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Citation: 2003TCC318
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Date: 20030604
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Docket: 2002-4053(EI)
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BETWEEN:
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EGGSPECTATIONS INTERNATIONAL HOLDING CORP. INC.,
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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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AND
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Docket: 2002-4077(EI)
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JIMMY SKINDILIAS,
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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
Somers,
D.J.T.C.C.
[1] These
appeals were heard on common evidence in Montreal, Québec, on April 1st, 2003.
[2] The
Appellants are appealing from a decision made by the Minister of National
Revenue (the "Minister") that the employment of the Worker,
Jimmy Skindilias, with the Payor, Eggspectations International Holding
Corp. Inc., hereinafter referred to as the Appellant, during the period in question,
from April 22 to June 7, 2002, was insurable employment because there existed a
contract of service and therefore an employee/employer relationship between
them.
[3] The
burden of proof is on the Appellants. They must show on a balance of probabilities
that the Minister erred in fact and in law in his decision. Each case stands on
its own merits.
[4] In
reaching his decision, the Minister relied on the following assumptions of fact
which were admitted or denied:
a) the Appellant
was incorporated on April 20, 2000; (admitted)
b) the
shareholders of the Appellant during the disputed period were: (admitted)
9084-7997
Québec Inc. 72.4% of voting shares
2847-5390 Québec Inc. 22.5%
Groupimmo
Inc. 5%
Eggspectation
Inc. 0.1%
c) the Worker and
Castrenza Renda each held 50% of the voting shares of 9084-7997 Québec Inc;
(admitted)
d) the Worker
held 70% of the voting shares of Eggspectation Inc.; (admitted)
e) the Appellant
owned the restaurant's trade mark, Eggspectation and sold by franchise the
right to use it; (denied)
f) the
Appellant had 10 employees on its payroll; (admitted)
g) the Worker
was the President and the director of the operations of the Appellant;
(admitted)
h) the Worker's
tasks were to find, to negotiate and to sell the franchises and to supervise
the construction of the restaurants; (denied)
i) the Worker
had to make reports to the shareholders regularly; (denied)
j) the Worker
had no fixed working hours schedule; (admitted)
k) the Worker
worked over 30 hours per week for the Appellant; (denied)
l) the Worker
worked half of the time in the Appellant's office and half of the time on the
road with clients; (denied)
m) the Worker was
paid every two weeks an amount of $2,000.00 decided by the Appellant; (admitted)
n) the Worker
used the office equipment of the Appellant; (admitted)
o) the Worker
used his own car but he was reimbursed for his expenses by the Appellant;
(denied)
p) the Worker
had no risk of losses or chance of profits; (denied)
q) the Worker's
tasks were integrated in the Appellant's business. (denied)
[5] The
Appellant was incorporated on April 20, 2000.
[6] The
shareholders of the Appellant during the period in question were: 9084‑7997
Québec Inc. with 72.4% of voting shares, 2847-5390 Québec Inc. with 22.5%,
Groupimmo Inc. with 5% and Eggspectation Inc. with 0.1%.
[7] The
Worker and Castrenza Renda each held 50% of the voting shares of 9084-7997
Québec Inc.
[8] The
Worker held 70% of the voting shares of Eggspectation Inc.
[9] The
Worker testified that the Appellant owned the restaurant's trade mark.
[10] The Worker was in charge of the operations of the Appellant. He stated
that he franchised out or managed the business for other individuals. The
Appellant had four employees on the payroll.
[11] The restaurants had three operations being: beverage, floor and
kitchen. There are 11 restaurants in the enterprise: 8 in Montreal,
Québec, 1 in Ottawa, Ontario and 2 in USA.
[12] The Worker was the President and Director of the Appellant. He worked
five to eight hours a day and visited the various restaurants. The Worker
shared the offices at the head office with four permanent employees.
[13] The Worker was in charge of hiring and dismissing the employees. The
Worker and Castrenza Renda consulted each other one to ten times a day.
[14] The Worker mentioned that he had to give a permanent warranty for
loans up to $1,000,000.
[15] Jimmy Bagiotas, the chartered accountant, testified that the Worker
did not personally own shares in the Appellant but through the 50% shares he
owns in 9084-7997 Québec Inc. as stated in subparagraph 5(b) of the Reply to
the Notice of Appeal.
[16] Mireille Lapierre, Appeals Officer at Canada Customs and Revenue
Agency, testified that she had a telephone conversation on September 26, 2002
with the Worker, Jimmy Skindilias and Pradeep Anand, the controller. She stated
that the Appellant has been in operation since April 2000, that the Worker was
the president of the enterprise and that the enterprise consisted in selling
restaurant franchises.
[17] The Worker was the president and director of operations of the
Appellant. His responsibility was to find new franchises and to negotiate such
with clients and to supervise the installation of the restaurants. His duties
required him to be out of the office most of the time.
[18] The Worker's salary was established at $2,000 per two weeks paid
regularly by cheque. The Worker's car expenses were reimbursed by the
Appellant.
[19] The Worker's hours of work were irregular; he was working depending on
the type of work to be performed from 30 to 100 hours per week.
[20] Control by the Appellant over the Worker's duties was not constant but
the Appellant had the right to exercise that control.
[21] The Appellant owned all the equipment necessary for its operations.
The Worker was reimbursed for the use and expenses incurred with his vehicle.
[22] The Worker, according to the Appeals Officer, did not suffer any
financial risks of loss nor any possible financial gain except his salary paid
on a regular basis.
[23] The Worker was integrated in the Appellant's business.
[24] In determining whether the parties have established an
employer-employee relationship the total relationship of the parties must be
considered.
[25] In the case Wiebe Door Services Ltd. v. M.N.R,. 87 DTC 5025,
the Federal Court of Appeal concluded that the four-in-one test should be taken
into consideration: (1) control; (2) ownership of tools; (3) chance of profit
and risk of loss; and (4) integration.
[26] In the case of Gallant v. Canada (Department of National
Revenue) (F.C.A.), [1986] F.C.J. No. 330, the Federal Court of Appeal
expressed itself as follows:
...In the Court's view, the first
ground is based on the mistaken idea that there cannot be a contract of service
unless the employer actually exercises close control over the way the employee
does his work. The distinguishing feature of a contract of service is not the
control actually exercised by the employer over his employee but the power the employer
has to control the way the employee performs his duties. If this rule is
applied to the circumstances of the case at bar, it is quite clear that the
applicant was an employee and not a contractor.
[27] In the case at hand, the Appellant, which had a distinct legal
personality, controlled the Worker's performance in his duties. The two main
shareholders, including the Worker, consulted each other daily concerning vital
decisions. It is reasonable to conclude that the Appellant had control over the
Worker's performance.
[28] The Appellant fully owned the equipment used by the Worker who
executed his tasks partly at the Appellant's office. The Worker was paid for
the use of his vehicle. Under this item the Worker was an employee.
[29] The Worker's expenses were reimbursed and he was remunerated on a
regular basis. The Worker signed a warranty for loans of considerable amounts
but these undertakings were made as a shareholder and not as an employee.
Considering these facts the Worker was an employee.
[30] The Worker was working exclusively for the Appellant. He was
integrated in the operations of the company. His work was essential to the
success of the company's performance.
[31] Considering all the facts as related, the Worker was working under a
contract of service.
[32] The Appeals Officer concluded that the worker owned effectively 36.2%
of the shares in the Appellant, through the division of shares as stated in
subparagraph 5(b) of the Reply to the Notice of Appeal.
[33] Paragraph 5(2)(b) of the Employment Insurance Act does
not apply in this case as the Worker does not control more than 40% of the
voting shares of the corporation.
[34] In summary, the Worker was the president and director of the
operations of the Appellant, a position of strength in the company. He was
dedicated and the success of the company depended on his work performance. The
fact of working long irregular hours does not prevent him from being employed
under a contract of service. It appears from the evidence that due to devotion
to his work the company is flourishing and on the road to being a successful
international company.
[35] Considering all the evidence in this case, the Worker was engaged
during the period in question in insurable employment with the Appellant pursuant
to paragraph 5(1)(a) of the Employment Insurance Act because he
was working under a contract of service.
[36] The appeals are dismissed.
Signed at
Ottawa, Canada, this 4th day of June 2003.
D.J.T.C.C.
Jurisprudence consulted
Wiebe Door Services Ltd. v. Minister of
National Revenue, [1986] 3 C.F. 553 (F.C.A.)
Acier Inoxydable Fafard Inc. v. Canada
(Minister of National Revenue - M.N.R.), [2002]
F.C.J. no 794
Gallant v. Canada (Department of National
Revenue) (F.C.A.), [1986] F.C.J. no 330
Gervais v. Canada (Minister of National
Revenue - M.N.R.), [1996] T.C.J. no 611
Roxboro Excavation Inc. v. Canada
(Minister of National Revenue - M.N.R.), [1999]
T.C.J. no 32
Roxboro Excavation Inc. v. Canada
(Minister of National Revenue - M.N.R.), [2000]
F.C.J. no 799
Brochu v. Canada (Minister of National
Revenue - M.N.R.), [1996] T.C.J. no 118
Massé et Plante Auto (1997) Ltée v.
Canada (Minister of National Revenue - M.N.R.),
[2001] A.C.I. no 423
Industries J.S.P. Inc. v. Canada
(Minister of National Revenue - M.N.R.), [1999]
T.C.J. no 32
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