Citation: 2008TCC170
Date: 20080328
Docket: 2007-702(EI)
BETWEEN:
JOSEPH CAMPBELL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
NATALIE NUSSEY,
Intervenor.
REASONS FOR JUDGMENT
Boyle, J.
[1] This is an appeal
from a ruling determination made by Canada Revenue Agency under the Employment
Insurance Act that (i) the Appellant’s adult daughter was an employee of
the Appellant but (ii) was not engaged in insurable employment because (a) she
does not deal at arm’s length with her employer and (b) the terms of her employment
are not considered to be arm’s length terms for purposes of paragraph 5(3)(b)
of the Employment Insurance Act.
[2] The Reply filed by
the Minister sought to raise the issue of whether the worker was an employee in
addition to the issue of whether the employment was non-arm’s length. It was
not entirely clear to me that this could be properly before the Court since the
Minister would effectively be appealing against his own ruling. I do not need
to decide this as Crown counsel conceded in argument that the worker was an
employee. Given the way the pleadings and assumptions were drafted, and the
evidence entered, including the cross-examination of the Appellant and the
evidence-in-chief of the CRA Appeals Officer, I would have had to conclude that
the Crown had not shown its ruling that the daughter was an employee was not
correct.
[3] Thus the only issue
to be addressed is whether the employment of the daughter was on arm’s length terms
as described in paragraph 5(3)(b).
I. Legislation
[4] Paragraph 5(3)(b)
provides as follows:
(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.
II. Standard of
review
[5] The standard of review in such
a case is whether the Minister’s conclusion was properly arrived at and is
reasonable in light of the evidence before him as supplemented before the
Court. See, for example, the decisions of the Federal Court of Appeal in Légaré
v. Canada, [1999] F.C.J. No. 878 and in Pérusse v. Canada, [2000]
F.C.J. No. 310 as well as this Court’s 2005 decision in Birkland v. Canada,
[2005] F.C.J. No. 195.
III. Facts/Evidence
[6] There were three witnesses at trial: the
Appellant employer Reverend Campbell, the employer’s daughter Nathalie Nussey,
and the CRA Appeals Officer. Each of the witnesses provided clear,
understandable and credible testimony. There was no serious suggestion in
cross-examination by either side that the other side’s witnesses were not
credible. While the Appellant’s agent may have said one of his
cross-examination questions went to the Appeals Officer’s credibility, it
really only went to the completeness of one of her earlier answers in
cross-examination. I accept as correct the testimony of each of the witnesses;
the witnesses’ testimony did not conflict on any material point.
[7] The Appellant
Reverend Campbell is a religious Minister and before the period in question had
been pastor at a church. In January 2006, he took on a contract position with a
Canadian religious charity as its National Director of Development. One of the charity’s
programs he oversaw was the sale to churches across Canada of an eight-week Christian Education
program. This was a new program for the charity. Its promotion involved the
charity’s personnel initially contacting churches across Canada to introduce them to
the program, determine their level of potential interest in the program, and
offer to send a promotional information package to the church.
[8] There were
initially two callers retained by the charity. Reverend Campbell supervised and
oversaw those callers. They reported in writing to him on the outcome of their calls
in order that he could personally follow up with the Pastor or Director of
Christian Education at a church that expressed a degree of interest in the
program. The callers also reported to him on their hours and their progress in
calling all of the Canadian churches identified on their database.
[9] One of the charity’s
callers was the Appellant’s daughter and the other was an unrelated person.
There is no suggestion that the charity was not an entirely arm’s length
organisation to the Appellant and the Intervenor. The work was not full‑time
but ranged from ten to twenty hours per week. The work was not well paying at
less than $10 per hour. The callers worked from their own homes. They were paid
by the charity bimonthly after submitting their time sheets.
[10] This was a new business
venture for the Appellant. Upon becoming a self‑employed contract
business person, he obtained some professional business and financial advice.
This included registering his sole proprietorship as a business with CRA which
he did. He also understood it may be advantageous for a business person to
employ others, including family members, to do work they were capable of, that
was needed, and that was paid at market rates and on market terms.
[11] As this was a new
venture for the Appellant and a new program for the charity, the Appellant and the
charity were both ambitious and conservative, hopeful for great success but
careful to take steps incrementally. At the outset it was decided to begin with
two callers. They began with the charity in February 2006 shortly after
the Appellant’s contract with the charity began.
[12] Based on the
knowledge the Appellant and the charity have of church schedules, they
anticipated that their busy times to focus on promoting such a project would be
January to June and September to November. The summer months of July and August
were expected to be quiet times at churches with staff on holidays, and the
Christmas focus at churches during Advent meant they would not try to promote
the project directly to churches in December. Similarly, the callers were
encouraged to attend to their work in the mornings, when they knew church
offices were more likely to be staffed.
[13] The charity had both
callers do the same things and paid both the same amount on the same terms.
[14] In April or May
2006, the Appellant offered both callers employed positions with his business.
They would be doing the same caller work on behalf of the charity and all of
their terms and conditions of employment including those relating to control
and direction and reporting, etc. would remain the same. It was not entirely
clear whether it was intended that the hourly rate would decrease to $8 per
hour but it did, perhaps inadvertently. In any event the CRA Appeals Officer
testified that either rate was considered a reasonable arm’s length rate for
the work done. According to a document filed, the charity was charged back the
cost of its worker outsourced to the Appellant.
[15] The Appellant’s
daughter, who is the Intervenor in this matter, accepted the offer of
employment. Her co-worker did not. The other caller was then collecting EI
benefits and preferred to receive contract wages for her part-time work as is
permitted to some extent. Also, she planned to give up the charity work and
return to full-time employment by October 1st when her EI benefits ended.
[16] The Intervenor
worked for the Appellant until the end of June. Similarly, the other caller’s
work ended with the charity at the end of June. During his employment of the Intervenor,
the Appellant made the appropriate employer withholdings and issued and filed a
T4 and a Record of Earnings.
[17] In mid-July, a new
caller was hired to support the program in the summer months and continued
thereafter. She was not related to the Appellant or the charity. She was also
offered an opportunity to become an employee of the Appellant or to work under
a contract with the charity. She chose to work directly under contract for the
charity. The Appellant later again offered this caller the chance to be an
employee of his business but she again turned it down. While there was no
evidence of why the new caller chose to work under contract with the charity
instead of as an employee, there are many considerations relevant to Canadian
workers faced with such a choice including whether she has other contract work
clients, the different basis of deducting work-related expenses for tax
purposes, and paying EI and CPP balanced against the likelihood of collecting
meaningful amounts in their own personal circumstances.
[18] The success of the
program and the Appellant’s business venture have not warranted the hiring of
any further callers by the charity or the Appellant.
[19] At the time in May
2006 that the Appellant offered employment to the Intervenor, each was aware
that it was possible that the daughter, who was expecting at the time, could be
a few hours short of qualifying for EI when her baby was expected to be born
based on her other principal work as a youth social worker. This would depend in
part on when she had to stop working as a result of her pregnancy. Also, since
the work she was already doing for the charity was set up on contract basis, it
was not expected to provide insurable hours for this purpose. The daughter was
advised of this risk of being approximately 30 hours short of the 600 insurable
hours needed by an EI officer and recommended to find additional part-time
employment to ensure she qualified. Both the Appellant and the Intervenor were
aware that, provided her new employment status to work on the project was on
arm’s length terms, the part-time work should be sufficient to remove this
risk. As it turned out, the daughter was offered sufficient shifts at her
social worker employment that, had she worked them all, she would not have
needed the few additional hours in order to qualify for EI benefits upon the
birth of her baby. The Intervenor also testified that for the few hours needed
she could just as easily have taken new part-time employment instead of
changing contract work she was already doing to employment.
[20] The Appellant
testified that over his working career he had previously offered workers the
choice of employment or contract work depending upon what the workers’
expressed preferences for EI purposes were. This was consistent with what the
CRA Appeals Officer said he had told her and is corroborated by her notes.
[21] There are some minor
inconsistencies between the detailed testimony given in Court and the answers
given by the Appellant and the Intervenor in their respective CRA Arm’s Length
and Worker Questionnaires. This is typically the case and I conclude nothing
follows from that.
[22] The uncontradicted
and unchallenged evidence is that the Appellant paid the Intervenor by cheque bimonthly
and this is the same as when the Intervenor worked under contract directly for the
charity. The Crown put the cheques into evidence and observed that they were
written on a joint account of the Appellant’s, they were sequentially numbered
although dated over a two-month period, and all four were deposited by the Intervenor
to her bank at the same time.
[23] An interesting issue
rose when CRA Appeals Officer began to testify. Her testimony went in orally
after referring to her notes on a couple of occasions. However, it became
apparent that she had no recollection of what was recorded in the notes and the
Crown had not sought to introduce the Officer’s notes into evidence. While the
Appellant’s agent did not raise an objection, since he was not a lawyer and the
proceeding was governed by the Court’s Informal Procedure, I raised with
the Crown its apparent difficulty of having a witness whose review of her notes
did not revive a present recollection she could testify to. The Crown wisely
chose to introduce her notes into evidence and she testified that she always
made written notes of what was said right after any phone call or conversation.
[24] It is important for
counsel to remember there is a difference between the use of file notes to
revive or refresh a past recollection and the use of file notes as evidence of
a past recollection recorded. Most notably, in the former case the testimony is
the evidence whereas with past recollection recorded the document will be the
evidence.
[25] A leading case on
past recollection recorded is Fleming v. Toronto R.W. Co. (1911), 25 O.L.R.
317 especially at paragraphs 25 and 31.
[26] The four criteria
set out in Wigmore on Evidence ((Chadbourn rev. 1970), vol. 3, c. 28 s. 744 et
seq.) were recently adopted by the Supreme Court of Canada in R. v. Fliss,
[2002] 1 S.C.R. 535, paragraph 63. These are:
1. The past
recollection, must have been recorded in some reliable way.
2. At the time,
it must have been sufficiently fresh and vivid to be probably accurate.
3. The witness
must be able now to assert that the record accurately represented his knowledge
and recollection at the time. The usual phrase requires the witness to affirm
that he “knew it to be true at the time”.
4. The original
record itself must be used, if it is procurable.
[27] The CRA Appeals Officer’s
evidence was that, in considering what the Minister’s opinion would be for
purposes of paragraph 5(3)(b), she considered:
(i) the
remuneration paid;
(ii) the
terms and conditions of employment;
(iii)the duration of the employment;
and
(iv) the importance and
nature of the work.
In addition to the cheques and CRA
Questionnaires, she reviewed the employee’s time sheets.
[28] With respect to
remuneration, the CRA Officer was satisfied that it was on reasonable arm’s
length terms for the work done. That it may have been one dollar per hour less
than the charity had been paying for whatever reason did not make it
unreasonable. In her words, it was fine with CRA.
[29] With respect to the
terms and conditions, she noted that the employee worked at home and used her
own equipment. That was not considered unreasonable — she said that is
consistent with her own work for CRA.
[30] The areas of
concerns which left her of the opinion that the terms were not arm’s length as
described in paragraph 5(3)(b) were:
(i) the
pay cheques were on a personal joint account, were sequentially numbered, and
were all cashed by the employee at once; and
(ii) she
felt it was “created employment” of short duration for the purpose of getting
EI benefits since the Intervenor was already doing the same work directly for the
charity and simply wanted to get 32 more hours of insurable employment to
attain the 600 hours required for her EI parental benefits.
IV. Analysis
[31] The CRA Ruling
concluded that the Intervenor was an employee engaged in a contract of service
not an independent contract under a contract for services for EI purposes. The
Crown acknowledged this was an employment relationship.
[32] With certain
specific exceptions I will turn to next, all of the terms and conditions and
working arrangements applicable to the employment are the same as they were
when the daughter did the same work for the charity immediately prior to the
employment in question. All of those terms were set between the charity and the
Intervenor who dealt at arm’s length. Even though the worker reported to her
father while working directly for the charity, the work terms and conditions
were the same as those of her arm’s length co-worker.
[33] One exception is
that for some reason she was paid only $8 an hour as an employee while it was
$9 an hour with the charity. However, the CRA witness testified the Minister
was of the opinion that was nonetheless an arm’s length rate for the work done.
This difference is not material.
[34] Another possible exception
is that after receiving her pay cheques from her father, the employee did not
immediately cash them. I do not regard that as relevant even had anyone told me
when the Intervenor was in the habit of cashing her cheques from the charity or
others she worked for. Once an employer pays a related employee by a valid
cheque that can be expected to be honoured, I do not see the relevance of when
the employee chooses to deposit it to her bank account. Arm’s length terms of
employment normally expect regular payment. In this case the Intervenor said
she chose to hold the few modest cheques for a particular anticipated
expenditure. My view would not be any different if an employee chose not to
cash pay cheques from a related employer out of concern for the payor’s cash
flow or other financial circumstances. Canadian business owners and their
families often get paid last. Provided a valid cheque that would be honoured is
received in payment for an appropriate amount and within an appropriate period
of time, that ends the arm’s length scrutiny period. Any non‑arm’s length
decisions thereafter made on when to cash it cannot make the terms and
conditions of employment any less arm’s length. The non-arm’s length decision
to effectively “loan” the money to the related employer would be a personal one
made after the arm’s length work was done and paid for. It would be silly, even
if these were the circumstances, to require a related employee to first cash a
cheque and then separately make a personal loan of her earned income to her
related employer.
[35] I am unable to find
any relevance in the fact that the cheques were written on a joint account. The
employer was one of the names on the joint account. There is certainly no magic
in this context to an individual Canadian engaged in business for his own
account having a so-called business account. Countless Canadians pay business-related
expenses with personal cheques. Provided they are for legitimate business
expenditures of a legitimate business, and can be and are accounted for as
expenses of the business, this can be of no consequence. Similarly, business
account cheques and credit cards are often used for personal expenditures and,
provided they are accounted for as personal expenditures, this too will be no
cause for concern. Cash, coin, cheque, plastic, barter, payment-in-kind, all
matters not. The only question is: Were the payments made?
[36] I was intrigued
initially by the observation that the cheques were all numbered sequentially
even though they were dated, and said to have been written, over the two-month
period of employment. However, based upon the evidence in this case, I cannot
be satisfied that the fact of sequential numbering can be considered relevant.
The unchallenged evidence is that these cheques were written over the course of
the two months. The Crown did not put to either of the witnesses that they were
not written when they were dated. The Crown did not ask how many other chequing
accounts the Appellant had or how many cheques he and the joint account holder
(presumably his wife) would normally write in a month. The Crown did not enter
as evidence any of the Appellant’s cheques that may have been used to remit the
employee withholdings, etc. to CRA during that period to demonstrate any inconsistency
in the dating of these sequentially numbered cheques. I note that many
Canadians now write very few cheques. In short, no basis was laid for using
this fact to challenge the credibility of the witnesses with respect to their
testimony of when these cheques were drawn and delivered. In fairness, the
Crown did not ask me to consider whether the evidence might not have been
entirely truthful. In these circumstances, I cannot accept that the sequential
numbering of itself could reasonably assist the Minister in forming an opinion
as to whether the employment terms were arm’s length.
[37] It is clear from all
of the evidence that all of the terms and conditions of the daughter’s
employment were the same as the terms of her work with the charity. (I have
already addressed the fact the rate of pay was a dollar an hour less.) Thus, it
is clearly only reasonable to conclude that the terms are terms that arm’s
length parties could reasonably be expected to agree to. That necessary
conclusion is mandated by the fact that arm’s length parties had agreed on the
very terms for this very work performed by the very same person and her
unrelated co-worker. In argument, the Crown even acknowledged that each term by
itself was reasonable.
[38] However, it is not
clear that this conclusion necessarily leads to the further conclusion that the
Minister’s opinion under paragraph 5(3)(b) was not reasonable. Paragraph
5(3)(b) requires it be “reasonable to conclude that [the employer and
the employee] would have entered into a substantially similar contract of
employment if they had being dealing with each other at arm’s length” (emphasis
added). This raises the question whether arm’s length persons would have
entered into an employment/contract of service relationship instead of an
independent contractor/contract for services relationship.
[39] That question in
turn raises the question of whether the Intervenor’s contract with the charity
was an employment relationship for EI purposes even though it was described in
evidence as a contract for services. The charity was not a party to these
proceedings, the contract was not put in evidence, and there was no evidence of
such things as the intention of either the charity or its callers with respect
to that contract. I certainly do not make any comments on what a proper
characterization of the charity’s contract might be for EI purposes or suggest
that it may be other than a contract for services. However, for purposes of this
proceeding, given that the CRA Ruling concluded the work relationship between
the Appellant and the Intervenor was one of employment, and given that the
evidence is that the contract terms were in all material respects the same,
I must conclude that in considering the employment relationship in this
proceeding for purposes of paragraph 5(3)(b) of the EI legislation, the
Minister should have considered the Intervenor’s work relationship with the
charity to be of the same character as the work relationship between the
Appellant and the Intervenor — one of employment. It would be quite exceptional
for an agreement a worker has with one party to be in law employment while an
identical agreement she has with another party to be other than employment.
Thus, it appears that the Minister’s opinion that the terms of the Appellant’s
employment of the Intervenor, or the employment itself, would not reasonably
have been entered into had the parties been dealing at arm’s length was not
properly arrived at and was not reasonable in light of the evidence before him
as supplemented before this Court.
[40] I am not persuaded
that the Crown’s position can be aided by the CRA’s conclusion that this
appeared to be “created employment”. Real, bona fide and necessary work was
done for value. The work, the need, and the reasonableness of the terms were
settled by arm’s length persons before the non‑arm’s length employment
relationship existed. Created employment is not the test under paragraph 5(3)(b)
that Parliament chose to address the potential mischief. It instead legislated
a reasonable arm’s length terms objective test.
[41] I cannot conclude
that paragraph 5(3)(b) implicitly has a purpose test such that if one of
the purposes of otherwise bona fide non-arm’s length employment on arm’s
length terms is to access potential EI benefits in the future, the employment
is excluded from “insurable employment”. The words of paragraph 5(3)(b)
are clear. They mandate a comparison of the terms of the non‑arm’s length
and related employment to the terms that arm’s length parties could be reasonably
be expected to agree to. There is no mention of purpose and it would be most
inappropriate to read the concept of purpose into the language of paragraph
5(3)(b) for public policy, social policy, tax policy or other policy
reasons. The Supreme Court of Canada in 65302 British Columbia Ltd. v. H.M.Q.,
99 DTC 5799 and in Shell Canada Limited v. H.M.Q., 99 DTC 5669 expressly
cautions against courts, under the guise of statutory interpretation, relying
on or developing unexpressed notions of policy or principle, especially where
the legislation specifically addresses the concern in a clear way.
[42] In 65302 British Columbia, Justice Iacobucci
writing for the majority wrote regarding the Income Tax Act:
50 This Court has on many occasions endorsed
Driedger’s statement of the modern principle of statutory construction: “the words of an Act are to be read in their
entire context and in their grammatical and ordinary sense harmoniously with
the scheme of the Act, the object of the Act, and the intention of Parliament”. See
Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21.
This rule is no different for tax statutes: Stubart Investments Ltd. v.
The Queen, [1984] 1 S.C.R. 536, at p. 578.
51 However, this Court has also often been
cautious in utilizing tools of statutory interpretation in order to stray from
clear and unambiguous statutory language. In Canada v. Antosko, [1994] 2
S.C.R. 312, at pp. 326-27, this Court held:
While it
is true that the courts must view discrete sections of the Income Tax Act
in light of the other provisions of the Act and of the purpose of the
legislation, and that they must analyze a given transaction in the context of
economic and commercial reality, such techniques cannot alter the result where
the words of the statute are clear and plain and where the legal and practical
effect of the transaction is undisputed.
In
discussing this case, P. W. Hogg and J. E. Magee, while correctly acknowledging
that the context and purpose of a statutory provision must always be considered,
comment that “[i]t would introduce intolerable uncertainty into the Income
Tax Act if clear language in a detailed provision of the Act were to be
qualified by unexpressed exceptions derived from a court’s view of the object
and purpose of the provision”: Principles of Canadian Income Tax Law
(2nd ed. 1997), at pp. 475-76. This is not an endorsement of a literalist
approach to statutory interpretation, but a recognition that in applying the
principles of interpretation to the Act, attention must be paid to the fact
that the Act is one of the most detailed, complex, and comprehensive statutes
in our legislative inventory and courts should be reluctant to embrace
unexpressed notions of policy or principle in the guise of statutory
interpretation.
[…]
57 This brings us to the crux of
the issue. While fully alive to the need in general to harmonize the
interpretation of different statutes, the question here arises in the specific
context of a tax collection system based on self-assessment. Parliament designed
the system and it is open to Parliament, as part of that design, to choose for
itself to resolve any apparent conflicts between policies underlying tax
provisions and other enactments. Parliament has indicated its intention to
perform this role, not only in the design of the self-assessment system, which
requires individuals without legal training to work through a complex series of
provisions to calculate net income, for which maximum explicit guidance is
necessary, but more specifically in its identification in the Act itself of
certain outlays which the taxpayer is not permitted to deduct, as discussed
below. Having recognized the problem of potentially conflicting legislative
policies, Parliament has provided the solution, which is that in the absence
of Parliamentary direction in the Income Tax Act itself, outlays and
expenses are deductible if made for the purpose of gaining or producing income.
[…]
62 While various policy objectives are
pursued through our tax system, and do violate the principles of neutrality and
equity, it is my view that such public policy determinations are better left
to Parliament. Particularly apposite is this Court’s statement in Royal
Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411, at
para. 112, that “a legislative mandate is apt to be clearer than a rule
whose precise bounds will become fixed only as a result of expensive and
lengthy litigation”. This statement was approved of by the Court in Canderel
Ltd. v. Canada, [1998] 1 S.C.R. 147, at para. 41, adding that “[t]he law
of income tax is sufficiently complicated without unhelpful judicial incursions
into the realm of lawmaking. As a matter of policy, and out of respect for the
proper role of the legislature, it is trite to say that the promulgation of new
rules of tax law must be left to Parliament”.
63 This approach and conclusion are
supported by the fact that Parliament has expressly disallowed the deduction of
certain expenses on what appear to be public policy grounds…
[…]
65 Moreover, given that
Parliament has expressly turned its mind to the deduction of expenses
associated with certain activities that are offences under the Criminal Code,
outlined in s. 67.5 of the Act, I do not find a legitimate role for judicial
amendment on the general question of deductibility of fines and penalties. Since
the Act is not silent on the issue of restricting the deduction of some
expenses incurred for the purpose of gaining income, this is a strong
indication that Parliament did direct its attention to the question and that
where it wished to limit the deduction of expenses or payments of fines and
penalties, it did so expressly…
(Emphasis added)
[43] In Shell the
Supreme Court of Canada wrote, again regarding the Income Tax Act:
43 […]
The Act is a complex statute through which Parliament seeks to balance a myriad
of principles. This Court has consistently held that courts must therefore
be cautious before finding within the clear provisions of the Act an
unexpressed legislative intention: Canderel Ltd. v. Canada, [1998] 1
S.C.R. 147, at para. 41, per Iacobucci J.; Royal Bank of Canada v.
Sparrow Electric Corp., [1997] 1 S.C.R. 411, at para. 112, per
Iacobucci J.; Antosko, supra, at p. 328, per Iacobucci J. Finding
unexpressed legislative intentions under the guise of purposive interpretation
runs the risk of upsetting the balance Parliament has attempted to strike in
the Act.
[…]
46 Inquiring
into the “economic realities” of a particular situation, instead of simply
applying clear and unambiguous provisions of the Act to the taxpayer’s legal
transactions, has an unfortunate practical effect. This approach wrongly
invites a rule that where there are two ways to structure a transaction with
the same economic effect, the court must have regard only to the one without
tax advantages. With respect, this approach fails to give appropriate weight to
the jurisprudence of this Court providing that, in the absence of a specific
statutory bar to the contrary, taxpayers are entitled to structure their
affairs in a manner that reduces the tax payable: […]
(Emphasis added)
[44] More recently, in Canada
Trustco Mortgage Co. v. Canada, 2005 D.T.C. 5523, the Supreme
Court of Canada was considering the general anti-avoidance rule in the Income
Tax Act, which expressly requires a consideration of purpose. The Court
wrote unanimously, at paragraph 11:
Where
Parliament has specified precisely what conditions must be satisfied to achieve
a particular result, it is reasonable to assume that Parliament intended that
taxpayers would rely on such provisions to achieve the result they prescribe.
[45] While the Supreme
Court in these cases was specifically addressing the interpretation of the Income
Tax Act, they rightly always begin by reminding us that the interpretation
of tax statutes is generally no different from the interpretation of statutes
generally. Hence, I am most comfortable applying their comments to address the
interpretation of the Employment Insurance Act.
[46] Since paragraph
5(3)(b) as worded is clear having regard to both the text and context of
the provision, and clearly does not address purpose, it is not open to this
Court to introduce a purpose test into it. The effect of any such judicially
developed purpose test would be an unwarranted encroachment by the judiciary
into the realms of our elected Parliament. If such a “created employment” or
purpose test represents sound policy, it is open to Parliament to enact it. It
may however have significant implications for many Canadians’ entitlement to EI
benefits.
[47] I am very mindful of
the fact that paragraph 5(2)(i) addresses a particular mischief and that
paragraph 5(3)(b) is an exception to paragraph 5(2)(i). In Légaré,
the Federal Court of Appeal discussed the purpose behind paragraph 5(3)(b)
as follows, at paragraph 12:
Under
the Unemployment Insurance Act, excepted employment between related
persons is clearly based on the idea that it is difficult to rely on the
statements of interested parties and that the possibility that jobs may be
invented or established with unreal conditions of employment is too great
between people who can so easily act together. And the purpose of the 1990
exception was simply to reduce the impact of the presumption of fact by
permitting an exception from the penalty (which is only just) in cases in which
the fear of abuse is no longer justified.
[48] I note that the
feared abuse described by Justice Marceau in paragraph 12 is “the
possibility that jobs may be invented or established with unreal conditions of
employment” between non-arm’s length parties. My comments above are also
consistent with such a purposive consideration of paragraph 5(3)(b). The
Federal Court of Appeal did not say that the mischief was one of doing real
needed work for reasonable pay where one of the purposes for the employment
relationship was to have insurable hours for EI purposes. Employment insurance
is one of Canada’s important social
programs. It is offered to Canadians so that they may take advantage of it. A
purpose test would seem to run contrary to that to a certain degree. The abuse
or mischief that paragraph 5(3)(b) clearly addresses is insurable
employment being created that is not what it seems — on terms where the actual
work performed or wages paid did not meet an objective arm’s length test. In
this case, they not only meet such an objective test, they can prove that with
subjective evidence.
[49] For these reasons, I
conclude that the Minister’s opinion was not reasonable in light of the
fullness of the evidence. I will order that the Minister’s decision be varied
to reflect that the Intervenor was in insurable employment.
Signed at Ottawa,
Canada, this 28th day of March 2008.
*
"Patrick Boyle"
Email this Content