[OFFICIAL ENGLISH TRANSLATION]
Date: 20011115
Docket: 2000-987(EI)
BETWEEN:
FRANCE POTVIN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
PAPETERIE A. ET D. INC.,
Intervenor.
REASONS FOR JUDGMENT
Somers, J.T.C.C.
[1] This appeal was heard at
Chicoutimi, Quebec, on August 10, 2001.
[2] In a letter dated December 8,
1999, the Minister of National Revenue (the "Minister") informed
the appellant of his decision according to which the employment
that she had held during the period at issue, that is, from
October 10, 1992, to February 2, 1998, with Papeterie A. et D.
Inc., the payer, was not insurable because she controlled more
than 40 per cent of the voting shares of the payer.
[3] By Notice of Appeal filed on
February 24, 2000, the appellant appealed before this Court from
the decision of the Minister, dated December 8, 1999, relating to
the period from January 1 to February 3, 1998.
[4] Subsection 5(2) of the
Employment Insurance Act reads in part as follows:
(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;
...
[5] The burden of proof is on the
appellant. She has to show on the balance of evidence that the
Minister's decision is unfounded in fact and in law. Each
case stands on its own merits.
[6] In making his decision, the
Minister relied on the following assumptions of fact, which were
either admitted or denied by the appellant:
[TRANSLATION]
(a) the payer
operated an office supplies and furnishings business;
(admitted)
(b) from September
1, 1995, to February 3, 1998, the shareholders of the payer
were:
Denis
Brassard
51% of the voting shares
The
appellant
49% of the voting shares (denied)
(c) Denis Brassard
was the spouse of the appellant; (admitted)
(d) Denis Brassard
and the appellant were directors of the payer; (admitted)
(e) the business
employed 10 people, including the appellant; (admitted)
(f) the
appellant's duties consisted of handling customer service and
placing orders; (admitted)
(g) a resolution of
the payer's board of directors, dated February 3, 1998,
authorized the appellant to transfer her shares to numbered
company 2740-0787 Québec Inc.; (denied)
(h)
in the payer's register of shareholders, the appellant was listed
as a shareholder until February 3, 1998; (denied)
(i) according
to the register of transfers, signed by the appellant on February
3, 1998, the appellant sold, assigned and transferred the 49
shares of the payer that she owned to 2740-0787 Québec
Inc.; (denied)
(j) in the
payer's register of directors, the appellant was listed as
director until February 3, 1998; (denied)
(k) on February 4,
1998, the appellant and Denis Brassard sold almost all of the
shares of 2740-0787 Québec Inc. owned by them to
Procure de Jonquière Inc., with the sale taking effect
between the parties as of January 6, 1998; (denied)
(l) from
January 1, 1998, to February 3, 1998, the appellant was a
shareholder of the payer. (denied)
[7] The only two witnesses heard at
the hearing of this appeal were the appellant and Arthur Gobeil,
a chartered accountant.
[8] The payer operated an office
supplies and furnishings business. According to the appellant,
she was a sales clerk for the payer from 1992 to January 6, 1998.
Before January 6, 1998, the shareholders of the payer were Denis
Brassard, the appellant's spouse, and the appellant, owning
respectively 51 per cent and 49 per cent of the voting
shares.
[9] Denis Brassard and the appellant
managed the business and employed 10 people, including the
appellant.
[10] On January 6, 1998, Procure de
Jonquière Inc, acting and represented by Henri-Paul
Brassard, signed an offer to purchase the shares of the appellant
and of Denis Brassard. The offer to purchase was signed by
the parties in the presence of a notary, since deceased (Exhibit
A-1). The purchase price offered was in the amount of
$575,000,00, of which $175,000.00 was payable in cash at the time
of the signing of the deed of sale.
[11] Clause 11.00 of the offer to purchase
reads in part as follows:
[TRANSLATION]
However, because of the exceptional circumstances of
this offer, the parties hereto agree that possession of the
business shall be taken on January 6, 1998, by the OFFEROR and
Denis BRASSARD, who shall administer the assets of the company
jointly until the date of closing under the working conditions
stipulated in the agreement between the parties hereto.
[12] On February 4, 1998, Denis Brassard and
the appellant signed a deed of sale in the presence of a notary
by which they transferred their shares to Procure de
Jonquière Inc. (Exhibit A-2).
[13] Some of the clauses of the deed of sale
read as follows:
[TRANSLATION]
0.01.04
Date of closing
means February 4, 1998, or any other date fixed by mutual
agreement of the parties for the signing of the documents
required to execute the transaction that is the subject matter
hereof.
0.01.05
Effective date
means January 6, 1998, or any other date fixed by mutual
agreement of the parties, from which time the Purchaser shall be
entitled to receive all income generated by the business and
shall have the concomitant obligation to assume the payment of
all operating expenses relating to the business.
12.00
COMING INTO FORCE
This agreement shall come into force on the date on which it
is signed and shall be binding on the parties as of January 6,
1998.
[14] The appellant asserts that she ended
her duties as director on January 6, 1998. However, she continued
to work for the payer, paying her employment insurance premiums
until June 1999.
[15] According to a resolution of the board
of directors, adopted on November 27, 1997, (Exhibit I-1), Denis
Brassard and the appellant acted as directors of the payer: Denis
Brassard as chairman and the appellant as secretary.
[16] According to another resolution of the
board of directors, dated February 3, 1998, (Exhibit I-1), Denis
Brassard and the appellant transferred 51 and 49 Class A shares
respectively to 2740-0787 Québec Inc.
[17] On February 3, 1998, the appellant sent
a letter to the payer informing it that she was resigning from
her position as director and secretary of the company (Exhibit
I-1). On the same day, that is, February 3, 1998, a document
entitled [TRANSLATION] "transfer and power of attorney" (Exhibit
I-2) was signed by the appellant by which she sold, assigned and
transferred for valuable consideration 49 shares to 2740-0787
Québec Inc.
[18] The register of shareholders (Exhibit
I-3) shows that the appellant was a shareholder of 2740-0787
Québec Inc. from September 1, 1995, to February 3, 1998.
The register of directors (Exhibit I-4) shows that the appellant
was a director of the payer from January 6, 1996, to February 3,
1998.
[19] A share certificate dated February 3,
1998, (Exhibit I-5) certifies that 2740-0787
Québec Inc. is the holder of 100 Class A shares of the
company.
[20] Arthur Gobeil, a chartered accountant
and adviser to Henri-Paul Brassard, the new purchaser of the
shares of the appellant and her spouse, Denis Brassard, asserts
that he participated actively, as of October 1997, in the
negotiations that led to the sale of the shares. The final
negotiations that resulted in the signing of the offer to
purchase, dated January 6, 1998, took place in December 1997.
[21] On January 6, 1998, Henri-Paul Brassard
took control of the company for all practical purposes and was
authorized to sign cheques.
Analysis of the evidence
[22] Exhibit I-2 filed by the intervenor in
the record discloses the following facts:
-
in the payer's share register, the appellant had been listed as
the holder of 49 Class A shares since September 1, 1995;
- in the payer's
register of shareholders, the appellant was listed as a
shareholder from September 1, 1995, to February 3, 1998;
- in the payer's
register of directors, the appellant was listed as a director
until February 3, 1998;
- the payer's share
transfer register records the transfer of 49 shares from the
appellant to numbered company 2740-0787 Québec Inc. on
February 3, 1998. The information found in the payer's share
register and in the share transfer documents is to the same
effect.
[23] Based on the above-mentioned documents,
it may be concluded that, during the period at issue, the
appellant had de jure control over more than 40 per cent
of the voting shares until February 3, 1998.
[24] Exhibit I-1, filed in the record,
discloses the following facts:
- a resolution of
the payer's board of directors, dated November 27, 1997,
establishes that the appellant and her spouse were [TRANSLATION]
"all the directors of the Company eligible to vote";
- another resolution
of the board of directors, of the same date, indicates that the
appellant and her spouse were elected as directors of the
company;
-
a third resolution of the board of directors, of the same date,
shows
that the appellant and her spouse were elected as officers of
the company;
- by resolution
dated February 3, 1998, the payer's board of directors authorized
the appellant to transfer the 49 Class A shares held by her
to
2740-0787 Québec Inc. That resolution was signed by the
appellant and her spouse in their capacity as [TRANSLATION] "all
the directors of the Company eligible to vote";
- by the same
resolution, the appellant resigned from her position as director
and secretary of the company; and
- lastly, by a
resolution adopted on February 4, 1998, the new directors and
officers of the company were elected.
[25] The above-mentioned documents show
that, for the period from January 6 to February 3, 1998, the
appellant fully exercised her rights in the administration of the
company by voting, electing directors and being elected as
director of the company. Thus, for the period at issue, the
appellant had de facto control of more than 40 per cent of
the voting shares and enjoyed the full exercise of the rights
attached thereto.
[26] It should be noted that paragraph
5(2)(b) of the Act does not refer to control of the
corporation but rather to control of the shares. That
Henri-Paul Brassard took control of the administration
of the company is of no consequence; the fact remains that,
during the period at issue, the appellant continued to exercise
the rights of the shares held by her.
[27] For the period at issue, the employment
held by the appellant is excluded from insurable employment,
within the meaning of paragraph 5(2)(b) of the Act,
because she controlled more than 40 per cent of the voting shares
of the payer.
[28] The appeal is dismissed and the
Minister's decision is confirmed.
Signed at Ottawa, Canada, this 15th day of November 2001.
D.J.T.C.C.
Translation certified true
on this 13th day of February 2003.
Sophie Debbané, Revisor
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