Benguaich v. M.N.R., docket 97-367-UI

Date: 19980820

Docket: 97-367-UI

BETWEEN:

ISAAC BENGUAICH,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Rowe, D.J.T.C.C.

[1]            The appellant appeals from a decision (in the form of a determination) - dated December 4, 1996 - wherein the Minister of National Revenue (the "Minister") decided the appellant's employment with Trinkets Incorporated from April 16, 1992 to April 15, 1993 was not insurable because his employment was excepted employment as he was not dealing at arm's length with his employer nor was he deemed to have been dealing at arm's length pursuant to paragraph 3(2)(c) of the Unemployment Insurance Act (the "Act").

[2]            As a consequence of the respondent having failed to file a Reply to Notice of Appeal in accordance with the time limit set forth in the relevant Tax Court of Canada Rules - Unemployment Insurance, the Honourable Deputy Judge Léger, by Amended Order dated April 6, 1998, ordered that at the hearing of the appeal the respondent shall bear the burden of proof.

[3]            Counsel for the respondent advised he wished to withdraw paragraph 14(j) of the Reply to Notice of Appeal as it was not being relied upon, as stated therein, by the Minister. Since the respondent carried the burden of proof and that assumption - without more - would not be proof of the matter alleged, I fail to see the point.

[4]            Counsel agreed the evidence taken on the appeal of Miriam Benguaich - 97-366(UI) - where relevant - could be applied to the within appeal and the exhibits filed therein would, where relevant, be applicable to the appeal of Isaac Benguaich.

[5]            The evidence given by Sara Benaim on the appeal of her mother, Miriam Benguaich, as it is relevant to the within appeal, is reproduced below:

[6]            Sara Benaim stated she is the President, Director and sole shareholder in Trinkets Incorporated (Trinkets) which she formed in 1980. The corporation carries on the jewellery business and the first store was opened in the Dufferin Mall at Bloor and Dufferin in Toronto. The business grew until there were a total of 9 Trinkets retail outlets and the payroll was $220,618.23 in 1991 - Exhibit A-2 - compared to only $24,000 per annum several years later as a result of severe downsizing of the business and closures of outlets as set forth in a list filed as Exhibit A-1. The Head Office of the corporation was located in a premise purchased for that purpose at 150 Spinnaker Way, Concord, Ontario.

[7]            The Head Office - a strata-title property - was rented out and then sold, at a loss, in 1996. An extract from the financial statement of Trinkets for the year ending September 30, 1990 - Exhibit A-3 - revealed sales of $1,378,791.00, slightly higher than sales for the corresponding period in 1989. The financial statement for 1991 - Exhibit A-4 - showed sales in the sum of $1,071,936.00 while the financial statement for 1993 - Exhibit A-5 - indicated sales had fallen to $800,806.00 from $848,910.00 in 1992. Sales for the year ending September 30, 1994 had declined further and were only $781,211.00 as set forth in the financial statement filed as Exhibit A-6.

[8]            The non interest-bearing demand loan by her father and mother to Trinkets, secured by a mortgage against their home, was made in order to inject capital into the business through a line of credit at the bank and, as shown on the financial statement - Exhibit A-4 - had a balance owing of $43,353.00 on September 30, 1991. The bank had loaned Trinkets the sum of $90,000 and had taken security against inventory together with the pledge of a term deposit. The bank had been owed approximately $200,000 and when it called in the demand loan and the real estate owned by the corporation could not be readily sold in response, it was necessary for Sara Benaim to re-mortgage her principal residence and to rent out the office premises until it could be sold. Later, she was able to repay her parents and it was only in 1990 - when business began to decline - that she had needed to turn to them for financial assistance in the form of a loan.

[9]            In the within appeal, Sara Benaim testified she is the daughter of the appellant, Isaac Benguaich, who is now 76 years old and in ill health. He was born in Tangiers, Morocco and came to Canada 36 years ago. He began working for Trinkets in 1982. At that time, Sara Benaim testified she was pregnant with her first child and her father had just been laid off from his job so he took over her duties and ran the company for a period of four months. Upon her return to work, the business continued to grow and she discovered there were nearly 100 items of jewellery - per week - which customers had handed in, for repair, to the various Trinkets outlets. As a result, she set up a repair shop in the office condominium used by Trinkets as a Head Office and purchased the necessary materials and equipment for that purpose. The repair work was extremely time-consuming and gold had to be purchased in particular sizes as the items collected from customers for repair or sizing were products purchased from Trinkets or other vendors. She hired Isaac Benguaich to carry out the necessary repair work and he also began travelling with her from store to store because the insurance coverage for inventory was limited to $5,000 per person and if they travelled together they could move a total of $10,000 in merchandise from one Trinkets outlet to another and still be covered in the event of loss. In addition, the appellant reconciled credit card slips for accounting purposes. He was paid a salary - $700.00 bi-weekly based on a 40-hour week - but his working hours were irregular in that a trip to Hamilton might cause him to return home after normal working hours. He was also paid the sum of $500 per month to cover the use of his vehicle and to compensate him for other travelling expenses. Sara Benaim referred to a list of photocopies of paycheques issued by Trinkets to the appellant - Exhibit A-15. (The numbering system for exhibits in the within appeal follows in sequence from those entered in the appeal of Miriam Benguaich, as referred to earlier.) When it became necessary to rent out the condominium used as Head Office, the repair facility was closed out and, with retail outlets being closed due to falling sales volume, the repair work was sent out to an independent contractor. The policy of Trinkets had been not to charge a customer for sizing if the purchase was in excess of one hundred dollars. At one point, the repair work - including changing batteries for watches, clocks and other items - was grossing $150,000 per year. In 1994, the Trinkets store in Mississauga was closed and, in 1995, the outlet in Hamilton was shut down. She was offered a location for three months in Square One Mall and, in order to operate, she contacted some former employees and her father, Isaac was called back to do work, as and when required. He looked after deposits, inventory records and accompanied her on trips to other stores. She stated the appellant was well qualified to do the repair and other work and had taken courses offered by the Canadian Jewellers Association and also learned on the job. He also took bookkeeping courses at Seneca College so he could help out with the paperwork in the office. Once the repair shop had been closed, thereafter when he was called in to work, he did not collect unemployment insurance benefits during any period he was employed. On some occasions, Sara Benaim stated there was a delay in paying wages to the appellant due to the financial position of Trinkets. The appellant owned no shares in Trinkets and, while other workers were requested to hold off cashing pay cheques from time to time, her father did not cash his cheques for a long time and some may still be outstanding according to company bank statements. Sara Benaim stated she explained the whole story of the employment of her parents to Peter Sanginesi, the Revenue Canada investigator and also told him that if her parents were not entitled to unemployment insurance benefits then Revenue Canada should re-pay her for having paid premiums for the past 15 years. Later, she dealt with Deborah Brochu, an Appeals Officer, and provided her with various documents from time to time, as requested.

[10]          In cross-examination, Sara Benaim was referred to certain payroll records of Trinkets - Exhibit R-3 - as well as photocopies of cheques issued by Trinkets to Isaac Benguaich - Exhibit R-4. She explained her father chose to receive a weekly salary - paid bi-weekly - because he preferred to have a fixed income. He was able to do the repair work as he had experience gained over many years from observing and assisting a friend who had a watch repair business. He was flexible in his working hours and was willing to size a $2,000 ring at 9:00 p.m. if it would assist in making the sale. Sara Benaim stated the appellant knew she was experiencing financial difficulties and had cancelled cheques to prove that other workers deferred cashing their pay cheques but not for as long a period as her father. She acknowledged having received a letter - Exhibit R-5 - dated September 13, 1996 - from Deborah Brochu requesting clarification on several matters arising from the Questionnaire which had earlier been completed by her and returned to Ms. Brochu. She responded to the request for additional information and/or explanation on November 1, 1996. The salary paid to her father was at the rate of $700 bi-weekly as shown on the payroll records in Exhibit A-7. In completing the Questionnaire - Exhibit R-8 - Sara Benaim stated the appellant had actually received payment for each pay period. At page 7 of the Questionnaire - question 7(a) - she stated the salary of the appellant was "approximately $300.00 per week". She explained that most of the Trinkets outlets had no full-time employees and even if some people worked a lot of hours they were still paid - by agreement - on an hourly basis.

[11]          Deborah Brochu testified she has been employed by Revenue Canada for 16 years and has been an Appeals Officer in the Canada Pension Plan and Unemployment - now Employment - Insurance section for 4 years. On April 16, 1996 the file of Isaac Benguaich was assigned to her. In accordance with established procedure, a clerk in her office - on February 9, 1996 - had mailed out Questionnaires to the worker and to Trinkets, the payor. A sample of the letter enclosing the Questionnaire to a worker was filed as Exhibit R-6. A similar letter - with necessary changes in context - is sent to the payor. Not having received any response to the material, she sent a follow-up letter - by registered letter - to the appellant and to the payor in which she imposed a 15-day deadline for response. On June 17, 1996 Ms. Brochu stated she sent out another letter - this time by certified mail - requesting a response within 10 days of receipt. On July 22, 1996 a response was received in the form of a completed Questionnaire which was faxed to her office bearing the signatures of Sara Benaim and Isaac Benguaich. On July 24, 1996 a letter on the letterhead of Garfinkle, Biderman, Barristers and Solicitors, was received by Ms. Brochu enclosing financial statements of Trinkets and other information pertaining to the operation of Trinkets. Ms. Brochu stated she called Sara Benaim on September 9, 1996 to discuss some matters with her, especially pertaining to cancelled cheques from Trinkets to the appellant for all pay periods relevant to the issue. Sara Benaim was asked why her father had received pay cheques following his lay off and the response was that his pay for the earlier periods was delayed. The loan arrangement between the appellant, his wife, Miriam Benguaich and Sara Benaim was discussed and Ms. Brochu explained she requested cancelled cheques from Trinkets which would substantiate the claim of Sara Benaim that other workers had also delayed cashing pay cheques when Trinkets was facing financial problems. On September 13, 1996 - the day following the conversation with Sara Benaim - a letter was sent to her - Exhibit R-5 - requesting further clarification on some matters. In response, Sara Benaim completed certain portions of the document - Exhibit R-5 - and attached other sheets of paper on which she had provided payroll information or further explanation of the working relationship between the appellant and Trinkets. On November 20, 1996, Ms. Brochu stated she telephoned Sara Benaim and informed her she had sent the same copies of cheques that had been provided earlier and that there were still no pay cheques payable by Trinkets to the appellant for certain pay periods. The relevant pay cheques were requested within 10 days but there was no response. As a result, Ms. Brochu completed her report - Exhibit R-9 - and handed it to her supervisor on December 2, 1996. On December 4, 1996, J.M. (Jackie) Cleaver, Chief, Appeals Division for the Minister of National Revenue issued the decision letter to the appellant and to the payor. On December 18, 1996 Ms. Brochu stated she received a telephone call from Sara Benaim asking why there had been a decision before reviewing the additional material which she had mailed. Ms. Brochu informed Sara Benaim no such material had been received and on December 20, 1996 copies of pay cheques relating to Miriam Benguaich were received at the Revenue Canada office for the attention of Deborah Brochu. There were still no pay cheques pertaining to non-related workers which would bear on the issue as to whether or not their pay had been delayed and there were no pay cheques for the appellant covering the pay periods of March 22, 1992; August 24, 1992; September 7, 1992; September 21, 1992; October 4, 1992; February 8, 1993; February 22, 1993; March 8, 1993 and March 22, 1993. Referring to her Report on a Determination or Appeal - Exhibit R-9 - Ms. Brochu stated she obtained the information set forth on page 2 under the category "FACTS" by reviewing the information in the Questionnaire - Exhibit R-8 - and other supporting material including payroll records and sales figures provided by Sara Benaim. She also accessed T-4 returns from the mainframe computer as well as T-1 and T-2 income tax returns. She also had read the report from Joan McMurdo, a Rulings Officer, who had determined the appellant was not engaged in insurable employment for the period from April 16, 1992 to April 15, 1993. Ms. Brochu prepared a chart - set out at page 6 of her report - in which she analyzed the dates upon which cheques were issued to the appellant and the dates when they were cashed. As she noted on page 8 of her report under a discussion pertaining to the appellant's remuneration, "the shortest period between the issuance date and the date the cheque was cashed was 29 days and the longest was 122 days. The average length of time was 75 days". The appellant had also received cheques from Trinkets following his lay off on April 15, 1993. During the telephone conversation with Sara Benaim on September 12, 1996 Ms. Brochu noted in her report - at paragraph 2 on page 6 - that Sara Benaim's explanation had been she had been holding off pay cheques covering earlier pay periods and that the cheques issued to Isaac Benguaich in 1994 and 1995 were actually payments on the loan owed to her father and were not paycheques and that her father had returned to work as temporary seasonal help for Christmas and was paid once a month based on the hours he worked. Ms. Brochu stated she had requested that Sara Benaim send a copy of the appellant's payroll record for the period under review (April 16, 1992 to April 15, 1993) and she was provided with a computerized listing of pay dates with only one entry for the pay period ending April 19, 1993 indicating a payment of $700.00 gross wages. The record contained entries purporting to be for a period commencing December 30, 1991 and continuing thereafter but the deductions entered were all the same which would not have been correct as the amounts required to be deducted for unemployment insurance premiums and income tax had changed during that time. In the Questionnaire, the appellant and Sara Benaim - on behalf of Trinkets - had stated the appellant's pay was approximately $300.00 per week together with a car allowance of $500.00 per month. The Record of Employment - Exhibit R-10 - stated the appellant's salary, for the preceding 20 weeks, was $1,200.00 bi-weekly and that he had been working as a Manager. The payroll record - Exhibit R-3 - and a number of cancelled pay cheques to the appellant supported the finding that his pay was $700.00 every two weeks. Ms. Brochu stated the unemployment insurance benefits payable - if based on that amount of salary - would have been much smaller than if payments were based on the salary as stated in the Record of Employment. In the Application for Unemployment Insurance Benefits - attached to and forming part of Exhibit R-10 - the appellant had indicated - by marking the appropriate boxes in Questions 41 and 43, respectively - that he was not related to his employer and was not involved in any business relationship with the payor. The Record of Employment was signed by Ruth Soussan, known to Ms. Brochu to be an employee of Trinkets and the sister of Sara Benaim and the daughter of the appellant. Ms. Brochu explained she was well aware the appellant had performed services which were important to Trinkets and that he had a stake in the business in the sense he had signed a collateral loan - in 1990 - to help finance the continuing operations of the business. Ms. Brochu stated the various discrepancies, "weighed on my mind". There were no cancelled pay cheques from Trinkets - to the appellant - for periods totalling 18 weeks of employment. There was a history of pay cheques that had been issued to him being held back and not cashed for long periods of time - averaging 75 days. She noted the appellant had made an interest-free loan to Trinkets and that the appellant had received a monthly salary rather than being paid at an hourly rate. She stated this was not "a big thing" and she was satisfied the work had been done by the appellant and that it was important. Further, she found the terms and conditions of employment to have been reasonable and it was apparent the appellant's lay off was attributable to economic difficulties experienced by Trinkets during a severe downturn in the economy. As for waiting for Sara Benaim to provide the missing paycheques and other information requested on specific points, Ms. Brochu stated she had received only one voice message on her voice-mail on November 27, 1996 to the effect the requested information would be forthcoming. After considering various matters as detailed in her report - Exhibit R-9 - Ms. Brochu stated she came to the conclusion the appellant's employment with Trinkets could not be seen as having been similar to an arm's length worker and he was, therefore, not engaged in insurable employment. She also considered the parties to have been in collusion to use the unemployment insurance system to maximize the amount of benefit payable by misrepresenting the facts on the Record of Employment and in the Unemployment Insurance Application for Benefits. The T-4 slips and records issued by Trinkets for 1992 indicated the company paid the appellant a salary of $17,500. In 1993, he was paid a salary of $5,600. In 1994 and 1995 Trinkets reported the appellant was paid $6,300 and $4,900, respectively for wages.

[12]          In cross-examination, Deborah Brochu stated she had never received any request from Sara Benaim for any extension of time in which to produce certain documents. There had been no interviews with any other employees of Trinkets but the payroll records had been reviewed. She stated she had not spoken directly to Peter Sanginesi, the Investigating Officer from Human Resources Development Canada and the decision of the Rulings Officer had been in accordance with a policy - as opposed to being contained in the legislation - used by Revenue Canada when making decisions on insurable employment pursuant to the Unemployment Insurance Act.

[13]          In rebuttal, Sara Benaim testified she had told Ms. Brochu the Christmas season was extremely busy for her and several times she had chosen not to leave a message on Brochu's voice-mail. She stated she had closed down her Head Office and had attempted to provide as much information as she could gather and that all of the appropriate deductions for her father, the appellant, had been made and remitted.

[14]          Counsel for the respondent submitted the burden of proof required by the Amended Order of Deputy Judge Léger had been discharged. Counsel referred to the evidence and submitted the procedure that was followed was fair and reasonable and there was ample opportunity for the appellant and the payor to respond to specific requests for information and to put forward their position to the Minister. As a result of the extensions granted to the appellant and the payor and the method by which the decision was made, in Counsel's view of the evidence the requirements of subsection 61(4) of the Act had been satisfied.

[15]                          Counsel for the appellant submitted the burden of proof had not been met and that the appellant had done the work and had been compensated reasonably for same under difficult economic circumstances faced by the payor.

[16]                          Counsel for the parties agreed the effect of the Amended Order of Deputy Judge Léger was to require the respondent to prove - on a balance of probabilities - those facts upon which the Minister had relied rather than - as is usually the case - having the benefit of the assumptions of fact contained in the Reply to Notice of Appeal being regarded as valid until effectively disproved by the appellant to the degree required. In the case of Adolfo Elia v. M.N.R., A-560-97 - a decision of the Federal Court of Appeal dated March 3, 1998, Pratte J.A. - writing for the Court - noted, as follows, at pages 2 and 3 of the certified translation:

"... the judge did not take into account the well-settled rule that the allegations in the reply to the notice of appeal, in which the Minister states the facts on which he based his decision, must be assumed to be true as long as the appellant has not provided them to be false."

[17]          The Amended Order of Deputy Judge Léger did not have the effect of presuming the facts as alleged in the Notice of Appeal to have been true. In carrying the burden of proof, as ordered, the Minister presented evidence upon which the decision was based and the issue is whether or not the facts upon which the Minister relied were proven and whether the evidence presented before me requires that I interfere with the Minister's discretion as exercised pursuant to subparagraph 3(2)(c)(ii) of the Act.

[18]          The relevant provision of the Act is paragraph 3(2)(c) which reads 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 ..."

[19]          On the matter of the exercise of ministerial discretion pursuant to paragraph 3(2)(c) of the Act, Chief Justice Isaac in Attorney General of Canada v. Jencan Ltd., (1997) 215 N.R. 352, a decision of the Federal Court of Appeal, at p. 363 and continuing, stated:

"The sheer number of appeals from ministerial determinations made pursuant to subparagraph 3(2)(c)(ii) since the Tignish decision suggests that the law requires further clarification. For this reason, I set out below the principles which may fairly be derived from the authorities in this court with respect to subparagraph 3(2)(c)(ii).

The decision of this Court in Tignish, supra, requires that the Tax Court undertake a two-stage inquiry when hearing an appeal from a determination by the Minister under subparagraph 3(2)(c)(ii). At the first stage, the Tax Court must confine the analysis to a determination of the legality of the Minister's decision. If, and only if, the Tax Court finds that one of the grounds for interference are established can it then consider the merits of the Minister's decision. As will be more fully developed below, it is by restricting the threshold inquiry that the Minister is granted judicial deference by the Tax Court when his discretionary determinations under subparagraph 3(2)(c)(ii) are reviewed on appeal. Desjardins, J.A., speaking for this Court in Tignish, supra, described the Tax Court's circumscribed jurisdiction at the first stage of the inquiry as follows:

Subsection 71(1) of the Act provides that the Tax Court has authority to decide questions of fact and law. The applicant, who is the party appealing the determination of the Minister, has the burden of proving its case and is entitled to bring new evidence to contradict the facts relied on by the Minister. The respondent submits, however, that since the present determination is a discretionary one, the jurisdiction of the Tax Court is strictly circumscribed. The Minister is the only one who can satisfy himself, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions and importance of the work performed, that the applicant and its employee are to be deemed to deal with each other at arm's length. 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.

                In my view, the respondent's position is correct in law...

In Ferme Émile Richard v. M.N.R., this Court confirmed its position. In obiter dictum, Décary J.A. stated the following:

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.

Section 70 provides a statutory right of appeal to the Tax Court from any determination made by the Minister under section 61, including a determination made under subparagraph 3(2)(c)(ii). The jurisdiction of the Tax Court to review a determination by the Minister under subparagraph 3(2)(c)(ii) is circumscribed because Parliament, by the language of this provision, clearly intended to confer upon the Minister a discretionary power to make these determinations. The words "if the Minister of National Revenue is satisfied" contained in subparagraph 3(2)(c)(ii) confer upon the Minister the authority to exercise an administrative discretion to make the type of decision contemplated by the subparagraph. Because it is a decision made pursuant to a discretionary power, as opposed to a quasi-judicial decision, it follows that the Tax Court must show judicial deference to the Minister's determination when he exercises that power. Thus, when Décary J.A. stated in Ferme Émile, supra, that such an appeal to the Tax Court "more closely resembles an application for judicial review", he merely intended, in my respectful view, to emphasize that judicial deference must be accorded to a determination by the Minister under this provision unless and until the Tax Court finds that the Minister has exercised his discretion in a manner contrary to law.

If the Minister's power to deem "related persons" to be at arm's length for the purposes of the UI Act is discretionary, why, one might ask, does the right of appeal to the Tax Court under section 70 apply to subparagraph 3(2)(c)(ii) at all? The answer is that even discretionary powers are subject to review to ensure that they are exercised in a judicial manner or, in other words, in a manner consistent with the law. It is a necessary incident of the rule of law that all powers granted by Parliament are of an inherently limited nature. In D.R. Fraser and Co. Ltd. v. Minister of National Revenue, Lord Macmillan summarized the legal principles which ought to govern such review. He stated:

The criteria by which the exercise of a statutory discretion must be judged have been defined in many authoritative cases, and it is well settled that if the discretion has been exercised bona fide, uninfluenced by irrelevant considerations and not arbitrarily or illegally, no court is entitled to interfere even if the court, had the discretion been theirs, might have exercised it otherwise.

Lord Macmillan's comments were quoted with approval by Abbott J. of the Supreme Court in Boulis v. Minister of Manpower and Immigration. See also Friends of the Oldman River Society v. Canada (Minister of Transport) and Canada v. Purcell.

Thus, by limiting the first stage of the Tax Court's inquiry to a review of the legality of ministerial determinations under subparagraph 3(2)(c)(ii), this Court has merely applied accepted judicial principles in order to strike the proper balance between the claimant's statutory right to have a determination by the Minister reviewed and the need for judicial deference in recognition of the fact that Parliament has entrusted a discretionary authority under this provision to the Minister.

On the basis of the foregoing, the Deputy Tax Court Judge was justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii) only if it was established that the Minister exercised his discretion in a manner that was contrary to law. And, as I already said, there are specific grounds for interference implied by the requirement to exercise a discretion judicially. The Tax Court is justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii) - by proceeding to review the merits of the Minister's determination - where it is established that the Minister: (i) acted in bad faith or for an improper purpose or motive; (ii) failed to take into account all of the relevant circumstances, as expressly required by paragraph 3(2)(c)(ii); or (iii) took into account an irrelevant factor."

[20]          In the case of Elia (supra) at page 2 of the certified translation - after observing the Tax Court Judge had misunderstood the decisions of the Court - Pratte, J.A. stated:

"Contrary to what the judge thought, it is not necessary, in order for the judge to be able to exercise that power, for it to be established that the Minister's decision was unreasonable or made in bad faith having regard to the evidence before the Minister. What is necessary is that the evidence presented to the judge establish that the Minister acted in bad faith, or capriciously or unlawfully, or based his decision on irrelevant facts or did not have regard to relevant facts. The judge may then substitute his decision for that of the Minister."

[21]          A review of the evidence makes it apparent the Minister did not act in bad faith, or capriciously or unlawfully in arriving at the decsion which is the subject of the within appeal. The issue is whether or not the respondent has demonstrated on a balance of probabilities that the decision of the Minister was not based on irrelevant facts and that he had regard to facts which were relevant under the circumstances.

[22]          It is reasonable to conclude from the decision in Elia (supra) that it is not the mere taking into account - during the decision-making - process the existence of facts later, perhaps, considered as irrelevant which is the basis for justifying intervention by the Court. Rather, it requires that the final decision made by the Minister on the issue of insurability under the Act can be seen not to have been based on irrelevant facts or that it was made without regard to relevant facts. A fact may be relevant for one purpose, and not another, even though the overall analysis is part of a process undertaken pursuant to a particular legislative provision. There is nothing unusual in that. The misrepresentation by the payor in the Record of Employment - and by the appellant in applying for benefits - is clearly relevant to the issue of remuneration and the duration of the employment, both of which are enumerated in subparagraph 3(2)(c)(ii) of the Act as matters to be considered by the Minister before arriving at a conclusion whether or not the parties would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. However, standing alone - without support from other relevant facts - it would not, in my view, support a decision that the employment of Isaac Benguaich was, therefore, excepted employment and not insurable. Absent other relevant facts capable of supporting a decision, it may, on occasion, be inferred a particular decision was based on an irrelevancy or, perhaps, can be regarded as founded in malice or caprice. In the within appeal, all of the evidence - including the testimony of Sara Benaim and the exhibits filed in the appeal of Miriam Benguaich 97-366(UI) made applicable to the within appeal - and, especially the testimony and report of Deborah Brochu - supports the conclusion arrived at by the Minister. There was never any reliable evidence the appellant had been paid - at all - for 18 weeks of the period of employment which was the subject of the decision. Then, while there is evidence from the payroll record and certain cancelled pay cheques that the appellant's salary was $700.00 every two weeks, there is other evidence which raises legitimate concerns about the nature of his employment and the actual amount of remuneration paid. Since the appellant was not being paid during times when Trinkets was experiencing a shortfall in revenue, it is logical the salary to the appellant would not have been entered - on a timely basis - in Trinket's payroll record because to have done so would require the appropriate deductions to have been remitted to Revenue Canada shortly thereafter whereas delaying payment completely would avoid that requirement. There was no evidence - other than the bald, unsupported assertion by Sara Benaim - that any other non-related workers, during the relevant period, had delayed cashing cheques as a result of a direct request by her to assist Trinkets in that manner. As Deborah Brochu stated in evidence and as noted in her report, in her opinion, an unrelated worker would not continue indefinitely to delay cashing cheques for periods between 29 and 122 days. The duration of the employment is difficult to pin down because the payroll records are unreliable and there were no cheques issued to demonstrate whether or not the appellant worked for 18 weeks during the period under review. Payments following the lay off were said by Sara Benaim to have been loan payments and not pay cheques but when asked for some confirmation of this characterization Sara Benaim then stated the appellant had returned to work on a part-time basis in 1994 and 1995 and if the cheque appeared to have deductions taken from it then it would have been for wages paid once per month when her father was called in to work from time to time on a temporary or seasonal basis. It is extremely doubtful that any working relationship with a non-related person would be subject to the degree of confusion, misrepresentation, inconsistency, ambiguity and deception which was present in the employment of the appellant with Trinkets. The evidence of Deborah Brochu illustrates that the terms and conditions of employment and the nature and importance of the work done by the appellant had been considered together with the fact the appellant had issued a non-interest bearing loan to his employer in 1990 and was being re-paid at the rate of $600.00 per month according to the information related to her in a conversation with Sara Benaim in September, 1996. Nothwithstanding the overall burden of proof resting upon the respondent in the within appeal, once the evidence had been presented on the issues referred to above, there was a shift in the evidentiary burden and an explanation worthy of belief should have been offered on behalf of the appellant to negate the impact of the respondent's evidence. Instead, the evidence of Sara Benaim did not provide the degree of reliability upon which one could reasonably conclude the respondent had failed to discharge the burden in the appeal as a whole, as directed.

[23]          I am satisfied - on all of the evidence - that the decision of the Minister was reasonable, fair and was arrived at in accordance with the process recognized as adequate under the Act by the Federal Court of Appeal in the case of Jencan (supra). There is an abundance of evidence before me which is capable of supporting the decision of the Minister and I find the decision was not based on irrelevant facts nor was it made without regard to facts which were relevant under the circumstances. As a result, I am not justified in interfering with the exercise of the Minister's discretion in issuing the decision dated December 4, 1996.

[24]          The appeal is dismissed and the Minister's decision is confirmed.

Signed at Toronto, Ontario, this 20th day of August 1998.

"D.W. Rowe"

D.J.T.C.C.