Date: 20020418
Docket: A-38-01
Montréal, Quebec, April 18, 2002
Coram: DÉCARY J.A.
NOËL J.A.
PELLETIER J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Plaintiff
and
GROUPE DESMARAIS
PINSONNEAULT & AVARD INC.
Defendant
JUDGMENT
The application for judicial review is allowed with costs, the Tax Court of Canada decision reversed and the matter referred back to be again decided on the basis that the workers in question held insurable employment within the meaning of s. 5(1)(a) of the Employment Insurance Act during the relevant period.
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Robert Décary
J.A.
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Certified true translation
Suzanne M. Gauthier, C. Tr., LL.L.
Date: 20020418
Docket: A-38-01
Neutral citation: 2002 FCA 144
CORAM: DÉCARY J.A.
NOËL J.A.
PELLETIER J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Plaintiff
and
GROUPE DESMARAIS PINSONNEAULT & AVARD INC.
Defendant
Hearing held at Montréal, Quebec on April 18, 2002.
Judgment rendered at Montréal, Quebec on April 18, 2002.
REASONS FOR JUDGMENT: NOËL J.A.
Date: 20020418
Docket: A-38-01
Neutral citation: 2002 FCA 144
CORAM: DÉCARY J.A.
NOËL J.A.
PELLETIER J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Plaintiff
and
GROUPE DESMARAIS PINSONNEAULT & AVARD INC.
Defendant
REASONS FOR JUDGMENT
(Delivered from the bench at Montréal, Quebec
on April 18, 2002.)
NOËL J.A.
[1] This is an application for judicial review from a decision by Deputy Judge Watson of the Tax Court of Canada on December 22, 2000 ([2000] T.C.J. No. 883). The Tax Court of Canada concluded that the workers in question did not hold insurable employment within the meaning of s. 5(1)(a) of the Employment Insurance Act, S.C. 1996, c. 23 ("the Act").
[2] The trial judge, after listing the presumptions on which the Minister relied in making the assessments in question, summarized the relevant facts as follows:
[TRANSLATION]
[7] [The defendant] was incorporated in 1995 following the merger of two existing insurance businesses which belonged to the four workers; the payer's shares were distributed between the two Desmarais brothers, who each held 30% of the shares, while Yvon Pinsonneault and Martin Avard each held 20%.
[8] After [the defendant] was incorporated, the workers did their daily duties without supervision as equal partners, each specializing in [their] recognized fields . . . The workers had no fixed schedule but met informally when necessary to take important decisions on behalf of [the defendant], such as those relating to the expenditure and policy of [the defendant]. Each performed his daily duties independently. If one was absent from work for an extended period, he arranged informally for one of the other three to provide service to customers during his absence. Each of the four workers received a fixed annual salary of $52,000: if [the defendant] made a profit at the end of the year the workers met to decide the appropriate amounts of dividends to be declared or premiums to be paid. Each worker was personally responsible for any loss suffered by [the defendant] and any bank loan or debt of the latter.
[3] He went on to conclude as follows:
[TRANSLATION]
[9] In view of all the circumstances of the case, including the testimony, the admissions and the documentary evidence in light of well-settled precedent, the Court is satisfied that [the defendant] has succeeded in its burden of establishing on a balance of probabilities that a genuine contract of service resulting in an employer-employee relationship did not exist between itself and the four workers during the period at issue. The four workers were actually partners who worked independently, without any relationship of subordination to the payer.
[4] In concluding that there was no relationship of subordination between the workers and the defendant, the trial judge does not appear to have taken into account the well-settled rule that a company has a separate legal personality from that of its shareholders and that consequently the workers were subject to the defendant's power of supervision.
[5] The question the trial judge should have asked was whether the company had the power to control the way the workers did their work, not whether the company actually exercised such control. The fact that the company did not exercise the control or that the workers did not feel subject to it in doing their work did not have the effect of removing, reducing or limiting the power the company had to intervene through its board of directors.
[6] We would add that the trial judge could not conclude there was no relationship of subordination between the defendant and the workers simply because they performed their daily duties independently and without supervision. The control exercised by a company over its senior employees is obviously less than that exercised over its subordinate employees.
[7] If the trial judge had recognized that the defendant had a separate legal personality, as he should have done, and analyzed the evidence in light of the applicable rules (Wiebe Door Services v. M.R.N., [1986] 3 C.S. 553), he would have had no choice but to conclude that a contract of service existed between the defendant and the workers.
[8] The application for judicial review will accordingly be allowed with costs, the trial judge's decision will be reversed and the matter referred back to the Tax Court of Canada to be again decided on the basis that the workers in question held insurable employment within the meaning of s. 5(1)(a) of the Act during the relevant period.
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Marc Noël
J.A.
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Certified true translation
Suzanne M. Gauthier, C. Tr., LL.L.
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FEDERAL COURT OF CANADA
APPEAL DIVISION
Date: 20020418
Docket: A-38-01
Between:
ATTORNEY GENERAL OF CANADA
Plaintiff
and
GROUPE DESMARAIS
PINSONNEAULT & AVARD INC.
Defendant
REASONS FOR JUDGMENT OF THE COURT
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FEDERAL COURT OF CANADA
APPEAL DIVISION
SOLICITORS OF RECORD
FILE: A-38-01
STYLE OF CAUSE: ATTORNEY GENERAL OF CANADA
Plaintiff
and
GROUPE DESMARAIS PINSONNEAULT & AVARD INC.
Defendant
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: April 18, 2002
REASONS FOR JUDGMENT OF THE COURT BY: NOËL J.A.
CONCURRED IN BY: DÉCARY J.A.
PELLETIER J.A.
DATED: April 18, 2002
APPEARANCES:
Marie-Andrée Legault FOR THE PLAINTIFF
Roch Guertin FOR THE DEFENDANT
SOLICITORS OF RECORD:
Morris Rosenberg FOR THE PLAINTIFF
Deputy Attorney General of Canada
Montréal, Quebec
Roch Guertin FOR THE DEFENDANT
Montréal, Quebec
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