Date: 19971110
Dockets: 96-1888-UI; 96-1889-UI; 96-1890-UI
BETWEEN:
JOSÉE GASSE, MADONE GASSE, HÉLÈNE
GASSE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
And
2537-5361 QUÉBEC INC. (HÔTEL MARSOUI),
Intervener.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] These appeals are from three determinations by the
Minister of National Revenue (“the Minister”) that
the appellants did not hold insurable employment with
2537-5361 Québec Inc. (“the company”)
during the following periods:
in the case of Josée Gasse:
from February 7 to August 27, 1993;
from June 13 to September 1, 1994;
from May 1 to August 19, 1995.
in the case of Madone Gasse:
from July 4 to September 10, 1993;
from June 26 to September 14, 1994;
from May 28 to September 2, 1995.
in the case of Hélène Gasse:
from August 1 to October 9, 1993;
from July 24 to October 15, 1994;
from June 25 to July 1, 1995;
from September 10 to October 7, 1995.
[2] These appeals were heard on common evidence, and testimony
was given by Renée Gasse, Josée Gasse, Madone
Gasse, Hélène Gasse, Louise Dessureault (an
insurability officer for the respondent) and Jocelyne Rioux (an
appeals officer for the respondent).
[3] In his determinations, the Minister found that in each
instance the employment was not insurable because it was excepted
from insurable employment under paragraph 3(2)(c) of
the Unemployment Insurance Act (“the
Act”).
[4] In making his determinations, the Minister relied on the
facts set out in paragraph 8 of each Reply to the Notice of
Appeal. Those facts are as follows:
Appeal 96-1888(UI) (Josée Gasse)
[TRANSLATION]
(a) The payer,[1] which was incorporated on or about August 1, 1987,
operates the Hôtel Marsoui, which is located in Marsoui on
the Gaspé Peninsula.
(b) The payer’s business has seven rooms that are rented
out to workers on a “room and board” basis from April
to September of each year.
(c) The business also has a dining room that seats about 20
people and is open from the end of April until September and a
bar that seats 80 people and is operated year-round.
(d) The dining room offers morning, noon and evening menus,
and bands play at the bar throughout the year.
(e) During the periods at issue, the payer’s
shareholders were:
- the appellant
- Madone Gasse, the appellant’s sister
- Jovette Gasse, the appellant’s sister
- Renée Gasse, Madone Gasse’s second cousin
* They each owned 25 percent of the issued shares.
(f) The appellant and Madone Gasse are the only shareholders
who were paid by the payer.
(g) Renée Gasse does the payer’s accounting
year-round without being paid; she has a full-time job at the
post office.
(h) Jovette Gasse works at the payer’s bar whenever she
is free, and she is not paid for that work.
(i) In addition to the appellant and Madone Gasse, the payer
occasionally hired three other workers during the periods at
issue.
(j) The appellant was the manager of the payer’s
business; she ordered supplies for the dining room, the hotel and
the bar; she drew up and planned the employees’ schedules;
she did the payroll along with Renée Gasse; she made bank
deposits and she saw to it that the business ran smoothly, and
she did so year-round.
(k) The appellant claims that she received fixed wages of $360
a week (40 hours at $9 an hour) during the weeks she allegedly
worked.
(l) The appellant was paid by cheque, but all of her cheques
were cashed directly out of the payer’s till.
(m) The appellant claims that she worked full-time for 10
weeks in 1993, 12 weeks in 1994 and 13 weeks in 1995, that is,
the minimum number of weeks needed for her to qualify for
unemployment insurance benefits.
(n) There is no correlation between the weeks allegedly worked
by the appellant, the monthly income reported by the payer and
the periods allegedly worked by the payer’s other
employees.
(o) The appellant’s work was essential to the
payer’s activities and the periods she allegedly worked do
not correspond to those she actually worked.
(p) The appellant is related to the payer within the meaning
of section 251 of the Income Tax Act.
(q) The payer would never have hired an unrelated person on
terms substantially similar to those given to the appellant.
[5] Counsel for the appellant admitted subparagraphs 8(a), (d)
to (i) and (l). He denied the other subparagraphs set out
above.
Appeal 96-1889(UI) (Madone Gasse)[2]
[TRANSLATION]
(j) The appellant was the payer’s regular cook; she had
to prepare from 20 to 25 meals per day in addition to the meals
served to the residents.
(k) The appellant claims that she received fixed wages of $360
a week (40 hours at $9 an hour) during the weeks she allegedly
worked.
(l) The appellant was paid by cheque, but all of her cheques
were cashed directly out of the payer’s till.
(m) The appellant claims that she worked full-time for 10
weeks in 1993, 12 weeks in 1994 and 14 weeks in 1995, that is,
the minimum number of weeks needed for her to qualify for
unemployment insurance benefits.
(n) The appellant’s work was essential to the payer and,
even though the restaurant was open from the end of April until
September, the appellant claims that she worked full-time only
during the above-mentioned weeks.
(o) There is no correlation between the weeks allegedly worked
by the appellant, the monthly income reported by the payer and
the periods allegedly worked by the payer’s other
employees.
(p) The appellant continued to provide services to the payer
while she was collecting unemployment insurance benefits; no one
filled her position.
(q) The appellant is related to the payer within the meaning
of section 251 of the Income Tax Act.
(r) The payer would never have hired an unrelated person on
terms substantially similar to those given to the appellant.
Appeal 96-1990(UI) (Hélène Gasse)[3]
[TRANSLATION]
(j) The appellant is the sister of Madone, Josée and
Jovette Gasse.
(k) The appellant was hired by the payer as an assistant cook;
her duties were to prepare vegetables and help the cook, Madone
Gasse, prepare meals.
(l) The appellant claims, inter alia, that she worked
at the restaurant three days a week and did not wait tables,
since Marie-France Sohier had been hired to do so; she
claims that, in the fall, she worked at the bar.
(m) The appellant claims that she was paid $5.73 an hour
during the weeks she allegedly worked.
(n) The appellant was paid by cheque, but all of her cheques
were cashed directly out of the payer’s till.
(o) The appellant claims that she worked full-time for 10
weeks in 1993, 12 weeks in 1994 and 13 weeks in 1995, that is,
the minimum number of weeks needed for her to qualify for
unemployment insurance benefits.
(p) In 1995, the appellant obtained a record of employment
indicating that she had worked for the Hôtel des Vagues du
Mont-St-Pierre for eight weeks; she had just one week
of alleged work for the payer and, since she needed four more
weeks to qualify for unemployment insurance benefits, she
allegedly worked for four weeks at the payer’s bar.
(q) The appellant allegedly worked for the payer from
September 10 to October 7, 1995 (four weeks) even though her two
sisters, Madone and Josée, were allegedly no longer
working there because there was less business and even though the
payer had hired Michelle Côté to work at the bar to
replace Linda Therrien.
(r) The appellant’s work was essential to the payer and,
although the restaurant was open from the end of April until
September, the appellant claims that she worked full-time only
during the above-mentioned weeks.
(s) There is no correlation between the weeks allegedly worked
by the appellant, the monthly income reported by the payer and
the periods allegedly worked by the payer’s other
employees.
(t) The appellant is related to the payer within the meaning
of section 251 of the Income Tax Act.
(u) The payer would never have hired an unrelated person on
terms substantially similar to those given to the appellant.
[6] Paragraph 3(2)(c) of the Act reads as
follows:
3.(2) Excepted employment is . . .
(c) subject to paragraph (d), employment where
the employer and employee are not dealing with each other at
arm’s length and, for the purposes of this paragraph,
(i) the question of whether persons are not dealing with each
other at arm’s length shall be determined in accordance
with the provisions of the Income Tax Act, and
(ii) where the employer is, within the meaning of that Act,
related to the employee, they shall be 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] It is clear that the appellants and the company are not
dealing with each other at arm’s length.[4] The issue that I must first
resolve is whether the Minister acted properly in exercising the
discretion conferred on him by
subparagraph 3(2)(c)(ii) of the Act.[5]
[8] The appellants must prove on a balance of probabilities
that the Minister exercised his discretion improperly in
determining that, having regard to all the circumstances of the
employment, the company would not have entered into a
substantially similar contract of employment if it had been
dealing with the appellants at arm’s length.
[9] In my opinion, the appellants have not proved this.
[10] It is clear that, for the purpose of determining whether
the Minister properly exercised his discretion, I can consider
facts that came out at the hearing.[6] On this point, Desjardins J.A.
stated the following in Tignish Auto Parts Inc.:[7]
[T]he court is entitled to examine the facts which are shown
by evidence to have been before the Minister when he reached his
conclusion so as to determine if these facts are proven. But if
there is sufficient material to support the Minister’s
conclusion, the court is not at liberty to overrule it merely
because it would have come to a different conclusion.
[11] The legal principles governing the power to review a
decision made in the exercise of a statutory discretion (such as
that conferred on the Minister by paragraph 3(2)(c) of the
Act) were restated in Jencan, supra, where
the Chief Justice of the Federal Court, at paragraph 34,
quoted the comments made by Lord Macmillan of the Privy
Council in D.R. Fraser and Co. Ltd. v. Minister of National
Revenue, [1949] A.C. 24, at page 36 (P.C.):
The criteria by which the exercise of a statutory discretion
must be judged have been defined in many authoritative cases, and
it is well settled that if the discretion has been exercised bona
fide, uninfluenced by irrelevant considerations and not
arbitrarily or illegally, no court is entitled to interfere even
if the court, had the discretion been theirs, might have
exercised it otherwise.
[12] Thus, a court’s power to interfere on judicial
review, as in the case at bar, will be justified only if it is
shown that the Minister: (i) acted in bad faith or for an
improper purpose or motive; (ii) failed to take into account
all of the relevant circumstances, as expressly required by
subparagraph 3(2)(c)(ii); or (iii) took into
account irrelevant factors in making his determination (see
Jencan, supra, paragraph 37).
[13] The appellants argued that the Minister violated a
fundamental rule of natural justice by not meeting with them
personally, as they say they requested, but relying solely on an
investigation conducted by means of telephone interviews with
each of them and with Renée Gasse and Jovette Gasse,
both of whom are representatives of the company.
[14] The appellants' files were dealt with by Louise
Dessureault, an insurability officer for the respondent, and
Jocelyne Rioux, an appeals officer for the respondent. According
to the correspondence filed in evidence as Exhibit I-3, at the
very outset of her investigation, Ms. Rioux contacted the
appellants’ counsel of record at that time, Denis Paradis,
who told her to speak to the appellants directly and to begin the
usual review procedures with respect to their files.
[15] Ms. Rioux thus contacted the appellants on May 1, 1996,
to set a date to question them about their employment. On May 7,
1996, Ms. Rioux conducted those interviews by telephone. The
telephone conversation with each appellant apparently lasted
about 30 minutes and, at the same time, the appellants were
apparently asked to provide certain documents.
[16] On June 7, 1996, Ms. Rioux contacted Renée Gasse
and Jovette Gasse. Her interviews with each of them apparently
also lasted 30 minutes. On June 26, 1996, having read the
various documents requested, Ms. Rioux sent the Minister’s
determination to each of the appellants.
[17] The evidence shows that only Jovette Gasse asked Ms.
Rioux to meet with her personally and that Ms. Rioux said that it
was not possible because of the distance involved (Ms.
Rioux’s office is in Laval and the appellants live in
Marsoui on the Gaspé Peninsula).
[18] The appellants’ current counsel apparently
contacted Ms. Rioux on July 29, 1996, to request a meeting
with her. Ms. Rioux answered by letter, saying that the
determination was final.
[19] In my opinion, the Minister’s representative acted
in compliance with the Act and the appellants were not
prejudiced in any way. Their own counsel at the time had advised
Ms. Rioux to contact them directly. Ms. Rioux spent enough time
with the appellants and had enough documentation to put together
sufficient information to decide the matter. On the evidence I
have before me, I certainly cannot conclude that the Minister
acted in bad faith toward the appellants. Given the distance
factor, Ms. Rioux carried out her job with the means at her
disposal and did not take advantage of the situation. I would add
that she seems to have had the appellants’ full
co-operation.
[20] As regards the issue of whether the Minister, in making
his determination, considered facts that were wrong or
incorrectly assessed the other facts he had before him by failing
to take all the relevant circumstances into account, I would note
here that it is not sufficient in order to overturn the
Minister's determination that the appellants merely disprove
some of the facts taken into account by the Minister. They must
show that the facts relied on by the Minister that were wrong or
misinterpreted carry such weight that his determination can no
longer stand (see Attorney General of Canada v. Jolyn Sports
Inc., [1997] F.C.J. No. 512 (Q.L.) (C.A.)). If the facts
proved at trial are sufficient in law to support the
Minister’s conclusion that the parties would not have
entered into a substantially similar contract of service if they
had been at arm’s length, then the Minister’s
determination must be upheld (see Jencan, supra,
paragraph 50).
[21] One of the facts relied on by the Minister is that the
company operated a business renting out rooms (seven) and
providing board and a dining room service from April to September
of each year. The appellants established that the rooms might
sometimes be rented outside that period if there was a demand for
them. Such was allegedly the case in February 1993, when
Josée Gasse looked after the rooms and the dining room
alone (except for one week when Madone Gasse helped her out on a
part-time basis).
[22] The Minister also relied on the fact that the bar could
seat 80 people and was operated year-round. Although counsel for
the appellants denied that fact at the start of the hearing, the
testimony did not contradict it. Moreover, counsel for the
appellants admitted that the dining room provided three meals a
day and that bands played at the bar throughout the year.
[23] It was also admitted that Josée Gasse had a
full-time job at the post office and that she did the
company’s accounting year-round without being paid by the
company. As well, the appellants admitted that Jovette Gasse
worked at the bar when she was free and that she was not paid for
that work.
[24] Although it was denied at the start of the hearing, the
evidence clearly showed that Josée Gasse’s main
duties were those of a manager. Renée Gasse said that the
employees reported to Josée Gasse when Josée was on
the payroll. Josée Gasse was the one who checked the
employees’ schedules and made sure they were paid. However,
it seems that Josée Gasse was versatile and could just as
easily handle cleaning the rooms, cooking, waiting tables and
running the bar. Josée Gasse also admitted that she
sometimes ordered inventory for the bar outside the periods she
worked. She said that all it took was a telephone call lasting
just a few minutes. It also took her just a few minutes to make
bank deposits.
[25] Josée Gasse said that she was paid fixed weekly
wages of $360 (40 hours at $9 an hour) for her work. According to
her testimony, she shared her hours with Madone Gasse, who was
paid the same wages. Madone Gasse had been hired as a cook to
prepare three meals a day for 10 or so residents (about six hours
a day, according to her). She also sometimes cleaned the
rooms.
[26] Madone Gasse said that she usually worked only from
Monday to Thursday and that, in addition to the weekday meals,
she prepared the weekend meals. It was Hélène Gasse
who, as the assistant cook, warmed up the meals for customers on
the days Madone Gasse was not working. However, Madone Gasse
admitted that she went in to help Hélène Gasse
whenever Hélène asked her to. Hélène
Gasse also looked after the bar. She was paid $5.73 an hour.
[27] Another fact on which the Minister relied, and no doubt
the most important one in this case, is that there was no
correlation between the work weeks shown on the payroll for each
appellant and the monthly income reported by the company. The
Minister concluded from this that each appellant’s work was
essential to the business’s activities and that the work
periods shown for each appellant did not correspond to the
periods they actually worked.
[28] Counsel for the respondent summarized the
respondent’s analytical process as follows:[8]
[TRANSLATION]
The appeals officer also did a comparative study of the
appellants’ periods of employment and unemployment and the
business’s monthly income. She noted several
irregularities: the appellants were sometimes laid off because of
a “shortage of work” even though the business’s
income was higher at those times; there were months when no one
was on the payroll and yet the business’s income was
substantial.[9]
From her investigation at the Department of Human Resources
Development, the appeals officer found that the appellants were
on the payroll for only the number of weeks they needed to again
become eligible for unemployment insurance benefits (with few
exceptions).
The appellants made some revealing statements to the appeals
officer:
The following passage from Madone Gasse’s statutory
declaration[10]
was read to her by the officer: “. . . I work my weeks in
order to qualify, and apart from that I’m not paid; I work
without pay. . . .”
[29] On this point, the appellants said that they worked when
Renée Gasse told them to come to work. Renée Gasse
said that Marsoui is a small, very remote village and that she
wanted to give everyone work so as to make sure that all her
employees kept their jobs. She referred to this as rotating the
employees. In an attempt to explain the months in which the
business earned income but had no employees on the payroll,
Renée Gasse said that she, Jovette Gasse and
Jovette’s husband looked after the bar at such times. They
did so without pay, since it was their business.
[30] Counsel for the appellants argued as follows on this
point:
[TRANSLATION]
The employer’s representatives, and in particular
Renée Gasse, clearly explained to the Court that their
involvement in the business as employees, and that of
Jovette Gasse and Mr. Berthol (Jovette Gasse’s
spouse), was not paid employment, which accounts for the fact
that there was no one on the payroll during certain months when
the bar was open. It also explains where the income came from
even though there were no paid employees. The Minister’s
representatives did not take that evidence into account in any
way.
The employer’s representative, Renée Gasse,
explained to the Court that the directors sometimes had
“blitzes” at the bar to help bring in money. For
those blitzes, there were not necessarily any employees on the
payroll other than the barmaid. The blitzes account for certain
periods during which the business’s income could be quite
high without there being many employees at work.
It can be seen that the Minister’s representatives never
took into account this way of operating (page 3 of Ms.
Boutin’s factum).[11]
[31] I am not persuaded by the explanation put forward by the
appellants and Renée Gasse, or by that given by their
counsel, that the Minister was wrong to believe that the work
periods shown on the payroll for each appellant did not
correspond to the periods they actually worked. It is my view
that the Minister had enough relevant facts to reach the
conclusion that he reached.
[32] I have trouble understanding how there could be no
employees during periods when the business had good income. For
example, in May 1993, when there was $3,429 in income,
Josée Gasse was hired. In May 1994, with $8,784 in income
— almost three times more than during the same period in
1993 — there were no employees. Renée (who already
had a full-time job at the post office), Jovette Gasse (who
worked at the Caisse Populaire de Tourelle[12]) and Jovette’s
husband (who had no share in the company and thus had no interest
in it) testified that they were the ones who looked after the
entire business, without being paid. Moreover, although income
fell from $8,784 in May 1994 to $3,977 in June 1994, the company
allegedly hired the three appellants as paid employees as of June
1994.
[33] In my opinion, these facts alone, and the other examples
than can be found in the table showing each employee’s work
periods (Exhibit A-1) and that showing monthly sales (Exhibit
A-2) carry enough weight to demonstrate that it is virtually
impossible to believe (or at least one can have serious doubts in
that regard) that none of the appellants worked during the months
when they said they were not working. In my view, the
respondent’s version, which is that the appellants worked
for longer periods than are indicated on their records of
employment (while they were collecting unemployment insurance
benefits), is not without merit.
[34] If I were to believe the appellants’ version,
namely that Renée Gasse, Jovette Gasse and her husband
were capable of looking after the business alone during periods
when income was higher, I would have to conclude that the
appellants’ work was not justified during the periods at
issue because the company was able to manage quite well without
their services when the business was earning substantial
income.
[35] These are all relevant factors on which the
Minister’s representative relied in concluding, after
looking at all the circumstances,[13] that a substantially similar
contract of employment would not have been entered into if the
parties had been dealing with each other at arm’s
length.
[36] In light of the foregoing, it is my view that the
appellants have not shown on a balance of probabilities that all
the facts the Minister considered were wrong or that the Minister
incorrectly assessed them in concluding as he did. Accordingly, I
have no power to interfere by reversing the Minister’s
determinations. I can only affirm them.[14]
[37] In conclusion, I feel that I do not have a sufficient
basis for revising the Minister’s determinations. The
appeals are therefore dismissed and the Minister’s
determination of the question in each appeal is affirmed.
“Lucie Lamarre”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 27th day of May
1999.
Erich Klein, Revisor
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