Mazraani v. M.N.R.

Mazraani v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2022-10-04
Neutral citation
2022 TCC 109
File numbers
2013-3484(EI)
Judges and Taxing Officers
Guy R. Smith
Subjects
Employment Insurance Act
Decision Content
Docket: 2013-3484(EI)
BETWEEN:
KASSEM MAZRAANI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
INDUSTRIELLE ALLIANCE, ASSURANCE ET
SERVICES FINANCIERS INC.,
Intervenor.
Appeal heard on August 29, 30, 31 and September 1 and 2, 2022, at Montreal, Quebec.
Before: The Honourable Justice Guy R. Smith
Appearances:
For the Appellant:
The Appellant himself
Counsel for the Respondent:
Emmanuel Jilwan
Counsel for the Intervenor:
Yves Turgeon
Amélya Garcia
JUDGMENT
In accordance with the attached Reasons for Judgment, the appeal made under subsection 103(1) of the Employment Insurance Act, is dismissed, without costs, and the decision of the Minister of National Revenue dated August 1, 2013, is upheld.
Signed at Ottawa, Canada, this 4th day of October 2022.
“Guy R. Smith”
Smith J.
Citation: 2022 TCC 109
Date: 20221004
Docket: 2013-3484(EI)
BETWEEN:
KASSEM MAZRAANI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
INDUSTRIELLE ALLIANCE, ASSURANCE ET
SERVICES FINANCIERS INC.,
Intervenor.
REASONS FOR JUDGMENT
Smith J.
I. Overview
[1] Kassem Mazraani (the “Appellant”) worked as an insurance sales agent for Industrielle Alliance, Assurance et Services Financiers inc. (“IA”) from April 10, 2012 to November 23, 2012. Following his termination, he sought a determination as to whether he was engaged in insurable employment pursuant to paragraph 5(1)(a) of the Employment Insurance Act, S.C. 1996 c. 23 (“EIA”).
[2] By letter dated August 1, 2013, the Minister of National Revenue (the “Minister”) informed the Appellant that it had been determined that his employment was not insurable as the “requirements of a contract of service had not been met” and “an employer-employee relationship did not exist”.
[3] It is from this decision that the Appellant appeals to this Court. IA joined the appeal as an intervenor (the “Intervenor”) to support the Minister’s position.
[4] The only issue before the Court is whether the Appellant was engaged in insurable employment pursuant to the provisions of the EIA or whether he was an independent contractor engaged in a contract for services.
II. Minister’s Assumptions of Fact
[5] In concluding that the Appellant did not hold insurable employment, the Respondent relied on the following assumptions of fact:
a) The Payer [IA] is a personal insurance and financial services company whose principal activity is the sale of life, disability and health insurance.
b) [IA]’s head office is located in the city of Québec, and it has several branches throughout the Province of Quebec;
c) In the Province of Quebec, the insurance and financial services industry is regulated by the Autorité des marches financiers (the “AMF”);
d) In order to sell insurance and other related financial products in Quebec, individuals and companies must hold a valid license from the AMF;
e) The Appellant was hired by [IA] as a financial advisor in April 2012;
f) Prior to working for [IA], the Appellant had already worked for several years as a financial planner with another major insurance company;
g) At the time of his hiring by [IA], the Appellant’s AMF license was inactive;
h) Between April 3, 2012 and June 7, 2012, the Appellant attended a mandatory training course which was offered by [IA], on the basis of two hours a day, three days a week;
i) The completion of this training course was required in order for the Appellant to meet regulatory requirements and to reactivate his AMF license;
j) The Appellant did not receive any remuneration for his attendance and completion of this training course;
k) On May 3, 2012, the Appellant and [IA] entered a written contract with an effective date of April 30, 2012;
l) This contract provided, inter alia, that:
i. The Appellant was authorized to solicit and obtain applications and requests for the various contracts and financial services offered either directly or indirectly by [IA];
ii. The Appellant was liable for any amount incurred by or owed to [IA] or a client due to a mistake, negligence, fraud or dishonesty by him or one of his mandataries;
iii. The Appellant was remunerated by way of a “fund” that was set up by [IA];
iv. The Appellant was remunerated on a weekly basis by way of advances on the balance of this fund;
v. The balance of this fund was obtained by calculating the commissions and bonuses paid to the Appellant, less any charges, weekly advances and other fees, expenses and commitments made in the performance of his duties;
vi. The Appellant would remain liable to [IA] after the termination of the contract for any negative balance in this fund;
vii. The Appellant was an independent contractor, and the contract specified that it must not be interpreted as establishing an employer-employee relationship between him and [IA];
viii. The Appellant agreed to pay all expenses incurred in the exercise of his duties, including but not limited to the following:
- obtaining or renewing the licenses necessary to exercise his duties;
- obtaining or renewing professional civil liability insurance;
- membership dues in professional or other associations;
- his business office, including secretarial fees and office supplies;
- information systems, long-distance calls and facsimiles;
- travel, solicitation and publicity;
- training and upgrading;
ix. The Appellant was not authorized to:
- bind [IA] by any promise or agreement;
- incur any liability whatsoever on behalf of [IA];
- use brochures, advertisements or printed matter bearing [IA]’s name or logo that had not been preapproved in writing by [IA];
- accept a risk on behalf of [IA];
- commit [IA] to any relationship whatsoever;
m) In a letter from [IA] dated April 27, 2012, the Appellant was also advised that his agent contract would be terminated if he did not receive any remuneration for five consecutive weeks;
n) The Appellant was affiliated with [IA]’s branch located in Ville LaSalle;
o) The Appellant’s tasks were to solicit and obtain applications for [IA]’s insurance products from potential clients;
p) The Appellant would set up appointments over the phone with potential clients, and meet with them in order to present and sell them products offered by [IA] or other affiliated companies;
q) These meetings often took place at the clients’ homes;
r) The Appellant had access to a cubicle at [IA]’s Ville LaSalle branch where he could also work from;
s) The Appellant was required to transmit to [IA] all of the applications for insurance that he obtained from potential clients;
t) The Appellant was paid exclusively on commission;
u) The Appellant was entitled to receive advances on these commissions;
v) Upon each successful sale of [IA]’s products, the Appellant would earn a percentage of the total value of the insurance contract;
w) The Appellant was not subject to direct control by [IA];
x) [IA] did not supervise the amount or the quality of the work performed by the Appellant, aside from ensuring that the Appellant complied with legislative and regulatory requirements;
y) [IA] did not dictate the way in which the Appellant had to perform his tasks;
z) [IA] did not assign a particular territory to the Appellant;
aa) [IA] did not provide the Appellant with a list of clients to contact;
bb) The Appellant determined his own work schedule;
cc) [IA] did not control the hours worked by the Appellant or his absences;
dd) The Appellant’s attendance at [IA]’s premises was not compulsory nor was it monitored;
ee) The Appellant was not entitled to vacation or sick leave with [IA];
ff) The Appellant was required to pay for his own professional liability insurance;
gg) The Appellant had the option to provide his own computer or to rent one from [IA];
hh) The Appellant rented a laptop computer from [IA] in order to perform his work;
ii) The cost of the computer rental was deducted from the Appellant’s compensation fund on a weekly basis;
jj) The Appellant was required to use his own vehicle to travel for his work for [IA];
kk) The Appellant did not receive any compensation or allowance from [IA] for the use of his vehicle;
ll) The Appellant had a chance of profit and a risk of loss in providing his services to [IA];
mm) The Appellant had no guarantee of a steady income while working for [IA];
nn) The Appellant was responsible for any and all expenses incurred in the performance of his work for [IA];
oo) The Appellant did not receive any compensation or allowance from [IA] for his work-related expenses;
pp) In the event that policies for which the Appellant received a commission were cancelled within a certain time after taking effect, the Appellant was liable to reimburse [IA] a pro-rated amount of the commission received upon the successful sale of said policies;
qq) [IA] issued a T4A slip (Statement of other income) in the name of the Appellant for the 2012 taxation year;
rr) [IA] reported that the Appellant earned an amount of $7,084.91 in self-employed commissions;
ss) No deductions at source were made by [IA] from the Appellant’s income in respect of income tax, employment insurance to the Quebec Pension Plan;
tt) In his income tax return for taxation year 2012, the Appellant declared gross commission income from self-employment in the amount of $7,084;
uu) The Appellant reported that he incurred $7,098 in expenses to earn his income from the Payer in 2012;
vv) The Appellant declared a net loss of $14 from his commission income earned from the Payer in 2012.
III. The Background Facts
[6] The Appellant testified on his own behalf. The Intervenor called a number of witnesses including Bruno Michaud, Yves Charbonneau, Stephanie Woo, Vanessa Charbonneau, Pascale Apold and Éric Leclerc.
[7] The Appellant completed the Canadian Securities Course offered by the Canadian Securities Institute in 2002. He later followed a study program offered by the Autorité des marchés financiers du Québec (“AMF”) and obtained the licenses required to sell insurance products and mutual funds in 2008. He joined London life Insurance Company (“London Life”) where he worked from the beginning of 2009 until his termination in March 2011.
[8] The Appellant submitted an application for a position with IA on December 21, 2011 and, after an interview process conducted by a third party, was invited to attend the offices of IA on April 2, 2012 where he was greeted by Eric Leclerc, Branch Manager and René Beaulé who would become his sales manager.
[9] A desk was assigned to him with a filing cabinet, keys, a telephone and magnetic access card. On April 3, 2012, he signed a lease agreement for a laptop computer requiring weekly payments of $18.05 deducted from his commission account (Ex. A-19) and was provided with a user name and password to access IA’s computer-based “Extranet” reserved for IA sales agents (Ex. A-18).
[10] He received training for the use of the telephone and was given sample messages (Ex. A-53). He was also provided with sample promotional materials that could be personalized with his photo and contact information but were otherwise standardized for IA (Ex. A.54).
[11] He also attended a 10-week training program for “new” sales agents that involved two-hour courses, three days per week (Ex. A-8). It was comprised of a broad range of topics including prospecting, sales techniques, time management, insurance products, retirement planning, compliance issues and the like. IA does not dispute that the Appellant attended most if not all of these courses. However, there is some disagreement as to whether the training program was mandatory.
[12] From mid-August to the end of September, the Appellant attended 13 training courses of one to three hours per week. These courses were intended for “all” sales agents and allowed them to obtain “professional development units” or PDU’s (“unité de formation continue” or “UFC”) (Ex. A-24). Each unit represented one hour of recognized training that had to be reported to the Chambre de la sécurité financières (“CSF”). All sales agents including the Appellant were required to obtain 30 PDU’s over a 24-month period failing which their license was subject to suspension. During his time with IA, the Appellant acquired 16 PDU’s including 3 for “compliance” (Ex. A-24).
[13] The Appellant testified that he received frequent emails from Mr. Leclerc’s assistant reminding him to enter upcoming events in his calendar (Ex. A-41). The language used in the emails varied but often mentioned that attendance was “important” and at other times that it was “essential” or “imperative”. It sometimes stated “please take note” (“veuillez prendre connaissance”) of upcoming events that were to be entered in the agent’s agenda.
[14] The agenda located in the Intranet was continually up-dated. It listed all upcoming training courses or modules. Also included were attachments with the sales production numbers of all agents in the branch, leaders of the week in various sales categories, ongoing or upcoming sales competitions including the “President’s Competition”, potential prizes and cumulative performance bonuses. A list of sales agents who had not been present for the last training module was also attached.
[15] On May 29, 2012, the Appellant received an email concerning an upcoming presentation on a new software program known as “Gestion Clients”. It indicated that attendance was “mandatory” (“obligatoire”) and that agents were expected to be present “without exception” (“sans exception”) (Ex. A-40). The Appellant attended this event.
The Letter of Offer
[16] When he met Mr. Leclerc on April 2, 2012, the Appellant could not actually sell insurance products because his insurance sales license had lapsed and he was required to renew his “E&O” or liability insurance coverage.
[17] On April 11, 2012 he submitted an “Application for a Representative’s Certificate” with the AMF. Two representatives of IA also signed to confirm that the Appellant would be “attached” to the firm “without being an employee” (Ex. R-4-2). The Appellant was required to make a payment or “contribution” of $237.13 to the CSF and did so but the amount was later reimbursed by IA.
[18] The Appellant’s insurance sale license was reinstated on April 26, 2012. The next day, he received a letter from IA (the “Letter of Offer”) indicating that it was offering him “an agent contract” and told that he could “begin underwriting insurance and annuities contracts (. . .) as a financial security advisor on April 30, 2012” (Ex. A-5). It stated that he would be part of “unit 35 of team 90”, that he would “be in charge of the policies and clientele” that made up part of that “service unit” and that Mr. Beaulé would be his sales director.
[19] The Letter of Offer explained that according to IA’s “Career Establishment Program”, an amount of $2,500 would be credited to his account and he would be entitled to “advances on commissions” equal to $600 per week. It also specified that if he did “not receive any remuneration for five consecutive weeks”, IA would “terminate the program” and the agent contract. The Letter of Offer referenced the “Commissions and Bonuses Schedules and Compensation Rules”. It reminded him that “the Act respecting the distribution of financial products and services stipulates that you must hold a valid license” (Ex. A-20).
The Agent Contract
[20] The Appellant acknowledged receipt of the Letter of Offer on May 3, 2012 in the presence of Mr. Leclerc. At the same time, he signed the agent contract (the “Agent Contract”) (Ex. A-20). It indicated that he would be entitled to remuneration as described in the Letter of Offer and that, in consideration of any insurance contracts obtained, commissions would be credited to his account.
[21] The Agent Contract provided that the Appellant was “an independent contractor”, that there was not a “employee-employer relationship” and that he “agreed to pay all expenses incurred in the exercise of his/her duties”, including “without limiting the generality of the foregoing”; “obtaining and renewing licenses necessary to exercise his duties”; “professional civil liability insurance”; “membership dues in professional or other associations”; “business office, including secretarial fees and office supplies”; “information systems, long-distance calls and facsimiles”; “travel, solicitation and publicity”; and “training and up‑grading.” The Appellant was entitled to incorporate his business as long as he controlled the company and that he alone could sell insurance products.
[22] IA reserved the right to “set minimum production and business persistency standards . . . and to amend these standards from time to time”.
[23] The Agent had an obligation to “immediately remit” any amount received “on behalf of the Company” from the sale of insurance products. The use of a trust account was subject to strict oversight and IA reserved the right to terminate an agent contract for “inappropriate management” of trust accounts.
[24] The Agent Contract provided that sales agents could not contractually bind IA or incur any liability on its behalf, nor accept any risk.
[25] The use of brochures, advertisements and printed material, including business cards, was subject to oversight by IA and were in a standardized or pre‑approved format. Paragraph 13 indicated that all “forms, handbooks, policies, computer software and other Company documents” remained the property of IA.
[26] An agent could be terminated for various reasons including not having “a valid insurance permit” or acting “to the detriment of the interests of a client”.
[27] IA reserved the right to transfer clients to another agent if a “request was made to that effect by the client” or the agent’s contract was terminated. Paragraph 16 provided that after the cancellation of the Agent Contract, the agent was subject to a non-competition clause and could not solicit clients who were part of the service unit at the time of cancellation for a period of two years.
[28] On May 3, 2012, the Appellant also signed a number of documents that would allow him to receive referral fees from IA agents licensed to sell “automobile and residential insurance contracts” (Ex. A-22 and A-23).
[29] The Appellant testified that the Agent Contract was never discussed or explained to him including his status as an “independent contractor”. He had signed but not read the contract. He also maintained that remuneration was not discussed.
[30] The Appellant maintained that all secretarial services, office supplies, training, telephone line and business cards were paid by IA. He was also reimbursed for the fee paid to the CMF. He assumed his travel expenses.
The Appellant’s Sales Activities
[31] There was little cogent evidence of the Appellant’s actual sales activities though it is not disputed that, with the assistance of Mr. Beaulé, he completed the necessary documentation to obtain a group policy for himself, his spouse and two children. This appears to have been recorded by IA as four insurance policies.
[32] The “Statement for Group Insurance” dated May 30, 2012 (Ex. A-12) described his disability and life insurance as being based on an “annual salary” of $31,200. The Appellant pointed to the use of the words “annual salary”.
[33] Similarly, the more detailed summary of the group coverage (Ex. A-12-a) used the expression “date of employment – May 4, 2012” and “annual salary” of $31,200. It was clear that the policy took effect on May 31, 2012.
[34] The Appellant explained that he was listed on a schedule to appear as a sales agent at a kiosque located in a local shopping mall. The cost was $40.00 per block of time or $20 per agent (Ex. A-51). He was expected to hand out product descriptions and forms intended to gather contact information from prospective clients. He used this service on numerous occasions.
[35] In September, the Appellant prepared a sales proposal for a universal life insurance policy but was not allowed to complete the sale because the client was already represented by an IA agent on his team. He indicated that he did not discuss it with the agent in question and had only spoken to his sales manager, Mr. Beaulé.
[36] He prepared a joint proposal for clients located in Gatineau QC. He travelled there to meet them but one spouse was not present. He contacted Mr. Beaulé who instructed him “to close the sale.” He did so with the client signing documents that were later amended for a single person. This was the only other policy sold by the Appellant during his tenure with IA.
[37] In October 2012, Mr. Beaulé asked the Appellant to contact an existing client from the group whom he had never met and whose monthly cheque had been returned by the bank for non-sufficient funds. He did so (Ex. A-6 and A-7).
The Appellant’s Termination
[38] On November 20, 2011, the Appellant received an email from Eric Leclerc indicating that he had not generated any sales for more than 4 consecutive weeks, that he was overdrawn for amounts that had been advanced to encourage an increase in his level of activity and that the situation had not improved (Ex. A-3).
[39] He then received a letter from Michel Arsenault, Superintendent of Sales, indicating that the Agent Contract was terminated effective November 23. The Appellant was reminded that he remained responsible for charges arising from policies cancelled within 2 years. He was also reminded of the non-competition clause in his contract. On December 13, 2011, he attended the branch office to return the computer, keys, magnetic card and signed a remittal form (Ex. A-15). At that point, his commission account was overdrawn by ($1,392.99).
[40] For the 2012 taxation year, IA issued a T4A for $7,084 that the Appellant reported as gross commission income. He claimed expenses of $7,098 thus reporting net commission income of ($14.00) (Ex. R-1).
[41] In 2012, IA deposited a total of $4,489.69 in the Appellant’s bank account. This represented gross commissions less the advance of $2,500 and other charges.
Cross-examination of the Appellant
[42] In cross-examination, the Appellant admitted that he also generated business income from the sale of reading glasses. For the 2012 taxation year, he reported gross business income of $11,126 and a net business loss of ($2,285).
[43] The Appellant admitted that although he had indicated that he worked full-time for IA, it was mostly from Monday to Thursday. He reserved Fridays for personal time but occasionally went to the IA office. On Saturday and Sunday, he attended a flea market at “Marché St. Eustache” where he sold reading glasses.
[44] The Appellant could not remember what his legal status was at London Life but admitted that they did not withhold taxes. He refused to acknowledge that after his termination, the issue was whether he was an independent contactor or an employee, indicating that London Life had settled with him “because” he was an employee. After his termination by London Life, he did not file a claim for employment insurance but received social assistance of $5,346.
[45] He professed not to really understand the difference between being employed or self-employed from a taxation point of view because he prepared his tax returns by simply imputing the numbers using a program known as “U-File”. He admitted having taken a course on basic taxation with the AMF, clarifying that he had actually taken it three times and only passed the last exam.
[46] Apart from the group policy for himself and his family, the Appellant admitted that the only other policy sold by him, was a $50,000 life insurance policy. The application was initially rejected by compliance because monthly payments of $75.87 had been entered as $23,886,000. The Appellant insisted it was unintentional and the result of a computer glitch. It was later corrected.
[47] When questioned about the sales kiosque where he appeared as a sales representative, the Appellant insisted it was mandatory because his name was on the schedule and the email from IA told him to “be on time”.
IV. Witnesses for the Intervenor
i) Bruno Michaud
[48] Mr. Michaud retired from his position as Vice-President of Sales in 2017, after 35 years of service. He held a similar position with IA in 2012.
[49] He recognized the Appellant’s Agent Contract (Ex. A-20) and explained that IA had gone through an important transition in the early 1990’s when it absorbed another insurance company with about 170 sales agents who were all considered independent contractors. IA redrafted its agent contract so that existing agents would also become independent contractors. It submitted a first draft to the Canada Revenue Agency (“CRA”) for discussions purposes in 1993. After a few revisions, CRA accepted the revised draft contract (Ex. 4-3) and agreed to recognize the status of former employees as independent contractors if the working relationship supported the provisions of such a revised contract.
[50] Mr. Michaud reviewed the Appellant’s application to the AMF for a representative’s certificate (Ex. R-4.2) and confirmed that all agents had to be “attached” to a “firm” and that in the Appellant’s case, he was “attached” to IA but “without being an employee” as indicated in the form.
[51] He explained that sales agents were responsible for establishing their own sales objectives and determining the means by which they would achieve those objectives. They were responsible for their daily schedules and where they worked. They could do so at home or at an external office. They could determine when they took time-off including annual vacations. They had no obligation to report their activities. Branch meetings were not mandatory and there were no disciplinary measures. Agents were responsible for all prospecting expenses including business cards and promotional material although IA provided the first box of 250 business cards on a gratuitous basis.
[52] Mr. Michaud indicated that a sales agent could get some clerical assistance from IA up to a certain point but that the agent was responsible for the cost of a full-time assistant and would determine their schedule, remuneration and holidays.
[53] He explained that sales agents could work with other licensed agents and split fees or commissions with them. They could also incorporate provided the company was “attached” to IA. This gave agents the flexibility to determine their salary and dividends. They could also sell shares in their company, something that was not possible if they transferred their clientele directly to another agent.
[54] In cross-examination, Mr. Michaud reviewed the Letter of Offer (Ex. A-5) and agreed that the Appellant had been assigned to “unit 35 of team 90” but explained that this was for organizational purposes as total sales would be reported for that unit. He acknowledged that IA assigned a sales manager to the team.
[55] Mr. Michaud acknowledged that some branch meeting were “obligatory” such as the meeting to discuss the Gestion Clients software (Ex. A-20). He explained that the branch published sales numbers to create some competition amongst sales agents so that they could surpass themselves and increase sales. He acknowledged that leaders could be entitled to some form of benefit.
[56] Mr. Michaud also acknowledged that the change made in 1993 was mainly for tax purposes and that, in the transition from employee to independent contractors, there was no change since sales agents were already quite independent. They paid all their expenses generally equal to 30% of gross revenues. They were assigned an office at the branch but attended mostly to complete paperwork.
ii) Yves Charbonneau
[57] Mr. Charbonneau signed an agent contract with IA in 1993. He was described as an independent contractor (Ex. R-4.6). In 2004, he incorporated his own company and it signed a similar contract with IA (Ex. R-4.8). He filed the necessary notice with the Registraire des entreprises du Québec (Ex. R-4.27) and the AMF to indicate that his company would be attached to IA (Ex. R-4.30 and R-4.31). He had decided to incorporate following discussions with his accountant.
[58] Mr. Charbonneau was not restricted to any particular territory. He could develop his own clientele and determine his own work schedule. He paid his own assistant and established her work schedule. They worked together but he was responsible for the professional aspects. He paid for all prospecting expenses. He reported to his sales manager to keep him apprised of his results. At the beginning of his career, he attended almost all branch meetings and training sessions but later in his career only attended if the topic was of interest to him. After 36 years, he had never been the subject of a reprimand for missing a meeting.
[59] In cross-examination, Mr. Charbonneau acknowledged that he remembered the Appellant as they had been on the same team in 2012. He admitted that IA had gone through a change in 1993 but that he did not notice any real change.
[60] Mr. Charbonneau was questioned on the meaning of the word “imperitive” and “essential” (“impéraif and “promordiale”) that he interpreted as meaning it was important to attend the meeting but not mandatory. However, if an email said the meeting was “obligatory” (“obligatoire”), then he was required to attend.
[61] Mr. Charbonneau recognized an email for “week 42” (Ex. A-72) that included an agenda, a new training session and attachments. When asked why it included a list of agents who were absent, he suggested it meant they had simply not attended the last presentation. He agreed that it also meant IA was recording those who were present and those who were not. He agreed that they received regular emails with updated agenda and ranking of all agents from top producer of the week to the lowest producer but suggested that the latter could simply be a new recruit. He did not agree that this was actually a competition.
[62] Mr. Charbonneau admitted that IA provided him with an office including a telephone and landline. He admitted that all of his training was paid for and provided by IA unless he sought outside training. He admitted that he had never paid for or developed any software since he used the software provided by IA.
[63] In re-examination, Mr. Charbonneau recognized the email sent to all agents (Ex. A-40) indicating that it was “obligatory” to attend a meeting for the presentation of the “Gestion Clients” software. He saw nothing unusual about this email and attended the meeting because it was the software used by all IA agents.
iii) Stephanie Woo
[64] Ms. Woo joined IA at about the same time as the Appellant and signed the standard agent contract. She was a new agent and had not previously held a license.
[65] By all accounts, she progressed quickly. In 2014, she purchased another sales agent’s clientele for $14,515 (Ex. R-4.14). In 2022, she incorporated a new company for her business and separate company as a holding company. She took the same steps as Mr. Charbonneau and filed a notice with the AMF.
[66] When she started with IA, she was a “trainee” as she did not have her insurance sale license. She was therefore required to attend a training program over 90 days that was mandatory for compliance purposes. She regularly reported to her sales manager and considered her a “coach”. She could not recall the meeting involving Gestion Clients but suggested she had probably attended.
[67] As with Mr. Charbonneau, she developed her own clientele, determined her own work schedule and paid for all her prospecting expenses. She also paid for an assistant and determined her working schedule. She attended most weekly training sessions, explaining that they were highly recommended but not mandatory.
[68] Ms. Woo had two “incredible years” grossing $50,000 in 2012 and $100,000 in 2013, followed by four average years when she had two children. She was able to reach an agreement with another sales agent to split her commissions on a 50/50 basis. Her gross commissions had since increased to about $175,000.
[69] In cross-examination, she indicated she did not specifically recognize the schedule of training sessions for 2012 (Ex. A-8) or the actual printed version of the modules (Ex. A-57) she recognized the topics, admitting that she took the training and that it was mostly provided by the sales directors.
[70] Although she was a top producer in 2012, she had no knowledge of the insurance industry or insurance products prior to joining IA in 2012. She benefitted from the training offered by IA as well as external training. She had one-on-one meetings with her sales director. At the beginning, the administrative staff and her sales director assisted in the completion of documentation.
[71] She indicated that as a sales agent, she could not accept cash or a cheque in her personal name and that all premiums had to be paid to IA.
[72] She did not recall the instructions for the telephone or the draft messages, indicating that she did not use the landline, preferring her cell phone.
[73] In 2012, she only sold IA insurance products.
[74] In re-examination, she explained that she could sell insurance products from other insurance companies such as Manulife or Sunlife if a client requested it and IA had an agreement with those companies.
iv) Vanessa Charbonneau
[75] Ms. Charbonneau signed the standard IA agent contract in 2010 (Ex. R-4.24). She eventually incorporated her business in 2022 (Ex. R-4.25 and 4.26) and filed the appropriate registration forms with the AMF (Ex. R-4.28 and 4.29).
[76] She remembered the Appellant because he had questioned her about her position with IA when she was at a sales kiosque in the fall of 2011. She told him that she was an independent contactor paid exclusively by commissions.
[77] According to her attendance at the kiosque was voluntary, there was an organized schedule and she generally shared the costs another sales agent.
[78] She also recalled an incident involving the Appellant when he had approached her about the transfer of an existing client. She had refused offering to share the commission or transfer the client to him for a fee. The Appellant did not agree and therefore she contacted her sales manager who dealt with it.
[79] As with other witnesses, she had no specific territory, she developed her own clientele and paid her own expenses. She hired her own assistant that she found using an advertisement in a local newspaper.
[80] She established her sales objectives with her sales manager but they remained her own objectives. The more clients she met, that more sales she made. She tried to meet between 10 to 15 every week. The role of the sales manager was to guide her in that process and assist with different insurance products.
[81] She indicated that she would sometimes delegate her work to other agents, especially for more technical issues. This included her father, Yves Charbonneau.
[82] In cross-examination, she recognized a document titled “Keep your clock on time all year long” subtitled “I take responsibility and do what’s necessary to succeed” with a list of 10 bullets points (Ex. A-42). One bullet point indicated: “I take part in agency meetings and I consult the information on the extranet”. Ms. Charbonneau did not agree that this told her “what to do” but rather that it was a guide to help agents succeed in their business. She applied some of the suggestions.
[83] She admitted that when she joined IA she was assigned to a group and required to serve clients within that group. She was in fact assigned 40 existing clients that she had never met. She indicated that, once assigned, the clients belonged to her but that she could only “sell” them to another IA agent. She acknowledged that if she left IA, she could not take these clients with her.
[84] She acknowledged that IA provided her with an office, desk, telephone and landline as well as sales brochures. She did not pay for any software development. IA provided training for all their insurance products.
[85] She explained that she had no knowledge of any consequences if agents were absent for a meeting and that if a list was prepared, it was to ensure that the listed agents could remember to obtain a copy of the training module.
[86] On re-examination, Ms. Charbonneau explained that she was not certain if she had an obligation to take on clients assigned to her from within the group. She had never questioned this and had simply served them.
v) Pasquale Apold
[87] Ms. Apold was a lawyer who worked for IA from 2011 to 2017.
[88] In 2012 she was chief of compliance and her role was to ensure compliance with legislation known as an Act Respecting the Distribution of Financial Products and Services, CQLR C D-9.2 (“DFP&S”) (“Loi sur la distribution de produits et services financiers, RLRQ C D-9.2.”). That legislation regulated the sale of insurance products (amongst other products) sold by representatives who were required to be acting for a firm and authorized to do so by a certificate issued by the AMF. In accordance with article 80 of that legislation, a firm was responsible for “any injury caused to a client by the fault of one of its representatives in the performance of the representative’s functions”.
[89] The other relevant legislation was an Act respecting the regulation of the financial sector, CQLR c E-6.1 (“Loi sur l’encadrement du secteur financier, RLRQ c E-6.1”) that established the role, functions and powers of the AMF. Ms. Apold acknowledged that she consulted and followed the “Guide on Governance and Compliance” published by the AMF.
[90] To ensure compliance with this legislation, IA was required to put in place a system of surveillance and to prepare appropriate directives, documentation and forms, training of directors and inspectors and engage compliance officers.
[91] One of the forms used by administrative staff was the compliance monitoring grid (“conformité - grille de suivi”) (Ex. -56) distributed to all IA branches to ensure that client applications were in compliance with the legislation.
[92] She explained that one of the requirements of the legislation was the preparation of an “illustration” intended to explain the insurance product before it was sold to a prospective client. IA was required to establish strict guidelines (“lignes directrices”) for the preparation of such illustrations.
[93] Similarly, the legislation imposed strict guidelines for “all forms of advertising or display” (Ex. A-46). Accordingly, sales agents were provided with sample business cards and pre-approved advertising forms that could be completed by adding a photo and telephone number. All forms of advertising were subject to pre-approval and IA was responsible for advertising used by its sales agents.
[94] Ms. Apold recognized the “Coaching Guide” (Ex. A-42) used for trainees but explained that it likely had not been completed because the Appellant was not a “trainee”, having previously held an insurance license.
[95] She recognized the renewal form filed with the AMF (Ex. 4.2) noting that an applicant could represent a firm as an “employee” or “without being an employee” but that the Appellant had indicated the latter.
[96] She explained that an agent who was an “employee” was not required to develop a clientele and would typically serve clients at the branch while agents described as independent contractors were expected to work outside the branch and develop their own clientele, although it too would become the property of IA.
[97] In cross-examination, Ms. Apold was questioned on the use of the “compliance – aide-memoire” (Ex. A-26). She explained that the administrative employees at each branch were trained to use it for each file.
[98] She acknowledged that there was no difference between the Appellant’s busines