Citation: 2005TCC446
Date: 20050728
Docket: 2004-2225(EI)
BETWEEN:
MARC CLAVEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This appeal is about whether an employment is insurable. The periods in issue under the decision of the Minister of National Revenue ("the Minister") are June 18 to November 16, 2001, January 21 to June 28, 2002, July 1 to October 18, 2002, and October 28 to July 11, 2003.
[2] The issue in the instant appeal is whether the Appellant's true employer during the periods in issue was Coopérative forestière de Ferland-Boileau, or 9066-2107 Québec Inc., a corporation all of whose voting shares were held by the Appellant during the periods in issue.
[3] In making the decision under appeal, the Minister relied on the following assumptions of fact:
[TRANSLATION]
(a) The Appellant has been the sole shareholder of 9066-2107 Québec Inc. for five years. (admitted)
(b) 9066-2107 Québec Inc. owns a truck and a trailer worth approximately $100,000. (admitted)
(c) 9066-2107 Québec Inc. leases its truck and trailer to Coopérative Forestière Ferland-Boileau (the Payor). (admitted)
(d) The Payor is a forestry business that needs forestry transportation companies to carry on its activities. (admitted)
(e) The Payor rents the truck owned by 9066-2107 Québec Inc. roughly nine months per year. (admitted)
(f) The Payor rents roughly a dozen trucks. (admitted)
(g) During the period in issue, the Appellant was merely the driver of the truck rented from 9066-2107 Québec Inc. (admitted)
(h) The Appellant was not reassigned to other duties while the truck owned by 9066-2107 Québec Inc. was in disrepair (admitted)
(i) A five-year transportation contract effective October 1, 1999, was signed between 9066-2107 Québec Inc. (lessor) and the Payor (lessee). (admitted)
(j) The transportation contract provides that the lessor, 9066-2107 Québec Inc., is responsible for any breakdowns of the truck. (admitted)
(k) The Appellant's work schedule was nine half-shifts a week, specifically, two half-shifts a day from Monday to Thursday and a single half-shift on Friday. (admitted)
(l) There was a period during the winter when the truck owned by 9066-2107 Québec Inc. needed two drivers so that it could operate 24 hours a day. (admitted)
(m) Yannick Barbeau, the second driver, was paid directly by 9066-2107 Québec Inc. (denied)
(n) The rental income from the truck was based on the number of days that the truck was rented out and varied with the tonnage. (admitted)
(o) The Appellant's salary and benefits were deducted from the income derived from the rental of the truck from 9066-2107 Québec Inc. (admitted)
(p) The fuel costs for the truck or the salaries paid, were deducted from the truck rental income. (admitted)
(q) When the Appellant travelled outside the city for the Payor, the accommodation and meal costs were deducted from the truck rental income. (admitted)
(r) The pay for the equipment was not differentiated from the pay for the person during the periods in issue. (denied)
(s) Since September 2002, the Payor has been paying GST and QST on the Appellant's salaries. (denied)
(t) The forestry transportation contract that 9066-2107 Québec Inc. signed with the Payor was the only such contract that it signed. (admitted)
(u) The Appellant stopped being a driver for the Payor in 2003 following a decision by the Payor. (admitted)
(v) 9066-2170 Québec Inc. continues to lease its truck to the Payor with Yannick Barbeau as the driver. (admitted)
(w) The Appellant's true employment contract was with 9066-2107 Québec Inc, not with the Payor. (denied)
[4] Almost all the assumptions of fact were admitted; only paragraphs (m), (r), (s) and (w) were denied.
[5] In support of his appeal, in which the burden of proof was on him, the Appellant testified and adduced the testimony of Éric Simard, the managing director of Coopérative forestière de Ferland-Boileau.
[6] The testimony of both individuals essentially restated the facts relied upon in making the determination under appeal.
[7] In light of all the admitted facts, notably paragraphs (a), (b), (c), (g), (h), (i), (j), (n), (o), (p), (q) and (s), it appears that the contract purporting to be an employment contract actually possessed characteristics specific to a true contract of enterprise.
[8] The parties obviously wanted to structure their affairs so that the work performed by the Appellant would be insurable, and they did this describing the contract as a contract of service as opposed to a contract of enterprise.
[9] This is perfectly legitimate, provided the facts genuinely and consistently point to such a reality.
[10] Creating or imagining a legal structure that reflects the parties' intentions is insufficient to conclude that a true contract of service exists.
[11] The remuneration in the case at bar essentially came from the value payable under a truck and trailer leasing agreement. The remuneration that the Appellant received was a part of the money payable for the lease of the truck and the trailer from the corporation that the Appellant controlled because he owned 100% of its voting shares.
[12] The remuneration received by the Appellant started and stopped when the truck owned by the corporation that he controlled started and stopped being used.
[13] Ultimately, the amount paid for the rental was the net amount, that is to say, the amount left over after all the expenses were paid.
[14] The expenses included diesel fuel and maintenance costs, but they also included all the premiums or contributions normally paid by the employer, apart from salaries.
[15] In truth, the corporation, all of whose voting shares the Appellant owned, had a contract of enterprise with Coopérative forestière de Ferland-Boileau. The Appellant worked for the corporation that he completely controlled, and did so for his own benefit.
[16] Even if the parties intended that their working relationship be governed by a certain kind of legal relationship, and they provided for such a relationship in various documents, firstly, this is not sufficient, and secondly, the Minister is not bound by any such agreement.
[17] It appears that the work done by some truck owners who had similar agreements with Coopérative forestière de Ferland-Boileau has been determined to be insurable.
[18] Although the courts have often said that each case involving the insurability of employment is unique, or that the determination must be based exclusively on the facts of the specific case, I wish to reiterate that the Appellant's work for the corporation that he owned and from which he benefited could, in theory, have been held insurable if the percentage of shares held had been less than 40%. Here, the Appellant held 100% of the voting shares.
[19] The Appellant's work must therefore be excluded from insurable employment, in accordance with paragraph 5(2)(b) of the Employment Insurance Act, which reads as follows:
5. (2) Insurable employment does not include
. . .
(b) the employment of a person by a corporation if the person controls more than 40% of the voting shares of the corporation;
[20] The cooperative was essentially acting as the Appellant's mandatary in managing all the expenses that he would have had to incur personally if the ultimate objective had not been for the Appellant to perform work under a contract of service.
[21] The legal relationship between the company that the Appellant controlled (he controlled more than 40% of the voting shares; in fact, he controlled all of them) and the forestry cooperative was, unquestionably, a contract for services. In other words, there was a genuine contract of enterprise between the forestry cooperative and the corporation controlled by the Appellant.
[22] Since the Appellant was employed by a business more than 40% of whose shares he held, and was therefore not eligible for Employment Insurance benefits, the parties arranged matters so that the Appellant would be considered to be working for the cooperative and to its benefit.
[23] In actual facts, the parties did not manage and treat their relationship consistently; while certain elements may have pointed to a contract of service, the reality was entirely different. The cooperative was essentially the Appellant's purported employer; the fact is that the cooperative was not responsible for any of the contributions that true employers are normally required to make. I have in mind, among other things, contributions to the Employment Insurance program.
[24] While I have no doubt as to the parties' intentions and their good faith when they affirmed that their contract was a contract of service, the work, the terms and conditions under which it was performed and the direct relationship between the work and the truck and trailer, rental indicate that the Appellant's true employer was the corporation, more than 40% of whose shares he owned. This excluded the work from insurable employment by virtue of paragraph 5(2)(b) of the Act.
[25] Consequently, the appeal is dismissed.
Signed at Ottawa, Canada, this 28th day of July 2005.
"Alain Tardif"
Certified true translation
on this 13th day of February, 2006.
Garth McLeod, Translator
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