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Citation: 2003TCC839
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Date: 20031112
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Docket: 2002-4307(EI)
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BETWEEN:
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AMAR GREWAL,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
AND BETWEEN:
Docket: 2002-4308(CPP)
AMAR GREWAL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AND BETWEEN:
Docket: 2002-4309(EI)
GURCHARAN GREWAL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AND BETWEEN:
Docket: 2002-4310(EI)
HARVINDER SANDHU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AND BETWEEN:
Docket: 2002-4311(EI)
INDERJIT SANDHU O/A S&G FARMS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AND BETWEEN:
Docket: 2002-4312(CPP)
INDERJIT SANDHU O/A S&G FARMS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier,
J.
[1] These
appeals were heard together on common evidence by consent of the parties at
Kelowna, British Columbia, on October 20, 21 and 22, 2003.
[2] In
general, the facts in dispute are summarized in the Reply to the Notice of
Appeal of Inderjit Sandhu in file number 2002-4311(EI). Paragraphs 2 to 7
inclusive thereof read:
2. In response
to the Appellant's appeal of three rulings under section 91 of the Employment
Insurance Act, S.C. 1996 c.23 (the "Act"), the Respondent
determined that Gurcharan Grewal, Amar Grewal and Harvinder Sandhu were not
employed by the Appellant in insurable employment during the periods from May
28 to November 11, 2000 and July 1 to October 20, 2001 (Gurcharan Grewal), from
May 28 to October 14, 2000 and July 1 to October 20, 2001 (Amar Grewal) and
from September 19 to December 17, 1999, August 6 to November 11, 2000 and July
1 to October 20, 2001 (Harvinder Sandhu) (the "Periods").
3. In
determining that Gurcharan Grewal ("Gurcharan"), Amar Grewal
("Amar") and Harvinder Sandhu ("Harvinder") were not
employed in insurable employment with the Appellant during the Periods, the
Respondent relied on the following assumptions of fact:
a) S&G Farms
is a partnership between Inderjit Sandhu ("Inderjit") and Amar Grewal;
b) the Appellant
operates a vegetable farm located at 8915 Island Road, Oliver, BC.;
c) Inderjit and
Amar purchased the farm in January 1998;
d) Inderjit is
married to Harvinder;
e) Amar is
married to Gurcharan
f) Amar and
Gurcharan are Harvinder's parents;
g) the farm
property has two houses with Inderjit and Harvinder living in one house and
Amar and Gurcharan residing in the other house;
h) the mortgages
for the property are in Amar's name;
i) the business
bank account is in Amar's name;
j) Amar shared
in the potential financial risks of the Appellant;
k) Amar is a
partner in the business;
l) the
Appellant alleges Gurcharan, Amar and Harvinder worked on the farm picking and
packing vegetables;
m) the Appellant
did not pay Gurcharan, Amar and Harvinder weekly as reported in the records of
employment or their applications for employment insurance benefits;
n) cancelled
cheques issued by the Appellant to Gurcharan, Amar and Harvinder are not in
accordance with amounts actually earned;
o) Gurcharan,
Amar and Harvinder have provided conflicting and contradictory information
about the work that they performed for the Appellant during the Periods;
p) the
Appellant's records are inaccurate, unreliable and inconsistent with each
other;
q) Gurcharan,
Amar and Harvinder did not work the number of hours reported on the records of
employment issued by the Appellant; and
r) Gurcharan,
Amar and Harvinder were not employed by the Appellant under a contract of
service.
B. ISSUES TO BE
DECIDED
4. The issue are:
i) whether
Gurcharan, Amar and Harvinder were employed by the Appellant pursuant to a
contract of service during the periods; and
ii) if they were
so employed, whether Gurcharan, Amar and Harvinder are excluded from insurable
employment on the basis that they do not deal with the Appellant at arm's
length.
C. STATUTORY
PROVISIONS RELIED ON
5. He relies on
paragraphs 5(1)(a), 5(2)(i) and 5(3)(b) and subsection 2(1) of the Act,
and sections 251 and 252 of the Income Tax Act, as amended.
D. GROUNDS RELIED
ON AND RELIEF SOUGHT
6. He
respectfully submits that the Gurcharan, Amar and Harvinder were not employed
in insurable employment with the Appellant during the Periods as they were not
engaged under a contract of service within the meaning of paragraph 5(1)(a) of
the Act.
7. In the
alternative, he submits that the Appellant and Gurcharan, Amar and Harvinder
were related and that their employment was excluded employment pursuant to
paragraph 5(2)(i) of the Act. He submits that Gurcharan, Amar and Harvinder
and the Appellant are not deemed (sic) to be dealing with each other at
arm's length within the meaning of 5(3)(b) of the Act as the Minister is
not satisfied that, having regard to all the circumstances of the employment, a
substantially similar contract of employment would exist if the parties had
been dealing with each other at arm's length.
[3] The
following subparagraphs of the assumptions quoted were not refuted: 3b), d),
e), f), g), h), i), l), m) and p).
[4] With
respect to Amar Grewal, the farmland purchased in 1997 was purchased in
Inderjit's and Amar's names and together they granted a mortgage on it to the
Royal Bank of Canada. This was done because the Royal Bank, according to Amar,
"required Amar's name on the title to secure its loan for the
purchase". Amar testified that registration of the title in Amar's and
Inderjit's names was also done to secure a loan of about $35,000 by Amar to
Inderjit to assist Inderjit in the purchase. The accountants then registered
the two for GST purposes to avoid paying GST on the price of the land,
according to the testimony of Judith McAllister, C.G.A. but thereafter, the
accountants filed "NIL" GST returns and Inderjit registered the farm
separately for GST purposes and filed the appropriate GST returns under S&G
Farms which he had duly registered with the Province and with GST as a
proprietorship. Inderjit also testified that the Royal Bank bank account in the
names of Inderjit and Amar was never exercised for chequing or other purposes
by Amar and nothing refuted that evidence. None of this evidence was submitted
to the officials of Human Resources Development Canada ("HRDC") or
Canada Customs and Revenue Agency ("CCRA").
[5] However,
Amar testified that he no longer has any title and that it was shared in equal
20 per cent interests among Inderjit Sandhu, Harvinder Sandhu, Binder Kara
Sandhu, Niki Kara Sandhu and Sukhminder Kara Gill. He also testified that
Inderjit had paid him back the $35,000 and that he had used the money for a
trip to India and to pay for a wedding there. There are no bank records or
cheques recording repayment of the $35,000. However Judith McAllister's
testimony about the GST registration and the fact that there is no evidence of
any cheques on the S&G Farms bank account signed by Amar serve to confirm
this testimony. In addition, Inderjit testified that Amar had never reported
anything about the farm for income tax purposes – Inderjit has reported
everything.
[6] On
this basis, the Court finds that Amar was not a partner in S&G Farms.
Rather, he was an employee on the farm.
[7] Inderjit
conducted the appeals for all of the Appellants. He called a total of 21
witnesses, including himself and including a number of the Respondent's
officers. Judith McAllister, C.G.A., S&G Farms' accountant testified twice
for the Appellants. She is believed respecting her first testimony on the
stand. At that time she stated that her firm does the books and payroll for
about 120 orchard and ground crop farms in the South Okanagan such as S&G
Farms. Their computer program records employees' salaries weekly or bi-weekly
for all of them, but employers on these farms only pay their employees when
they are paid for selling their crops, often at the end of the crop year. She
also testified that only non-whites work on the ground crop farms such as
S&G Farms' tomato, green pepper and eggplant farm. Usually only a few
employees are kept on by these farms, after the crop has been picked, in order
to clean up. The heavy employment numbers are during planting, picking and
packing. This testimony was supported by most witnesses and was not refuted by
any witnesses. It is accepted in its entirety.
[8] The
evidence is that Gurcharan, Amar and Harvinder worked on S&G Farms
planting, picking and packing vegetables and the Court accepts that as true.
None of the employees of S&G Farms were paid weekly as reported. They were
all paid as crops were sold and money was collected. At times during the years
in question, S&G Farms employed up to 20 workers. In recent years it has
employed as many as 35 workers.
[9] Various
other workers testified that Gurcharan, Amar and Harvinder worked side-by-side
with them for S&G Farms and that all were treated the same in their duties,
work breaks and other matters. They did not testify about pay or salaries. All
of these witnesses have worked for S&G Farms and it appears that some of
them have yet to receive Employment Insurance benefits which they applied for
respecting their 2002 work for S&G Farms. At least some of them appear to be
indigent. S&G Farms' 2002 Employment Insurance records are still the
subject of investigation by HRDC.
[10] The Court accepts the testimony of Bradford Novikoff of Employment
Insurance and Narinder Bansal of HRDC that Inderjit said that no one else was
working for S&G Farms on the farm when they interviewed him there on July
10, 2001. The Court does not accept the testimony of the Appellants that they
were paid any cash on account of wages. Rather, the Court accepts as true the
records of wages described hereafter which were paid by cheques. In particular,
the Court believes that no allegations of cash payments were made until about
two weeks before the hearing date when the Appellants learned that the cheques
alleged to be salary payments did not add up to a sufficient amount to equal
the necessary total hours to qualify for employment insurance. Furthermore,
cheque number 680 for $11,600 and dated December 6, 2000 payable by S&G
Farms to Gurcharan Sandhu is found by the Court to have been changed after it
was deposited to add the following:
1. Additional Payee "Amar Grewal"
2. Addition to "Re" of the words "2000
both"
(Compare Exhibit R-2, tabs A-11 and B-1).
As a result, the Court finds that this cheque was originally only made out
to Gurcharan Grewal when it was deposited. What it was paid for will be dealt
with later.
[11] In particular, Inderjit Sandhu's testimony is found to be not credible
where it conflicts with the testimony of other witnesses or where it conflicts
with documentary evidence. Some of the areas where his testimony is not
accepted are:
1. On July 10, 2001,
members of the investigating "team" met with him at the farm. Two
testified that Inderjit stated that no workers were working that day (see
paragraph [10]). They are believed. Inderjit testified that he did not mean all
workers, or that he or the team misunderstood each other, or that some were
working outside that field, or that he did not understand that to mean family
members; he is not believed.
2. Lillian
Callegari, the Appeals Officer on the file testified on October 21, 2003 that,
except for the alleged 1999 payments to Harvinder, she never heard of any cash
payments to the employees in question until this was raised by the Appellants
in their testimony on October 20, 2003. Previously Inderjit advised her that
payment was by cheques that he described. The Court finds that none of the
Appellants who are alleged to be employees were paid any alleged wages in cash
and that any wages paid consisted of the cheques described hereafter for the
amounts as found by the Court.
[12] Respecting Amar Grewal, the periods of alleged employment are May 28
to October 14, 2000 and July 1 to October 20, 2001.
The gross and net pay alleged for each period is:
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Gross
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Net
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2000
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$7,042.50
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$5,498.72
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2001
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$8,208.72
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$6,521.64
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The only
remuneration paid to Amar Grewal is the following:
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2000
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Cheque October
22, 2000
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$4,919.02
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2001
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Cheque October
1, 2001
Cheque October
28, 2001
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$4,886.13
$1,274.57
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Total
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$16,160.40
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[13] Respecting Gurcharan Grewal, the alleged periods of employment are May 28 to
November 11, 2000 and July 1 to October 20, 2001.
The gross and net pay alleged for each period is:
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Gross
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Net
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2000
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$9,543.01
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$7,513.98
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2001
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$7,301.58
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$5,862.10
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The alleged
remuneration by cheques paid to Gurcharan Grewal is the following:
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2000
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Cheque December
6
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$11,600.00
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2001
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Cheque October 1
Cheque October
29
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$4,513.53
$1,002.07
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Total
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$5,515.60
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The cheque for
$11,600 was submitted to government officials twice and was changed by the
second submission as described in part in paragraph [10] herein. A bank book
shows that it was deposited to Harvinder Sandhu's bank account and that $11,535
was paid out of Harvinder's account on December 7. In these circumstances, what
the $11,600 represents and whether it or any part of it ever was intended for
Gurcharan (Harvinder's mother) is unknown. Nonetheless, Ms. Callegari found
that cheque to be problematic. Her findings are accepted.
[14] The alleged remuneration of Harvinder Sandhu is as follows:
1999 – Harvinder testified that she received $4,800 in cash - $3,000 on
November 25, 1999 and $1,800 on December 20, 1999 and that it was not banked.
Rather she used $4,500 to buy furniture. The Court offered her the opportunity
to return to the stand the next day with the furniture receipts but Harvinder
stated that she was so excited by the purchase that she did not take, or have
the receipts. Other than this testimony and an alleged Blueline Sales book
sheet which was shown to officials with these entries, there is no proof of
this. It is not accepted as true. It is well known that alleged commercial
transactions between family members require timely independent substantiation
by documents such as cheques, bank records, transfers and independent third
party verification. None of that exists respecting these allegations for 1999.
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2000
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Cheque July 31
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$600.00
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Cheque September
9
Cheque October
25
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$2,500.00
$1,500.00
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The Court notes
that Harvinder allegedly did not commence work until August 6, after the July
31 cheque. She allegedly stopped work on November 11, but her last cheque was
on October 25.
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2001
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Cheque October
16
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$4,886.13
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Cheque October
28
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$1,185.80
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Total
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$6,071.93
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The gross and net
pay alleged for each period is:
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Gross
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Net
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1999
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$5,928.00
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$4,795.96
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2000
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unknown
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$4,886.13
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2001
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$8,124.48
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$6,460.40
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[15] The evidence is that the various shortages in net pay due to each
alleged employee were not referred to by any Appellant until Ms. Callegari's
report was given to the Appellants' former counsel about two weeks before the
hearing date. Her report itemized the shortages in net pay. Ms. Callegari and
the other government officials testified that they first heard about the
alleged cash payments (except for the $4,800 allegedly paid to Harvinder in
1999) at the hearing of this appeal on October 20 and 21, 2003. They are
believed and the Court does not believe any testimony about cash payments of
the differences in net pay allegedly due.
[16] There are a number of versions of hours reported to various government
officials for each alleged employee. One is taken from a calendar for 2001
(Exhibit R-2, Tab A-14) apparently done on a day-to-day basis by Jasminder
Grewal which the Court finds was submitted by Inderjit Sandhu to William Harrington
of HRDC. There is another allegedly done by each alleged employee. There is a
third which Inderjit submitted to Lillian Callegari. On October 21, 2003 a
fourth was submitted to the Court by Inderjit Sandhu which he stated was his
original payroll record (Exhibit A-2 and A-3, and a summary Exhibit A-4). Cross
examination established that these are simply further make-ups by Inderjit.
Given Inderjit's lack of credibility, his activities in revising the $11,600
cheque, and the various versions of the other Appellants' hours submitted to
various government officials, Lillian Callegari was unable to make any finding
as to the actual amounts of hours worked by the three alleged workers in this
case. The only difference before the Court is the addition of Exhibits A-2, A-3
and A-4, which are simply a fourth version by Inderjit. They do not make him
more credible, and they do confirm Ms. Callegari's problems.
[17] Paragraph 7 of the Reply to Inderjit's appeal is that, in any event,
the employment in question, including Amar's, is excluded by virtue of the
relationships. In the Respondent's argument dealing with paragraph 5(3)(b)
of the Employment Insurance Act, it was stated that the two prime areas
in question are remuneration and hours worked. The Court agrees.
[18] The Court finds that the Minister of National Revenue (the
"Minister") and its representative did not act in bad faith or for an
improper purpose or motive; that they did not fail to take into account all of
the relevant circumstances; and that they did not take into account any
irrelevant factor.
[19] At trial, the first testimony of Ms. McAllister respecting the
ownership and operation of the farm was a new factor which provided evidence
that was not given to the Minister – in particular the avoidance or evasive
activities respecting the GST on the purchase of Amar's interest. This
information would cause the Court to change Amar's status from that of a
partner in the farm to that of an employee of Inderjit. But it does not change
the Minister's findings respecting Amar's hours or remuneration. If anything,
these findings of the questionable matters respecting the hours and
remuneration and any activities of Inderjit and Amar relating to them, are
confirmed by the Court Hearing.
[20] As a result, all of the appeals under the Employment Insurance Act
are dismissed.
[21] The only Canada Pension Plan ruling is in respect to Gurcharan. The
$11,600 cheque in 2000 does not have a clear relationship to anything
respecting any alleged employment of Gurcharan. The two cheques for $4,513.53
and $1,002.07 to Gurcharan in 2001 were ruled to be for amounts less than what
was purportedly owed to Gurcharan. However, respecting 2001:
1. There is no Canada Pension Plan
provision comparable to 5(3)(b) in the Employment Insurance Act.
2. The Rulings
Officer found that the total of $5,5515.60 paid to Gurcharan was $346.50 less
than was alleged due to her.
3. Thus, while
Gurcharan's hours were questionable, the finding was that, in any event, the
$5,515.60 constituted income for services rendered.
In these circumstances, the Court finds the sum of $5,515.60 to constitute
pensionable earnings and the Canada Pension Plan appeals by Inderjit and
Gurcharan are allowed respecting this in 2001.
Signed at Ottawa,
Canada, this 12th day of November 2003.
Beaubier, J.
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