Massignani c. M.R.N.

Massignani c. M.R.N.
Court (s) Database
Tax Court of Canada Judgments
Date
2004-03-09
Neutral citation
2004 TCC 75
File numbers
98-758(UI)
Judges and Taxing Officers
Pierre Archambault
Subjects
Employment Insurance Act
Decision Content
Docket: 98-758(UI)
BETWEEN:
TIBÉRIO MASSIGNANI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the appeal of Francine Provost
(98-763(UI)) on October 15, 16, and 17, 2003, and November 7, 2003,
at Montréal, Quebec
Before: The Honourable Judge Pierre Archambault
Appearances:
Counsel for the Appellant:
Charles A. Ashton
Counsel for the Respondent:
Anne Poirier
____________________________________________________________________
JUDGMENT
The appeal is dismissed and the decision of the Minister of National Revenue is confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of March, 2004.
"Pierre Archambault"
Archambault J.
Translation certified true
on this 30th day of March, 2005.
Colette Dupuis-Beaulne, Translator
Docket: 98-763(UI)
BETWEEN:
FRANCINE PROVOST,
Appellant
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the appeal of Tibério Massignani (98-758(UI)) on October 15, 16, and 17, 2003,
and November 7, 2003, at Montréal, Quebec
Before: The Honourable Judge Pierre Archambault
Appearances:
Counsel for the Appellant:
Charles A. Ashton
Counsel for the Respondent:
Anne Poirier
____________________________________________________________________
JUDGMENT
The appeal is dismissed and the decision of the Minister of National Revenue is confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of March, 2004.
"Pierre Archambault"
Archambault J.
Translation certified true
on this 30th day of March 2005.
Colette Dupuis-Beaulne, Translator
Citation: 2004TCC75
Date: 20040309
Docket: 98-758(UI)
BETWEEN:
TIBÉRIO MASSIGNANI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
Docket: 98-763(UI)
BETWEEN:
FRANCINE PROVOST,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Archambault J.
[1] Mr. Tibério Massignani ("Tibério") and Ms. Francine Provost are appealing from the decisions rendered by the Minister of National Revenue (the "Minister") with respect to the insurability of their employment with Les Confections Tiva Inc. ("Tiva"). The periods of employment ("relevant periods") contemplated by the Minister's decisions are as follows for Tibério:
(i)
March 5, 1990, to August 31, 1990;
(ii)
November 11, 1991, to July 24, 1992;
(iii)
March 7, 1994, to July 29, 1994.
The relevant periods for Ms. Provost are as follows:
(i)
January 12, 1991, to February 20, 1992;
(ii)
August 1, 1994, to December 9, 1994;
(iii)
July 10, 1995, to July 14, 1995.
[2] These appeals are being heard for a second time, further to a decision of the Federal Court of Appeal in Massignani v. Canada, 2003 FCA 172, [2003] F.C.J. No. 542 (Q.L.), in which an application for judicial review was made, and the Court ordered that the appeals be heard by a different judge. The reasons in support of the Minister's decision are the same for all of the relevant periods, namely, the Appellants did not hold genuine employment at Tiva, and, consequently, it was not an insurable employment. Furthermore, even if the Appellants held genuine employment, this employment is excluded from insurable employment, because a non-arm's length relationship existed between them and Tiva. Essentially, the Minister concluded that the Appellants had participated in a scheme to defraud the Government of Canada (Employment and Immigration Canada and Human Resources Development Canada ("HRDC")) of a sum exceeding $5,000, thus committing a criminal offence under section 380 of the Criminal Code. The scheme allowed employees of Tiva to work while receiving unemployment insurance benefits.
[3] A warrant for the arrest of Tibério was signed by a justice of the peace on April 5, 1997, and Tibério pleaded guilty to the above-noted offence on June 30, 1998. The scheme was carried out during the period beginning January 1, 1991, and ended July 12, 1996. In the case of a similar action regarding the period beginning September 9, 1990, and ended March 4, 1995, involving employment insurance benefits that Tibério received while working for Tiva, a conditional stay was entered in Tibério's court record. Even though arrest warrants had been issued against Ms. Provost, charges were not filed against her.
Facts
[4] Tiva is a corporation that was incorporated on January 20, 1982, to acquire a men's and women's clothing manufacturing business.[1] It operated this business until March 1996.[2] During the relevant periods, this business was located on Richelieu Street in St-Hubert, Quebec. Until the time of her death in October 1995, Ms. Lina Massignani, Tibério's mother, held all of the common shares in Tiva. After that time, Tibério's brother, Vladimiro, became the sole shareholder of the common shares. Tibério, however, held some preferred shares in Tiva. According to Tibério, the funds raised by Tiva through the preferred shares were used to purchase a building. Ms. Massignani was originally from Italy, and she spoke very little French or English. She started working as a forewoman in a manufacturing business owned by Mr. Marcoux and his spouse. When the Marcoux couple started to experience financial difficulties, Ms. Massignani decided to buy the business. According to Ms. Diane H. ("Diane"), who joined the business shortly after Ms. Massignani acquired it, Ms. Massignani's sons, Tibério and Vladimiro, negotiated the purchase.
[5] Firstly, it should be noted that Tiva is a family business. The two Massignani brothers negotiated its purchase, and, according to Diane, they also operated the business from the outset. The two brothers and their mother were authorized to sign cheques for Tiva; two signatures were required. Diane, who was employed as a secretary for Tiva from 1981 to March 1993, was Vladimiro's spouse until 1987. She remarried in 1988. Vladimiro became the common-law spouse of one of Tiva's forewomen who was hired in 1992 or 1993. Ms. Francine Provost has been the common-law spouse of Tibério since 1986. She started to work for Tiva doing finishing work, and she was later promoted to secretary.
Scheme
[6] According to Diane, the scheme had existed for a number of years, at least since 1985, and it was still being used when she left Tiva in March 1993. According to her, Tibério would call each of the business's employees into his office, and, after explaining about the financial difficulties the business was experiencing, he would ask them to claim unemployment insurance benefits while they continued to work for Tiva. According to the testimony of Ms. Elizabeth B. ("Elizabeth"), Ms. Provost asked her to participate in the scheme.[3] According to Diane, most of the employees who agreed to file a claim for unemployment insurance benefits for some periods came back to work for Tiva on a full-time basis during these periods, but for a lower hourly wage. According to her, Tiva was saving approximately two or three dollars an hour in wages. However, during these periods, these employees were treated as self-employed workers, and their remuneration was paid either by Tiva, where the employee could provide another name or another social insurance number, or by a numbered corporation. Diane also stated that the T4A prepared to report the remuneration paid to the self-employed workers contained, in many cases, errors in the name, social insurance number, or address of the worker. The Appeals Officer corroborated this fact. She noted that 23 of the 60 T4As prepared for 1993 contained errors.
[7] A number of witnesses confirmed that they participated in this scheme. Diane acknowledged that she participated in it as a result of the pressure Tibério placed on her, owing to Tiva's financial difficulties. She acknowledged that she received unemployment insurance benefits while she was working and that she was liable for repaying a sum of $12,300 to HRDC. At the time of her bankruptcy, she still owed $9,300. Elizabeth also acknowledged that she had participated in the scheme and that she received remuneration for her services under the name of Lise B. She claimed that she repaid the sum of $12,000 to HRDC. The Appeals Officer confirmed that the social insurance number appearing on the T4A issued to Lise B. was not valid. Ms. Ida H. ("Ida") acknowledged that she received remuneration paid by Tiva in this scheme through a numbered company and through Herman Sports Wear.
[8] According to Diane, Tibério also participated in the scheme, and he used an assumed name, with the first name François, for payment of his remuneration. The Appeals Officer confirmed that the T4A issued to Tibério for 1993 contained an invalid social insurance number. According to Ms. Nicole M. ("Nicole") and Diane, Vladimiro also participated in the scheme. According to Diane, the name used by Ms. Provost in the scheme was Nancy, her daughter's name, or Lussier, her former spouse's name. During her testimony, Ms. Provost did not deny Diane's testimony. She even acknowledged that she used her former spouse's name at times. A T4 was issued in the name of Prévost for 1994, and the social insurance number entered was also invalid.
[9] According to Diane, numbered corporations belonging to Tibério, Vladimiro, and Ms. Provost were used to make under-the-table payments. In general, these corporations did not make source deductions and did not issue T4s. Moreover, they did not file GST or QST returns. These corporations were used for a period of less than one year so that they would not draw the attention of the tax authorities to the fact that these returns had not been filed. According to the Appeals Officer's verifications, Vladimiro was the president of three of these numbered companies; these companies did not file any income tax returns (T2) and they did not have a number for source deductions ("SD"). Nicole acknowledged that she received her remuneration through one of these corporations and that she participated in the scheme from January to March 1994. The remuneration was paid in her spouse's name and the social insurance number indicated was not valid.
[10] During his testimony, Tibério stated that he did not own any numbered companies from 1990 to 1995 except for Gestion Massie, which he transferred to his brother. Ms. Provost acknowledged that she had been the owner of two numbered corporations. The first one, 2733-7278 Québec Inc. ("Company 2733"), was incorporated in January 1990, and it was only used until December 1990. She was the sole shareholder of this company. She explained that she had attempted to operate her own business and that Company 2733 had leased 1,200-square-metre premises and equipment from Tiva. She acknowledged that 75% of the workers she used were self-employed workers and that she had five or six employees. Company 2733 had only three or four clients. Ms. Provost stated that, at that time, she worked 25 hours per week for Company 2733. According to the Appeals Officer, this corporation did not have a SD number, but it did file two income tax returns. The other numbered corporation, 9033-9011 Québec Inc. ("Company 9033"), was incorporated in April 1996. This company filed an income tax return in 1997, and it had a SD number; however, it did not have a corporate identification number.
Tibério's work
[11] Tibério's claim that he started working for Tiva in 1984 or 1985 was contradicted by Diane, who claimed that he started working for Tiva from the outset, in 1982. Tibério described his duties for Tiva from 1990 to 1996 as including three important duties. Forty percent of his time was spent maintaining, repairing, and preparing the equipment used by Tiva's operators and seamstresses. Thirty to forty percent of his time was spent controlling the productivity of these operators and seamstresses. The balance of his time was spent delivering garments to and picking up garments from the residences of the self-employed workers.
[12] This description contains no mention of managerial duties; the duty that most resembles a managerial task is controlling productivity. This duty consisted of determining the amount of time that each of the workers spent carrying out their duties. It does not, obviously, correspond with the description provided by Diane and some of the former workers who testified at the hearing. Diane described Tibério's responsibilities as those of a production manager. Vladimiro dealt with the clients and handled the shipping of assembled pieces. Diane stated that Tibério was quick-tempered, making his relations with the business's clients difficult. However, Tibério and Vladimiro were the ones who met with the accountants and the bankers. Diane stated that Lina Massignani did not have an office in the administrative area of Tiva's workshop; she worked with the other workers as a forewoman. Elizabeth indicated that Tibério was always in the office. Tibério, Vladimiro, or Ms. Provost would announce lay-offs owing to work shortages. It should be noted that the description of duties given by Diane further corresponds with the titles that Tibério used to describe himself in his unemployment insurance benefit claims, in which he describes his position as that of [TRANSLATION] "manager of 'garment' production," or "person responsible for production," or "production manager."
[13] During Tibério's testimony, in which he attempted to provide evidence of his relationship of subordination, he claimed that he received his instructions from his mother, who was, in his opinion, the person who made all of the important decisions. Tibério indicated that, when he was working in the workshop, he received his instructions from the forewomen.
[14] With respect to the terms and conditions of Tibério's employment, he did not, according to him, benefit from preferential treatment as a result of his familial relationship with his mother. He claimed that she was strict with him, particularly when he worked in the workshop. When work shortages arose, Tibério was laid-off like the other employees. During his examination, he estimated that his weekly remuneration from 1990 to 1994 ranged from $550 to $650. During his cross-examination, he gave an estimation of $650 to $850. He was paid weekly for a minimum of 40 hours per week; however, the average was 45 hours per week. His unemployment insurance claims indicate that his income was in line with his second version of the facts. In his September 1990 claim, he indicated that his weekly wages were $744 for 40 to 50 hours of work per week. In the August 1992 claim, he entered wages of $850 for 55 to 60 hours per week. This same claim for benefits shows that he worked 50 hours in his last week. Finally, according to his August 1994 claim, his weekly remuneration was $750 for 40 of work hours per week.
[15] Tibério indicated that his hourly wage was $14 to $18 and that this remuneration was comparable to the wages paid to workers in the field of human engineering, which ranged from $20 to $24 per hour. He also indicated that the forewomen earned between $10 and $12 per hour. He estimated that a mechanic earned between $15 and $20 per hour. However, there were no witnesses whatsoever to corroborate this data. A remuneration of $744 for an average week of 45 hours[4] represents an hourly rate of $16.53. A remuneration of $850 for an average of 55 hours per week pays an hourly rate of $15.45, and a remuneration of $750 for an average of 40 hours per week pays $18.75 per hour. A payroll record was not filed to corroborate these figures, specifically, the number of hours of work. It should also be noted that the only document filed in evidence by the Appellants in support of their assertions is a medical report relating to Ms. Provost. An allegation was made that the Royal Canadian Mounted Police ("RCMP") had seized documents and had not returned all of them, which explains why no other documents were filed.
Tibério's periods of unemployment
[16] Tibério claimed that, between 1990 and 1995, his employment with Tiva and his unemployment insurance benefits were his only sources of income.[5] He did not work for other employers. His attempts to find another employment were unsuccessful because, according to him, certain economic conditions existed at the time. Consequently it appears that, during the periods that are not at issue in his appeal, Tibério was unemployed, and he received unemployment insurance benefits for at least a portion of these periods of unemployment. The period beginning August 31, 1990, and ended November 11, 1991, represents 14 and a half months, and the period beginning July 24, 1992, and ended March 7, 1994, represents 19 and a half months ("Tibério's periods of unemployment").
[17] Tibério claimed that he did not provide any services to Tiva during these periods of unemployment, with or without remuneration. He acknowledges only that he ran short errands for his mother, namely, doing the bank deposits. During his cross-examination, when he was asked what measures Tiva took to ensure the maintenance and repairs of the machines during his periods of unemployment, Tibério stated that it had hired sub-contractors. It should be noted that, at that time, Tiva had approximately 25 machines and 35 employees and, according to Elizabeth's testimony, a machine would break down at least every two weeks. Tibério indicated that Nicole prepared the equipment to take into account the requirements of the various productions, yet during the 1990s, Nicole only worked from August 1993 to March 1994.
[18] Tibério claimed that he had been laid-off from Tiva owing to a shortage of work. During his testimony, he gave a lengthy narrative describing the impact of the Free Trade Agreement on the textile industry. According to him, the number of workers in this industry fell from 100,000 in the 1980s to 60,000 or 65,000 in the 1990s. Prior to 1990, employees would work on a full-time basis, except for short periods during the change of seasons; during the 1990s, work stoppages lasted longer. He emphasized that this occurred mostly in the fall, but also in the spring. However, it was never during the same period. He claimed that it depended on the contracts and that the periods in which there was no work could range from two weeks to two months. The number of employees working for Tiva decreased from 40 or 50 in the 1980s to between 25 and 35 in the 1990s. Ms. Provost acknowledged that this figure might have been as high as 40 employees during these years.
[19] Tibério's description was contradicted by Diane's version of the facts. According to her, there has always been work, and the lay-offs were part of the scheme. Most of the laid-off workers continued to work. According to Diane, Tibério has always continued to work for Tiva. I recall that Diane was employed by Tiva until March 1993. Ida, who was also employed by Tiva until December 11, 1992, confirmed that Tibério was present and that he was not absent for extended periods. Elizabeth, who started working for Tiva in early 1992 and continued until 1996, confirmed that Tibério was always in the office and that he was rarely in the workshop. She added that there was not one week during her time with Tiva in which she did not see him.
[20] Nicole, who worked for a second period for Tiva between August 1993 and March 1994, confirmed that Tibério handled administration and repairs, and that he was present all of the time, except for a one-month period in August 1993 during which time he travelled to Europe.
Francine Provost's work
[21] Ms. Provost claimed that she has been working since the age of 16 and that her specialty was operating "special" finishing machines, namely, machines used to sew on buttons, pockets, and collars. Her employment with Tiva began in 1984, and she has always been paid on an hourly basis. Her hourly wage was $9 in 1990, and $10.50 in 1994 while she was working as a secretary. She was required to clock in every day, just like all of the other employees at Tiva (except for the Massignanis), even when she was performing secretarial duties. She started working in the office gradually in 1986 or 1987. This period corresponds with the time at which she began living with Tibério. Her administrative duties included payroll, accounts payable, and accounts receivable. She claimed that Tiva purchased a computer in 1990, which increased productivity in administrative work greatly. What used to take three days to do could now be done in three hours. Consequently, the secretaries were required to work in the workshop also. She claimed that she performed secretarial work for two and a half days per week and that the balance of her time was spent in the workshop.
[22] According to Diane, the computer was purchased in 1986 or 1987. However, because the scheme was implemented during this period, it was necessary to keep two sets of books. One set, used to track the under-the-table payments, was kept manually. As a result, there was enough work to keep two full-time secretaries busy. She stated that she spent 90% of her time performing secretarial work during the 1990s. According to Elizabeth,[6] Ms. Provost was always in the office. She stated that Ms. Provost would help out on special machines perhaps twice per month, when there was extra work. According to Nicole, when she was employed by Tiva, from August 1993 to March 1994, Ms. Provost was not working in the administrative section of the workshop; rather, she handled productivity control.
[23] According to Ms. Provost, Nicole earned an hourly wage of $10.50 in 1994. Nicole, however, stated that her wages were only approximately $9 per hour. According to a decree setting out the terms and conditions for the remuneration of workers in the textile industry, specifically, in the field of ladies' clothing, the operator of a regular machine earned $8.95 per hour in 1990 and $9.63 per hour in 1993.
Ms. Provost's periods of unemployment
[24] Two periods are not included in the relevant periods of employment for Ms. Provost; the first, beginning February 20, 1992, and ended August 1, 1994, represents 29 months, and the other, beginning December 9, 1994, and ended July 10, 1995, represents a period of seven months.[7] With respect to the 29-month period, Ms. Provost provided the following explanations. Firstly, she experienced a severe depression in late February 1992 requiring that she be hospitalized for a period of two months. During her interview with the Appeals Officer, she claimed that she was hospitalized for four months. Her medical file reveals that her hospital stay was 44 days long, beginning on March 4, 1992. Ms. Provost claimed that she convalesced for one year. However, her medical records indicate that, as of April 30, 1992, everything was going very well, and that by May 28, 1992, she was planning to open a new store. However, she had a relapse in October 1992, which led to a four-day hospital stay. She was diagnosed with another condition, and the appropriate medication was prescribed to her. Regular follow-ups took place throughout the fall.
[25] In her testimony, Ms. Provost stated that she had returned to work gradually in March 1993 and that she worked on a full-time basis during July, August, and September 1993. She stated that she was able to assume all of her duties for a period of six months, which would have taken her to September. However, she claimed that she was unsure whether she had worked after July 1993.
[26] Her medical report shows that, on March 11, 1993, she returned to work. A note dated July 15, 1993, indicates that she had returned to work on a full-time basis. In May 1995, according to the medical report, she again had to start taking the medication that she had stopped taking in July 1993, which gave rise to a relapse. Throughout the month of August, everything was going well and she was scheduled to leave on vacation for five weeks. It is interesting to note that this trip took place a number of weeks after she had worked her 20th week-the week she needed in order to be entitled to unemployment insurance benefits-the week of July 10, 1995.
[27] In their testimony, Diane, Elizabeth, and Nicole confirmed that Ms. Provost worked in the workshop at Tiva during the periods in which they were employed by the company. Diane and Elizabeth acknowledged that Ms. Provost had been absent owing to her health. Specifically, Elizabeth acknowledged that she had been absent for one month. Diane stated that this absence took place around September or October 1991, approximately one and a half years before she left. Nicole started to work at approximately the same time as Ms. Provost was returning to work on a full-time basis.
[28] To explain her seven-month period of unemployment beginning December 1994 and ended July 1995, Ms. Provost stated that Tiva had experienced a work shortage. It was not, therefore, health-related. She indicated that she was not eligible to receive unemployment insurance benefits at that time, because she needed one more week to become eligible-a week that she worked in July 1995. She stated that she had not worked during this seven-month period of unemployment and that she rarely went to Tiva. Therefore, she rendered no services to Tiva during this period. Elizabeth, however, indicated that during this period, Ms. Provost was always at the office. Ms. Provost acknowledged that she had worked from January 1996 to May 1996,[8] the point at which the RCMP carried out its search.
[29] In her testimony, the Appeals Officer indicated that, in addition to the Appellants' files, she had handled Vladimiro's file for the following periods: May 20, 1990, to October 19, 1990; September 7, 1992, to February 12, 1993; and, May 9, 1994, to December 12, 1994. Shortly before the appeal hearings of Tibério and Ms. Provost, Vladimiro informed the Court that he was withdrawing his appeal, which was to be heard at the same time as Tibério's and Ms. Provost's. The Appeals Officer pointed up the fact that neither Ms. Provost, nor Tibério, nor Vladimiro had been employed by Tiva at any time during 1993, except for the month of January and two weeks in February for Vladimiro. That year, Tiva posted $637,000 in sales. The sales figures were $1,013,000 for 1992, and $656,000 for 1994. According to the Appeals Officer, the Appellants' contracts of employment were not genuine contracts of employment owing to their participation in the scheme. When I asked her about the extent of her analysis of the terms and conditions of the Appellants' employment contracts under paragraph 3(2)(c) of the Employment Insurance Act (the "Act"), she simply reiterated that there was no genuine employment contract. She acknowledged that she had not analyzed these terms and conditions in detail, although this paragraph is mentioned in the decision itself.
Position of the parties
[30] Counsel for the Appellants maintains that the independent witnesses heard at the hearing, and the Appeals Officer in this case, were unduly influenced by the scheme that was implemented by Tiva. Did these witnesses, who participated in the scheme, not perform services pursuant to a contract of service? He could not understand how a different conclusion could be drawn in the case of the Appellants. Regarding the terms and conditions of remuneration for the Appellants, he maintains that they were no different than those of the other employees or of people working under similar conditions in other businesses. Consequently, the terms and conditions of employment would have been the same, even if an arm's-length relationship had existed between the Appellants and Tiva. He acknowledged, however, that if I were to conclude that the Appellants had worked without remuneration or for a lesser remuneration during their period of unemployment, the conclusion would have to be that these were not the reasonable conditions to which a third party would agree.
[31] Counsel maintains that Ms. Provost did not work without pay for Tiva during her periods of unemployment. He pointed out that she stopped working at the end of February 1992 for health reasons. Moreover, he claims that Ms. Provost worked for her own numbered company during the other periods, specifically from January 1994 to March 1994, even though Nicole testified that Ms. Provost was present the entire time that she worked for Tiva.
[32] Counsel for the Respondent maintains that the employment contracts binding the Appellants to Tiva did not constitute genuine contracts of employment. She relied on a number of decisions in case law, specifically, the following excerpts from the decision of Tardif J. in Thibeault v. Canada, [1998] T.C.J. No. 690 (Q.L.):
20 To receive unemployment insurance, now called employment insurance, the work must be performed within the framework of a genuine contract of service. The following criteria have been identified in the case law as elements of a contract of employment: a relationship of subordination giving the payer a power of control over the work performed by the employee, the chance of profit and risk of loss, ownership of the tools and integration.
21 The application of these criteria to the facts available obviously facilitates the exercise of characterization. On the other hand, it is just as important that there be genuine employment, without which the exercise of applying the criteria is completely useless.
22 Genuine employment is employment remunerated according to market conditions, which contributes in a real and positive way to the advancement and development of the business paying the salary in consideration of work performed. These are basically economic factors that leave little, if any, room for generosity or compassion.
[...]
29 Of course, it is neither illegal nor reprehensible to organize one's affairs so as to profit from the social program that is the unemployment insurance scheme, subject to the express condition that nothing be misrepresented, disguised or contrived and that the payment of benefits occur as a result of events over which the beneficiary has no control. Where the size of the salary bears no relation to the economic value of the services rendered, where the beginning and end of word periods coincide with the end and the beginning of the payment period and where the length of the work period also coincides with the number of weeks required to requalify, very serious doubts arise as to the legitimacy of the employment contract. Where the coincidences are numerous and improbable, there is a risk of giving rise to an inference that the parties agreed to an artificial arrangement to enable them to profit from the benefits.
30 In this case, not only are the coincidences great and very numerous, the size of the salary has never been justified in a proper and reasonable manner.
[33] Counsel noted that this decision had been confirmed by the Federal Court of Appeal in Coopérative forestière de Girardville v. M.N.R., Docket A-587-98, on June 15, 2000. In a two-paragraph decision, Desjardins J. indicated that the judge had correctly examined the issue of whether a genuine employment existed between the claimant and the Coopérative. She concluded that the decision under judicial review presented nothing unreasonable. Consequently, the Federal Court of Appeal dismissed the applications for judicial review.
[34] Finally, counsel for the Respondent cited the decision of my colleague, Dussault J., in Carpentier v. Canada, [1995] T.C.J. No. 279 (Q.L.), in which he referred to the approach taken by our colleague, Lamarre-Proulx J., in Gauthier v. Canada, [1993] T.C.J. No 109 (Q.L.).[9] I cite paragraph 9 of Dussault J.'s reasons:
Judge Lamarre Proulx of this Court stated in Gauthier, "The object of the Act is to insure true employment." On this point, it is appropriate to examine all of the circumstances, including the work performed and the remuneration agreed upon, in order to determine whether there was a true contract of service between the parties or whether the contract of employment submitted truly represented the relations they decided to have between them. I also hasten to point out that it is clearly established that the onus is on the appellant to show on a balance of probabilities that such a contract existed where it is disputed by the respondent.
[Emphasis mine.]
[35] Finally, counsel maintains that one of the requisites to the validity of a contract of employment was not present, because there was an unlawful cause or consideration. She relied specifically on section 984 of the Civil Code of Lower Canada ("C.C.L.C."). Moreover, under section 990 of the C.C.L.C., the consideration is unlawful when it is prohibited by law, or is contrary to good morals or public order. In the new Civil Code of Québec ("C.c.Q.") (in effect since January 1, 1994), article 1411 states that a contract whose cause is prohibited by law or contrary to public order is null. Article 1417 of the C.c.Q. stipulates that a contract is absolutely null where the condition of formation sanctioned by its nullity is necessary for the protection of the general interest. Under article 1418 of the C.c.Q., "The absolute nullity of a contract may be invoked by any person having a present and actual interest in doing so; it is invoked by the court of its own motion. A contract that is absolutely null may not be confirmed."
[36] In support of her position, counsel for the Respondent also relied on my decision of May 23, 1997, in Isidore v. Canada, [1997] T.C.J. No. 463 (Q.L.). This case involved a contract of employment between a Canadian business and two citizens of a foreign country. One of them had been denied refugee status by the Canadian authorities, and the other was awaiting a decision from Immigration in his case. I also concluded that, in the presence of an unlawful cause, these people had not rendered services pursuant to a valid contract. I concluded that working in Canada without employment authorization, as required by section 18 of the Immigration Regulations, 1978, made pursuant to the Immigration Act, was prohibited by law and contrary to public order. Consequently, the contracts at issue were null and void.
[37] Counsel for the Respondent cited the decision of the Superior Court of Québec in Office de la construction du Québec v. Corporation municipale de Paspébiac, [1980] C.S. 70. To understand the decision, it is important to summarize briefly the most relevant facts:
[TRANSLATION]
Because the work had been suspended for a lack of funding, the Arena Committee devised a project whereby the numerous unemployed local construction workers would work for unemployment insurance stamps, to enable them to draw benefits at a later date.
This project was not officially sanctioned by the municipal council, but the mayor, the individual councillors, and the secretary of the municipality were aware of the arrangement.
A pay list was prepared in accordance with the required standards, including the regular deductions, except for provincial and federal taxes. Unemployment insurance stamps were affixed in the workers' booklets.
A cheque was issued to each of the employees for each week of work, and each employee would endorse it and give it back to the municipality.
[38] I will now comment on this decision. I believe that the Superior Court rightly concluded that a genuine contract of employment did not exist; rather, a service had been provided on a volunteer basis. The Superior Court concluded that the volunteer work was not subject to the Quebec construction decree. In the alternative, the Court indicated that, where it was not volunteer work, the contract was completely null and had no legal existence. In the opinion of the judge, it was a contract based on an unlawful consideration contemplated in article 989 of the C.C.L.C. Under article 13 of the C.C.L.C., no one can, by private agreement, validly contravene the laws of public order and good morals. Given the conclusion that there was no remuneration paid under the agreement entered into by the workers and the municipality, the arrangement was in violation of the provisions of the Unemployment Insurance Act. At page 72, the judge wrote:
[TRANSLATION]
In fact, their employment is not an insurable employment within the meaning of section 25 of the Unemployment Insurance Act. A remuneration must be paid by the employer or another party for an employment to be insurable.
[39] It is my opinion that, in that case, clearly, the parties had not entered into a contract of employment. It was not, at any time, a matter of paying a genuine remuneration. Consequently, the contract that was concluded was merely a mock document. Because there was no contract of employment, the decree on the construction industry in the province of Quebec was not applicable to this contract, which was not a contract of employment. The sole purpose of the mock document was to make the workers eligible for unemployment insurance benefits unlawfully.
Analysis
Existence of a contract of employment
[40] According to well-established case law, the burden of demonstrating that the Appellants held an insurable employment during the relevant periods is on the Appellants. Paragraph 3(1)(a) of the Act stipulates that an insurable employment is employment under a contract of service ("contract of employment"). Because the Act does not define this type of contract, reference must be made to legislation in Quebec, the province in which the contract between the Appellants and Tiva was entered into. For the period beginning 1990 and ended 1993, reference must be made to the Civil Code of Lower Canada, specifically, paragraph 1665(a), which defines a contract of employment and a contract for services. We must, therefore, rely on doctrine and case law to distinguish between these two types of contracts.
[41] In Droit du Travail,[10] Robert P. Gagnon puts forward this concept of the contract of employment:
[TRANSLATION]
A contract of employment is one through which a person (the employee) agrees to work for a certain period of time for another person (the employer), under this person's supervision, for remuneration. There is no prescribed form for this contract; it can be an oral agreement or an extensive written document, and it can include a detailed list of the reciprocal obligations of the parties or simply a signature on a hiring form.
[42] It is not always easy to distinguish between a contract of employment and a contract for services; there are a number of similarities between the two. In both cases, a person may agree to provide a service in exchange for remuneration, for an indeterminate period. What is the fundamental difference between the two contracts? Rinfret J. of the Supreme Court of Canada provides the answer in Quebec Asbestos Corp. v. Couture:[11]
[TRANSLATION]
The contract we have to interpret does not reserve to Quebec Asbestos Corporation the right to give Couture orders and instructions as to the manner of carrying out the duties that he accepted. This right is the basis of the authority and subordination without which no one can really be an employer.
[Emphasis mine.]
[43] Pigeon J. adopted the same approach in Hôpital Notre-Dame et Théoret v. Laurent.[12] In Gallant v. M.N.R.,[13] Pratte J. of the Federal Court of Appeal agrees, and adds an important detail:
[...]The distinguishing feature of a contract of service is not the control actually