Part I — Recent Case Law
Principles of Interpretation in
Canadian Bijuralism as Applied in the Tax Context:What is the Current State of Affairs?

Column on Bijuralism and Harmonization

Michelle Desrosiers, Notary, M. Fisc.
Department of Justice Canada

2. 9041-6868 QUÉBEC

In our opinion, this case marks a turning point in the application of section 8.1 of the Interpretation Act in tax cases where property and civil rights are in issue, at least in situations where the nature of the work performed by an individual must be determined. This unanimous decision by the Federal Court of Appeal clearly and unambiguously explains the approach to be taken by the courts where the provision in question incorporates civil rights concepts as well as the importance of section 8.1 of the Interpretation Act in that approach.

There were two issues in the case: whether the work performed by Mr. Tambeau, a shareholder of 9041-6868 Québec inc., constituted insurable employment with the appellant company within the meaning of paragraph 5(1)(a) E.I.A. and, if so, whether that insurable employment was excluded under paragraph 5(2)(b) E.I.A. The outcome of the case is not especially relevant for the purposes of this column. What is important is the unanimous approach taken by the Court, which we consider persuasive enough to make it worth reproducing the relevant passages of the judgment.

2  With respect to the nature of the contract, the judge's answer was correct, but, in my humble opinion, he arrived at it incorrectly. He did not say anything about the provisions of the Civil Code of Québec, and merely referred, at the end of his analysis of the evidence, to the common law rules stated in Wiebe Door Services Ltd. v. Canada (Minister of National Revenue), [1986] 3 FC 533 (FCA) and 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983. I would hasten to point out that this mistake is nothing new and can be explained by the vacillations in the case law, to which it is now time to put an end. 3  When the Civil Code of Québec came into force in 1994, followed by the enactment of the Federal Law - Civil Law Harmonization Act, No. 1, SC 2001, c. 4 by the Parliament of Canada and the addition of section 8.1 to the Interpretation Act, R.S.C., c. I-21 by that Act, it restored the civil law of Quebec to its rightful place in federal law, a place that the courts had sometimes had a tendency to ignore. On this point, we need only read the decision of this Court in St-Hilaire v. Canada, [2004] 4 FC 289 (FCA) and the article by Mr. Justice Pierre Archambault of the Tax Court of Canada . . . recently published in the Second Collection of Studies in Tax Law (2005) in the collection entitled The Harmonization of Federal Legislation with Quebec Civil Law and Canadian Bijuralism, to see that the concept of "contract of service" in paragraph 5(1)(a) of the Employment Insurance Act must be analyzed from the perspective of the civil law of Quebec when the applicable provincial law is the law of Quebec.

In paragraph 4 of the judgment, Décary J.A., writing for the Court, considered it useful to reproduce section 8.1 of the Interpretation Act to demonstrate the importance of the wording of that provision and the interpretation it must be given in a situation in which private law concepts are relied on in a tax context. He continued as follows:

5  Section 8.1 of the Interpretation Act came into force on June 1, 2001. It codified the principle that the private law of a province and a federal statute are complementary, which had been recognized (see St-Hilaire, supra) but had not always been put into practice. When that section came into force, the immediate effect was to restore the role of the civil law in matters under the jurisdiction of this Court, to bring to light how the common law might have been borrowed from, over the years, in cases where Quebec civil law applied or should have applied, and to caution us against any such borrowing in future. 6  It is possible, and in most cases even probable, that where contracts are similar they would be characterized similarly, whether the civil law or common law rules are applied. The exercise, however, is not a matter of comparative law, and the ultimate objective is not to achieve a uniform result. On the contrary, the exercise, as was in fact intended by the Parliament of Canada, is one of ensuring that the approach taken by the court is the approach that applies in the applicable system, and the ultimate objective is to preserve the integrity of each legal system. On that point, what was said by Mr. Justice Mignault in Curly v. Latreille, (1920) 60 S.C.R. 131, at page 177 applies as well now as it did then:

[TRANSLATION] It is sometimes dangerous to go outside a legal system in search of precedents in another system, based on the fact that the two systems contain similar rules, except, of course, where one system has borrowed a rule from the other that was previously foreign to it. Even when the rule is similar in the two systems, it may be that it has not been understood or interpreted in the same way in each of them, and because the legal interpretation — I am of course referring to interpretation that is binding on us — is in fact part of the law that it interprets, it may in fact happen that despite their apparent similarity, the two rules are not at all identical. I would therefore not base the conclusions that I think must be adopted in this case on any precedent taken from English law …

7  In other words, it is the Civil Code of Québec that determines what rules apply to a contract entered into in Quebec.

After reproducing the provisions of the Civil Code of Québec that applied in this case, the Court noted that the definition of a contract of employment itself stresses control, "which makes control the actual purpose of the exercise and therefore much more than a mere indicator of organization".[1] Finally, since, in the Court's opinion, the terms of the contract were unequivocal, clearly expressed the common intention of the parties and reflected the parties' true relationship, the Court found that the contract was a contract of employment. On the second issue, it was alleged that the number of voting shares that must be considered in determining the percentage provided for in paragraph 5(2)(b) E.I.A. cannot include shares in respect of which the holders are unable to exercise their voting rights, for example under section 102 of the Quebec Companies Act[2]where the shares have not been paid for. The Court rejected this position outright on the basis that a voting share does not cease to be a voting share simply because the holder of the share is unable to exercise its right to vote.

2.1. 9079-6038 Québec inc. v. M.N.R.[3]

Following the decision in 9041-6868 Québec, the Tax Court of Canada decided another case in which it had to determine the status of workers for the purposes of the Employment Insurance Act, but it did so without referring to 9041-6868 Québec. In 9079-6038 Québec, Bédard J. nonetheless followed the trend established by the courts as regards the applicability of the codified principle of complementarity in interpreting the provisions of the Employment Insurance Act where the case originates in Quebec. The Court began by setting out the rules that should be followed in such a context:

[Translation] [7] When the courts have to define concepts from Quebec private law in applying a federal statute such as the Employment Insurance Act, they must follow the rule of interpretation set out in section 8.1 of the Interpretation Act. To determine the nature of a Quebec contract of employment and distinguish it from a contract for services, at least since June 1, 2001, reference must be made to the relevant provisions of the Civil Code of Québec ("Civil Code"). Those rules are incompatible with the rules stated in cases such as 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, and Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553. Unlike the situation in the common law, the components of a contract of employment have been codified and, since the coming into force of articles 2085 and 2099 of the Civil Code on January 1, 1994, the courts no longer have the latitude the common law courts have to define a contract of employment. If court decisions must be relied on to determine whether there was a contract of employment, the decisions that must be chosen are ones that have taken an approach consistent with civil law principles.

The case involved an appeal from decisions by the Minister of National Revenue to the effect that the work performed by the workers for the appellant, whose business involved selling and installing alarm systems, met the requirements for a contract of service under paragraph 5(1)(a) E.I.A. The Court, which agreed with the Minister on this point, outlined the requirements for reaching an appropriate conclusion.

In such a context, the appellant bears the burden of proving the facts in issue on a balance of probabilities in order to show that the Minister's decisions should be vacated. The appellant must prove the contract the parties entered into and establish what they both intended to be the nature of that contract. If there is no direct evidence of that intention, the appellant can rely on indicia that are in accordance with the contract entered into and the provisions of the Civil Code of Québec governing it. Bédard J. was of the view that, in this case, the appellant had to prove that there was no relationship of subordination for the Court to find that there was no contract of employment. For this purpose, the Court could, if necessary, use indicia of autonomy such as those set out in Wiebe Door, namely ownership of the tools and the chance of profit and risk of loss. However, Bédard J. was of the opinion that, unlike with the common law approach, once a judge finds that there is no relationship of subordination, this ends the analysis for the purpose of determining whether the contract is a contract for services. According to him, there is no need to consider the relevance of ownership of the tools and the chance of profit or risk of loss because, under the Civil Code of Québec, the absence of a relationship of subordination is the only thing that distinguishes a contract for services from a contract of employment. Thus, in his view, elements such as ownership of the tools and the chance of profit or risk of loss are not essential to a contract for services. However, the absence of a relationship of subordination is an essential element.

Ultimately, the Court expressed the opinion that a decision must normally be based on the facts revealed by the evidence as regards the performance of the contract, even if the intention expressed by the parties indicates the contrary. If the evidence on the performance of the contract is not conclusive, a decision can nonetheless be rendered based on the parties' intention and the way they have described their contract, if the evidence on these issues is probative. If that evidence is not conclusive either, the appellant's appeal should be dismissed because of insufficient evidence.


Where a case relates to the nature of the work performed by a taxpayer, the case law is now clear: if the province of application is Quebec, it is the Civil Code of Québec that supplements federal law, and the approach taken in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.[4]and Wiebe Door is incompatible with the relevant provisions of the Civil Code of Québec. As we have seen, neither the Income Tax Act nor the Employment Insurance Act explicitly dissociates the meaning of the terms "employment", "employee" and "relationship of subordination" from Quebec civil law, nor do these two statutes implicitly indicate that these terms should be given the meaning they have in the common law. According to Professor Duff:

…a general presumption that Parliament might have intended the distinction between employees and independent contractors to apply uniformly throughout Canada should not outweigh the explicit affirmation of Canadian bijuralism in new section 8.1 of the federal Interpretation Act and the preamble to the Federal Law-Civil Law Harmonization Act, No. 1. Consequently, to the extent that tax cases in Quebec rely on Wiebe Door rather than the CCQ, or on a separate test in addition to that in the CCQ, they are incompatible with new section 8.1 of the federal Interpretation Act.[5]

This is the conclusion that emerges from 9041-6868 Québec.

Hopefully, Canadian courts deciding tax cases on this point, but also cases in other areas involving civil law concepts, will continue to apply the rules set out in section 8.1 of the Interpretation Act consistently and just as persuasively. For transactions that occur in Quebec, the tax community can then be certain that rules taken from Quebec civil law will be applied in interpreting the provisions of the Income Tax Act where that Act is silent or where its provisions refer to property and civil rights concepts that are not defined elsewhere.