Roy v. M.N.R., docket 96-1968-UI

Date: 19971028

Docket: 96-1968-UI

BETWEEN:

PAULINE DOMPIERRE ROY,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1] The appellant did not testify in support of her appeal. Only her husband and Omer Rioux, representing the business which assumed responsibility for the salary paid to the appellant, testified.

[2] It came out in the testimony of those two individuals that the appellant and her husband had operated a peat business for a number of years until 1983. Their children were not interested in taking over and Daniel Roy, the appellant's spouse, decided to lease his business to the Rioux family, two of the Rioux sons having acquired some experience during the period Mr. Roy and his wife operated the peat business.

[3] The lease was finalized in 1983 by three agreements signed the same day and filed as Exhibits A-1, A-2 and A-3 respectively. According to one of the agreements the peat business, thenceforth to be operated under the style and trade name "Tourbière Rio-Val Inc.", was leased for a period of 15 years for an annual consideration of $7,450. No increase in rental was provided for.

[4] In addition to the agreement regarding rent the parties concluded another agreement on the same day, June 20, 1983, which provided as follows:

[TRANSLATION]

SERVICE CONTRACT

(AGREEMENT III)

ON JUNE 20, 1983,

APPEARED:

DANIEL ROY, industrialist, domiciled at 13 9ième Avenue sud, St-Fabien, in the county of Rimouski, G0L 2Z0,

- and -

PAULINE DOMPIERRE, wife of the said Mr. ROY, contractually separated as to property, of the same place,

hereinafter referred to as: Mr. & Mrs. ROY,

- AND -

LA TOURBIÈRE RIO-VAL INC. (address: P.O. Box 34, 1ère Rue, St-Fabien, Rimouski, G0L 2Z0), legally incorporated and having its head office at St-Fabien, represented herein by Omer Rioux, its president, who declares himself duly authorized under the terms of a resolution adopted by the board of directors of the said company on June 20, 1983, a certified copy of which remains attached to the original hereof, having been recognized to be true by the said representative and countersigned by him and the undersigned notary for purposes of identification,

hereinafter referred to as: THE COMPANY,

THE SAME have declared and agreed:

DECLARATIONS

A. The said Mr. Roy and the company have today executed before notary Georges-Henri Dubé a lease under the terms of which the lessor has leased to the lessee for a period of 15 years the peat bog he exploits in St-Fabien, in the county of Rimouski;

B. It is important for the company to have the services of the said Mr. and Mrs. Roy because of their expertise in peat so that the peat bog can be developed.

AGREEMENTS

HAVING MADE THESE DECLARATIONS, the parties have agreed that:

1. The company hereby retains Mr. and Mrs. Roy, here present and accepting, for a period of 26 weeks a year, beginning on April 1 and ending on September 30 of each year, for a duration of 15 years commencing on April 1, 1983.

2. The services rendered by Mr. and Mrs. Roy to the company will involve acting as directors, management advisers and promoters of the sale of peat products.

3. The company undertakes to pay the said Mr. and Mrs. Roy as their salary the sum of $400 a week.

4. Mr. and Mrs. Roy undertake, throughout the term of the agreement, not to become involved directly or indirectly, as employee or shareholder, in any business or undertaking of the same or of a similar kind, other than that of the company, anywhere in the province of Quebec, in the province of New Brunswick and in all the American states.

5. In the event of the death of Mr. or Mrs. Roy the company will continue to pay to the estate of the first to die and to the survivor the sum of $400 a week for 26 weeks a year throughout the term of this agreement.

However, this agreement shall be rescinded if the aforesaid lease of the peat bog is cancelled or if the option to purchase provided for therein is exercised by the company.

6. If the lessee does not pay the lessor at the end of each of the years of operation beginning on April 1 of each year all the weekly salary owed to the said Mr. and Mrs. Roy for the said year of operation, the lessor may terminate the aforesaid lease upon sending the lessee written notice that if the salary owed is not paid within 60 days the aforesaid lease shall be rescinded.

The money thus owed to the said Mr. and Mrs. Roy may be offset by the value of improvements and additions made to the buildings belonging to the said Mr. Roy or his estate, and by the value of additional equipment nailed or similarly affixed to the immovables of the said Mr. Roy, as specified in the aforesaid lease.

If there is still money owed to the said Mr. and Mrs. Roy as salary after the calculations made under the preceding paragraph, the company undertakes to pay such amounts to the said Mr. and Mrs. Roy in annual payments of $1,000 each, the first of which shall become due and payable one year after cancellation of this agreement, and the others in succession at the same time in each succeeding year, until payment is made in full, with interest on any outstanding balance at 10 percent per annum, to be calculated and payable annually concurrently with and in addition to each of the annual payments.

The company and the said Mr. and Mrs. Roy agree that any instance of default hereunder shall be regarded as default under the following instruments, and vice versa:

(a) The lease granted by Daniel Roy to La Tourbière Rio-Val Inc., recorded before Georges-Henri Dubé, notary, on June 20, 1983, as No. 13,788 in his archives;

(b) The option to purchase concluded between the same parties under private seal on June 20, 1983.

Done and signed at Rimouski this 20th day of June 1983. (Four words struck out are void.)

______________________________

Daniel Roy

______________________________

Pauline Dompierre

LA TOURBIÈRE RIO-VAL INC.

by: __________________________

Omer Rioux

________________________

witness

________________________

witness

GHD/bd.

[5] Relying on this agreement the appellant's husband — the appellant herself was not present at the hearing — argued that there were elements constituting a genuine contract of service between his wife Pauline Dompierre and La Tourbière Rio-Val Inc.

[6] He gave a very brief description of the work done by the appellant during the periods at issue: the appellant acted as interpreter for the lessees, who sold almost all the peat moss production to Anglophone customers.

[7] The appellant also handled public relations with a view to developing new markets and identifying new customers for the lessee business La Tourbière Rio-Val Inc. All the appellant's work was done from her home. As to the importance of that work, her husband explained that it was done sporadically without any work schedule, according to the needs of La Tourbière Rio-Val Inc.

[8] The representative of the business which was paying $400 each week could provide no specific job description: he simply indicated that the appellant occasionally acted as an interpreter. As to her involvement with customers and potential buyers, he indicated that the peat moss producers had joined together to set up a sales agency which began functioning in 1987. He indicated that from that time onwards the appellant's services were used much less. The company still paid the sum of $400 a week as it was required to do under the agreement, although the work performed had greatly diminished.

[9] As to the breakdown of the $400 in question, the appellant's husband indicated that he had assigned his share thereof to his wife, the appellant, from 1991 onwards in return for the services she had rendered him when she was working actively for the peat bog he had exploited.

[10] To say that the appellant's work was performed under a genuine contract of service within the meaning of the Unemployment Insurance Act ("the Act") would run counter to all the precedents on insurability. This was no contract of employment, but rather compensation in the guise of a contract of employment. There was no relationship of subordination and no power of control over the work allegedly done by the appellant. The sum the company gave the appellant was in fact not a real salary since the amount had nothing at all to do with the quality and quantity of the work done. The payer could not reduce the amount and could not terminate the agreement without the consent of those benefiting from it, namely the appellant and her husband. Further, the agreement is very explicit as to the nature of the parties' obligations, which had nothing to do with a genuine contract of service; I refer in particular to paragraphs 5 and 6, reading as follows:

5. In the event of the death of Mr. or Mrs. Roy the company will continue to pay to the estate of the first to die and to the survivor the sum of $400 a week for 26 weeks a year throughout the term of this agreement.

However, this agreement shall be rescinded if the aforesaid lease of the peat bog is cancelled or if the option to purchase provided for therein is exercised by the company.

6. If the lessee does not pay the lessor at the end of each of the years of operation beginning on April 1 of each year all the weekly salary owed to the said Mr. and Mrs. Roy for the said year of operation, the lessor may terminate the aforesaid lease upon sending the lessee written notice that if the salary owed is not paid within 60 days the aforesaid lease shall be rescinded.

The money thus owed to the said Mr. and Mrs. Roy may be offset by the value of improvements and additions made to the buildings belonging to the said Mr. Roy or his estate, and by the value of additional equipment nailed or similarly affixed to the immovables of the said Mr. Roy, as specified in the aforesaid lease.

If there is still money owed to the said Mr. and Mrs. Roy as salary after the calculations made under the preceding paragraph, the company undertakes to pay such amounts to the said Mr. and Mrs. Roy in annual payments of $1,000 each, the first of which shall become due and payable one year after cancellation of this agreement, and the others in succession at the same time in each succeeding year, until payment is made in full, with interest on any outstanding balance at 10 percent per annum, to be calculated and payable annually concurrently with and in addition to each of the annual payments.

The company and the said Mr. and Mrs. Roy agree that any instance of default hereunder shall be regarded as default under the following instruments, and vice versa:

(a) The lease granted by Daniel Roy to La Tourbière Rio-Val Inc., recorded before Georges-Henri Dubé, notary, on June 20, 1983, as No. 13,788 in his archives;

(b) The option to purchase concluded between the same parties under private seal on June 20, 1983.

[11] The amount described as salary was essentially part of the consideration agreed on for leasing the business. The parties were free to agree on a particular distribution of the rental among themselves. However, that did not have the effect of creating an insurable contract of service.

[12] While not objectionable in itself, the fact that the lessor made the lease subject to special clauses and undertakings so as to ensure that the lessees would treat the leased property with reasonable care was certainly not sufficient for there to be a genuine contract of service within the meaning of the Act.

[13] A genuine contract of service requires the presence of certain essential elements such as real remuneration defined in terms of work actually done. Additionally, the person paying the salary must have some power of control or intervention over the person doing the work being remunerated. There was no relationship of subordination in the instant case and the remuneration had nothing to do with the alleged work.

[14] For these reasons, I unhesitatingly dismiss the appellant's appeal.

"Alain Tardif"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 7th day of July 1998.

Erich Klein, Revisor