Citation: 2006TCC540
Date: 20061004
Docket: 2006-152(EI)
BETWEEN:
HARPALJIT K. DHALIWAL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Harpaljit Dhaliwal, is appealing the decision of the Minister of National
Revenue that she was not engaged in insurable employment with Unique Drywall
Inc., a company of which her husband is the sole shareholder, for the periods
July 1 to October 31, 2003 and August 1, 2004 to January 31, 2005.
[2] Briefly stated,
the Appellant handled the administrative end of her husband's drywall company:
she answered phones, did the banking, and generally assisted as needed with the
company’s contracting process. She worked out of the office in the family home
which allowed her the flexibility to get their children to and from school.
From time to time she used the company truck to do so.
[3] There is no
dispute that the Appellant performed her duties as an employee working under a
contract of service. The Minister's decision that her work was not insurable
had to do with her non-arm's length status as the wife of the principal of her
employer, Unique Drywall. The Minister, having considered the circumstances of
the Appellant's employment, was not satisfied that a person dealing at arm's length
would have entered substantially the same contract.
[4] The Appellant
testified at the hearing. She struck me as an intelligent, capable woman with a
keen knowledge of all aspects of her husband's business. Her husband was
present for most of the hearing but did not give evidence.
[5] The Appellant
had the onus of proving wrong the assumptions upon which the Minister based his
decision. At the heart of the dispute between the Appellant and the Minister
are the following assumptions which I have dealt with below in four categories.
Assumptions
6(p) and (q)
Pay
p) the Appellant's rate of pay from July 1, 2003 to October
31, 2003 was $1,600.00 per month;
q) the Appellant's rate of pay from August 1, 2004 to January
31, 2005 was $2,000.00 per month;
[6] The Minister was
of the view that such a large increase in pay in such a short time was not
typical of an employee working in an arm's length situation. I am inclined to
agree. The Appellant was unable to explain any reason for the increase other
than a vague reference to inflation with no supporting information or
statistics. Further, it is difficult to reconcile an employer's decision to
grant a raise of this magnitude to an employee who, in the months just prior to
the increase, had been laid off for lack of work. Accordingly, I am unable to
find any evidentiary basis for disturbing the Minister's conclusions in this
regard.
Assumptions
6(t) to (x):
Pay
t) the
Appellant loaned the Payor $10,000.00 on August 1, 2002;
u) the
Appellant loaned the Payor $10,000.00 on April 11, 2003;
v) the
Appellant loaned the Payor $20,000 on March 1, 2005;
...
x) the Payor alleged it repaid the money borrowed from the
Appellant when it had the funds;
[7] The gist of
these assumptions is that the Appellant lent money to Unique Drywall,
something to which an arm's length employee would be unlikely to agree. I am
satisfied, however, that the Appellant did not, in fact, lend her own money to
her employer; the funds came from a joint line of credit in her and her husband's
name. Her husband took advances on the line of credit for his company and
Unique Drywall repaid them by cheque often made payable to the Appellant. I
accept the Appellant's explanation that this method was used to assist in the
company's records keeping and that she did not personally lend money to
Unique Drywall.
Assumptions
6(z) and (aa):
Hours
z) the Appellant dropped off her children at school at 8:00
a.m. and picked them up from school at 3:15 p.m. Monday to Friday;
Outside the
Period
aa) the Appellant used the Payor's truck as the family vehicle
during periods when she was not employed by the Payor;
[8] These
assumptions have to do with the Appellant's having picked up and dropped off
her children at school, sometimes using the company truck to do so. Having
heard the Appellant's evidence of how infrequently this occurred and given the
availability of members of her extended family to help with this task and the
realities of running a small family business, I am satisfied that the Minister
did not have all of the relevant facts before him in respect of this aspect of
his decision. Further, it is not unheard of for arm’s length employers to
permit their employees sufficient flexibility to see to family-related tasks
from time to time.
Assumptions
6(bb) and (cc):
Outside the
Period
bb) the Appellant provided services to the Payor without
remuneration during periods in which she was not employed by the Payor; and
cc) the Appellant and the Payor have provided inconsistent and
conflicting information at each level of review.
[9] These
assumptions are the most problematic for the Appellant. The Respondent called
Mr. Ken Miller, the rulings officer and Ms. Amelia Lo, the appeals officer on
the Appellant's case. I found them to be careful and knowledgeable witnesses.
During their respective investigations of the Appellant's file, both found
certain inconsistencies in the information provided by the Appellant; in
particular, whether she continued to perform some of her duties during the
periods when she said she was unemployed i.e., banking, delivering supplies and
using the company truck and how her reported hours worked were calculated.
[10] The Appellant
addressed these issues to some degree in her examination-in-chief and was
cross-examined on them. I am unable to say I was convinced by her answers.
Given the extent of her involvement in the proper running of her husband's
business, her inability to explain in any detail the reasons for her lay off
defies common sense. Further, she admitted that she did continue to do some
things for the company while unemployed; given the diligent nature of the
Appellant and the fact that the company's business office was in the family
home, it is unlikely that when the phone rang the Appellant did not pick it up.
Taken as a whole, there is insufficient evidence to refute the Minister's
assumption "that the Appellant provided services to [Unique Drywall]
without remuneration during the periods in which she was not employed by
[Unique Drywall]".
[11] I am equally at a
loss to understand the discrepancy between the Appellant's actual hours of work
and the number of hours reported in the ROE. Although the Appellant testified
that she worked roughly 8 am to 3 pm daily with some weekend work, to have
accumulated the 712 hours reported on the ROE, she would have had to work, on
average, 10.5 hours per day during her periods of employment. She was unable to
explain the difference stating only that it was her husband who filled in the
ROE. Nonetheless, I accept her evidence that she did not prepare the reporting
documents and that it was her husband who took care of such things as well as
setting her salary and deciding to lay her off. Although having been present
for a good part of the hearing and having listened to the Appellant's answers,
for reasons not known to the Court, he chose not to step forward to fill in the
blanks in his wife's testimony.
[12] In any event, although the Appellant was successful in
demolishing some of the Minister's assumptions, there is overall insufficient
evidence before me to conclude that the basis of the Minister's decision was
wrong. For all of these reasons, the
appeal is dismissed.
Signed at Vancouver, British Columbia, this 4th day of October, 2006.
"G. Sheridan"
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