Kabatoff v. M.N.R., docket 1999-4401-EI

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.W. Rowe"

D.J.T.C.C.