Ford v. M.N.R., docket 96-1402-UI

Date: 19971017

Docket: 96-1402-UI

BETWEEN:

DEIRDRE FORD,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Somers, D.J.T.C.C.

[1] This appeal was heard in Corner Brook, Newfoundland, on September 15, 1997.

[2] The Appellant is appealing from a decision made by the Minister of National Revenue (the “Minister”), dated May 15, 1996, that the employment held with Ford’s Funeral Home Limited, the Payor, during the period at issue, from April 1 to September 2, 1995, is excepted from insurable employment within the meaning of the Unemployment Insurance Act (the “Act”) since she and the Payor were not dealing at arm’s length.

[3] Section 3(1) of the Unemployment Insurance Act reads in part as follows:

"3. (1) Insurable employment is employment that is not included in excepted employment and is

...”

[4] Section 3(2) reads in part as follows:

"(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 . . ."

[5] Section 251 of the Income Tax Act reads in part as follows:

"Section 251. Arm's length.

(1) For the purposes of this Act,

(a) related persons shall be deemed not to deal with each other at arm's length; and

(b) it is a question of fact whether persons not related to each other were at a particular time dealing with each other at arm's length.

(2) Definition of "related persons". For the purpose of this Act, "related persons", or persons related to each other, are

(a) individuals connected by blood relationship, marriage or adoption;

(b) a corporation and

(i) a person who controls the corporation, if it is controlled by one person,

(ii) a person who is a member of a related group that controls the corporation, or

(iii) any person related to a person described in subparagraph (i) or (ii) . . ."

[6] The burden of proof is on the Appellant. She must show, on a balance of probabilities, that the Minister erred in fact and in law in his decision. Each case stands on its own merits.

[7] In arriving at his decision, the Minister relied on the following allegations of fact which were admitted or denied by the Appellant :

“(a) the Payor was a corporation duly incorporated under the laws of the Province of Newfoundland; (admitted)

(b) Glen Ford was the Payor’s president and owned 98% of the Payor’s issued shares during the period in question; (admitted)

(c) Glen ford is the Appellant’s father; (admitted)

(d) the Payor operated a funeral home year-round in Port aux Basques, Newfoundland; (admitted)

(e) the Appellant was engaged by the Payor to answer the phone, wash vehicles, pick up remains, assist in preparation for burial and assist in performing the funeral; (denied)

(f) the Appellant’s remuneration was based on a rate of $8.00 per hour for a 40-hour work week; (admitted)

(g) the Appellant was remunerated on a bi-weekly basis at the rate of $640 for 80 hours worked; (admitted)

(h) the Appellant did not have set hours of work and was paid for a full 80 hours work even when she did not work the 80 hours; (denied)

(i) the Appellant was paid for hours that she did not work; (denied)

(j) the Appellant was paid for 22 weeks work at 40 hours per week when she only worked 21 weeks for the Payor; (denied)

(k) the duration of the Appellant’s employment was excessive; (denied)

(l) the Appellant required 20 insurable weeks in order to qualify for unemployment insurance benefits; (admitted)

(m) the Appellant received a Record of Employment from the Payor with 21 insurable weeks; (denied)

(n) the Appellant ceased working for the Payor on August 25, 1995 as she had been accepted to college; (denied)

(o) after being laid off the Appellant applied for unemployment insurance benefits and requested fee payer status while attending Kingstec Community College in Kentville, Nova Scotia, which was scheduled to begin on September 4, 1995; (admitted)

(p) in 1994 the Appellant worked for the Payor for the following remuneration: January to April at a rate of $50.00 per week; May at a rate of $5.00 per hour; and June to August at a rate of $200.00 per week; (admitted)

(q) the Appellant performed substantially similar services during the period from September 1994 to March 1995 with no remuneration; (denied)

(r) the Appellant’s remuneration was excessive during the period in question; (denied)

(s) from April 1, 1995 to June 21, 1995, the Appellant was attending high school full time in order to complete grade 12; (admitted)

(t) the Appellant was not available to work during the hours she attended high school; (admitted)

(u) the Payor had 23 funerals between April 1 and June 21, 1995, 15 of which were held on weekdays during school hours; (denied)

(v) the Appellant did not replace any worker during the period in question and the Appellant was not replaced after she left this employment to attend college; (denied)

(w) the Appellant’s duties were performed by the Payor’s other full-time and part-time workers before and after the period in question; (denied)

(x) the Appellant’s employment was an artificial arrangement designed to enable the Appellant to qualify for unemployment insurance while attending college; (denied)

(y) the Appellant is related to the Payor within the meaning of paragraph 251(1)(b) of the Income Tax Act; (admitted)

(z) the Appellant was not dealing with the Payor at arm’s length; (denied)

(aa) 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 not reasonable to conclude that the Appellant and the Payor would have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length. (denied)”

[8] The Payor was a corporation duly incorporated whose president was Glen Ford, the Appellant’s father, who owned 98% of the Payor’s issued shares. The Payor operated a funeral home year-round in Port aux Basques, Newfoundland.

[9] During the period in question the Appellant was engaged to answer the phone, wash vehicles, pick up remains, assist in the preparation for burial and assist in performing the funeral. The Appellant stated that she did the paperwork, helped the bereaved to fill in the documents for the Canada Pension Plan, completed death certificates and death notices. When going to high school in 1995 her hours of work were from 2:30 p.m. to 10:00 p.m. during which time she did her school work. She also stated that she did not have a set working schedule and that she also worked on weekends, answering the phone on a 24-hour basis.

[10] The Appellant was hired full time in 1995 because her father had serious kidney and liver problems and was hospitalized in Port aux Basques and then in Corner Brook for a couple of weeks as of June 22, 1995.

[11] The Appellant’s father stated in his testimony that he could only do light work and that the other employees attended to the funeral home’s business, one employee being a licensed embalmer whose rate of pay was between $10 and $12.50 an hour.

[12] The Appellant worked in 1994 doing approximately the same type of work, except for the administrative work. Her salary from January to April 1994 was $50 per week and from June to August $200 per week. From September 1994 to March 1995, she performed duties such as cleaning and dusting without remuneration. The reason given for not being paid was “I guess my father did not have enough work”.

[13] The Appellant stated that she was interested in this type of work since she wanted to obtain a funeral director’s licence which she did get by going to school in 1996. Even though she obtained her driver’s licence in May 1995, she stated that she sometimes picked up the remains at the airport or elsewhere.

[14] During her last week of work she left to register at a school in Kentville, Nova Scotia and was gone for three or four days. The reason for the Appellant being laid off, according to her father, was that she had to go back to school and he was able to resume his duties even though he had stated that in July 1995, after his operation, he could only assume light duties and that the Appellant was kept on in August 1995 because she needed the training.

[15] As set out by a decision of the Federal Court of Appeal in the case of Ferme Émile Richard et Fils Inc. v. M.N.R. (178 N.R. 361), signed December 1, 1994, in cases involving subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act, the Court must ask itself if the Minister's decision "resulted from the proper exercise of his discretionary authority". The Court should first require the Appellant to "present evidence of wilful or arbitrary conduct by the Minister".

[16] The Federal Court of Appeal in the case of Attorney General of Canada and Jencan Ltd. (A-599-96), dated June 24, 1997, reiterated the same principle as the one enunciated in Ferme Émile Richard, supra, where Chief Justice Isaac expressed himself as follows (page 25):

“...If there is sufficient material to support the Minister’s determination, the Deputy Tax Court Judge is not at liberty to overrule the Minister merely because one or more of the Minister’s assumptions were disproved at trial and the judge would have come to a different conclusion on the balance of probabilities. In other words, it is only where the Minister’s determination lacks a reasonable evidentiary foundation that the Tax Court’s intervention is warranted. An assumption of fact that is disproved at trial may, but does not necessarily, constitute a defect which renders a determination by the Minister contrary to law. It will depend on the strength or weakness of the remaining evidence. The Tax Court must, therefore, go one step further and ask itself whether, without the assumptions of fact which have been disproved, there is sufficient evidence remaining to support the determination made by the Minister. If that question is answered in the affirmative, the inquiry ends...”

[17] The evidence given by the Appellant and her father indicates that the Appellant was practically running the business while her father was incapacitated during his illness, however the father admitted that he did light work and was able to resume his duties when the Appellant returned to school. In 1994, the Appellant sometimes did some work, such as dusting, without remuneration. It is unreasonable to conclude that administrative duties were added on in 1995, some funerals having been held during the week while she was at school.

[18] The Appellant worked the necessary number of weeks in order to qualify for unemployment insurance benefits. She did not work a regular number of hours during the last week of August 1995. She was laid off because she was going to school in Nova Scotia.

[19] It is reasonable to conclude that the Appellant and the Payor would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length. Taking into consideration all of the circumstances, I am satisfied that the Appellant has failed in her onus of establishing, on a balance of probabilities, that the Minister acted in a capricious or arbitrary fashion in this case. The employment is therefore excepted from insurable employment pursuant to paragraph 3(2)(c) of the Act.

[20] The appeal is dismissed and the Minister’s decision dated May 15, 1996 is affirmed.

“J. Somers”

D.J.T.C.C.