Rioux v. M.N.R., docket 96-1628-UI

Date: 19971028

Docket: 96-1628-UI

BETWEEN:

OMER RIOUX,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1] This is an appeal from a determination, dated August 16, 1996, that the appellant’s employment was uninsurable for the following periods: April 6 to August 15, 1992, March 22 to October 16, 1993, March 14 to October 29, 1994, and May 15 to October 21, 1995.

[2] The determination resulted from the exercise of the discretion conferred by paragraph 3(2)(c) of the Unemployment Insurance Act; the respondent also relied on subsection 61(3) of the Act and sections 251 and 252 of the Income Tax Act.

[3] The facts on which the determination was based were set out as follows by the respondent:

[TRANSLATION]

(a) the payer operates a peat business;

(b) during the years at issue, the payer’s voting shares were distributed as follows:

the appellant 37.4 percent

Gaétan Rioux, the appellant’s son 28 percent

Yves Rioux, the appellant’s son 28 percent

Alain Rioux 6.6 percent

(c) the appellant was the chairman of the board of directors and the manager of the 16 or 17 employees assigned to the payer’s operations;

(d) the appellant was not supervised in the day-to-day operation of the payer’s business;

(e) in 1992 and 1993, the appellant’s weekly earnings were roughly equal to the maximum insurable earnings;

(f) in 1994, the appellant’s weekly earnings were equal to the maximum insurable earnings;

(g) the appellant invested $4,000 to acquire his voting shares and also invested property worth $32,500 in return for 3,250 non-voting class B shares;

(h) during the periods at issue, the appellant personally guaranteed a $30,000 debt incurred by the payer;

(i) the appellant loaned the payer the following amounts:

in December 1993 $32,000

in February 1995 $4,000

in April 1995 $6,000

in August 1995 $40,000

in October 1995 $20,000

(j) the appellant worked for the payer between the periods when he received a salary, and there is no indication that he was paid for that work;

(k) the alleged work periods do not correspond to the payer’s periods of activity;

(l) the appellant was the payer’s mainstay;

(m) the appellant was not subordinated to the payer;

(n) in these circumstances, it is not reasonable to conclude that the appellant’s contract of employment would have been substantially similar if he had been dealing with the payer at arm’s length.

[4] Only the appellant testified at the hearing; he did not adduce any documentary evidence aside from a letter from the Caisse Populaire de St-Fabien (Exhibit A-1) concerning the guarantee he had given for Tourbière Rio-Val Inc., the payer in the case at bar.

[5] The appellant’s testimony disclosed that he was very much aware of the dividing line between his status as an employee and his status as a shareholder; while testifying, he constantly distinguished between the two in terms of what he did in operating and running the business and what he did as a director.

[6]Although subparagraphs 5(c), (d), (e), (f), (g), (h), (i), (j), (k) and (l) were denied as written, the evidence showed that the allegations in those subparagraphs were well-founded.

[7] The appellant argued that subparagraph 5(m) was inaccurate because the board of directors met regularly; moreover the shareholders took part in job meetings every Monday. It would have been helpful to have had confirmation of this authority of the board of directors over the appellant’s work, since this was a fundamental point. The appellant did not see fit to file the company’s minute book, and no testimony was given by any shareholder or director. The available evidence essentially derives from the testimony of the appellant, who testified both in his capacity as an appellant-worker and in his capacity as a representative of the payer company. Accordingly, the description of the relationship of subordination should be assessed in this specific context.

[8] In view of the appellant’s financial involvement in the company’s affairs, a point with regard to which, once again, no documentary evidence was adduced to flesh out his testimony, it appears that he must have had considerable control. That control was moreover strengthened by the fact that the company’s business office was located in the appellant’s home. Finally, the only two persons authorized to sign cheques were the appellant and his spouse. Although his spouse was neither a shareholder nor a director, she attended in her capacity as secretary all the meetings of the father and his three sons.

[9] The appellant testified that salaries had been determined on the basis of what the shareholders had been paid in their former duties. Once again, this could not be verified, since the payroll journal was not filed. According to the appellant, the salaries were based on an hourly rate of pay for 50-hour weeks.

[10] The number of hours could vary from week to week; the weather often prevented him from working 50 hours and, in certain circumstances, dictated that he work much more than 50 hours. The secretary administered the system for keeping track of how many hours he was ahead or behind. The Court was unable to examine the book as it was not filed.

[11]Only the payroll journal could have confirmed the variations described by the appellant. It seems that the hours worked always balanced out, since the shareholders and the appellant were apparently always paid the same salaries in spite of nature’s uncertainties.

[12] On cross-examination, it was learned that the appellant had helped load the product on several occasions outside his work periods, although he played down the importance of that work.

[13] The respondent conducted his investigation and his analysis of the appellant’s records by means of a very detailed questionnaire completed by the appellant. This procedure had been requested by the appellant and his counsel.

[14] The appellant said that he had found it very difficult to complete the questionnaire, adding that often there was not enough space for the answers and that some of the questions were ambiguous and complicated. Yet the appellant chose not to answer question 29, which was worded as follows:

[TRANSLATION]

(29) IS THERE ANYTHING ELSE YOU WISH TO NOTE?

Moreover, the completed questionnaire was forwarded to the Department through counsel for the appellant, which would suggest that it was checked. The appellant was very articulate when he testified, and his testimony disclosed that he had a great deal of experience in and knowledge of the business world. I cannot accept his complaint or his criticisms concerning the problems presented by the questionnaire. In the first place, he was able to have the benefit of the advice of his lawyer, and secondly, he could simply have attached appendices if there was not enough space for the answers.

[15]When a determination results from the exercise of the discretion conferred by paragraph 3(2)(c) of the Act, this Court’s jurisdiction is limited to judicial review. The parameters of this jurisdiction were described by the Federal Court of Appeal in the following cases:

(1) Ferme Émile Richard et Fils Inc. v. Department of National Revenue (December 1, 1994, 178 N.R. 361)

(2) Tignish Auto Parts Inc. v. Minister of National Revenue (July 25, 1994, 185 N.R. 73)

(3) Attorney General of Canada v. Jencan Ltd. (June 24, 1997, A-599-96)

(4) Her Majesty the Queen v. Bayside Drive-In Ltd. et al. (July 25, 1997, A-626-96)

(5) Raymonde Bérard v. M.N.R., [1997] F.C.J. No. 88, A-487-96.

[16] In the case at bar, did the respondent act wilfully or arbitrarily? Did he ignore certain decisive facts? Did he attach too much importance to irrelevant factors? Did he exceed the limits of his discretion?

[17]Based on the evidence — the burden of proof being on the appellant — the answer to these questions must be no; the few factors or facts on which the appellant relied in claiming to have met this burden of proof are not at all persuasive, much less decisive.

[18]Using a procedure that he himself chose (a written questionnaire), the appellant could have provided and submitted all the facts, documents and information that would have been helpful in assessing his case. Following an adverse determination, he came before this Court alone, and with no documents aside from a letter from the credit union, and argued that the discretion was not properly exercised; his conclusion was that the respondent acted unreasonably.

[19]This is not a sufficient basis for finding that the approach taken by the respondent was arbitrary. The respondent may, of course, have interpreted certain facts differently than this Court would have: is this sufficient in itself to invalidate his exercise of discretion? I do not think so. Those facts would have had to be fundamental.

[20]Despite the corporate reality, the evidence as a whole showed that the appellant had considerable influence over the company’s affairs; this perception could have been attenuated or refuted by the testimony of other witnesses or by filing the relevant minutes. The appellant alone controlled what he thought he should submit to the Court, which must base its decision on the evidence adduced.

[21] The weight of the evidence allowed of and even dictated the respondent’s determination herein. On the other hand, that same evidence never showed that the respondent had made any gross errors in assessing the file sent to him by the appellant. There is nothing in the evidence that might in any way throw discredit on the respondent’s exercise of his discretion.

[22]That evidence, absolutely essential to this Court’s intervention, prohibits me from analyzing or reviewing the case from the perspective of a trial de novo. In other words, the appellant had to show that the respondent did not fulfil his obligations in exercising his discretion.

[23]Since this was not proved, I cannot intervene; I would add, however, that my intervention would not necessarily have meant allowing the appeal, because there again I consider the evidence deficient.

[24] For these reasons, the appeal is dismissed.

“Alain Tardif”

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 2nd day of July 1998.

Erich Klein, Revisor