Date: 20070122
Docket: A-117-06
Citation: 2007 FCA 56
CORAM: LÉTOURNEAU
J.A.
EVANS
J.A.
MALONE
J.A.
BETWEEN:
DARSHAN NURSERIES INC., NIRMALJIT KAUR
RANDHAWA, AND
PARMINDER KAUR RANDHAWA
Appellants
and
THE MINISTER OF NATIONAL
REVENUE
Respondent
REASONS FOR JUDGMENT
EVANS J.A.
[1]
This is an
appeal by two employees, Nirmaljit Kaur Randhawa (“Nirmaljit”) and Parminder
Kaur Randhawa (“Parminder”), and their employer, Darshan Nurseries Inc.
(“Nurseries”) from a decision of Justice Little of the Tax Court of Canada. In
that decision, the Judge rejected their appeals from a ruling by the Minister
of National Revenue that Nirmaljit and Parminder were not in “insurable
employment” with Nurseries for the purpose of the Employment Insurance Act,
S.C. 1996, c. 23.
[2]
The
relevant provisions of the Act are as follows:
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2) Insurable
employment does not include
(i)
employment if the employer and employee are not dealing with each other at
arm’s length.
3) For the
purposes of paragraph (2)(i),
(a) the question of whether persons are not dealing with
each other at arm’s length shall be determined in accordance with the Income
Tax Act; and
(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.
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(2) N’est pas
un emploi assurable :
i) l’emploi
dans le cadre duquel l’employeur et l’employé ont entre eux un lien de
dépendance.
(3) Pour
l’application de l’alinéa (2)i) :
a) la question de savoir si des personnes ont entre
elles un lien de dépendance est déterminée conformément à la Loi de
l’impôt sur le revenu;
b) l’employeur et
l’employé, lorsqu’ils sont des personnes liées au sens de cette loi, sont réputés
ne pas avoir de lien de dépendance si le ministre du Revenu national est
convaincu qu’il est raisonnable de conclure, compte tenu de toutes les
circonstances, notamment la rétribution versée, les modalités d’emploi
ainsi que la durée, la nature et l’importance du travail accompli, qu’ils
auraient conclu entre eux un contrat de travail à peu près semblable s’ils
n’avaient pas eu de lien de dépendance.
|
[3]
The
periods of employment under review in this appeal are, for Nirmaljit, March 8
to July 3, 1999, February 7 to July 27, 2000, and April 5 to September 1, 2001.
For Parminder, the periods are March 20 to October 7, 2000, and May 7 to
October 20, 2001.
[4]
During
these periods, Nurseries was solely owned by Darshan Randhawa (“Darshan”).
Nirmjalit is his wife. Parminder is married to Darshan’s brother, Inderpal.
Justice Little concluded that, at the times relevant to this appeal, Nirmaljit,
Inderpal, and Parminder were employed by Nurseries under contracts of service.
This finding is not now challenged by the Minister.
[5]
Having
held that these employees were related to their employer for the purpose of the
Act, the Judge concluded that there was sufficient evidence for the Minister
not to be satisfied that, “having regard to all the circumstances”, it was
“reasonable to conclude” that Nirmaljit and Parminder “would have entered into
a substantially similar contract of employment if they had been dealing with
each other at arm’s length.” Since Nirmaljit and Parminder were not dealing
with Nurseries at arm’s length, they were not in insurable employment. However,
the Judge allowed Inderpal’s appeal, on the ground that his work had been
remunerated by promissory notes and Darshan’s subsequent transfer to him of 50%
of the shares in Nurseries.
[6]
The nub of
the dispute concerns the extent to which unrelated employees of Nurseries were
paid in priority to the appellants. The Minister’s argument was that, because
unrelated employees were paid more regularly and with less delay than the
appellants, it was not reasonable to conclude that unrelated employees would
have accepted the same conditions of employment as the appellants. The Judge
noted the irregularity and delays in the payment of wages to Nirmaljit and
Parminder, and concluded the unrelated employees were paid in priority to the
appellants.
[7]
The
appellants appeal to this Court on the ground that, on the evidence before him,
the Judge’s conclusion was erroneous. In particular, they say, Nurseries had a
serious cash-flow problem because it could not sell its trees and shrubs until
they had sufficiently matured, which occurred some considerable time after the
employees had performed their work. The situation was exacerbated by Darshan’s
inefficient management of the business, especially during a period of poor
health. The evidence shows, they allege, that unrelated employees, who appear
not to have been reliant on their wages from Nurseries, remained loyal to
Darshan, confident that they would eventually be paid for their work, as indeed
they were, when the business’s finances permitted.
[8]
Because
the appellants impugn the Judge’s findings on questions of fact, and questions
of mixed fact and law, they must demonstrate that his conclusion was vitiated
by palpable and overriding error. It is important to note in this regard that
the hearing in the Tax Court lasted six days and involved an array of witnesses
and a mass of documents, many of which concerned Nurseries’ pay practices.
[9]
In these
circumstances, it is particularly salutary for an appellate court to recognize
the advantages which the Tax Court Judge had in seeing and hearing the
witnesses, and immersing himself in the evidence. A rational basis in the facts
and the evidence for the Judge’s conclusions will suffice to uphold his
decision. We are not persuaded that they lacked that rational basis.
[10]
The
appellants’ witness, Hardeep Wadhawan, a payroll clerk employed by Nurseries’
accountants, GP Wadhawan Inc., prepared a payroll summary showing the annual
income of employees of Nurseries, and the dates and amounts of the cheques made
out to them in payment of their wages. In my opinion, these, together with more
detailed documentary evidence respecting the number of hours and dates that
employees worked, and the wages that they earned, provide a reasonable basis
for the Judge’s conclusion that the appellants were paid later and less
regularly than unrelated employees.
[11]
For
example, the payroll summary (Appeal Book, vol, 2.3, pp. 736-41) shows (at p.
736) that an unrelated employee, Manjit Mann, received 6 cheques in 1999, 8 in
2000, and 5 in 2001, generally at approximately monthly intervals. Baljit Sidhu
(at p. 737) received 8 cheques in 1998, and Sarabjit Rai (at p. 739) received 8
cheques in 1998, 5 in 1999, and 7 cheques in 2000.
[12]
In
contrast, the Judge found that Nirmaljit had accrued wages of more than $22,000
in taxation years 2000 and 2001, but was not paid by Nurseries what she was
owed until May 2002. According to the Judge, Parminder had accrued wages of
more than $28,000 in 2000 and the first half of 2001, but was not paid any
wages until July 2001, and was not fully paid until May 2002. Counsel for the
appellants does not challenge these findings. Indeed, he concedes that, unlike
the appellants, no unrelated employee had to wait a year, and more, to be paid.
[13]
Counsel
for the appellants says that Darshan testified that he did not always have
sufficient cash to pay all his employees for work done, and prioritized the
payment of wages on the basis of need, not intending thereby to favour the
unrelated employees over the appellants. In my view, the intentions of the
employer are not relevant. The question is whether it is reasonable to
conclude, on the basis of all the circumstances of the employment, including
delays in and the regularity of the payment of wages to the appellants, whether
unrelated employees would have accepted similar conditions of employment. The
fact that Darshan eventually paid all his employees does not undermine the
Judge’s conclusion.
[14]
Counsel
for the appellants also submits that the Judge erred when he stated at
paragraphs 16 and 19 of the reasons that Paul Wadhawan, Nurseries’ accountant,
testified that Nurseries paid the unrelated employees ahead of the appellants.
Counsel for the respondent admits that the Judge made a mistake in attributing
this statement to Paul Wadawhan. He should have said that the payroll summaries
put into evidence by Hardeep Wadawhan showed that unrelated employees were paid
more regularly and with less delay than the appellants.
[15]
It is
unfortunate that the Judge erroneously attributed to the testimony of Paul
Wadawhan his conclusion respecting the relative treatment of unrelated and
related employees with regard to the payment of wages. It would certainly have
been helpful if the Judge had made some analysis of the payroll summaries,
which, surprisingly, were not the subject of discussion at trial.
[16]
Nonetheless,
I am not persuaded that these shortcomings in the reasons warrant the
intervention of the Court and a new trial. The Judge’s conclusion respecting
differences in the wage treatment of the appellants and unrelated employees is
supported by the evidence before him, and justifies his ultimate determination
that there was sufficient evidence for the Minister not to be satisfied that it
was reasonable to conclude that unrelated employees would have agreed to be
employed on substantially similar conditions as the appellants.
[17]
For these
reasons, I would dismiss the appeal, but, in view of the error in the Judge’s
reasons, without costs.
“John
M. Evans”
“I
agree.
Gilles
Létourneau J.A.”
“I
agree.
B.
Malone J.A.”
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