Citation: 2008TCC262
Date: 20080520
Docket: 2007-3920(EI)
BETWEEN:
ROYAL LAROCHE,
Appellant,
and
MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
Royal Laroche has
appealed from a decision of the Minister of National Revenue ("the
Minister") under the Employment Insurance Act ("the Act").
The Minister determined that Mr. Laroche was not engaged in insurable
employment while he was working for Wilfrid Laroche ("the payor")
from May 1, 2006, to December 16,
2006 ("the relevant
period").
[2]
At the beginning of the
hearing, counsel for Mr. Laroche admitted or denied the following facts,
set out in paragraphs 11 and 12 of the Reply to the Notice of Appeal:
(11) The Appellant and
the payor are not dealing with each other at arm's length within the meaning of
the Income Tax Act, because:
(a)
Wilfrid Laroche operated
a business excavating and installing septic beds; (admitted)
(b)
Wilfrid Laroche was the
sole proprietor of the business; (admitted)
(c)
Wilfrid Laroche is the
Appellant's grandfather; (admitted)
(d)
The Appellant is related
by blood to a person who controls the payor's business; (admitted)
(12) The Minister
determined that the Appellant and the payor were not dealing with each other at
arm's length in the employment. The Minister was satisfied that it was not
reasonable to conclude that the Appellant and the payor would have entered into
a substantially similar contract if they had been dealing with each other at
arm's length, having regard to the following circumstances:
(a)
the payor operated a
business excavating and installing septic beds on agricultural and residential
properties; (admitted)
(b)
the payor stated to the
Respondent's agent that he had operated the business for 40 years; (admitted)
(c)
according to the payor,
the business had sales of roughly $200,000 per year; (admitted)
(d)
the Appellant was born
on January 5, 1987; (admitted)
(e)
the Appellant was hired
as a labourer; (admitted)
(f)
according to the payor,
the Appellant's duties consisted in driving the steam shovel, the bulldozer and
the ten-wheel truck, doing excavation, but never doing finishing work, and
doing mechanical maintenance such as greasing; (admitted)
(g)
on July 10, 2007, the Appellant stated to a representative of the
Respondent that he considered himself to be a jack of all trades taking instructions
from the payor, his uncle Serge Laroche or his father Réal Laroche; (admitted)
(h)
on July 10, 2007, the
Appellant stated to a representative of the Respondent that if the weather was
good he helped in the agricultural excavating; if it rained, he repaired the
machinery in the garage; (admitted)
(i)
also on July 10, 2007, the Appellant stated to a representative of the
Respondent that he sometimes worked 30 hours a week, sometimes 32,
sometimes 28, depending on the weather; (admitted)
(j)
on December 21, 2006,
the Appellant stated in his claim for unemployment benefits that he worked
40 hours a week, Monday to Friday, eight hours a day; (admitted)
(k)
in the payor's payroll
journal, the Appellant was always recorded as working 30 hours every week,
for 33 consecutive weeks between May 1 and December 16, 2006; (admitted)
(l)
on December 21, 2006,
the Appellant stated in his claim for unemployment benefits that he had
990 hours of insurable employment; for an initial claim, the Appellant needed
910 hours to qualify; (admitted)
(m)
on February 14, 2007, the payor stated to a representative of the
Respondent that he would have hired someone other than the Appellant when
needed, maybe half the time; (denied as written)
(n)
the duration of the
Appellant's employment is unreasonable; (denied)
(o)
according to the payor,
the Appellant was paid $10 per hour; (admitted)
(p)
in the payor's payroll
journal, the Appellant was recorded as being paid $312 per week, for a total of
$10,296 for 33 consecutive weeks; (admitted)
(q)
according to the 10
cheques issued to the Appellant by the payor —
$800 on June 30, $500 on July 14, $801 on August 1, $500 on
September 1, $600 on September 25, $600 on October 5, $300 on October
15, $600 on October 26, $600 on November 15, and $533.83 on November 17 — the total earnings paid to the Appellant by cheque were $5,834.83 [sic];
(admitted)
(r)
the worker was paid
irregularly and sporadically; (denied as written)
(s)
the cheques issued to
the Appellant by the payor did not correspond to the amounts recorded in the payor's
payroll journal; (admitted)
(t)
a worker dealing with
an employer at arm's length would not have agreed to receive his earnings in an
irregular manner; (denied)
(u)
according to the payor,
the Appellant received cash payments in the early part of his period of
employment; (admitted)
(v)
on February 20, 2007,
the payor gave the Respondent a document showing cash payments totalling $2,975
between May 13, 2006, and December 16, 2006; (admitted)
(w)
according to the
document provided by the payor on February 20, 2007, the Appellant was short $1,486.82 to reach the
amount recorded in the payor's payroll journal: the difference between $10,296
and $5,834.83 [sic] (the cheques) plus $2,975 (cash); (denied as
written)
(x)
a worker dealing with
an employer at arm's length would not have agreed not to receive all of his
earnings; (denied)
(y)
the Appellant's cheques
were cashed late; (denied as written)
(z)
on June 12, 2007, the
payor stated to a representative of the Respondent that he had told the
Appellant he would pay him when he had the money; (admitted)
(aa)
on July 11, 2007, the payor stated to a representative of the
Respondent that he had asked the Appellant six times not to cash his paycheque;
(admitted)
(bb)
a worker dealing with
an employer at arm's length would have cashed his paycheques without delay; (denied)
(cc)
the terms and
conditions of the Appellant's remuneration were unreasonable; (denied)
(dd)
on February 1, 2007, the
payor stated to a representative of the Respondent that he wanted to hire the
Appellant to show him the work; (denied as written)
(ee)
on February 1, 2007, the payor declared to a representative of the
Respondent that the Appellant watched what the payor did in order to learn and
practice; (denied as written)
(ff)
on February 1, 2007, the
payor stated to a representative of the Respondent that the Appellant always
had to be accompanied by either Serge Laroche or the other worker, or by the
payor himself, since a young person cannot be left alone with the heavy
machinery because it is too dangerous; (denied as written)
(gg)
on February 14, 2007, the payor stated to a representative of the
Respondent that he did not really need the worker; he gave him work because he
did not want him hanging out with five or six other guys and doing things he
should not be doing; (denied)
(hh)
on July 10, 2007, the
Appellant stated to a representative of the Respondent that if his grandfather
had had to hire someone else, that person would have had to have experience,
and it takes time to learn this work; (admitted)
(ii)
at the time of the
period in issue, the Appellant did not have the driver's licence and driving
experience needed to drive a ten‑wheel truck; (denied as written)
(jj)
the nature and
importance of the work and the terms and conditions of the Appellant's work
were not reasonable; (denied)
(kk)
the Minister is
satisfied that the terms and conditions of this work could not apply if the
parties were dealing with each other at arm's length. (denied)
[3]
I would immediately
note that the credibility of the Appellant and the payor is not doubted. They
testified candidly, to the best of their knowledge, and with great clarity.
[4]
It is also apparent
from the testimony given by the Appellant and the payor and from the reliable
documentary evidence submitted by the Appellant that:
(a)
it was the Appellant's
job to manoeuvre the payor's heavy machinery (steam shovel and bulldozer) under
the supervision of the payor or of his uncle, because he was learning. He drove
the payor's truck off the public roadways. He also did manual labour such as
shovelling. He did mechanical maintenance (draining oil, greasing, changing
tires and soldering) on the Appellant's machinery and also ran errands for the
payor;
(b)
the Appellant recorded
the hours he worked in his notebook, the hours varying from week to week
depending on the weather and the contracts they had. The Appellant explained
that he worked an average of 30 hours a week for 33 consecutive weeks,
between May 1 and December 16,
2006, for a total of 990
hours. It should be noted that the Appellant's testimony on this point was corroborated
by the payor's;
(c)
the Appellant received
his complete net earnings, a total of $8,808.75, as follows:
(i)
on May 13, 2006, the
payor paid the Appellant $500 in cash;
(ii)
on May 27, 2006, the payor paid the Appellant $500 in cash;
(iii)
on June 10, 2006, the
payor paid the Appellant $500 in cash;
(iv)
on June 30, 2006, the payor wrote a cheque for $800 on his bank
account, payable to the Appellant. The cheque was cashed by the Appellant five
days after it was issued;
(v)
on July 14, 2006, the
payor wrote a cheque on his account payable to the Appellant in the amount of
$500, which was cashed by the Appellant two days after it was issued;
(vi)
on July 20, 2006, the payor paid the Appellant $400 in cash;
(vii)
on August 1, 2006, the
payor wrote a cheque on his bank account payable to the Appellant in the amount
of $801, which was cashed by the Appellant 13 days after it was issued;
(viii)
on August 18, 2006, the payor paid the Appellant $500 in cash;
(ix)
on September 1, 2006, the
payor wrote a cheque on his bank account payable to the Appellant in the amount
of $500, which was cashed by the Appellant four days after it was issued;
(x)
on September 25, 2006, the payor wrote a cheque on his bank account payable
to the Appellant in the amount of $600, which was cashed by the Appellant on
the same day as it was issued;
(xi)
on October 5, 2006, the
payor wrote a cheque on his bank account payable to the Appellant in the amount
of $600, which was cashed by the Appellant six days after it was issued;
(xii)
on October 15, 2006, the payor wrote a cheque on his bank account payable
to the Appellant in the amount of $300, which was cashed by the Appellant four days
after it was issued;
(xiii)
on October 26, 2006, the
payor wrote a cheque on his bank account payable to the Appellant in the amount
of $600, which was cashed by the Appellant one day after it was issued;
(xiv) on November 15, 2006, the payor wrote a cheque on his bank account payable
to the Appellant in the amount of $600, which was cashed by the Appellant two days
after it was issued;
(xv) on December 17,
2006 (not November 17, the date shown on the cheque), the payor wrote a cheque
on his bank account payable to the Appellant in the amount of $533,87, which
was cashed by the Appellant 10 days after the date on which it was actually
issued;
(xvi) On December
16, 2006, the payor paid the Appellant $575 in cash.
(d)
the payor had cash flow
problems during the relevant period. The payor explained that this was why he
paid the Appellant irregularly and sporadically and asked him on several
occasions to delay cashing the cheques he had written to him. In addition, the
Appellant explained that he had agreed to be paid irregularly and to delay
cashing cheques on several occasions because he could cope with the
inconvenience easily, given that he had no debts to pay and no family to
support.
(e)
the payor would have
entered into a contract substantially similar to the contract with the
Appellant with a person with whom he was dealing at arm's length if the
Appellant had not been available during the relevant period. The payor explained
that he would have hired any young man on the same terms and conditions as he
gave his grandson, provided that the person could prove that he was reliable.
Analysis
[5]
It must be noted that the
Respondent has determined that this employment was not insurable under
paragraph 5(2)(i) and subsection 5(3) of the Act because he was
satisfied that it was not reasonable to conclude, having regard to all the
circumstances, that the Appellant and the payor would have entered into a
substantially similar contract of employment if they had been dealing with each
other at arm's length.
[6]
The Federal Court of
Appeal has defined the role assigned to a Tax Court of Canada judge on several
occasions. That role does not permit the judge to substitute his or her
discretion for the Minister's, but does involve an obligation to "verify
whether the facts inferred or relied on by the Minister are real and were
correctly assessed having regard to the context in which they occurred, and
after doing so, . . . decide whether the conclusion with which the
Minister was 'satisfied' still seems reasonable".
[7]
In other words, before
deciding whether the Minister's conclusion still seems to me to be reasonable,
I must verify, having regard to the evidence before me, whether the Minister's allegations
are in fact correct, having regard to the factors set out in paragraph 5(3)(b)
of the Act. We must therefore ask whether the payor and the Appellant would
have entered into a substantially similar contract of employment if they had
been dealing with each other at arm's length.
[8]
The Appellant had the
burden of proving that the Minister did not exercise his discretion in
accordance with the principles that apply in this regard, that is, that the
Minister did not examine all of the relevant facts or failed to have regard to
all of the facts that were relevant. In this case, the Appellant has satisfied
me that during the relevant period he worked an average of 30 hours per week,
for 33 consecutive weeks. All in all, the Appellant has satisfied me that he
really worked 990 hours during the relevant period and was paid in full for
that work. The Respondent at no time alleged in this case that the $10 hourly
rate was unreasonable. In fact, counsel for the Respondent essentially relied,
in argument, on the following four facts as alleged in the Reply to the Notice
of Appeal, in her submission that the Appellant and the payor would not have
entered into a substantially similar contract of employment if they had been
dealing with each other at arm's length:
12(m) on February 14, 2007, the payor stated to a representative of the
Respondent that he would have hired someone other than the Appellant when
needed, maybe half the time;
12(r) the worker was
paid irregularly and sporadically;
12(y) the Appellant's cheques
were cashed late;
12(bb) a worker dealing
with an employer at arm's length would have cashed his paycheques without delay.
[9]
It is my opinion that
there is no basis for the allegation in paragraph 12(m) of the Reply to the
Notice of Appeal, in that the payor has satisfied me that he never made that
statement to Louise Boulay, the insurability officer in this case. Even if the
payor had made that statement, I would have been of the opinion that that fact
was irrelevant in any event, given that the services were actually performed
for the payor.
[10]
With respect to the
other facts alleged by the Minister, I am of the opinion that the Minister
failed to have regard to the following facts:
(i)
the payor's business
was a very small business that was having cash flow problems during the
relevant period;
(ii)
the payor asked the
Appellant only a few times to delay cashing the cheques, and in those cases the
time between when the cheques were issued and when they were cashed was only a
few days;
(iii)
the Appellant was young
and had no financial and family obligations; he was young and wanted to learn
the trade of heavy machinery operator.
All in all, the question the Minister should have
asked in the case at bar was: is it reasonable to think that a young man of 19
who is dealing with the payor at arm's length and who has little experience as
a heavy machinery operator, who wants to learn, who lives with his parents and
has no financial obligations, would have agreed to help the payor out by
waiting a few days before cashing a few cheques that were written to him, and
to be paid irregularly?
[11]
Having regard to the
evidence before me and having examined the factors set out in paragraph 5(3)(b)
of the Act and ascertained that they are correct, I find that the allegations
and conclusions of which the Minister was satisfied seem unreasonable.
Accordingly, I am of the opinion that this employment was insurable employment.
[12]
For all these reasons,
the appeal is allowed.
Signed at Ottawa, Canada, this
20th day of May 2008.
"Paul Bédard"
Translation
certified true
on this 3rd day of
July 2008.
Brian McCordick,
Translator
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