [TRANSLATION]
"The Appellant's duties consisted in working at the workshop, maintaining
the machinery and occasionally working on the sites."]
(n) The Appellant had
the same tasks and duties for the Payor, 9067-6347 Québec Inc. [Diamantex],
9024-8626 Québec Inc. [Forage Béton] and Diamantex S.E.N.C. (denied)
(o) The Appellant and
Pierre Gélinas managed the affairs of the Payor and the different legal
entities without distinguishing among them. (denied)
(p) In 2004, the Payor
transferred $201,300 to 9024-8626 Québec Inc. [Forage Béton]; in 2005,
the Payor transferred $219,150. (admitted)
(q) The work orders,
invoices, bids and advertising were produced jointly under the Payor's name and
that of Forage Béton P.M., Diamantex or 9024‑8626 Québec Inc. (denied)
(r) On April 26, 2006,
Yvon Savard, the Appellant's father, told a representative of the Respondent
that he signed a "pad" of the Payor's blank cheques and gave it to
the accountant. (denied)
(s) On April 5, 2006, in a signed declaration, Pierre Gélinas stated:
[TRANSLATION] "Gilles Gélinas got involved in Diamantex S.E.N.C. and
9140-5803 Québec Inc. ["the Payor"] to help us. He was more of
a nominee than anything else. He never invested in either of the businesses. (denied)
(t) The Appellant and
Pierre Gélinas controlled all the Payor's activities. (denied)
(u) The work done by
the Appellant and Pierre Gélinas was not subject to any instructions or control
by the Payor. (denied)
(v) In carrying out
his duties, the Appellant used equipment that belonged to the Payor or to 9024-8626
Québec Inc. [Forage Béton]. (admitted)
(w) As at March 31,
2005, the Payor's capital assets were worth a total of $14,448 and the capital
assets of 9024-8626 Québec Inc. [Forage Béton] were worth more than $86,000
as at February 28, 2005. (admitted)
(x) The corporations
did not work out an amount between themselves for the use of the equipment. (denied)
(y) The Appellant paid
himself an hourly wage of $12, while the employees were paid $24. (admitted)
(z) The Appellant and Pierre
Gélinas, the Payor's managers, were entered for fewer hours in the Payor's
payroll journal (18-36 hours per month) than the employees they supervised
(120-160 hours per month). (denied)
(aa) The Appellant was
not paid for all the hours that he actually worked. (denied)
(bb) On February 10, 2005,
the Payor gave the Appellant a Record of Employment (ROE) stating that the
first day of work was July 19, 2004, that the last day of work was February
4, 2005, that the number of insurable hours was 800 and that the insurable
earnings amounted to $9,600. (admitted)
(cc) On November 30,
2005, the Payor gave the Appellant an ROE stating that the first day of work
was January 10, 2005, that the last day of work was
November 25, 2005, that the number of insurable hours was 1215 and
that the insurable earnings amounted to $12,785. (admitted)
(dd) The Appellant's
earnings as reported on his ROE are not consistent with the aggregate total of
the paycheques issued by the Payor. Specifically, for 2004, the Appellant's
reported earnings were $8,285 and his paycheques amounted to $3,100; and in
2005, the Appellant's reported earnings were $12,785 and his paycheques
amounted to $8,406. (denied)
(ee) During the period
in issue, 9024-8626 Québec Inc. [Forage Béton] remunerated the Appellant
with six cheques in 2004 totalling $3,550, and 21 cheques in 2005
totalling $6,215.95. (admitted)
(ff) 9024-8626 Québec
Inc. [Forage Béton] issued no T4s to the Appellant in 2004 or 2005. (admitted)
(gg) The Appellant and
Pierre Gélinas were excluded from insurable employment because [they] each held
more than 40% of the voting shares of 9024-8626 Québec Inc. [Forage Béton].
(denied)
(hh) The Appellant,
Pierre Gélinas and the Payor were part of a scheme to qualify the Appellant and
Pierre Gélinas for employment insurance while they continued to work for
9024-8626 Québec Inc. [Forage Béton]. (denied)
(ii) The Appellant and
Pierre Gélinas were the Payor's directing minds, and their influence over the
Payor was such that the type of arm's length relationship needed to create true
subordination between the parties could not have existed. (denied)
[9] At the hearing, Yvon
Savard, Martin Savard, Pierre Gélinas, Pierre Savoie and appeals officer Lyne
Courcy testified. The Payor's other two owners, Gilles Gélinas and Marc
Lavoie, did not testify.
[10] Yvon Savard is the
Appellant Martin Savard's father. Yvon Savard retired from his career with the
Department of Indian Affairs in 1995. During the period in issue, he had a job with
the Montagnais band council. He worked 30 to 35 hours a week for the council. In
March 2004, his son Martin asked him to meet Myriam Charbonneau, an
accountant who had been recommended to Martin by the KPMG trustee. The trustee
had said that the situation might be "salvageable". Martin Savard and
Pierre Gélinas had already met Ms. Charbonneau.
[11] Ms. Charbonneau
told Yvon Savard that she determined that Martin Savard and Pierre Gélinas were
indeed in a difficult situation and that at a certain point they had
demonstrated an inability to manage a business. She asked Yvon if he wanted to
get involved in a business that she would be starting up. This would also
require him to invest money.
[12] Yvon Savard knew
nothing about running companies in the field of concrete drilling and sawing,
but Ms. Charbonneau reassured him that she would look after everything: the
paperwork and the creation of the business. After giving the matter some
thought, he decided to get involved, on the condition that Ms. Charbonneau
would be closely involved in the business.
[13] Yvon Savard wanted
to help his son save a business that had been in his son's hands for 12 to 15
years. This is a laudable objective. Yvon Savard did not want to lose his
money.
[14] Yvon Savard testified
that he invested $10,000 in the Payor in late March or early April. He also
injected $35,000 into Forage Béton. The latter amount made it possible for Forage
Béton to come to an agreement with its creditors, and, unlike Diamantex, Forage
Béton did not go bankrupt.
[15] According to Yvon
Savard, following the settlement with the creditors, Forage Béton was supposed
to shut down no later than June 2004. He expected the Payor to repay him the
$35,000 that he had invested in Forage Béton.
[16] There was no
explanation as to why the Payor would have been required to repay him money that
was invested in Forage Béton.
[17] Yvon Savard also
testified that the Payor was a going concern, that he was the one who managed
the business, and that Martin Savard and Pierre Gélinas had to look after the
duties described in Exhibits A‑1 and A‑2 respectively.
[18] He testified that in
order to be certain of obtaining the services of Martin and Pierre, the Payor
signed documents entitled [TRANSLATION] "Contract of Employment and
Conditions of Employment" with each of them (Exhibits A‑1 and A‑2).
[19] I should note that
although the period in issue begins on July 19, 2004, both documents are
dated September 27, 2004.
[20] Martin Savard testified
that his father managed the business, which contradicts what he said to Pierre
Savoie, an employment insurance investigator.
[21] Martin also
testified that Ms. Charbonneau, the accountant,
recommended that the Payor be created so that the old companies' activities
could be continued.
[22] Although Yvon Savard
testified that he managed the business, that he was in constant contact with
Ms. Charbonneau, that he kept track of the accounts payable and
receivable, that he truly asked questions, especially of Ms. Charbonneau,
because he felt the situation was going badly, that he asked for balance
sheets, that he held meetings, and that he devoted many hours to the business, my finding is that Yvon Savard did not
manage the business.
[23] My finding is based
on several reasons, including the following:
(a) Yvon
Savard's answers were rather general.
(b) He
often said that certain things were done because Ms. Charbonneau told him
that this was how they should be done. If he had spent 2000 hours working for
the Payor, he would have been able to provide more explanations.
(c) On
his examination-in-chief, he was asked what Forage Béton did. He did not
know, and he answered: [TRANSLATION] "[T]he business ... that's
a good question. I don't know what the business did. It was supposed to
have disappeared in June 2004."
Yet, in
2004, the Payor wrote cheques totalling $120,000 to Forage Béton. In 2005, the Payor paid nearly $220,000
to Forage Béton. A person
who was truly managing a business that paid close to $340,000 to another business
would have had an idea of what the other business was engaged in.
(d) Yvon
Savard received no profit and loss statement, balance sheet or income tax
return.
(e) Earlier,
he made a statement to Pierre Savoie, an employment insurance investigator with
Human Resources and Skills Development Canada (now Human Resources and Social
Development Canada). In that statement, he said, among other things, that
although the business had its head office at his home, his address served merely
as a mailbox; that he brought the mail once or twice a week to the accountant;
that he signed cheques prepared by the accountant or that the accountant had
him sign blank cheques; that he began to be more interested in the business in
September 2005 because he was starting to fear for his investment; that he
never got involved in managing the Payor except to safeguard his investment; that
he never met with the other shareholders; and that the accountant made
arrangements with Martin Savard and Pierre Gélinas for the decision-making.
[24] Yvon Savard,
Martin Savard and Pierre Gélinas did not explain why a new company, the Payor,
was needed in order to save Forage Béton (which did not go bankrupt and
continued to carry on business.) The only answer that I got was that
Ms. Charbonneau told everyone that this had to be done.
Ms. Charbonneau did not testify.
[25] The Minister assumed
that the paycheque amounts received by the Appellants were less than the
earnings reported in the Payor's ROEs, and that Forage Béton paid the Appellants
remuneration.
[26] The Appellants took
the position that the amounts from Forage Béton were paid on the Payor's behalf.
They testified that this happened because Ms. Charbonneau,
the accountant, told them to take Forage Béton's money when she did not
have the time to prepare their paycheques. The Appellants could sign Forage
Béton cheques.
[27] I do not accept this
as evidence showing that these payments were wages that Forage Béton paid on
behalf of the Payor. There was no evidence of an agreement between the
companies to this effect, or of accounting entries that reflected such an
arrangement.
[28] Forage Béton continued
to operate during the period in question, and issued T4 slips for wages paid to
other people. Forage Béton reported sales and expenses in its income tax
returns for the periods ended February 28, 2005, and February 28, 2006,
and reported monthly sales for GST purposes during the period from July 31, 2004 to
May 31, 2005.
[29] The Payor's
financial statements as at March 31, 2005, show an $80,822 loan to Forage
Béton as an asset.
[30] The four pages of
Exhibit I-7 show that the documentation for the contracts frequently does not
distinguish among the Payor, Forage Béton and Diamantex. Page 1 is a work
order bearing all three names. Page 2, an invoice, is under the Payor's
name, but the e-mail address is diamantex@globetrotter.net and the website is www.diamantex1998.com. Page 3, a bid, bears the names of Diamantex,
Forage Béton and the Payor. Lastly, page 4 contains an advertisement containing
the names Forage Béton and Diamantex.
[31] Although the
Appellants denied that the Payor and Forage Béton did not work out an amount
between themselves for the use of the equipment, they did not prove that the
Payor paid Forage Béton for the use of the equipment, or that there was an
agreement regarding an amount to be paid for the use of the equipment.
Conclusion
[32] Yvon Savard was not
the Payor's manager. There was no evidence that the Payor's other shareholders
were active. Everything having to do with the Payor and Forage Béton was
managed by the Appellants with the help of Ms. Charbonneau, the
accountant. The legal relationship between the Appellants and the Payor is not very
clear, but it was not an employment contract, because the Appellants were not
under the Payor's direction or control.
[33] Accordingly, the
appeal must be dismissed.
Signed at Ottawa, Canada, this 22nd day of February 2008.
"Gaston Jorré"
Translation
certified true
on this 7th day of
April 2008.
Brian McCordick,
Translator
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