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Citation: 2004TCC817
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Date: 20041221
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Docket: 2004-1906(EI)
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BETWEEN:
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BENOÎT LEQUIN,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE
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Respondent,
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and
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ALUMINIUM KNOWLTON INC.,
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Intervener.
[OFFICIAL ENGLISH TRANSLATION]
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REASONS FOR JUDGMENT
Savoie D.J.
[1] This appeal was heard at Montreal,
Quebec on November 25, 2004.
[2] The case involves an appeal
regarding the insurability of the Appellant's employment
while in the service of Aluminium Knowlton Inc., the Payer, for
the period from October 1, 2001, to May 3, 2003 (the period at
issue).
[3] On January 28, 2004, the Minister
of National Revenue (the "Minister") informed the
Appellant of his decision to the effect that the Appellant had
not held insurable employment during the period at issue.
[4] However, in his Reply to the
Notice of Appeal, the Minister acknowledged that the Appellant
did hold insurable employment for the period from October 1,
2001, to March 8, 2003, but that his employment for the period
from March 9 to May 3, 2003, was not insurable. Therefore the
only period now at issue is that of March 9 to May 3, 2003.
[5] For this reduced period at issue,
the Minister contends that the Appellant's employment was not
insurable under subsections 5(2)(i) and 5(3) of the
Employment Insurance Act (the "Act"), because he was
satisfied that it was not reasonable to conclude, given the
circumstances, 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.
[6] In rendering his decision, the
Minister relied on the following
assumptions of fact:
a) The Payer
is a general contractor; (admitted)
b) He owns a
business that sells and installs windows, doors, and aluminum
siding; (admitted)
c) The
business operates year-round, but there is more business from
spring to fall; (admitted)
d) For the
fiscal years ending May 31, 2002 and 2003, the Payer's sales
were, respectively, approximately $1.4 million and
$1.9 million; (admitted)
e) The Payer
had about thirty different employees each year; (denied)
f) During the
period at issue, the Appellant worked for the Payer as a
salesperson; (denied)
g) The
Appellant met with clients, collected information about the work
to be done, estimated costs, and prepared the bids; (denied)
h) He worked
on the road and at the Payer's office; (admitted)
i) He
worked from 48 to 50 hours per week; (admitted)
j) The
Appellant used his own automobile for travelling; (admitted)
k) The Payer
paid him a travel allowance of 41 ¢ per kilometre for the
first 5,000 kilometres and 35 ¢ [sic] for any
distance exceeding that; (denied)
l) The
Appellant received fixed remuneration per week; (denied)
m) From October 1,
2001, to November 30, 2002, the Appellant received $465.00 per
week; (admitted)
n) From
December 1, 2002, to March 8, 2003, the Appellant received
$515.00 per week; (admitted)
o) From March
9 to April 19, 2003, the Appellant received $900.00 per week;
(admitted)
p) From April
20 to 26, 2003, the Appellant received $950.00; (admitted)
q) From April
27 to May 3, 2003, the Appellant received $900.00; (admitted)
r) He
was remunerated only for 44 hours of work per week;
(admitted)
s) Any hours
worked during the week exceeding 44 hours were banked;
(admitted)
t) The
Appellant used his banked hours to take paid vacations.
(admitted)
[7] In his testimony during the
hearing, the Appellant stated that he was a representative of the
Payer, rather than simply a salesperson, and that in addition to
the duties acknowledged by the Minister, he also did work
planning, placed orders for merchandise, prepared team plans,
ensured that work was completed, and was in charge of invoicing
and verifying the work. He stated that his travel allowance was
41 ¢ per kilometre for the first 3,500 kilometres and
35 ¢ for any distance exceeding that.
[8] He also stated that the weekly
payment that he received was only a small advance on his real
income which would later be adjusted based on his initial
agreement with the Payer, whereby he would receive a share of the
profits as per the agreement. However, this agreement was not
produced at the hearing, except through the testimonies of the
Appellant and of Diane Racicot, vice-president of the Payer,
and Exhibit A-1 titled "bonus calculation." Perhaps it should be
concluded, then, that these additional payments made to the
Appellant during the period at issue that immediately preceded
his departure were not his salary, but rather his income based on
his share of the profits according to the Payer's financial
statements, which show the profit from the Payer's operations as
at May 31, 2003.
[9] The Payer's financial statements
were not produced. They could have enlightened this Court on the
basis for the agreement between the Appellant and the Payer, the
period covered by the bonus calculation, the explanation for the
percentage of profit calculation, the Appellant's role in the
Payer's business, and several other unanswered questions.
[10] The oral testimony suggested that the
additional payments made to the Appellant were commission
payments, but Exhibit A-1 shows a bonus or profit sharing. It
becomes difficult to reconcile the Appellant's request with the
facts presented with respect to the payments made to the
Appellant. These facts sometimes show a salary, sometimes a
commission, and sometimes a bonus or profit sharing.
[11] In making his decision, the Minister
relied on paragraphs 5(1)(a) and 5(2)(i) and
subsections 5(3) and 93(3) of the Act.
[12] Subsection 5(1) of the Act reads in
part as follows:
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;
[...]
[13] Subsections 5(2) and (3) of the Act are
worded 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.
[14] The Federal Court of Appeal has set out
the principles of application to resolve the issue submitted to
this Court in Légaré v.
Canada(Minister of National Revenue - M.N.R.),
[1999] F.C.J. No. 878. The following is an
excerpt:
The Act requires the
Minister to make a determination based on his own conviction
drawn from a review of the file. The wording used
introduces a form of subjective element, and while this has been
called a discretionary power of the Minister, this
characterization should not obscure the fact that the exercise of
this power must clearly be completely and exclusively based on an
objective appreciation of known or inferred facts. And
the Minister's determination is subject to
review. In fact, the Act confers the power of review
on the Tax Court of Canada on the basis of what is discovered in
an inquiry carried out in the presence of all interested
parties. The Court is not mandated to make the same
kind of determination as the Minister and thus cannot purely and
simply substitute its assessment for that of the Minister: that
falls under the Minister's so-called discretionary
power. However, the Court must 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, it must decide whether the
conclusion with which the Minister was "satisfied"
still seems reasonable.
Remuneration
[15] Beginning March 2003, a few months
before his employment ended, the Appellant's salary almost
doubled, rising from $550 per week to $900. The explanations
provided by the Appellant, by Diane Racicot, and by Exhibit A-1
did not help explain exactly what happened between the Appellant
and the Payer, for the reasons listed above. The Minister chose
to ignore these ambiguous and contradictory explanations, and
concluded that a stranger would never have received such
treatment, namely, a doubled salary a few months before his
employment ended.
Terms and conditions of employment
[16] The Appellant admitted that the hours
that he worked in a week exceeding 44 hours were banked, and that
he used his banked hours to take paid vacations. This is
certainly another explanation for the Minister's decision.
Duration of work
[17] The Appellant admitted that the Payer's
business operated year-round, but that there was more business
from spring to fall. This does not explain why the Appellant was
hired on October 1, 2001, just at the beginning of the business's
slack period, and why his employment ended at the beginning of
May, when, logically, the business's busy season was
beginning.
Nature and importance of the work
[18] It must be admitted that the
Appellant's job was necessary and important for the Payer's
business and was fully integrated into its operations.
[19] The onus was on the Appellant to prove
that the Minister's presumptions were incorrect. His attempts
to do so failed.
[20] After analyzing the evidence submitted,
in light of the case law, particularly in Légaré
v. Canada, supra, this Court must conclude that the
Minister's decision still seems reasonable, given that the facts
he relied on are real and were correctly assessed having regard
to the context in which they occurred.
[21] Accordingly, I find that the
Appellant's employment during the period of March 9 to May 3,
2003, is not insurable, because it is not reasonable to conclude,
given all the circumstances, 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.
[22] The appeal is allowed and the
Minister's decision is amended, since he recognized in his Reply
to the Notice of Appeal that the Appellant did hold insurable
employment for the period from October 1, 2001 to March 8,
2003.
Signed at Grand-Barachois, New Brunswick, this 21st
day of December 2004.
Savoie D.J.
Translation certified true
on this 9th day of March 2005.
Colette Dupuis-Beaulne, Translator
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