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Citation: 2003TCC526
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Date: 20030811
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Docket: 2001‑570(EI)
2001‑571(EI)
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BETWEEN:
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BRIGITTE PAQUET,
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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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REASONS FOR JUDGMENT
Savoie,
D.J.
[1] These
appeals were heard on common evidence at Matane, Quebec, on
May 26, 2003.
[2] These
are appeals from two decisions by the Minister of National Revenue (the
"Minister") dated January 24, 2001, that the Appellant's
work during the periods at issue, from July 10
to November 6, 1999, when in the service of Donald Marin
and Charles‑Antoine Marin, operating
La Seigneurie Dam Enr., the "Payor", and from
June 11 to July 29, 2000, when in the service of
Donald Marin, operating the Bar le Vieux Marin, the
"Payor", was not insurable.
[3] According
to the Minister, the examination of the circumstances of the employment during
the periods at issue show that this employment was not insurable because they
would not have entered into a substantially similar contract if the Appellant
and the Payors had been dealing with one another at arm's length.
[4] However,
the Minister, in the Replies to the Notices of Appeal, determined that the
Appellant's employment was not insurable because, during the periods at issue,
this employment did not meet the requirements for a contract of service
according to the Employment Insurance Act (the "Act").
[5] These
are both appeals of the decisions by the Payors, but since they did not attend
the hearing, their appeals were rejected by failure to appear, at the request
of Counsel for the Minister.
[6] Paragraph 5(1)
of the Act reads in part as follows:
Subject
to subsection (2), insurable employment is
(a) employment in Canada by
one or more employers, under any express or implied contract of service or
apprenticeship, written or oral, whether the earnings of the employed person
are received from the employer or some other person and whether the earnings
are calculated by time or by the piece, or partly by time and partly by the
piece, or otherwise;
. . .
[7] The
burden of proof is on the Appellant, who must establish, on the balance of
probabilities, that the decisions of the Minister are without foundation in
fact and in law. Each case stands on its own merits.
[8] In
making his decisions, the Minister relied on the following assumptions of fact:
In docket 2001‑571(EI)
[translation]
(a) On
December 11, 1998, Donald Marin and Charles‑Antoine Marin
registered the business name "La Seigneurie Dam Enr.";
(b) Donald Marin
is Charles‑Antoine Marin's brother;
(c) Donald Marin
was the Appellant's boyfriend and lived with her for several months;
(d) The Payor
operated a restaurant and a bar;
(e) The bar began
operations in February 1999;
(f) The
Appellant was a server;
(g) The Appellant
did not have a set work schedule;
(h) The Appellant's
work hours were not recorded;
(i) On
November 11, 1999, the Payor issued a record of employment to the
Appellant for the period from August 8, 1999, to
November 6, 1999, indicating 530 insurable hours and insurable
earnings of $5,748.16;
(j) The record
of employment does not reflect reality;
(k) The Appellant
began her work for the Payor on July 17, 1999;
(l) According to
the statement by Donald Marin on January 8, 2001, the Appellant
provided services to the Payor before and after the periods indicated on her
record of employment, without pay;
(m) The period
allegedly worked by the Appellant does not correspond to the period actually
worked;
(n) The Appellant
endorsed her pay cheques; she returned them to Donald Marin so that he
could deposit them to the business account;
(o) The Payor and
the Appellant had an arrangement in order to enable the Appellant to qualify
for employment insurance benefits.
The Appellant admitted paragraphs (a) to (f), (i) and (k); She denied
the assumptions set out in paragraphs (g), (h), (j) and (l) to (o).
In docket 2001‑570(EI)
[translation]
(a) On
March 10, 2000, Donald Marin registered the business name
"Bar Le Vieux Marin";
(b) Donald Marin
was the sole owner of the business name;
(c) Donald Marin
was the Appellant's boyfriend and he lived with her for several months;
(d) The Payor
operated a bar/restaurant that was open seven days a week from 3 p.m. to
2 or 3 a.m.;
(e) The bar began
operations on April 14, 2000;
(f) The
Appellant was a server;
(g) The Appellant
did not have a set work schedule;
(h) The
Appellant's working hours were not recorded;
(i) On
August 14, 2000, the Payor issued a record of employment for the
Appellant for the period from June 11, 2000, to
July 29, 2000, indicating 437.5 insurable hours and insurable
earnings of $4,651.41;
(j) The record
of employment does not reflect reality;
(k) In May, 2000,
the Appellant signed receipts in the Payor's name;
(l) According to
the Payor's statement dated January 8, 2001, the Appellant provided
services to the Payor without pay, before and after the periods indicated on
her record of employment;
(m) The period
during which the Appellant allegedly worked does not correspond to the period
actually worked;
(n) According to
the Payor's statement dated January 8, 2001, the Payor did not have the
financial ability to pay the Appellant;
(o) During the
period at issue, the Appellant did not cash her pay cheques; she waited until
the Payor had the necessary liquidity;
(p) The Payor and
the Appellant had made an arrangement for the purpose of enabling the Appellant
to qualify for employment insurance benefits.
The Appellant
admitted the assumptions in paragraphs (a), (b), (d), (e), (f) and (i);
she denied those in paragraphs (c), (g), (j), (l), (m), (o) and (p) and
she said she had no knowledge of the assumptions in paragraphs (h), (k)
and (n).
[9] On
December 11, 1998, Donald Marin and Charles‑Antoine Marin,
two brothers, registered the business name
"La Seigneurie Dam Enr." They operated a restaurant
and a bar. The Appellant, Donald Marin's girlfriend, was a server at the
bar, which began operations in February 1999. This business only operated
in 1999. Charles‑Antoine Marin withdrew from the business and
his brother Donald Marin closed the restaurant. In March 2000,
Donald Marin registered the business name
"Bar Le Vieux Marin" and began to operate this
business on April 14, 2000, where the Appellant became a server,
according to her record of employment, beginning on June 11, 2000.
Her relationship with Donald Marin was sporadic. They broke up and got
back together three times between the summer of 1999 and the fall
of 2000.
[10] It was established that the Appellant did not have a work schedule.
Sara Santerre, an employee of the Payor, La Seigneurie Dam Enr.,
in her statutory declaration dated June 22, 2000, affirmed the
following:
[translation]
. . . Brigitte did not have a
schedule as such; sometimes she arrived at 8 a.m. or lots of other times
much later, but I know she took care of the bar.
. . . Brigitte did what she wanted,
she was there, she wasn't there, and she really didn't know much about the
restaurant business.
[11] The Appellant responded to the Minister's assumption that her working
hours were not recorded, saying that she reported them on her tips declaration.
It should be noted, however, that these declarations were not produced and that
this statement is not supported by the rest of the evidence. It should also be
emphasized that in her testimony she affirmed that she did not remember whether
she declared her tips.
[12] The Minister emphasized that the records of employment do not reflect
reality. The Payors admitted this to the investigators. They did not testify at
the hearing, did not attend, and were not called as witnesses. The Appellant
denied this assumption of the Minister but did not prove that it was false.
[13] The Payors also admitted to the investigators that the Appellant
provided services to them before and after the periods indicated on the records
of employment. Once again, the Appellant did not succeed in proving this
assumption false. In fact the documentation produced as evidence established
that the Appellant had provided services in May 2000 whereas her period of
employment began on June 11, according to her record of employment.
[14] The documentary evidence demonstrated that in 1999, the Appellant
endorsed her pay cheques and returned them to the Payor. Confronted with this
fact, she had to admit it. None of the Appellant's pay cheques for 1999,
beginning from August 22, were cashed until November 15, 1999,
with the exception of the pay cheque for August 31, which was cashed on
October 15, 1999. It was established that in order to be paid, the
Appellant had to wait until the Payor received his bottle credit from Molson.
[15] The evidence revealed that when the Payor did not have any money, the
Appellant waited to be paid. She did not cash her pay cheques. When the Payor
received the money, she gave him her cheque in exchange for cash. The Appellant
revealed that the Payor's business was not good in 1999 and 2000, but because
she wanted to keep her job, she waited.
[16] It was established that the Appellant provided services, did errands
for the Payors, without pay. She admitted this.
[17] The Appellant claimed she did not work outside the periods at issue,
but she admitted that she spent time at the Payor's business in her free time,
either to eat or have a drink, and that, if the servers were busy, she helped
out without being paid.
[18] The Appellant's evidence does not take into account the services
rendered to the Payors. For 1999, this evidence does not take into
consideration the $30 she received from the Payor for each shift she worked
while she was being trained. For 2000, this evidence does not take into account
the services rendered in May and the numerous receipts she signed for the Payor
when she was unemployed.
[19] The documentary evidence revealed that the Appellant's periods of work
do not correspond to the economic activity of the Payors. Also, the table
produced in evidence as Exhibit I‑5, the Payor had the means in 1999
to pay the Appellant in August, so why wait until November?
[20] The same table showed economic activity in November and
December 1999, justifying the Appellant's services, but she was
unemployed.
[21] All these considerations led the Minister to conclude that the
Appellant and the Payors had made an arrangement for the purpose of enabling
the Appellant to qualify to receive employment insurance benefits.
[22] A case similar to this one was presented at this Court before
Tardif J. in Thibeault v. Canada (Minister of National Revenue –
M.N.R.), [1998] T.C.J. No. 690.
[23] The issue led Tardif J. to state that:
Genuine employment is employment
remunerated according to market conditions, which contributes in a real and
positive way to the advancement and development of the business paying the
salary in consideration of work performed. These are basically economic factors
that leave little, if any, room for generosity or compassion.
. . .
Where the size of the salary bears no relation to the
economic value of the services rendered, where the beginning and end of work
periods coincide with the end and the beginning of the payment period and where
the length of the work period also coincides with the number of weeks required
to requalify, very serious doubts arise as to the legitimacy of the employment
contract. Where the coincidences are numerous and improbable, there
is a risk of giving rise to an inference that the parties agreed to an
artificial arrangement to enable them to profit from the benefits.
[24] The Appellant asked this Court to overturn Minister's decision. It is
appropriate to recall the circumstances that may justify this Court's
intervention and, in particular, the recognized limits of this power to review
and intervene.
[25] In this respect, the words of Marceau J. of the Federal Court of
Appeal are useful. They are reproduced below as they appear at paragraph 4
of Légaré v. Canada (Minister of National Revenue – M.N.R.),
[1999] F.C.J. No. 878:
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.
[26] The Federal Court of Appeal took up this same idea in Gray v.
Canada (Minister of National Revenue – M.N.R.),
[2002] F.C.J. No. 158. Desjardins J. wrote the following:
The applicant submits with the assumptions on which
the Minister relied on in his reply to the notice of appeal were largely irrelevant
. . . The applicant also submits that the fact that the applicant
worked for the payor outside of his remuneration period did not amount, in the
circumstances of the case at bar, to an important factor to be relied on.
. . .
With regard to the applicant's second argument, the
weight to be given to relevant factors is for the Tax Court judge to
assess and not a matter for this Court to reassess.
[27] After reviewing the Appellant's file, the Minister concluded that
there was no real contract of service between the Appellant and the Payors. He
concluded, among other things, that there was an arrangement between the Payors
and the Appellant for the sole purpose of enabling the Appellant to draw
employment insurance benefits.
[28] Tardif J., of this Court, in Thibeault, supra,
described the circumstances which invalidate a contract of service. He
explained as follows, at paragraphs 22 and 29:
Genuine
employment is employment remunerated according to market conditions, which
contributes in a real and positive way to the advancement and development of
the business paying the salary in consideration of work performed. These are
basically economic factors that leave little, if any, room for generosity or
compassion.
Of course, it is neither illegal nor
reprehensible to organize one's affairs so as to profit from the social program
that is the unemployment insurance scheme, subject to the express condition
that nothing be misrepresented, disguised or contrived and that the payment of
benefits occur as a result of events over which the beneficiary has no control.
Where the size of the salary bears no relation to the economic value of the
services rendered, where the beginning and end of work periods coincide with
the end and the beginning of the payment period and where the length of the
work period also coincides with the number of weeks required to requalify, very
serious doubts arise as to the legitimacy of the employment
contract. Where the coincidences are numerous and improbable, there
is a risk of giving rise to an inference that the parties agreed to an
artificial arrangement to enable them to profit from the benefits.
[29] It is appropriate to add that this decision was upheld by the Federal
Court of Appeal on June 15, 2000, when it dismissed the application
for judicial review with costs.
[30] Parties that agree upon payment established according to criteria
other than the time or period during which the work was conducted, thereby
desiring to take advantage of the provisions of the Act, introduce factors that
are foreign to a true contract of service, effectively call its validity into
question.
[31] I therefore conclude that the Appellant's employment was not insurable
because there was not an arm's‑length relationship between the Payors and
the Appellant.
[32] In addition, the Appellant's employment was not insurable, within the
meaning of the Act, during the periods at issue, since during these periods the
Payors and the Appellant did not have a true contract of service within the
meaning of paragraph 5(1)(a) of the Act.
[33] Finally, in light of the evidence presented at the hearing, it must be
concluded that there was an arrangement between the Payors and the Appellant
for the sole purpose of enabling the Appellant to qualify for employment
insurance benefits.
[34] For these reasons, the appeals are dismissed and the decisions of the
Minister are upheld.
Signed at Grand‑Barachois, New Brunswick,
this 11th day of August 2003.
Savoie, D.J.
on this 18th
day of March 2004.
Shulamit Day‑Savage, Translator
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