Citation: 2009 TCC 455
Date: 20090914
Docket: 2007-2621(EI)
BETWEEN:
PAMELA BENOIT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
LIONEL BENOIT,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre
J.
[1]
This is an
appeal from a decision by the Minister of National Revenue (Minister) whereby
it was determined that the Appellant did not hold insurable employment when she
worked for Acadia Rebar Ltd. (Acadia) during the period from
November 1, 2005, to October 13, 2006. The Minister determined
that the Appellant and Acadia were not dealing with each other at arm’s length
within the meaning of paragraphs 5(2)(i) and 5(3)(b) of the Employment
Insurance Act (EIA). Those statutory provisions read as follows:
Types of insurable employment
5.
Excluded employment
(2) Insurable employment does not include
(i) employment
if the employer and employee are not dealing with each other at arm’s length.
Arm’s length dealing
(3) For the purposes of paragraph (2)(i),
(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.
[2]
The facts on
which the Minister based his conclusion are set out in paragraph 6 of the
Reply to the Notice of Appeal and read as follows:
6.
In making his decision, the
Respondent relied on the following assumptions of fact:
(a)
The Payor [Acadia] is
a body corporate whose sole shareholder was the Appellant’s brother,
Lionel Benoît (“the shareholder”). [admitted]
(b)
The Payor’s
business consisted in building steel reinforcement bars at St. Léolin,
New Brunswick. [admitted]
(c)
The Payor’s business operated year-round although the busiest months were May to October. [admitted]
(d)
The Appellant had
been hired as a secretary and bookkeeper. [admitted]
(e)
The
Appellant’s duties included: preparing the employees’ pay; remitting source
deductions; preparing T4s; preparing records of employment; making entries in
the accounting software; preparing invoices and bank deposits; answering the telephone;
and performing other office tasks. [admitted]
(f)
The
Appellant had neither the necessary training nor experience in this field and
during a previous period, the shareholder and the Payor’s outside accountant
had given her on-site training. [admitted]
(g)
The
Appellant worked in the Payor’s office, located in the shareholder’s personal
residence. [admitted]
(h)
During
the period in issue, for 13 non-consecutive weeks, the Appellant had worked
full-time, 5 days and 45 hours a week (“the full-time work”). [admitted]
(i)
During
the period in issue, for 20 non-consecutive weeks, the Appellant had worked
part-time (“the part-time work”). [admitted]
(j)
For the
part-time work, her hours of work were reduced to 5 hours per week and she
received an hourly wage of $10.00, including 4% holiday pay. [denied in part]
(k)
For the
full-time work, the Appellant’s remuneration, at the beginning of the period in
issue and until July 2006, was $468.00 per week, including 4% holiday pay.
[admitted]
(l)
Beginning
in July 2006, the Appellant’s remuneration for the full-time work was
$718.00 per week, plus 4% holiday pay, representing an increase of $250.00 a
week. [admitted]
(m)
The Appellant had to travel in the performance of her duties in order to
deposit pay cheques and expense‑reimbursement cheques in employees’ bank
accounts at two local financial institutions. [admitted]
(n)
The Appellant also
had to travel occasionally to make bank
deposits, pay invoices and run other errands for the Payor. [admitted]
(o)
Most of the Appellant’s trips were between St. Léolin and Bathurst, Bas‑Caraquet,
St. Simon, Shippagan, Tracadie and Caraquet. [admitted]
(p)
The increase in the Appellant’s weekly remuneration specified in subparagraph 6(l)
above was supposedly an allowance aimed at covering her travel expenses. [denied]
(q)
The Appellant also
had to travel in the performance of her duties during her weeks of part-time
work, and during those weeks she received no allowance or reimbursement for her
travel expenses. [denied in part]
(r)
The Appellant’s pay
cheque for the week of July 10, 2006, was used to pay an insurance
invoice for the Payor. [denied]
(s)
The Appellant
deposited two more of her pay cheques directly into the account of a creditor
of the Payor. [denied]
(t)
At an unspecified
date before the period in issue, the Appellant had received a personal loan
(“the Loan”) from the Payor. [admitted]
(u)
During the period in
issue, the Appellant repaid a total of $952.06 of the Loan, through pay
deductions, in 21 unequal payments (“the payments”). [admitted]
(v)
Eighteen of her 21 payments
represented 100% of her net remuneration during weeks of part-time work. [admitted]
(w)
During the period in
issue, the Appellant was not entered in the payroll journal for seven weeks,
and during those seven weeks there were more than nine employees working
for the Payor. [admitted]
(x)
There was no
correlation between the number of hours the Appellant had to work each week and
the number of other employees hired. [admitted]
(y)
The other employees
were governed by a collective labour agreement and received 8% holiday pay, an
hourly wage of $11.56 to $23.00 and regular pay increases, in accordance with
their collective agreement. [admitted]
(z)
The Appellant was not
laid off because of a shortage of work. [denied]
[3]
The Appellant and her
brother Lionel Benoit, the owner of Acadia,
both testified. The Appellant explained that when she worked part-time, it
could be for more than five hours. This is shown by the copy of the payroll
journal filed in evidence as Exhibit I‑2 and reproduced in a table
prepared by the appeals officer of the Canada Revenue Agency (CRA),
Isabelle Gauthier (Exhibit I‑4). Those documents show that the
Appellant was always paid for all her hours of work.
[4]
At first, the Appellant
received $10.00 an hour, with no allowance for work‑related travel. She
said that she made a 92.6‑km round trip from the office to the different
places she had to go (to deposit employees’ pay cheques at their financial
institutions, remit taxes to the government, make bank deposits for the
employer) about two or three times a week. After a certain time she realized
that her remuneration was not high enough to cover the expenses she incurred
travelling for the employer. In mid‑July‑2006, her brother
proposed increasing her weekly salary by $250.00 in order to cover those
expenses and give her a raise. Lionel Benoit explained that he had started
by paying her $10.00 an hour at the beginning of the period while waiting to
see how well she adapted to her new job.
[5]
According to the record
of employment (ROE) filed as Exhibit I‑1, the Appellant worked for
Acadia from June 20, 2005, to October 22, 2005, and
received a gross weekly salary of $468.00, for 40 hours of work, representing
an hourly wage of just over $10.00.
[6]
The second ROE, also
filed as Exhibit I-1, shows that the Appellant worked again from
November 1, 2005, to October 13, 2006. According to
Exhibits I‑2 and I‑4, she worked from 5 to 10 hours per week from
early January 2006 to early June 2006, at an hourly rate of $10.00.
During that period, there were 10 weeks in which she did not work at all. As of June 3, 2006, she began working full‑time
again for a weekly salary of $468.00 until July 15, 2006, the date on
which her salary was increased to $728.00 for 42 to 45 hours of work per week.
According to these documents, there were four non-consecutive weeks during the
summer in which the Appellant did not work at all, and one week in which she
worked five hours. After her layoff, she apparently worked for seven
non-consecutive weeks, between 5 and 11 hours per week, until late
December 2006, at an hourly wage of $10.00.
[7]
The Appellant explained that she
agreed to help her brother after her layoff. He explained that his business, after starting with
$32,000.00 in losses in 1997, now had sales of $1.5 million. He now has
contracts across Canada and during the period in issue he had to be away
regularly to check on things at all his worksites. There were many employees
scattered not only across the province, but also outside the province. It
was too expensive for him to institute the direct deposit system for employee
pay. Also, he needed someone to deposit his employees’ pay directly at each of
their financial institutions.
[8]
Since he was travelling
more and more, he also needed someone on the spot, especially when he was away,
to handle bookkeeping, invoicing, bank deposits and tax remittances. That is
why he asked his sister, the Appellant, if she would be interested in doing
that work. He explained that during those
weeks when he was at the head office of the business, he could also do that
work himself.
[9]
The appeals officer
also noted that the Appellant had received pay advances from the employer,
which she repaid sporadically by deducting the amount repaid directly from her
pay. Lionel Benoit explained that this was not preferential treatment of
his sister. He has some thirty employees and he also gives those employees
advances on their wages. All of those
advances are made by cheque and entered in the books of the business.
[10]
The appeals officer
also noted that one the Appellant’s pay cheques was used to pay an insurance
broker, Assurance Chaleur Ltée (Exhibit I-3, cheque dated 2006‑06‑08).
Ms. Gauthier checked with the broker, which confirmed that Acadia had an
account there. However, Ms. Gauthier did not check whether the Appellant
herself also had an account with the broker. The Appellant adduced an insurance
certificate she had kept for her personal vehicle, effective from
May 24, 2008, to May 24, 2009, with the broker
Assurance Chaleur Ltée (Exhibit A-2). She also showed the Court her
insurance certificate with the same broker for the current year. According
to Exhibit A‑2, the insurance premium for the year 2008‑2009
was $870.00. The amount of the cheque to which the appeals officer refers is
$372.05 and it was paid in early June 2006. This date is within two weeks
of the expiry date of the insurance policy adduced by the Appellant for the
year 2008‑2009. In my opinion, this
evidence is sufficient to show, on a balance of probabilities, that the
Appellant held an insurance policy with the broker Assurance Chaleur Ltée in
2006, and that her pay cheque was used to pay part of her own insurance and not
that of the business.
[11]
The appeals officer
also noted that the Appellant had deposited one of her pay cheques directly
with CitiFinancial (Exhibit‑I-3, cheque dated 29-09-2006 in the amount of
$548.17). The Appellant filed in evidence a mortgage loan account statement,
note and security agreement for a personal loan that she contracted with
CitiFinancial on 04-07-2004 (Exhibit A-1). That is sufficient to show that
the cheque was used for her personal purposes and not on behalf of her
brother’s business.
[12]
The appeals officer also noted
that the Appellant sometimes had her brother’s authorization to sign for him. The Appellant explained that she signed for
her brother, with his authorization, when there was an emergency and he was
away. Lionel Benoit said that he does not have much education
(“Grade 9”, in his words) and that he did not know that he could give the
Appellant power of attorney, as secretary of the business, to sign on behalf of
the business. However, Lionel Benoit said that he was the one who had
signed all cheques made out to the Appellant (Exhibit I‑3).
[13]
The appeals officer
also considered the layoff unjustified, since in October 2006 there were
between 8 and 12 employees still working for the business. Lionel Benoit explained that he always returns to
the area at that time of year because his son starts his hockey season. Since he is there, he performs the tasks himself,
although he still asks the Appellant to work part-time when needed (especially
for making entries in the payroll journal or for invoicing). During those
periods, the Appellant would sometimes make a few trips for the business. He explained that if some worksites were still
operating, there were controllers and foremen on site.
[14]
Counsel for the Respondent argues
that the Minister was justified in concluding that Acadia, the employer, would
not have entered into a substantially similar contract of employment with the
Appellant if they had been dealing with each other at arm’s length. Counsel for the Respondent points, in
particular, to the pay advances allegedly made to the Appellant and which she
allegedly repaid by foregoing her entire pay on several occasions, mainly when
she was working part‑time for Acadia.
[15]
Counsel for the
Respondent deplores the fact that the Appellant adduced no evidence of the pay
advances allegedly made by Acadia. She also suggests that the Appellant worked
without remuneration, under the pretext that she was repaying advances that she
cannot prove she received.
[16]
Counsel for the Respondent also
raises the question of the Appellant’s pay cheque which was given to the
insurance broker with which Acadia did business. According to counsel for the
Respondent, the Appellant did not adduce evidence that she had a personal
insurance policy with the same broker. I already stated above that I accepted
the Appellant’s evidence on this point.
[17]
Furthermore, counsel for the
Respondent notes that the Appellant received a considerable salary increase in
July 2006, to cover travel expenses, although no study was done on the
actual expenses connected with her trips.
[18]
On this last point, I
am of the opinion that the Appellant was specific on the kilometres covered in
the performance of her duties and that it was easy for Lionel Benoit to
determine the cost, based on the distance travelled.
[19]
Counsel for the Respondent also
raises the fact that the Appellant could work fewer hours, or not at all, while
there were still as many employees working for the business.
[20]
The role of the Tax Court of
Canada in an appeal from a determination by the Minister under the exclusionary
provisions of subsections 5(2) and 5(3) of the EIA is to investigate all the
facts with the parties and witnesses called to testify under oath for the first
time and to consider whether the Minister’s conclusion still seems reasonable.
However, the Court must not substitute its own opinion for that of the Minister
when there are no new facts and there is nothing to indicate that the known
facts were misunderstood (Pérusse v. Canada (Minister of National
Revenue – M.N.R.), [2000] F.C.J. No. 310, at paragraph 15).
[21]
In this case, the
appeals officer stated in her report, and during her testimony, that despite
considerable goodwill both on her part and by Lionel Benoit, he had not
had the opportunity to give his version of the facts. Lionel Benoit
travels a great deal for his business and communication by cellular telephone
or by a public telephone was not possible at the time the investigation was
being conducted. The hearing of this appeal had in fact already been postponed
to allow Lionel Benoit, who was at a worksite in Alberta, to come and
testify at the Appellant’s trial. I heard his testimony and that of the
Appellant. Even though Lionel Benoit
is a relatively prosperous businessman, who creates jobs that are useful to our
country’s economy, he humbly admits to not having much education
(“Grade 9”, as he says). It
may be because of that lack of education that certain documents were not drawn
up (such as written agreements proving that his business had made pay advances
to its employees) and that he let his sister sign cheques for him in
emergencies when he was unable to do so himself. There are certainly certain
gaps in the evidence that the Appellant could have filled. For instance, Lionel
Benoit says that he regularly makes pay advances to his employees who need
them, that those advances are made by cheque, and that he writes on the cheques
that they are advances on wages.
[22]
The Appellant did not bring
cheques showing that she had also received certain pay advances. She adduced a
copy of the payroll journal which shows the repayment of those advances through
pay reductions. Counsel for the Respondent suggests that this may be an
indication that the Appellant worked without remuneration.
[23]
I found the Appellant
and her brother, Lionel Benoit, to be very credible. Both of them
explained, entirely in good faith, the Appellant’s duties and the reasons for
which she worked an uneven number of hours when she was a part-time employee. She said that she had never worked without
remuneration and I have no reason to doubt her words. The appeals officer
suggested in her testimony that a third party would not have been as dedicated
to Lionel Benoit. I do
not agree. Anyone working for
a business can have the same dedication, especially to help out the boss who
ultimately provides the person’s work. It is a very normal relationship of
trust and mutual support between an employer and an employee.
[24]
Lionel Benoit gave his
version and said quite naturally that he treated all of his employees the same
way. Thus, he accommodated
them by seeing that their pay cheques were deposited directly into their bank
accounts on payday, which was what the Appellant had been hired to do if
Mr. Benoit could not do so himself. Just as he made advances on wages to
his other employees, he made some to his sister.
[25]
As for the expenditures that the
appeals officer considered were made by the Appellant for the employer with her
own pay cheques, the Appellant adduced sufficient evidence, in my opinion, to
show that that was not the case.
[26]
The documents filed in
evidence by the Appellant, as well as the testimony of Lionel Benoit, are
new facts that were not available to the Minister when he made his decision.
[27]
In my opinion, these new facts
change the view of things. They seriously undermine the apparent reasonableness
of the Minister’s decision (Le Livreur Plus Inc. v. Canada (Minister of
National Revenue – M.N.R.), [2004] F.C.J. No. 267, at
paragraph 13). The fact that the Appellant reduced her hours of work or
ceased work altogether reflects the agreement she had with her employer. I do
not believe that the Appellant worked without remuneration, or that she was
overpaid for the work she performed. The increase in her remuneration was very
well explained and was meant to cover the expenses of the trips she made for
the employer. Even though she was not reimbursed for those expenses when she
worked part-time, I understand from the evidence that those trips were greatly
reduced and that her work consisted largely in making entries in the payroll
journal, doing invoicing and preparing employee pay cheques.
[28]
In light of the new evidence in
the record, which could not be adduced during the Minister’s investigation, I
consider that the Appellant has shown, on a balance of probabilities, that the
Minister’s decision no longer appears reasonable in the circumstances.
[29]
The appeal is allowed
and the decision is varied to take into account the fact that, during the
period from November 1, 2005, to October 13, 2006, the
Appellant held insurable employment which is not excluded under
paragraph 5(2)(i) of the EIA, since she and Acadia (the employer)
are deemed to have dealt with each other at arm’s length under
paragraph 5(3)(b) of the EIA.
Signed at Ottawa, Canada, this 14th day of
September 2009.
“Lucie Lamarre”
Translation certified true
on this 21st day of October
2009.
Brian McCordick, Translator
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