Citation: 2006TCC350
Date: 20060630
Docket: 2005-1741(EI)
BETWEEN:
STEVE ROUSSEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Deputy Judge Savoie
[1] This is an appeal
concerning the insurability of the Appellant’s employment when he was working
for Gilles Rousseau, the Payer, for the periods from June 15 to October
30, 1998, from June 14 to November 12, 1999, from July 3 to October 13,
2000, and from September 13 to 27, 2002, the periods at issue.
[2] On January 17, 2005, the Minister of National
Revenue (the “Minister”) informed the Appellant of his decision that he did not
hold insurable employment during the periods at issue. In rendering his
decision, the Minister relied on the following presumed facts:
[translation]
(7)
The Minister determined
that the Appellant and the Payer had a non-arm’s length relationship in the
context of the employment. Indeed, the Minister was satisfied that it was not
reasonable to conclude that the Appellant and the Payer could have entered into a
substantially similar contract of employment if they had not been dealing with
each other at arm’s length,
given the following circumstances:
(a)
the Payer operated a
bee farm of 48 hives since 1993;
(b)
in 1998, the Payer
decided to operate a small fruit and market gardening business on
3 hectares of land;
(c)
on August 17, 1998, the
Payer registered the company name “Ferme horticole Rousseau”;
(d)
the Payer was the sole
owner of the business;
(e)
the Payer sold his
fruit and vegetables to the local food markets Metro, IGA and Provigo;
(f)
the Appellant had
completed a horticulture course in 1996;
(g)
in 1998, the Appellant
was hired by the Payer as an agricultural worker;
(h)
the Appellant’s tasks
were to plant seed, prepare the soil for planting, look after fruit and
vegetable production, maintain machinery, deliver vegetables, assist in the
operation of the hives and the production of honey;
(i)
the Payer did not
impose a work schedule on the Appellant;
(j)
the Appellant’s actual
work hours were not verified by the Payer;
(k)
on March 4, 2004, in a
signed declaration to HRDC, the Payer stated that the Appellant was the boss,
the Payer gave him a free hand and the liberty to make all decisions concerning
market gardening;
(l)
on March 4, 2004, in a
signed declaration to HRDC, the Payer declared that he had started the business
in order to help the Appellant;
(m)
the Appellant was
listed on the Payer’s payroll for weeks of 43 hours;
(n)
from 1998 to 2000, the
Appellant received compensation of $440.23 for 43 hours of work, that is
$10.24 per hour;
(o)
year after year, the
Payer’s business declared the following losses:
|
Years
|
Net revenue
|
Losses
|
|
1998
|
$11,489
|
-$8,750
|
|
1999
|
$14,055
|
-$8,750
|
|
2000
|
$6,362
|
-$8,750
|
|
2001
|
$4,579
|
-$4,152
|
|
2002
|
$9,800
|
-$ 50
|
(p)
Considering the
revenues generated by the business, the extent of the annual losses and the
significance of salary expenses, it is unreasonable to believe that an arm’s
length worker would be compensated at the Appellant’s hourly rate;
(q)
in 2001, the Appellant
was not listed in the Payer’s payroll;
(r)
on November 2, 1998,
the Payer gave the Appellant a record of employment indicating June 15, 1998,
as first day of work and October 30, 1998, as last day of work for 860
insurable hours and $8,806.40 in insurable earnings;
(s)
on November 15, 1999,
the Payer gave the Appellant a record of employment indicating June 14, 1999,
as first day of work and November 12, 1999, as last day of work for 946
insurable hours and $9,687.04 in insurable earnings;
(t)
on October 16, 2000,
the Payer gave the Appellant a record of employment indicating July 3, 2000, as
first day of work and October 13, 2000, as last day of work for 645 insurable
hours and $6,604.80 in insurable earnings;
(u)
on September 30, 2002,
the Payer gave the Appellant a record of employment indicating September 13,
2002, as first day of work and September 27, 2002, as last day of work for 71
insurable hours and $639.00 in insurable earnings;
(v)
the Appellant started
tomato seedlings in mid-March and started transplanting them 6 weeks later;
(w)
before planting, in
May, the Appellant tilled and harrowed with the tractor and spread fertilizer
on the growing land;
(x)
also in May, the
Appellant cleaned and prepared the hives;
(y)
on April 21, 2004, in a
signed declaration to HRDC, the Appellant stated: “I did provide services to
the business on a volunteer basis, because the business couldn’t always afford
to pay me;
(z)
the Appellant was
listed on the payroll from the first day for which he received compensation and
not the first day of work;
(aa)
on April 21, 2004, in a
signed declaration to HRDC, the Appellant stated: “I never declared
the work done at the business during my periods of unemployment because I was
not paid. I didn’t consider this work to be employment.”;
(bb)
the Appellant’s records
of employment do not reflect the actual number of hours worked or the periods
worked;
(cc)
a person at arm’s
length would not have had compensation, duration of work or employment
conditions similar to those of the Appellant.
[3] The
Appellant has admitted all the facts presumed by the Minister except those
listed in subparagraphs 7.(b), (h), (i), (j), (k), (l), (m),( p), (r), (s),
(t), (u), (y), (aa), (bb) et (cc).
[4] It
must be pointed out, from the start, that the Appellant’s evidence was
unsuccessful in disproving any of the Minister’s presumed facts.
[5] The
Appellant admitted in his declaration and in his testimony that he does work
for the Payer on a volunteer basis each spring, from March until June or July
to prepare the seeding.
[6] The
Appellant and the Payer both testified at the hearing. Unfortunately, this
exercise merely corroborated the Minister’s thesis and decision. On several
occasions they contradicted their statutory declarations. Their memories often
failed. They were frequently unable to answer the relevant questions they were
asked.
[7] The
Minister determined that the Appellant’s employment was not insurable pursuant
to paragraph 5(2)(i) and subsection 5(3) of the Employment Insurance
Act (the “Act”), since he was satisfied that, having regard to all the
circumstances, it was not reasonable to conclude that the Appellant and the
Payer would have would have entered into a substantially similar contract of
employment if they had been dealing with each other at arm’s length. It is
appropriate to reproduce an excerpt of the Act that is applicable to the case
before the Court.
5. (1)
Subject to subsection (2), insurable employment is
(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.
[8] It is therefore a
matter of analyzing the exercise performed by the Minister in accordance with
the legislative mandate under paragraph 5(3)(b) of the Act aimed at
determining whether the Appellant’s employment is excluded from insurable
employment due to a non-arm’s length relationship between him and the Payer.
REMUNERATION PAID
[9] During the period
from 1998 to 2000, the Appellant was compensated at a salary of $440.32 per
week for 43 hours of work, or $10.34 per hour. The Appellant and the Payer
affirmed that the Appellant was compensated at such a rate due to his skills,
given his knowledge of beekeeping. It was also explained that there was a real
labour shortage in this field. This prompted the Minister to say that he had
difficulty reconciling this salary with the one paid to the Appellant in 2002,
i.e. $319.50 per week for 35 hours of work, or $9.12 per hour. Moreover, it was
established that the hourly rate paid to the Appellant by other arm’s length
employers was $9.00 in 2001 and $9.36 in 2002.
[10] At the hearing, the
Appellant admitted the Payer’s revenues and losses for the years 1998 to 2002,
listed in paragraph 7. (o) of the Reply to Notice of Appeal, the data of which
is reproduced in the table below:
|
Years
|
Net revenue
|
Losses
|
|
1998
|
$11,489
|
- $8,750
|
|
1999
|
$14,055
|
- $8,750
|
|
2000
|
$6,362
|
- $8,750
|
|
2001
|
$4,579
|
- $4,152
|
|
2002
|
$9,800
|
- $50
|
[11] The evidence
demonstrated that the losses incurred by the business were heavier than those
indicated in the income tax returns due to the regulatory restrictions on the
amount of deductible losses permitted. The documents filed by the Minister at
the hearing demonstrated that the actual losses incurred by the Payer came to
$20,956.68 in 1998, $17,450.24 in 1999 and $23,360.45 in 2000.
[12] Considering the low
revenues generated by the business, the annual losses and the significance of
salary costs in the annual losses, the Minister considered that it was
unreasonable to believe that an arm’s length worker would be compensated at
such an hourly rate for 43 hours of work per week.
TERMS AND CONDITIONS OF THE
EMPLOYMENT
[13] In his testimony,
Gilles Rousseau stated that he had worked full-time for another employer from
1993 to 1996 and that he looked after his beekeeping production after work and
on weekends. He added that his son, Steve, had taken a course in horticulture,
which he finished in 1996. He then decided to add market gardening to his
beekeeping production in 1997 and to hire his son to take care of production.
Moreover, he intended to turn this business over to his son if it was
successful.
[14] In 1997, the Payer
borrowed $40,000 to purchase machinery, increase the number of hives and pay
Steve’s salary. He also had a line of credit of $6,800, which was also used to
pay the Appellant’s salary from 1997 to 2000. From 1998 to 2000, the Payer’s
agricultural business generated annual revenues varying between $6,362 and
$14,055 and declared yearly business losses of $8,750. From 1997 to 2000, the
Payer sold his fruits and vegetables to local food markets. During the periods
at issue, the Appellant looked after fruit and vegetable production, machinery
maintenance, vegetable delivery, the hives and honey production, tasks in
preparation for growing and end of season work. In his statutory declaration of
April 21, 2004, the Appellant stated that he provided services to the business
on a volunteer basis because it could not always afford to pay him, but that as
compensation, he stayed with his parents without having to pay board.
[15] It was established
that the Payer did not impose a work schedule on the Appellant. Moreover, the
Appellant’s actual work hours were not verified by the Payer. The Payer
declared on March 4, 2004, to HRDC, that the Appellant was the boss. He added
that he gave his son, the Appellant, a free hand and the liberty to make all
decisions concerning market gardening. In the same statutory declaration, the
Payer stated that he had started the business in the aim of helping his son.
[16] It was demonstrated
that during the seeding season, i.e. March until June, the Appellant worked for
the Payer on a voluntary basis. Indeed, the Appellant admitted subparagraph
7.(v) of the Reply to Notice of Appeal, which reads as follows:
[TRANSLATION]
7.(v) the Appellant
started the tomato seedlings in mid-March and started transplanting them
6 weeks later.
[17] The records of
employment issued to the Appellant by the Payer indicated employment periods
starting in June. When the investigators questioned the Payer about his
business losses and low revenues, he affirmed that he only did it to help his
son. After his review, the Minister concluded that the terms and conditions of
employment were unreasonable and that they would not be offered to a stranger
in the same circumstances.
NATURE AND
IMPORTANCE OF THE WORK
[18] The tasks give to
the Appellant were integrated into the Payer’s activities. However, it is odd
to note that when employed by another employer in 2002, Gilles Rousseau still produced sold $3,000
in vegetables, while in 2000, the Appellant was compensated for 43 hours
per week for 15 weeks and the Payer only sold $5,630 in vegetables.
[19] The Minister
considered that the Payer’s low revenues and the significant annual losses he
incurred starting in 1997 could not justify hiring an arm’s length worker in
the same circumstances.
DURATION OF
THE EMPLOYMENT
[20] In his statutory
declaration of April 21, 2004, the Appellant stated that his mother filled in
the first paid day of work on the record of employment and not the first actual
day of work. The facts then confirmed this affirmation since it has been
established that the work started in March and required 15 to 20 hours of work
per week once the hives were brought out, generally in May.
[21] In 1997, the
Appellant’s period of paid employment started the first week of June and ended
the second week of November, totalling 23 weeks. This is the period concerned
in the first application for employment insurance benefits. The agricultural
revenues totalled $4,994.00 and the net loss incurred was $8,750.00. In 1998,
the employment period, according to the record of employment, started the
second week of June and ended the last week of October, representing
20 weeks of employment. That year, agricultural revenues totalled
$11,489.00, of that $8,638.88 representing the proceeds of vegetable sales,
$2,315.00 representing the proceeds of fruit sales and $536.50 representing the
proceeds of honey sales, while the net loss came to $8,750.00 $ and the
Appellant received $9,834.79 in salary. In 1999, the Appellant’s period of paid
employment started the second week of June and ended the second week of
November, totalling 22 weeks of employment while the net revenues totalled
14,055.00, of that $10,475.21 representing the proceeds of vegetable sales,
$2,928.00 representing the proceeds of fruit sales and $652.04 representing the
proceeds of honey sales, while the net loss came to $8,750.00 and the Appellant
received a salary of $10,715.43. In 2000, the Appellant’s period of paid
employment started the first week of July and ended the second week of October
for a total of 15 weeks of employment. During that year, agricultural revenues
totalled $6,362.00, of that $5,630.41 from vegetable sales, $0 from the
proceeds of fruit sales and $732.24 in proceeds from honey sales, and the net
loss came to $8,750.00, while the Appellant received a salary totalling
$7,262.89. In 2001, the Appellant worked for another payer from May until
August. He then went back to school. That year, the Payer’s agricultural
revenues were $4,579.00 and the net loss came to $4,152.00. On September 13,
2002, the Appellant filed an application for employment insurance benefits
following his layoff from Équipement G. Comeau Inc. He was notified that he
lacked insurable hours to qualify for the benefits. In October 2002, he
presented a new record of employment for two weeks of work for the Payer Gilles
Rousseau. In 2002, the Payer’s agricultural revenues came to $9,800.00,
$2,975.71 in proceeds from vegetable sales, $0 in proceeds from fruit sales and
$6,825.00 in proceeds from honey sales, while the net loss came to $50.00. The
Payer stated that he hired his son because he was sick and hospitalized;
however it was established that his transportation by ambulance took place on
November 11, 2002.
[22] In the opinion of
this Court, the Minister rightly exercised his discretion under subsection 5(3)
of the Act.
[23] The Appellant had
the burden of proving the Minister’s presumptions to be false. He did not.
[24] In the
circumstances, it is appropriate to cite Mr. Justice Pratte in Elia v.
Canada (Minister of National Revenue – M.N.R.), [1998] F.C.J. No. 316, in
which he held the following:
Contrary to what the judge believed, he therefore
could have intervened and should have intervened if, as he asserted, the
evidence established that the Minister’s decision was unreasonable. However, it
seems to us that the judge’s assertion is also inaccurate and based on an error
of law, since the judge did not take into account the well-settled rule that
the allegations in the reply to the notice of appeal, in which th Minister
states the facts on which he based his decision, must be assumed to be true as
long as the appellant has not proved them false.
[25] This Court has no
reason to intervene in the Minister’s decision.
[26] Consequently, the
appeal is dismissed and the decision by the Minister is confirmed.
Signed at Grand-Barachois, New-Brunswick, this
30th day of June 2006.
Savoie
D.J.
on this 4th day of December 2006.
Gibson Boyd, Translator
|
COURT FILE NO.:
|
2005-1741(EI)
|
|
STYLE OF CAUSE:
|
Steve Rousseau
v. M.N.R.
|
|
PLACE OF
HEARING:
|
Québec, Quebec
|
|
DATE OF HEARING:
|
March 31, 2006
|
|
REASONS FOR
JUDGMENT BY:
|
The Honourable
S.J. Savoie,
Deputy Judge
|
|
DATE OF
JUDGMENT:
|
June 30, 2006
|
|
Agent for the
Appellant:
|
Gaston Sylvain
|
|
Counsel for the
Respondent:
|
Michel Lamarre
|
|
For the
Respondent:
|
John H. Sims,
Q.C.
Deputy Attorney
General of Canada
Ottawa, Canada
|
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