Date: 19981207
Docket: 98-238-UI
BETWEEN:
JOHANNE ASPIROT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Charron, D.J.T.C.C.
[1]
This appeal was heard at New Carlisle, Quebec on October 7,
1998 to determine whether the appellant held insurable employment
within the meaning of the Unemployment Insurance Act and
the Employment Insurance Act (the "Act")
during the periods from June 18 to September 15, 1995,
from June 17 to September 6, 1996 and from June 2
to August 22, 1997 when she worked for Lisette Aspirot
(the payer).
[2]
By letter dated December 23, 1997, the respondent informed
the appellant that this employment was not insurable because she
and the payer were not dealing with each other at arm's
length.
Summary of Facts
[3]
The facts on which the respondent relied in making his decision
are stated in paragraph 5 of the Reply to the Notice of
Appeal as follows:
[TRANSLATION]
(a)
the payer has operated a gas station and convenience store for
more than 20 years; (admitted)
(b)
the appellant is the payer's daughter; (admitted)
(c)
the appellant, her spouse and their daughter, born on
November 18, 1995, lived with the appellant's parents;
(admitted)
(d)
she pays no rent or board; (admitted)
(e)
she has worked for the payer for 18 years; (admitted)
(f)
the payer's business is located approximately 400 metres
from the payer's residence; (admitted)
(g)
the business was open from 8:00 a.m. to 11:00 p.m.,
seven days a week; (admitted)
(h)
the appellant was the payer's only paid employee; (admitted
subject to amplification)
(i)
the payer's husband also helped out at the convenience store,
but without pay; (admitted subject to amplification)
(j)
the appellant was remunerated for a number of weeks corresponding
to the minimum required to qualify for unemployment insurance
benefits; (admitted subject to amplification)
(k)
the payer claims that she hired her daughter in the summer
because there was more work (admitted subject to
amplification)
(l)
the payer's turnover is not higher during the summer than
during the rest of the year; (admitted subject to
amplification)
(m) the
appellant claims that she could not work the rest of the year
because she had to take care of her daughter while receiving
unemployment insurance benefits; (denied as drafted)
(n)
to be entitled to unemployment benefits, a person must be
available to work; (denied as drafted)
(o)
the payer claims that she cleaned her residence thoroughly in the
summer, that is during the period when her daughter was working
for the business, and she explained that, during the other nine
months, she worked in the business while her daughter took care
of the house, whereas the appellant claims that she worked in the
business with her mother. (admitted subject to amplification)
[4]
The appellant admitted that all the subparagraphs of
paragraph 5 of the Reply to the Notice of Appeal were true,
except those she denied or of which she had no knowledge, as
indicated in parentheses at the end of each subparagraph.
Lisette Aspirot's Testimony
[5]
Lisette Aspirot has operated a convenience store and gas
station with her husband Joseph in Paspébiac since 1979.
In 1980, the parents had to seek the help of their daughter
Johanne as a result of an excess of work. Since October 20, 1992,
Joseph has been receiving his pension and working for Lisette for
nothing. Lisette has hired other persons as necessary, including
Léandre Deraiche. She did so during months when
business was booming and they sold as much as $33,000 worth of
gasoline. Sales fluctuated between $20,000 and $25,000 in 1995,
$17,000 and $20,000 in 1996 and 1997 and $875 and $6,000 in 1998.
Fortunately the convenience store enabled the family to survive.
In the last three years, Johanne worked only 12 or 13 weeks
a year because it was so boring. This was moreover the number of
weeks she had worked since 1981. The business was open from
8:00 a.m. to 11:00 p.m., seven days a week. Johanne
worked the shift from 8:00 a.m. until noon and from 1:00 to
5:00 p.m., whereas Lisette worked from 1:00 to
9:00 p.m. and Joseph from 5:00 until 9:00 p.m. If
Johanne was absent, Joseph replaced her from 8:00 a.m. until
noon. In his free time, Joseph did repairs and renovations in the
store or house or cut firewood. Johanne was paid by cheque and
had Saturdays and Sundays off. The payer offered her customers
credit: some paid by the week, others by the month, and others
did not pay at all. Johanne did the bookkeeping and kept track of
the credit. When Johanne worked at the cash, her parents or one
of her aunts babysat her child. On December 12, 1997,
Lisette made a written declaration which reads as follows:
[TRANSLATION]
My daughter Johanne has worked at the convenience store since
1979. Since 1995, it has been agreed that I would hire her only
during the summer holidays, from June to September each year. I
could have employed her before the holidays because there was
work for her, but the agreement was that she would work during
the holidays. She worked from 8:00 a.m. to 5:00 p.m.,
Monday to Friday, as a clerk-cashier at the convenience store. In
1997, I hired her on June 2 because I knew that my daughter
would be starting classes in Chandler on August 25 of that
year. Consequently, I laid her off on August 22. She could
have worked at her job before June and after September in 1995,
1996 and 1997 (Exhibit I-1).
Johanne was laid off by her mother when there was work so that
she could take her hairdressing classes. Johanne was the only
paid employee and the payer intended eventually to give her the
business. In any case, the payer has only one other daughter, who
shows no interest in the store.
Johanne Aspirot's Testimony
[6]
Johanne is a hairdresser but sometimes worked as a cashier at her
parents' store. She also kept the books of account, placed
orders, handled the credit, stocked the shelves, sold
Loto-Québec tickets, served customers, did the cleaning
and washed the floor. On November 18, 1996, Johanne had a
daughter, whom she took to the store with her when she went to
work. If necessary, she had her babysat by her mother or her two
aunts, who adored the child. Johanne lived with her parents and
did not pay board. When she was not working in the store, she
cleaned the house the rest of the year. In 1995, Johanne
witnessed her grandmother's murder by her son and she is
still traumatized by it, but this never prevented her from
working. During the periods in issue, the appellant's spouse
lived with her at the home of his in-laws, Lisette and
Joseph. He left on December 2, 1997.
Analysis of the Facts in Relation to the Act
[7]
The respondent admits that the appellant was bound to the payer
by a contract of service. For this reason, he only alleges a
non-arm's length relationship in support of his Reply to the
Notice of Appeal. The question now arises as to whether the
appellant would have received such high remuneration if she had
been dealing with the payer at arm's length.
[8]
Subsection 3(2) and paragraph 5(2)(i) of the
Act read in part as follows:
(2) Excepted employment is
. . .
(c)
subject to paragraph (d), employment where the employer
and employee are not dealing with each other at arm's length
and, for the purposes of this paragraph,
(i)
the question of whether persons are not dealing with each other
at arm's length shall be determined in accordance with the
provisions of the Income Tax Act, and
(ii)
where the employer is, within the meaning of that Act, related to
the employee, they shall be deemed to deal with each other at
arm's length if the Minister of National Revenue is satisfied
that, having regard to all the circumstances of the employment,
including the remuneration paid, the terms and conditions, the
duration and the nature and importance of the work performed, it
is reasonable to conclude that they would have entered into a
substantially similar contract of employment if they had been
dealing with each other at arm's
length . . . .
[9]
Under section 251 of the Income Tax Act, related
persons are deemed not to deal with each other at arm's
length. Where persons are related to each other, there cannot be
insurable employment unless the Minister of National Revenue is
satisfied otherwise in accordance with the above-quoted
subparagraph 3(2)(c)(ii) and
paragraph 5(2)(i) of the Act.
[10] The
Federal Court of Appeal has rendered a number of important
decisions respecting the application of
paragraph 3(2)(c) of the Act.
[11] In the
first of these decisions, Tignish Auto Parts Inc. v.
M.N.R. (185 N.R. 73), dated July 25, 1994, the
Federal Court of Appeal cited counsel for the respondent, in
whose opinion it concurred:
Under the authority of Minister of National Revenue v.
Wrights' Canadian Ropes Ltd., contends the respondent,
unless the Minister has not had regard to all the circumstances
of the employment (as required by subparagraph 3(2)(c)(ii) of the
Act), has considered irrelevant factors, or has acted in
contravention of some principle of law, the court may not
interfere. Moreover, the court is entitled to examine the facts
which are shown by evidence to have been before the Minister when
he reached his conclusion so as to determine if these facts are
proven. But if there is sufficient material to support the
Minister's conclusion, the court is not at liberty to
overrule it merely because it would have come to a different
conclusion. If, however, those facts are, in the opinion of the
court, insufficient in law to support the conclusion arrived at
by the Minister, his determination cannot stand and the court is
justified in intervening.
[12] There are
thus four tests which the Tax Court of Canada can apply in
deciding whether it is justified in intervening:
the Minister of National Revenue
(1)
has not had regard to all the circumstances;
(2)
has considered irrelevant factors;
(3)
has acted in contravention of some principle of law; or
(4)
has based his decision on insufficient facts.
[13] In
Ferme Émile Richard et Fils Inc.
(178 N.R. 361) of December 1, 1994, the Federal
Court of Appeal summarized Tignish Auto Parts Inc. as
follows:
. . . As this court recently noted in Tignish Auto Parts
Inc. v. Minister of National Revenue, July 25, 1994,
A-555-93, F.C.A., not reported, an appeal to the Tax Court of
Canada in a case involving the application of s. 3(2)(c)(ii) is
not an appeal in the strict sense of the word and more closely
resembles an application for judicial review. In other words, the
court does not have to consider whether the Minister's
decision was correct: what it must consider is whether the
Minister's decision resulted from the proper exercise of his
discretionary authority. It is only where the court concludes
that the Minister made an improper use of his discretion that the
discussion before it is transformed into an appeal de novo and
the court is empowered to decide whether, taking all the
circumstances into account, such a contract of employment would
have been concluded between the employer and employee if they had
been dealing at arm's length.
[14] The
appellant submits that the respondent did not have regard to all
the circumstances in excepting her employment from insurable
employment. The respondent did not consider the murder of her
grandmother by her son.
[15] On this
point, in Attorney General of Canada v. Jencan Ltd.
(1997), 215 N.R. 352, Isaac C.J. of the Federal
Court of Appeal, writing for the Court, held as follows:
The Deputy Tax Court Judge, however, erred in law in
concluding that, because some of the assumptions of fact relied
upon by the Minister had been disproved at trial, he was
automatically entitled to review the merits of the determination
made by the Minister. Having found that certain assumptions
relied upon by the Minister were disproved at trial, the Deputy
Tax Court Judge should have then asked whether the remaining
facts which were proved at trial were sufficient in law to
support the Minister's determination that the parties would
not have entered into a substantially similar contract of service
if they had been at arm's length. If there is sufficient
material to support the Minister's determination, the Deputy
Tax Court Judge is not at liberty to overrule the Minister merely
because one or more of the Minister's assumptions were
disproved at trial and the judge would have come to a different
conclusion on the balance of probabilities. In other words, it is
only where the Minister's determination lacks a reasonable
evidentiary foundation that the Tax Court's intervention is
warranted . . . . An assumption of fact that
is disproved at trial may, but does not necessarily, constitute a
defect which renders a determination by the Minister contrary to
law.
[16] The
evidence shows that it is incorrect to say that the appellant was
the only employee who received remuneration:
Léandre Deraiche worked for a salary.
[17] The payer
says that, since she has worked for her, Johanne has worked only
12 or 13 weeks a year, the minimum required to qualify for
unemployment insurance benefits.
[18]
Subparagraph 5(k) of the Reply to the Notice of Appeal
states that Lisette says she hired her daughter in the summer
because there was more work. In her declaration
(Exhibit I-1), she states that she could have employed
her before the holidays because there was work for her, but the
agreement was that she would work during the holidays. In 1995,
sales were virtually the same throughout the year. It was only in
1998 that they declined sharply.
[19] The
appellant claims that she could not work the rest of the year
because she had to take care of her daughter while receiving
unemployment insurance benefits. When Johanne was laid off, her
mother claims that it was because there was no more work, but
this is false: she was laid off so that she could attend her
hairdressing classes.
[20] The payer
testified that Johanne took care of the house while her mother
worked in the business for nine months. Johanne attended to the
convenience store during the summer, while her mother did the
cleaning, took a vacation and babysat the little girl.
[21] It seems
clear from the evidence adduced and the documents filed by the
parties that the respondent had regard to virtually all the
circumstances, ruled out irrelevant factors, acted in accordance
with the recognized principles of law and based his decision on
sufficient facts; in view of the many contradictions contained in
the evidence and considering that the rest of the evidence is
sufficient to justify the respondent's decision that the
parties would not have entered into a similar contract if they
had been dealing with each other at arm's length, the appeal
is dismissed and the Minister's decision is confirmed.
Signed at Ottawa, Canada, this 7th day of December 1998.
"G. Charron"
D.J.T.C.C.
Translation certified true on this 28th day of February
2001.
Stephen Balogh, Revisor
[OFFICIAL ENGLISH TRANSLATION]
98-238(UI)
BETWEEN:
JOHANNE ASPIROT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on October 7, 1998, at New
Carlisle, Quebec, by
the Honourable Deputy Judge G. Charron
Appearances
Counsel for the
Appellant:
G. Nadon
Counsel for the
Respondent:
A. Saheb-Ettaba
JUDGMENT
The
appeal is dismissed and the Minister's decision confirmed in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 7th day of December 1998.
D.J.T.C.C.
Translation certified true
on this 28th day of February 2001.
Stephen Balogh, Revisor
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