Citation: 2009TCC35
Date: 20090126
Docket: 2008-562(EI)
BETWEEN:
JIN HUA HUANG,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JUN HUA ZHU,
Intervenor.
REASONS FOR JUDGMENT
Rowe, D.J.
[1] The Appellant appealed from a decision by
the Minister of National Revenue (the “Minister”) dated December 5, 2007
wherein the Minister determined the employment of the Appellant, Jin Hua Huang (“Huang”)
with her husband, Jun Hua Zhu, (“Zhu”) from April 1, 2007 to August 31, 2007,
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 Huang and Zhu would have been substantially similar if they
had been dealing with each other at arm’s length.
[2] A Certified Court Interpreter – Jade Zhen –
was present to assist Zhu by interpreting from Mandarin to English and English
to Mandarin.
[3] Huang testified she is also known as Louise
Huang and is employed as a Project Engineer with the Municipality of Delta, British
Columbia. She holds a Master’s
degree in that discipline from the University of British Columbia and has been in Canada
for 8 years. Huang referred to a document – filed as Exhibit A-1 – in which she
set out her comments pertaining to certain assumptions of fact as set forth in
paragraph 6 of the Reply to the Notice of Appeal (“Reply”). Huang agreed the
assumptions contained in said paragraphs were correct as follows:
A. STATEMENT OF FACTS
1.
With respect to the facts alleged in the Notice
of Appeal, he admits:
a)
the Appellant provided services to Jun Hua Zhu
(“Jun Zhu”) in his business;
b)
the Appellant held the job title of office
assistant and two of her duties were to provide business marketing services and
office receptionist services;
…
6.
In determining that the Appellant’s employment
was not insurable employment with Jun Zhu during the Period, the Minister
relied on the following assumptions of fact:
a)
the facts admitted in paragraph one, above;
Jun
Hua Zhu (“Jun Zhu”), the Employer
b)
the nature of Jun Zhu’s business (the “Business”) was medical services,
acupuncture, Chinese herbs, foot reflexology, Chinese massage and teaching;
c)
Jun Zhu had received training as an acupuncturist in China and immigrated
to Canada in 1999;
d)
Jun Zhu operated the Business as a sole proprietorship;
e)
the Business has been in operation since 2003;
f)
Jun Zhu operated the Business under the name Wen Integral Traditional
Chinese Medical Clinic;
g)
the Business is also known as Wen Acupuncture & TCM Clinic;
h)
Jun Zhu is the husband of the Appellant;
i)
Jun Zhu operated the Business year round;
j)
during the Period, Jun Zhu operated the Business from a location at
#30 – 1480 Foster Street, White Rock, B.C.;
…
l)
the Business location is one kilometre from the Principal Residence:
m)
Jun Zhu controlled the day-to-day operations of the Business;
n)
Jun Zhu made the major business decisions of the Business;
o)
the Business had the following gross monthly sales from April, 2007
to October, 2007:
|
Month
|
Gross Monthly
Sales
|
|
April, 2007
|
$288.32
|
|
May, 2007
|
$1,137.93
|
|
June, 2007
|
$487.44
|
|
July, 2007
|
$354.06
|
|
August, 2007
|
$1,787.16
|
|
Total Gross Sales
during the Period
|
$4,054.91
|
|
September, 2007
|
$3,766.18
|
|
October, 2007
|
$3,814.04
|
Jin Hua Huang, the Appellant
p)
the Appellant is also known as Louise Hang;
…
[4] Huang testified she had not worked for Zhu
prior to December, 2006 and was not involved in obtaining a business location
nor had she played a role in obtaining the lease on the business premises in
the Municipality of White Rock, as assumed by the Minister in subparagraph 6(l) of
the Reply. Huang stated she had visited those premises only once prior to
starting work on April 1, 2007 when the acupuncture Clinic opened for business.
She disagreed with the assumptions of the Minister set out in subparagraph 6(r)
that she had coordinated the leasehold improvements in the new location and
done so because she was more fluent in English than Zhu. Huang stated the
contractor hired to perform the necessary renovations and improvements spoke
Mandarin and Zhu probably communicated with him in that language so there was
no need for her to play any role in that undertaking. Further, she did not have
a good understanding of construction matters. Huang stated she was hired by Zhu
to act as a marketing manager to promote the new business within the community
and to perform the duties of Office Assistant. Zhu had no other employees and
Huang worked in the office from 9:30 a.m. to 5:30 p.m., Monday through Friday.
Her salary was $2,300.00 per month and her duties required her to design various
marketing materials including a logo, a business card - Exhibit A-2 - which
identified her as Louise Huang, Marketing Manager - and advertising in the
Yellow Pages. She also provided information to the Chamber of Commerce in Delta
and in White Rock. There were 9 or 10 other businesses in those municipalities
that offered similar services to those available in Zhu’s Wen Acupuncture &
TCM Clinic (“Clinic”). Huang stated she contacted people personally to advise
them of the availability of products and services at the Clinic. She designed a
website and prepared brochures and advertisements for publications. She
attended community events sponsored by the Business Improvement Association
where she handed out promotional material regarding the Clinic. She also
conducted some door-to-door residential visits to promote the Clinic. Huang
acknowledged that sales at the Clinic during the first 4 months of her
employment were only $4,054.91 while her wages for that period were $9,200.00.
In her view, that was to be expected as the business was new and there is not
much need for treatment during the summer months when the weather is warm and
people are active. Huang stated that Zhu had registered his business at some
point in 2003 but worked as an instructor at a college on a part-time basis and
also performed acupuncture services at certain clinics since he had been
registered as an acupuncturist in British Columbia
since 2001. She reiterated she had not performed any services for Zhu between
December 1, 2006 and April 1, 2007 so there was no reason for her to have
received any payment from him. Huang stated that while working in the White
Rock office, she answered the phone, made appointments and greeted patients but
Zhu collected the fees for treatments and payments for products. With respect
to receipt of pay cheques, Huang referred to the table in paragraph 6(kk) and
stated that the date - May 4, 2007 - written on the pay cheque she negotiated
on June 6, 2007 – was in error and Zhu should have used the correct date of
June 4 instead of May 4. She pointed out she had received a pay cheque dated
May 3, 2007 which she negotiated that day and it would not have made any sense
for Zhu to have issued another pay cheque dated the next day since she had
started work only on April 1. She acknowledged that Zhu had not paid her wages
for July until August 13 and suggested he must have forgotten. The Clinic had a
bank account but she did not have any signing authority nor any investment in
that business. Huang worked until August 31 and her baby was born on September
24. She stated the only work performed for Zhu after August 31 was to upload
the website to the server, a process that probably occupied about 20 minutes.
While employed by Zhu, she had completed all the design needed to construct it
and had started that process in July. However, because digital photographs of
Clinic products had to be taken and inserted in the website together with
descriptions and benefits to the patient and because she had to perform other
duties, was able to work on the site from time to time. The editing process was
time-consuming and various revisions were undertaken before it was ready to be
published by uploading it to the server. During her previous employment, Huang
had designed a website and carried out promotional activities and was familiar
with preparation of brochures and similar material and had utilized software
for those purposes. After leaving that employment, she searched for work as an
Office Assistant while striving to find work in her engineering profession.
When deciding to work for Zhu, she agreed on a monthly salary of $2,300.00
which was based on an hourly wage of about $15.00. In her opinion, that wage
was fair because she did not require any training or learning on-the-job in view
of her marketing experience which included attending various trade shows. Huang
had prepared a document titled Work List – Exhibit A-3 – which she had intended
to submit to the Minister but decided it was not required once the Minister
accepted that work had been performed by her at the Clinic. Huang stated she
had been aware on April 1, 2007 that the work which needed to be done would be
completed in less than 6 months and she intended to obtain employment as an
engineer which she obtained with the City of Chilliwack and later with the Municipality of Delta.
After she left Zhu’s employ, she was not replaced at the Clinic. She considered
this to be normal since the start-up work had been performed and there was no
need for a Receptionist/Office Assistant until business volume increased at
some point in the future. Huang stated she regarded the work performed by her
for Zhu to be substantially the same as she would have performed for an
unrelated employer.
[5] Huang was cross-examined by counsel for the
Respondent. She confirmed the Clinic is operated by her husband – Zhu - as a
sole proprietorship. She recalled the telephone interview with the Rulings
Officer – Lisa Amundsen (“Amundsen”) in September, 2007 and had informed her
that Zhu had worked part-time for acupuncture clinics prior to April 1 of that
year. Huang identified a bundle of documents she transmitted by facsimile to
Heidi Thomson - Appeals Officer - on November 23, 2007 which included examples
of advertising and promotional material and extracts from a newsletter she had
prepared for the Clinic. Huang stated she had earned $40,000.00 per year at her
previous job which she left in late 2005 to start her own water and waste
treatment business by importing specialized equipment from the United States
and selling it in Canada, an enterprise similar to that carried on
by her previous employer where she had worked for 4 years. Huang stated that
when she knew she was pregnant she started looking for employment close to
their family home but decided to work for her husband when he opened the
Clinic. Huang transmitted copies of her pay cheques – Exhibit R-2 – to Thomson.
She repeated her observation that the cheque dated May 4, 2007, should have
been dated June 4 but she had not detected the error prior to depositing it on
June 6. Huang agreed the work at the Clinic had to be performed personally and
that she did not have to record hours. The internet connection was at their
residence and she did some work for the Clinic from there. Huang stated she did
not participate in the process of obtaining the Clinic business space and that
her husband had written and received e-mails with respect to the lease. She
denied having informed the Rulings Officer that she was performing services for
her husband in December in connection with any business activity. In her
assessment, Zhu’s written English is better than her own so there was no need
for her to become involved in any matters pertaining to the landlord and the
desired space. When speaking with the Rulings Officer, she stated she went with
Zhu on one occasion to inspect the space and any other inference drawn of other
involvement must have been the result of a misunderstanding. Huang confirmed
her earlier statement that she did not receive any payment from Zhu until after
she started working on April 1, 2007 and did not receive any payment after
August 31, 2007. She had attempted to find employment as an engineer and wanted
to work enough hours – 600 – to qualify for unemployment benefits based on
maternity leave. In 2007, she and Zhu had a 9 year old son and friends cared
for him after school until they returned home. Huang acknowledged there was no
specific day for her salary to be paid by Zhu. The amount she earned per month
was within $500.00 – after source deductions – of the amount she had earned at
her former employment and she was confident she could have worked at an office
job for another employer to earn approximately $2,000.00 per month. In her
opinion, the work she performed at the Clinic was important at the initial
stage of the business if it were to succeed.
[6] The intervenor – Zhu – did not
cross-examine.
[7] The Appellant closed her case.
[8] Zhu testified in English. The interpreter
had been booked only for the morning but Zhu informed the Court he wanted to
proceed rather than re-schedule a continuation when an interpreter could
attend. Zhu was informed that if necessary, his wife – Huang – could interpret
from English to Mandarin and Mandarin to English. Zhu stated he came to Canada from China in 1999. He was a qualified specialist in
internal medicine in China but was not permitted to practice in British Columbia. He studied acupuncture and registered in 2001 with
the College of Traditional Chinese Medicine
Practitioners and Acupuncturists of British Columbia (“College”) a successor to
the College of Acupuncturists, first established in 1996. Once qualified as an
acupuncturist, he worked part-time in various acupuncture clinics. In 2005, he
suffered a serious medical problem that was almost fatal and afterwards
recuperated for nearly one year. Once he regained his health, he wanted to find
a location to open a clinic in White Rock and began searching in various news
publications until he found one that appeared to be suitable. He entered into
negotiations with Dr. Finch, a dentist, for some adjoining extra space already
leased by her from the landlord. In his opinion, it was very important to
create the proper image for a new business and he needed someone who could
design a website, create promotional materials, handle advertising and act as
an Office Assistant. At that time, Huang was looking for employment and Zhu
suggested she should work for him and offered a salary of $2,300.00 per month
which she accepted. Zhu stated he did not know how long the job would last.
Later, it turned out he could handle all office duties personally without
hiring another person. With respect to the lease, Zhu stated he handled all
negotiations personally and referred to a bundle of sheets – Exhibit A-4 – comprised
of e-mails between himself and Dr. Finch, who was willing to sub-lease part of
her office space to him for purposes of the Clinic together with communications
with Vicky, a representative of Ocean Park Enterprises Ltd., (“Ocean Park”),
the entity managing White Rock Square in which Dr. Finch had her office space.
In the course of communicating with Dr. Finch and Vicky, Zhu used “Davy” as his
first name rather than Jun. Zhu began corresponding with Dr. Finch by e-mail on
January 4, 2007 and stated Huang did not participate in the ongoing process to
obtain the sub-lease. His ability to read and write English was better than his
capacity to speak it, particularly as at 2007. Zhu stated that prior to April
1, 2007 he did not practice acupuncture from their family home but used that
home address to register with the College in 2004 when he paid his annual
membership fees and insurance. He graduated from medical school in China in
1984 – at age 20 – and went on to specialize in internal medicine and is continuing
his efforts to become registered as a physician in British Columbia. In the interim, he intended to earn a living by
practising as an acupuncturist and by offering other related health services
and products from the 300-square foot office in White Rock. In his experience,
the volume of patients depends on many factors including the type of office
presented, the extent of advertising and promotion and other influences such as
weather conditions. He did some research into the matter and ascertained that marketing
companies charged fees that were beyond his budget and he was aware he needed
an Office Assistant during the early stages of his new practice. He opened a
bank account for the Clinic and had sole signing authority. Huang did some
website work from their home but worked on the website design using the
computer at the office as there was no requirement for an internet connection
until the site was ready to be posted to the server. The internet service at
their home was registered to the Clinic. Zhu stated he employed Huang because
of her skills in advertising and promotion and her knowledge of office
procedure and her ability to market the health products offered for sale to
patients. With respect to the issue of the construction required to the Clinic
space, Zhu referred to the Construction Agreement – Exhibit A-5 – dated March
6, 2007 - which was written in both Mandarin and English since the contractor
was Chinese and they communicated in Mandarin. Zhu translated the Chinese
characters into English. As a result of his facility in both languages, it was
not necessary for Huang to play any role whatsoever in this aspect of the
start-up process and only provided her services when the Clinic was open for
business on April 1, 2007. Zhu stated his ability to speak English had improved
considerably since that date and he is able to deal with patients and to
conduct all aspects of his practice in that language.
[9] Zhu was cross-examined by counsel for the Respondent.
Zhu stated he had worked part-time since 2003 as an instructor at a Chinese
Medicine college. He agreed that he had spoken with Amundsen – Rulings Officer
– but denied the suggestion that he told her he had hired Huang in December,
2006 to assist him in his new enterprise. Zhu stated there must have been a
misunderstanding as there was nothing for Huang to do at that point since he
handled all lease negotiations and dealt directly with the contractor. Once the
Clinic opened, he controlled it and made all business decisions. Zhu identified
the Questionnaire – Exhibit R-3 – that he completed, signed on October 28, 2007
and returned to the Appeals Officer in which he provided gross sales figures –
page 8 – and attached payroll records for Huang. The Clinic website was
published in September by Huang from their family residence. Zhu conceded he
was inexperienced in terms of establishing a business and formed the opinion
later that he should have started to advertise his services earlier than April
1 when the Clinic was opened.
[10] Huang did not cross-examine.
[11] Zhu – intervenor – closed his case.
[12] Amundsen testified she has been employed by
Canada Revenue Agency (“CRA”) since 1995 and has served as a Rulings Officer
for the past 5 years. In the course of issuing a ruling on the insurability of
Huang’s employment with Zhu, on August 31, 2007, she conducted an extensive
telephone interview with Huang over the course of about 30 minutes. In
Amundsen’s assessment, Huang spoke English fluently and stated she started
working for Zhu in December, 2006 and had met with the contractor, although she
and her husband did not receive keys to the business premises until April 1.
Amundsen recalled that Huang also disclosed it was necessary for her to deal
with the contractor because Zhu’s English was not very good. Amundsen stated
Huang told her the Clinic website was not published yet but she would complete
that task and would not be paid by Zhu for that service. Amundsen stated she
formed the clear impression from her discussion with Huang that Zhu was seeing
patients in an in-home office at their residence and was also working as an
instructor. Amundsen checked the CRA database and ascertained Zhu had reported
business revenue from that home address and a business loss had been claimed in
a particular taxation year prior to 2007. Amundsen stated a major factor in her
ruling was the understanding that Huang had played a role in locating the
leased premises and negotiating the lease but had not been remunerated for her
services until after April 1, 2007. Amundsen recalled Huang explained the work
she had performed with respect to the brochures, newsletter and contacts with
the Chamber of Commerce. Amundsen stated that during the telephone
conversations with Huang and Zhu, she made notes on her computer.
[13] Amundsen was cross-examined by Huang and
reiterated she had not misunderstood the nature of their conversation.
[14] Amundsen was cross-examined by Zhu. She
stated she had reviewed her typed notes of the telephone interview with Zhu on
three occasions before testifying and formed the opinion he understood the
subject matter and the import of the questions posed by her and had answered
them accordingly.
[15] Zhu testified in rebuttal that he had filed
income tax returns showing revenue received in the course of teaching at a
college - as an independent contractor - and by providing other instruction and
training. For that purpose, he used their home address as his business address
but none of that income had been derived from treating patients.
[16] The position of the Appellant was that she
had done the necessary important work to enable the business to get started and
that the duration was reasonable having regard to the circumstances. In her
submission, the salary of about $15.00 per hour was reasonable bearing in mind
her previous experience with marketing, advertising, trade fairs and website
design and her familiarity with office procedure. Although she wanted to work
enough to qualify for unemployment benefits based on maternity leave, she
submitted she could have done so by working for another employer while waiting
to obtain permanent employment as an engineer. She submitted it was not unusual
for an employee to use a private computer for the benefit of an employer and
that the website had taken more time to complete because she was not able to
work at it on a steady basis because of the need to carry out other tasks
pertaining mainly to marketing the Clinic business.
[17] Zhu – as intervenor – submitted it was
clear on the evidence Huang had not been providing any business services to him
until April 1, 2007 and that she had done the work in return for a reasonable
wage. He also submitted that an individual has the right to choose employment
based on considerations other than money. He submitted the evidence established
he did not have any prior business experience and merely made a mistake when
writing the cheque dated May 4, 2007 instead of inserting the correct date of
June 7.
[18] Counsel for the Respondent submitted the
evidence of Amundsen was clear that Huang had discussed the nature of the
services provided to Zhu – on a voluntary basis – prior to April 1, 2007,
beginning in December, 2006 concerning the lease. Counsel submitted it was not
reasonable for Huang to have accepted lower-paying employment with Zhu except
that she was pregnant and time was running out for her to work enough hours to
satisfy the threshold for maternity leave entitlements pursuant to the Act.
Counsel pointed to the evidence indicating Huang had not been paid on a consistent
basis and had published the website at some point in September even though her
last day of employment was August 31. In counsel’s assessment of the overall
evidence, Huang had not performed enough work to justify the salary paid during
that 5-month period, particularly in light of the minimal revenue earned by Zhu
in operating the Clinic. Based on the evidence, counsel submitted the decision
of the Minister was correct after having considered the indicia set forth in
the relevant provision of the Act.
[19] 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.
[20] In Quigley
Electric Ltd. v. Canada (Minister of National Revenue – M.N.R.), [2003]
F.C.J. No. 1789; 2003 FCA 461, 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.
[21] In the case of Porter v. Canada (Minister
of National Revenue - M.N.R.), [2005] T.C.J. No. 266; 2005 TCC 364, Campbell,
J. reviewed the comments of Justice Archambault in Bélanger v. Canada
(Minister of National Revenue - M.N.R.), 2005 CarswellNat 3971; 2005 TCC 36
and those of Justice Bowie in Birkland v. Canada (Minister of National
Revenue - M.N.R.), [2005] T.C.J. No. 195; 2005 TCC 291 wherein both
discussed the function of this Court in the context of the decision of the
Federal Court of Appeal in Légaré, supra, and subsequent decisions of
that Court. At paragraphs 12 and 13 of her Judgment, Justice Campbell stated:
12 The Tax
Court's mandate, in Employment Insurance cases as set out in the cases of
Légaré and Pérusse, was recently reaffirmed by Letourneau J. in Livreur Plus
Inc. v. Canada, [2004] F.C.J. No. 267
at paragraphs 12, 13 and 14:
12. As already mentioned, the Minister assumed in support
of his decision the existence of a number of facts obtained by inquiry from
workers and the business he considered to be the employer. Those facts are
taken as proven. It is for the person objecting to the Minister's decision to
refute them.
13. The function of a Tax Court of Canada judge
hearing an appeal from the Minister's decision is to verify the existence and
accuracy of those facts and the assessment of them by the Minister or his
officials, and after doing so, to decide in light of that whether the
Minister's decision still seems to be reasonable: Légaré v. Canada (Minister
of National Revenue -- M.N.R.), [1999] F.C.J. No. 878;
Pérusse v. Canada (Minister of National Revenue -- M.N.R.), [2000] F.C.J. No. 310;
Massignani v. Canada (Minister of National Revenue), 2003 FCA 172; Bélanger
v. Canada (Minister of National Revenue), 2003 FCA 455. In
fact, certain material facts relied on by the Minister may be refuted, or the
view taken of them may not stand up to judicial review, so that because of
their importance the apparent reasonableness of the Minister's decision will be
completely destroyed or seriously undermined.
14. In exercising this function the judge must
accord the Minister a certain measure of deference, as to the initial
assessment, and cannot simply substitute his own opinion for that of the
Minister unless there are new facts or evidence that the known facts were
misunderstood or wrongly assessed: Pérusse v. Canada (Minister
of National Revenue - M.N.R.) supra,
paragraph 15.
13 In summary,
the function of this Court is to verify the existence and accuracy of the facts
relied upon by the Minister, consider all of the facts in evidence before the
Court, including any new facts, and to then assess whether the Minister's
decision still seems "reasonable" in light of findings of fact by
this Court. This assessment should accord a certain measure of deference to the
Minister.
[22] I turn now to the facts in the within
appeal. It is apparent from the assumptions set forth in the Reply and from the
testimony of Amundsen – Rulings Officer – that the Minister’s decision relied
heavily on the following material:
1. that prior to April 1,
2007 Zhu operated his business of medical services, acupuncture, Chinese herbs,
foot reflexology, Chinese massage and teaching, from the principal residence occupied
by himself and Huang. (See subparagraph 6(k) of the Reply.)
2. that the Appellant was
hired in December, 2006 to obtain a new business location and to obtain a lease
for that location. (See subparagraph 6(q) of the Reply.)
3. that the Appellant
dealt with the contractor after the lease was signed in order to coordinate
the leasehold improvements for the new business location because her English
was better than Zhu’s. (See subparagraph 6 (r) of the Reply.)
4. that the Appellant
received no remuneration from Zhu between December, 2006 and April 1, 2007 even
though she was providing services to his business. (See subparagraph 6(gg) of
the Reply.)
5. that Zhu did not fully
pay the Appellant for the services she performed as an Office Assistant. (See subparagraph
6(ii) of the Reply.)
6. that the Appellant
received remuneration for the month of May, 2007, one month early and did not
cash the cheque until June 6, 2007. (See subparagraph 6(ll) of the Reply.)
[23] I will review the relevant portions of the
evidence relating to the matters set out above.
[24] The evidence of Amundsen – Rulings Officer
– was that she understood clearly from speaking to Huang and subsequently to
Zhu – by telephone – that Huang was the one who found the business location and
negotiated the lease and dealt with the contractor. She also understood that
Zhu had been operating his business from their principal residence in Surrey and examined his income tax returns wherein she
ascertained he reported business income from that address and certain expenses
which had resulted in a loss.
[25] Huang testified she did not participate in
any dealings with Dr. Finch regarding the sub-lease of space to Zhu and she did
not communicate with the agent of the landlord – Ocean Park – with respect to that matter. She also stated she was not involved
with the contractor, an individual who spoke Mandarin and that Zhu negotiated
with him and – probably - conducted all necessary business in that language.
Zhu testified he had been searching for space in White Rock and when he located
an appropriate premises began communicating – mainly by e-mail – with Dr. Finch
and the representative – Vicky – of Ocean Park, as of January 4, 2007, in order
to obtain the lease and permission to undertake leasehold improvements. The
contract – Exhibit A-5 – with Royal Globe Construction Ltd. – for the
renovations was dated March 6, 2007, and it is reasonable to assume the
sub-lease of the premises from Dr. Finch must have been signed and the approval
of Ocean Park for the
construction must have been obtained prior to that date. A perusal of the
e-mails indicates that Zhu was capable of expressing his thoughts
satisfactorily although the grammar and structure is indicative of someone for
whom English is a second language. The written material prepared by Huang which
was presented in the form of exhibits – including Exhibit A-1 - indicates her
ability to write English was not markedly superior to that of Zhu although her
spoken English was much better than his at that time.
[26] I accept the version of events as related
by both Huang and Zhu concerning this aspect of the proceeding. It did not make
any sense for Huang to be fixed with the responsibility of finding the space
and negotiating the lease and hiring a contractor to make the necessary
improvements when Zhu was more capable than her of carrying out those tasks
particularly since there were no language impediments that would defeat his
goal. As an acupuncturist, he was aware of the type of space needed to pursue
his goal of opening a practice. I also accept the explanation by Zhu that he
was earning revenue as an instructor at a college and/or earning money by
working part-time at acupuncture clinics prior to 2007 and had reported that revenue
as business income while using their principal residence as a business address
because it was the one he had used to register with the College. I accept his
evidence that he did not carry on an acupuncture practice from the residential
location and that he decided to open a practice in White Rock and undertook
steps to achieve that end, beginning in December, 2006. I am satisfied Huang
did not perform any work for Zhu’s business until the Clinic opened on April 1,
2007.
[27] When Zhu elected to testify in English
rather than having the appeal re-scheduled to obtain the services of a
Mandarin-speaking interpreter, it was extremely difficult to understand him
even though he was speaking to me directly from the witness box. Both of us
were aware of the context and I was able to observe him intently. The documents
were readily accessible in order to understand the points he was making in the
course of his testimony. In addition, counsel for the Respondent was helpful in
referring Zhu to certain exhibits or to particular parts within a document dealing
with dates, locations, et cetera. In my assessment of the evidence, it would
have been nearly impossible for Amundsen to have obtained an unambiguous, clear
understanding from Zhu of the relevant circumstances of the employment
situation between himself and Huang by speaking with him via telephone on
August 31, 2007. Zhu spoke very quickly and had to start over again on several
occasions in order to get his thoughts arranged in an orderly sequence so he
could express them orally. He had a tendency to speak very quickly and it was
difficult – sometimes – to understand the import of his testimony without
taking the time to have him repeat it in segments in order to be certain of the
meaning. His ability to speak English is much better in November, 2008 than
when he spoke with Amundsen because he has been dealing with patients in
English as well as in Mandarin since he opened the Clinic. Because much of his
medical studies throughout his career in China and thereafter were in English,
he did not have difficulty reading that language and could write sufficiently
well to express his thoughts in matters respecting business, banking or normal
daily transactions and interactions with English-speaking people.
[28] I appreciate that it is cost-effective for
Ruling Officers and Appeals Officers to conduct interviews by telephone.
However, I suggest that when the interviewees have a maternal language other
than English and it is apparent they are not fluent in discussing matters
surrounding their employment that a CRA officer who speaks and understands that
particular language become involved either as the interviewer or as
interpreter. Even during Huang’s testimony, it was necessary to interrupt and
ask her to clarify certain matters particularly when dealing with more than one
subject when describing a sequence of events. I note Amundsen did not present
her typed notes of the conversations with Huang and Zhu even though she
testified she had referred to them on three different occasions prior to
testifying. Also, the statements of income and expense filed by Zhu with his
income tax returns filed in which he reported business income were not
available for examination yet Amundsen stated this was an important factor in
deciding Zhu had operated an acupuncture business prior to opening the Clinic
at White Rock on April 1, 2007 and that Huang was working for him without pay
during this earlier period.
[29] I am satisfied on the evidence that Huang
was fully paid for her services by Zhu. Both testified the May 4, 2007 cheque
was dated incorrectly and that it should have been dated June 4, 2007. It was
negotiated on June 6 and the only anomaly was with respect to the July pay
cheque which was not issued until August 13 and negotiated 5 days later.
Therefore, Huang did not receive an advance on her pay and 4 of the 5 cheques
were issued in a timely fashion and negotiated by Huang.
[30] To intervene or not to intervene, that is
the question; whether ‘tis propitious to let stand the decision of the
Minister, clothed in presumptive righteousness and shielded by the deference
commanded to be accorded by those sitting in High Places, or to declare it fit
for demolition because of egregious damage done to pillars and foundation and
thereafter to commence afresh the inquiry demanded by statute.
[31] In Birkland, supra, Justice Bowie
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] It is apparent the Minister proceeded
incorrectly on the basis Huang had provided various services to Zhu between
December, 2006 and April 1, 2007 for which she was not paid and assumed Zhu had
been carrying on the same type of business from their residence that he
conducted later at the Clinic in White Rock. It is also clear this
misunderstanding was the most important factor in arriving at the decision that
Huang’s employment was not insurable. The additional matter of the apparent pay
advance after being employed only one month also played a part in the
determination as did the assumption Huang was not fully recompensed for her
services. In view of those errors, the decision of the Minister is no longer
reasonable. I must intervene and will analyze the evidence to decide whether
the Appellant was in insurable employment with Zhu during the relevant period.
It is helpful to re-state the wording of paragraph 5(3)(b):
5. (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.
Remuneration:
[33] The Appellant was paid the sum of $2,300.00
per month which was based on the approximate rate of $15.00 per hour for 40
hours a week for 4.3 weeks each month. In view of Huang’s experience in
performing office work together with her ability to create a website, conduct a
local advertising and marketing campaign and otherwise handle all aspects of
promotion for a new enterprise in an area with existing competition, that rate
of remuneration was reasonable. She did not receive vacation pay and it is
probable neither party addressed this aspect of employment, perhaps because her
pay was in the form of a monthly salary.
Terms and conditions:
[34] Some of the work was performed off-site,
including at the residence of Huang and Zhu where there was an internet
connection in the name of the Clinic. She performed certain services as
required at the Clinic office such as answering the phone, booking appointments
and designing advertising for insertion in various publications. Other work was
done away from the office when Huang attended meetings to promote the Clinic
and to attend at Seniors’ Centres, libraries, churches, community events, local
service clubs and summer beach displays in order to make the public aware of
Zhu’s new Clinic. As assumed by the Minister, she also did banking, provided
interpretation when required, published a newsletter and ran errands. The hours
of work were consistent with those required by the operation of the new Clinic.
Duration:
[35] Although there was no specific period
established at the outset of Huang’s employment, it was obvious she would not
be working past September as she was due to deliver a child during that month.
It was also apparent to both that the marketing, advertising and promotion to
get the Clinic up and running – while extremely important – would not require
someone to perform those specific services on an ongoing basis and the work
performed by an Office Assistant would depend on the volume of patients
attending the Clinic. An alternative would have been for Zhu to retain the
services of a marketing and advertising agency but he rejected that because of
the expense associated with that service coupled with the need to also hire
someone to perform the services of an Office Assistant during the establishment
of his new business for an unspecified period.
Nature and importance of the work performed:
[36] From the perspective of Zhu who had not
been involved earlier in the operation of his own acupuncture and TCM business,
it was important to make himself known in the White Rock and surrounding areas,
particularly since there were 9 or 10 others offering similar services. He did
not have any experience in designing and placing advertising in appropriate
publications nor was he capable at that point of communicating sufficiently in
English with members of the general public, business organizations, service
groups and the advertising media to handle his own promotions. He knew Huang
was capable of designing a website and could discuss with her the properties of
the various herbs and other products to be displayed on said site or as the
subject of comment in advertising and newsletters. The ability to speak, write
and understand Mandarin was essential to that task. Huang had the ability to
display the products in the Clinic and to ensure the office was capable of
functioning properly during the first few months of operation. As it turned
out, Zhu did not have to hire another employee because he was able to handle
the office work himself even though the volume of patients increased. The
Minister relied on the fact (subparagraph 6(nn) of the Reply) that the gross
business income of the Clinic increased after the Appellant started her maternity
leave. The relevant numbers are set forth in the table below subparagraph 6(o)
of the Reply and indicate the gross sales during the entire period Huang was
employed was only $4,054.91. The sales in September and October were $3,766.18
and $3,814.04, respectively. The Clinic continues to operate and one could draw
the logical inference that the marketing strategies employed by Huang were
successful. It is normal for any new business or professional practice to start
out slowly and – often - the costs of operation will exceed revenue for the
first year or more. In my view of the evidence, the entire body of work
performed by Huang was important to the establishment of that new Clinic if it
was to be accorded a reasonable opportunity to succeed.
[37] I have taken into account that Huang
published the Clinic website to the server sometime in September after she had
ceased to work for Zhu. Huang testified this final part of the process occupied
about 20 to 30 minutes of her time using the Clinic internet connection from
their residence. She was not paid for this work but it is an integral part of
the earlier work for which she was remunerated as part of her monthly salary.
Huang testified the website design occupied a greater amount of time because
she was performing so many other duties and had to take the digital photographs
and write explanatory copy whenever she was not occupied otherwise.
[38] In the case of Docherty v. Minister of
National Revenue, [2000] T.C.J. No. 690, I commented – at paragraph 25 as
follows:
[25] The
template to be utilized in making a comparison with arm’s length working
relationships does not require a perfect match. That is recognized within the
language of the legislation because it refers to a “substantially similar
contract of employment”. Any time the parties are related to each other within
the meaning of the relevant legislation, there will be idiosyncrasies arising
from the working relationship, especially if the spouse is the sole employee or
perhaps a member of a small staff. However, the object is not to disqualify
these people from participating in the national employment insurance scheme
provided certain conditions have been met. To do so without valid reasons is
inequitable and contrary to the intent of the legislation.
[39] Sometimes it is relevant when deciding
these cases based on a specific set of facts to compare it to the circumstances
of employment which were the subject of other appeals. For example, in the
within appeal, the Appellant did not perform services outside the period of
employment other than to post the website to a server. In the case of Hatami
v. Canada (Minister of National Revenue – M.N.R.), [2007] T.C.J. No. 268; 2007
TCC 428, Justice Miller found the employment situation was akin to that of a
wife who helped her husband to get a business up and running by working
sporadically without pay and agreeing not to cash pay cheques until the cash
flow of the business had improved. Justice Miller had concerns about the duration
of the work – 2 months – particularly in light of her previous employment – 5
months – with her husband, both times when she was pregnant. Justice Miller
also discounted the significance of timesheets submitted by the Appellant in
that case as having been created after the fact as “window-dressing.”
[40] In the case of Forget v. Canada (Minister
of National Revenue – M.N.R.), [2003] T.C.J. No. 575; 2003 TCC 733, Campbell, J. found that the Appellant waited to receive her
pay until the company could afford to pay and had done so only because she was
the spouse of her employer.
[41] In Samson v. Canada (Minister of
National Revenue – M.N.R.), [2005] T.C.J. No. 290; 2005 TCC 383, Little, J.
dealt with an appeal wherein the Appellant had made 135 bank deposits and
prepared and signed a total of 623 cheques during a period she was not on the
payor’s payroll and had signed a number of invoices. In Justice Little’s view,
that work was clear evidence that person who was at arm’s length with the payor
would not have performed activities of that “magnitude and nature” and
concluded the Minister was correct in deciding the employment of that Appellant
was not insurable.
[42] Taking into account the whole of the
evidence and applying the jurisprudence to the facts as determined in these
Reasons, the appeal is hereby allowed and the decision of the Minister is
varied to find that:
Jin Hua Huang was employed in
insurable employment with Jun Hua Zhu from April 1, 2007 to August 31, 2007.
Signed at Sidney,
British Columbia, this 26th day of January, 2009.
“D.W. Rowe”
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