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Citation: 2004TCC134
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Date: 20040308
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Court File No.: 1999-4845(EI)
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BETWEEN:
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JEAN-CLAUDE PICARD,
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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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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] Jean-Claude Picard has appealed a
decision of the Minister of National Revenue
("the Minister") that his employment by Lise
Tremblay ("the payor") during the periods in
issue, specifically May 6 to September 7, 1996,
June 2 to October 4, 1997, and July 6 to
October 3, 1998, is excluded from insurable employment
within the meaning of the Employment Insurance Act
("the Act") because Mr. Picard was not
dealing with Ms. Tremblay at arm's length.
[2] Subsection 5(1) of the Act reads
in part as follows:
5.(1) 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;
. . .
[3] Subsections 5(2) and 5(3) of the
Act read 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.
[4] Section 251 of the Income Tax
Act reads in part as follows:
Section 251: Arm's length
(1) For the
purposes of this Act,
(a) related
persons shall be deemed not to deal with each other at arm's
length;
. . .
(2) Definition of "related persons" - For the
purpose of this Act, "related persons", or persons
related to each other, are
(a)
individuals connected by blood relationship, marriage or
common-law partnership or adoption;
. . .
[5] The Minister's decision is
based on the following statements of fact set out in
paragraph 6 of the Reply to the Notice of Appeal, which were
admitted or denied as the case may be:
[TRANSLATION]
(a) The payor has
been operating a family agricultural enterprise since 1990 under
the business name "Jardins Gallix Enr." (denied)
(b) From 1985 to
1990, the appellant operated the business. He sold it to his
spouse in 1990. (denied as written)
(c) The payor has
nine greenhouses and grows flowers and tomatoes; all the assets
of the operation were transferred to her name. (admitted with
clarifications)
(d) During the busy
season, which is January for tomatoes and March for flowers, the
payor hires 10-12 people. (denied)
(e) The appellant
works for the payor as a manager; he supervises the other workers
and does a little of everything for the business. (admitted in
part)
(f) The
appellant is the only owner of a parcel of land on which the
payor grows strawberries and raspberries. (denied)
(g) The appellant,
as manager, claims that he replaces the payor when the work
becomes too heavy for her alone, but he renders services for the
payor during the entire season, i.e. before and after the periods
in issue. (denied)
(h) Both parties
acknowledge that the appellant renders services outside the
periods in issue. (denied)
(i) When he
was remunerated, the appellant's gross pay varied from $624
to $655 per week, without regard to the hours actually worked.
(denied)
(j) The
appellant was generally paid by cheque; the cheques contain
several irregularities: (denied)
- The cheques are often cashed a long time (up to six months)
after being issued by the payor.
- The appellant received two full paycheques during the week of
June 23 to June 29, 1996, but cannot provide an
explanation for this.
- From August 25 to September 7, 1996, the appellant
was purportedly paid cash.
- Many of the appellant's paycheques are deposited into the
account used solely for the hypothec on the house, which is in
the payor's name.
- Two of the appellant's paycheques were deposited directly
into the payor's personal account.
(k) The
appellant's purported periods of employment do not coincide
with the periods during which he actually worked. (denied)
Analysis
[6] The Federal Court of Appeal has
defined the role of Tax Court judges under the Act on several
occasions. This role does not permit a judge to substitute his or
her discretion for that of the Minister, but does carry with it
the 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."[3]
[7] In other words, before deciding
whether the conclusion with which the Minister was satisfied
stills seems reasonable, I must, in light of the evidence before
me, verify whether the Minister's allegations appear
well-founded, in whole or in part, having regard to the
factors set out in paragraph 5(3)(b) of the Act.
[8] It should be noted from the outset
that Mr. Picard and the payor are the only people who
testified at the hearing.
[9] The evidence discloses that the
payor operated an agricultural enterprise under the name Jardins
Gallix Enr. during the years 1996, 1997 and 1998. At that time,
the payor grew flowers and tomatoes in her greenhouses. She also
grew strawberries and raspberries. In addition, she operated a
garden centre on the same land, which enabled her, among other
things, to sell what her growing operations produced.
[10] Mr. Picard's uncontradicted
and credible testimony disclosed that he worked an average of six
days a week, ten hours a day, during the periods in issue.
His gross weekly pay for this work varied from $624 to $655.
His primary function was to supervise the payor's employees,
but he checked the heating and ventilation system (among other
things), took care of flower deliveries and prepared the fields.
He occasionally assisted the payor at the garden centre. In
other words, he was the payor's right-hand man and did
a little of everything for the business. Mr. Picard
considered the periods in issue very active for the business and
believed that the payor had a great need for his services.
[11] At the hearing, Mr. Picard
acknowledged that he worked an average of two hours a week on a
volunteer basis for the payor. He did not deny the answers to
questions 18 and 19 on the statutory declaration he provided to
Human Resources Development Canada (Exhibit I-1). His
answer to question 19 states that when things were going badly,
he might work up to 15 hours a week on a volunteer basis
during the month preceding and following each of the periods in
issue.
[12] The evidence also disclosed that
Mr. Picard deposited his August 3, 1996,
August 10, 1996, August 17, 1996 and
September 17, 1996, paycheques in December 1996 at
the request of the payor, who did not have enough funds to honour
them. Mr. Picard deposited his July, August and
September 1997 paycheques in October 1997 for the same
reason.
[13] At the hearing, Mr. Picard did not
deny depositing several paycheques into the bank account used
solely to pay down the hypothec on the house that belonged to the
payor. He testified that he did so because he was a surety in
respect of the hypothec. In fact, he tendered
Exhibit A-4, a copy of the loan instrument, which
states that he is a surety.
[14] Further, Mr. Picard did not deny
that he deposited two paycheques into the payor's personal
bank account. As justification, he simply said,
straightforwardly, that it is normal for one spouse to help out
the other.
[15] With respect to the Minister's
assertion that Mr. Picard received two paycheques for the
period of June 26 to June 29, 1996,
Mr. Picard testified that has no recollection of this, and
that if it did occur, it was undoubtedly a mistake.
[16] As for the Minister's allegations
that he was paid in cash for the period of
August 25, 1996, to September 7, 1996,
Mr. Picard explained forthrightly that he cashed the cheques
using the petty cash from the garden centre booth. He added that
he did this because he would otherwise have been forced to drive
53 km to his credit union to get cash on that occasion.
[17] In my opinion, the evidence discloses
that Mr. Picard did indeed work for the agricultural
enterprise throughout his periods of employment, that he worked
60 hours a week, and that his pay was based on this
60-week average. The evidence also disclosed that the
periods in issue fell within the business' busy periods and
that Mr. Picard's pay was within the applicable range
given the responsibilities that the payor entrusted to him and
his experience. In my opinion, this disposes conclusively of
paragraphs (i) and (k) of the Minister's allegations; neither
of the two paragraphs establishes non-arm's length
dealing.
[18] I find that the Minister erred in
considering almost exclusively the nature, duration and
importance of the work done outside the periods of employment in
issue and the way in which Mr. Picard used his paycheques.
This brings us to paragraphs (g), (h) and (j) of the
Minister's allegations.
[19] The evidence certainly disclosed that
Mr. Picard worked on a volunteer basis for the payor outside
the periods in issue - occasionally up to 15 hours.
[20] However, what Mr. Picard did
outside his periods on employment is of little relevance in my
view, since it was not alleged, in the case at bar, that the
wages paid during the period of employment took account of the
work done outside those periods, or that Mr. Picard
included, in the hours counted toward his insurable employment,
the hours that he worked outside the periods of employment, or
that work done outside his periods of employment was included in
the work done during those periods. The fact that Mr. Picard
worked on a volunteer basis outside the periods in issue may
indicate that he would not have done that volunteer work if he
had not been the payor's spouse. As Décary J.A.
stated in Théberge v. Canada (M.N.R.),
[2002] F.C.J. No. 464 (QL):
. . . However, that is not the work we are
concerned with, and the judge erred by taking it into account in
the absence of any indication that the insurable employment at
issue was subject to special terms and conditions that were
attributable services being rendered outside the period of
employment.
[21] In my view, Mr. Picard's use
of his paycheques is of little relevance to the case at bar and
is not determinative. By occasionally depositing his paycheques
into his spouse's bank account, Mr. Picard was simply
fulfilling his obligation to contribute to household expenses. I
do not see how Mr. Picard's deferral of certain
paycheque deposits, in order to assist the payor's business
temporarily, can lead to an inference that his insurable
employment was subject to special terms and conditions that the
payor would not have been granted to an employee with whom she
was dealing at arm's length.
[22] In light of the evidence before me,
after considering the factors set out in
paragraph 5(3)(b) of the Act and verifying whether
the Minister's allegations are well-founded, I find
that the conclusion with which the Minister was satisfied is
unreasonable.
[23] For these reasons, the appeal must be
allowed and the Minister's decision is vacated.
Signed at Ottawa, Canada, this 8th day of March 2004.
Bédard J.
Translation certified true
on this 14th day of January 2005.
Jacques Deschênes, Translator
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