Citation: 2006TCC537
Date: 20061024
Docket: 2006-326(EI)
BETWEEN:
JOSÉE GAUTHIER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Savoie D.J.
[1] This appeal was heard at Québec, Quebec, on August 22, 2006.
[2] It is an appeal
from the decision of the Minister of National Revenue
("the Minister") dated October 25, 2005. The period in
issue is from September 20 to November 27, 2004. The debate centres on
the work done by the Appellant for the payor Lucien Paquet.
[3] The Minister
determined that the Appellant was not employed in insurable employment under a
contract of service, but that even if she had been, her employment would
be excluded from insurable employment under paragraph 5(2)(i) of the Employment Insurance
Act ("the Act") because she and the payor were not dealing
with each other at arm's length.
[4] In making his decision, the Minister relied on
the following assumptions of fact:
[TRANSLATION]
5.(a) The payor Lucien Paquet is the sole shareholder of the
business. (admitted)
(b) The payor runs a transportation
business that specializes in the transportation of lumber. (admitted)
(c) The payor
operates his business throughout the year but there is a slowdown during the
spring thaw. (admitted)
(d) The payor's
business premises are in his home, and the payor has a garage located a short
walk from his home. (admitted)
(e) During the last seven years of operation,
Patrick Paquet, the payor's son, was the only regular employee of the business.
(admitted)
(f) Patrick's main task was to drive the
payor's truck. (admitted)
(g) During the
10-week period in issue, the payor hired the Appellant for the first time with
pay. (admitted)
(h) The
Appellant's principal duties were to run errands for the payor. These errands
consisted in going to the Caisse Populaire, paying suppliers' invoices,
bringing bills to the accountant, etc. (admitted with clarifications)
(i) The Appellant
alleges that she worked 40 hours per week during the period in issue, whereas
the payor states that she worked "as needed" during that period.
(denied)
(j) According to
the payor, sometimes the Appellant did not work for days, and sometimes she
worked only half-days. (denied)
(k) The payor did
not record the Appellant's hours of work. (admitted)
(l) The
Appellant says that her main duty was to sell potatoes over a two-month period,
whereas the payor specifies that the potatoes were only sold during two
weekends (Friday-Sunday) per year. (denied)
(m) The Appellant
specified that she did not work weekends. (admitted)
(n) During the
2004 season, the payor made two trips to purchase potatoes that he sold in his
garage. (admitted)
(o) The payor
prepared no invoices concerning the purchase and sale of potatoes. (admitted
with clarifications)
(p) On the Record
of Employment that she submitted with her claim for benefits, the Appellant
stated that she worked for the payor as an office clerk and made no mention of
her work selling potatoes. (admitted)
(q) The payor
specified that the Appellant was paid $6.00-$7.00 per hour, whereas the
Appellant said that she was paid $13.00 per hour. (denied)
(r) During the
period in issue, the Appellant claims that she was paid gross fixed
remuneration of $520.00 per week, and alleges that this was for 40 hours of
work. (admitted)
(s) There is no
proof that the Appellant was paid her remuneration; she was supposedly paid in
cash by the payor. (admitted)
(t) The
Appellant needed 700 hours of work to qualify for unemployment benefits.
(admitted)
(u) The 44 hours
entered on the payor's purported Record of Employment enabled the Appellant to
obtain a total of 736 insurable hours. (admitted)
(v) There was an
arrangement between the parties for the sole purpose of enabling the Appellant
to draw employment insurance benefits. (denied)
6. The Appellant
and the payor are related within the meaning of the Income Tax Act
because
(a) Lucien Paquet
was the sole shareholder of the business. (admitted)
(b) The Appellant
is Patrick Paquet's wife. (admitted)
(c) Patrick
Paquet is Lucien Paquet's son. (admitted)
(d) The Appellant
is Lucien Paquet's daughter-in-law. (admitted)
(e) The Appellant
was related to a person who controls the payor. (admitted)
[5] The Appellant admitted to all the Minister's
assumptions of fact, except those set out in subparagraphs 5(i), (j), (l), (q)
and (v), which she denied, and those set out in subparagraphs 5(h) and (o),
which she wished to clarify.
[6] At the hearing, the Appellant revealed that she
had to take on her father‑in‑law's duties because of the health
problems that he had been experiencing since March 2004. At the hearing,
she produced a medical report regarding his health. The report, tendered as
Exhibit A‑1 and dated July 5, 2005, was issued by
Clinique Médicale St-Zacharie and reads:
[TRANSLATION]
To Whom It May Concern:
Mr. Paquet is a 79-year-old patient suffering from
Type II diabetes, coronary heart disease, ATA, major vision loss and
significant hearing loss. This condition has remained unchanged since March
2004.
[7] The Appellant said that her father-in-law was
no longer in good enough physical condition to drive due to his vision and hearing
loss. However, the evidence discloses that Lucien Paquet transported a load of
potatoes to his garage in his truck in September 2004. Moreover, it was
established that Lucien Paquet and his son Patrick took over the Appellant's
duties following her layoff.
[8] In addition to the duties that the Minister
acknowledges that she had, the Appellant said that she looked after settling
the tonnage of the goods transported to the United States. This task consists in converting data from the
metric system to the U.S. measurement system.
[9] At the hearing, the Appellant specified that
she could provide invoices for the potato purchases, but that potato sales were
always cash transactions.
[10] At the hearing, the Minister produced a document
entitled "Supplementary Record of Claim" (Exhibit I‑5)
prepared by Yolaine Vachon, an investigator with Human Resources Development
Canada who also testified at the hearing. The investigation revealed that the
payor's business was audited in February 2004, at which time only the
source deductions for January and February 2004 had been remitted.
However, Pierre E. Rodrigue, the accountant for the business, told the
investigator that the Appellant had made the source deductions for the months
of September to December 2004. Specifically, the excerpt from the payroll
journal prepared by the Appellant states that $116.16 worth of employment
insurance (EI) source deductions were made in respect of September 2004,
and $293.52 worth of EI source deductions were made in respect of
October 2004, but, after verification with the Canada Revenue Agency, it
was discovered that the amounts withheld at the source from the Appellant's pay
were $116.16 for September 2004 and $145.20 for October 2004.
These amounts represent only the employer's contribution to the EI
system.
[11] Having been told that the Appellant was the
person who completed the payroll journal, the investigators noticed that the
handwriting of the person assigned to do entries remained the same throughout
the periods preceding, during and after the Appellant's employment, thereby
casting doubt on the Appellant's assertions regarding the duration of her
employment.
[12] The evidence establishes, on a balance of
probabilities, that the Appellant worked part-time for the payor for roughly $6
to $7 per hour. Here duties were to run errands, which consisted in going to
the caisse populaire, going to suppliers' premises to pay invoices,
delivering invoices to the accountant, doing mail runs and settling the tonnage
of goods delivered to the United States. She had no fixed work schedule. She was
paid in cash, and there was absolutely no subordination in the relationship
because her work was not supervised in any way.
[13] The Appellant and her spouse Patrick Paquet
approached the payor regarding the possibility of the payor giving the
Appellant work, and they are apparently the ones who set her salary at $13 per
hour. The Appellant needed 700 hours to qualify for unemployment benefits. The
efforts of the Appellant and her spouse were fruitful: the payor acceded to
their request and asked them to notify the accountant. Faced with the
allegations in the instant case, the investigators asked the Appellant, the
payor and the accountant to produce the documents that would substantiate them.
No documents were produced, with the exception of the Record of Employment
(Exhibit A‑2), which was discredited by the remainder of the
evidence. It must be noted that the 400 hours entered on the Record of
Employment would provide the Appellant with a total of 736 hours.
[14] At the
hearing, Yolaine Vachon stated that the information obtained during the
investigation was highly contradictory. She repeatedly asked for documents, but
her efforts were unsuccessful. As part of her investigation, Ms. Vachon
interviewed Pierre E. Rodrigue, the accountant, on the telephone on
February 3, 2005. She asked him to produce the books of account, but
he replied that it was impossible for him to do so because the accounting was
only done once a year. She therefore asked him to produce the payor's cheques,
at which time he made the following disturbing statement:
[TRANSLATION]
What I told you before (in this matter) is worthless.
The only person who can help you is the Appellant.
[15] The few
documents submitted to the investigator afterwards did not disclose anything
consistent with the information already obtained. At this point, the
investigator handed the file over to the Canada Revenue Agency.
[16] At the
hearing, the Appellant testified that her principal duty was to sell the
potatoes that the payor had purchased in the fall of 2004. However, neither her
benefit claim nor her Record of Employment make reference to this duty. Her
testimony on this point is discredited by the payor's testimony, and, moreover,
the accountant never brought it up.
[17] The
Appellant is asking this Court to vacate the Minister's decision, but the
analysis of the evidence before me in light of the established factors does not
warrant this Court's intervention.
[18] The burden
was on the Appellant to prove, on a balance of probabilities, that the facts on
which the Minister relied in rendering his decision were wrong, but the
Appellant did not discharge this burden.
[19] Under
these circumstances, it is appropriate to quote the remarks of Pratte J.A.
in Elia v. Canada (Minister of National Revenue – M.N.R.), [1998] F.C.J. No. 316, where he
held:
Contrary to what the judge believed, he
therefore could have intervened and should have intervened if, as he asserted,
the evidence established that the Minister's decision was unreasonable.
However, it seems to us that the judge's assertion is also inaccurate and based
on an error of law, since the judge did not take into account the well-settled
rule that the allegations in the reply to the notice of appeal, in which the
Minister states the facts on which he based his decision, must be assumed to be
true as long as the appellant has not proved them false.
[20] A
situation analogous to the case at bar was considered by this Court in Lemay
v. Canada (Minister of National Revenue – M.N.R.), [2006]
T.C.J. No. 304, where Tardif J. dismissed the appeal, stating as
follows:
In addition, the work must be genuine,
especially if the
contract of employment is subject to the provisions of the
Employment Insurance Act ("the Act").
Indeed, the parties to an agreement
governing the performance of work for remuneration must honour that agreement
to the letter. However, upon examining the contract's compliance with the
provisions of the Act, the Court may conclude that it is, in essence, merely an
arrangement between the parties to render the purported employee eligible to
receive employment insurance benefits.
A burden of proof can only be met through
plausible evidence, and such plausibility generally depends on reliable,
coherent explanations. The evidence may leave some doubts due to the passage of
time. Hence, the requisite level of proof is proof on a balance of
probabilities, not certainty beyond any doubt.
In the case at bar, the Appellant has not
made her case on a balance of probabilities. Rather, the evidence adduced
contained numerous inconsistencies. On balance, the evidence tends to show
that during the periods in issue, the Appellant and her employer made an
arrangement one of the fundamental objectives of which was to secure the
maximum amount of employment insurance benefits for the Appellant, as opposed
to paying the Appellant fair value for her work.
[21] Having
completed this analysis, this Court must find, as did the Minister, that there
was an arrangement between the parties for the sole purpose of enabling the
Appellant to qualify for employment insurance benefits.
[22] For all
these reasons, the appeal is dismissed and the Minister's decision is
confirmed.
Signed at Grand-Barachois, New Brunswick, this 24th day of October 2006.
Savoie
D.J.
Translation certified true
on this 18th day of July 2007.
Brian McCordick, Translator
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