[OFFICIAL ENGLISH TRANSLATION]
Date: 20020815
Docket: 2001-1743(EI)
BETWEEN:
GESTION LE MONTAGNAIS INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was heard at
Québec, Quebec, on June 4, 2002.
[2] The appellant is appealing from a
decision by the Minister of National Revenue ("the
Minister") finding that the employment held by the worker,
Claude Ménard, while employed by the appellant during
the period at issue, from January 1 to
December 31, 1999, was insurable because it met the
requirements for a contract of service and because there was an
employer-employee relationship between the appellant and
the worker.
[3] Subsection 5(1) of the
Employment Insurance Act reads in part as follows:
5.(1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more
employers, under any express or implied contract of service or
apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other
person and whether the earnings are calculated by time or by the
piece, or partly by time and partly by the piece, or
otherwise;
. . .
[4] Subsections 5(2) and (3) of the
Employment Insurance Act read in part as follows:
(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.
[5] Section 251 of the Income Tax
Act reads in part as follows:
Section 251: Arm's length.
(1) For the
purposes of this Act,
(a) related
persons shall be deemed not to deal with each other at arm's
length;
. . .
(2) Definition of "related persons". For the
purposes of this Act, "related persons", or persons
related to each other, are
(a)
individuals connected by blood relationship, marriage or
adoption;
(b) a
corporation and
(i) a person
who controls the corporation, if it is controlled by one
person,
(ii) a person who is
a member of a related group that controls the corporation, or
(iii) any person related
to a person described in subparagraph (i) or (ii); and
. . .
[6] The burden of proof is on the
appellant, and it must show on a balance of probabilities that
the Minister's decision is unfounded in fact and in law. Each
case turns on its own facts.
[7] In making his decision, the
Minister relied on the following facts, all of which have been
admitted:
[TRANSLATION]
(a) the appellant
was incorporated on January 13, 1993;
(b) the
appellant's voting shareholders were:
Gilles
Ménard
20% of the shares
Réjean
Ménard
20% of the shares
Jean-Roch
Ménard
20% of the shares
the
worker
20% of the shares
Clermont
Blouin
20% of the shares
(c) the worker is
the brother of Gilles, Réjean and Jean-Roch
Ménard and the brother-in-law of
Clermont Blouin;
(d) the appellant
carried on a restaurant and catering business;
(e) the appellant
had 20 to 27 employees;
(f) the
appellant's restaurant was operated year-round in
Sainte-Anne-de-Beaupré;
(g) the worker was
the restaurant's manager;
(h) the worker's
duties involved looking after day-to-day management,
supervising the staff and ensuring that the business ran
smoothly;
(i) the worker
did not have a fixed schedule but generally took Thursdays and
Fridays off;
(j) the worker
was paid a regular salary of $1,600 every two weeks by direct
deposit;
(k) the worker's
salary was reasonable given his duties and responsibilities;
(l) the worker
worked for the appellant year-round;
(m) the appellant had an
active corporate life and held shareholders' and
directors' meetings every three or four weeks;
(n) the worker had
to report to and obtain the consent of the other shareholders for
the business' important decisions;
(o) like all the
other shareholders, the worker guaranteed the appellant's
loans and credit lines in proportion to the shares he held;
(p) the worker had
no risk of financial loss or chance of profit;
(q) the worker used
the tools and equipment owned by the appellant;
(r) the worker's
work was an integral part of the appellant's activities.
[8] The only witness heard in this
case was Gilles Ménard, the worker's brother and
a shareholder in the appellant along with other members of the
same family and Clermont Blouin.
[9] The witness stated that, from 1994
to 1999, the worker, Claude Ménard, managed a
restaurant operated by the appellant in
Ste-Anne-de-Beaupré.
[10] Gilles Ménard explained
that the five shareholders referred to in the Reply to the Notice
of Appeal were shareholders in three companies. In 1995, the
worker, Claude Ménard, was the manager of the
restaurant and was directly responsible for running it and hiring
employees. The other four shareholders were simply investors in
the company.
[11] Gilles Ménard asked
the Minister to rule on the insurability of
Claude Ménard's employment for 1993 when he was
working for the appellant.
[12] On the basis of a questionnaire that
she completed and signed after obtaining information from
Gilles Ménard, Pierrette Lecompte determined
that Claude Ménard's employment with
Gestion Le Montagnais Inc. in 1993 was uninsurable
because it did not meet the requirements of
paragraph 3(1)(a) of the Unemployment Insurance
Act and because it was excepted under
paragraph 3(2)(a) of the Act.
[13] According to the witness,
Claude Ménard's conditions of employment in this
case were the same as in 1993.
[14] For the purposes of this case, that is,
for the period at issue, counsel for the appellant admitted that
Claude Ménard's employment was insurable.
[15] Counsel raised just one question of
law, namely, the application of the doctrine of legitimate
expectations.
[16] Professor Geneviève Cartier of
the law faculty of Université de Sherbrooke
explained this doctrine as follows in (1992), 23 R.D.U.S. 75:
[TRANSLATION]
In its most widely accepted formulation, this doctrine
prescribes that administrative authorities must comply with
natural justice or procedural fairness not only when they make a
decision that affects individual rights, privileges or interests
but also each time that such an act adversely affects an
individual's "legitimate expectations".
[17] According to counsel for the appellant,
the Supreme Court examined and commented on this concept in
Mount Sinai Hospital Center v. Quebec (Minister of Health and
Social Services), 2001 S.C.C. 41, File No. 27022.
[18] A number of decisions were submitted
for the purposes of this case, but there is no need to look at
all of them. The courts seem to have consistently held that
administrative authorities are not bound by administrative
decisions.
[19] In Blackmore v. M.N.R., NR 519,
the learned judge stated:
Legally, I am bound to say that notwithstanding any mistake or
error or wrong advice on the part of the personnel of the
Commission, the Commission is not prevented from seeking to carry
out the provisions of the Unemployment Insurance Act,
1971. This has been held repeatedly by Umpires in the past. There
is the well established principle that an estoppel will not
arise, when the conditions of a statute are not met. Put tritely,
estoppel does not lie against the Crown and, further, estoppels
of all kinds are subject to the general rule that they cannot
override the law of the land.
[20] In Ludco Enterprises Ltd. v.
Canada, [1993] F.C.J. No. 1299, dated
December 3, 1993, Dubé J. of the Federal
Court of Canada stated the following:
. . . nonetheless, as noted earlier, the case law has clearly
established that the Minister is not bound by his earlier
assessments, or by his earlier policies, or by his
representations or the representations of his agents, or by the
treatment he gives or has given to other taxpayers. The
Minister's duty is to apply the Act as it stands. The Act
authorizes the Minister to amend his assessments and requires
that he make assessments in accordance with the provisions of the
Act. Moreover, in an appeal from an assessment the Court is
limited to the remedies provided by the Act and cannot give a
declaratory judgment.
[21] In Hrab v. Canada, [1996] T.C.J.
No. 128, dated February 14, 1996,
Judge Teskey of this Court stated the following:
Estoppel does not apply to different taxation years. Each year
is separate and distinct. The Appellant's 1992 appeal is
separate and apart from his 1991 appeal. The evidence before me
in the 1992 appeal and the underlying facts that have been
adduced are different. The first Order of Hawkins J. was not
interpreted in the 1991 decision.
[22] In the case at bar, the appellant is
using a so-called decision made by an administrative
authority on the uninsurability of the employment of the worker,
Claude Ménard, while he was employed by the appellant
in 1993.
[23] A "Canada Pension Plan and
Unemployment Insurance Ruling Report" from Revenue Canada
Customs, Excise and Taxation dated July 14, 1994, was
filed in evidence as Exhibit A-1. It should be noted
that the document is called a "ruling report"
["rapport d'opinion" in French] and that it was
signed by a coverage officer, not an appeals officer. It explains
Claude Ménard's working conditions while he was
employed by the appellant in 1993.
[24] The report's conclusion reads as
follows:
[translation]
Employment uninsurable since it does not meet requirements of
paragraph 3(1)(a) of the Unemployment Insurance
Act and since employment excepted under
paragraph 3(2)(d) of Unemployment Insurance
Act for 1993.
[25] It is important to point out that
paragraph 3(1)(a) of the Unemployment Insurance
Act is now paragraph 5(1)(a) of the Employment
Insurance Act and that the ruling was based on
paragraph 3(2)(d) of the Unemployment Insurance
Act, which reads as follows:
(d) the employment of a person by a corporation
if the person controls more than forty per cent of the voting
shares of that corporation;
[26] It should be noted that, in this case,
the Minister's decision on the insurability of the
worker's employment was not based on
paragraph 3(2)(d), now paragraph 5(2)(b)
of the Employment Insurance Act.
[27] Under the Delegation of Powers or
Duties (Part III Unemployment Insurance Act) Regulations
dated June 11, 1992, SOR/92-378, the Director,
Appeals Division, may exercise the Minister's powers.
Section 5 of the Regulations reads as follows:
The Director, Appeals and Referrals Division, the Director,
Policy and Programs Division, the Chief, Determination and
Appeals Section, or an officer holding the position of Chief of
Appeals in a District Office of the Department of National
Revenue, Taxation, may exercise the powers or perform the duties
of the Minister under sections 61 and 71 of the Act.
[28] Based on these regulations, the
coverage officer's conclusion is not a decision but an
opinion; indeed, the name of the report in French is
"rapport d'opinion".
[29] In Simard v. Canada (Minister of
National Revenue - M.N.R.), T.C.C.,
No. 95-2846(UI), October 31, 1996 ([1996]
A.C.I. no 1561), Judge St-Onge of this Court
stated the following:
[translation]
Under section 64 of the Act, only the Minister of
National Revenue has jurisdiction to make a decision on the
insurability of the appellant's employment, and it is that
decision that conclusively settles the issue of the insurability
of employment. Any other decision is merely a position or
opinion. Only the Minister of National Revenue has jurisdiction
to make a decision on the insurability of employment.
[30] This Court finds that the Minister did
not actually make a decision that the worker's employment for
1993 was uninsurable.
[31] Only the Minister of National Revenue
or the Minister's delegate has jurisdiction to make a
decision on the insurability of Claude Ménard's
employment.
[32] The appellant has admitted all the
facts alleged in the Reply to the Notice of Appeal. The worker
therefore held insurable employment during the period at issue,
since that employment met the requirements for a contract of
service.
[33] The appeal is dismissed and the
Minister's decision is confirmed.
Signed at Ottawa, Canada, this 15th day of August 2002.
D.J.T.C.C.
Translation certified true
on this 9th day of June 2003.
Sophie Debbané, Revisor
Cases
cited:
Mount Sinai Hospital Center v. Quebec (Minister of Health and
Social Services),2001 S.C.C. 41, No. 27022
Blackmore v. M.N.R., NR 519
Ludco Enterprises Ltd. v. Canada, [1993] F.C.J. No.
1299
Hrab v. Canada, [1996] T.C.J. No. 128
Regulations SOR/92-378
Simard v. Canada (Minister of National Revenue -
M.N.R.), T.C.C., No. 95-2846(UI),
October 31, 1996 ([1996] A.C.I. no 1561)
Email this Content