Garneau v. M.N.R.

Garneau v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2006-05-29
Neutral citation
2006 TCC 160
File numbers
2004-4005(EI)
Judges and Taxing Officers
Pierre Archambault
Subjects
Employment Insurance Act
Decision Content
Docket: 2004-4005(EI)
BETWEEN:
JACINTHE GARNEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the appeal of
Denise Bellefeuille (2004-4008(EI))
June 1, 3, 8, 9 and 10 and October 6, 2005, at Montréal, Quebec.
Before: The Honourable Justice Pierre Archambault
Appearances:
Counsel for the Appellant:
Roch Guertin
Counsel for the Respondent:
Benoît Mandeville
____________________________________________________________________
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 29th day of May 2006.
“Pierre Archambault”
Archambault J.
Translation certified true
on this 15th day of March 2007.
Monica F. Chamberlain, Reviser
Docket: 2004-4008(EI)
BETWEEN:
DENISE BELLEFEUILLE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the appeal of
Jacinthe Garneau (2004-4005(EI))
June 1, 3, 8, 9 and 10 and October 6, 2005, at Montréal, Quebec.
Before: The Honourable Justice Archambault
Appearances:
Counsel for the Appellant:
Roch Guertin
Counsel for the Respondent:
Benoît Mandeville
____________________________________________________________________
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 29th day of May 2006.
“Pierre Archambault”
Archambault J.
Translation certified true
on this 15th day of March 2007.
Monica F. Chamberlain, Reviser
Citation: 2006TCC160
Date: 20060529
Dockets: 2004-4005(EI)
2004-4008(EI)
BETWEEN:
JACINTHE GARNEAU,
DENISE BELLEFEUILLE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Archambault J.
[1] The Appellants, Jacinthe Garneau and Denise Bellefeuille, appeal from decisions handed down by the Minister of National Revenue (the Minister) concerning the insurability of their employment with Boiserie Dubé & Associés Inc. (the Payer), a company controlled by Joseph Dubé. The material times relating to Ms. Garneau’s work (the Garneau periods) are the following:
· May 5, 1997 to December 12, 1997
· May 31, 1998 to November 7, 1998
· June 7, 1999 to October 22, 1999
· May 22, 2000 to October 6, 2000
· March 4, 2001 to June 22, 2001.
[2] Those germane to Ms. Bellefeuille’s work (the Bellefeuille periods) are:
· June 8, 1997 to September 12, 1997
· June 21, 1998 to October 15, 1999
· April 17, 2000 to September 1, 2000
· April 16, 2001 to August 31, 2001.
[3] Concerning Ms. Garneau, the Minister stated in his Amended Reply to the Notice of Appeal that she [Translation] “was not employed in insurable employment...because...there was no genuine contract of service” between her and the payer (paragraph 11).[1] [Translation] “In the alternative, he submitted that the Appellant did not deal at arm’s length with the payer during the periods at issue pursuant to paragraph 5(3)(a) of the Employment Insurance Act [EIA] and paragraph 251(1)(c) of the Income Tax Act [ITA] and, consequently, the Appellant’s employment, if employment it was, was excluded pursuant to paragraph 5(2)(i) of the [EIA] (paragraph 12).” Finally, according to the Minister, paragraph 5(3)(b) of the EIA was not applicable in the case at bar.[2]
[4] Concerning Ms. Bellefeuille, the Minister submitted in his Amended Reply to the Notice of Appeal that she was not employed in insurable employment because there [Translation] “was no employment” (paragraph 10). [Translation] “In the alternative, should the Court find that the Appellant was an employee of the payer..., he submitted that there was no genuine contract of employment” (paragraph 11). Finally, the Minister maintained that, even if there were a genuine contract of employment, it would be excluded from insurable employment because of the non-arm’s length relationship between Ms. Bellefeuille and the payer “under paragraphs 251(1)(a) and 251(2)(a) of the [ITA]” (paragraph 12), and he [Translation] “submitted that persons dealing at arm’s length would not have entered into a contract of employment substantially similar to the one between the Appellant and the payer” (paragraph 13). Ms. Bellefeuille was a person related to the payer because she was the wife of Mr. Dubé.[3]
Factual background
[5] The Appellants are represented by the same counsel and they have agreed to have their appeals heard on common evidence. The hearing of these appeals, initially scheduled for one day, lasted six days: five days in June 2005 to hear the evidence and one day for argument on October 6, 2005. Counsel for the Minister, who had undertaken to file written submissions on September 30, 2005, submitted a 227-page document. Counsel for the Appellants made oral submissions. For a better understanding of the scope taken on by these appeals, it is helpful to describe the circumstances surrounding the progress of the two cases.
• The HRDC investigation
[6] The request that the Employment Insurance Commission of Canada (the Commission) made to an employee (insurance officer) of the Canada Revenue Agency (Agency) concerning the insurability of the Appellants’ employment followed an investigation by the Department of Human Resources Development Canada (HRDC). Following an anonymous tip in September 2001, HRDC conducted an investigation of the payer that continued until the summer of 2003.[4] The following is an excerpt from HRDC’s “Investigation Report – penalty on the employer” (Exhibit I‑27, page 2):
[Translation]
The investigation revealed that some employees worked full time for the business while receiving employment insurance benefits, that the employer had issued false or deceptive Records of Employment not reflective of reality and that there were employees who unabashedly worked under the table.
We especially noted that Boiserie Dubé & Associés Inc. had used employment insurance funds to pay the salaries of employees and family members, doing so in an ongoing and repetitive manner, following an “established pattern”, since the start of the business early in 1997. The investigation also showed that the employer began this conduct in 1996 when the two shareholders were working for another business as employees (Boiserie D.C.).
[Emphasis added.]
[7] It is apparent that the facts of this case are very similar to those in Massignani v. Canada, 2004 TCC 75 and Pourvoirie au pays de Réal Massé Inc. et al. v. Canada, 2004 TCC 582. As Létourneau J. wrote in Desaulniers v. Canada, 2006 FCA 15[5] paragraph 1, it was “a scheme by which the Employment/Unemployment Insurance benefits they received financed to a large extent the salaries their employer paid them” (scheme).
[8] In her investigation report, the HRDC investigator recommended the imposition of penalties and that warning letters be sent to the payer for committing offences against the EIA, [Translation] “namely, [for] issuing a false Record of Employment, issuing 11 erroneous Records of Employment, and helping and participating with a worker to receive benefits while working full time” (Exhibit I‑27, last page). The total amount of benefits[6] overpaid to eight employees, including Ms. Garneau, Ms. Bellefeuille and Guylaine Dubé, was $73,015 and the total amount of the penalties imposed on these recipients was $18,144. The investigator went on to say:
[Translation]
It is important to note that the total amount of the overpayments and penalties for the claimants would have been far greater but for the delays that we experienced in meeting with the employer and obtaining the documents needed to conduct our investigation and make decisions, while complying with the limitation periods in the workers’ cases.
There would also have been a greater number of offences against the Act by the employer for the same reasons.
[9] The investigator wrote in her report that Ms. Garneau had completed a number of Records of Employment containing false or misleading information. For example, when she was an employee of Boiserie D.C. Inc. (BDC), she prepared her own Record of Employment, which was signed by Mr. Dubé when he was no longer an employee of BDC; she gave as the reason for the termination of employment a lack of work, whereas she had left BDC to join the payer’s company as a shareholder and employee (Exhibit I‑27, pages 3, 4 and 5). Ms. Garneau also filed a claim for unemployment benefits on January 14, 1997 containing the same misleading information, that is, that a lack of work was the reason for the termination of her employment with BDC (Exhibit I‑2). For the employees or alleged employees of BDC, Ms. Garneau completed Records of Employment on which Marcel Maltais' signature was forged. This is true, inter alia, of the Records of Employment for Guylaine Dubé, the daughter of Mr. Dubé, Stéphane Laferrière and Gaston Dubuc (Exhibit I‑14). Ms. Dubé’s Record of Employment is also misleading since she never worked for BDC. As for Mr. Laferrière, the reason given for the termination of employment was a lack of work and the last day of work was given as December 21, 1996 (Exhibit I‑14), whereas Mr. Laferrière worked for BDC until February 22, 1997, if one is to go by the Record of Employment signed by Monique Dugas (Exhibit I‑27, page 4 and Exhibit I‑17). On the Record of Employment for Mr. Dubuc, Ms. Garneau indicated the reason for the termination of employment as a lack of work, whereas Mr. Dubuc had voluntarily quit his job in order to work for the payer (Exhibit I‑27, pages 4 and 5, and Exhibit I‑30 (statutory declaration by Mr. Dubuc)).
[10] The investigation report describes a number of misleading and erroneous Records of Employment submitted to HRDC by the payer. At a meeting with the investigator on May 10, 2002, Ms. Garneau admitted that she had prepared all of them (Exhibit I‑32, page 4). With regard to Mr. Dubuc’s Record of Employment, the investigator said that this worker had admitted that he began his employment in February 1997, and not on April 20, 1997, as the Record of Employment indicates. Furthermore, she reported that he did not stop working for the payer because of a lack of work but because he had decided instead to quit his job. She adds [Translation] “that there was an agreement with the employer so that the worker would not have any trouble with Employment Insurance if he indicated a lack of work” (Exhibit I‑27, page 5, and Exhibit I‑30 (statutory declaration by Mr. Dubuc)). The payer’s version is contained in the investigator’s report (Exhibit I‑27, page 5): [Translation] “The employer confirms that Gaston Dubuc began to work for him as of February 1997, but only after reading the documents in evidence. He stated, however, that Gaston Dubuc worked as a subcontractor from February 1997 to 19‑04‑97, as a self-employed employee. This statement cannot be considered credible.”
[11] The investigator wrote with regard to Stéphane Laferrière:[7]
[Translation]
This worker acknowledges that he began his employment with this company on 24‑02‑97 instead of on 13‑04‑97, as recorded on the Record of Employment. He stated that he received Employment Insurance benefits while working full time, that he knew it was illegal, but that Joseph Dubé had told him there was no risk because the cheques that he gave him were for his expenses.
For his part, the employer stated that he knew that Stéphane Laferrière was receiving Employment Insurance benefits, but that the worker wanted him to write the cheques for him in his spouse’s name.
We have in evidence cheques dated from before 13‑04‑97, either made out to the worker, and not to his spouse, or to Réno‑Dépôt, and countersigned by the worker.
[Emphasis added.]
[12] The investigator’s report contains many cases like that of Mr. Laferrière. The report also describes other kinds of arrangements in which Mr. Dubé was involved, inter alia, the arrangement with Nancy Ménard described at page 8:
[Translation]
The worker stated that she had definitely worked for Boiserie Dubé & Associés Inc. from 19‑03‑01 to 25‑09‑01. However, she said that she had an arrangement with the boss, Joseph Dubé, that, instead of a raise, he would pay her for an hour or more on her pay cheque.
[Emphasis added.
• Decisions by the insurance officer
[13] When he received the requests for decision concerning the insurability of the Appellants’ employment in the summer of 2003, the insurance officer consulted the voluminous documentary evidence assembled by the HRDC investigator. Among the documents were numerous summaries of the investigator’s interviews with the payer’s shareholders, Mr. Dubé’s spouse, his children and the employer’s employees and former employees. He later interviewed all of them and they confirmed to him what they had already told the investigator. Relying in part on the statement of Guylaine Dubé that Ms. Bellefeuille had not worked for the payer, the insurance officer found that she had not been employed with the payer in insurable employment. With regard to Ms. Garneau, the insurance officer found that her employment was excluded from insurable employment because she and the payer were not dealing at arm’s length.[8]
• The admissions
[14] In making his decision concerning Ms. Garneau, the Minister assumed the following facts, which are set out in his Amended Reply to the Notice of Appeal:
[Translation]
8. ...
(a) the payer was incorporated on November 7, 1996; [admitted]
(b) the payer operated a business manufacturing wooden stairs and various kinds of wood trim; [admitted]
(c) the payer’s shareholders with voting shares were
Joseph Dubé
75% of the shares
The Appellant
25% of the shares;
[admitted]
(d) Until 2002, according to the constitution of the payer, the Appellant was director of the payer; [admitted]
(e) on December 4, 1999, the Appellant and Joseph Dubé began a conjugal relationship; [admitted]
(f) the Appellant had been hired by the payer as a secretary-bookkeeper; [admitted]
(g) the Appellant’s duties were billing, bookkeeping, doing the payroll and acting as receptionist for the payer; [admitted]
(h) the Appellant worked year-round for the payer on the premises of the business; [denied]
(i) on May 10, 2002, in a statement to an HRDC representative, the Appellant stated that, when she was receiving unemployment benefits, she may have worked fewer hours, maybe half-days instead of full days; [denied]
(j) the Appellant continued to work for the employer after her alleged layoffs; [denied]
(k) the Appellant had been the mistress of Joseph Dubé, the payer’s other shareholder, since 1996.[denied]
9. The Deputy Attorney General of Canada adds that:
(a) on December 19, the payer gave the Appellant a Record of Employment that indicated the first day of work as May 5, 1997, and the last day of work as December 12, 1997, and indicated 1,085 insurable hours and insurable earnings of $16,275.00; [admitted]
(b) on November 12, 1998, the payer gave the Appellant a Record of Employment that indicated the first day of work as May 31, 1998, and the last day of work as November 7, 1998, and indicated 1,130 insurable hours and insurable earnings of $17,500.00; [admitted]
(c) on November 3, 1999, the payer gave the Appellant a Record of Employment that indicated the first day of work as June 7, 1999, and the last day of work as October 22, 1999, and indicated 795 insurable hours and insurable earnings of $15,900.00; [admitted]
(d) on October 12, 2000, the payer gave the Appellant a Record of Employment that indicated the first day of work as May 22, 2000, and the last day of work as October 6, 2000, and indicated 800 insurable hours and the insurable earnings of $16,000.00; [admitted]
(e) on July 4, 2001, the payer gave the Appellant a Record of Employment that indicated the first day of work as March 4, 2001, and the last day of work as June 22, 2001, and indicated 640 insurable hours and insurable earnings of $11,400.00; [admitted]
(f) the Records of Employment do not reflect reality with respect to the periods worked or the number of hours worked by the Appellant; [denied]
(g) the payer and the Appellant entered into an arrangement to qualify the Appellant to receive unemployment benefits while she continued to work for the payer. [denied]
(h) The Appellant, Joseph Dubé and the payer acted in concert in the context of the Appellant’s contract of employment for the payer. [denied]
[15] In rendering his decision concerning Ms. Bellefeuille, the Minister assumed the following facts, which are set out in his Amended Reply to the Notice of Appeal:
[Translation]
8. ...
(a) the payer was incorporated on November 7, 1996; [admitted]
(b) the payer operated a business manufacturing wooden stairs and various kinds of wood trim; [admitted]
(c) the majority shareholder, with 75% of the voting shares of the payer, was Joseph Dubé; [admitted]
(d) the Appellant is the wife of Joseph Dubé; [admitted]
(e) the Appellant is a legal secretary and she worked for notaries’ offices at the same time she claims to have worked for the payer; [denied]
(f) the Appellant was allegedly hired by the payer as a secretary; [denied]
(g) the Appellant’s duties for the payer involved typing letters, preparing cases for small claims court and delivering files to the payer’s lawyer, whereas in reality the Appellant rendered little or no services to the payer; [denied]
(h) on September 29, 1997, the payer gave the Appellant a Record of Employment showing the first day of work as June 8, 1997, and the last day of work as September 12, 1997, and indicated 224 insurable hours and insurable earnings of $3,360.00; [admitted]
(i) on October 20, 1999, the payer gave the Appellant a Record of Employment that indicated the first day of work as June 8, 1997 (corrected to June 21, 1998) and the last day of work as October 15, 1999, and indicated 1,180 insurable hours and insurable earnings of $12,800.00; [admitted]
(j) on September 8, 2000, the payer gave the Appellant a Record of Employment that indicated the first day of work as April 17, 2000, and the last day of work as September 1, 2000, and indicated 450 insurable hours and insurable earnings of $8,110.00; [admitted]
(k) on September 7, 2001, the payer gave the Appellant a Record of Employment that indicated the first day of work as April 16, 2001, and the last day of work as August 31, 2001, and indicated 400 insurable hours and insurable earnings of $5,620.00; [admitted]
(l) the Records of Employment do not reflect reality with respect to the dates the Appellant worked or her hours or earnings. [denied]
• Work prior to 1997
Jacinthe Garneau with Quincaillerie
[16] Ms. Garneau worked for Dragon et Chapdelaine inc. (Quincaillerie) from June 1979 to October 20, 1995. The termination of this employment was due to the closing of the business. Ms. Garneau described herself as a bookkeeper on the Record of Employment that she had prepared.[9] Quincaillerie belonged to a group of building contractors, including a certain Mr. Maltais. The latter considered Ms. Garneau as his number two. At one time, Quincaillerie had a division that manufactured wooden stairs and various kinds of wood trim. The division was known as Boiserie D.C.[10] At some unspecified time, but probably when Quincaillerie[11] closed down, the woodwork division was transferred to BDC. The shop foreman of this division was Joseph Dubé who had been employed in the division since 1993 (Exhibit I‑14).
[17] Quincaillerie operated a larger company than BDC or the payer. It had between 15 and 20 employees, one of whom was a bookkeeper.[12] Quincaillerie's sales were $15,000,000; the payer’s fluctuated around $1 million. For the 2000, 2001 and 2002 calendar years, the payer’s sales were as follows:[13]
Table 1
Payer’s sales
2000
2001
2002
January
26,300
61,470
54,819
February
35,560
39,310
0
March
40,970
82,520
161,490
April
79,930
125,450
29,020
May
100,960
166,170
161,630
June
108,890
129,050
190,900
July
48,900
31,760
143,000
August
93,440
118,900
124,000
September
200,660
67,780
122,850
October
3,990
52,310
144,773
November
75,160
42,360
37,100
December
83,715
85,710
N/A
898,475
1,002,790
1,169,582
[18] According to the payer’s financial statements for the 1998 to 2000 fiscal years, sales and profits (losses) were as follows:[14]
Table 2
Payer’s sales and profits
31/03/98
31/3/99
31/12/00
Sales
529,745
977,653
898,593
Profits
(losses)
(67,467)
4,395
21,141
[19] When she was employed by Quincaillerie, Ms. Garneau said, she earned $550 to $575 per week. In addition, she said, she received a year-end bonus, which allegedly increased her weekly salary to $800. In his testimony, Mr. Maltais stated that Quincaillerie had established a bonus plan for its two managers. He doubted that such a plan had been set up for Ms. Garneau. If it had, she would have had to receive a bonus of $11,700, representing 39% of her base salary in order for Ms. Garneau’s statement to be accurate, which is unlikely.[15] Moreover, the Record of Employment does not mention any other form of compensation, such as a bonus (Exhibit I‑12).
[20] Ms. Garneau said that she had been paid by the week by Quincaillerie and not by the hour. However, on her October 24, 1995, claim for unemployment insurance benefits, filed after this business closed, Ms. Garneau wrote [Translation] “$12 an hour” in answer to the question [Translation] “What were your normal earnings before deductions?” In answer to the question [Translation] “Minimum acceptable base salary”, she wrote [Translation] “$10 to $12” (see Exhibit I‑13). In addition, according to the Record of Employment (Exhibit I‑12) dated October 20, 1995, that Ms. Garneau herself prepared and signed, her weekly earnings during the 20 weeks preceding the termination of her employment fluctuated between $384 and $528. The longest period without a variation was four weeks. Assuming that her hourly wage was $12, the results are as follows:
Table 3
Ms. Garneau’s earnings at Quincaillerie
Number of weeks
Weekly wage
Number of hours
1
815[16]
?
9
528
44
4
504
42
1
456
38
3
432
36
1
408
34
1
384
32
Total
20
These facts show, then, that Ms. Garneau was paid by Quincaillerie on the basis of the hours that she actually worked.
Jacinthe Garneau at BDC
[21] After a little over two months of being unemployed following the closing of Quincaillerie, Ms. Garneau was hired by BDC on January 8, 1996, to perform duties similar to those she had performed at Quincaillerie. On her claim for unemployment benefits dated January 14, 1997 (Exhibit I‑2), Ms. Garneau indicated $525 as the earnings paid by BDC for 35 hours of work, which corresponds to an hourly rate of $15. However, it must be emphasized that the weekly earnings correspond to what she received at Quincaillerie. Wages of $525 at an hourly rate of $12 yields close to 44 hours a week. In addition, the minimum acceptable salary indicated on her claim for benefit is $12 an hour for employment as an accountant or secretary. It is more likely that BDC hired Ms. Garneau on conditions similar to those she had had at Quincaillerie before her layoff and that her hourly rate at BDC was $12 (and not $15), then. According to her Record of Employment (Exhibit I‑2), which was prepared by her, signed by Mr. Dubé and dated December 20, 1996,[17] her weekly salary fluctuated between $450 and $525 in the 20 weeks preceding her departure on December 20, 1996. On the assumption that her hourly salary was $12, the following result is obtained:
Table 4
Salary of Ms. Garneau
at BDC
Number of weeks
Weekly salary
Number of hours
4
450
37.5
15
525
43.75
1
750[18]
?
Total
20
The facts also reveal that Ms. Garneau was probably paid by the hour instead of by the week.
Joseph Dubé, Denise Bellefeuille and Guylaine Dubé at BDC
[22] According to Mr. Dubé’s claim for benefits dated January 14, 1997,[19] his weekly salary at BDC was $250[20] for 37 hours of work as “Director”, which makes for an hourly wage of $6.76! Is it not surprising, incidentally, to learn that the names of his wife, Ms. Bellefeuille, and his daughter, Guylaine, were entered in the payroll journal of BDC and that they each received an amount of $250 per week? If the weekly salaries of these two individuals were attributed to Mr. Dubé, he would have received a salary of $750, which would correspond to an hourly wage of $20.27. This looks more reasonable than $6.76.
[23] According to the Record of Employment of July 29, 1996, prepared and signed by Ms. Garneau, Ms. Bellefeuille allegedly worked at BDC from April 9, 1996, to July 12, 1996 (Exhibits A‑17 and I‑33). Her weekly salary was $250 for the last 14 weeks before the termination of her employment, except for the very last week in which it rose to $380.[21] In addition, according to her Record of Employment (Exhibit I‑14), Guylaine Dubé worked at BDC from August 12, 1996, to December 20, 1996.[22] The last day of her alleged employment matches that of her father. The name of the contact person appearing on this Record of Employment is Ms. Vachon, i.e., the married name of Ms. Garneau, and it was she who completed the form.
[24] Oddly enough, Mr. Dubé’s justification for his low salary was his desire to show his bosses that he had the ability to properly manage BDC. However, he said he told BDC that he might need help to do his work and that BDC should pay the people he might use. This would explain the remuneration paid to his daughter and his wife. Moreover, he acknowledged that he received a pension from CSST for a permanent partial disability and that, by agreeing to work for $250 a week, his monthly pension went from $2,400 to $1,068. Surprisingly, he maintained that he could have received a weekly salary of $600 without having this pension reduced.[23]
[25] However, in her testimony at the hearing and in a statutory declaration (Exhibit I‑15), Guylaine Dubé acknowledged that she had not worked for BDC and that all the cheques that she had received from BDC had been endorsed and given to her mother. Mr. Dubé acknowledged in his testimony that his daughter Guylaine had never actually worked for the business. As for Ms. Bellefeuille, Mr. Dubé claimed that she did legal research and prepared small claims cases for BDC. However, she was not the person who took the documentation for the claims and lawsuits to BDC’s lawyer.[24]
Incorporation of the payer and the departure of Mr. Dubé and Ms. Garneau from BDC
[26] The payer was incorporated on November 7, 1996 (Exhibit I‑3). The founder and first director of the company was Joseph Dubé. According to his testimony, the company was incorporated to acquire the assets of BDC, because they were for sale. Mr. Dubé’s negotiations with Mr. Maltais, one of the shareholders of BDC, had turned out badly, he said, because the latter thought that some of the company stocks had disappeared and, although he could not prove it, he held Mr. Dubé responsible for this situation. Mr. Dubé claimed that Mr. Maltais agreed to sell the assets of BDC if he were given $50,000 without the other shareholders’ knowledge, which Mr. Maltais denied in his testimony.
[27] In any event, Mr. Dubé was dismissed and then decided to start his own business through the payer. The evidence is contradictory as to the timing of Mr. Dubé’s departure. According to Ms. Garneau, Mr. Dubé left BDC at the end of October or the beginning of November 1996, or two months before her own departure. On his claim for benefit of January 14, 1997 (Exhibit I‑16), Mr. Dubé gave as his “last day of work” December 16, 1996 (a Monday). The Record of Employment prepared by Ms. Garneau and signed by Mr. Maltais shows the last day of work as December 20, 1996, i.e., the Friday of that week. According to Mr. Maltais, Mr. Dubé and Ms. Garneau had left their employment at BDC together, which corresponds with the dates on their respective Records of Employment.[25]
[28] Although Ms. Garneau indicated on her Record of Employment[26] of December 20, 1996, that the reason for the termination of her employment with BDC was a lack of work, Mr. Maltais stated at the hearing that he had tried to keep Ms. Garneau. Mr. Maltais had hired another chief executive officer for BDC and was counting on Ms. Garneau to continue to be — to use his expression — [Translation] “my eyes” in the management of BDC. On her claim for benefit, Ms. Garneau also indicated a “lack of work” as the reason for the termination of her employment (Exhibit I‑2). Therefore, she stated the facts incorrectly on her Record of Employment and on her claim for benefit and this enabled her to obtain more benefit than she was entitled to.
[29] Testifying at the Minister’s request, Mr. Maltais said that he later better understood the reason for Ms. Garneau’s departure in December 1996 when Gaston Dubuc, a former BDC employee who joined the payer, told him three to five months after her departure that he had surprised Ms. Garneau and Mr. Dubé engaged in sexual activity in an office. According to Mr. Dubuc, Mr. Dubé and Ms. Garneau were living together at the time. According to the report of the appeals officer, counsel for the Appellants had stated in the presence of Mr. Dubé, at the meeting on May 19, 2004 in the Agency office, that Ms. Garneau had been the latter’s mistress since 1996 (Exhibit I‑18, paragraph 39).
[30] In testimony-in-chief, Mr. Dubé and Ms. Garneau denied that they had been lovers since 1996. On cross-examination, only Mr. Dubé denied having intimate relations with Ms. Garneau at BDC. Ms. Garneau did not testify again. According to Mr. Dubé, he only began to court Ms. Garneau in May or June 1997, when each of them was married. Their intimate relationship did not start until late in 1998. However, this version of the facts does not accord with the statements in the Amended Motion for Interim Relief, signed on October 6, 1998, by Ms. Garneau’s counsel. According to this motion, the separation of Ms. Garneau and her husband took place around August 21, 1998, and there are six separate statements concerning Mr. Dubé, Ms. Garneau’s “new spouse”.[27] The motion is accompanied by a sworn statement by Ms. Garneau attesting to the truth of the facts set out in the motion (Exhibit A‑2). According to Mr. Dubé’s version, his cohabitation with Ms. Garneau did not begin until the end of December 1999, when he separated from Ms. Bellefeuille,[28] whereas Ms. Garneau puts the beginning of their cohabitation in January 2000. However, counsel for Ms. Garneau admitted that the cohabitation began on December 4, 1999.[29]
• Work with the payer from 1997 to 2001
Joseph Dubé
[31] After the failure of the negotiations to purchase BDC’s business and following his dismissal, Mr. Dubé looked for premises for the payer and also took steps to obtain financing. Mr. Dubé hoped to obtain government aid, but apparently had little success. The new premises were available as of February 1997 and some BDC employees came to work for the payer, including Jacinthe Garneau, Stéphane Laferrière and Gaston Dubuc.
[32] Once he was employed by the payer, Mr. Dubé continued to receive $250 a week, from 1997 to 2001;[30] Denise Bellefeuille and Guylaine Dubé continued to be paid by the payer just as they had been paid at BDC.
Jacinthe Garneau
[33] Ms. Garneau stated that she had left BDC to join the payer because she saw little future in that company and she wanted to invest in her own business.[31] She said that she had invested between $10,000 and $20,000 to start up the payer and her investment later rose to about $30 thousand.[32] According to Mr. Dubé’s testimony, she did not invest the money directly in the payer, but made a loan to it instead. Although it is admitted that Ms. Garneau held 25% of the company’s shares, she did not know what class of shares she held. According to the payer’s financial statements, there were two kinds of shares in circulation, 400 class A voting shares, with a paid-up capital of $40 (or $0.10 per share) and class B non-voting shares, having a paid-up capital of $26,500 in 1997 and $55,600 as at March 31, 1998. According to the payer’s shareholders’ register, Ms. Garneau’s shares were subscribed on November 20, 1996.
[34] However, according to Exhibit I‑16, Mr. Dubé, on February 11, 1997, told an HRDC officer that he was the sole shareholder of the payer, that he had invested $20,000, that he had already leased premises in St‑Hubert and planned to begin operating on March 1, 1997. In a statutory declaration to the Commission dated November 24, 1999, Mr. Dubé indicated that Ms. Garneau had purchased [Translation] “25% of the shares in April or March 1997” (Exhibit I‑23). In his testimony at the hearing, he offered another version: it seems that it was either in June or July 1997 that it was decided to issue 100 class A shares to Ms. Garneau. A “unanimous shareholders’ agreement” was allegedly signed by Mr. Dubé and Ms. Garneau on September 15, 1997 (Exhibit A‑9). According to Mr. Dubé, the shareholders’ register was crafted on February 18, 2002,[33] i.e., it had been backdated.
[35] Mr. Dubé, furthermore, tried to explain Ms. Garneau’s presence as a shareholder and director of the payer as due to the advice he had received from a certain lawyer to the effect that he had to provide the names of three directors. Now, the articles of incorporation of the payer indicate that the number of directors could vary between one and ten. Moreover, as counsel for the Minister noted, only two directors are entered on the list of directors (Exhibit I‑3), as at November 20, 1996, and they are Mr. Dubé and Ms. Garneau.
[36] The following table shows Ms. Garneau’s salary with the payer according to the payroll journal:[34]
Table 5
Ms. Garneau’s salary with the payer
according to the payroll journal
Periods
Weekly
salary
Number of hours
Hypothetical hourly rate
Hourly rate
(37.5) [35]
1997
May 4 – Dec. 12
525
35
15
14.00
1998
May 31 – June 20
600
40
15
16.00
June 21 – Nov. 7
800
40
20
21.33
1999
June 6 – 12
700
35
20
18.66
June 13 – Oct. 23
800
40
20
21.33
2000
May 22 – June 2[36]
700
35
20
18.66
June 11 – July 15[37]
700
35
20
18.66
July 16. – Oct. 7
800
40
20
21.33
2001
March 4 – 17
800
40
20
21.33
March 18 – April 28
700
40
17.50
18.66
April 29 – May 5
600
40
15
16.00
May 6 – June 23
700
40
17.50
18.66
Although the payroll journal shows the number of hours for the weekly salary that was paid, Mr. Dubé stated that he did not keep track of Ms. Garneau’s hours of work and that her salary did not reflect them. Consequently, the number of hours shown in the journal does not necessarily correspond to reality. Furthermore, according to Ms. Garneau, she generally worked from 35 to 40 hours per week.
[37] The following table provides information concerning Ms. Garneau’s salary based on her claims for benefit:
Table 6
Ms. Garneau’s salary with the payer based on the claims for benefit
Periods of work
Weekly salary
Number of hours
Hypothetical hourly rate
Salary requested
May 5 – Dec. 12, 97[38]
525
35
15
10-12[39]
May 4 – Nov. 13, 98[40]
800
40
20
600
June 7 – Oct. 22, 99[41]
800
40
20
N/A
May 22, – Oct. 6, 00[42]
800
40
20
700
March 4 – June 22, 01[43]
800
40
20
n/a (sick)
[38] After June 22, 2001, Ms. Garneau obtained from her physician medical certificates stating that she was unfit to work on account of depression for the period from June 26 to October 28, 2001 (Exhibit A‑3). After that, she continued to receive benefits (supposedly because of a lack of work) until February 2002 (Exhibit I‑29).
[39] Ms. Garneau said that she returned to work at the payer in about March or April 2002. After that, she filed no more claims for benefit. It should be noted that, as of December 2001, Ms. Garneau knew that HRDC was investigating the payer and some of its employees. At the time of the first meeting,[44] the investigation was not specifically focusing on Ms. Garneau or Ms. Bellefeuille, but rather on other employees of the payer. As long as the investigation dealt with the other employees, said the investigator, she received excellent cooperation. After she said that the investigation was focusing on all of the employees, including Ms. Garneau, the latter’s attitude and that of Mr. Dubé changed. The investigator received less cooperation from them.
[40] According to the analysis by the HRDC investigator, the benefits received by Ms. Garneau in 1999, 2000 and 2001 represented the maximum weeks of benefits to which they were entitled, based on the Records of Employment that had been prepared (see Exhibit I‑34). Ms. Garneau was again listed in the payer’s payroll journal after receiving the maximum employment insurance benefits. For 1998, Ms. Garneau would have been entitled to 29 weeks of benefits whereas she received benefits for 25 weeks. That information is not available for 1997. Ms. Garneau’s periods of employment and benefit periods for 1996 to 2001 are as follows:
Table 7
Ms. Garneau’s periods of employment with BDC and the payer
and her benefit periods
Work
Unemployment benefits[45]
Jan. 8, 1996 — Dec. 20, 1996*
Dec. 23, 1996 — May 3, 1997
May 5, 1997 — Dec. 12, 1997
Feb. 1, 1998 — May 29, 1998[46]
May 31, 1998 — Nov. 7, 1998
Nov. 8, 1998 —June 5, 1999
June 7, 1999 — Oct. 22, 1999
Oct. 24, 1999 — May 20, 2000
May 22, 2000 — Oct. 6, 2000
Oct. 8, 2000 — March 3, 2001
March 4, 2001 — June 22, 2001
June 24, 2001 — Oct. 20, 2001 (sick)
Oct. 28, 2001 — Feb. 23, 2002
* Employment with BDC
[41] Because of financial problems, the payer negotiated for a compromise in April 2004, which negotiations were allegedly broken off in October 2004. It was at that time that the payer’s business was allegedly sold to a new company controlled by a Mr. Pinsonneault. Ms. Garneau signed a five-year contract of employment with this company; she was to perform bookkeeping and receptionist duties. Her salary was $575 for a 38-hour workweek (or $15.13 per hour), to which was added a 5% commission on sales made by her, the sales work bearing [Translation] “no relationship, direct or indirect, with the employer’s development and promotion efforts” (Exhibit A‑5, Art. 2). This contract contained non-competition and non-solicitation clauses. Ms. Garneau was entitled to just two weeks’ vacation per year.
Denise Bellefeuille with the notaries and the payer
[42] During the Bellefeuille periods, Ms. Bellefeuille had been employed as a legal secretary with some notaries since 1995 at least, as shown in the following table compiled from the Records of Employment prepared by the notaries. For the purposes of comparison, Ms. Bellefeuille’s periods of employment at BDC and the payer and those of Ms. Garneau have been added:
Table 8
Periods of employment of Ms. Garneau and Ms. Bellefeuille
Ms. Garneau
Ms. Bellefeuille
Year
Payer/BDC
Payer/BDC
Notaries[47]
1995
Nov. 4 − Dec. 31
1996
Jan. 8 − Dec. 20
April 9 − July 12
Jan. 1 − July 19
1997
May 5 − Dec. 12
June 8 − Sept. 12
April 7 − Oct. 17
1998
May 31 − Nov. 7
June 21 − Dec. 31
March 13 − Dec. 31
1999
June 7 − Oct. 22
Jan. 1− Oct. 15
Jan. 1 − Feb. 26
April 19 − July 30
2000
May 22 − Oct. 6
April 17 − Sept. 1
April 3 − July 21
2001
March 4 − June 22
April 16 − August 31
April 2 − Sept. 7
[43] According to the report of the meeting held by the HRDC investigator with Notary Aubertin, on April 24, 2002, Ms. Bellefeuille worked five days a week and often more (Exhibits I‑36 and I‑37). She even worked overtime on some Saturdays. The notaries, Ms. Gélinas and Mr. Aubertin, both said that Ms.