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Citation: 2003TCC128
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Date: 20030331
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Docket: 2001-1805(EI)
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BETWEEN:
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CLAUDETTE DECHAMPLAIN,
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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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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Deputy Judge Savoie, T.C.C.
[1] This appeal was
heard at Matane, Quebec, on October 28, 2002.
[2] This is an appeal
concerning the insurability of the appellant’s employment when employed with
Robert Lévesque, the payer, during the periods at issue, namely, from August 2
to November 29, 1997, from May 4 to October 2, 1998, from May 31 to October 16,
1999, and from May 1 to August 25, 2000.
[3] On February 16,
2001, the Minister of National Revenue (the “Minister”) informed the appellant
of his decision that this employment was not insurable during the periods at
issue, because he was of the opinion, after examining the terms and conditions
of the employment, that she and the payer would not have entered into a substantially
similar contract of employment if they had been dealing with each other at
arm’s length. He also informed the appellant that this employment was not
insurable because it did not meet the requirements of a contract of service.
[4] The Minister’s
decision is based on the following facts set out in paragraph 8 of his Reply to
the Notice of Appeal:
[Translation]
(a) During
the periods at issue, the appellant and the payer were common-law spouses.
(b) On
May 14, 1997, the appellant and the payer purchased “Cantine
3 Dimensions”.
(c) The
purchase price was $57,000.
(d) Initially,
the operating permit for the canteen was in the names of the appellant and the
payer. On August 12, 1997, the appellant had her name removed from the
operating licence so that she could collect employment insurance.
(e) Before
the purchase of the canteen, the appellant had worked there as a cook for three
seasons.
(f) The
canteen had a counter and a few tables outside as well as four tables inside.
(g) In
1997, the appellant worked as the manager of the establishment; the payer went
out to work and the appellant handled everything.
(h) The
payer suffered an automobile accident on March 20, 1998, and was disabled (he
could no longer walk); from that time on, he entrusted the entire management of
the canteen to the appellant.
(i) During
the periods at issue, the appellant handled purchases, meal preparation and the
supervision of the establishment’s employees.
(j) The
appellant claimed that she always worked 40 hours a week whereas she had no
work schedule that she had to follow and no record was kept of her hours.
(k) The
appellant provided services without pay to the establishment; she provided
services outside the periods at issue so that she could collect employment
insurance benefits.
(l) During
the periods at issue, the appellant received an alleged salary of $8.50 an hour
in 1997 and 1998, and $9.00 thereafter, for a 40-hour week.
(m) During
the periods at issue, the appellant was sometimes paid by cheque, sometimes in
cash directly from the canteen till.
(n) In
an affidavit dated September 29, 2000, the appellant acknowledged that the
records of employment for the periods in 1999 and 2000 were false with respect
to the periods actually worked.
(o) On
September 20, 2000, the appellant transferred, by notarial act, her interest in
“Cantine 3 Dimensions”.
[5] The appellant
admitted the assumptions of the Minister set out in subparagraphs (a) to (c),
(e), (f), (l), (m) and (o) and denied subparagraphs (d), (g) to (k) and (n) as
written.
[6] It is important
to note that the appellant contented herself with simply denying some of the
assumptions on which the Minister based his decision. It is safe to conclude,
then, that those assumptions of the Minister whose falsity was not demonstrated
have been proved true, following the principle established by the Federal Court
of Appeal in Elia v. Canada (Minister of National Revenue - M.N.R.),
[1998] F.C.A. No. 316.
[7] However, the
evidence from the hearing and the statutory declarations introduced into
evidence by counsel for the Minister established the following facts:
1. During
the periods at issue, the appellant was an equal partner with Robert Lévesque,
the payer.
2. She
worked at the canteen as manager from May 4 to October 2, 1998. In 1999, she
worked from May 31 to August 28. After that, she worked without pay until the
canteen closed on about October 16. She also worked without pay at mealtimes to
keep her eye on the business, while collecting employment insurance benefits at
the same time.
3. She
was entered in the payroll journal on June 4, 2000, although she had already
worked without pay at mealtimes since early in May, but without receiving
employment insurance benefits. She did not report her unpaid work on her
unemployment cards and she made false declarations.
4. The
appellant controlled her own work schedule and gave her hours to the
accountant, Lucette Algerson, to enter in the payroll journal.
5. She
was often paid in cash from the canteen’s till. She had always managed the
canteen because the payer had been employed full time as a janitor until 1998
when he was injured in an automobile accident.
6. She
acknowledged that her records of employment with respect to the first and the
last days of work were false.
7. She
had sole signing authority for the cheques of the business.
8. The
appellant received no compensation, except $1.00, from Robert Lévesque when she
transferred her shares in the business to him in September 2000. The canteen
was in fact owned by both of them during the periods at issue.
9. When
Mr. Lévesque and the appellant bought the canteen, they paid the sum of $11,000
from their joint account.
10. The
payer, Mr. Lévesque, knew nothing about the canteen’s income; the appellant and
the accountant handled it.
[8] The appellant
maintained that, despite the documentation introduced into evidence confirming
the acquisition of the business and the guarantees signed by herself and her
spouse, she did not consider herself an owner. She stated that her spouse, the
payer, was the one who decided everything, and that all she had to do was sign.
She added that that is why she sold her share of the business to the payer for
the sum of one dollar ($1.00) in September 2000.
[9] However, the
documents introduced into evidence do in fact bear her signature, freely
obtained, as confirmed by Me Nadine Rioux, Notary, who testified at
the hearing. The evidence further disclosed that the appellant had signed, as
joint guarantor with Robert Lévesque, the mortgage taken out to purchase the
canteen.
[10] In paragraph 9 of
the Reply to the Notice of Appeal, the Minister laid out the legislative
provisions on which he had relied in the performance of his duties under
paragraph 93(3) of the Employment Insurance Act (the “Act”). He
relied, inter alia, on paragraph 5(1)(a) and subsections
2(1) and 93(3) of the Act. In other words, the Minister submitted that
the appellant did not hold insurable employment within the meaning of the Act
during the periods at issue, since, during those periods, she carried on her
own business. Article 2186 of the Civil Code of Québec defines a
contract of partnership as follows:
A
contract of partnership is a contract by which the parties, in a spirit of
cooperation, agree to carry on an activity, including the operation of an
enterprise, to contribute thereto by combining property, knowledge or
activities and to share any resulting pecuniary profits.
[11] This Court had to
decide a case similar to the instant case in Parent v. Canada (Minister
of National Revenue – M.N.R.), [1999] T.C.J. No. 83. This Court, per
Judge Archambault, ruled as follows, at paragraph 38:
[...] Unlike a
joint-stock company, a partnership is not considered to be a person separate
from its partners. The partnership's business is that of the partners. The
partnership's assets belong to the partners. François Parent was thus working
for himself. His work was therefore not done according to the instructions and
under the direction or control of another person as required by article 2085 of
the C.C.Q. Accordingly, there was no contract of employment between Mr. Parent
and the DN partnership.
[12] Judge Lamarre of
this Court in Carpentier v. Canada (Minister of National
Revenue – M.N.R.), [1996] T.C.J. No. 502 repeated the same idea, stating:
In view of the features
associated with a contract of partnership both under the C.C.L.C. and under the
C.C.Q. and the tests used by the courts to determine whether a contract of
service exists, it seems clear to me that a partner cannot be an employee in
his own partnership. Since as partner he participates in the
decision-making of the partnership in pursuit of the common goal of the
partnership and shares in profits and losses, he is automatically in control
and therefore cannot at the same time act as a subordinate to himself, even if
there are several partners.
[13] On considering the
evidence adduced, the conclusion that the Minister’s finding that the appellant
was carrying on her own business has been confirmed appears to me to be
appropriate. She could therefore not be an employee of her own business under
the Act, the Civil Code of Québec and the authorities referred to
above.
[14] In light of the
above, particularly the evidence gathered, the appellant’s admissions, the
unrefuted assumptions of the Minister, the contradictions between the evidence
at the hearing and the prior statements, this Court does not see any merit in
interfering with the Minister’s decision.
[15] Furthermore, this
Court is of the opinion that, even if it had found that there was a contract of
service, it would have held that the appellant’s employment was not insurable
because she and the payer were not dealing at arm’s length, according to
paragraph 5(2)(i), subsection 5(3) of the Act and sections 251
and 252 of the Income Tax Act.
[16] For all these
reasons, the appeal is dismissed and the Minister’s decision is confirmed.
Signed at Grand-Barachois,
New
Brunswick,
this 31st day of March 2003.
D.J.T.C.C.
Translation certified
true
on this 30th day of
January 2004.
Leslie
Harrar, Translator
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