Date: 19981207

Docket: 98-511-UI

BETWEEN:

DAMIAN DANIEL HAULE,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for judgment

Lamarre Proulx, J.T.C.C.

[1] The Appellant is appealing from the decision of the Minister of National Revenue (the “Minister”), that the Appellant did not hold insurable employment during the period from January 1st, 1997 to August 13, 1997.

[2] The Minister relied on paragraph 5(1)(a) of the Employment Insurance Act (the "Act"), on section 18 of the Immigration Regulations, 1978, and on articles 9, 1385 et al of the Civil Code of Quebec. The Minister was of the view that the Appellant had no valid contract of service with the payer because of the limitations of the Appellant’s work permit.

[3] The facts taken into account by the Minister are described at paragraph 5 of the Reply to the Notice of Appeal (the "Reply") as follows:

a) the Appellant is a native of Tanzania;

b) he had Work Permits from Canada for the periods of November 29^th, 1994 to December 31^st, 1996 and of August 14^th, 1997 to October 31^st, 1997;

c) during the period in question, the Appellant, an engineer, was registered as a full time student at McGill University;

d) he was doing research towards a doctorate degree;

e) as the University had no more grant to allow the Appellant to continue his studies, the Appellant convinced the Payer to pay him weekly payments to allow him to continue his research;

f) during the period in question, the Appellant had a Student Authorization for studies at McGill University;

g) during the period in question, the Appellant had no Working permit to allow him to work in Canada.

[4] Paragraphs 2 and 3 of the Reply are of interest in this case:

2.                     On March 20^th 1998, the Appellant filed an application to determine whether he held insurable employment while working for CAE Electronics Ltd., (hereinafter the Payer), from March 25^th, 1996 to October 31^st, 1997.

3.                     By letter dated May 25^th 1998, the Respondent informed the Appellant, on the one hand, that his employment was insurable for the periods from March 25^th, 1996 to December 30^th, 1996 and from August 14^th, 1997 to October 31^st, 1997 because there existed an employer-employee relationship between him and the Payer, and on the other hand, that his employment was not insurable for the period from January 1^st, 1997 to August 13^th, 1997, because there did not exist an employer–employee relationship between him and the Payer during that period.

4.                    

[5] Exhibit-R-2 is a student authorization issued by the Department of Citizenship and Immigration. The terms and conditions are: 1) Prohibited from engaging in employment in Canada; and 4) May accept employment on the campus of the institution at which registered in full-time studies. It is signed January 9, 1997 and is valid until July 30, 1997.

[6] The Appellant stated that he had worked for CAE Electronics Ltd. from March 25, 1996. He produced as Exhibit A-2, a letter of employment from CAE Electronics Ltd. dated January 6, 1996. It says the following:

It is with pleasure we confirm our offer of employment in the position of Member of Technical Staff II on a temporary basis subject to your renewing your work permit. Your hourly rate will be $19.48 an hour.

[7] Exhibit R-6, that is the record of employment, shows weekly earnings of $761.23.

[8] In his Notice of Appeal, the Appellant says the following:

During the above-mentioned period, I was holding a valid Student Authorization and I was registered full-time for studies at McGill University. Hence, according to Immigration Canada, I can accept employment on-the-campus only! This is very true, for employments NOT related to the area of studies. However, for employments which are directly related to the area of study, such as a research work, one can work outside the campus as long as an arrangement or contract is made between the institution, research supervisor and an outside organization or company (e.g. Hospitals, Research films, etc.). This kind of arrangement is considered as an employment on-the-campus which doesn’t require a separate work permit. This appears as an exceptional case as stipulated on page 11 of the Information Guide IMM-9997E(12-96) which was revised on December 31, 1996 by Immigration Canada. I was asked by one immigration agent to use this information to whoever requires clarification on my situation.

Detailed specifics on my case is as follows: since 1987 I was applying and granted both the Student Authorization and a Work Permit. This is because the nature of my studies was pure research. Even in December 1996, I applied for both visa and forwarded the required fees by that time. Unfortunately, I didn’t get the Work Permit renewed and the corresponding fee of $125 was refunded to me by Immigration Canada. Moreover, it has to be understood that letters were attached to support my application for Work Permit from both McGill University and CAE Electronics Ltd. This is because I was actually working with CAE since 1995 to accomplish my research work at McGill. It was the McGill Career and Placement Service (CAPS) which referred me to CAE due to the nature of my research. CAPS does, among other things, arrange for student internships, job referrals, contact organizations or companies interested in student researchers, etc. Above all, CAPS is located on-the-campus with its Director and councels. Hence, if this situation doesn’t fit the above exceptional case, then there was a mistake made by the Immigration for NOT renewing my Work Permit without explanation except refunding the fee.

[9] As a matter of fact, the Appellant obtained the proper authorization in August of 1997 as shown by Exhibit R-1, another student authorization. The document is to the effect that the Appellant is authorized to work for CAE Electronics Ltd. It is signed August 14, 1997 and is valid until February 14, 1999.

[10] Agent for the Respondent submitted that the Appellant's contract of employment, pursuant to articles 1417 and 1418 of the Civil Code of Quebec, was absolutely null since its object was prohibited by law. Indeed subsection 18(1) of the Immigration Regulations, 1978, prohibited the Appellant from engaging in employment outside the boundaries of the McGill campus.

[11] Articles 1417 and 1418 of the Civil Code of Quebec and paragraph 18(1) of the Immigration Regulations, 1978, read as follows:

Art. 1417 A contract is absolutely null where the condition of formation sanctioned by its nullity is necessary for the protection of the general interest.

Art. 1418 The absolute nullity of a contract may be invoked by any person having a present and actual interest in doing so; it is invoked by the court of its own motion.

A contract that is absolutely null may not be confirmed.

18(1) Subject to subsection 19(1), no person, other than a Canadian citizen or permanent resident, shall engage or continue in employment in Canada without a valid and subsisting employment authorization.

[12] Agent for the Respondent referred to the decision of the Federal Court of Appeal in Kathleen Still v. M.N.R. dated November 24, 1997 by drawing the attention of the Court to this passage:

[44] ... Each case turns on its facts within a particular statutory framework. Arguably, this Court should be applying the common law doctrine of illegality as understood and applied in each province. In theory, the legal consequences flowing from a person's failure to obtain a work permit, as required under the Immigration Act, could be dependent on the common law of the province in which the employment contract arose. Given the bijuridical nature of the Federal Court, we cannot lose sight of the fact that cases originating from Quebec are to be decided under the illegality provisions found within the Civil Code of Quebec.

[13] Agent for the Respondent also referred to the decision of this Court in Trevor P. Isidore and Abdoulaye Kante v. M.N.R., rendered by Archambault J., May 23, 1997, and to the following passages:

[TRANSLATION]

Let us now consider how the provisions in question have been applied in the Quebec courts. In Saravia c. 101482 Canada Inc. [1987] R.J.Q. 2658, Judge Dumais of the Court of Quebec had to deal with the same point as is raised in these appeals, namely the legal effect of failure to obtain to a work permit under the Immigration Act. At page 2659, Judge Dumais dismissed the action for unlawful dismissal on the following ground:

Of course it is accepted by this Court that the Immigration Act, 1976 is of “public order”, and cannot be modified by a contract between private parties, nor can it be overlooked by the Court...

This Court cannot find otherwise: the Immigration Act, 1976 is a statute of public order, and a contract, knowingly or not, made in breach of one or many of its sections will be void and null. Such is the sanction clearly written in sections 13 and 14 of our Civil Code.

[14] Further on, at pages 8 and 9, Archambault J. concludes:

I therefore conclude, as Judge Dumais did in Saravia, that the Immigration Act is a statute of public order and that it is for the protection of the general interest. It is aimed at regulating who may come and remain in Canada. In particular, Canadian citizens and permanent residents (except in certain circumstances) have the right to come into and remain in Canada. The objectives set out in s. 3 of the Immigration Act make it clear that public order is one of the objectives sought by this Act. I consider that s. 18 of the Immigration Regulations, 1978 gives Canadian authorities one of the tools they must have in order to maintain public order in Canada.

It therefore seems to me to be clear that under Quebec law no valid contract of employment could exist between the appellants and their respective payers during the relevant periods. The object of the contracts during those periods was a prohibited one and accordingly the agreement between the appellants and their respective payers during those periods was null and void. ...

[15] In the above decision, Archambault J. relied on Saravia c. 101482 Canada Inc. (C.P.), [1987] R.J.Q. 2658. As we will see later from the decision of the Federal Court of Appeal in Still (supra), the critical element to determine whether public order is at stake in a matter of statutory prohibition similar to the one in question, will be the bona fides of the party seeking relief. Albeit, this element was not fundamental in the Saravia decision, it was however an element that was taken into account. I quote at page 2660:

In the case of the present petition, an examination on discovery of Respondent has proven that said Respondent did wilfully entering into a contract of employment with Petitioner, while knowing that he could not do so as an illegal resident of Canada, without a permit to work.

[16] The decision in Isidore and Kante (above) was rendered May 23, 1997. The decision of the Federal Court of Appeal in the Still matter was rendered November 24, 1997. It reversed a decision of our Court rendered pursuant to the law of Ontario, that had also found that the contract of employment was not valid on the ground of public order. Although the Reply to the Notice of Appeal was written many months after the Still decision, (the Reply is dated July 30, 1998), there is no reference in the Minister's assumptions of fact as to whether or not the Appellant acted in good faith.

[17] The Still decision was written by Robertson J.A., with Strayer J.A, and Linden J.A. concurring. The facts of that case are similar to the facts of the case at bar. It is a matter of whether there was insurable employment under the Act where the employment was not in compliance with section 18 of the Immigration Regulations, 1978. Robertson J.A. made an in depth analysis of the doctrine of illegality regarding the valid formation of a contract when that illegality comes from a non-compliance with a statutory provision. He stated that the purpose and object of the statutory prohibition is relevant when deciding whether the contract is or is not enforceable. The remedy being sought and the consequences which would flow from a finding that a contract is unenforceable have to be considered in determining the nature and the effect of the illegality. Public order certainly requires that a person should not benefit from his or her own wrong in a matter of illegality.

[18] Therefore, Robertson J.A. made the analysis of the purpose and object of section 18 of the Immigration Regulations, 1978 in paragraphs [51] and [52] of his reasons. He found that the clearest statement for the legislative purpose underlying the requirement of legal immigrants to obtain a work permit was to be found in subsections 20(1) and (3) of the Immigration Regulations, 1978. These provisions require to determine whether the employment of a person will adversely affect the employment opportunities of Canadian citizens or permanent residents in Canada. In the end, Robertson J.A. recognized that the purpose of the statutory provision in question was compelling, but not to the extent that it could alone be determinative of the issue as to whether the contract of employment was to be found null and unenforceable on the basis of illegality. He also found that the remedy being sought and the consequences from a finding of nullity would be excessive having regard to the purpose of the legislative enactment and the good faith of the person. The issue regarding the application of that particular statutory prohibition was then to be determined by the good faith of the person. It would indeed go against public order for a person to benefit from that person's own wrong.

[19] I wish now to refer to several passages of the Still decision:

[39] A contract which is either expressly or impliedly prohibited by statute is normally considered void ab initio. That is to say, prima facie neither party is entitled to seek the court's aid. This is so even if the party seeking relief acted in good faith. Ignorance of the law is no excuse. ...

[40] Applying the above doctrinal framework to the facts of this case, the first question is whether it can be said that subsection 18(1) of the Immigration Regulations, either expressly or impliedly prohibits persons such as the applicant from entering into and pursuing employment, without a work permit. In my view, the words of that provision leave no doubt that what the applicant did was prohibited by statute: "no person, other than a Canadian citizen or permanent resident, shall engage or continue in employment in Canada...". Even if I were to concede that those words do not evidence an express prohibition, it certainly arises by implication. ...

[41] Under the classical model of the illegality doctrine, the fact that the applicant acted in good faith is an irrelevant consideration. Accordingly, her employment during the period May 9, to September 23, 1993, constituted an illegal contract which was void ab initio. Assuming this to be so, the next issue is whether employment under an illegal contract can constitute insurable employment within the meaning of the Unemployment Insurance Act. If I accept that the applicant's employment contract was void from the outset then surely that question must be answered in the negative. Nonetheless, I am not prepared to accept the classical model for several reasons.

[42] First, I am of the view that the classical model has long since lost its persuasive force and is no longer being applied consistently. The doctrine is honoured more in its breach than in its observance through the proliferation of so-called judicial "exceptions" to the rule. ...

[43] The second reason for rejecting the classical model is that it fails to account for the reality that today a finding of illegality is dependent, not only on the purpose underlying the statutory prohibition, but also on the remedy being sought and the consequences which flow from a finding that a contract is unenforceable. It must be remembered that the law of illegality arose out of a live controversy between parties to an allegedly illegal contract. In this case, there is no live controversy between contracting parties and the ramifications of declaring an employment contract illegal are too far-reaching. For example, I might be prepared to speculate that an Ontario court would not hold the applicant's employer liable for breach of contract had it dismissed her after learning that she did not have the required work permit. But am I to assume that the applicant would have no right to unpaid wages earned prior to the dismissal or for that matter a right to the protection found in the Ontario Employment Standards Act [R.S.O. 1990, c. E-14]? What if the applicant's employer hired her knowing full well that she had not received a work permit. Would this factor make her claim for unpaid wages more palatable? What if the applicant had been injured on the job? Would an Ontario court conclude that she was not entitled to benefits under the Workers' Compensation Act of that province? The fact that so many statutes predicate entitlement or eligibility on an existing contract of service is reason enough for any court to decline the invitation to automatically declare any employment contract invalid on grounds of illegality, and more so if the declaration is based on the tenets of the classical doctrine of illegality.

[20] No jurisprudence was presented to me regarding Quebec acts similar to those mentioned in paragraph [43] of Robertson J.A.'s reasons that is acts having to do with safety, health and compensation. It would have been of the greatest interest to know if the administrative tribunals administering these types of legislation did not give some effect to situations of employment in the nature of the one that is at issue here. (Paragraph [44] of the Still decision, which refers to the application of the Civil Code of Quebec, has already been cited at paragraph [12] of these reasons.)

[45] It is true that this Court need only decide the issue of legality in the federal context and nothing we decide with respect to the validity or the enforceability of a contract of employment is binding on the provincial courts. Nonetheless, I believe that the Federal Court should strive to promote consistency in decision making with respect to entitlement to unemployment insurance benefits.

[21] I believe also that this Court should strive to promote consistency in the determination of what constitutes insurable employment in a matter regarding the interpretation of federal legislation.

[46] Professor Waddams suggests that where a statute prohibits the formation of a contract the courts should be free to decide the consequences (at page 372). I agree. If legislatures do not wish to spell out in detail the contractual consequences flowing from a breach of a statutory prohibition, and are content to impose only a penalty or administrative sanction, then it is entirely within a court's jurisdiction to determine, in effect, whether other sanctions should be imposed. As the doctrine of illegality is not a creature of statute, but of judicial creation, it is incumbent on the present judiciary to ensure that its premises accord with contemporary values. ...

[48] In conclusion, the extent to which the precepts of the common law doctrine of illegality are ill-suited to resolving the issue at hand provides the impetus for this Court to chart a course of analysis which is reflective of both the modern approach and its public law milieu. In my opinion, the doctrine of statutory illegality in the federal context is better served by the following principle (not rule): where a contract is expressly or impliedly prohibited by statute, a court may refuse to grant relief to a party when, in all of the circumstances of the case, including regard to the objects and purposes of the statutory prohibition, it would be contrary to public policy, reflected in the relief claimed, to do so.

[49] As the doctrine of illegality rests on the understanding that it would be contrary to public policy to allow a person to maintain an action on a contract prohibited by statute, then it is only appropriate to identify those policy considerations which outweigh the applicant's prima facie right to unemployment insurance benefits. Public policy is, of course, a variable concept which is more easily illustrated than defined (e.g. the case of the highwaymen discussed supra). In the present case, the public policy dimension manifests itself in two ways. The first is reflected in the strongly held belief that a person should not benefit from his or her own wrong. This is an alternative way of expressing moral disapprobation for wrongful conduct. The second rests in the understanding that relief should not be available to a party if it would have the effect of undermining the purposes or objects of the two federal statutes which are involved in this judicial review application. While on the one hand we have to consider the policy behind the legislation being violated, the Immigration Act, we must also consider the policy behind the legislation which gives rise to the benefits that have been denied, the Unemployment Insurance Act.

[51] On the other hand, there are the objectives underlying the restrictions found within the Immigration Act. The clearest statement of the purpose underlying the requirement that a person receive a work permit before engaging in employment is found in subsections 20(1) and (3) of the Immigration Regulations, 1978. Subsection 20(1) provides that an immigration officer shall not issue a work permit if "in his opinion" the employment of persons such as the applicant: "will adversely affect the employment opportunities for Canadian citizens...". Subsection 20(3) goes on to provide that in forming an opinion, the immigration officer is required to consider whether the prospective employer has made reasonable efforts to attract or train Canadian citizens or permanent residents. Consideration must also be given to: "whether the wages and working conditions offered [by the prospective employer] are sufficient to attract and retain in employment Canadian citizens or permanent residents."

[54] In my view, this is a case in which the bona fides of the party seeking relief is of critical significance. Ms. Still is not an illegal immigrant. In concluding that she acted in good faith, the Tax Court Judge took into consideration the government document provided to her. ...

[55] There is one other factor I believe to be of significance. It is open to ask whether the denial of unemployment benefits is a de facto penalty which is disproportionate to the statutory breach. I note that there is no express penalty for the breach in question and that a conviction under the general penal provision could not be obtained because of the requirement that a person knowingly contravene the Immigration Act. In effect, the applicant is not subject to any penalty under that legislation because of the statutory breach. If the Immigration Act is only concerned with those who knowingly fail to obtain a work permit, why should this Court impose a penalty amounting to thousands of dollars in benefits? .

[56] Having regard to objects of the Unemployment Insurance Act, the fact that the applicant is a legal immigrant to this country and that she acted in good faith, I am not prepared to conclude that she is disentitled to unemployment insurance benefits on the ground of illegality. I recognize that the object of the statutory prohibition is a compelling one, but that in the circumstances of this case the penalty imposed is disproportionate to the breach. Allowing the applicant to claim benefits would not invite people to come to Canada and work illegally. In fact, for a judge to find that an illegal immigrant to Canada acted in good faith would be nothing short of an oxymoron. The payment of unemployment insurance premiums would not by itself guarantee the right to benefits. No one is being given a licence to abuse Canada's social services. In the end, public policy weighs in favour of legal immigrants who have acted in good faith. To paraphrase the words of Justice McLachlin in Hall v. Hebert, supra, this is not a case where relief must be denied in order to "preserve the integrity of the legal system". In conclusion, it is in the public interest, not contrary to public policy, to grant unemployment benefits to the applicant.

[22] It was found by Robertson J.A., for the purposes of the Immigration Act and the Employment Insurance Act, that it was not necessary to sanction the non-compliance within section 18 of the Immigration Regulations, 1978, by the nullity of the contract for the protection of the general interest when that non-compliance occurred in good faith. The non-compliance that had occurred in the Still case was exactly of the same nature as the non-compliance in the case at bar. The Federal Court of Appeal being a tribunal above our Court and having jurisdiction in interpreting the federal acts such as the Immigration Act and the Employment Insurance Act, I feel bound by the rule of the stare decisis to its finding that compliance with section 18 of the Immigration Regulations, 1978, is not necessary for the protection of the general interest. Therefore, I conclude that the Appellant's contract of employment is not absolutely null within the meaning of article 1417 of the Civil Code of Quebec since it is a requirement of that article that the condition of formation be sanctioned by its nullity where it is necessary for the protection of the general interest.

[23] As I have previously mentioned, the element of good faith has not been raised in the Reply nor at the hearing, although the Respondent knew of the very possible implication of the Still decision in this matter. There was no debate on this aspect and I have no reason to believe that there was no good faith on the Appellant's behalf.

[24] The appeal is allowed.

Signed at Montréal, Quebec, this 7th day of December, 1998.

"Louise Lamarre Proulx"

J.T.C.C.