Date: 20060616
Docket: A-569-05
Citation: 2006 FCA 226
CORAM: DÉCARY
J.A.
LÉTOURNEAU
J.A.
NOËL
J.A.
BETWEEN:
LORRAINE MALENFANT
Appellant
and
THE ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
[1]
This is
another case of employment insurability involving a small incorporated
business, Érablière Jean-Yves Malenfant Inc. (the payer). As is often the case,
the issue arises as the result of a retroactive determination made by the
Minister of National Revenue (Minister) to the effect that the payer and the
appellant, Ms. Malenfant, who is Jean-Yves Malenfant’s spouse and sole
shareholder of the payer, would not have concluded similar contracts of
employment if they were in an arm’s length relationship.
[2]
As is
often the case, because of its retroactivity, this determination under
paragraph 5(2)(i) of the Employment Insurance Act, S.C.
1996, c. 23 (Act) involves a claim for amounts paid, which in this case, we are
told, add up to some $38,000 for the years 1999 to 2004.
[3]
The
business in question operates a maple sugar bush and sells firewood. The modest
gross income for this business, which is not contested, is as follows for the
years 2000 to 2003 (see appellant’s record at page 65):
maple products sale of wood
12/31/00 $12,006
$48,104
12/31/01 $85,766
$24,479
12/31/02 $62,166
$75,539
12/31/03 $91,791
$66,647
[4]
Depending
on the year, the payer would hire between three and six employees, which
included Mr. and Ms. Malenfant.
[5]
After
having examined the criteria specified by the Act and developed by case law for
the analysis of the question of the insurability of such employment, Mr.
Justice Dussault (judge) of the Tax Court of Canada concluded that the
employment held by the appellant for the periods in question was not insurable.
A summary of these reasons is contained in paragraphs 41 to 45 of the decision,
which read as follows:
[41]
The Respondent’s decisions cover specific periods of employment. However, the
fact that a person provides services to a Payer year round for several years
cannot be ignored in assessing the relationship between the parties.
[42]
The documents entered in evidence show unequivocally that the Appellant managed
the Payer’s business yearround. However, it is impossible to determine exactly
how much time was actually spent on management of the business compared with
work related to production per se during sugaring season. However, by
her own estimate in the statutory declaration she signed on July 27, 2004, the
Appellant said that the duties she described as “accounting” for the business
may have amounted to the equivalent of one month’s work. The few hours declared
or indicated in the pay book outside the periods of full-time employment, where
they were so declared or indicated in some years, surely did not represent the
work done by the Appellant in managing the business. The only conclusion to be
drawn is that the Appellant was not always paid for the services provided to
the Payer.
[43]
During the hearing, both Mr. Malenfant and the Appellant said that she did
not work for free and that she was always paid for her services, contradicting
their earlier statements on that subject. There is a possibility that this
about-face is attributable to the fact that they realized later that their
statements could hurt their case. At a minimum, such contradictions cast
serious doubt as to whether the Appellant was actually paid for all the hours
she worked during the periods of full-time employment, usually in the spring,
and on the basis of which the Minister made his decisions.
[44]
The other important factor on which the Minister’s decisions were based is the
consistent delay in paying the Appellant’s salary each year. That factor was
amply demonstrated both by the statutory declarations and by the testimony and
the documents entered in evidence. While it may be that an employee
occasionally agrees to or tolerates a delay in the payment of his or her
salary, I believe that a consistent delay of several weeks and even several
months year after year is not a situation that would be acceptable to a person
dealing at arm’s length with a payer. Mr. Malenfant himself said that the other
employees were paid regularly using a line of credit and not, like him and the
Appellant, when he received a payment from the Federation for the maple syrup
it purchased.
[45] I
believe that these factors carry sufficient weight to allow me to conclude that
the decisions made by the Minister still seem reasonable and that intervention
by the Court is not warranted in the circumstances.
[6]
Counsel
for the appellant’s lawyer attacks the judge’s conclusions concerning the hours
worked by the appellant and paid, the extent of her voluntary work and the
matter of the delay in receiving her pay for work performed. The judge
qualified this delay as being systematic.
[7]
The
conclusions reached by the judge on these points are conclusions of fact which
required an assessment of the testimony and documentary evidence as well as of
the credibility of the witnesses. These conclusions are supported by evidence
on record. Saving any exceptions which do not apply here, conclusions based on
matters of credibility are of the jurisdiction of the judge who saw and heard
the witnesses.
[8]
Counsel
for the appellant submitted that this appeal was governed by the principles
established by our Court in Théberge v. Canada (Minister of National
Revenue), 2002 FCA 123, applied in Chouinard v. Minister of National
Revenue, 2003 FCA 338.
[9]
More
specifically, he relies on paragraphs 7, 19 and 20 of the reasons of Mr.
Justice Décary in Théberge. These paragraphs read as follows:
The judge therefore
proceeded to examine the evidence given before him and concluded that the
employment had to be excepted. With respect, I am of the opinion that this
Court must intervene. The judge erred by failing to consider both the
Minister's allegations and the criteria referred to in paragraph 3(2)(c):
the remuneration paid, the terms and conditions, the duration and the nature
and importance of the work performed. He also erred by considering almost
exclusively the duration and the nature and importance of the work performed
outside of the periods of employment at issue.
What a claimant does
outside the period during which he or she is employed in what the Minister
considers to be insurable employment can be relevant, for example, to verify
that the claimant is unemployed, to determine the amount of his or her
benefits, or to establish his or her period of unemployment. However, for the
purposes of the exception provided in paragraph 3(2)(c) of the Act, what
a claimant does outside of his or her period of employment will be of little
relevance when, as in this case, it is not alleged that the salary paid during
the period of employment took into account the work performed outside of that
period, that the applicant had included, in the hours spent on his or her
insurable employment, hours worked outside of the period, or that work
performed outside of his or her period of employment had been included in the
work performed during his or her period of employment. It seems to me to be
self-evident, and this is confirmed by the evidence, that in the case of family
businesses engaged in seasonal work, the minimal amount of work that remains to
be done outside the active season is usually performed by family members,
without pay. Excepting seasonal employment, in a family farm business, on the
ground that cows are milked year-round amounts, for all practical purposes, to
depriving family members who qualify by working during the active season of
unemployment insurance and to overlooking the two main characteristics of such
a business: that it is a family business and a seasonal business.
A claimant is not
required to remain completely inactive while he or she is receiving benefits.
Under section 10 of the Act, benefits are payable for each “week of
unemployment” included in the benefit period and a "week of
unemployment" is a week during which the claimant does not work a full
working week. Under subsection 15(2) of the Act, a claimant may have earnings
in respect of any time that falls in a week of unemployment and those earnings
will be deducted only if they are in excess of an amount equal to twenty-five
per cent of the claimant's weekly benefit. It is moreover settled law that work
that is truly unpaid does not affect a claimant's status as unemployed (Bérubé
v. Canada (Employment and Immigration), (1990) 124 N.R. 354 (F.C.A.)).
[10]
The
appellant submitted that the judge did not abide by the obligations mentioned
in the first paragraph cited. With respect, this submission is unfounded
because the judge reviewed the allegations of the Minister on the basis of the
factors mentioned in that judgment.
[11]
As far as
the ratio decidendi in Théberge is concerned, I do not think it
applies in this case. Here, we are not dealing with a strictly seasonal family
business, as was the case in Théberge. The business for which the
appellant worked operated throughout the year and also employed persons who
were at arm’s length. In addition, the pay received by these persons was as a
rule different from what the appellant accepted and received and could not be
explained otherwise but by the fact that the appellant and payer were not
dealing at arm’s length. There was nothing like this in Théberge.
Finally, in Théberge, there was no substantial number of hours spent on
voluntary work during the paid hours of work, unlike in the case at bar.
[12]
However, I
cannot conclude this judgment without underlining, as I stated at the hearing,
the harm caused to the appellant by the retroactive determination by the
Minister as to the insurability of the employment. Counsel for the respondent
told us there was a possibility of writing off all or part of the amount due.
Without getting involved in any way with this prerogative, which belongs to the
Minister, I feel this is a case in which this possibility should be considered
for a substantial part of the amount in issue.
[13]
For these
reasons, I would dismiss the appeal, but without costs in the circumstances.
“Gilles
Létourneau”
“I
concur
Robert
Décary J.A.”
“I
concur
Marc
Noël J.A.”
Certified
true translation
Michael
Palles
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