Date: 20000911
Docket: A-59-98
CORAM: DESJARDINS J.A.
McDONALD J.A.
BETWEEN:
MANGIT K. MANGAT
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
Docket: A-60-98
BETWEEN:
ADAR MANGAT
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, British Columbia, on Monday, May 1, 2000.
Judgment rendered at Ottawa, Ontario, on Monday, September 11, 2000.
REASONS FOR JUDGMENT BY: McDONALD J.A.
CONCURRED IN BY: DESJARDINS J.A
LÉTOURNEAU J.A.
Date: 20000911
Docket: A-59-98
CORAM: DESJARDINS J.A.
McDONALD J.A.
BETWEEN:
MANGIT K. MANGAT
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
Docket: A-60-98
BETWEEN:
ADAR MANGAT
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
McDONALD J.A.
[1] The applications for judicial review made by Mangit Mangat (A-59-98) and Adar Mangat (A-60-98) were heard together. The Applicants seek judicial review pursuant to section 28 of the Federal Court Act1 of a decision by the Tax Court of Canada issued February 13, 1998, dismissing an appeal from an assessment made by the Minister of National Revenue ("the Minister").
The Facts
[2] During the years in question (1993, 1994 and 1995) Mr. (Adar) Mangat and Mrs. (Mangit) Mangat owned motor vehicles which they leased to individual taxi drivers. In order to operate a taxi cab in British Columbia one must hold a licence from the Motor Carrier Commission (pursuant to the Motor Carrier Act2). Neither of the Applicants held such a licence. Instead they owned shares in and entered into agreements with two companies ("White Rock" and "Surdell") which owned taxi licences and ran dispatching services.
[3] The operations of White Rock and Surdell are identical. Owning shares in the companies entitles a shareholder, like the applicants, to the use of a licence (the number of shares required varies from company to company). Each company holds taxi cab licences, operates dispatching services, advertises taxi services and owns the communication equipment, taxi fare meters and car rooftop lights. In addition to the costs of their shares the Applicants paid White Rock and
Surdell a monthly fee for their dispatching services and paid a share of all advertising.
[4] The Applicants leased out their motor vehicles to drivers. All of the services of the taxi dispatch companies were included in the cost of the lease. However, the Applicants claim not to be the parties who hired the taxi drivers, saying that this was the responsibility of the taxi dispatch companies. Who in fact hired the drivers is a disputed matter in this appeal. However the Tax Court Judge found at paragraph 12 of his reasons that the role of the taxi dispatch companies in the hiring process was concerned with approving of proposed drivers upon being satisfied that they possessed the class of driver's licence required for driving a taxi. Beyond that, there is no finding by the Tax Court Judge as to who hired the taxi drivers.
[5] The Applicants were assessed for unemployment insurance premiums not remitted to the Ministry during the years 1993, 1994 and 1995 on the basis that the Applicants were deemed employers of the drivers within the meaning of the Unemployment Insurance Act,3 and regulations, in particular paragraph 12(e) of the Unemployment Insurance Regulations4 and subsection 17(1) of the Unemployment Insurance (Collection of Premiums) 5 Regulations.
These regulations read as follows:
Unemployment Insurance Regulations Règlement sur l'assurance-chômage
12. Employment in any of the following employments, unless it is excepted employment under subsection 3(2) of the Act or excepted from insurable employment by any other provision of these Regulations, is included in insurable employment:
....
(e) employment of a person as a driver of any taxi....
12. Sont inclus dans les emplois assurables, s'ils ne sont pas des emplois exclus en vertu du paragraphe 3(2) de la Loi ou d'une disposition du présent règlement, les emplois suivants:
....
e) l'emploi exercé par une personne à titre de chauffeur de taxi...
Unemployment Insurance (Collection of Premiums) Regulations
Règlement sur l'assurance-chômage (perception des cotisations)
17. (1) The owner, proprietor or operator of a business or public authority that employs a person in employment described in paragraph 12(e) of the Unemployment Insurance Regulations shall, for the purposes of maintaining records, calculating insurable earnings and paying premiums under the Act and these Regulations, be deemed to be the employer of every such person whose employment is included in insurable employment by virtue of that paragraph.
17. (1) Le propriétaire ou l'exploitant d'une entreprise privée ou d'un établissement public qui occupe une personne à un emploi visé à l'alinéa 12e) du Règlement sur l'assurance-chômage est réputée, aux fins de la tenue des registres, du calcul de la rémunération assurable et du paiement des cotisations aux termes de la Loi et du présent règlement, être l'employeur de toute personne qu'il occupe ainsi et dont l'emploi est inclus dans les emplois assurables en vertu dudit alinéa.
The result of the assessment was that the Applicants were deemed to be employers of the drivers of their taxi cabs, and thus responsible for collecting employee premiums and for paying them together with their own premiums as an employer.
Tax Court Decision
[6] The Applicants' appeal to the Tax Court of Canada was dismissed. The Tax Court Judge found that the Applicants were deemed employers within the terms of the regulations. He determined that the Applicants were in the business of owning and maintaining taxi cabs which they lease to taxi drivers. This conclusion was based in large part on the finding that the lease rate was negotiated between the Applicants and the drivers, and that the lease rate paid by the drivers to the Applicants included the cost of the services provided by the taxi dispatch companies. As the Tax Court Judge stated at paragraph 22:
| By buying shares in these (taxi dispatch) companies, the Appellants (Applicants herein) were able to convert an ordinary motor vehicle into a taxi cab and by paying the monthly charges (to the companies), the lessees of their cabs had access to dispatch services and the benefit of group advertising and a group fleet image. It was this whole package the drivers leased from the Appellants. |
[7] There is a typographical error in the Tax Court Judgment in paragraph 2. The judgment reads "The only issue before me is whether the Appellants are employees within the terms of the Act" it should read: "The only issue before me is whether the Appellants are employers within the terms of the Act..." This error is not of a substantive nature and thus does not affect the findings of the Tax Court.
[8] There is no dispute as to the amounts of the assessments at issue in this application. The only issue is whether the Applicants are deemed employers within the meaning of the Unemployment Insurance Act and the relevant regulations.
Were the Applicants deemed employers for the purposes of the Act?
[9] The combined effect of subsection 17(1) of the Unemployment Insurance (Collection of Premiums) Regulations and Paragraph 12(e) of the Unemployment Insurance Regulations is that the owner, proprietor or operator of a business that employs a person as a driver of a taxi is deemed to be an employer for the purposes of the Act. The essential question in this case is whether the Applicants, as owners of the taxis, employ persons as drivers, or whether the taxi dispatch companies fulfil that role.
[10] The Applicants contend that the employer-employee relationship was between the taxi dispatch companies and the drivers. The Applicants maintain they did not "operate" the taxi business but, rather, turned that role over to the companies whose services they contracted. It is the Applicants' position that they simply leased their vehicles to the taxi drivers. The Applicants place significant weight on the fact that they did not pay the drivers and that in fact, money flowed in the opposite direction as the drivers paid the Applicants for the use of their vehicles.
[11] In my view, the direction of the flow of money as between the taxi drivers and the Applicants is irrelevant in this case. The nature of the taxi business is that the driver, as employee, receives income from the customers and then turns over the appropriate amount to the owners. The amount leftover constitutes the driver's salary. The fact that the money flows in the opposite direction from the normal employment relationship does not relieve the Applicants of their duty to collect the appropriate unemployment insurance premiums. The Applicants simply had to include the premiums in the amount charged to the driver for the lease.
[12] On the facts as found by the Tax Court Judge, the Applicants provided more than a vehicle to the taxi drivers. Included in the amount charged to the drivers was the use of the taxi licence and the services of the taxi dispatch companies. The contractual relationships flowed from the companies to the Applicants and from the Applicants to the drivers. The drivers had no direct relationship with the taxi dispatch companies. The interactions between the drivers and the taxi dispatch companies were mediated by the Applicants. In other words, without the contract between the taxi dispatch companies and the Applicants, the drivers would have no relationship with the companies.
[13] As a practical matter, the taxi dispatch companies are in no position to collect the premiums from the drivers. They have no direct employment relationship with the drivers and do not receive any remittances from the drivers. In nearly all respects, the taxi dispatch companies deal directly with the owners of the taxis.
[14] In seeking to demonstrate that they are not in fact the employer of the taxi drivers, the Applicants also argue that they did not hire the drivers, that this was the responsibility of the taxi dispatch companies. The Applicants say that the Tax Court Judge's finding that they are the employers of persons they did not hire was in error.
[15] I do not agree. While the taxi dispatch companies had some input into the hiring of drivers, simply having a share in the responsibility for hiring is not determinative of an employment relationship. To conclude that the taxi drivers were the employees of the taxi dispatch companies on this basis would require one to ignore all of the other elements of the arrangement through which the Applicants leased their vehicles to the taxi drivers. I note that in oral argument, counsel for the Applicant did not take issue with the findings of the Tax Court Judge concerning connection between the Applicants and the taxi drivers under the lease arrangement.
[16] It is not necessary for the Applicants to control all aspects of the hiring process in order to employ a person as a driver of a taxi. Hiring is but one stage of an employment relationship. The Tax Court Judge correctly looked at all of the circumstances of the relationship between the taxi drivers and the Applicants in concluding that they employed the drivers. Furthermore, even if I were to accept that the companies had effective control over the hiring process, which is far from clear in my view, one could plausibly assert that in the circumstances, the companies were acting on behalf of the owners of the taxi cabs.
Case Law
[17] The Tax Court Judge relied on two cases -- 715341 Ontario Ltd. v. The Minister of National Revenue, (1993), 162 N.R. 392 and John Witwicki v. The Minister of National Revenue, NR 13, July 31, 1974 (Mahoney J.).
[18] With respect to the Witwicki case, both parties agree that the Tax Court Judge misdirected himself in relying on this case because it goes against his finding in the case at bar. The Tax Court took Witwicki to stand for the proposition that the owner of the vehicle was the proper person to be assessed by the Minister. The Court in Witwicki actually found, based on the evidence presented to the Umpire, that the taxi drivers were employees of the dispatch service. However, this misdirection does not seem to rise to the level of reviewable error for two reasons. First, the Witwicki decision was not binding upon the Tax Court Judge, and in any event was distinguished in Harry Hrudey v. M.N.R., NR 24, September 3, 1974 (Heald J.) a case with facts very similar to the case at bar. Second, the Tax Court Judge's reliance on the Witwicki decision was not material to his disposition of the case. Rather, the decision in 715341 Ontario Ltd. had more import to the Tax Court Judge's finding.
Assessment of Premiums
[19] The Applicants submitted an alternative argument not raised at trial. The Respondent did not make any objection to the introduction of this argument as it turns on a question of law and therefore there is no concern about whether sufficient evidence exists on the record to deal with the issue.
[20] The Applicants argue that if they are found to be employers for the purposes of the Act, the amount assessed should only include the employers' portion of the premiums. The Applicants submit that the Minister has no statutory authority to assess an employer for the employees' portion of the premiums. They maintain that subsection 56(1) of the Unemployment Insurance Act only empowers the Minister to assess amounts payable under the Act and not under the regulations. Therefore, the Applicants argue the Minister is only authorized to collect an employers' premium from an employer.
[21] In my view, this argument cannot succeed. Subsection 56(1) of the Act provides that "the Minister may assess an employer for an amount payable by him under this Act..." There is nothing in the wording of this section that restricts its meaning to amounts payable by the employer for his/her share of the premiums. The Respondent's position is a more tenable one: that subsection 56(1) must be read in conjunction with subsections 53(1) and (2) in order to determine what amounts the Minister is permitted to assess. Subsections 53(1) and (2) clearly contemplate that the employer shall remit both the amount of the employee's premium and the amount of the employer's own premium.
[22] Amendments to subsection 53(1) of the Act were made during the relevant time in this case.6 However, in my view the substance of the subsection was not materially changed from the version which was in effect for the first two of the three years in question in this proceeding. The amended subsection 53(1) and subsection 53(2) are as follows:
| 53.(1) Every employer paying remuneration to a person employed by the employer in insurable employment shall deduct from that remuneration as or on account of the employee's premium payable by that insured person under section 51 for any week or weeks in respect of which that remuneration is paid
such amount as is determined in accordance with prescribed rules and shall remit that amount, together with the employer's premium payable by the employer under that section for such week or weeks, to the Receiver General at such time and in such manner as is prescribed.....
| (2) Subject to subsection (3), every employer who fails to deduct and remit an amount from the remuneration of an insured person as and when required under subsection (1) is liable to pay Her Majesty the whole amount that should have been deducted and remitted from the time it should have been deducted. |
|
53.(1) Tout employeur qui paie une rétribution à une personne exerçant à son service un emploi assurable est tenu de retenir sur cette rétribution, au titre de la cotisation ouvrière payable par cet assuré en vertu de l'article 51 pour la ou les semaines pour lesquelles cette rétribution est payée, un montant déterminé en
conformité avec les règles prescrites et est tenue de verser ce montant au receveur-général avec la cotisation patronale correspondante payable en vertu de cet article, au moment et de la manière prescrits...
(2) Sous réserve du paragraphe (3), tout employeur qui n'effectue pas, aux conditions et au moment prévus au paragraphe (1), la retenue sur la rémunération d'un assuré et son versement est débiteur envers Sa Majesté, à partir de la date où la retenue aurait dû être effectuée, de la somme globale qui aurait dû être retenue et versée.
|
[23] This wording in subsections 53(1) and (2) gives content to the phrase "amount payable" in subsection 56(1). The amount payable by the employer includes the amount collected from employees in respect of their premiums or the amount which ought to have been collected from the employee according to subsection (1). The Minister is, therefore, authorized to assess the employer for the full amount of the premiums payable under the Act.
[24] The Applicants submit that section 53 does not apply to the situation at issue in this case since they do not pay remuneration to the individuals who drive their taxi cabs. This argument goes back to the issue addressed earlier concerning the flow of money. The Applicants rely on the fact that they do not provide the drivers with a pay-cheque to support their claim that section 53 does not apply to them. They would have this Court restrict the meaning of "paying remuneration" to situations where money actually changes hands from the employer to the employee.
[25] I do not agree with the Applicants' position on this issue and find it problematic for a number of reasons. First, the wording of paragraph 12(e) of the Unemployment Insurance Regulations explicitly includes employment as a driver of any taxi in insurable employment. By definition, employees are paid remuneration. This is a significant difference between one who is self-employed and one who is an employee. The was surely an awareness of the practices of the taxi industry when paragraph 12(e) was drafted. Indeed, the fact that taxi drivers were explicitly included as insurable employees seems to speak to the fact that some confusion might otherwise result from these practices. The Unemployment Insurance Regulations appear intended to avoid such confusion by explicitly including taxi drivers as insurable employees and not as self-employed individuals.
[26] The simple fact that the drivers give money to the employer and not vice versa does not mean that the driver is not being paid remuneration. The actual way in which the driver receives payment is immaterial. It is a fact that the money collected by the driver belongs to the owner of the vehicle. The driver can only keep that which he/she is entitled to according to the agreement with the owner. In theory this relationship is the same as the more traditional employment arrangement. The employee generates money for the employer and the employer returns a certain portion of that money to the employee as remuneration for services rendered. In the case at bar the parties have simply skipped the step of turning over all the money to the employer only to have the employer turn around and give a portion back to the drivers. Taxi drivers simply keep their portion, as per their agreement with the employer. This does not negate the fact that the drivers are being remunerated for their work.
[27] Finally, the Applicants rely on the proposition that remuneration takes only one form, that being tangible payment given to the employee by the employer. The scope of the term "remuneration" has been considered by this Court in Sheridan v. Minister of National Revenue (1985), 57 N.R. 69 at 74. In that case Justice Heald relied on the following definition:
| The Shorter Oxford Dictionary (3rd Ed.) defines "remunerate" and "remuneration" as follows: |
| 1. trans. to repay, requite, make some return for (services etc.) |
| 2. to reward (a person); to pay (a person) for services rendered or work done... |
| Hence remuneration, reward, recompense, repayment, payment, pay. |
| Volume 4 of Stroud's Judicial Dictionary (4th Ed.) states inter alia, that "remuneration" means a quid pro quo.7 |
[28] The Supreme Court of Canada has also considered the meaning of "remuneration" in Canada (Attorney General) v. Canadian Pacific Ltd. [1986] 1 S.C.R. 678. Mr. Justice La
Forest's reasoning at page 687 is particularly instructive.
| ...The expression "remuneration ... paid by his employer" in the English version, "rétribution ... qui lui est payée par son employeur" in the French version, may also appear equivocal. According to Le Petit Robert (1984), rétribution means "ce que l'on gagne par son travail", a definition that does not give much assistance. But the word "remuneration" in the English version throws more light on the subject. In Skailes v. Blue Anchor Line Ltd., [1911] 1 K.B. 360, the English Court of Appeal interpreted this expression for the purposes of the Workmen's Compensation Act of the time as comprising not only a bonus paid to a purser by his employer, but also the profits from the sale of liquor to passengers on board. If one adopts this approach, it seems to me that the word can also include a tip paid to the employer for distribution to his employees. As to the word "paid", which can equally well mean mere distribution by the employer or payment of a debt owing by him, I would simply observe that if one gives the word "remuneration" a broad meaning, one must also give a broad meaning to the word "paid". |
[29] Clearly, the words "paying remuneration" should not be read so narrowly so as to exclude the situation at issue in this case. The drivers are "rewarded" for their work as they keep a certain portion of the day's earnings. Interpreting the words "paying" and "remuneration" broadly it becomes clear that this is the effect of the arrangement between the Applicants and the taxi drivers.
[30] Section 53 of the Act thus applies to the Applicants and must inform the interpretation of section 56. Specifically, section 53 makes it clear that the amount payable by the employer, as referred to in subsection 56(1) includes the amount deducted, or that which ought to have been deducted from the employee's earnings.
Conclusion
[31] The applications should be dismissed with costs. The Tax Court Judge made no palpable and overriding errors with respect to his findings of fact and committed no jurisdictional error in concluding that the Applicants were deemed employers for the purposes of the Unemployment Insurance Act. Finally, the Minister was authorized to assess the Applicants for the full amount of the premiums due.
[32] A copy of these reasons should be filed in Court File No. A-60-98, and should be considered the reasons for judgment in each case.
"F.J. McDonald"
J.A.
"I concur,
Alice Desjardins J.A."
"I concur,
Gilles Létourneau J.A."
__________________
1 R.S.C. 1985, c. F-7.
2 R.S.B.C. 1979 c. 286.
3 R.S.C. 1985, c. U-1.
4 C.R.C. Vol. XVIII, c. 1576.
5 C.R.C. Vol. XVIII, c. 1575.
6 S.C. 1994, c. 21, ss. 129(1). Under subsection 129(2) of the amending legislation, the new version was made applicable after 1994. The prior version can be found at S.C. 1993, c. 24, ss. 151(1).
7 Page 2324 - the authority for this definition is said to be the judgment of Blackburn J. in R. v. Postmaster General, 1 Q.B.D. 663, 664.
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