Citation: 2009TCC417
Date: 20090901
Docket: 2008-3660(EI)
BETWEEN:
MICHELLE CLARKE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] Michelle Clarke
is appealing the decision of the Minister of National Revenue that she was
engaged in excluded employment under paragraph 5(3)(b) of the Employment
Insurance Act.
[2] Paragraph 5(3)(b)
reads as follows:
(3) Arm’s length dealing - 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.
[3] There is no question that By-Son Enterprises Ltd. and
Ms. Clarke are “related” as she is the spouse of the company’s principal. Based on the facts before him, the Minister was not
satisfied that it was reasonable to conclude By‑Son Enterprises Ltd. and
Ms. Clarke would have entered into a substantially similar contract of
employment if they had been dealing with each other at arm’s length.
[4] The case law has
established that judicial deference must be shown to the exercise of the
Minister’s discretion under paragraph 5(3)(b)[1]. It is not for this Court merely to substitute its
judgment for that of the Minister; rather, the Court must be satisfied that the
facts presented to the Minister were misunderstood or incomplete. In the
present case, I am satisfied that the Minister did not have a complete picture
of all of the circumstances of Ms. Clarke’s employment.
[5] To understand
the true nature of the Appellant’s work in 2007, it is important to put it in
context: Ms. Clarke and her husband Byron, the principal of By-Son Enterprises
Ltd., live near Denzel, a small rural community in western Saskatchewan.
[6] At all times
relevant to this appeal, By-Son Enterprises Ltd. was engaged in providing
secondary services to companies working in the Alberta oilfields. The pressures
of the industry required By-Son Enterprises Ltd. to be available in the field “24/7”;
as a result, Byron and two or three employees worked shifts in rotation between
the field and the company’s base in Saskatchewan: typically, 21 days in “camp”
in the oilfield followed by four or five days “out”.
[7] From January to
April 2007, Ms. Clarke was employed by By-Son Enterprises Ltd. shuttling
employees, equipment and supplies between the company’s Saskatchewan
headquarters and the Alberta oilfields. At that time, she was also working on a
casual basis at the doctor’s office and two co-ops in the local community.
Meanwhile, her husband was working far from home in the Alberta
oilfields, focused on making a success of his company.
[8] Because By-Son Enterprises Ltd. was in the process of
establishing its Alberta operation and Ms. Clarke had not
done such work before, it was difficult for
them to enunciate precisely what her duties would be and the exact amount of
her remuneration. However, both Ms. Clarke and By-Son Enterprises Ltd.
understood the general nature of the job she was undertaking; they were also
able to estimate the costs to Ms. Clarke of such employment: wear and tear on
the vehicle, fuel expenses and repairs, and lost opportunities for local work. With
these variables in mind, she and By-Son Enterprises Ltd. reached a verbal
agreement that she would be paid a reasonable amount for the time actually
devoted to carrying out her shuttle work and would be reimbursed for her
expenses. For reasons that will be discussed below, By‑Son Enterprises
Ltd. did not pay Ms. Clarke her wages for the period January to April 2007
until November 2007.
[9] In May 2007, the
bank with which By-Son Enterprises Ltd. was dealing encountered certain
difficulties not relevant to this appeal. This event, together with the company’s
desire to get its records in better order and the fact that the former
bookkeeper was located in another community some 45 minutes from Denzel, caused
By-Son Enterprises Ltd. to offer Ms. Clarke a new position as an administrator.
Around the same time, By-Son Enterprises Ltd. turned its books and records over
to its accountant for revision and updating. These were not returned until
November 2007.
[10] In
her new position, Ms. Clarke took over the duties of the company’s former
part-time bookkeeper but had the additional responsibility of setting up a new
financial records-keeping system for the company, transferring the existing
records to it and entering current data. When sometime later Ms. Clarke
discovered she was pregnant, she had the further task of training Byron to look
after the new bookkeeping system.
[11] Ms. Clarke had a
diploma in Business Administration[2]
and was qualified to handle basic bookkeeping duties. Because she lacked
specialized training in payroll, however, By-Son Enterprises Ltd. hired a
consultant to provide some training and to assist her with the initial set up.
While working to improve her payroll skills and reorganizing the company’s
administrative function, Ms. Clarke met twice with the former bookkeeper for
assistance with the transition.
[12] Ms. Clarke’s
duties were more onerous than those of the former bookkeeper who had provided part-time
bookkeeping services to several different local concerns. In addition to taking
over her bookkeeping duties, Ms. Clarke was responsible for confirming the
accuracy of By-Son Enterprises Ltd.’s receipts and invoices; recording and
reporting to the company’s insurer the inter-provincial mileage records of the
vehicles used in its operations; and reconciling payments received for the
company’s services with the amounts billed. The former bookkeeper had been paid
for her part-time services on an hourly basis; Ms. Clarke and By-Son
Enterprises Ltd. had verbally agreed that she would be paid a flat salary of $1,000
per month for her bookkeeping and administrative work. In these circumstances,
the difference between Ms. Clarke’s earnings and those of the bookkeeper are
understandable.
[13] As it turned out, Ms.
Clarke did not receive any payment for her services in the field or as the
company’s administrator until November 2007. I accept her explanation that this
was due, in part, to the time it took to reorganize the company’s books,
including waiting for the accountant to complete his review and revision of its
financial records, the transfer from the old system to the new, the overlap of
the company’s GST periods with its year end, the unknowns associated with
getting a new company established in a high-pressure economy, and her own inexperience
with certain aspects of her duties. Throughout this period, however, By-Son
Enterprises Ltd. offered to pay advances to Ms. Clark, as it had done for one
or two of its other employees. Ms. Clarke declined this offer as she felt it
would only further complicate her efforts to get the company’s records in
order. She was still in the process of learning the new payroll system. Finally,
she had no reason to doubt the company’s assurance that she would be paid in
accordance with their oral agreement; in the meantime, she was content to rely
on her other employment for her financial needs.
[14] Ms. Clarke did
not pretend to be an expert in the economy of rural western Canada. She was
entirely credible, however, in her description of her experiences as an
employee and resident of that area. She said that it was “customary”, in
ventures as precarious as oil and agriculture, to wait to reap the rewards of
one’s labours. By way of example, she said that she had been employed as a
bookkeeper for an arm’s length agricultural business and had had to wait 8½
months to be paid. By the same token, she explained that By-Son Enterprises
Ltd. had had to wait until April 2007 to be paid for services it had rendered to
Alberta companies in January. Both she and Byron (as the principal of By-Son
Enterprises Ltd.) were accustomed to having to wait for revenue to be realized
before being remunerated themselves.
[15] In November, when
the accountant’s review of the company’s records was completed, the books were
returned to Ms. Clarke who, by that time, had the new system up and running.
The company promptly issued cheques, as promised, for her past months’ wages
and salary. All proper deductions and remittances were made at that time[3]. The following month, her December salary was paid by
cheque on January 9, 2008. The slight delay of what was, in all other
respects, a timely payment, is understandable given the intervention of two
significant events in that month: the Christmas season and the birth of Ms.
Clarke’s child on December 22, 2007.
[16] According to
counsel for the Respondent, it was the way in which Ms. Clarke was remunerated
for her work that most influenced the Minister’s decision. Not having had the
benefit of a complete explanation of all the circumstances surrounding Ms.
Clarke’s employment, the Minister’s decision is perhaps understandable. However,
what is reasonable as contemplated by paragraph 5(3)(b) must be
determined in light of the circumstances that existed for the employee and
employer concerned. The question is whether, in those circumstances, those particular individuals would still
have entered into a “substantially similar” contract of employment if they had
been dealing with each other at arm’s length. Having heard Ms. Clarke’s credible, thorough and well-organized
evidence regarding her employment, I am satisfied for the reasons set out above
that it is reasonable to conclude that she and By-Son Enterprises Ltd. would
have entered into a substantially similar contract if they had been at arm’s
length.
[17] The appeal is
allowed on the basis that Ms. Clarke was engaged in insurable employment for
the period January 3 to December 20, 2007.
Signed at Ottawa, Canada this 1st day of September, 2009.
“G. A. Sheridan”
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