Date: 20010508
Dockets: 2000-2851-EI,
2000-2856-CPP
BETWEEN:
INTERNATIONAL MINERALS & CHEMICAL
(CANADA) GLOBAL LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasonsfor
Judgment
Beaubier, J.T.C.C.
[1]
These appeals were heard together on common arguments at Regina,
Saskatchewan, on April 24, 2001. The parties filed a Partial
Agreed Statement of Facts, which, in respect to 2000-2856 (CPP),
reads as follows:
PARTIAL AGREED STATEMENT OF
FACTS
The parties to the within action hereby agree, through their
respective counsel, that for purposes only of this appeal and any
appeal therefrom, the facts set out herein are true. No evidence
inconsistent with this Partial Agreed Statement of Facts may be
adduced at the hearing of this appeal or at any appeal therefrom
but additional evidence, not inconsistent with this Partial
Agreed Statement of Facts, may be adduced by either party.
1.
At all relevant times, the Appellant was and is a corporation
incorporated under the laws of Canada.
2.
At all relevant times, IMC Esterhazy Ltd. ("IMC
Esterhazy") was and is a corporation incorporated under the
laws of the Province of Saskatchewan.
3.
On and before August 31, 1998, the Appellant carried on a potash
business principally located near Esterhazy, Saskatchewan (the
"business"). The Appellant deducted and remitted
contributions under the Canada Pension Plan, R.S.C. 1985,
c. C-8 (hereinafter the "Plan") from January 1, 1998 to
August 31, 1998 with respect to employees engaged in the business
and, with respect to certain employees engaged in the business
during this period, deducted and remitted contributions up to the
maximum yearly amount.
4.
At all relevant times, the employees engaged in the business were
engaged under contracts of service.
5.
On August 31, 1998, the Appellant and IMC Esterhazy formed a
limited partnership under and in accordance with the laws of the
Province of Saskatchewan ("IMC Limited Partnership"),
pursuant to an agreement in writing between the Appellant and IMC
Esterhazy dated August 31, 1998 (the "Limited
Partnership Agreement"). The Appellant is the general
partner of the IMC Limited Partnership and owns a 99.5% interest
in the IMC Limited Partnership. IMC Esterhazy is the limited
partner of the IMC Limited Partnership and owns a .5% interest in
the IMC Limited Partnership.
6.
On August 31, 1998, the Appellant transferred all or
substantially all of the business to the IMC Limited
Partnership.
7.
As a result of the transaction referred to in paragraph 6 above,
on and after September 1, 1998, the Appellant, as the general
partner of the IMC Limited Partnership, carried on the
business.
8.
On August 31, 1998, the Appellant's auditors, Ernst &
Young, requested Revenue Canada, Taxation to confirm in writing
whether, on and after September 1, 1998, a new
"employer" will be created for purposes of deducting
and remitting contributions under the Plan as a result of the
facts referred to in paragraphs 5 and 6 above.
9.
On September 16, 1998, Revenue Canada, Taxation advised the
Appellant through correspondence to its auditors, Ernst &
Young, that where: "[a] new legal entity has been formed as
part of a business reorganization, the employer is required to
start deducting CPP and EI contributions as if no deductions had
been made previously. In many cases the employees have already
paid the maximum contribution for the year. As a result, the
employer may request a waiver from the department to alleviate
any undue hardship to the employees. The employer will continue
remitting the employers CPP and the EI premiums as if the
individual were a new employee. Unfortunately, there is no relief
for the employer". As a result, Revenue Canada Taxation
implicitly took the position that the IMC Limited Partnership was
a new employer and, therefore, was obligated to deduct and remit
contributions under the Plan on and after September 1, 1998 as if
no deductions had been previously made by the Appellant in the
1998 calendar year.
10.
On September 24, 1998, the Appellant, as general partner of the
IMC Limited Partnership, deducted and remitted contributions
under the Plan to Revenue Canada, Taxation with respect to salary
and wages paid on September 15, 1998 to employees
engaged in the business. Although the contributions deducted and
remitted were calculated on the basis that the IMC Limited
Partnership was a new employer, the Appellant expressly stated to
Revenue Canada, Taxation that it was not in agreement with this
position and was remitting on this basis to avoid any potential
penalties and/or interest under the Plan with respect to these
remittances.
11.
On October 6, 1998, the Appellant, through its solicitors,
MacPherson Leslie & Tyerman, again requested Revenue Canada,
Taxation to confirm in writing that, on and after September 1,
1998, the Appellant, as general partner of the IMC Limited
Partnership, was the "employer" required to deduct and
remit contributions under the Plan with respect to employees
engaged in the business and that IMC Limited Partnership was not
an "employer" for purposes of the Plan.
12.
As a result of the Minister of National Revenue's position
referred to in paragraph 9 above that the IMC Limited Partnership
was a new employer, the Appellant, as the general partner of the
IMC Limited Partnership, deducted and remitted contributions
under the Plan from September 1, 1998 to December 31, 1998 with
respect to employees engaged in the business on the basis that
IMC Limited Partnership was a new employer for purposes of the
Plan.
13.
On February 26, 1999, notwithstanding the Minister of National
Revenue's position referred to in paragraph 9 above that the
IMC Limited Partnership was a new employer, the Appellant filed
the 1998 T4 - Summary of Remuneration Paid with Revenue Canada,
Taxation on the basis that:
(i)
Prior to September 1, 1998, the Appellant was the
"employer" required to deduct and remit contributions
under the Plan with respect to employees engaged in the business;
and
(ii)
On and after September 1, 1998, the Appellant, as general partner
of the IMC Limited Partnership, was the "employer"
required to deduct and remit contributions under the Plan with
respect to employees engaged in the business.
The 1998 T4 - Summary of Remuneration Paid filed by the
Appellant with Revenue Canada, Taxation indicated an overpayment
of $852,896 with respect to deductions under the Plan and the
Employment Insurance Act, S.C. 1996, c. 23 with respect to
employees engaged in the business in 1998. The Respondent has not
verified this overpayment to date.
14.
On March 11, 1999, Revenue Canada, Taxation advised the Appellant
in writing that IMC Limited Partnership was a "new legal
entity" and as such was the employer of the employees
engaged in the business for purposes of the Plan.
15.
On May 26, 1999, the Appellant filed an Application for Ruling to
Revenue Canada, Taxation requesting a ruling that, on and after
September 1, 1998, the Appellant, as general partner of the IMC
Limited Partnership, was the "employer" required to
deduct and remit contributions under the Plan with respect to
employees engaged in the business and that IMC Limited
Partnership was not an "employer" for the purposes of
the Plan.
16.
On or about July 21, 1999, the Minister of National Revenue made
a ruling which provided that "effective August 31, 1998 a
new employer entity, International Minerals & Chemical
(Canada) Limited Partnership was created".
17.
In response to the ruling of the Minister of National Revenue
referred to in paragraph 16 above, the Appellant filed an appeal
to the Minister of National Revenue in accordance with section 27
of the Plan.
18.
In response to the Appellant's appeal referred to in
paragraph 17 above, on or about March 21, 2000 the Minister of
National Revenue rendered a decision on the appeal which
determined that the IMC Limited Partnership was a new employer
and, as a result, had the obligation to deduct and remit
contributions under the Plan without consideration for the
amounts previously deducted in 1998 by the Appellant.
19.
The Appellant and the Respondent admit the authenticity of all
documents included in the Joint Exhibit Book attached hereto as
Schedule "A" and agree that all such documents are
admitted as exhibits and shall form part of the record in this
appeal.
20.
[2]
The following paragraphs from the Limited Partnership Agreement
relate to the dispute before the Court:
Section 2.9 Partnership Property
The property of the Partnership shall consist of all the real and
personal property, whether tangible or intangible, of any nature
or kind whatsoever, acquired, purchased or owned from time to
time by the Partnership. The General Partner may hold legal title
to any of the assets or property of the Partnership in its name
for the benefit of the Partnership.
Section 3.2 General Partner
The General Partner shall contribute as Capital Contributions to
the Partnership the following:
...
(b)
its interest in the assets (the "Operating Assets")
constituting the IMC Business, under the terms and conditions and
otherwise as provided for in the Instrument of Transfer attached
hereto as Annex A,
(Annex A is not in evidence.)
...
Section 4.1 Profit
For the purposes of this Article 4, "profit" of the
Partnership shall be calculated for each fiscal year (or part
thereof) of the Partnership in accordance with generally accepted
accounting principles in Canada consistently applied, and shall
include, without limitation, all sales revenue generated from the
Business (less any actual expenses incurred in connection with
any such sales) after deducting all reasonable operating expenses
properly incurred in connection with the Business.
Section 5.1 Control
The General Partner shall have the full and exclusive control of
the Business. The Limited Partner shall have no control over and
no right to control the business of the Partnership or the
management or direction of its property, affairs or policy and
shall not have any power to transact the business of, or sign for
or in any way bind, the Partnership. Notwithstanding the
foregoing, the Limited Partner may from time to time investigate
the state and progress of the business and affairs of the
Partnership and may advise as to its management, in accordance
with and to the extent of the rights given to limited partners
under the Act.
Section 5.2 Management Services
The General Partner shall have full and exclusive power and
authority to manage, control, operate and direct the Business and
the property and affairs of the Partnership. In connection
therewith, and without limiting the generality of the foregoing
or any other provision of this Agreement, the General Partner
will have full power and authority for and on behalf of the
Partnership to:
...
(i)
employ, retain, engage or dismiss from employment, personnel,
agents, representatives or professionals with the powers and
duties, upon the terms and for the compensation as in the
discretion of the General Partner may be necessary or advisable
in the carrying on of the Business;
...
(k)
act as attorney in fact or agent of the Partnership in dispersing
and collecting monies for the Partnership, paying debts and
fulfilling the obligations of the Partnership in handling and
settling any claims of the Partnership;
...
(q)
provide for accounting, maintenance of records, maintenance and
safekeeping of all Partnership documents, the provision of office
space, staff, equipment and all clerical services required for
the operations and activities of the Partnership and the
preparation and forwarding to the Partners of annual statements
of account as of the end of each fiscal year;
...
(t)
do anything that is in furtherance or incidental to the Business
or that is provided for in this Agreement; and
...
All expenses incurred by the General Partner in managing and
conducting the Business of the Partnership, including the cost of
such professional, technical, administrative and other services
and advice as it shall deem necessary, shall be paid by the
Partnership.
...
Section 5.4 Books and Records
...
(2)
The Limited Partner shall, in order to examine into the state and
progress of the Business, have free access at all times to
inspect and examine all books, securities, letters and other
things concerning the Business of the Partnership and the General
Partner shall, on request, promptly furnish to the Limited
Partner correct information, accounts and statements of and
concerning all such transactions without any concealment or
suppression.
Section 5.8 Signing of Cheques
All cheques drawn on the Partnership's bank account shall
be signed by such person or persons as shall from time to time be
designated by the General Partner.
Section 5.9 Signing of Agreements
All contracts, agreements and other documents shall be signed by
the General Partner on behalf of the Partnership by such person
or persons as shall from time to time be designated by the
General Partner.
Section 5.10 Conduct of Business
The Business shall be conducted under the name of the
Partnership, as set forth in Section 2.2 hereof.
Section 5.11 Loans by Partnership
The General Partner, for and on behalf of the Partnership, may
make loans to corporations which are related to the General
Partner or Limited Partner, if such loans are otherwise not
within the authority of the General Partner pursuant to section
5.2, in such amounts and on such terms and conditions as are
approved by both the General Partner and the Limited Partner.
[3]
It was agreed between the parties that Wesley N. Schwalm would be
the nominal Appellant respecting all of the employees for whom
the Limited Partnership's 1998 contributions after August 31,
1998 were made. The decision appealed from respecting the appeal
of the Ruling on account of the Canada Pension Plan contributions
reads:
ATTENTION: DON R HOOD
DIRECTOR OF STRATEGIC PLANNING
INTERNATIONAL MINERALS & CHEMICAL
(CANADA) LIMITED PARTNERSHIP
GENERAL DELIVERY
ESTERHAZY SK S0A 0X0
S. Copithorne
Appeals Division
(780) 449-0355
1-800-772-0292
Date of Mailing: Mar 21 2000
Dear Sir:
This letter concerns your appeal of the Ruling dated July 21,
1999 regarding whether Canada Pension Plan contributions were
payable by you, on amounts paid to Wesley N Schwalm during the
period August 31, 1998 to December 31, 1998
It has been decided that contributons [sic] were payable. This
is because International Minerals & Chemical (Canada) Limited
Partnership, as a new employer of Wesley N Schwalm, had the
obligation to deduct and remit Canada Pension Plan contributions,
without consideration for the amounts deducted previously in 1998
by International Minerals & Chemical (Canada) Global
Limited.
If you disagree with this decision, you may appeal to the Tax
Court of Canada within 90 days of the mailing date of this
letter. Information on how to proceed is attached.
The decision in this letter is issued pursuant to section 27.2
of the Canada Pension Plan and is based on paragraph 6(1)(a) and
subsection 21(1) of the Canada Pension Plan.
Yours sincerely,
Original signed by
RONALD SMITH
Ronald Smith
Team Leader
CPP/EI Appeals,
for
Minister of National Revenue
cc:
Attention: Todd M. Rosenberg
MacPherson Leslie & Tyerman
1500 - 410 - 22 Street E
Saskatoon SK S7K 5T6
The Employment Insurance decision differs only in its last
paragraph which reads:
The decision in this letter is issued pursuant to section 93
of the Employment Insurance Act and is based on paragraph 5(1)(a)
and subsection 82(1) of the Employment Insurance Act.
[4]
The following provisions in the Canada Pension Plan,
R.S.C. 1985, c. C-8 are germane:
|
2. (1) In
this Act,
...
"employer" means a person liable to pay
salary, wages or other remuneration for services performed
in employment, and in relation to an officer includes the
person from whom the officer receives his
remuneration;
|
2. (1) Les définitions qui suivent
s'appliquent à la présente loi.
...
"employeur" Personne tenue de verser un
traitement, un salaire, ou une autre
rémunération pour des services accomplis dans
un emploi. Est assimilée à un employeur, dans
le cas d'un fonctionnaire, la personne qui lui verse sa
rémunération.
|
|
21. (1) Every employer paying remuneration to an
employee employed by the employer at any time in
pensionable employment shall deduct from that remuneration
as or on account of the employee's contribution for the
year in which the remuneration for the pensionable
employment is paid to the employee such amount as is
determined in accordance with prescribed rules and shall
remit that amount, together with such amount as is
prescribed with respect to the contribution required to be
made by the employer under this Act, to the Receiver
General at such time as is prescribed and, where at that
prescribed time the employer is a prescribed person, the
remittance shall be made to the account of the Receiver
General at a financial institution (within the meaning that
would be assigned by the definition "financial
institution" in subsection 190(1) of the Income Tax
Act if that definition were read without reference to
paragraphs (d) and (e) thereof).
|
21. (1) Tout employeur payant une
rémunération à un employé
à son service, à une date quelconque, dans un
emploi ouvrant droit à pension est tenu d'en
déduire, à titre de cotisation de
l'employé ou au titre de la cotisation pour
l'année au cours de laquelle la
rémunération au titre de l'emploi ouvrant
droit à pension est payée à cet
employé, le montant déterminé
conformément à des règles prescrites;
l'employeur remet au receveur général,
à la date prescrite, ce montant ainsi que le montant
qui est prescrit à l'égard de la
cotisation qu'il est tenu de verser selon la
présente loi. De plus, lorsque l'employeur est
une personne prescrite à la date prescrite, le
montant est versé au compte du receveur
général dans une institution
financière (au sens du paragraphe 190(1) de la
Loi de l'impôt sur le revenu, compte non
tenu des alinéas d) et e) de la
définition de cette expression).
|
|
23. (2) Section 160, subsections 161(11) and
220(3.1), (4) and (5), sections 221.1 and 223 to 224.3,
subsections 227(9.1) and (10), sections 229, 236 and 244
(except subsections 244(1) and (4)) and subsections 248(7)
and (11) of the Income Tax Act apply, with such
modifications as the circumstances require, in relation to
all contributions, interest, penalties and other amounts
payable by a person under this Act, and for the purposes of
this subsection, the reference in subsection 224(1.2) of
that Act to "subsection 227(10.1) or a similar
provision" shall be read as a reference to
"section 22 of the Canada Pension
Plan".
|
23. (2) L'article 160, les paragraphes
161(11) et 220(3.1), (4) et (5), les articles 221.1 et 223
à 224.3, les paragraphes 227(9.1) et (10), les
articles 229, 236 et 244, à l'exception des
paragraphes 244(1) et (4), et les paragraphes 248(7) et
(11) de la Loi de l'impôt sur le revenu
s'appliquent, avec les adaptations nécessaires,
aux cotisations, intérêts,
pénalités et autres montants payables par une
personne en vertu de la présente loi. Pour
l'application du présent paragraphe, le passage,
au paragraphe 224(1.2) de cette loi, " du paragraphe
227(10.1) ou d'une disposition semblable " est
remplacé par le passage " de l'article 22
du Régime de pensions du Canada ".
|
[5]
The following provisions of the Employment Insurance Act,
S.C. 1996, c. 23 are germane:
|
2. (1) In this Act,
...
"employer" includes a person who has been an
employer and, in respect of remuneration of an individual
referred to as sponsor or co-ordinator of a project in
paragraph 5(1)(e), it includes that individual;
|
2. (1) Les définitions qui suivent
s'appliquent à la présente loi.
...
" employeur " Sont
assimilés à un employeur une personne qui a
été employeur, de même que, du point de
vue de la rémunération qu'il en tire, le
particulier promoteur ou coordonnateur d'un projet
visé à l'alinéa 5(1)e).
|
|
68. Subject to sections 69 and 70, an employer
shall pay a premium equal to 1.4 times the
employees' premiums that the employer is required to
deduct under subsection 82(1).
|
68. Sous réserve des articles 69 et 70, la
cotisation patronale qu'un employeur est tenu de verser
correspond à 1,4 fois la cotisation ouvrière
de ses employés qu'il est tenu de retenir au
titre du paragraphe 82(1).
|
|
82. (1) Every employer paying remuneration
to a person they employ in insurable employment shall
(a) deduct the prescribed amount from the
remuneration as or on account of the employee's premium
payable by that insured person under section 67 for
any period for which the remuneration is paid; and
(b) remit the amount, together with the
employer's premium payable by the employer under
section 68 for that period, to the Receiver General at the
prescribed time and in the prescribed manner.
(2) The employer shall not make any deduction as or on
account of the person's premium for a year if in that
year the insurable earnings paid by the employer to the
person have reached the maximum yearly insurable
earnings.
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82. (1) L'employeur qui paie une
rétribution à une personne exerçant
à son service un emploi assurable est tenu de
retenir sur cette rétribution, au titre de la
cotisation ouvrière payable par cet assuré en
vertu de l'article 67 pour toute période
à l'égard de laquelle cette
rétribution est payée, un
montant déterminé conformément
à une mesure d'ordre réglementaire et de
le verser au receveur général avec la
cotisation patronale correspondante payable en vertu de
l'article 68, au moment et de la manière
prévus par règlement.
(2) L'employeur cesse les retenues à
l'égard de cette personne lorsque la
rétribution qu'il lui a versée, pour
l'année, atteint le maximum de la
rémunération annuelle assurable.
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|
99. Section 160, subsections 161(11)
and 220(3.1), sections 221.1 and 224 to 224.3 and
subsections 227(9.1) and (10) and 248(7) and (11) of
theIncome Tax Act apply to all premiums,
interest, penalties and other amounts payable by a person
under this Part, with such modifications as the
circumstances require, and for the purposes of this
section, the reference in subsection 224(1.2) of that
Act to "sub-section 227(10.1) or a similar
provision" shall be read as a reference to
"section 85 of the Employment Insurance
Act".
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99. L'article 160, les
paragraphes 161(11) et 220(3.1), les
articles 221.1 et 224 à 224.3 et les
paragraphes 227(9.1) et (10) et 248(7) et (11) de la Loi
de l'impôt sur le revenu s'appliquent,
avec les adaptations nécessaires, aux cotisations,
intérêts, pénalités ou autres
sommes payables par une personne en vertu de la
présente partie. Pour l'application du
présent article, le passage " de
l'article 85 de la Loi sur
l'assurance-emploi " vaut mention de
" du paragraphe 227(10.1) ou d'une
disposition semblable " au
paragraphe 224(1.2) de cette loi.
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[6]
The parties' arguments respecting this appeal centred on the
meaning of the word "person" in the Canada Pension
Plan and Employment Insurance Act provisions.
The Respondent's argument centred on the premise that the
partnership is a "person" and a new employer on the
facts in this case. The Appellant's argument centred on the
premise that the limited partnership is a relationship and not a
legal entity and therefore, is not a "person". Thus,
the Appellant corporation, International Minerals & Chemical
(Canada) Global Limited ("IM & C(C)GL"), which
became the general partner on August 31, 1998 was, and remained,
the sole employer.
[7]
There is no definition of "person" in
Saskatchewan's The Partnership Act. The
Partnership Act of Manitoba included in its definition of
"person" both a limited partnership and a trust. In
The Queen v. Robinson et al.,
98 DTC 6065 (F.C.A.), Stone, J.A., speaking for
the panel of the Federal Court of Appeal dealt with the question
as to whether a limited partner in Manitoba was carrying on an
active business within the meaning of section 122 of the
Income Tax Act. At pages 6069 and 6070, Stone J.A.
said:
That being said, these provisions must be viewed in the
context of the statute as a whole, particularly section 3 and the
definitions of "partnership" and "person" in
section 1. These provisions, in my view, appear clearly to
contemplate that all of the partners of a limited partnership
carry on the business of the partnership. Whether a partnership
be limited or general under the Manitoba statute, it must consist
of "persons carrying on business in common, with a view of
profit". It is, therefore, the persons which compose the
partnership that carry on the business rather than the limited
partnership itself. The position of limited partners under the
corresponding English statute would appear to be similar to that
prevailing under the Manitoba statute. In Reed v. Young,
[1983] BTC 430 (Ch. D.),2 a tax case, Nourse, J.
stated at page 446:
For present purposes, the essential features of a limited
partnership are twofold. First, there must be one or more general
partners who are liable for all the debts and obligations of the
firm. Secondly, there must be or one more limited partners who at
the time of entering into the partnership must contribute capital
(which cannot be drawn out during the continuance of the
partnership) and who are not liable for the debts and obligations
of the firm beyond the amount so contributed. ... There is
another distinctive feature, which is that a limited partner
cannot take part in the management of the partnership business
and does not have power to bind the firm. ... These three
features apart, there is no inordinate difference between a
limited and an ordinary partnership. The result is that while
the partnership is a going concern a limited partner adopts a
pose as supine, and profits or loses as much or as little, as a
sleeping partner in an ordinary partnership. The only difference
between the two is that the sleeping partner may be rudely awoken
to find that his liability for the debts and obligations of the
firm is unlimited.
[Emphasis added]
That the appellant took no part in the management of the
business does not, in my view, mean that it and the other limited
partners did not carry on that business in conjunction with the
general partners in that year. Neither must the direct evidence
in the record be neglected. That all of the partners carried on
the business in 1988 is precisely what they expressly agreed to
do pursuant to clause 1 of the August 31, 1970, partnership
agreement.
The recent decision of the Tax Court of Canada in Grocott
v. R., [1996] 1 C.T.C. 2311, supports this conclusion. That
case involved a question of whether a non-resident limited
partner of a limited partnership formed pursuant to Ontario's
Limited Partnership Act, R.S.O. 1990, c. L-16, had derived
"incomes from businesses carried by him in Canada"
within the meaning of subparagraph 115(a)(ii) of the
Income Tax Act, despite the fact that the taxpayer had
taken "no part in the control of the business ..." in
the sense described in section 13 of the Ontario
statute.3 The Tax Court concluded that the taxpayer
had derived income from a business carried on by him in Canada. I
would here adopt the following reasoning of Bowman, J.T.C.C., at
pages 2316-17:
Limited partnerships are created by statute. In Ontario,
unlike certain other provinces, the Limited Partnerships
Act is a separate statute from the Partnerships Act.
One of the most salient features is that the liability of the
limited partner is, under section 9, limited to his capital
contribution. Also, under section 13 a limited partner is not
liable as a general partner unless, in addition to exercising
rights and powers as a limited partner, the limited partner takes
part in the control of the business. Mr. Grocott took no part in
the control of the business. A limited partner of course has the
right to be informed as to the business of the partnership and to
receive his or her share of the income. A limited partner is
nonetheless a partner in a partnership. It is simply that his
liability is limited by statute provided that he does not
participate in running the business.
I do not think it can be said that this limitation of
liability and prohibition against any active part in the control
of the business means that he is not carrying on business through
the partnership.2 [Footnote omitted.] A
non-resident partner who did not actively participate in the
business of a general partnership but who was nonetheless a
participant in the profits was held in Randall v. R.
(sub nom. Randall v. The Queen, [1985] 1 C.T.C. 268,
85 DTC 5208 (F.C.T.D.) to be carrying on business in Canada.
I do not think that the fact that the partnership is a limited
partnership alters the nature of the non-resident limited
partner's participation. I trust that I am being neither ...
"results oriented" (Tennant v. R. (sub nom.
Tennant v. Canada), [1994] 2 C.T.C. 113, 94 DTC 6505,
175 N.R. 332 (F.C.A.)) nor ... "purely mechanical"
(Swantje v. R. (sub nom. Swantje v. Canada), [1994]
2 C.T.C. 382, 94 DTC 6633, 174 N.R. 224 (F.C.A.)) in my
interpretation of these provisions when I observe that it
would be a rather surprising result if a non-resident who is a
limited partner in a Canadian limited partnership that carried on
business in Canada could escape taxation under section 115 on his
Canadian source profits from the partnership on the basis that he
was not carrying on business in Canada.4
[Emphasis added]
[8]
The quotation adopted from Bowman, J. is to the effect that a
limited partner can carry on business "through the
partnership". In this case the question becomes whether a
general partner is an employer "through the
partnership". While the partnership is a business entity, it
is not a person within the definition of "employer" in
the Employment Insurance Act or the Canada Pension
Plan nor is it a person at common law. The general partner,
the Appellant, is such a person and is also liable in law for
everything relating to the enterprise, just as it was before
September 1, 1998.
[9]
In accordance with the inclusive definition of
"employer" in the Canada Pension Plan,
IM & C(C)GL is the employer. It remained the
"person liable to pay salary, wages or other remuneration
for services performed in employment" pursuant to subsection
2(1) of the Canada Pension Plan. Under this definition,
although a new legal entity was formed, IM & C(C)GL was
liable both before and after August 31, 1998 and therefore, there
was no change in the employer under the definition in the
Canada Pension Plan. For this reason, this appeal is
granted.
[10] The
Employment Insurance Act definition of employer
"includes a person who has been an employer". After
August 31, 1998, the Appellant became a member of the
partnership. As a person at law it was an employer as a member of
the new partnership firm and it is liable as a person who is an
employer within the meaning of the Employment Insurance
Act.
[11] For these
reasons the Court finds that IMC Limited Partnership not a new
employer of Wesley N. Schwalm during the period
September 1, 1998 to December 31, 1998. Therefore, it
did not have the obligation to deduct and remit contributions (or
premiums) without consideration of the amounts it deducted
previously.
[12] The
appeals are allowed. Therefore:
1.
Pursuant to section 103 of the Employment Insurance Act,
the decision is referred to the Minister for reconsideration and
reassessment pursuant to these reasons.
2.
Pursuant to section 28 of the Canada Pension Plan, the
decision is referred to the Minister for reconsideration and
reassessment pursuant to these reasons.
3.
Signed at Ottawa, Canada, this 8th day of May, 2001.
"Beaubier"
"D.W. Beaubier"
J.T.C.C.
COURT FILE
NO.:
2000-2851(EI) and 2000-2856(CPP)
STYLE OF
CAUSE:
International Minerals & Chemical (Global) Canada
Limited v.
The Minister of National Revenue
PLACE OF
HEARING:
Regina,
Saskatchewan
DATE OF
HEARING:
April 24, 2001
REASONS FOR JUDGMENT
BY:
The Honourable Judge D.W. Beaubier
DATE OF
JUDGMENT:
May 8,
2001
APPEARANCES:
For the
Appellant:
Douglas Hodson
Todd M. Rosenberg
Counsel for the
Respondent:
Lyle Bouvier
Cary Clark, Student-at-Law
COUNSEL OF RECORD:
For the
Appellant:
Name:
Todd M. Rosenberg
Firm:
MacPherson Leslie & Tyerman
Saskatoon, Saskatchewan
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2851(EI)
BETWEEN:
INTERNATIONAL MINERALS & CHEMICAL
(CANADA) GLOBAL LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together on common evidence with
the appeals of
International Minerals & Chemical
(Canada) Global Limited(2000-2856(CPP))
on April 24, 2001 at Regina, Saskatchewan
by the Honourable Judge D.W. Beaubier
Appearances
Counsel for the
Appellant:
Douglas Hodson
Todd M. Rosenberg
Counsel for the
Respondent:
Lyle Bouvier
Cary Clark, Student-at-Law
JUDGMENT
The
appeal is allowed and the matter is referred back to the Minister
of National Revenue for reconsideration and reassessment in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 8th day of May, 2001.
J.T.C.C.
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