Guimond v. M.N.R., docket 97-1130-UI

Date: 19980911

Docket: 97-1130-UI

BETWEEN:

PATRICK GUIMOND,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Prévost, J.T.C.C.

[1] This appeal was heard at St-Joseph-de-Beauce, Quebec, on August 25, 1998.

[2] It is an appeal from a determination by the Minister of the National Revenue (“the Minister”) dated May 16, 1997, that the appellant’s employment with Joseph Guimond from January 13 to February 7, 1997 was not insurable because it was employment in which the employee and employer were not at arm’s length.

[3] Paragraph 5 of the Reply to the Notice of Appeal reads as follows:

[TRANSLATION]

5. In arriving at his decision the respondent Minister of National Revenue relied inter alia on the following facts:

(a) Joseph Guimond has been the sole proprietor of a grocery store-butcher's shop for over 20 years; (A)

(b) the appellant is the payer’s son; (A)

(c) the grocery store–butcher's shop is open

- from 9 a.m. to 6 p.m. Mondays, Tuesdays and Wednesdays

- from 9 a.m. to 9 p.m. Thursdays and Fridays,

- from 9 am to 5 p.m. Saturdays; (A)

(d) the payer had only one full-time employee, namely his wife; (A)

(e) the payer’s wife was paid $245 a week; (NK)

(f) the payer broke his right leg on December 9, 1996; (D)

(g) the payer was authorized to return to work on February 17, 1997, according to Serge Gagnon, an orthopedic surgeon, but from December 9, 1996 to February 9, 1997 the payer continued working for his business, although he worked sitting down; (DAW)

(h) from the time the payer suffered the fracture, on December 9, 1996, Messrs. Veilleux and Grondin worked for the payer as butchers; (NK)

(i) Messrs. Veilleux and Grondin cut up carcasses into 15-pound pieces; (NK)

(j) Messrs. Veilleux et Grondin were not paid for their work for the payer; (A)

(k) the appellant was laid off by François Giguère Inc. on December 20, 1996; (A)

(l) at that time the appellant had accumulated 22 insurable weeks; (A)

(m) on January 22, 1997 the Human Resources Centre informed the appellant that he needed 26 weeks of insurable employment to qualify; (D)

(n) on January 13, 1997 the payer ostensibly laid off Messrs. Veilleux and Grondin and hired the appellant; (D)

(o) the appellant’s duties were to shelve merchandise, label it and assist customers; (D)

(p) during the period in question the appellant was allegedly paid $320 a week by the payer; (DAW)

(q) the appellant had provided services to the payer before the period in question without pay; (A)

(r) the appellant provided services after February 7, 1997; (A)

(s) the payer stopped paying the appellant after February 7, 1997; (D)

(t) on February 7, 1997 the payer issued a record of employment in the appellant’s name, indicating that the appellant had been laid off for lack of work; (A)

(u) the record of employment was incorrect as the appellant had provided services to the payer without pay after February 7, 1997; (DAW)

(v) the appellant and the payer had a non-arm's-length relationship within the meaning of the Income Tax Act; (D)

(w) but for the relationship between the appellant and the payer, the latter would not have been hired to do such work; (D)

(x) further, the payer would never have hired a person with whom it had an arm's length relationship on the same terms as those offered the appellant, much less for such a period . . . . (D)

[4] In the foregoing passage from the Reply to the Notice of Appeal the Court has indicated in parentheses after each subparagraph the comments made by counsel for the appellant at the start of the hearing, as follows:

(A) admitted

(NK) no knowledge

(D) denied

(DAW) denied as written

Appellant’s evidence

According to Joseph Guimond

[5] Joseph Guimond has been a grocer-butcher for 20 years.

[6] He operated his grocery store-butcher's shop with his wife, but was the sole proprietor.

[7] The business was open year-round, except for Sundays, and the couple never took holidays other than this one day off each week.

[8] Joseph Guimond had a special clientele and did special orders at customers’ request.

[9] He had indeed had an accident, fracturing his right leg on December 8, 1996, and the following day the leg was put in a cast.

[10] He was nonetheless able to continue operating his business, initially with the help of two friends, Messrs. Veilleux and Grondin.

[11] Mr. Veilleux was retired and could help out as needed; Mr. Grondin had a job and came whenever he had free time.

[12] On January 13, 1997 he really needed the help of his son, the appellant, who was not working at that time, as he was no longer able to serve his customers properly: he needed someone in the store full-time.

[13] He accordingly hired the appellant to work from 9 a.m. to 6 p.m., Monday to Friday.

[14] The appellant did the same work as Joseph Guimond.

[15] January was especially busy for the business because of the parties organized by small businessmen in the area for their employees, which they could not do in December because of the extra work having to be done with the holidays approaching.

[16] However, February was much quieter.

[17] The reason he laid off his son on February 7, 1997, although his cast was not removed until a week later, was that at that time enough carcasses had been cut up to take him through the following days.

[18] His son still went to the shop from time to time for a soft drink and to chat with customers when he had nothing to do; he might also make a delivery when he had some spare time.

[19] His wife’s and his combined salary was $340 per week.

[20] They also took their food from the store and used the truck, the expenses for which were paid by the business.

[21] When he was in the cast, he still went to put in an appearance at the store and [TRANSLATION] “did what he could”.

[22] Messrs. Grondin and Veilleux took out the large pieces of meat so he could work on them while seated.

[23] The appellant, however, when he was hired, did just about everything required in order to replace him effectively.

[24] His customers were quite understanding in this unfortunate situation and his wife continued to do her work in the store while he talked to people.

[25] In his business everything was done in front of the customers.

[26] His son was paid $8 an hour and so for 40 hours’ work his pay was $320.

[27] This was indicated in the payroll (Exhibit I-1), and was written for him by his wife in her own hand.

[28] A real butcher earns $10 or $11 an hour.

[29] During the period at issue Joseph Guimond's son went to live with him so as to be on the spot.

[30] When Joseph Guimond hired his son, he had absolutely no idea that his son needed a few more weeks of insurable employment to qualify for unemployment insurance benefits.

[31] His son now has a full-time job with Canam-Manac.

According to Patrick Guimond, the appellant

[32] He did indeed receive a salary from his father and it was paid to him by cheque, as evidenced by the cheques.

[33] He was paid on Thursdays.

[34] He was laid off on February 7, 1997 and on the 8th he was unemployed.

[35] He made some applications and is now working at Canam-Manac.

[36] When he was with his father he did indeed work from Monday to Friday, primarily taking out quarters of meat and setting things up.

[37] When he was hired at the grocery store-butcher's shop he really did not know he needed more weeks to qualify for unemployment insurance benefits.

[38] However, in the days following January 22, 1997 he received from the St-Georges Human Resources Centre a letter (Exhibit A-2) of that date reading in part as follows:

[TRANSLATION]

As you have begun working for the first time or after a lengthy absence from the active population, you need 26 weeks of insurable employment to be entitled (to benefits). Unfortunately, you have only 22. (The parenthesis is by the undersigned)

[39] Patrick Guimond's records of employment (Exhibit I-2) clearly indicate that he worked for François Giguère Inc. for 22 weeks, until December 20, 1996, before going to work for his father for the period at issue.

[40] Armed with the record of employment issued by his father, he returned to the Human Resources Centre to again apply for benefits.

[41] He still stops by his father’s store as he has always done.

[42] When he was younger he also provided services at the store, doing such things as putting bottles in their proper places.

[43] The respondent called no witnesses.

Argument

According to counsel for the appellant

[44] We are dealing here with a small business frequented by people who know each other well, whose customers are indulgent and tolerant.

[45] In December 1996 the owner became incapacitated when he broke a leg.

[46] Two friends helped him out from time to time but by early January it became too much; voluntary help was no longer sufficient; the volunteers were not always available when needed and the owner of the business had to hire his only son in order to be able to continue carrying on the business effectively: he had no choice and so his decision was the right one.

[47] His son was available, and the owner surely cannot be blamed for hiring him.

[48] The business in question could not support three people and that was why the appellant was laid off as soon as his father and mother could handle it by themselves.

[49] It is quite clear that on January 13, 1997 the appellant did not know that he needed more weeks in order to qualify for benefits.

[50] He only knew this after January 22.

[51] When the appellant stopped by the grocery store he perhaps sometimes made a small delivery, but in return he took a soft drink for refreshment.

According to counsel for the respondent

[52] The appellant unquestionably worked for his father, who gave him instructions, and that is why only the non-arm’s-length dealing was relied on and argued in the instant case.

[53] The appellant’s father had a mishap in December 1996 and two of his friends lent him a hand, but without pay.

[54] When the appellant took over from them, however, he was paid.

[55] He was already working for his father when he found out that he needed four more weeks to qualify for benefits.

[56] He may have gotten ahead in preparing meat in his last week of work, but when the magic four-week figure was reached he was laid off although his father had to keep his cast for another week.

[57] It is true there is nothing illegal about that, but the Minister, as he was required to do, considered all the facts in deciding not to include the employment in insurable employment.

[58] The Minister considered the fact that when the appellant was younger he was already providing services to his father by putting bottles in their proper places and that he subsequently stopped by the store and did small errands.

[59] There was a non-arm's-length relationship: the appellant was earning a little more than the minimum wage, whereas a butcher might be paid $10 or $11 an hour.

[60] In Attorney General of Canada v. Jencan Ltd. (A-599-96), the Chief Justice of the Federal Court clearly explained the procedure this Court must follow where the Minister relies on non-arm’s-length dealing.

[61] The Chief Justice wrote (at p.15):

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.

(at p.18)

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.

(at p.21):

As Desjardins J.A. stated in Tignish:

[t]he court is entitled to examine the facts which are shown by the 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.

(at pp.24 and 25):

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. It will depend on the strength or weakness of the remaining evidence. The Tax Court must, therefore, go one step further and ask itself whether, without the assumptions of fact which have been disproved, there is sufficient evidence remaining to support the determination made by the Minister. If that question is answered in the affirmative, the inquiry ends. But, if answered in the negative, the determination is contrary to law, and only then is the Tax Court justified in engaging in its own assessment of the balance of probabilities.

[62] The Minister exercised his discretion legally and the Court accordingly cannot intervene.

[63] With respect to subparagraph (e) above of paragraph 5 of the Reply to the Notice of Appeal the appellant claimed to have no knowledge of the fact that the payer’s wife was paid $245 a week, while according to the evidence the amount of pay was actually $340 for the payer and his wife as a couple. Be that as it may, there was a non-arm's-length relationship between the father, the mother and the son.

[64] Subparagraph (f) was denied as it states that the fracture occurred on December 9, 1996, whereas it actually happened on the 8th: however, it was in fact on December 9 that the cast was put on the payer’s leg.

[65] Subparagraph (g) was denied as written, but the evidence is that the payer continued working in his business, although he worked sitting down.

[66] The appellant said he had no knowledge of subparagraph (h), but it appeared from the evidence that the fact therein stated was true.

[67] Subparagraph (m) was denied, but that was in fact what was stated in the letter (Exhibit A-2).

[68] Subparagraph (n) was denied, but the evidence as a whole showed it to be accurate.

[69] Subparagraph (p) was denied, but the same is true with respect to it as with respect to subparagraph (n).

[70] Subparagraph (s) was denied, but the appellant did say that as of February 8, 1997 he was unemployed.

[71] Subparagraph (u) was denied as written, but it stated the truth as the appellant did indeed provide services to the payer even after he was laid off.

[72] The Minister exercised his discretion properly.

According to counsel for the appellant in reply

[73] Jencan, supra, clearly establishes that the Minister must take all the relevant circumstances into account, and he did not do so here.

[74] The Minister in fact attached too much importance to the length of the employment and the magic number of the four weeks at issue.

[75] If there had been an arrangement to qualify the appellant for benefits, he could have worked a week longer and it would have been plain sailing, as they say.

Analysis

[76] The Minister wrongly considered the fact that the payer’s wife was paid $245 a week, whereas she and her husband only got $340 between them, plus of course their food and the use of the truck; he may thus have believed that the business could support more than two people. This factor was moreover in no way relevant to the decision to be made in the instant case.

[77] However, the Minister’s error regarding the date of the fracture is unimportant for the purposes of the conclusion herein.

[78] The Minister considered an irrelevant factor in taking into account the fact that the payer had nevertheless gone on working, although doing so sitting down, from September 9, 1996 to February 9, 1997: the payer did what he could and that was entirely to his credit. Obviously, with one leg in a cast he could not do his regular work and needed help.

[79] He was able to get by with the help of his two friends until January 13, 1997, but then it became too much and he had to have someone in the store full-time.

[80] The payer and the appellant appeared to the Court to be decent people who sought at all times to tell the truth and the Court fully believed them.

[81] The Minister does not seem to have considered the fact that the appellant’s employment resulted in the final analysis from the accident in question, that is, a fortuitous event.

[82] It is true that the letter (Exhibit A-2) is dated January 22, 1997, but it was undoubtedly not received until later: it was thus not on January 22 that the appellant was informed that he needed 26 weeks to qualify, but at a later date.

[83] The payer did not lay off his two friends on January 13, 1997 as they were

only working as volunteers; that was really no longer enough, with the high activity in the store in January.

[84] The payer did say that the appellant performed nearly all the payer's duties, and was not just shelving goods, labelling them and dealing with customers.

[85] The appellant rightly denied subparagraph (p) as written because of the word “allegedly” in that subparagraph, as the evidence was that he was in fact paid during the period at issue.

[86] The small services he may have rendered his father before and after the period at issue are of no significance for the purposes of the decision herein as they were quite small: a son may very well help his father out a bit now and then when he has nothing to do without any legal inferences necessarily having to be drawn therefrom.

[87] The fact that the record of employment was incorrect, which was taken into account by the Minister, was irrelevant.

[88] It is clear that with the slowdown in February and the supply of cut meat that he had, the payer could properly write on the record of employment that there was a lack of work.

[89] The payer had no choice: he had to hire his son when he did, and if his son had not been available he would have had to hire an unrelated person on the same or substantially the same conditions and for the same period.

[90] Clearly, neither the payer nor the appellant knew at the time the latter was hired that he needed more weeks to be eligible for benefits.

[91] It is good to see that the appellant has again found full-time employment.

[92] The payer certainly cannot be blamed for hiring his son in this way in circumstances such as these, arising from an absolutely fortuitous event.

[93] Counsel for the Minister readily admitted the mishap which the payer suffered and quite properly so.

[94] As counsel for the Minister rightly admitted in her argument, there is nothing illegal about the magic number in question, and here there was merely a coincidence, a fortunate one perhaps, but certainly not something which was planned.

[95] At the first stage of the inquiry spoken of in Jencan, supra, the Court, limiting its analysis to determining the legality of the ministerial decision in question, is of the view that it should intervene, even while exercising judicial restraint given the Minister’s discretion.

[96] The Minister did not take all the relevant circumstances into account and he moreover took irrelevant factors into account.

[97] There is insufficient evidence in the instant case to support the Minister’s conclusion.

[98] On its own assessment of the balance of probabilities the Court is of the view that the employment was insurable.

[99] The Court has no comment on counsel for the appellant’s suggestion that if his client had worked for his father for one more week it would have been plain sailing, as it must judge the case solely within the parameters of the Act and Jencan, supra.

[100] The appeal is accordingly allowed and the decision appealed from is reversed.

Signed at Laval, Quebec, this 11th day of September 1998.

"A. Prévost"

D.J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 19th day of April 1999.

Erich Klein, Revisor