[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2004TCC565
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Date: 20040830
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Docket: 2004-931(EI)
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BETWEEN:
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PIERRE MÉLANÇON,
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Appellant,
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And
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
Bédard J.
[1] The Appellant is appealing from
the decision of the Minister of National Revenue (the
"Minister"), who contends that the Appellant did not
hold insurable employment under a genuine contract of service
within the meaning of paragraph 5(1)(a) of the
Employment Insurance Act (the "Act") during the period
in issue, from August 5 to October 11, 2002, with
Primex 2000 Inc. (the "Payer").
[2] The facts on which the Minister
relied in making his decision are described in paragraph 5
of the Reply to the Notice of Appeal and are as follows:
[TRANSLATION]
(a) the Payer was
incorporated on October 21, 1996;
(b)
Gaston Langlais was the majority shareholder of the Payer
with 97 percent of the Payer's voting shares;
(c) the Payer
operated a wholesale live lobster buying and selling business
over the 10 weeks that fishery lasts;
(d) the Appellant
claims that he worked as an advisor for the restart-up of
the Payer's plant during the period in issue, whereas he did
not do so;
(e) there was no
lobster fishery during the period in issue;
(f) during the
period in issue, the Appellant claims that he worked for the
Payer every week, from Monday to Friday, from 8:30 a.m. to
5:00 p.m., whereas he in fact rendered only a few services
of short duration and only occasionally to the Payer, and did so
during and after the period in issue;
(g) during the
period in issue, the Appellant claims that he received gross
remuneration of $750 a week, whereas neither the Appellant nor
the Payer could provide evidence that the Appellant was in fact
remunerated;
(h) the Appellant
claims that he was paid in cash by the Payer;
(i) on
October 18, 2002, the Payer issued a record of employment to
the Appellant for the period starting on August 5, 2002, and
ending on October 11, 2002, showing 350 insurable hours
and total insurable earnings of $7,500;
(j) the record
of employment does not reflect the actual situation with respect
to the period worked, the hours worked or the remuneration
paid;
(k) the Appellant
needed 420 hours to qualify for employment insurance
benefits and he accumulated only 225 insurable hours in an
employment that ended on August 2, 2002;
(l) the
Appellant and the Payer entered into an arrangement to enable the
Appellant to qualify for employment insurance benefits.
Analysis
[3] Employment that is not a sham and
that meets all the conditions set out in the Civil Code of Quebec
constitutes a genuine contract of employment for the purposes of
the Act, even if the purpose of the contract of employment was to
render a person eligible for employment insurance benefits.
However, this Court has an obligation to take a careful look at
the agreement that existed between the parties - the Appellant
and the Payer in this instance - to ensure that a genuine
contract of employment existed.
[4] The first question that must be
resolved here is whether the contract binding on the Appellant
constituted a genuine contract of employment. The three essential
elements of a contract of employment are: the provision of a
service, payment of remuneration, and the existence of a
relationship of subordination. The terms and conditions of a
genuine contract of employment must centre on the work to be
performed, a mechanism for controlling the performance of the
work and, finally, on the payment of remuneration that basically
corresponds to the quantity and quality of the work done.
Provision of Services
[5] Did the Appellant in fact render
services to the Payer? First it should be emphasized that the
Appellant's evidence is essentially based on his testimony
and that of Gaston Langlais, the principal shareholder of
the Payer. Their testimony revealed:
(i) that, in 1996, the Payer
acquired a plant from a third party, who had initially built it
to produce breaded seafood products, but that the third party had
however disposed of the equipment necessary for that type of
production before 1996;
(ii) that the Payer essentially
retained the Appellant's services to help it restart the
production of breaded seafood products;
(iii) that, during the period in
issue, the Appellant not only conducted studies and research for
the purpose of restarting the plant, but also contacted a number
of financial and government stakeholders in order to finance the
restart-up project;
(iv) that the Appellant, although a
notary by training, had the required skills to do the work
because he had rendered similar services to other employers;
(v) that the Appellant devoted
350 hours to the project at a rate of 35 hours a week;
the Appellant's work was mainly performed at the plant; he
was the only employee working at the plant during the period in
issue, since the lobster season was closed at the time. He went
to the head office from time to time (which was located at
Mr. Langlais' residence) to use the Payer's
computer;
(vi) that the Appellant filed no written
report on his research and analysis, but had only made oral
reports during his sporadic meetings with Mr. Langlais.
[6] First I would like to emphasize
that the Appellant's testimony was, to say the least, vague,
even silent, as to the exact nature of his studies and analyses.
Did he conduct a market study or a feasibility study or prepare a
financing plan? Furthermore, he did not see fit to file any
correspondence whatever in support of his testimony that he had
contacted a number of government and private agencies to find
financing and grants in order to restart the project. Nor was his
testimony on this point supported by any other independent and
credible testimony. Furthermore, I find it implausible and
improbable that the Payer would not have required written reports
on the results of his research and analysis and that it would
merely have accepted oral reports in the circumstances. It should
not be forgotten that the Appellant spent 350 hours on those
studies and analyses and that the cost was $7,500.
[7] I wish to recall that the burden
was on the Appellant to show on a balance of probabilities that
he had in fact rendered such services to the Payer. The Appellant
simply did not discharge the obligation that was on him. In other
words, the testimony of the Appellant and Mr. Langlais,
which is not supported by any documentary evidence or any
independent and credible testimony whatever, simply did not
satisfy me that the Appellant had actually rendered such services
to the Payer.
Remuneration
[8] Did the Appellant really receive
weekly remuneration of $750 for services rendered throughout the
entire period in issue? The Appellant's evidence on this
point was based solely on his testimony and that of
Gaston Langlais.
[9] On this matter, the
Appellant's testimony revealed:
(i) that he was remunerated by
Mr. Langlais rather than the Payer since the Payer's
bank account was seized during the period in issue;
(ii) that Mr. Langlais paid
him in cash;
(iii) that he was not remunerated
regularly, that is to say every week, although he received all
the remuneration owed him under the contract of employment;
(iv) that he deposited a portion of his
remuneration in his spouse's bank account because he did not
have a bank account, not seeing the utility in having one
personally.
[10] Mr. Langlais' testimony
revealed:
(i) that he personally had to pay
the Appellant the remuneration under the contract of employment
binding the Appellant and the Payer since the latter's bank
account was seized during the period in issue; he added that he
had treated the amounts thus paid to the Appellant as advances
made to the Payer, without however bringing any documentary
evidence whatever on this point;
(ii) that he paid the Appellant in
cash; in cross-examination by counsel for the Respondent on the
reason he had paid the Appellant in cash rather than by cheque,
Mr. Langlais took offence and answered in an aggressive tone
that he had had no obligation to pay him by cheque;
(iii) that he did not pay the Appellant
regularly, that is to say every week, but nevertheless paid the
Appellant all the remuneration owed him by the Payer under the
contract of employment binding the Appellant and the Payer;
however, he was unable actually to explain why the Payer's
payroll (Exhibit A-2) showed that the Appellant had
been paid every week.
[11] Once again, I would recall that the
burden of proof was on the Appellant, who had to show on a
balance of probabilities that he had actually received such
remuneration and that it basically corresponded to the quality
and quantity of the work performed. I find that the Appellant did
not discharge his obligation to do so. The evidence he brought in
the instant case was essentially based on his testimony and that
of Mr. Langlais, who cannot be characterized as an
independent witness. I simply did not find that evidence
convincing.
[12] I find that there was no genuine
contract of employment in the case at bar since, in my view, the
services were not actually rendered by the Appellant and
remuneration corresponding to the quality and quantity of the
work performed was not really received by him. In my opinion, the
employment was simply a sham designed to render the Appellant
eligible for employment insurance benefits. In view of the above,
I see no point in analyzing the existence, or lack thereof, of a
relationship of subordination between the Payer and the Appellant
or ruling on that matter. It should be recalled that the
employment insurance system is a social program whose aim is to
support those who actually lose their jobs.
[13] Having regard to the above, the appeal
is dismissed and the Minister's decision is confirmed.
Signed at Ottawa, Canada, this 30th day of August 2004.
Bédard J.
Certified true translation
Colette Dupuis-Beaulne
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