Citation: 2010 TCC 562
Date: 20101103
Dockets: 2010-564(EI)
2010-942(EI)
BETWEEN:
GULZAR PANNU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent;
AND BETWEEN:
A.D.S. CONSTRUCTION LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe, D.J.
[1]
The Appellant, Gulzar
Pannu (“Gulzar”) appealed from a decision by the Minister of National Revenue
(the “Minister”) – dated December 1, 2009 – wherein the Minister determined
that his employment with A.D.S. Construction Ltd. (“ADS”) from January 1, 2008
to June 30, 2008 and from December 16, 2007 to December 31, 2007 and from July
1, 2008 to December 26, 2008, was not insurable employment pursuant to
paragraph 5(2)(i) of the Employment Insurance Act (the “Act”).
The Minister, after considering all of the terms and conditions of said
employment, was not satisfied the contract of employment between the Appellant
and ADS would have been substantially similar if they had been dealing with
each other at arm’s length.
[2]
Gulzar was represented
by his agent, Tejinder Singh Gill (“Gill”).
[3]
ADS filed a separate
appeal – 2010-942(EI) and its agent – Dashmesh Singh Pannu (“Dashmesh”) and
counsel for the Respondent and Gill agreed this appeal could be heard - on
common evidence - with the Gulzar appeal.
[4]
The parties agreed that
only the employment from July 1 to December 26, 2008 was in dispute.
[5]
Dashmesh Singh Pannu testified
in the Punjabi language and the questions and answers and other aspects of the
proceedings were interpreted by Ravinder Aggarwal, a certified court
interpreter fluent in English and Punjabi.
[6]
Dashmesh testified he
is President and sole shareholder of ADS, a construction company operating out
of Surrey, British Columbia. Gulzar is his father
and was born on September 1, 1925. ADS operates on a year-round basis during
the hours from 9 a.m. to 5 p.m., Monday to Friday. Dashmesh agreed the
following assumptions of fact as stated in subparagraphs 8(g) to (k) and also in
subparagraphs 8(m) to 8(r) of the Reply to the Notice of Appeal (“Reply”) were
correct, as follows:
8. In determining that the Appellant was not employed in
insurable employment with the Payor during the Period, the Minister
relied on the following assumptions of fact:
…
g)
the Appellant’s main duties were to clean up at
the work site, hammer nails, help co-workers with their tools, and serve snacks
and tea;
h)
the Appellant’s duties also included keeping an
eye on the Payor’s employees when the Payor was off-site;
i)
the Appellant was paid at the rate of $9.50 per
hour by cheque;
j)
the Appellant’s cheques were not cashed on a
regular basis;
k)
the Appellant’s cheques were deposited into a
shared bank account with Dashmesh and Dashmesh’s wife;
…
m)
the Appellant did not provide services to
the Payor during the months of January to June of 2008;
n)
the Appellant was not laid off due to a
shortage of work during the months of January to June 2008;
o)
the Appellant was visiting his sister in
Abbotsford and his daughter and nephew in England during the months of January to June of 2008;
p)
the Payor’s record of revenues for January
to December 2008 show a consistent level of income with no slow period;
q)
the Payor did not keep timesheets
recording the Appellant’s hours;
r)
the Appellant did not work on Saturdays;
…
[7]
Dashmesh stated that
with respect to Gulzar’s duties (8(g)), he also removed nails from lumber.
During the period at issue, ADS had 5 employees including himself and Gulzar.
Dashmesh agreed Gulzar did not cash his cheques on a regular basis because he
did not have any of the usual identification documents. Gulzar lived with Dashmesh
and his wife and went to the bank with them occasionally where he had equal
signing authority on the shared account. Dashmesh disagreed with the assumption
at subparagraph 8(l) and stated framers were paid only $14 to $16 per hour, not
$18. With respect to the assumptions at subparagraphs 8(s) and 8(t),
respectively, Dashmesh disagreed that the wage range for helpers/labourers in the
construction industry is approximately $15 per hour and stated Gulzar’s
replacement – Rahdhi Hothi (“Hothi”) – was not paid $18 per hour. Dashmesh
stated he was able to hire workers at a beginning wage of $9 per hour and increased
their rate in accordance with their experience gained over time. As for Hothi,
he earns only $13 per hour currently and in August, 2009, was paid $9 per hour
as there was an abundance of labour available due to the recession which
affected the construction industry. Hothi was a young man, newly-arrived from India and had no construction experience. Dashmesh stated
all workers recorded their own time and reported to him the hours worked.
Gulzar did so verbally and Dashmesh was aware of the time spent on the job
since he drove Gulzar to and from work from their shared residence. Dashmesh
stated Gulzar had served 24 years in the Indian Army as an Engineer and came to
Canada in April, 2002. Dashmesh arrived in Canada in September, 1998 and went to school for only two or
three months and the majority of his construction clients are Punjabi-speaking
and he does his banking in that language. As a result, his English is limited
when required to deal with matters requiring an expanded vocabulary in matters
not related to his business. Dashmesh stated Gulzar picked berries in 2009 but
is currently not employed due to ill health. In the course of operating ADS,
Dashmesh stated he had recently informed the Workers Compensation Board that he
would re-hire a worker – now able to return from an injury – to perform light
duties of the sort carried out by Gulzar during the relevant period. The work
carried out over the past 12 years by ADS is mainly in residential construction
and 4 workers were laid off in 2009 due to a slowdown. Dashmesh stated, it is
usual to have a worker – sometimes young, sometimes older – on site to perform
light duties but the responsibilities and duties of a younger person will
increase with the passage of time as experience is gained and the hourly wage
will be raised accordingly. When Dashmesh had to leave a work site – for
periods between one and four hours, two or three times a week – to search for
additional work for ADS, Gulzar carried on with his own duties and also “kept
an eye on the workers” none of whom related to him or Gulzar.
[8]
The agent for Gulzar
did not cross-examine.
[9]
In cross-examination by
counsel for the Respondent, Dashmesh agreed he made all business decisions for
ADS. Gulzar is now 85 and was 83 when working during the relevant period and
earned $9.50 per hour which was not much above the minimum wage. ADS had 4 or 5
workers prior to hiring Gulzar and the duties later performed by him had been
done by one or other of the workers who was a framer and earned $13 per hour.
Trainees were paid only $9 an hour and were expected to learn the framing trade
and could earn a higher hourly wage upon gaining experience since 4 workers
were required to frame a house. In the case of Gulzar, he was not expected to
perform any other duties except the ones referred to earlier and would not have
been subject to layoff even if work had slowed down. ADS bids for a framing job
based on a price per square foot. Dashmesh stated that although ADS had work
available, Gulzar did not want to work from January to June, 2008 and visited
family and friends, during which period he was not paid by ADS. Gulzar returned
to work on July 1, 2008. Counsel referred Dashmesh to 3 pages of payroll
information for Gulzar – Exhibit R-1. The statement pertaining to the pay
period ending
July 31, 2008 indicated under the column headed “YTD” that Gulzar had
earned gross pay of $9,573.72 to that point in 2008. Dashmesh stated he had not
known that YTD meant “Year-to-Date” and stated ADS had not paid Gulzar any
money in 2008 between January 1 and July 1, the date he started back to work.
Dashmesh produced a bundle of photocopies of pay stubs relating to Gulzar –
Exhibit A-1 – together with a T4 slip – Exhibit A-2 – which indicated Gulzar’s
total income in 2008 earned from his employment with ADS was a total of $9,573.72.
Dashmesh stated that it was obvious that YTD entry – supposedly effective as at
July 31 – was incorrect. Dashmesh acknowledged that ADS had – on occasion –
paid an experienced framer up to $18 an hour. All workers were picked up at
their homes and driven to and from work.
[10]
Dashmesh advised the
Court the case for ADS was closed.
[11]
Tejinder Singh Gill testified
he is an insurance broker living in Surrey. He knows
Gulzar and is an acquaintance of Dashmesh. He was involved in the paperwork
pertaining to the appeal to the Minister from the ruling. He stated Gulzar
provided him with a calendar - Exhibit A-3 – a copy of which he provided to the
Appeals Officer. There are no entries in the calendar until July 1, when Gulzar
returned to work at ADS. Gill stated Gulzar had a heart attack in November,
2009 and was advised not to attend Court for his appeal.
[12]
Neither Dashmesh nor
counsel for the Respondent cross-examined Gill.
[13]
Gill advised that the
case for Gulzar was closed.
[14]
Rosemary Basha (“Basha”)
testified she has been employed by Canada Revenue Agency (“CRA”) as an Appeals
Officer for 5 years. She received the files pertaining to Gulzar and ADS and
reviewed the material. She read the Questionnaire – Exhibit R-5 – submitted by
Dashmesh, as well as the one prepared on behalf of Gulzar, an extract from
which was filed as Exhibit R-6. Basha prepared a CPT 110 – Report On An Appeal
(“Report”) – Exhibit R-2 – dated November 30, 2007 – in which she recommended
the Minister decide the employment of Gulzar was not insurable employment
within the meaning of the Act for the reasons stated therein. Basha
stated she knew Gulzar was the father of Dashmesh and that his pay was $9.50
per hour. However, she understood from a response contained in a Questionnaire
that other employees were earning $18 per hour. She relied on research at Job
Futures website which indicated the average hourly pay for construction
workers was $15.17 and the industry was paying from $21.78 to $23.23 per hour
for supervisors. The print-outs were filed as Exhibit R-3 and R-4,
respectively. Basha stated she relied on this information and concluded
Gulzar’s hourly pay was too low even though he was not performing any framing
work. On page 5 of her Report, Basha analyzed a series of what she considered
were contradictions and conflicting information between what was provided to
the Rulings Officer and subsequently for the purpose of the appeal to the
Minister. In Basha’s opinion, Gulzar had not been laid off from January to
June, 2008 due to any slowdown in ADS business but because he wanted to visit
his sister in Abbotsford, British
Columbia and some relatives
in England. Basha was satisfied Gulzar did not have
to wait to cash his pay cheques and the explanation offered concerning the
irregular deposits was acceptable. However, she did not consider the calendar –
Exhibit A-3 - used to record hours as reliable since it did not indicate Gulzar
had worked any Saturdays but on his application for Unemployment Benefits, he
indicated he had worked some and the same information had been provided to her
as Appeals Officer. Basha stated that hourly workers must keep track of their
hours for pay and remittance purposes. Despite lack of mention in the
Questionnaires concerning any supervisory duties performed by Gulzar, Basha was
satisfied he had exercised that function – on occasion – as part of his duties.
Basha was satisfied no contract of service existed between January 1 and June
30, 2008 and that during this period Gulzar did not receive any remuneration from
ADS. In her Report, Basha dealt with certain factors, as follows:
Arm’s Length:
[15]
The parties were
related since Gulzar was the father of Dashmesh, the sole shareholder of ADS.
Remuneration:
[16]
The hourly pay of $9.50
was not reasonable for Gulzar’s duties as a worker on a construction site even
in the limited role of helper and occasional supervisor of other workers in the
absence of Dashmesh. Even in that reduced role, the remuneration should have
been higher since the average hourly pay for construction workers was $15.17.
The low pay was indicative of a non-arm’s length relationship.
Terms and Conditions:
[17]
Although Gulzar may
have worked some Saturdays, he did not maintain a proper record of his total
hours worked which is required within the industry and this default was
considered to be indicative of a non-arm’s length relationship.
Duration:
[18]
ADS operated on a
year-round basis and Gulzar worked from July 1 to December 31, 2008 but was
laid off in January, 2009 after ADS experienced a slowdown in business. This
factor indicated an arm’s length relationship.
Nature and Importance of Work Performed:
[19]
Gulzar did not work for
ADS from January 1 to June 30, 2008 even though ADS was operating at normal
business volume. Non-related workers who performed his duties before and after
his employment were receiving $18 per hour and were framers who were not hired
specifically to perform Gulzar’s duties which demonstrated that his duties were
not sufficiently important to the ADS business operation that a replacement was
required to perform that limited function. This factor was considered to
indicate a non-arm’s length relationship.
[20]
As a consequence of the
analysis performed in the preparation of the Report, Basha formed the opinion
it was not reasonable to conclude that ADS and Gulzar would have entered into a
substantially similar contract of employment if they had been dealing at arm’s
length. She recommended the Minister decide Gulzar was not employed in
insurable employment with ADS during July 1 to December 26, 2008, the period at
issue in the within appeals.
[21]
Basha stated she had
not seen the payroll information sheets – Exhibit R-1 – prior to Court.
[22]
In cross-examination by
Dashmesh – agent for ADS – Basha stated she assumed all workers were paid $18
per hour since that was the response provided to Q. 22 in the Questionnaire –
Exhibit R-5 – signed by him. The extent of the supervision carried out by
Gulzar was as stated in subparagraph 8(h) of the Reply in that it was limited
to keeping watch over ADS employees when Dashmesh was off-site.
[23]
In cross-examination by
Gill – agent for Gulzar – Basha stated she had no way of ascertaining that the
$18 per hour stated in the Questionnaire was intended to convey a maximum
hourly pay for framers and that no other information was provided to indicate
there was a range of pay for that specific function.
[24]
Counsel advised the
case for the Respondent was closed.
[25]
On behalf of ADS,
Dashmesh submitted the evidence supported his contention that a non-related
worker would have been paid the same wage for performing the limited duties
carried out by Gulzar.
[26]
Gill, agent for Gulzar
did not make any submission.
[27]
Counsel for the Respondent
submitted the remuneration paid to Gulzar was too low even taking into account
the nature of the duties performed in the sense he did no framing work and was
not expected to learn that trade in view of his advanced age. Counsel pointed
out that Gulzar was permitted to take off work during the first 6 months of
2008 even though the ADS business continued at the same rate which indicates
this exception was based on their father-son relationship. Prior to hiring
Gulzar, his duties had been performed by other workers who were either framers
or trainees who were expected to progress to the point where they could join
the main four-person framing crew. Counsel submitted the decision of the
Minister in each case should be confirmed.
[28]
The relevant provisions
of the Act are paragraphs 5(1)(a) and 5(2)(i) and
subsection 5(3) which read as follows:
5. (1) Subject to subsection (2),
insurable employment is
(a) employment in Canada by one or more employers,
under any express or implied contract of service or apprenticeship, written or
oral, whether the earnings of the employed person are received from the employer
or some other person and whether the earnings are calculated by time or by the
piece, or partly by time and partly by the piece, or otherwise;
…
(2) Insurable employment does not
include
…
(i) employment if the employer and employee are not dealing
with each other at arm's length.
(3) For the purposes of paragraph
(2)(i),
(a) the question of whether persons are not dealing
with each other at arm's length shall be determined in accordance with the Income
Tax Act; and
(b) if the employer is, within the meaning of that Act,
related to the employee, they are 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.
[29]
In Quigley
Electric Ltd. v. Canada (Minister of National Revenue – M.N.R.), [2003]
F.C.J. No. 1789; 2003 FCA 461 (F.C.A.), the Federal Court of Appeal heard an application for
judicial review of a decision issued by a judge of the Tax Court of Canada
confirming the decision of the Minister that the Appellant’s employment with a
related employer was not insurable. Malone J.A., writing for the Court - at
paragraph 7 and following – stated:
7 A legal error of law is also
said to have been committed when the Judge failed to apply the legal test
outlined by this Court in Légaré v. Canada (Minister of National Revenue) (1999) 246
N.R. 176 (F.C.A.) and Perusse v. Canada (2000) 261
N.R. 150 (F.C.A.). That test is whether, considering all of the
evidence, the Minister's decision was reasonable.
8 Specifically, it is argued
that the Judge circumscribed the scope of his review function when, after
finding that the Minister clearly did not have all the facts before him he
stated:
... That is not to say that on reviewing
new information, I am then precluded from finding that the Minister
did not have, after all, sufficient information to exercise his mandate
as he did without my interference. This would simply mean that I have
found that the new factors not considered were not relevant.
9 According to the applicant,
the proper question was not whether the Minister had sufficient information to
make a decision, notwithstanding the evidence of Mrs. Quigley; rather the
question was whether, considering all the evidence, the Minister's decision
still seemed reasonable. Instead, the applicant asserts that the Judge carried
out an irrelevant examination of whether Mrs. Quigley was a "principal"
or a "subordinate" of Quigley Electric Ltd.
10 In my analysis, the Judge
correctly followed the approach advanced by this Court in Canada (A.G.) v.
Jencan Ltd. [1998] 1
F.C. 187 (C.A.), namely, that the Minister's exercise of discretion
under paragraph 5(3)(b) can only be interfered with if she acted in bad faith,
failed to take into account all relevant circumstances or took into account an
irrelevant factor.
11 Bad faith on the part of the
Minister is not an issue in this case.
12 While
the reasons for decision are lengthy, it is clear that the Judge was analysing
the oral evidence of Jean Quigley in conjunction with paragraph 5(3)(b);
namely, whether having regard to all of 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. After reviewing other
authorities in the Tax Court, the Judge rejected any suggestion that Mrs.
Quigley could be termed a principal of Quigley Electric Ltd. and in turn
dismissed her examples of special treatment within the company as arising from
her personal relationship with the controlling shareholder and not to her
employment contract.
13 He
concluded by indicating that the factors considered by the Minister, as set out
earlier in his reasons, were the relevant factors for his consideration. That,
in the context of this case, can only mean that the Minister's decision was
reasonable considering all of the evidence. I can discern no legal error in
this analysis or conclusion.
14 I would dismiss the
application for judicial review with costs.
[30]
In his testimony,
Dashmesh stated most framers earned less than $18 per hour particularly when
they did not have much experience. The worker hired to perform Gulzar’s duties
was paid only $13 per hour – not $18 – as alleged by the Minister and a trainee
was hired in 2009 at $9.50 per hour because construction jobs were scarce due
to economic conditions. That information was not available to the Appeals
Officer. Gill testified he received the calendar – Exhibit A-3 - from Gulzar
and provided it to the CRA office for perusal. An examination of the pages of
the calendar from July to December indicates some corrections were made to
entries by marking over certain numbers or names and there are entries made in
different ink or styles of pen or marker. I am satisfied the calendar was
maintained by Gulzar to record his working hours but the only Saturday work
recorded during the relevant period was 6 hours on December 20. In any event,
it is not significant because Gulzar lived with Dashmesh and his wife and rode
to and from work with him every day so it would not take a sophisticated
computer and elaborate software to record the hours worked.
[31]
In the case of Birkland
v. Canada (Minister of National Revenue – M.N.R.), [2005] T.C.J. No. 195;
2005 TCC 291, Bowie, J. provided a summary of the state of the
jurisprudence and commented as follows at the end of paragraph 4 of his
Judgment:
4. … This Court's role, as I understand it
now, following these decisions, is to conduct a trial at which both
parties may adduce evidence as to the terms upon which the Appellant
was employed, evidence as to the terms upon which persons at arm's length
doing similar work were employed by the same employer, and evidence
relevant to the conditions of employment prevailing in the industry for
the same kind of work at the same time and place. Of course, there may
also be evidence as to the relationship between the Appellant and the
employer. In the light of all that evidence, and the judge's view of
the credibility of the witnesses, this Court must then assess whether the
Minister, if he had had the benefit of all that evidence, could
reasonably have failed to conclude that the employer and a person acting
at arm's length would have entered into a substantially similar
contract of employment. That, as I understand it, is the degree of judicial
deference that Parliament's use of the expression "... if the Minister of
National Revenue is satisfied ..." in paragraph 5(3)(b) accords to
the Minister's opinion.
[32]
The evidence established
the culture of the workplace where the making and serving of tea is important
and the nature of the duties performed by Gulzar, although they did not include
framing and were never intended to include that function, were valuable to the
operation of the business. The Minister was satisfied the employment during the
period at issue was genuine. The Minister took into account the nature of
Gulzar’s duties including certain supervisory functions on occasions when
Dashmesh was absent. In so doing, the Minister concluded the pay of $9.50 per
hour for that work performed on a construction site was too low and was
indicative of a non-arm’s length relationship. The Minister also considered the
leave granted to Gulzar for the purpose of taking a long holiday for the first
6 months of 2008 and also the nature of the special position Gulzar occupied
before and after his return to work. The Minister took into account certain
information to indicate the employment had been created – and tailored
throughout – specifically for Gulzar because Dashmesh was his son and the sole
shareholder of ADS. Gulzar was 83 years old in 2008 and had a long, successful
career in the Indian Army. He was a man who wanted to work and thereby
contribute to the operation of his son’s business.
[33]
If I had the
jurisdiction to decide the within appeals de novo, the result could have
been different but to vary the decision of the Minister in each instance would
be to substitute my own judgment. After having considered all the evidence, the
decision of the Minister in each instance is still reasonable. Certain facts
were considered by the Minister and a subsequent analysis was undertaken of the
relevant indicia as required by the legislation. During this process, no
unreasonable inferences were drawn in the course of arriving at the assumptions
upon which the decision was based. Those assumptions were not invalidated by
the evidence adduced on behalf of either Appellant and they remain
substantially intact in every material sense.
[34]
Each
decision of the Minister is
confirmed and both appeals are hereby dismissed.
Signed
at Calgary, Alberta this 3rd day of November 2010.
“D. W. Rowe”
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