[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2004TCC92
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Date: 20040127
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Docket: 2003-1071(EI)
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BETWEEN:
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CHRISTIANE CADIEUX,
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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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REASONS FOR JUDGMENT
Justice Lamarre Proulx
[1] This is an appeal from a decision
of the Minister of National Revenue (the "Minister") to the
effect that the Appellant's employment with Chaussures Confort
Inc. from June 2 to 28, 2002, was not insurable employment.
The Minister's decision is dated December 16, 2002.
[2] The Minister based the decision on
the presumptions of fact described in paragraph 5 of the Reply to
the Notice of Appeal (the "Reply") as follows:
The Respondent, the Minister of National Revenue, based the
decision on the following presumptions of fact:
a) the Payer
runs a specialized shoe (orthotics) sales firm located in the
St-Jean sur le Richelieu shopping centre;
b) Mr.
André Cadieux, the Appellant's brother, was the firm's
sole shareholder;
c) the Payer
usually hired four people, including Mr. Cadieux and his two
daughters;
d) the
Appellant is an experienced social psychologist and usually
worked in schools as a special-education teacher;
e) the
Appellant was unemployed and her brother hired her as a
consultant because he wanted to re-organize the Payer's firm;
f) the
Payer initially told the Appellant that her services would be
required only for a maximum of four weeks because he had a
limited budget;
g) the Payer
asked the Appellant to act as an observer with a view to making
recommendations for developing the business and increasing
traffic and to improving communication among employees and
customer relations;
h) the
Appellant was supposed to be in the store between 9:00 a.m. and
2:00 p.m. to observe and completed her work by conducting
research in the library on customer psychology;
i) the
Appellant could finish her work at home and provided the Payer
with her recommendations orally;
j) the
Appellant did not have a specific work schedule to be followed
and the Payer did not keep track of her hours of work;
k) under the
initial agreement, the Appellant was supposed to be paid $10 an
hour for approximately 30 hours of work a week;
l) the
Appellant's hours of work increased to 40 hours a week and her
compensation to $20 an hour during the last two weeks of the
period at issue;
m) when she
completed her work, the Appellant did not prepare a written
report on her recommendations for the Payer;
n) during the
period at issue, the Appellant accumulated 140 hours of work, of
which 100 were hours of observation on the Payer's premises;
o) the
services provided by the Appellant were outside her usual
specialty and were unrelated to the Payer's normal
activities;
p) during the
short period of her employment (four weeks) the Appellant's
compensation increased from $10 to $20 an hour without
justification and without the Payer having any control over the
hours she actually worked.
[3] During her testimony, the
Appellant accepted paragraphs 5(a) to 5(e) of the Reply. In
connection with paragraph 5(c), she mentioned that someone else
normally worked for the Payer, a Mr. Bertrand. The Appellant
mentioned in connection with paragraph 5(d) that it was difficult
to find work in her area of expertise which explained why she was
working as a special education teacher.
[4] In connection with
paragraph 5(f), the Appellant mentioned that her services
had been retained on a week by week basis.
[5] She accepted paragraphs 5(g) to
5(i). She mentioned that opposed to what is written in paragraph
5 (h), she observed from 9:00 a.m. to 1:00 p.m. for the
first two weeks. Her observation work increased one hour a
day during her last two weeks.
[6] She denied paragraph 5(j). She
mentioned that she was supposed to do her observation work during
the times specified by her brother, who did not want her on the
premises when there were a lot of people in the store.
[7] She accepted paragraphs 5 (k)
to 5 (m) of the Reply. In connection with the increase
in her hourly pay from $10 to $20, she explained that that was
what she had requested from the start and her brother had not
agreed, but did so for the last two weeks of the period.
[8] In connection with paragraph
5 (n), she said that she did about 90 hours of
observation and 50 hours of research at home or the library.
[9] In connection with paragraph 5(o),
the Appellant mentioned that she used her social psychology
training to render the services she provided.
[10] In connection with paragraph 5(p), she
reiterated what she had already said, that she had asked for $20
an hour and her brother had finally agreed. Her brother saw
her observing and she reported to him once a week, on Fridays,
thereby ensuring that her brother knew what she was doing.
She followed his orders and instructions and was not in the store
when he did not want her there. There were no specific
objectives to be met. There was no work description in
writing.
[11] Ms. Julie Lambert, Appeals
Officer, testified. She had a conference call with the
Appellant and her counsel on December 11, 2002. During this call,
she learned that there was no work contract in writing, that the
agreement was on a week to week basis, that the Appellant was
scheduled to observe during periods when she would not disturb
customers and her brother did not plan the work or supervise
her. The firm did not provide her with any tools. Mr.
Cadieux, the Payer, did not want to answer the Appeals Officer's
questionnaire. He referred to the testimony he had provided
the insurability officer.
[12] The Appellant pointed out that it was
insurable employment because her brother could dismiss her when
he wanted. Further, he controlled her because he decided
when she did her observation work and she had to report to
him: every Friday she reported her observations for the
week. The raise from $10 to $20 was a small one because a
consultant can earn much more.
[13] Counsel for the Respondent pointed out
that the employer had not provided any justification for
increasing the hourly rate from $10 to $20. The terms and
conditions of the employment were that the observation on the
premises was to be done when there were not too many customers in
the store and the research was to be done at home or at the
library. It was therefore not a typical job in the
firm. The employer did not provide any instructions on how
services were to be provided. There was no written contract
or final report.
[14] Counsel for the Respondent cited two
Federal Court of Appeal decisions: Massignani v. Canada
(Minister of National Revenue), [2003] T.C.J. No 542
(Q.L.) and Miller v. Canada (Minister of National
Revenue), [2002] T.C.J. No 1498 (Q.L.).
[15] He cited paragraph 2 in the Massignani
decision:
2 First,
the deputy judge failed to consider and fulfill his role under
the Unemployment Insurance Act, S.C. 1970-71-72. c. 48
(the "Act"), paragraph 3(2)(c), a role that this Court
described in Légaré v. Canada (1999), 246 N.R. 176
and Pérusse v. Canada (2000), 261 N.R. 150, which were
followed in Valente v. Minister of National Revenue, 2003 FCA
132. This role does not allow the judge to substitute his
discretion for that of the Minister, but it does encompass the
duty 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": see
Légaré, supra, at page 179, Pérusse, supra,
at page 162.
[16] He cited paragraphs 3 and 4 in the
Miller decision:
3 At the
first stage of the inquiry, the Tax Court Judge must assess the
legality of the Minister's determination. In doing
so, the Tax Court Judge must accord judicial deference to the
Minister's discretionary decision unless the Tax Court Judge
finds that the Minister has exercised his discretion in a manner
contrary to law. In assessing whether the Minister has
exercised his discretion properly, the Tax Court Judge need not
defer to the Minister's findings of fact, but have regard to
the facts raised before the Court during the hearing of the
appeal.
4 The
Tax Court Judge may only proceed to the second stage and consider
the merits of the Minister's decision if one of the following
grounds for interference is established: (i) the Minister acted
in bad faith or for an improper purpose or motive; (ii) the
Minister failed to take into account all of the relevant
circumstances, as expressly required by subparagraph 3(2)(c)(ii);
or (iii) the Minister took into account an irrelevant
factor. Therefore, it "is only where the
Minister's determination lacks a reasonable evidentiary
foundation that the Tax Court's intervention is
warranted"
Analysis
[17] Paragraph 5(2)(i) and subsection
5(3) of the Employment Insurance Act (the "Act") read as
follows:
5(2) Insurable employment does not include
...
(i) employment if the employer and employee are not dealing
with each other at arm's length.
Arm's length dealing
5(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.
[18] Provision is made in paragraph
5(2)(i) that insurable employment is not employment where
the employer and employee deal with each other at non-arm's
length.
[19] Provision is made in subsection 5(3) of
the Act that if the Minister 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 the Appellant's brother 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, then
the employment is not excepted from insurable
employment.
[20] In the case at hand, was the Minister
not convinced that it was reasonable to reach this
conclusion? Was the decision right or wrong?
[21] It would be difficult for me to decide
that the decision was wrong.
[22] The facts on which the Minister based
the decision are accurate. There is no dispute as to the facts in
the case at hand. The initial impression of the facts is
that a contract for services, not a contract of employment, is
involved. It is therefore hard to understand why an
employer would offer a consultant a contract of employment. If
this consultant is an unrelated person, the employer will
normally want to know at the outset how much the consulting
contract will cost and to obtain a report. He or she would
have a real need for this consultant and would have given it a
great deal of thought before hiring him or her.
[23] The hourly rate seems to have been set
by the Appellant. It doubled after two weeks without the
work changing. The hours also became longer, but the workload did
not increase. The Appellant had 90 hours of observation
work and 50 hours of research at home and at the library.
The Friday reports were oral and no written report was provided
at the end.
[24] Under a contact of employment, there is
control which translates into a subordinate relationship.
Establishing control is not telling the working not to conduct
observations at certain times. There were no instructions
provided as to how the tasks were to be carried out. The
Appellant decided how her observations were to be conducted.
[25] The employer did not testify. He
did not want to fill out the Appeals Officer's
questionnaire. Further, the work was not related to the
employer's normal activities.
[26] I think that it was reasonable for the
Minister to conclude that had the Appellant not been the sister
of the Payer's sole shareholder, a similar contract of employment
would not have been entered into.
[27] The appeal is therefore dismissed.
Signed at Ottawa, Canada, the 27th day of
January, 2004.
Lamarre Proulx, J.
Certified true translation
Colette Beaulne
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