Date: 20001124
Docket: 1999-4401-EI
BETWEEN:
JACK KABATOFF,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Rowe, D.J.T.C.C.
[1]
The appellant appeals from a decision dated July 12, 1999 issued
by the Minister of National Revenue (the "Minister") in
which the Minister decided the employment of the appellant with
Peter Kabatoff and Anne Kabatoff operating as Kabatoff's Sand
and Gravel, the payor, during the periods October 3 to
December 23, 1994, April 24 to December 23, 1995, April 29
to December 21, 1996 and April 7 to December 19, 1997 was not
insurable employment because the appellant and the payor were not
dealing with each other at arm's length and the Minister was
not satisfied - pursuant to the provisions of paragraphs
3(2)(c) and 5(2)(i) of the Unemployment
Insurance Act and the Employment Insurance Act,
respectively - that the parties would have entered into a
substantially similar contract of employment had they been
dealing with each other at arm's length.
[2]
The appellant testified he is a carpenter residing in Castlegar,
British Columbia. He was born and raised in Castlegar and
following completion of Grade 12 in 1972 began his apprenticeship
in carpentry and - in 1978 - received his interprovincial
carpentry ticket. He started working as a carpenter and later
moved on to work as a lay out person, surveyor, foreman and then
as a general foreman/supervisor. At one point, he worked 10 years
for Commonwealth Construction Ltd. (Commonwealth) on major
projects in the Kootenays, a region in the interior of British
Columbia. Later, he worked on the construction of a large power
house in Trail and this project took three years to complete. In
1992, he left his employment with Commonwealth and began working
on a pulp mill expansion project in Castlegar. During the years
he worked at Commonwealth, there were very few layoffs and he
worked there full time as a supervisor ensuring costs remained
within a budget but - in 1990 - he was able to also do some work
for a contractor on a retirement home project. In 1993, he worked
for a company in the East Kootenays - at Skookumchuk - involved
in a large construction project but after that year the work
dried up in the area as no major projects were undertaken. There
was a mega-project planned at Kemano - in 1995 - but the
provincial government cancelled the construction. As a member of
his union for 25 years - through which work is assigned - he
would have had steady work at Kemano. The appellant stated that
during the relevant periods in the within appeal he began working
for his parents at the gravel pit and was paid at the rate of
$20.00 per hour. His father, Peter Kabatoff, and mother, Anne
Kabatoff, were then 69 and 62, respectively. Peter Kabatoff had
been a master carpenter - employed by various contractors - and
had decided to retire - at age 65 - in 1990. The appellant's
parents owned a 300-acre parcel in the rural part of the
Castlegar Valley and it had not been producing any income over
the years but the property taxes were beginning to increase. As a
result, the appellant's parents wanted to generate some
revenue and the appellant - in 1992 and 1993 - started
advertising the sale of sand and gravel situate on the property.
The appellant stated that during this time there was no equipment
owned by his parents but in 1994 his father - Peter Kabatoff -
requested assistance in developing Kabatoff's Sand and Gravel
(KSG), a partnership with Anne Kabatoff. There was not much
capital available to invest in the project and the appellant
agreed to work for the sum of $20.00 per hour which was much less
than the rate he had been accustomed to during the course of his
career. It was necessary to purchase a truck in order to haul the
sand and gravel to buyers and, after doing some research, he and
his father began visiting truck dealers with a view to finding an
appropriate vehicle whether new or used. A suitable unit,
specially designed for the gravel business in terms of carrying
capacity, was located and KSG purchased it for the sum of
$124,000. During the months of October, November and until
December 23, 1994, the appellant completed ledger entries,
prepared the Goods and Services Tax (GST) returns for the
previous quarter, prepared cost estimates, handled sales of
product to buyers - including the Town of Castlegar - promoted
the business and did the year-end statement in an effort to avoid
paying accounting fees which were charged out at $65.00 per hour.
During 1994, only the appellant, his father, and another person -
a part-time loader operator - worked in the business. The large
truck only arrived near the end of December. The appellant stated
the sand and gravel business is seasonal in nature - usually from
April to October - as once the snow falls and covers the area,
the work has to come to an end. The appellant recorded his days
of work on a calendar - Exhibit A-1 and produced a copy of his
payroll records - Exhibit A-2 - which was completed on the basis
of the entries in time cards. The appellant functioned as the
Business Manager of the gravel business and his wife answered
phone calls on their existing residential line and was paid for
her efforts. The appellant and his wife had a second telephone
line installed and the new one was then used as the family
number. The appellant agreed he handled all telephone calls,
orders, invoicing and writing cheques for his father and
mother's business. The only reimbursement by KSG for
telephone charges was in relation to business long-distance calls
and the appellant paid the costs for the rental of telephone
equipment. A payroll history - Exhibit A-3 - indicated his gross
pay in 1994 was $9,600.00 and his net pay was in the sum of
$7,545.24. However, according to the entries made on page 2 of
Exhibit A-3, he stated he only received the sum of $3,789.94 (not
the sum of $1,900.00 as assumed by the Minister) even though the
pay cards were collected every two weeks and sent to the
accountant's office where the appropriate deductions for
employees would be calculated. Then, the appellant would write a
cheque on the business bank account to pay the remittances and
also to pay - in full - the wages due to the loader
operator. The appellant stated his father had always assured him
his wages would be paid in full at a later date and that - in the
interim - he would be paid according to the funds available in
view of the cash-flow shortfall in the partnership. The appellant
stated that in 1998 and 1999 he was paid in full for all of his
back wages. After the winter shutdown in 1994, the appellant
began working for KSG again on April 24, 1995. During the
off-season, the appellant stated KSG operated in a minimal sense
in that he dealt with a few phone calls and picked up the
business mail. With respect to the preceding period - October 3
to December 23, 1994 - he had been notified - Exhibit A-4 - by
Employment and Immigration Canada that his employment with KSG
was insurable because he had been in an employee-employer
relationship with the business operated as a partnership by his
parents. The ruling had occurred because he had applied for
benefits in January, 1995 and had completed the appropriate forms
in which he stated clearly that he was related to the owners of
KSG. He received a telephone call from an official - Joy Harrison
- involved in the process of investigating his claim and he
answered several questions of the type dealt with in the course
of his testimony in Court concerning the general circumstances of
his employment. Additional information was supplied by the
payor's accounting firm. He was informed by Ms. Harrison that
a decision on his status would be forthcoming shortly and he then
received the letter - Exhibit A-4 - following which his benefits
began to arrive. Following the 1995 season, he again filed for
benefits, completed the forms and then - in due course - received
his benefits. On this occasion, there were no telephone calls or
other inquiries made by Employment and Immigration Canada in
respect of his claim. Each year thereafter, he followed the same
course of action and there was never any question raised until
the decision - dated July 12, 1999 - was issued by the Minister
stating that his employment with KSG for all the relevant periods
in the within appeal was not insurable. During the years he
worked for KSG, the appellant stated there were no projects
available in British Columbia and most of his fellow union
members were unemployed. The appellant and his wife - who did not
work outside the home - have three children (now aged, 16, 14 and
10) and he needed some revenue so by assisting his father and
mother to get the sand and gravel business into operation he - in
effect - created his own job. The appellant also recorded his
weeks worked for 1995 on a calendar - Exhibit A-5 - and also
produced the relevant time cards - Exhibit A-6 - and the payroll
record - Exhibit A-7. According to the payroll record, he earned
net pay of $10,311.01 but the total of the cheques issued by him
for his own wages - as set forth on the attached pages -
indicates he received only $4,855.27 of the amount due. The
appellant explained the shortfall was due largely to the need of
KSG to make truck payments in the sum of $5,000.00 per month
which used up most of the available funds. The appellant and his
father had signing authority on the partnership bank account. In
1995, business had improved and material could be delivered to
purchasers, some of whom were larger customers such as B.C. Hydro
and the Ministry of Highways. During this period, KSG had
purchased a loader at a cost of $35,000 and had earlier acquired
a screening plant and conveyor for the sum of $110,000. In 1995,
the appellant stated he spent less time at the gravel pit and was
compensated by KSG for preparing invoices, making entries in the
ledger and preparing cheques. As an example of the cost of the
equipment needed for the payor's business, the appellant
stated the partnership acquired - in 1998 - an excavator at a
cost of $246,000. He had assisted his father in undertaking
extensive research prior to making this large expenditure. In
1996, the appellant worked for KSG until December 21 and had been
searching for other work but the economy in the region was still
poor. The work performed by him was recorded - as usual - on a
calendar - Exhibit A-8 - and the time cards - Exhibit A-9- were
prepared. The payroll records - Exhibit A-10 - indicate he
received payment in the sum of $11,631.27 even though his net pay
for that year was in the sum of $10,311.19. The Minister had
assumed in the Reply to the Notice of Appeal at paragraph 4(l)
that the appellant had received the sum of $8,400.00 in 1996 and
that his net wages were $12,809.00. The cheques were written by
the appellant to himself and the overage was attributable to
repayment of some of the back wages due to him from earlier
years. In 1996, the appellant stated the business was
"holding its own" but there was not any real growth as
there was not a significant amount of construction taking place
in the Castlegar area and much of the business was made up of
small sales to ordinary homeowners. However, even if business is
brisk, it is still seasonal and snowfall prevents delivery of
material. At the end of 1996, the appellant was hearing talk of a
large new power project to begin construction in 1997. However,
in 1997, the appellant began working for KSG on April 7 and
worked until December 19. His weeks of work were recorded on a
calendar - Exhibit A- 11- and the time cards - Exhibit A-12 - and
the payroll record - Exhibit A-13 - were prepared in the usual
manner. The appellant stated his net pay was in the sum of
$15,088.31 and not $13,840.00 as set out in the Reply. The
summary of cheques written to him in 1997 indicates he received
the sum of $10,526.71 which he attributed to that year even
though five cheques - totalling $1,331.20 - were issued to the
appellant between January 15 and February 12, 1998. A further
cheque in the sum of $400.00 was issued to him on January 19,
1999 and the appellant stated this was also attributable to his
wages earned during the 1997 year. As to the amount actually
received by him in 1997 - for wages due in 1997 - there was a
shortfall on December 31, 1997 in the sum of $4,561.60. The
appellant stated all of the arrears were finally fully paid by
the end of 1999. In January, 1998, the appellant filed for
employment insurance benefits and they were paid to him. In 1998,
he worked for KSG and there was still talk of a big forthcoming
project which would bring boom times to the area and in the fall
of 1998 he was contacted about his interest in working on the
project when work actually began. The payor still operates the
business even though revenue has decreased but the value of the
property as a working sand and gravel pit has increased.
[3]
In cross-examination, the appellant, Jack Kabatoff, agreed that,
during the years he had worked for Commonwealth, he had always
received the exact amount of his net pay, as indicated on his pay
statements. When he began working for KSG, the appellant stated
he was aware there would not be sufficient funds to pay him his
full salary accruing at the rate of $20.00 per hour and, in order
to support his family, he took money out of his RRSP's. The
family home was free of any encumbrances and the appellant and
his family were able to get by on the amounts of the cheques he
was able to issue to himself on the KSG bank account, provided
there were sufficient funds available. The appellant was referred
to the payroll record for 1994 - Exhibit A-3 - and agreed he had
only received four cheques during that year for a total sum of
$1,900.00. The balance of the cheques - five in total - although
attributed by him to his 1994 wages, were actually received in
January and March, 1995. The ledger of KSG contained entries made
on the basis of what amounts should have been paid to the
appellant. The appellant stated he did not use a personal
chequing account and merely wrote cheques on the account of KSG
to pay certain household bills and invoices due to dentists and
piano teachers, as indicated on the pages attached to Exhibits
A-7 and A-10. Again, cheques issued to the appellant by KSG - in
1997 - were actually attributable to wages earned in 1996.
Between January 9 and March 6, 1997, the appellant received - or
had the benefit of - six cheques totalling the sum of $1,429.13.
The practice followed by the appellant and KSG was that the
previous year's wages would be paid in full before he began
working another season, usually by the first part of April. The
payroll record - Exhibit A-13 - indicated the appellant did not
receive his full wages for 1997 until he received the sum of
$1,331.20 by way of five cheques in 1998 and one final payment in
the sum of $400.00 which was not made until January 19, 1999.
Kabatoff explained his parents needed the money - owed to him for
wages - in order to continue operating their partnership. All
other workers were always paid - in full - every two weeks but he
had agreed to wait for his pay because the expensive equipment
purchased had to be financed by regular payments and if he had
received his full pay during 1994-1996, it would have impaired
the cash flow of KSG. The appellant stated he still discusses
business matters with his father and - someday - expects to be a
part owner of the property - together with his brother and sister
- due to inheritance. The appellant stated he is extremely happy
with his current occupation and earns a substantial income. He
has always been conscious of debt and the day he was married he
had a mortgage-free home. As for performing work during the
off-season, the appellant stated the GST return was due at the
end of April and he completed the paperwork and submitted it.
During this period, his father received all the correspondence
directed to KSG and the only involvement of the appellant was to
make out cheques to pay accounts receivable as his father's
limited education made it difficult for him to handle this aspect
of the business.
[4]
Counsel for the appellant submitted the Minister has a duty to
consider all of the circumstances surrounding the employment and
that this should include taking into account the poor economy in
the area during the relevant period. In counsel's view of the
evidence, the financial state of KSG should be considered as a
reasonable ground for the particular method utilized to pay the
appellant and, even though payment for wages was made at a later
date, the full amount due was paid by KSG. The point made by
counsel is that the entire area economy was in such bad shape
that others - not related to the payor - may well have been
willing to work under the same conditions of payment. Counsel
also submitted the ruling - Exhibit A-4 - issued by Employment
and Immigration Canada for the period October 3 to December 23,
1994 - finding the appellant to have been in insurable employment
with KSG - was binding upon the Minister as it had not been the
subject of any appeal by the Canadian Employment and Immigration
Commission, as then constituted pursuant to the Unemployment
Insurance Act.
[5]
Counsel for the respondent agreed the ruling contained in Exhibit
A-4 is binding and a ruling cannot be overturned merely by
issuing another ruling covering the same period. The Commission -
pursuant to subsection 61(3) of the Unemployment Insurance
Act - could have applied to have the Minister determine the
question or - perhaps - in accordance with transitional
provisions, could have utilized section 91 of the Employment
Insurance Act which permits the Commission to appeal - at any
time - notwithstanding that a worker or employer was restricted
to a 90-day appeal period. With regard to the merits of the
appeal as it related to years subsequent to 1994, counsel
submitted there was no basis for an intervention by the Court in
accordance with established jurisprudence. Further, counsel
submitted, even if an intervention were found to be appropriate,
that an independent view of the evidence would require the
Minister's decision be confirmed.
[6]
The Minister issued a decision in which the employment of the
appellant with the payor was found not to be insurable because
the Minister was not satisfied - pursuant to paragraph
5(3)b) of the Employment Insurance Act - that a
substantially similar contract of employment would have resulted
had the parties been dealing with each other at arm's length.
The relevant provision reads as follows:
"For the purposes of paragraph (2)i),
...
b)
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 of National Revenue 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."
[7]
The first issue to be determined is whether or not there is any
basis disclosed by the evidence for me to intervene in the
decision of the Minister.
[8]
In the case of Crawford and Company Ltd. and M.N.R.,
reported, [1999] T.C.J. No. 850 (QL), a decision of Porter,
D.J.T.C.C. issued December 8, 1999, Judge Porter considered the
appeals of three employees of the corporation, of whom two were
brothers, falling into the category of related persons within the
meaning of the Income Tax Act. The remaining appellant was
not a related person to the corporation and this required a
separate examination of the facts as no discretion had been
exercised by the Minister pursuant to
paragraph 5(3)b) of the Employment Insurance
Act. The analysis undertaken by Judge Porter, as it pertained
to the two brothers is extensive, and is relevant to the
requisite analysis undertaken in the within appeal. For that
reason, I am quoting extensively from the Crawford judgment
because it accords with my understanding of the law and the facts
in that case are substantially similar to the within appeal. At
page 21, commencing at paragraph 58, Judge Porter stated:
"In the scheme established under the EI Act,
Parliament has made provision for certain employment to be
insurable, leading to the payment of benefits upon termination,
and other employment which is "not included" and thus
carrying no benefits upon termination. Employment arrangements
made between persons, who are not dealing with each other at
arm's length, are categorized as not included. Brothers and
corporations controlled by them are deemed not to be dealing with
each other at arm's length pursuant to subsection 251(1) of
the Income Tax Act, which governs the situation. Quite
clearly the original purpose of this legislation was to safeguard
the system from having to pay out a multitude of benefits based
on artificial or fictitious employment arrangements, see the
comments of the Federal Court of Appeal in Paul v. The
Minister of National Revenue, (A-223-86) unreported,
where Hugessen J. said:
We are all prepared to assume, as invited by appellant's
counsel, that paragraph 3(2)(c) of the
Unemployment Insurance Act, 1971, and
subsection 14(a) of the Unemployment Insurance
Regulations have for at least one of their purposes the
prevention of abuse of the Unemployment Insurance Fund through
the creation of so-called
"employer-employee" relationships between persons
whose relationship is, in fact, quite different. That purpose
finds obvious relevance and rational justification in the case of
spouses who are living together in a marital relationship. But
even if, as appellant would have us do, we must look only at
spouses who are legally separated and may be dealing at arm's
length with one another, the nature of their relationship as
spouses is such as, in our view, to justify excluding from the
scheme of the Act the employment of one by the other.
...
We do not exclude the possibility that the provisions may have
other purposes, such as a social policy decision to remove all
employment within the family unit from the operation of the
Unemployment Insurance Act, 1971, as was suggested by
respondent's counsel.
The harshness of this situation has however been tempered by
paragraph 5(3)(b) of the EI Act, which
provides for such employment between related persons to be deemed
to be at arm's length and thus in turn to be treated as
insurable employment, if it meets all the other provisions, where
the Minister is satisfied having regard to all the circumstances
of the employment, including the remuneration paid,
theterms and conditions, the duration and the
nature and importance of the work performed, that it is
reasonable to conclude that they would have entered into a
substantially similar contract if they had (in fact) been dealing
with each other at arm's length.
It may be helpful to reframe my understanding of this section.
For people related to each other the gate is closed by the
statute to any claim for insurance benefits unless the Minister
can be satisfied that in effect the employment arrangement is the
same as that which unrelated persons, that is persons who are
clearly at arm's length, would have made. If it is a
substantially similar contract of employment, Parliament has
deemed it to be only fair that it should be included in the
scheme. However, the Minister is the gatekeeper. Unless he is so
satisfied the gate remains closed, the employment remains
excepted and the employee is not eligible for benefits.
Subsection 93(3) of the EI Act deals with appeals to and
the determination of questions by the Minister. It requires that
"the Minister shall decide the appeal within a reasonable
time after receiving it and shall notify the affected persons of
the decision".
Thus, the Minister has no discretion whether or not to decide the
question. He is required by law to do so. If he is not satisfied,
the gate remains closed and the employee is not eligible. If
however he is satisfied, without more ado or any action on the
part of the Minister (other than notification of the decision)
the employee becomes eligible for benefits, provided he is
otherwise qualified. It is not a discretionary power in the sense
that if the Minister is satisfied he may
then deem the employment to be insurable. He must
"determine the question" and depending on that
determination the law deems the employment to be either at
arm's length or not at arm's length. In this sense
the Minister has no discretion to exercise in the true sense of
the word, for in making his decision he must act quasi-judicially
and is not free to choose as he pleases. The various decisions of
the Federal Court of Appeal on this issue reveal that the same
test applies as to a myriad of other officials making
quasi-judicial decisions in many different fields. See Tignish
Auto Parts Inc. v. M.N.R., 185 N.R. 73, Ferme Émile
Richard et Fils Inc. v. M.N.R., 178 N.R. 361, Attorney
General of Canada and Jencan Ltd., (1997) 215 N.R. 352 and
Her Majesty the Queen and Bayside Drive-in Ltd., (1997)
218 N.R. 150."
[9]
In the case of Adolfo Elia v. M.N.R., [1997] F.C.J. No.
316 (QL), a decision of the Federal Court of Appeal dated March
3, 1998, at page 2 of the certified translation Pratte, J.A.
stated:
"Contrary to what the judge thought, it is not necessary,
in order for the judge to be able to exercise that power, for it
to be established that the Minister's decision was
unreasonable or made in bad faith having regard to the evidence
before the Minister. What is necessary is that the evidence
presented to the judge establish that the Minister acted in bad
faith, or capriciously or unlawfully, or based his decision on
irrelevant facts or did not have regard to relevant facts. The
judge may then substitute his decision for that of the
Minister."
[10] In
Légaré v. Canada (Minister of National
Revenue), [1999] F.C.J. No. 878 - another decision of the
Federal Court of Appeal - Marceau, J.A. speaking for the
Court stated at page 2 of the judgment:
"In this matter, the Court has before it
two applications for judicial review against two judgments
by a judge of the Tax Court of Canada in related cases heard on
the basis of common evidence which raise yet again the problems
of interpretation and application of the saving provision,
subparagraph 3(2)(c)(ii). I say yet again because since
its passage in 1990, several decisions of the Tax Court of Canada
and several judgments of this Court have already considered what
workable meaning could be given to
subparagraph 3(2)(c)(ii). In reading the text, the
problems it poses beyond its deficient wording are immediately
obvious, problems which essentially involve the nature of the
role conferred on the Minister, the scope of the Minister's
determination and, by extension, the extent of the Tax Court of
Canada's general power of review in the context of an appeal
under section 70 et seq. of the Act.
While the applicable principles for resolving these problems have
frequently been discussed, judging by the number of disputes
raised and opinions expressed, the statement of these principles
has apparently not always been completely understood. For the
purposes of the applications before us, we wish to restate the
guidelines which can be drawn from this long line of authority,
in terms which may perhaps make our findings more meaningful.
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."
[11] It is now
appropriate to examine the relevant assumptions relied on by the
Minister in the context of the evidence. The following
assumptions as set out in paragraph 4 of the Reply to the Notice
of Appeal are correct:
"(a) the
Payor partnership operates a sand and gravel pit;
(b)
the Appellant is the son of the two partners;
(d)
the Appellant is considered to be the business manager for the
Payor;
(e)
the Appellant handles all telephone calls, orders, invoicing and
writing cheques;
(f)
the Appellant mainly works out of his own home, using his own
phone for business purposes;
(i)
the Appellant kept track of his own hours;
(j)
the Appellant was not supervised on a daily basis but did seek
direction as needed from his father as well as the
accountant;
(m) the
Appellant continued to provide services to the Payor during the
times he was purportedly laid off."
[12] The
evidence disclosed the business - in 1994 - had only three - not
four - workers since the loader operator/truck driver was the
same person. The assumption - at subparagraph 4(g) - that the
payor paid the appellant's personal telephone bill was
incorrect. The amounts set forth in subparagraphs 4(k) and 4(l)
representing net wages and payments actually received during the
relevant periods were subject to different interpretation by the
appellant who undertook a calculation on the basis that certain
amounts received in the following year were related back to wage
arrears as though they had been received on a current basis.
However, the Minister relied on the fact that wages earned and
due were not paid until several months later and the appellant
would have been a person required to report income on a cash
basis for purposes of the Income Tax Act. The nature and
extent of the services rendered by the appellant to the payor
during his lay-off periods were not particularly onerous or
demanding but still occupied some of his time and were important
to the welfare of the business. The appellant stated he agreed to
wait for his wages because the business did not have a positive
cash flow sufficient to pay him - in full - in the same manner as
the other worker(s) and to keep up the heavy payments on the
expensive equipment. One must also take into account that the
business is owned by his mother and father and an increase in the
value as a result of his efforts will - in part - return to him
as one of three heirs to the property. The work done by the
appellant was at his own pace and appeared to involve a
considerable expenditure of time in relation to performing
services related to accounting or bookkeeping functions.
[13] Counsel
for the appellant submitted the Minister should have taken into
account the economy of the region and to have considered that
others - at arm's length - may well have entered into a
similar contract of employment. I do not agree. Any regional
disparities are the subject of regulations made pursuant to the
legislation as they relate to the number of weeks worked and
calculation of benefits received but do not form part of any
legitimate consideration by the Minister when carrying out the
duty imposed by paragraph 5(3)(b) of the Employment
Insurance Act. The significant requirement of the examination
is to apply objective standards to the work circumstance under
review and to reasonably ask and answer the question whether an
outsider would work under conditions where payment for wages - in
significant amounts - was delayed until well into the next year
or - in smaller proportion - for longer periods. The only other
worker(s) received full payment of wages earned. Similarly, one
would not expect a non-related worker to utilize the business
bank account of an employer to pay for personal, household and
family expenditures, in lieu of operating a personal chequing
account. When dealing with strangers, a lay-off is just that. The
non-related worker does not continue to provide - without pay -
many of the same important services to the erstwhile employer but
this is a regular feature of employment relationships between
related persons and was present in the within appeal.
[14] The
jurisprudence is clear that this Court cannot substitute its
decision for that of the Minister and cannot intervene for the
purposes of an examination of the evidence on a de novo
basis unless the preconditions for such an action have been
satisfied. In the within appeal, it is clear the decision of the
Minister was not made in bad faith, or capriciously or contrary
to law and there is nothing to support any finding that the
decision was based on irrelevant facts or that reliance on
irrelevant considerations was a motivating factor in arriving at
the decision. In my view, the facts inferred or relied on by the
Minister were verified by the evidence and properly taken into
account and weighed in the context of undertaking the exercise of
the duty imposed by the provisions of paragraph 5(3)(b) of
the Employment Insurance Act.
[15] I return
to the matter of the ruling - Exhibit A-4 - dated March 28, 1995,
concerning the period October 3 to December 23, 1994 in which it
was held the appellant had been in insurable employment with the
payor. According to the evidence of the appellant, he had
provided all relevant information concerning the working
relationship between himself and the partnership business owned
by his parents and - following an investigation - the ruling was
issued and he received the unemployment insurance benefits to
which he was entitled. He followed the same course of action
thereafter and would have had no reason - whatsoever - to believe
he would become ineligible to continue within the category of
insurable employment. This kind of uneven process of issuing
rulings, determinations/decisions does not sit well with workers
and employers who are trying their best to conform with a complex
system. To make matters worse, the parties must apply for a
refund of the payments - made in good faith on the basis the
worker was insurable - before the expiration of three years after
the end of the year in which the payment was made, as required by
sections 63 and 96 of the Unemployment Insurance Act and
Employment Insurance Act, respectively. In the within
appeal, the payor remitted premiums during 1995, 1996 and 1997.
On other occasions - counsel appearing for the Minister has taken
the position before me - in relation to similar facts - that an
application for refund would have had to be submitted by the end
of 1998, 1999 and 2000, respectively, in accordance with the
legislation. But, how could that have been done with respect to
premiums paid during 1995 and 1996 when the finding of the Court
on the legitimacy of the decision - dated July 12, 1999 - issued
by the Minister would not be available until this judgment was
issued to the parties? In the within appeal, counsel for the
respondent did not pursue that position. It seems to me this
alleged bar to a refund is completely ludicrous, inequitable and
contrary to the object and spirit of the legislation. It would
permit the Minister to issue - at any time - a decision covering
a period - in whole or in part - beyond the reach of the refund
provisions and, without even accounting for the time taken up by
the litigation process, then to refuse a refund of premium
payments erroneously made, on the basis an application had not
been made within the relevant time period that may have elapsed
even before the issuance of the very decision appealed from or -
if not then - quite probably by the time a decision was issued by
the Court in respect of an appeal. The better view must surely be
that the limitation period respecting the refund of payment of
premiums in relation to a worker whose employment was ultimately
found to have been uninsurable applies only so long as the matter
has not been taken out of the hands of the Minister. However,
once an appeal has been filed from that decision, then the time
should no longer run in respect of the refund period and a
finding by the Court that the worker was not insurable during a
certain period should then entitle the worker and the purported
employer to receive appropriate refunds no matter how far back
the payments were made. The persons who paid the premiums on the
mistaken belief they were in relation to a worker's insurable
employment would probably have an action against the Minister on
the basis of monies unlawfully retained and equitable principles
may well apply but that right to launch expensive litigation - in
yet another forum - is of cold comfort to ordinary workers or
people operating a small business.
[16] The
appeal is allowed and the decision of the Minister - while
otherwise confirmed as it pertains to the years 1995, 1996 and
1997 - is hereby varied to find as follows:
The appellant was in insurable employment with Peter Kabatoff and
Anne Kabatoff operating as Kabatoff's Sand and Gravel during
the period October 3, 1994 to December 23, 1994 as stated in the
ruling dated March 28, 1995 issued by Employment and
Immigration Canada.
Signed at Sidney, British Columbia, this 24th day of November
2000.
"D.W. Rowe"
D.J.T.C.C.
COURT FILE
NO.:
1999-4401(EI)
STYLE OF
CAUSE:
Jack Kabatoff and M.N.R.
PLACE OF
HEARING:
Kelowna, British Columbia
DATE OF
HEARING:
September 12, 2000
REASONS FOR JUDGMENT BY: The
Honourable Deputy Judge D.W. Rowe
DATE OF
JUDGMENT:
November 24, 2000
APPEARANCES:
Counsel for the Appellant: Marc R.B. Whittemore
Counsel for the
Respondent:
Kristy Foreman Gear
COUNSEL OF RECORD:
For the
Appellant:
Name:
Marc R.B. Whittemore
Firm:
Marc R.B. Whittemore
Law Corporation
Kelowna, British Columbia
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-4401(EI)
BETWEEN:
JACK KABATOFF,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on September 12, 2000 at Kelowna,
British Columbia, by
the Honourable Deputy Judge D.W. Rowe
Appearances
Counsel for the
Appellant:
Marc R.B. Whittemore
Counsel for the
Respondent:
Kristy Foreman Gear
JUDGMENT
The
appeal is allowed and the decision of the Minister is varied in
accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 24th day of November
2000.
D.J.T.C.C.