|
Citation: 2004TCC116
|
|
Date: 20040205
|
|
Docket: 2003-1640(EI)
|
|
BETWEEN:
|
|
MICHELINE CÔTÉ,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
|
REASONS FOR JUDGMENT
Lamarre J.
[1] The Appellant is appealing from a decision of
the Minister of National Revenue ("the Minister") whereby he
determined that the Appellant's employment with Les Murs Secs DM Inc. ("the
Payor") during the period from November 5, 2001 to November 9, 2002 was
excluded from insurable employment under paragraphs 5(2)(i) and 5(3)(b) of the Employment
Insurance Act ("the Act"). These provisions read as
follows:
5. (2) Insurable employment does not
include
. . .
(i) employment if
the employer and employee are not dealing with each other at arm's length.
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.
[2] The Minister found that the Appellant's
employment was not insurable during the period in issue because there was a
non-arm's length relationship between the Appellant and the Payor and the terms
and conditions of work would not have been similar if they had been dealing
with each other at arm's length (see paragraphs 6, 7 and 8 of the Reply to the
Notice of Appeal ("the Reply")). The presumptions of fact on which
the Minister relied in making his decision are found in paragraph 5 of the
Reply and read as follows:
[Translation]
(a) The Payor,
incorporated in 1998, operated a construction business specializing in the
finishing of gyprock joints.
(b) Michel Dion, the Appellant's
spouse, was the Payor's sole shareholder and president.
(c) The Payor hired
up to 35 specialized workers.
(d) The Payor also
hired an outside bookkeeper who was primarily involved in the preparation of
the Payor's tax return and financial statements.
(e) The Payor hired
the Appellant as a secretary-receptionist.
(f) The Appellant's
major duties consisted in:
- Preparing
the weekly payrolls.
- Invoicing
customers.
- Following
up on invoices and collecting on accounts receivable.
- Paying
bills.
- Recording
the Payor's transactions.
- Making some
trips to collect on accounts, pick up materials and deliver them to the various
worksites.
(g) The Appellant
performed her main duties at the family residence.
(h) The Appellant had
fixed work schedule; she worked between 30 and 50 hours per week.
(i) The Appellant
received fixed weekly remuneration; initially she was paid $300 per week, which
was increased to $400 per week in January 2002 and to $600 per week at the end
of March 2002.
(j) During the
period in issue, therefore, the Appellant's remuneration rose from $300 to $600
per week without any increase in her duties.
(k) The Payor ceased
its operations on November 9, 2002, and declared bankruptcy on December 19,
2002.
(l) After being laid
off, the Appellant continued to render services to the Payor on a voluntary
basis.
[3] With regard to paragraph (l) quoted above, the
Appellant explained that it was the trustee in bankruptcy who asked her to
prepare the T-4 slips for the employees so they would have a right to the claim
in bankruptcy. She was to be paid by the trustee, but this did not occur.
[4] The Appellant and her husband, Michel Dion,
said that the Payor had existed since 1998. The Appellant had worked there
since 1999, performing the same duties. She handled the day-to-day bookkeeping,
the employees' payroll, the entries in the books, the forms to be completed for
each employee for the Commission de la santé et de la sécurité du travail ("CSST")
and the Commission de la construction du Québec ("CCQ"), the
invoicing and collection of accounts, and she also acted as
secretary-receptionist. The description of her duties was filed as Exhibit A-1.
The Appellant worked from her personal residence, where the Payor's office was
located. She worked between 30 and 50 hours per week.
[5] Mr. Dion explained that he would have been unable
to hire someone else to do the same work at more than $300 per week before
2002. In 1999, he had only five or six employees and the number of employees
rose gradually to 30 by 2002.
[6] He said he obtained two big contracts, one in
the fall of 2001 at Place Ville-Marie in Montréal and the other in March 2002
at Place Bonaventure in Montréal. That is why, after hiring the necessary
employees, he gave the Appellant a raise to $400 per week at the beginning of
2002 and to $600 per week at the end of March 2002. It was the Appellant who
pointed out to Mr. Dion that she deserved a higher salary, more representative
of the pay for such employment in the construction industry. This was confirmed
by the accountant, Marius Poulin. Accordingly, Mr. Dion increased the Appellant's
salary in 2002 since the economic context of the business allowed it, with the
award of those two new large contracts. Unfortunately for the Payor, it was not
paid promptly enough by the customer and was therefore unable to bear the costs
related to the execution of those contracts. It had to lay off several
employees in mid-July 2002, bringing the number of employees down to 20. It terminated
the Place Bonaventure contract in September 2002, and in November 2002 the Payor
had to cease all of its operations. It declared bankruptcy in December 2002.
[7] It is true, as I commented at the hearing,
that the Appellant was probably underpaid before her salary was readjusted to
$600 per week in March 2002. In fact, Mr. Poulin mentioned that a secretary in
a similar business could earn up to $700 per week in 2003. It is also true that
a third person might not have agreed to work for $300 per week for the duties
the Appellant was performing. However, if we take into account the economic
context of the business at the time when the Appellant's salary was determined,
it is also possible that a third person would have accepted such a salary in
the knowledge, like the Appellant, that the arrival of new contracts would bolster
the Payor's finances and thereby increase her salary.
[8] In Légaré v. Canada, [1999] F.C.J. No.
878 (Q.L.) and Pérusse v. Canada, [2000] F.C.J. No. 310 (Q.L.), cited
with approval in Valente v. Canada, [2003] F.C.J. No. 418 (Q.L.), Massignani
v. Canada, [2003] F.C.J. No. 542 (Q.L.), Bélanger v. Canada, [2003] F.C.J.
No. 1774 (Q.L.) and Staltari v. Canada, [2003] F.C.J. No. 1771 (Q.L.), the
Federal Court of Appeal had the following to say about the role of the Tax
Court of Canada on appeals from ministerial decisions under paragraph 5(3)(b)
of the Act:
The Act requires the Minister to make a
determination based on his own conviction drawn from a review of the file. The
wording used introduces a form of subjective element, and while this has been
called a discretionary power of the Minister, this characterization should not
obscure the fact that the exercise of this power must clearly be completely and
exclusively based on an objective appreciation of known or inferred facts. And
the Minister's determination is subject to review. In fact, the Act confers the
power of review on the Tax Court of Canada on the basis of what is discovered
in an inquiry carried out in the presence of all interested parties. The Court
is not mandated to make the same kind of determination as the Minister and thus
cannot purely and simply substitute its assessment for that of the Minister:
that falls under the Minister's so-called discretionary power. However, the
Court must verify whether the facts inferred or relied on by the Minister are
real and were correctly assessed having regard to the context in which they occurred,
and after doing so, it must decide whether the conclusion with which the
Minister was "satisfied" still seems reasonable. [See paragraph 14 of
Pérusse.]
[9] Thus, as Marceau J.A. of the Federal Court of
Appeal said in Pérusse, supra, at paragraph 15:
15. The function of an
appellate judge is thus not simply to consider whether the Minister was right
in concluding as he did based on the factual information which Commission
inspectors were able to obtain and the interpretation he or his officers may
have given to it. The judge's function is to investigate all the facts with the
parties and witnesses called to testify under oath for the first time and to
consider whether the Minister's conclusion, in this new light, still seems "reasonable"
(the word used by Parliament). The Act requires the judge to show some
deference towards the Minister's initial assessment and, as I was saying,
directs him not simply to substitute his own opinion for that of the Minister
when there are no new facts and there is nothing to indicate that the known
facts were misunderstood. However, simply referring to the Minister's
discretion is misleading.
[10] It appears from the Reply that the factual
information on which the Minister relied in making his determination was that the
Appellant was working from her family residence, she had no fixed work schedule
although she worked between 30 and 50 hours per week, and her remuneration had
doubled during the period in issue without any increase in her duties.
Concerning the fact that she worked from home, the Appellant worked in the office
of the business, which was located in the residence. As to the work schedule,
she was working between 30 and 50 hours per week, which does not leave much time
for personal activities during the week. The Appellant said, moreover, that she
ran her personal errands on Saturdays.
[11] Finally, the most important factor considered
by the Minister, in my opinion, is the significant increase in salary in 2002
for performing the same duties. Here, I am of the opinion that the explanations
given by Mr. Dion justify, on a balance of probabilities, that the Appellant's
salary went from $300 per week in 2001 to $600 in 2002. In this way he brought the
Appellant's salary up to the norm. This raise was also explained by the
economic context of the business, as described by Mr. Dion. With the award of
two major contracts, it was justified to increase the Appellant's salary. In my
opinion, with the new light shed by the testimony of Mr. Dion and Mr. Poulin,
the Minister's decision no longer appears "reasonable" in the
circumstances.
[12] Counsel for the Respondent ultimately argued
the point that I had raised in evidence, namely that the Appellant was paid a
lower salary than the norm in the industry and that a third party might not
have agreed to work under the same terms and conditions. This is not a factor
that weighed in the Minister's decision and, in my opinion, as I explained at
paragraph 7 above, it is not a preponderant factor to consider in the
circumstances.
[13] In view of the foregoing, and the evidence
before me, I am of the opinion that the facts relied on by the Minister were
not assessed correctly by taking into account the context in which they
occurred. Consequently, the Minister's decision no longer appears reasonable to
me in the circumstances.
[14] For these reasons, the appeal is allowed and the Minister's decision is amended on
the basis that the Appellant's employment with the Payor during the period from
November 5, 2001 to November 9, 2002 was insurable employment not excluded
under paragraphs 5(2)(i) and 5(3)(b) of the Act.
Signed at Ottawa, Canada, this
5th day of February 2004.
Lamarre
J.
Translation certified
true
on this 9th day of
March 2009.
Brian McCordick,
Translator
Email this Content