Date: 20010910
Docket:
2000-5076-EI
BETWEEN:
PHILIPPE
POLLET,
Appellant,
and
THE MINISTER OF
NATIONAL REVENUE,
Respondent.
Reasons for
Judgment
Somers,
D.J.T.C.C.
[1]
This appeal was heard at Montréal, Quebec, on July 12,
2001.
[2]
The appellant is
appealing from the decision by the Minister of National Revenue
("the Minister") that his employment with the payer,
9031-3107 Québec Inc. o/a Distribution Pollpex,
during the periods at issue, namely from March 4, 1996,
to January 31, 1997, and from November 1, 1997, to
July 31, 1999, was not insurable because it did not
meet the requirements for a contract of service and because there
was no employer-employee relationship between the payer and
him.
[3]
Paragraph 5(1)(a) of the Employment Insurance Act
("the Act") reads as follows:
Subject to
subsection (2), insurable employment is
(a)
employment in Canada by one
or more employers, under any express or implied contract of
service or apprenticeship, written or oral, whether the earnings
of the employed person are received from the employer or some
other person and whether the earnings are calculated by time or
by the piece, or partly by time and partly by the piece, or
otherwise.
[4]
The burden of proof is on the appellant, who must show on a
balance of probabilities that the Minister's decision is
wrong in fact and in law. Each case turns on its own
facts.
[5]
In making his decision, the Minister relied on the following
facts, which were either admitted or denied:
[TRANSLATION]
(a)
the payer was incorporated on February 14, 1996;
(admitted)
(b)
the payer carried on business under the firm name Distribution
Pollpex; (admitted)
(c)
the payer specialized in industrial thermal insulation sales and
consulting; (admitted)
(d)
according to the corporate register, the payer's alleged
shareholders are: (denied)
Sébastien
Pollet
62% of the voting shares
the
appellant
38% of the voting shares
(e)
the appellant is Sébastien Pollet's father;
(admitted)
(f)
Sébastien Pollet was a student when the company was
incorporated; (admitted)
(g)
Sébastien Pollet did not pay for his shares or invest
anything in the payer; (admitted)
(h)
Sébastien Pollet did not know what the appellant's
periods of employment, his activities and his salary were, and he
never discussed the company with his father; (denied)
(i)
the payer did not have any corporate life following its
incorporation; (denied)
(j)
Sébastien Pollet admitted to the respondent's official
that he was a nominee; (denied)
(k)
the business's offices were in the appellant's home;
(admitted)
(l)
the appellant was the business's only employee;
(admitted)
(m)
the appellant was the sales manager and was responsible for
consulting with customers; (admitted)
(n)
the appellant made all the decisions alone; (denied)
(o)
the appellant determined his own salary and decided himself when
he would be hired and laid off; (denied)
(p)
the appellant alone signed the business's cheques;
(admitted)
(q)
the appellant was in charge of the business, and no one
controlled him. (denied)
[6]
The payer was incorporated on February 14, 1996, as a company
specializing in industrial thermal insulation sales and
consulting.
[7]
According to the company register, the shareholders are
Sébastien Pollet and the appellant, who own 62 percent and
38 percent, respectively, of the voting shares. The appellant is
Sébastien Pollet's father.
[8]
When the payer was incorporated in 1996, the appellant wanted to
get his two sons involved in the family business by giving them
each a third of the voting shares. Only Sébastien Pollet
agreed to be part of the business.
[9]
The appellant's accountant suggested that 62 percent of the
voting shares be allotted to Sébastien Pollet, while the
appellant would own a third of those shares.
[10]
Before the payer was incorporated, the appellant worked for
another company. He was the sales manager and was responsible for
consulting with customers.
[11]
At the time the payer was incorporated, Sébastien Pollet,
who was 23 years old, was a student and took little interest in
the company's operations. He received 62 percent of the
voting shares without investing a cent.
[12]
Sébastien Pollet testified that he is still a shareholder
in the company but is not active in the family business. He
informed his father of his intention not to get involved in the
company's operations. He was interested in being a graphic
artist.
[13]
Initially, he was kept informed about the company's
operations, but later he lost interest. The company's minutes
duly signed by the directors each year show that the appellant
was appointed as its president and Sébastien Pollet
as its secretary.
[14]
The appellant gave his son a quick look at the financial
statements, but his son was not particularly interested in
them.
[15]
On cross-examination, Sébastien Pollet said that he worked
for the company while he was a student without being paid or
receiving any dividends. He added that he did not really work; he
said he did sales, but admitted that he did not have much
experience. He replaced the appellant in 1996 or 1997 when the
appellant was ill.
[16]
Sébastien Pollet stated that he was not consulted about
the purchase of the vehicle or the furniture and that he does not
even know the make of the vehicle. He does not remember any of
the decisions that were made. He was not involved in determining
the appellant's salary. The appellant supervised himself
without any involvement by his son. He is not aware of his
father's working hours or the quality of his work. The
appellant himself determined when he would be laid
off.
[17]
The appellant testified that his son was informed about the
company's operations but in no great detail.
[18]
The appellant said that he was the company's only employee
and that he worked about 45 to 50 hours a week, although
sometimes up to 70 hours. He did not record his working
hours. He determined his own salary.
[19]
The company's office was in the appellant's home. The
company did not pay rent but did pay 40 percent of the
electricity costs, taxes, etc. The vehicle was owned by the
company.
[20]
On cross-examination, the appellant admitted that he did not have
a work schedule or any vacation and that he was not supervised.
He admitted that he had provided services to the company while
receiving employment insurance benefits and said that he reported
this to the Employment Insurance Commission and that his benefits
were changed accordingly.
[21]
The financial statements show investments of $20,000 and $5,000
in the company but the appellant could not explain the source of
those investments. His salary for the annual period from March 1,
1996, to February 28, 1997, was $27,853. His salary from March 1,
1997, to February 28, 1998, was $8,407.00, while his salary from
March 1, 1998, to February 28, 1999, was $22,023.00. He said that
his salary probably fell because there was less work.
[22]
The appeals officer questioned the appellant and Sébastien
Pollet. The latter apparently told her that he did not know how
many shares he owned, that the appellant ran the company from A
to Z and that the two shareholders did not hold any business
meetings. Being unfamiliar with the term "nominee", he
simply said that he was part of the company in name
only.
[23]
The Court has carefully read the case law submitted by both
parties. In applying the tests for determining whether there is a
contract of service, account must be taken of the specific
circumstances establishing the contractual relationship between
the parties. Each case turns on its own facts.
[24]
It is true that the payer is a legal entity separate from its
shareholders. The relationship of subordination criterion for
determining whether a contract of employment exists must be
considered.
[25]
In Scalia v. Canada (Minister of National Revenue -
M.N.R.), [1994] F.C.J. No. 798, Marceau J.A. of the Federal
Court of Appeal stated the following:
On analysing the evidence, however, we find that the applicant
had such ascendancy over the company, its activities and the
decisions of its board of directors, which was composed of
himself, his nephew and his sister-in-law, that there could not
have been the independent relationship between himself and the
company that is necessary to the creation of a true subordinate
relationship.
[26]
In Dalcourt v. Canada (Minister of National Revenue -
M.N.R.), [1996] F.C.J. No. 882, Marceau J.A. of the Federal
Court of Appeal reiterated this view, writing as
follows:
... He correctly concluded
that, as in Scalia, the applicant had "such influence [over
the payer] that there could not exist between him and the company
that relation of independence that is necessary to create a true
relationship of subordination."
[27]
In Bouillon v. Canada (Minister of National Revenue -
M.N.R.), [1996] F.C.J. No. 742, Desjardins J.A. of the
Federal Court of Appeal concluded the judgment as
follows:
The perplexing situation thus described casts serious doubt on
the payer's existence as an entity distinct from its main
shareholders, Bruno Bouillon and Ghislain Bélanger. These
two have acted as if the third "shareholder" did not
exist, even to the point of excluding him from the dividend. They
had complete control over the payer, which played only a role of
convenience and served as a screen for their activities. I find
that no agreement whatsoever existed between the applicant and
the payer, let alone a contract of service. I conclude that the
applicant worked for himself during the relevant
periods.
[28]
It is true that a shareholder may act in two capacities in a
company, namely as a director and as an employee; however, what
must be considered is the role played by the appellant in the
case at bar.
[29]
The appellant explained that he wanted to form a company to get
his two sons involved in the family business. According to the
appellant, his accountant advised him to divide the shares
between himself and his two sons by allotting a third to each,
but his elder son, an engineer by profession, did not agree to be
part of the company.
[30]
The accountant suggested that 62 percent of the shares be
allotted to the appellant and 38 percent to his son
Sébastien. The company's annual minutes show that the
appellant was its president and his son its secretary.
[31]
The appellant's son, Sébastien Pollet, who was a
university student in 1996, did not invest any money in the
company even though he owned 62 percent of its shares. He
received no dividends or profits from the company during the
periods at issue. He even replaced his father when he was ill in
1996 or 1997 without being paid. He said that he did not
contribute much to the company's efficient
operation.
[32]
The evidence showed that the son lost interest in the company and
had no experience with that type of business.
[33]
The son stated that his father gave him a quick look at the
financial statements, adding that this was not important to him.
He said that his father suggested giving him 62 percent of the
shares but that he did not understand [TRANSLATION]
"much" about it.
[34]
He does not remember any of the company's decisions and has
no recollection of its profits or financial losses, since his
father was the one who ran the company. He did not know his
father's salary or even why that salary decreased. The son
was not involved in managing the company and knew nothing of his
father's working hours and vacation time or of his
lay-offs.
[35]
The son did not receive any profits from the company. The
financial statements show investments of $20,000 and $5,000 in
the company. The son did not invest anything in it and the
appellant could not explain where those amounts came
from.
[36]
Based on what was stated by the Federal Court of Appeal in the
above-mentioned cases, the appellant was the company's
directing mind, there was no true relationship of subordination
between the appellant and the payer and no genuine contract of
service existed.
[37]
The appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of
September 2001.
"J. F. Somers"
D.J.T.C.C.
Translation certified
true on this 20th day of June 2002.
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH
TRANSLATION]
2000-5076(EI)
BETWEEN:
PHILIPPE POLLET,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on July 12, 2001, at
Montréal, Quebec, by
the Honourable Deputy Judge J. F.
Somers
Appearances
Counsel for the
Appellant:
Grégoire Cadieux
Counsel for the
Respondent:
Vlad Zolia
JUDGMENT
The appeal is dismissed and the decision of the Minister is
confirmed in accordance with the attached Reasons for
Judgment.
Signed at Ottawa, Canada,
this 10th day of September 2001.
D.J.T.C.C.
Translation certified
true
on this 20th day of June
2002.
Erich Klein, Revisor
Email this Content