REASONS FOR JUDGMENT
Hogan J.
I. Introduction
[1]
Alain Gosselin ("the appellant")
filed two appeals under the Employment Insurance program in connection with a
decision rendered by the Minister of National Revenue (the "respondent") regarding the
insurability of his employment.
[2]
On March 7, 2013, the respondent rendered a
decision indicating that the appellant’s employment was not insurable within
the meaning of the Employment Insurance Act (the "EIA") while
he was working for Maçonnerie Magloire Gosselin Inc., (the "payor")
during the period from August 13, 2012 to December 21, 2012. On
December 4, 2014, the respondent reached the same conclusion in another
decision concerning the period from March 4, 2013 to December 19,
2013.
II. Background
[3]
The parties agreed on several facts concerning
the period from August 13, 2012 to December 21, 2012, which are
contained in the partial agreed statement of facts filed in the Court Registry,
specifically:
1.
On March 7, 2013, following a request from
Service Canada for a ruling on employment insurability, an authorized Canada
Revenue Agency ("CRA") official ruled that, during the period from
August 13, 2012 to December 21, 2012 (hereinafter the "period at
issue"), the appellant did not have insurable employment while he was
working for Maçonnerie Magloire Gosselin Inc. (hereinafter the
"payor").
2.
On May 29, 2013, the appellant appealed the
decision of March 7, 2013, and asked the respondent to rule on the
question of whether he had insurable employment during the period at issue,
while he was working for the payor.
3.
In a letter dated December 23, 2013, the
respondent informed the appellant of its decision to the effect that his
employment while he was working for the payor during the period at issue was
not insurable.
4.
The appellant is appealing this decision.
5.
The appellant and the payor are related persons
within the meaning of the Income Tax Act, given the following
assumptions made by the respondent:
(a) The payor is a business corporation, incorporated on
November 2, 1990, under Part IA of the Companies Act, RSQ, c. C‑38.
(b) During the period at issue, the payor’s sole shareholder
was Les Investissements Transco Inc.
(c) The sole shareholder of Les Investissements Transco Inc.
is Lynn Dubois.
(d) Lynn Dubois is the
appellant’s spouse.
6.
The payor operates a masonry work company in the
field of residential, commercial and industrial construction.
7.
The payor’s Board of Directors is made up of
five directors: the appellant, Sylvain Gosselin and Richard Gosselin
(the appellant’s brothers), and Thierry Gosselin and Kevin Gosselin
(his sons).
8.
The appellant has been working for the payor
since 1990 under a verbal employment contract concluded in the province of
Quebec.
9.
The appellant works for the payor mainly as a
mason.
10.
The appellant is also responsible for purchasing
materials, and picking up other workers and taking them to the worksites.
11.
The appellant has an occupation competency
certificate from the Commission de la construction du Québec (hereinafter the
"CCQ") as a journeyman mason.
12.
The appellant was the payor’s guarantor with the
Régie du bâtiment du Québec for matters of administration, safety management,
project and worksite management, and construction work.
13.
The appellant was also the payor’s designated
representative with the CCQ.
14.
The appellant worked for the payor during
regular construction business hours (i.e. 7:00 a.m. to 3:00 p.m.).
15.
The appellant sometimes finished working earlier
than 3:00 p.m.
16.
The appellant’s work schedule during the period
at issue was Monday to Friday, from 7:00 a.m to 3:00 p.m. (40 hours
per week).
17.
For the weeks from August 13, 2012 to
December 1, 2012, the payor paid the appellant $25/hour for a 30-hour
week, which equals $750 per week.
18.
For the weeks from December 2, 2012 to
December 21, 2012, the payor paid the appellant $25/hour for a 40-hour
week, which equals $1000 per week.
19.
The payor laid off the appellant on
December 21, 2012, at the same time as its other employees, because the
season had ended.
20.
Contrary to the payor’s other employees with CCQ
occupation competency certificates, the appellant did not receive vacation pay
from either the payor or the CCQ during the construction vacation.
21.
Contrary to the payor’s other employees with CCQ
occupation competency certificates, the appellant did not receive any sick
leave, paid holidays, or other benefits.
[4]
Note that the parties agreed on substantially
similar facts for the period from March 4, 2013 to December 19, 2013.
[5]
To render its decision to the effect that the
appellant’s employment with the payor did not constitute insurable employment,
the respondent assumed the facts described in paragraphs 7 and 9 of its
replies to the appellant’s Notices of Appeal.
[6]
During the hearing, new facts were presented to the
Minister, namely that the payor had purchased a life insurance policy and paid
the premiums on it. This policy included disability insurance and life
insurance covering the appellant, life insurance for his spouse (Lyne Dubois),
and a personal retirement savings bonus.
III. Arguments of the parties
A. Appellant’s
position
[7]
First, the appellant maintains that the Court
may take into account new evidence presented during the hearing and that the
Court must consider all the evidence in order to assess the reasonableness of
the Minister’s decision.
[8]
Moreover, the appellant claims that his
remuneration and benefits are the same as those of other employees governed by
the Commission de la construction du Québec (the "CCQ"), given that,
when everything is taken into account, his net income is practically the same.
[9]
In his written submissions, the appellant
maintains that, in fact, he receives more than the other employees and that it
is to his advantage not to be governed by the CCQ and to receive the
above-mentioned additional benefits, in particular, drug insurance, life
insurance, wage-loss insurance and a retirement savings plan.
[10]
In short, the appellant argues that his
employment with the payor constituted insurable employment during the periods
in question.
[11]
The appellant also maintains that the Court
cannot draw a negative inference from the fact that Lynn Dubois, the
appellant’s spouse, did not testify, because Mr. Gosselin’s testimony
alone is sufficient.
[12]
In this regard, counsel for the appellant argues
that Mr. Gosselin’s testimony is credible and that the differences between
his testimony and that of Mr. Potvin, the CRA decision-making officer, are
perhaps only due to a poor understanding of the question or the answer.
B. Respondent’s
position
[13]
The respondent agrees that the Court may take
new facts into account, but points out that these new facts do not in any way
change the reasonableness of the Minister’s decision.
[14]
The respondent maintains that the appellant’s
employment with the payor did not constitute insurable employment during the
periods in question because, given all the circumstances, including the facts
identified above, it was not reasonable to conclude that the appellant and the
payor would have concluded a similar employment contract had they been dealing
with each other at arm’s length within the meaning of subsections 5(2) and
5(3) of the EIA.
[15]
In this regard, the respondent maintains that
the appellant was not being paid enough, given that before reporting to the
worksite in the morning, he took the company truck to pick up workers and
equipment, that he managed projects and worksite security, and that he made
important decisions on behalf of the company.
[16]
The respondent also maintains that the appellant
is not credible because his testimony during the hearing contradicts the
version he gave to the decision-making officer.
[17]
The respondent also said that the fact that the
appellant has an interest in the outcome of the proceedings is something to
take into consideration when assessing his credibility.
[18]
The respondent maintains that the Court must
draw a negative inference from the fact that Lynn Dubois was not called to
testify because the appellant bears the burden of presenting sufficient
evidence to refute the Minister’s assumptions.
IV. Comments regarding the
witnesses’ credibility
[19]
During the hearing, the CRA decision-making
officer, Mario Potvin, testified about the interviews he had conducted
with the appellant and Lyne Dubois. His report was also entered into
evidence.
[20]
During the interview conducted by the decision-making
officer, the appellant, according to Mr. Potvin, mentioned the following
facts:
WORKER’S VERSION:. . .
[translation]
He says that he does the same work as
everyone else, but that he also acts as superintendent. He manages the
employees on the worksite and the worksite. . . .
In terms of his schedule, he says that he
leaves home at 5:00 a.m. to get materials from the warehouse, which takes
approximately 15 minutes, but afterward, he has to go to the Montreal
worksite, which can take about 1 hour and 15 minutes. He says he
picks up some workers along the way, who travel with him. . . .
I called back the worker, Alain Gosselin
. . . to find out who handles calls from clients when the company is closed
during the winter.
He said that he is the one who answers
clients’ questions and quotes prices based on the square footage of the job. He
also said that if a problem arises in the company, he handles it.
[21]
According to Mr. Potvin, Lyne Dubois,
the payor, mentioned the following facts during her interview with the officer:
PAYOR’S VERSION:. . .
[translation]
The worker’s schedule starts at
5:00 a.m. when he goes to the warehouse to collect materials for the
workday. He then works on the worksites and ends around 3:00 p.m. . . .
According to Lyne Dubois, the three
brothers make the big decisions.
[22]
The appellant’s testimony at the hearing
differed from the version of the facts presented by Mr. Potvin regarding
the telephone conversation. The appellant said that he was not the
superintendent, that he did not manage the worksite, and that his oldest son
held that position and was the one who brought the trailer of equipment to the
worksite.
[23]
The appellant also said that he left Lavaltrie
at 5:00 a.m. to avoid traffic, and that he went to the office, collected the
tools he needed for the day, picked up workers along the way and had breakfast
with them. He said that he was not working during those hours, which is why he
was not paid for that time.
[24]
We therefore have contradictory versions.
[25]
In Nichols v. Canada, my colleague, Justice Miller,
provides a good summary of the elements that a judge can take into
consideration when assessing a witness’s credibility:
In assessing credibility I can consider
inconsistencies or weaknesses in the evidence of witnesses, including internal
inconsistencies (that is, whether the testimony changed while on the stand or
from that given at discovery), prior inconsistent statements, and external
inconsistencies (that is, whether the evidence of
the witness is inconsistent with independent evidence which has been accepted
by me). Second, I can assess the attitude and demeanour of the witness. Third,
I can assess whether the witness has a motive to fabricate evidence or to
mislead the court. Finally, I can consider the overall sense of the
evidence. That is, when common sense is applied to the testimony, does
it suggest that the evidence is impossible or highly improbable.
[My emphasis.]
[26]
As noted by counsel for the respondent, the
appellant contradicted himself during his testimony. On the one hand, at the
beginning of his testimony, he claimed that he was only employed as a mason on
the worksites and, later, he indicated that he played a larger role, that he
answered questions from his colleagues and that he could not set aside his supervisory
habits.
[27]
The appellant also tried to downplay his role
with the payor company by denying, at the beginning of his testimony, that he
submitted bids or that he answered questions from the company’s clients.
However, later in his testimony, he acknowledged that he sometimes answered
clients’ calls, even during periods when he had been laid off and was receiving
Employment Insurance benefits.
[28]
There are other facts that lead me to question
the appellant’s credibility. At the hearing, he revealed to the respondent, for
the first time, that he was covered by a life insurance policy that represented
a considerable benefit. I suspect he chose to reveal that benefit at that time
to counter the respondent’s allegation that his remuneration was too low
compared to what a person dealing at arm’s length with the payor company would
expect.
[29]
The evidence shows that this insurance was not
declared in the payor’s payroll or in the appellant’s Employment Insurance
claim. As counsel for the respondent pointed out, the Employment Insurance
application form asks the appellant to declare all [translation] "bonuses and
premiums, benefits under a group wage-loss indemnity plan, retirement benefits
or other benefits."
[30]
Note, as well, that Ms. Dubois, the
appellant’s spouse and, according to him, the person responsible for the
administration of the payor company, was not called as a witness to confirm the
appellant’s version of the facts. In Payne, Justice Campbell noted
that a negative inference could be drawn if a party that could have provided
pertinent evidence did not do so.
While credible oral testimony may be
sufficient in certain circumstances, and in the absence of relevant records, to
demolish the assumptions of fact, jurisprudence has also established that a
negative inference should be drawn against the party who is in the position of
being able to provide pertinent evidence to the Court but who, for whatever
reason, does not provide it.
[My emphasis.]
[31]
Under the circumstances, I infer that the
appellant did not call on Ms. Dubois to corroborate his version of the
facts because he was afraid that his wife’s testimony would contradict his own.
[32]
For all these reasons, I conclude that the
appellant’s testimony is neither reliable nor credible.
[33]
Mr. Potvin, on the other hand, was a
credible and reliable witness. He had no interest in the outcome of this case.
He testified that he wrote up his notes every day after conducting his
interviews. For these reasons, I accept his testimony regarding the important
role the appellant played with the payor company.
V. Issues in dispute
[34]
There are two issues in dispute, namely:
1)
Can the Court take into account new facts
revealed during the hearing?
2)
If so, is the Minister’s decision reasonable in
light of all the pertinent facts and circumstances?
VI. Applicable law and analysis
[35]
Under paragraph 5(2)(i) of the EIA,
employment is not insurable if the employer and employee are not dealing with
each other at arm’s length. However, paragraph 5(3)(b) of the EIA
states that this employee who is not dealing with the employer at arm’s length
can be considered to have insurable employment if the Minister is satisfied
that, having regard to all the circumstances, it is reasonable to conclude that
the parties would have entered into a substantially similar contract of
employment. Paragraph 5(3)(b) of the EIA reads as follows:
Arm’s length dealing
(3) 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.
[My emphasis.]
[36]
It is well established that the Court cannot
simply substitute its decision for the respondent’s. In Denis v. Canada
(Minister of National Revenue),
Chief Justice Richard describes the role of the judge as follows:
[5] The function of the Tax Court of Canada
judge in an appeal from a determination by the Minister on the exclusion
provisions contained in subsections 5(2) and (3) of the Act is to inquire into
all the facts with the parties and the witnesses called for the first time to
testify under oath, and to consider whether the Minister’s conclusion still
seems reasonable. However, the judge should not substitute his or her own
opinion for that of the Minister when there are no new facts and there is no
basis for thinking that the facts were misunderstood (see Pérusse v.
Canada (Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 310,
March 10, 2000).
[My emphasis.]
[37]
In Denis, it was determined that the
function of the Tax Court of Canada judge is to inquire into all the facts with
the parties and the witnesses to consider whether the Minister’s decision still
seems reasonable. To do so, the judge must take into account all the facts
presented in the case, even if they were not presented to the CRA
decision-making officer.
[38]
In Birkland v. M.N.R., Justice Bowie analyzed Denis
as follows:
This Court’s role, as I understand it now,
following these decisions, is to conduct a trial at which both parties may
adduce evidence as to the terms upon which the Appellant was employed,
evidence as to the terms upon which persons at arm’s length doing similar work
were employed by the same employer, and evidence relevant to the conditions of
employment prevailing in the industry for the same kind of work at the same
time and place. Of course, there may also be evidence as to the relationship
between the Appellant and the employer. In the light of all that evidence,
and the judge’s view of the credibility of the witnesses, this Court must then
assess whether the Minister, if he had had the benefit of all that evidence,
could reasonably have failed to conclude that the employer and a person acting
at arm’s length would have entered into a substantially similar contract of
employment. That, as I understand it, is the degree of judicial deference
that Parliament’s use of the expression "... if the Minister of National
Revenue is satisfied ..." in paragraph 5(3)(b) accords to the
Minister’s opinion.
[My emphasis.]
[Citations omitted.]
[39]
I agree with Justice Bowie’s statements.
The judge must therefore make a decision based on all the evidence adduced
during the trial concerning the reasonableness of the Minister’s decision.
[40]
For the following reasons, it is my opinion that
the Minister’s decision is reasonable, even taking into account the new facts.
[41]
First, the evidence shows that the appellant’s
position with the payor company was much more involved than that of a simple
mason. However, he accepted remuneration at an hourly rate that was lower than
that of other employees of the payor company.
[42]
I highly doubt that an employee dealing with the
employer at arm’s length would have given up vacation pay in exchange for Employment
Insurance benefits, especially since the benefits from his insurance policy
would have an impact on the Employment Insurance benefits to which he would be
entitled.
[43]
Rather, I believe the appellant preferred to
receive Employment Insurance benefits instead of higher wages because that was
of benefit to the payor company of which his wife was the sole shareholder. The
benefits to the payor company would be greater than they would have been if she
paid the appellant vacation pay as she did for the other employees.
[44]
This arrangement increased the family income. A
third party would not have accepted such an arrangement.
[45]
In addition, I doubt the payor company is
prepared to purchase the same amount of life insurance (including a retirement
bonus) for all its employees and their spouses, especially considering that the
appellant received this benefit even while he was unemployed.
[46]
Finally, an employee dealing at arm’s length
with the payor company would not have agreed to continue working for the
company after being laid off, as the appellant did.
[47]
For all these reasons, I dismiss the appellant’s
appeal.
Signed at Toronto, Ontario, this 21st day of
June 2016.
"Robert J. Hogan"
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