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Citation: 2003TCC129
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Date: 20030331
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Docket: 2001-3846(EI)
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BETWEEN:
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CAROLE LORD,
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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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AND
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Docket: 2001-3845(EI)
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ROBERT SÉNÉCHAL LTÉE,
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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
Deputy Judge Savoie, T.C.C.
[1] These appeals
were heard at Matane, Quebec, on November 1, 2002.
[2] The appeals
concern the insurability of the employment of the appellant, Carole Lord, when
she was employed with Robert Sénéchal Ltée, the payer, during the period at
issue, namely, from March 28, 1999, to February 10, 2001.
[3] On July 17, 2001,
the Minister of National Revenue (the “Minister”) informed the appellant and
the payer of his decision according to which the employment was not insurable
on the ground that a similar contract of employment would not have been entered
into if the parties had been dealing at arm’s length.
[4] In reaching his
decision, the Minister relied on the following assumptions of fact:
[Translation]
(a) the payer has been incorporated since 1959;
(b) the two shareholders of the payer are Denis Sénéchal and
Robert Sénéchal;
(c) the appellant is the spouse of Denis Sénéchal, and Denis
Sénéchal is the son of Robert Sénéchal;
(d) the payer operated a notions business with one store in Baie‑Comeau
and one store in Rimouski;
(e) the business had a turnover of approximately $2M a year and
employed some twenty people;
(f) the business was operated throughout the year;
(g) the busiest months are October, November, December and April,
May and June.
(h) the appellant was hired as a manager;
(i) the appellant’s duties consisted of handling the marketing and
inventories;
(j) from April 1992 to February 1999, the appellant was a manager
in the Baie‑Comeau store;
(k) the appellant received a fixed remuneration of
$1,040 every two weeks;
(l) in February 1999, the payer abolished the appellant’s position
and restructured his operations;
(m) in February 1999, the payer entrusted the duties of managing the
Baie‑Comeau store to Reine Tremblay and Nicole Gagnon;
(n) on February 16, 1999, the payer issued a record of employment
to the appellant for the period from January 1, 1992, to February 13, 1999,
which indicated 2,080 insurable hours and a total insurable remuneration of
$15,246.40 for the final 27 weeks;
(o) after her layoff, in February 1999, the appellant continued to
provide services to the payer;
(p) the appellant handled merchandize returns at the Rimouski store for 5 to 6 hours a week;
(q) the appellant received a weekly income of $75;
(r) beginning in September 1999, the appellant was a manager at the
Rimouski store;
(s) the appellant worked 40 hours and more a week while continuing
to receive remuneration of $75 a week;
(t) the appellant’s salary was unreasonable considering the hours
worked;
(u) on May 3, 2001, in her signed statutory declaration, the
appellant admitted that she had worked 40-hour weeks in October, November and
December 1999 and in January 2000 for the payer;
(v) the appellant provided services to the payer with the hours
actually worked being recorded in the payroll journal of the payer;
(w) the hours allegedly worked by the appellant did not correspond
to the hours actually worked;
(x) on February 12, 2001, the payer issued a record of employment
to the appellant for the period from January 31, 2000, to February 10, 2001,
which indicated 2,120 insurable hours and a total insurable remuneration of
15,120.00 for the final 27 weeks;
(y) the payer and the appellant entered into an arrangement to
allow the appellant to receive employment insurance benefits while continuing
to provide services to the payer.
[5] The appellant
admitted the Minister’s assumptions set out in subparagraphs (a) to (g), (j) to
(l), (n), (p), (q) and (x). She denied those set out in subparagraphs (r) to
(w) and (y) and wanted to add some clarifications to those set out in
subparagraphs (h), (i), (m) and (o).
[6] The evidence
disclosed that the appellant was the managing director at one of the payer’s
stores, in Baie‑Comeau, until February 1999 when the payer abolished her
position and restructured his operations by entrusting some of her former
duties to Reine Tremblay and Nicole Gagnon. They continued to receive their
usual hourly salary of $8.50 and $8 respectively, while the appellant, for
the same work, had previously been remunerated at $13.50 an hour. As managing
director, the appellant was paid $520 a week for 40 hours’ work even though she
really worked at least 60.
[7] After her layoff
in February 1999, the appellant continued to provide services to the payer, at
the Rimouski store, by handling the return of merchandize to the
suppliers. She worked 6 to 7 hours a week for $75. She did not report those
earnings during the weeks from March 28 to April 25, 1999.
[8] The appellant
admitted in a statutory declaration that she had worked full time for the payer
from September 1999 to January 2000 for $75 a week and that she had reported
these earnings as she had done for the period from March to September 1999,
that is, 5 to 6 hours a week. She acknowledged that she had made a false
declaration in that respect as well.
[9] The appellant
added that she willingly worked for no pay because it was impossible for her to
stay at home; she was [Translation] “devoted to her work” and had to work
there.
[10] Earlier in 2000,
the appellant became the full-time associate manager, thereby replacing Alcide
Perreault who was getting on in years and had been reassigned to less demanding
duties. She received a salary of $500 a week for 40 hours’ work, but she worked
well over 60 hours a week.
[11] According to the
Minister, the payer and the appellant would not have entered into a similar
contract of employment if they had been dealing with each other at arm’s
length. Therefore, in making his determination he exercised his discretion
under paragraph 5(3)(b) of the Employment Insurance Act,
when analysing the circumstances, including the remuneration paid, the terms
and conditions, the duration and the nature and importance of the appellant’s
work.
[12] Because of these
appeals, it falls to this Court to examine whether the Minister exercised his
discretion under this paragraph in accordance with the law.
[13] In examining all
of the circumstances surrounding the appellant’s employment during the period
at issue, this Court is forced to conclude, as the Minister did, that an
unrelated worker would not have agreed to work for the payer, as she had done,
without pay. The appellant’s statement that she would have done the same for
any other employer because she “was devoted to her work” and found it
impossible to stay at home is very laudable but does not alter the facts and
does not convince this Court that the Minister was wrong to conclude as he did.
[14] It was clearly
demonstrated that the compensation paid to the appellant was inconsistent with
the work actually performed.
[15] The evidence
established, moreover, that if the payer exercised control over the appellant,
it was control or supervision at a distance because of the numerous absences of
Denis Sénéchal, her husband and the sole director of the payer.
[16] It has been shown
that the appellant set her own work schedule, and she acknowledged that she had
worked a number of hours without pay for the payer while a claimant under the
employment insurance plan. The effect of this was to benefit the payer whose
business benefited from the employment insurance plan.
[17] The appellant
worked all year long for the payer, both part time and full time. She never
severed the employment relationship between her and the payer. The payer never
denied that she had continued to provide certain services during her periods of
unemployment.
[18] The appellant asks
this Court to vacate the Minister’s decision. The Court’s jurisdiction and role
in a case like this were described by the Federal Court of Appeal in Attorney
General of Canada v. Jencan Ltd. [1998] 1 F.C. 187. This oft-cited case
represents the state of the law in this area. At paragraph 29 of this case,
Isaac, J.A. posed the question in the following manner:
... 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.
[19] Continuing
his analysis, Isaac, C.J. stated:
The decision of this Court in
Tignish, supra, 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:
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Subsection 7(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.
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[20] Décary, J.A. for
the Federal Court of Appeal expressed similar views in Ferme Émile Richard
et Fils Inc. v. Minister of National Revenue et al. (178 N.R. 361).
[21] At paragraph 33 of
Jencan supra, Isaac, C.J. continued his review and stated:
...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 decisions…
[22] Isaac, C.J., at
paragraph 37 of Jencan, describes this Court’s power in similar
circumstances as follows:
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.
[23] It must be
recognized that this Court is bound under the doctrine of stare decisis
by the authority of the Federal Court of Appeal. Jencan makes it clear
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...
[24] Having regard to
the above, specifically the evidence gathered, the appellant’s admissions, the
unrefuted assumptions of fact of the Minister, the contradictions between the
evidence at the hearing and the earlier declarations, this Court does not see
that its intervention is warranted.
[25] Furthermore, this
Court is of the opinion that the Minister, in the exercise of his discretion
under subsections 5(3) and 93(3) of the Employment Insurance Act met the
requirements of the Act by having regard to all the circumstances of the
appellant’s employment, as laid down in Jencan, supra.
[26] The onus was on
the appellant to prove her case and she was entitled to adduce new evidence to
contradict the facts relied on by the Minister to justify his decision; she did
not do so.
[27] This Court must
therefore conclude that, taking all the circumstances into account, it was
reasonable for the Minister to decide that the appellant and the payer would
not have entered into a substantially similar contract had they been dealing
with each other at arm’s length within the meaning of paragraph 5(3)(b)
of the Employment Insurance Act.
[28] Consequently, the
appeals are dismissed and the Minister’s decision is confirmed.
Signed at Grand-Barachois,
New
Brunswick,
this 31st day of March 2003.
D.J.T.C.C.
Translation
certified true
on this 30th
day of January 2004.
Leslie
Harrar, Translator
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