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Citation: 2003TCC788
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Date: 20031118
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Docket: 2002‑2945(EI)
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BETWEEN:
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KATY BÉLISLE,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Savoie, J.
[1] This
appeal was heard at Québec, Quebec, on July 28, 2003.
[2] This
appeal concerns the insurability of the employment held by the Appellant when
she was engaged by Sylvain Dionne, the Payor, during the periods at issue,
namely from March 19 to October 12, 1998, and from March 26
to October 1, 1999, within the meaning of the Employment Insurance Act
(the "Act").
[3] On
June 10, 2002, the Minister of National Revenue (the
"Minister") informed the Appellant of his decision that, for the
periods at issue, this employment was not insurable because the Appellant and
the Payor would not have entered into a similar contract of employment if they
had been dealing with each other at arm's length.
[4] In
rendering his decision, the Minister relied on the following presumptions of
fact, which the Appellant admitted or denied:
[translation]
(a) The Payor carried on business under the firm name
Poissonnerie S. Dionne; (admitted)
(b) The Payor is
the sole owner of Poissonnerie S. Dionne; (admitted)
(c) The business
began its operations in March 1997; (admitted)
(d) The business
was seasonal, from March to October every year; (admitted)
(e) The business
was open seven days a week; (admitted)
(f) The
Appellant is Sylvain Dionne's spouse; (denied)
(g) The Appellant
worked as the manager of the fish market; (admitted)
(h) The Appellant
was responsible for the accounting, the employees, purchasing, sales, and for
the business in general; (admitted)
(i) The
Appellant received a fixed salary of $400 per week in 1998, and of $500 and
$725 per week in 1999; (admitted)
(j) The
Appellant rendered services to the Payor from 40 to 70 hours per
week; (denied)
(k) The Appellant
received the same salary regardless of the number of hours she actually worked
during the week; (denied)
(l) On
August 17, 1998, the Payor issued a record of employment to the
Appellant, for the period starting on March 29, 1998 and ending on
August 15, 1998, indicating 1,000 insurable hours and total insurable
earnings of $8,000.00; (admitted)
(m) On
August 30, 1999, the Payor issued a record of employment to the
Appellant, for the period starting on April 4, 1999 and ending on
August 21, 1999, indicating 800 insurable hours and total insurable
earnings of $12,700.00; (admitted)
(n) On
December 1, 2000, in a statutory declaration signed at HRDC, the
Payor stated: [translation]
"Nonetheless, Katy was responsible for purchasing fish for the duration of
the business's operations, that is, from the end of March to the beginning of
October every year"; (denied)
(o) On
December 1, 2000, in a statutory declaration signed at HRDC, the
Payor stated: [translation]
"We agreed to record on the payroll that she was receiving a higher salary
than the other employees to compensate for the periods in which she did not
take a salary, at the beginning when the business first opened, and at the end,
a few months before it closed; (denied)
(p) The records
of employment do not reflect reality in terms of the periods the Appellant
actually worked; (denied)
(q) The Appellant
rendered services to the Payor, without declared earnings, before and after the
dates listed on the records of employment; (denied)
(r) The Payor's
payroll journal did not reflect reality in terms of the periods the Appellant
actually worked; (denied)
(s) The weeks the
Appellant allegedly worked do not correspond to the weeks she actually worked.
(denied)
[5] The
Appellant admitted all of the Minister's presumptions except for those listed
in paragraphs (f), (j), (k), (n) and (o) to (s).
[6] The
Appellant denied paragraphs (n), (o), (p) and (q). However, the
Minister proved the merits of these presumptions, particularly during the
Payor's testimony, through the Payor's statutory declaration, dated
December 1, 2000, and filed in evidence as Exhibit I‑16,
as well as the table filed as Exhibit I‑17 by Paul Dessureault,
the investigating officer.
[7] Using
this material, which the Minister filed in evidence, as well as the
documentation reviewed during the investigation,
Officer Paul Dessureault prepared a table illustrating the chronology
of the duties the Appellant performed outside the employment periods. This
exercise proved that the Appellant's records of employment were false in terms
of the periods worked and that she had rendered services to the Payor, without
pay, before and after the dates listed on the records of employment. In this
regard, the same observation can be made upon reading the statutory declaration
of Sylvain Dionne, the Payor, filed in evidence as Exhibit I‑16,
a relevant passage from which is reproduced below:
[translation]
. . . I was the sole
owner of Poissonnerie S. Dionne Enrg. from March 1997 to
November or December 1999. The business opened its doors on or around
March 26, 1997. In passing . . . with regard to all of the
accounting, the ledgers, payroll journals, and all the rest, I know absolutely
nothing about that. Katy Bélisle, my former spouse, was solely responsible
for all of that, except for preparing income tax returns every year, which were
prepared by Louis Ouellet, an accountant with the firm Chabott
. . . etc. from Rivière‑du‑Loup. Katy was responsible for
deposits, for preparing most of the cheques, for filing invoices, etc. In
addition, every year, from 1997 to 1999 inclusive, she operated the business
upon opening and near the end when I reached my fishing quotas I joined Katy at
the fish market. Nonetheless, Katy was responsible for purchasing fish for the
duration of the business's operations, that is, from the end of March to the
beginning of October every year, because I wanted her to continue doing so, as
I was not as good as she was at bargaining and negotiating prices with
suppliers. Although she was on‑site during the periods in which she was
not listed in the payroll journal in 1998 and 1999, namely from 26/03/99 to
03/04/99, from 22/08/99 to 01/10/99, from 19/03/98 to 28/03/98, and from
16/08/98 to 12/10/98, Katy Bélisle was not paid any wages under the table
and she did not receive any benefits whatsoever. Since money was extremely
tight and we were unable to pay all of our accounts, we agreed that Katy would
start working at Poissonnerie at the end of March and, when she saw that sales
were increasing with the work, she would pay herself a salary and be listed on
the payroll. For a while, she listed a salary in her name. Katy had previously
informed me that she would not take a salary for such and such a week, and you
tell me that it is clear that she redeposited a paycheque into Poissonnerie's
account in 1998. She probably stopped paying herself a salary by cheque because
there was not always enough money for her to take a salary. We agreed to record
on the payroll that she was receiving a higher salary than the other employees
to compensate for the periods in which she did not take a salary, at the
beginning when the business first opened, and at the end, a few months before
it closed: the salary listed on the payroll compensated her somewhat for those
hours; thus, the only salary she received covered the end of March to the
beginning of October in 1998 and 1999. Clearly, an outside employee would not
have agreed to such conditions and to being responsible for all of the
accounting as well, without being paid accordingly, but Katy was my spouse until
the business closed at the beginning of October 1999, and she agreed to
these conditions because she was my spouse. I cannot tell you whether she
frequently listed a salary for herself in the payroll journal in 1998 and 1999,
without being able to draw the full salary, if any at all, as she was solely
responsible for paying the salaries and she is the only one who is aware of
this, but I know it happened. In 1997, Katy Bélisle worked full‑time,
seven days a week, throughout the entire season that Poissonnerie was open,
namely from 26/03/97 until the beginning of October. The same is true for the
period in which the business was open in 1998 and 1999, but if she took a
salary, it was a very low one in 1997. Furthermore, she had a lot of problems
with her credit cards, but there would not have been enough income for her to
pay them off and she lost them all. Since she was my spouse, she always took
her salary, during all three years, based on the amount of money that was
available. She could tell you what percentage of the salaries listed in the
books she actually took, and it was not to pay for luxuries, but strictly to
buy essential household items, to pay our bills, electricity, telephone, etc.
. . .
[8] The
Appellant denied the Minister's presumption listed in paragraph 5(f), that
she was the spouse of Sylvain Dionne. In addition, the Appellant and the
Payor testified that they were not common‑law spouses during the periods
at issue. They pointed out that they might have called themselves spouses in
the beginning to legitimize living together under the same roof and to comply
with the accountant's recommendation for tax reasons.
[9] It
is relevant to note that they were somewhat self‑conscious, hesitant,
reticent and evasive when testifying with regard to their status.
[10] The Appellant confirmed that she left in September 1999, because
Sylvain Dionne had someone else in his life. In her statutory declaration
(Exhibit I‑1), the Appellant made the following statements, among
others:
[translation]
. . .
I worked for Poissonnerie S. Dionne in 1998 and 1999. When I worked
for this business, I was living with Mr. Sylvain Dionne as a common‑law
spouse. We separated over a year ago and we signed a paper releasing me from
any liability with regard to the documents of Poissonnerie S. Dionne
. . .
[11] The Appellant signed this declaration on November 15, 2000.
Sylvain Dionne's comments concerning their status as a couple were cited, supra,
in the passage from his declaration, which was filed in evidence as Exhibit I‑16.
[12] In addition, the Payor's sister,
Patricia Dionne, in her statutory declaration dated
December 5, 2000, (Exhibit I‑18), made the following
statements, among others, and I quote:
[translation]
. . .
in the beginning, there was an agreement between my brother,
Sylvain Dionne, and his spouse at the time, Katy Bélisle, that since
the latter had no idea how a fish selling business operated . . . I
would work at Poissonnerie for two or three weeks to teach Katy how it operates.
. . .
Common‑law
spouses
[13] Investigator Paul Dessureault confirmed that the Appellant
and the Payor both stated that they were common‑law spouses until the
business closed. The Payor's sister, Patricia Dionne, told him the same
thing. Therefore, this investigator determined, upon reviewing the case and
interviewing the parties, that the Appellant and the Payor were common‑law
spouses, which explains the terms and conditions of the Appellant's employment;
that is, the same salary regardless of the number of hours worked, the fact
that she worked without pay in 1997, and the work performed before and after
the periods at issue. Mr. Dessureault stated that this is a frequent
occurrence in cases involving spouses.
[14] Witness Dessureault, the investigator who prepared the table filed in
evidence as Exhibit I‑17, testified that the Payor,
Sylvain Dionne, had told him that the Appellant operated the business
throughout the entire season, that is, from the end of March to the beginning
of October every year. He used the payroll journal to prepare the said table.
He did so for 1997, when the Appellant worked the entire season without pay. In
addition, it was shown that the Appellant did accounting for the Payor from
1997 to 1999.
[15] It is important to emphasize that the preceding information calls into
question the truth of the testimony provided by the Appellant and the Payor.
[16] In addition, the Appellant testified that her
declaration to the investigator was obtained under duress. Indeed, when
confronted with her declaration in which she stated, and I quote:
[translation]
. . . When
I worked for this business, I was living with Mr. Sylvain Dionne as a
common‑law spouse . . .
she testified:
[translation]
The investigator wrote that, not
me. The investigator threatened . . . if I did not sign it, he
would take me to Court.
[17] However, Investigator Dessureault denied making any threats. He
explained the procedure he always follows in every investigation, which takes
the form of questions and answers, whereby he writes out the question as well
as the answer provided by the person being questioned. Subsequently, he rereads
everything, asks the person he is questioning to do the same, and then he asks
if there are any corrections to be made. If the person makes corrections, the
investigator corrects the text and then the declaration is signed. In this
case, the declaration was signed on November 15, 2000, nearly
three years ago. The Minister argued that the Appellant's memory would be
more accurate at the time, than when she testified at the hearing, and that the
investigator's testimony should, in theory, be more objective. It is important
to add that the Minister argued that Mr. Carrier, Counsel for the
Appellant, did not cross‑examine Mr. Dessureault concerning any
threats.
[18] Payor Dionne testified that no promises or threats were made to
encourage him to sign the declaration. Indeed, he did not mention any threats.
Furthermore, the Minister wondered why the issue of threats had not been raised
prior to the date of the hearing.
[19] In light of the foregoing, this Court must determine, as did the
Minister, that the Appellant and the Payor were common‑law spouses
during the periods at issue; thus, they were related within the meaning of
section 251 of the Income Tax Act. This section states
that related persons shall be deemed not to deal with each other at arm's
length. Paragraph 5(2)(i) of the Employment Insurance Act
states that insurable employment does not include employment if the
employer and employee are not dealing with each other at arm's length.
Paragraph 5(3)(b) specifies that 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 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.
[20] In this case, the Minister determined, having exercised his discretion
under paragraph 5(3)(b) of the Act, that the Appellant's employment
was not insurable because the Appellant and the Payor were not dealing with
each other at arm's length.
[21] The Appellant asked this Court to set aside the Minister's decision.
In Attorney General of Canada v. Jencan Ltd.,
[1998] 1 F.C. 187, the Federal Court of Appeal described
the authority and role of this Court in such cases. This frequently cited case
represents the state of the law on this matter. At paragraph 29,
Isaac CJ., addressed the issue as follows:
. . . The critical issue in this application for judicial
review is whether the Deputy Tax Court Judge erred in law in
interfering with the discretionary determination made by the Minister under
subparagraph 3(2)(c)(ii). This provision gives the Minister the
discretionary authority to deem "related persons" to be at arm's
length for the purposes of the UI Act where the Minister is of the view
that the related persons would have entered into a substantially similar
contract of service if they had been at arm's
length. . . .
[22] Continuing his analysis, Isaac CJ., stated the following at
paragraph 31:
The decision of this Court in Tignish,
. . . requires that the Tax Court undertake a two‑stage
inquiry when hearing an appeal from a determination by the Minister under
subparagraph 3(2)(c)(ii). At the first stage, the Tax Court must
confine the analysis to a determination of the legality of the Minister's
decision. If, and only if, the Tax Court finds that one of the grounds for
interference are established can it then consider the merits of the Minister's
decision. As will be more fully developed below, it is by restricting the
threshold inquiry that the Minister is granted judicial deference by the
Tax Court when his discretionary determinations under
subparagraph 3(2)(c)(ii) are reviewed on appeal.
Desjardins J.A., speaking for this Court in Tignish, supra,
described the Tax Court's circumscribed jurisdiction at the first stage of
the inquiry as follows:
Subsection 71(1) of the Act provides
that the Tax Court has authority to decide questions of fact and law. The
applicant, who is the party appealing the determination of the Minister, has
the burden of proving its case and is entitled to bring new evidence to
contradict the facts relied on by the Minister. The respondent submits,
however, that since the present determination is a discretionary one, the
jurisdiction of the Tax Court is strictly circumscribed. The Minister is
the only one who can satisfy himself, having regard to all the circumstances of
the employment, including the remuneration paid, the terms and conditions and importance
of the work performed, that the applicant and its employee are to be deemed to
deal with each other at arm's length. Under the authority of Minister of
National Revenue v. Wrights' Canadian Ropes Ltd.,
contends the respondent, unless the Minister has not had regard to all the
circumstances of the employment (as required by subparagraph 3(2)(c)(ii)
of the Act), has considered irrelevant factors, or has acted in contravention
of some principle of law, the court may not interfere. Moreover, the court is
entitled to examine the facts which are shown by evidence to have been before
the Minister when he reached his conclusion so as to determine if these facts
are proven. But if there is sufficient material to support the Minister's
conclusion, the court is not at liberty to overrule it merely because it would
have come to a different conclusion. If, however, those facts are, in the
opinion of the court, insufficient in law to support the conclusion arrived at
by the Minister, his determination cannot stand and the court is justified in
intervening.
[23] In Ferme Émile Richard et Fils Inc. v. M.N.R.,
[1994] F.C.J. No. 1859, Décary J., of the
Federal Court of Appeal, used similar wording.
[24] In Jencan, supra, Isaac CJ., continued his
analysis, stating the following at paragraph 33:
. . . The jurisdiction of the
Tax Court to review a determination by the Minister under
subparagraph 3(2)(c)(ii) is circumscribed because Parliament, by
the language of this provision, clearly intended to confer upon the Minister a discretionary
power to make these determinations. . . .
[25] At paragraph 37 of that case, Isaac CJ., described the
authority of this Court in such circumstances in the following terms:
On the basis of the foregoing, the
Deputy Tax Court Judge was justified in interfering with the
Minister's determination under subparagraph 3(2)(c)(ii) only if it
was established that the Minister exercised his discretion in a manner that was
contrary to law. And, as I already said, there are specific grounds for interference
implied by the requirement to exercise a discretion judicially. The
Tax Court is justified in interfering with the Minister's determination
under subparagraph 3(2)(c)(ii)–by proceeding to review the merits
of the Minister's determination–where it is established that the Minister: (i)
acted in bad faith or for an improper purpose or motive; (ii) failed to take
into account all of the relevant circumstances, as expressly required by
paragraph 3(2)(c)(ii); or (iii) took into account an irrelevant factor.
[26] It must be acknowledged that this Court is bound, under the stare decisis
principle, by the authority of the Federal Court of Appeal. Tignish
specifies that:
. . . the jurisdiction of the
Tax Court is strictly circumscribed. The Minister is the only one who can
satisfy himself, having regard to all the circumstances of the employment,
including the remuneration paid, the terms and conditions and importance of the
work performed, that the applicant and its employee are to be deemed to deal with
each other at arm's length. Under the authority of Minister of National Revenue v.
Wrights' Canadian Ropes Ltd., contends the respondent,
unless the Minister has not had regard to all the circumstances of the
employment (as required by subparagraph 3(2)(c)(ii) of the Act),
has considered irrelevant factors, or has acted in contravention of some
principle of law, the court may not interfere. . .
[27] In light of the foregoing, particularly the evidence collected, the
Appellant's admissions, the unrefuted assumptions of fact relied on by the
Minister, and the contradictions between the evidence submitted at the hearing
and the previous declarations, this Court is of the view that it would be
entirely inappropriate to interfere.
[28] In addition, it is the opinion of this Court that, in exercising his
discretion under subsections 5(3) and 93(3) of the Act, the Minister
met the requirements therein, by having regard to all of the circumstances
surrounding the Appellant's employment, as explained in Jencan, supra.
[29] The Appellant had the burden of proving her case and she was entitled to bring new evidence to contradict the facts relied on by
the Minister in support of
his determination. She did not do so.
[30] Therefore, this Court must conclude, having regard to all of the
circumstances, that it was reasonable for the Minister to determine that the
Appellant and the Payor would not have entered into a substantially similar
contract of employment if they had been dealing with each other at arm's length
within the meaning of paragraph 5(3)(b) of the Act.
[31] Consequently, the appeal is dismissed and the Minister's decision is
confirmed.
Signed at Grand‑Barachois, New Brunswick,
this 18th day of November 2003.
Savoie, D.J.
on this 26th
day of April 2004.
Sharlene Cooper, Translator
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