Date: 20000630
Docket: 1999-3992-EI
BETWEEN:
AU GRAND BAZAR DE GRANBY INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Tardif, J.T.C.C.
[1]
The evidence showed that the company Au Grand Bazar de Granby
Inc. operated a superstore selling sports clothing and equipment.
It was such a large store that it was described as virtually one
of a kind in Quebec.
[2]
Denise Grondin held 99 percent of the voting shares and
her sons Pierre and Mario the remaining one percent. The
participating preferred shares were held by the Grondin
brothers.
[3]
This was a family business established in 1976 by
Denise Grondin's husband, the father of Mario and
Pierre. The business developed in normal fashion over the years.
Mario and Pierre Grondin began working there at a very early
age and continued during their studies, which they cut short in
order to make their careers in the business.
[4]
The Grondin sons' responsibilities increased considerably
following their father's death in 1992. The business then
experienced very strong growth, largely as a result of the
sons' determination and enthusiasm.
[5]
Mario and Pierre Grondin, who described themselves as
co-owners of the business, explained that it was
administered and managed in complete harmony with their mother,
who took part in all important decisions.
[6]
Admitting that their ideas and plans were generally much more
progressive and risky than those of their mother, who was rather
conservative, they were generous and respectful in their dealings
with their mother, toward whom they clearly had very noble
sentiments.
[7]
As the result of this privileged relationship, their mother was
always closely involved in all major decisions. Mrs. Grondin
was no doubt very proud of her two sons and trusted them
completely, and the evidence showed that, although rather prudent
by nature, she had never blocked or impeded her sons' ardent
desire and ambition to expand the business.
[8] I
believe that the two sons in fact always had a free hand in
implementing their ideas for the store's operation and their
various expansion plans.
[9]
It was shown on a preponderance of evidence that this was
undoubtedly a veritable model of organization for a family
business involving a number of members of the same family.
[10] Without
question, the soul of this family business was mainly the two
Grondin brothers. They managed the business together with tact
and respect as regards their father and mother, who allowed the
store to become what it in fact became.
[11] The
evidence clearly showed that they enjoyed special status within
the business despite the very small percentage of voting shares
they held. There is no doubt that they held and still hold de
facto control of the business.
[12] The
determination under appeal resulted from the exercise of
discretionary authority. Consequently, this Court may not
interfere unless it can first be concluded on a preponderance of
evidence that one or more palpable errors have been made.
[13] In this
case, the evidence was decisive on this point. The respondent had
Ms. Sévigny testify in her capacity as officer
responsible for the case. She essentially stated that the Grondin
brothers' testimony had been a repetition of the facts
brought to her attention during the review of the case.
[14] The
evidence showed that the Grondin brothers themselves made the
decisions to pay bonuses and determined their number and when
they were paid, and above all they determined their amount.
[15] The
evidence showed that the Grondin brothers each received more than
$80,000 in 1998 and more than $92,000 in 1999 in salary and
bonuses.
[16] The
evidence established that the Grondin brothers themselves set all
the terms and conditions respecting the performance of their
work.
[17] The
evidence showed that Mrs. Grondin, who held 99 percent
of the company's shares, was never contacted to complete the
investigation.
[18] The
evidence revealed that the respondent had in his possession and
consulted statistics on salaries paid to persons working in the
retail industry, and according to those statistics salaries paid
for the same type of work are very much lower than the incomes
the Grondin brothers received.
[19] These are
fundamental points to which a number of secondary ones could be
added. These facts are amply sufficient to find that the
respondent did not exercise his discretionary power in a
judicious and irreproachable manner. Indeed, such facts compelled
a finding entirely opposite to that which the respondent
made.
[20] How can
it be reasonably concluded that persons working in retail sales
who have an arm's length relationship with their employer set
and determine their own conditions of employment?
[21] How can
it be claimed that third parties unrelated to their employer
could decide on their own compensation based on the performance
of the business that employs them? There may of course exist
situations in which third parties receive benefits, bonuses,
commissions and so on based on performance, but the scales are
predetermined by the business and never by the recipients of
those performance bonuses.
[22] I
therefore find that the respondent did not adequately use his
discretion in determining that Pierre and Mario Grondin were
employed under a contract of employment similar to that which
persons dealing with the employer at arm's length might have
had.
[23] It was
shown on a preponderance of evidence that Pierre and
Mario Grondin enjoyed benefits and privileges that were
justified solely by their non-arm's-length relationship with
the business. In the absence of that relationship, they could not
have hoped for such advantageous conditions of employment.
Consequently, the work performed by the Grondin brothers must be
excepted from insurable employment under the Act.
[24] For these
reasons, the appeal is allowed.
Signed at Ottawa, Canada, this 30th day of June 2000.
"Alain Tardif"
J.T.C.C.
Translation certified true on this 28th day of September
2001.
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-3992(EI)
BETWEEN:
AU GRAND BAZAR DE GRANBY INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on June 13, 2000, at Sherbrooke,
Quebec, by
the Honourable Judge Alain Tardif
Appearances
Counsel for the
Appellant:
Richard Généreux
Counsel for the
Respondent:
Diane Lemery
JUDGMENT
The
appeal is allowed and the Minister's decision confirmed in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 30th day of June 2000.
J.T.C.C.
Translation certified true
on this 28th day of September 2001.
Erich Klein, Revisor
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