Clément v. M.N.R., docket 95-2465-UI

Date: 19980113

Docket: 95-2465-UI

BETWEEN:

SAUPHONIE CLÉMENT,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

AND

910256 ONTARIO INC.,

Intervener.

Reasons for Judgment

LAMARRE, J.T.C.C.

[1] These are appeals from two decisions by the Minister of National Revenue ("the Minister") that the appellant did not hold insurable employment with the company 910256 Ontario Inc. ("the company"), doing business under the trade name "La Binerie", for the following periods:

from May 5, 1991 to November 2, 1991;

from May 3, 1992 to October 30, 1992;

from May 1, 1993 to October 31, 1993; and

from May 1, 1994 to October 31, 1994.

Preliminary decision for the period in 1991

[2] This case was first heard by a deputy judge of the Tax Court of Canada, who gave a decision on December 9, 1996. In his decision Deputy Judge Allard dismissed the appeals except for the period from May 5 to November 2, 1991, a period for which counsel for the respondent had consented to judgment at the hearing. This judgment was the subject of an application for judicial review to the Federal Court of Appeal. By that application the appellant asked the Federal Court of Appeal to quash the decision rendered by Deputy Judge Allard, except for the period from May 5 to November 2, 1991. By a judgment rendered on July 31, 1997, approving a consent to judgment between the parties, the Tax Court of Canada decision of December 9, 1996 was quashed by the Federal Court of Appeal and the matter referred back for re-determination by a judge other than the judge who rendered the subject decision.

[3] The case accordingly came back before me for re-hearing. Counsel for the respondent then indicated that he intended to show that the Minister's decisions should be affirmed for all the periods which were initially the subject of appeals before this Court, including the period from May 5 to November 2, 1991.

[4] Counsel for the appellant objected to 1991 again being brought into question since the respondent had already consented to judgment for that period and the period was not appealed to the Federal Court of Appeal. Furthermore, counsel for the parties had never made any reference to questioning 1991 at the time of the consent to judgment in the Federal Court of Appeal. It was not until some days before the re-hearing in this Court that counsel for the respondent raised this point.[1]

[5] Counsel for the respondent argued that the Minister had mistakenly consented to judgment at the first hearing and if the Federal Court of Appeal did not see fit to split the decision which was quashed, it could be inferred that 1991 was still pending before this Court (counsel for the respondent cited the Federal Court of Appeal judgment in C.N.R. v. Brotherhood, 98 N.R. 133, in support of his contention).

[6] In my opinion 1991 cannot be questioned in the instant proceeding. The conclusions sought by the appellant in her application to the Federal Court of Appeal for judicial review clearly indicated that the appeal did not relate to 1991. In quashing the Tax Court of Canada decision rendered on December 9, 1996, the Federal Court of Appeal judgment could only deal with the years at issue before it, which were 1992, 1993 and 1994:

The conclusions constitute the pivot of any judicial review remedy. They condition the choice of recourse and serve as the basis for the decision when the remedy is allowed. That holds true for the federal jurisdiction, the common law provinces, and Quebec. . . .(R. Dussault and L. Borgeat, Administrative Law, A Treatise, vol. 4, 2nd ed. (Toronto: Carswell, 1990), at 486; also s. 1602 of Federal Court Rules and Pathak v. Canadian Human Rights Commission et al. (1995), 180 N.R. 152 (F.C.A.)).

[7] In my view, the judgment in Brotherhood, supra, cited by counsel for the respondent does not support his position. In that case the Federal Court of Appeal had the power to quash part of the decision under appeal since such a request was made in the conclusions sought by the application for judicial review. That is not the case here, as the appellant clearly indicated that she was not appealing the portion of the judgment relating to 1991. Furthermore, the Minister made no cross-appeal for that period. The Quebec Court of Appeal said the following in Nelson International of Canada Ltd. v. Béton Provincial Ltée, [1984] C.A. 260, at 261:

[TRANSLATION]

I do not think anyone will question the fact that the Court of Appeal has only the jurisdiction conferred by law and has no jurisdiction whatever to review a judgment which has not been appealed in due form and within the prescribed time limits. As applied to the case at bar this rule prevents the Court from reviewing the judgment for the benefit of the respondent, who I repeat made no cross-appeal . . .

[8] Under ss. 28 and 18.1 of the Federal Court Act and s. 1602 of the Federal Court Rules, the Federal Court of Appeal has the power to quash a Tax Court of Canada decision on an application for judicial review in which the applicant must identify the precise relief being sought.

[9] The relief sought by the appellant in the Federal Court of Appeal clearly indicated that she was asking the Court to quash the decision rendered by the Tax Court of Canada on December 9, 1996 [TRANSLATION] "except for the period from May 5 to November 2, 1991".

[10] Moreover, the respondent's request to re-open 1991 clearly took the appellant by surprise and, if I were to allow this request, she would suffer hardship. In my opinion, it would be a breach of the principle of natural justice or a lack of procedural fairness, which is provided for in s. 18.1(4)(b) of the Federal Court Act. Consequently, I consider that the consent to judgment made at the first hearing in this Court with respect to 1991 is still in effect and my decision will relate only to the periods concerned in 1992, 1993 and 1994.

[11] Concerning the appellant's request that the Court order payment of costs by the respondent to the appellant, there is no provision in the Unemployment Insurance Act ("the Act") which allows me to grant such a request (see Skimming v. M.N.R., [1996] F.C.J. No. 734 (F.C.J.)).

Appeal from Minister's decisions for subject periods in 1992, 1993 and 1994

[12] In his decisions the Minister determined that the appellant's employment was excepted from insurable employment pursuant to s. 3(2)(c) of the Act for the subject period in 1992. He determined that this employment was not held under a true contract of service pursuant to s. 3(1)(a) of the Act during the subject periods in 1993 and 1994.

[13] In arriving at his decisions the Minister relied on the facts set out in paragraph 4 of the Reply to the Notice of Appeal. Those facts read as follows:

[TRANSLATION]

(a) during the periods at issue the payer was doing business as:

(i) La Binerie, a business engaged in cooking and selling beans baked in sand;

(ii) Clément Forestery, a business operating a sawmill and engaged in forestry work;

(iii) Shamrock Enterprises, a business operating in the field of household maintenance and renovation;

(b) the payer was incorporated on November 7, 1990;

(c) until October 24, 1992 the payer's shareholders were:

Marcellin Clément - the appellant's husband - 32%

Ubald Clément - the appellant's brother-in-law - 34%

Edward Parisien - accountant - 34%;

(d) on October 24, 1992 Marcellin Clément and Ubald Clément resold their shares to the payer;

(e) during the periods in question:

(i) Marcellin Clément allegedly worked at La Binerie;

(ii) Ubald Clément had full-time employment with Clément Forestery until his death in December 1992;

(iii) Edward Parisien was the full-time accountant and visited La Binerie once or twice a year;

(iv) the appellant operated La Binerie;

(f) La Binerie was located on the same land as the appellant's residence, namely on Highway 105 three miles north of Kazabazua;

(g) the appellant did everything at La Binerie: she prepared the fires for cooking, cooked the baked beans, served customers, acted as cashier and did the cleaning;

(h) the appellant had sole control over her time;

(i) the appellant set her own working hours;

(j) the appellant worked from 10:00 a.m. to 10:00 p.m. seven days a week;

(k) according to the records of employment made up for the appellant, she was paid $500 a week in 1991 and 1992 and $600 a week in 1993 and 1994;

(l) the appellant received a pay increase of $100 a week even though the payer suffered losses from 1990 to 1994;

(m) the appellant was not subject to any control or supervision;

(n) during the periods mentioned in paragraph 3(a) above:

(i) the appellant and the payer were related persons within the meaning of the Income Tax Act;

(ii) the appellant and the payer were not dealing with each other at arm's length;

(iii) 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 not reasonable to conclude that the appellant and the payer would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length;

(o) there was no contract of service between the appellant and the payer in the periods mentioned in paragraph 3(b) above.

[14] Counsel for the appellant admitted subparagraphs 4(a)(i), (b) to (d), (e)(i) and (ii), (f), (g), (j), (k) and (l) set out above.

[15] I heard the appellant's testimony and that of her husband Marcellin Clément.

[16] Marcellin Clément operated La Binerie for some eight years before the company was created. His brother Ubald Clément had his own business in the forestry field. Edward Parisien is an accountant and always handled accounting for Marcellin Clément's business.

[17] In 1990, according to Marcellin Clément's testimony, Ubald Clément and Edward Parisien had the idea of creating a company to operate both businesses. They also had the idea of franchising La Binerie throughout Quebec, but this in fact was never done. At the time Marcellin Clément was 69 years old, his brother Ubald 59 and Edward Parisien 79.

[18] Marcellin Clément remained owner of the log cabin in which La Binerie was operated in Kazabazua. On April 12, 1991 he signed a lease with the company by which it undertook to lease the building for a period of 12 months beginning May 1, 1991 for $450 a month. This lease was to be automatically renewed each year. In the lease it stated that the premises were leased as a restaurant. Marcellin Clément explained that the equipment was part of this lease. Mr. Clément withdrew the rental directly from the restaurant's cash register.

[19] After the sale of its shares in October 1992 the company, subsequently controlled by Edward Parisien, continued the lease until 1995, which was then terminated.

[20] An excerpt from the minutes of a meeting of company shareholders held on May 5, 1992 was entered in evidence (Exhibit A-3). It was there resolved that Marcellin Clément would be appointed manager and administrator of La Binerie.

[21] Marcellin Clément accordingly continued operating the restaurant as in the past and continued to do the same when the company terminated the lease. Ubald Clément died in December 1992. In 1990, 1991 and 1992 he allegedly went to the restaurant a few times each week. Edward Parisien lived three hours from Kazabazua and came to the restaurant about once every two weeks, but according to Marcellin Clément never less than once a month.

[22] Marcellin Clément said he received a salary from the company until June 1992. After that time he did not receive any pay. He was responsible for purchasing goods, making up menus and setting prices. He maintained that he was put in charge by the company. He also indicated that the appellant had taken over part of his erstwhile duties.

[23] The appellant was hired to be responsible for cooking and for cleaning the restaurant as well as waiting on customers. She had already done this work even before the company was created. She said she began working in 1989. She worked 12 hours seven days a week and took her salary directly from the restaurant cash register. She was sometimes paid late. She said she was paid $500 a week in 1992 and her salary subsequently increased to $600.

[24] Counsel for the respondent argued that there was no true contract of service between the company and the appellant throughout the periods at issue and that accordingly she did not hold insurable employment pursuant to s. 3(1)(a) of the Act. He further maintained that the employment was excepted from insurable employment under s. 3(2)(c) of the Act for the work period in 1992.

[25] I am not satisfied on the evidence that Marcellin Clément really transferred his business to the company. A lease was entered in evidence to try and show that the company operated La Binerie during the periods at issue. However, Marcellin Clément mentioned that he took the rental directly from the restaurant cash register. If there was no money in the register, the rent was not paid. The same was true for the appellant's salary. The appellant had to wait to be paid until there was money in the register. In other words, the appellant and Marcellin Clément lived directly on the income from the restaurant.

[26] Marcellin Clément did not participate in meetings of the company and did not know whether his brother Ubald Clément operated his forestry business under his name or under that of the company. He had no access to the books of that business. Ubald Clément and Edward Parisien had no experience in the restaurant operation and came to Kazabazua from time to time.

[27] Marcellin Clément did not sell the stock in trade in his business to the company and each person only invested a very small sum of money in the company. The financial statements of La Binerie, which might have lent some weight to the appellant's position, were not filed in evidence.

[28] Marcellin Clément operated his restaurant before the company was created and continued operating it in the same way during the periods at issue and after the lease expired. I cannot conclude on a balance of probabilities based on the evidence adduced that La Binerie was operated by the company during the periods at issue. In my opinion, it played only a convenience role and served as a screen for the activities of the appellant and her husband. (See Bouillon v. M.N.R., [1996] F.C.J. No. 742 (Q.L.) (F.C.A.).)

[29] In view of this, I consider that the appellant was not working for the company during the periods at issue since she was working exclusively at the restaurant. Consequently, I cannot conclude that there was a true contract of service between the appellant and the company pursuant to s. 3(1)(a) of the Act.

[30] As to the question whether a contract of service existed between the appellant and Marcellin Clément, it seems to me that the nature of the relationship between them was not that existing between employees and their employer. The evidence actually has shown that the appellant took an active part in the business in the same way as Marcellin Clément did. The long hours she devoted to the business and the fact that her salary was not paid regularly if there was no money in the restaurant cash register suggested that she was actually engaged in a common venture with her husband rather than in an employer-employee relationship with him (see Marie-Ange Fournier v. M.N.R., [1997] F.C.J. No. 211 (Q.L.).)

[31] I therefore conclude that the appellant was not hired under a contract of service which produced genuine obligations (see Suzanne Eckel c. M.R.N., [1994] A.C.F. No. 981 (Q.L.) (F.C.A.)). Consequently, I consider that the appellant did not hold insurable employment under s. 3(1)(a) of the Act during the periods at issue.

[32] In view of the foregoing I do not have to rule on the application of s. 3(2)(c) of the Act.

Decision

[33] The appeal from the Minister's decisions for 1992, 1993 and 1994 is dismissed and the Minister's determination in each of the decisions affirmed.

[34] The Minister's decision for 1991 cannot be the subject of a re-determination and is reversed pursuant to the consent to judgment made in this Court at the first hearing.

Signed at Ottawa, Canada, this 13th day of January 1998.

" Lucie Lamarre "

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 24th day of February 1998.

Benoît Charron, Revisor

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