Citation: 2008TCC375
Date: 20080618
Dockets: 2008-197(EI)
BETWEEN:
MICHELLE M. RAMBEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1]
The
issue in this appeal is whether the decision of the Respondent that the
employment of the Appellant, Michelle M. Rambeau, by her spouse, George J. Rambeau,
during the period from April 30,
2007 to July 21, 2007 was not insurable employment for purposes of the Employment
Insurance Act ("Act") was reasonable. The only provisions
of the Act relied on by the Respondent are paragraphs 5(2)(i) and
5(3)(b) of the Act.
[2]
Subsection
5(2) of the Act provides in part that:
Insurable employment does not include
...
(i) employment if the employer and employee
are not dealing with each other at arm's length.
[3]
Subsection
5(3) of the Act provides that:
(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.
[4]
Since
the employer was (and still is) the Appellant’s spouse, the Appellant and her employer
were related for the purposes of the Income Tax Act as a result of
the provisions of paragraph 251(2)(a) of the Income Tax Act
and are deemed to not be dealing with each other at arm’s length under
paragraph 251(1)(a) of the Income Tax Act. As a result the issue in
this case is whether the decision of the Minister of National Revenue that the
Appellant and her spouse would not have entered into a substantially similar
contract of employment during the period in question if they would have been
dealing with each other at arm’s length, is reasonable.
[5]
In
the case of Porter v. M.N.R., 2005 TCC 364, Justice Campbell of
this Court reviewed the decisions of this Court and the Federal Court of Appeal
in relation to the role of the Tax Court in appeals of this nature. In
paragraph 13 of this decision Justice Campbell stated as follows:
In summary, the function of this Court is
to verify the existence and accuracy of the facts relied upon by the Minister,
consider all of the facts in evidence before the Court, including any new
facts, and to then assess whether the Minister's decision still seems
"reasonable" in light of findings of fact by this Court. This
assessment should accord a certain measure of deference to the Minister.
[6]
George J. Rambeau worked as a
lobster fisherman. For 18 years prior to 2007, the Appellant worked as a
deckhand on her spouse’s boat. However in 2007, she had back problems and found
that the work as a deckhand was too hard and therefore she was no longer able
to continue to do this work.
[7]
In 2007, the Appellant's spouse
hired her to perform various bookkeeping and housekeeping duties. The Respondent
agrees that the Appellant was employed by George J. Rambeau in 2007 but disagrees
that the employment was insurable employment for the purposes of the Act.
[8]
The estimate of the Appellant was
that she spent 40% of her working time on the bookkeeping work and 60% of her
working time doing the housekeeping work. She was paid $400 per week based on
an average of 48 hours per week.
[9]
The Appellant’s estimate of the
time she spent doing the bookkeeping work was that she would spend about 10
minutes working on the Department of Fisheries and Oceans (“DFO”) logbook,
about an hour to review the invoices and do the accounting entries, about one
hour to one and one-half hours every Thursday to do the payroll and about two
hours once a week to do the banking.
[10]
Assuming that the Appellant worked
on the DFO logbook for 10 minutes each day, and that she worked on the invoices
and accounting entries for one hour each day (she did a total of 90 entries
during the 3 months of employment), the total number of hours that she would
spend during a six-day week would be as follows:
|
Task
|
Estimated Hours per Week
|
|
DFO
Logbook
|
1.0
|
|
Invoices
– accounting entries
|
6.0
|
|
Payroll
|
1.5
|
|
Banking
|
2.0
|
|
Total:
|
10.5
|
[11]
The total estimated amount of
time spent on these duties, based on the estimates as provided by the Appellant,
is only 10.5 hours per week. The Appellant stated that these activities represented
40% of the Appellant's time performing her duties of employment. If this
represented 40% of such time, the total amount of time that she would work on all
of her duties each week would only be 26.25 hours. Since she was paid
based on working 48 hours per week, it does not seem unreasonable to conclude
that the Appellant and George J. Rambeau would not have entered into
substantially similar contract of employment if they would have been dealing
with each other at arm’s length.
[12]
The other major concern raised by
the Respondent is related to the nature of the work that the Appellant was
performing in 2007 and whether George J. Rambeau would have entered into
any contract at all with the Appellant to perform the housekeeping duties if
she was not his spouse. The housekeeping duties included various housekeeping
duties and tasks related to the property of the Appellant and George J. Rambeau
such as cooking breakfast and supper for George J. Rambeau, packing a
lunch can for George J. Rambeau, washing clothes for George J. Rambeau, fixing the
holes in the driveway, mowing and raking the lawn, and staining the deck. No
one was hired to perform any of these duties before the period during which the
Appellant was employed nor was anyone hired to perform these duties after the Appellant's
employment was terminated. Therefore the position of the Respondent that George
J. Rambeau and the Appellant would not have entered into a substantially
similar contract of employment if they would have been dealing with each other
at arm’s length does not seem unreasonable.
[13]
If the Appellant is correct that
hiring a spouse to do housekeeping work will qualify as insurable employment in
situations where no other arm's-length person was hired before or after, then
this would mean that a husband and wife could create a situation where each
could qualify for employment insurance benefits. For example a husband could hire
his wife to perform the housekeeping work for whatever period of time was
required in order for her to qualify for employment insurance benefits, and
then terminate her employment. She could then hire her husband to do the
housekeeping work for whatever period of time is required for him to qualify
for employment insurance benefits and then terminate his employment. This
alternating cycle of hiring each other to do the housekeeping could continue with
each person qualifying for employment insurance benefits based only on the
employment by the spouse for housekeeping duties. This does not seem to me to
be a type of employment that would have been contemplated by the Act as
insurable employment.
[14]
The Supreme Court of Canada in The
Queen v. Canada Trustco Mortgage Company, 2005 SCC 54, 2005 DTC 5523
(Eng.), [2005] 5 C.T.C. 215, 340 N.R. 1, 259 D.L.R. (4th) 193, [2005]
2 S.C.R. 601, stated that:
10 It has been long established as a matter
of statutory interpretation that “the words of an Act are to be read in their
entire context and in their grammatical and ordinary sense harmoniously with
the scheme of the Act, the object of the Act, and the intention of Parliament”:
see 65302 British Columbia Ltd. v. R., [1999] 3 S.C.R. 804 (S.C.C.), at
para. 50. The interpretation of a statutory provision must be made according to
a textual, contextual and purposive analysis to find a meaning that is
harmonious with the Act as a whole. When the words of a provision are precise
and unequivocal, the ordinary meaning of the words play a dominant role in the
interpretive process. On the other hand, where the words can support more than
one reasonable meaning, the ordinary meaning of the words plays a lesser role. The
relative effects of ordinary meaning, context and purpose on the interpretive
process may vary, but in all cases the court must seek to read the provisions
of an Act as a harmonious whole.
[15]
In my opinion, the words:
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
in paragraph 5(3)(b) of the Act in the context
of the Act read as a whole will include a determination of whether the
employer and the employee would have entered into any contract of employment at
all if they would have been dealing with each other at arm’s length. If an
employer would not have hired anyone with whom that employer is dealing at
arm’s length to do certain work, then it would be reasonable to conclude that
the employer and a related employee who was hired to do that work would not have
entered into a substantially similar contract of employment if they were
dealing with each other at arm’s length.
[16]
In Gauthier v. The Minister of
National Revenue, [2000] T.C.J. No. 583, the payor operated a dairy farm
and hired his son’s common-law spouse to perform various duties such as light
housekeeping, paperwork, preparing meals, answering the telephone and tending
to flowers and gardens. Justice Somers made the following comments in that
case:
18 It
is quite evident that this employment was an arrangement in order to have
sufficient hours to qualify for unemployment insurance benefits. She was too
sick to work for the school board, but she was healthy enough to work up to the
day before the child's birth. She did not prove that the Payor needed her to
work during the period in question. Her salary was excessive for the type of
work.
19 Taking
into consideration all of the circumstances, including the testimonies and
documentary of evidence, I am satisfied that the Appellant has failed in her
onus of establishing on a balance of probabilities that the Minister acted in a
capricious or arbitrary fashion in this case. The employment is therefore
excepted from insurable employment pursuant to paragraph 5(2)(i) of the Act.
[17]
By
referring to the appellant in that case not proving “that the Payor needed her
to work during the period in question”, Justice Somers appears to be saying
that the payor would not have hired her at all if she would have been dealing
at arm’s length.
[18]
In Pike
v. The Minister of National Revenue, [1994] T.C.J. No. 973, the
appellant (Helen Pike) was employed by a related person (Sarah Pike) to perform
babysitting and housekeeping duties for a period of 21 weeks. Helen Pike needed
20 weeks of employment to qualify for benefits under the Unemployment Insurance
Act as it was then. Justice Mogan made the following comments in that case:
9 The
facts which trouble me most about this case are (i) the Appellant did not deny
that she needed 20 weeks of employment to qualify for Unemployment Insurance
benefits; and (ii) after just 21 weeks of work, the services performed by the
Appellant were taken over by the family unit of Sarah and Gerald Pike. The
Federal Court of Appeal stated in the Tignish Auto Parts decision:
The applicant, who is the party appealing the determination of the
Minister, has the burden of proving its case and is entitled to bring new
evidence to contradict the facts relied on by the Minister.
10 In
this case, there was no evidence given by Sarah from the employer's point of
view. Given the close connection between the Appellant and Sarah, I should have
thought that it was the Appellant's burden to call Sarah as a witness in order
to put before the Court both the employee and employer sides of the employment
transaction. I would go further and suggest that whenever a person is
challenging the Minister's decision under subparagraph 3(2)(c)(ii) of the
Unemployment Insurance Act, it is most desirable and in many cases necessary to
hear the evidence of both the employee and the employer in order to determine
whether they would have entered into a substantially similar contract of
employment if they had been at arm's length.
[19]
George
J. Rambeau did not testify in this case and therefore there was no evidence
from the employer of whether he would have entered into a substantially similar
contract of employment with a person with whom he was dealing at arm’s length. The
Appellant has the burden of proving her case and therefore would have the
burden of proving that George J. Rambeau would have entered into a
substantially similar contract of employment with a person with whom he was
dealing at arm’s length. As well by referring to the fact that the work was
taken over by the family unit following the termination of the employee’s
employment, Justice Mogan also appears to be saying that the employer in that
case would not have hired the employee at all if they would have been dealing
at arm’s length.
[20]
In Narvie
v. The Minister of National Revenue, 2006 TCC 368, the employer was engaged
in the lobster fishery and employed his son as a deckhand. The employer’s son
did not replace any other worker and was not replaced when his employment
ended. Justice Savoie made the following comments in that case:
REMUNERATION PAID
13 It was established that the Appellant performed services for the
Payor both prior to and after the period under review without remuneration.
14 Furthermore,
the evidence disclosed that the Appellant was hired as a second deckhand on the
fishing boat and received a salary as such, regardless of the fact that his
services were not needed. Since 2003, the Payor engaged in lobster fishing with
one deckhand only. It was also proven that the Payor's gross revenue with two
deckhands did not exceed the revenue earned with the help of one single
deckhand.
15 This
certainly supports the conclusion that the Payor would not have hired a second
deckhand on those terms, or at all, if he and the Appellant had been dealing
with each other at arm's length.
TERMS AND
CONDITIONS
16 The
Payor hired the Appellant when, as was proven, he had no need for his services.
He admitted the Appellant could leave his employment after having accumulated
sufficient working hours to qualify for employment insurance benefits.
DURATION
17 The
period under review is from May 9 to May 21, 2005. The lobster season is from
May 1 to June 30 each year. The Appellant testified that he worked for the
Payor prior to and after the period in question without remuneration. The
Appellant left his employment once he had accumulated sufficient working hours
to qualify for employment benefits and both the Appellant and the Payor confirmed
this in their statement and testimony. It was also confirmed by both the
Appellant and the Payor that this was the agreement between them at the outset.
It is difficult to conceive that such an arrangement would have been entered
into between the Payor and the Appellant if they had been dealing with each
other at arm's length.
18 The
evidence made it clear that the services of the Appellant were not essential to
the Payor's economic activity. It bears repeating that the economic undertaking
of the Payor could be carried out quite adequately with the help of one single
deckhand.
19 The
nature of the arrangement under which the Appellant was employed is exactly the
kind of scheme that runs contrary to the stated intention of the Employment
Insurance Legislation as interpreted by the decisions of this Court and the
Federal Court of Appeal.
20 The
Appellant has failed to demonstrate the advisability of this Court's
intervention. On the contrary, such an intervention would be ill-founded.
21 The
Minister has correctly conducted his analysis under the Act and his
conclusion, even in light of the evidence produced at the hearing, is still
well founded.
[21]
There
was nothing in the facts that were presented that would suggest that the
Minister’s decision was unreasonable in determining that the Appellant and George
J. Rambeau would not have entered into a substantially similar contract of
employment if they would have been dealing at arm’s length. The hours for which
the Appellant was paid were significantly greater than the hours that the
Appellant was working. No one else was hired to perform the housekeeping work before
or after the Appellant. The employer did not testify and therefore there is no
indication that George J. Rambeau would have hired an arm’s length person on
substantially similar terms and conditions to perform the duties that the
Appellant was performing. It therefore seems to me that the Minister’s decision
was reasonable in concluding that the Appellant and George J. Rambeau would not
have entered into a substantially similar contract of employment if they would
have been dealing at arm’s length.
[22]
As a
result, I conclude that the decision of the Minister was reasonable and
therefore the appeal is dismissed.
Signed at Ottawa, Ontario, this 18th day of June 2008.
“Wyman W. Webb”
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