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Citation: 2003TCC113
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Date: 20030328
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Docket: 2001-3726(EI)
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BETWEEN:
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JAMES PATTERSON,
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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
Deputy Judge Savoie, T.C.C.
[1] This appeal was
heard at Matane, Quebec, on November 1, 2002.
[2] This appeal
concerns the insurability of the appellant’s employment when employed with
9074-4657 Québec Inc., (the “payer”) during the period at issue, from June 26
to November 24, 2000.
[3] On
July 10, 2001, the Minister of National Revenue (the “Minister”) informed the
appellant of his decision that this employment was not insurable on the basis
that he and the payer would not have entered into such a contract if they had
been dealing at arm’s length during the period at issue.
[4] In reaching his
decision, the Minister relied on the following assumptions of fact set out in
paragraph 5 of the Reply to the Notice of Appeal:
[Translation]
(a) the payer was incorporated in 1999;
(b) the payer’s sole shareholder is Kevin James Patterson;
(c) the appellant is the father of the payer’s sole shareholder;
(d) during the period at issue, the payer’s activities consisted of
operating a cabinet making shop and logging for the Domtar corporation;
(e) during the years prior to the period at issue, the appellant
was the sole shareholder and in charge of 9024‑6539 Québec Inc. whose
activity was logging for Domtar;
(f) 9024-6539 Québec Inc. ceased to operate in 1999;
(g) during the period at issue, the payer took back the timber
allocations formerly exploited by 9024-6539 Québec Inc;
(h) with his son, the appellant jointly and severally guaranteed
the payer’s line of credit in the amount of $10,000;
(i) the appellant managed all aspects of the payer’s logging
operations, including the employees’ pay cheques;
(j) the appellant’s duties consisted, inter alia, in
travelling from site to site to supervise the loggers working for the payer and
calling log carriers to coordinate deliveries to the paper mill;
(k) the appellant used his own pickup truck to travel to the sites;
(l) the payer reimbursed the payer for the gas used for his
travel;
(m) during the period at issue, the payer employed approximately 14
loggers;
(n) with the exception of the appellant, all of the payer’s
employees were paid weekly by cheque;
(o) the appellant’s remuneration was $500 a week;
(p) the appellant received two weeks’ salary in cash at the
beginning of the period at issue;
(q) the balance of his remuneration for the entire period at issue
was paid to him by cheque in the amount of $7,332.20 on December 28, 2000;
(r) in the weeks prior to the period at issue, the appellant worked
for the payer without pay, preparing for the next logging season, including
hiring loggers;
(s) the loggers began work in the forest at the end of May 2000
while the appellant began to be remunerated only on June 26, 2000;
(t) the alleged period of work of the appellant does not
correspond with the period that he actually worked.
[5] The appellant
admitted the Minister’s assumptions set out in subparagraphs (a) to (e), (g),
(m) and (o). He denied those set out in subparagraphs (i), (n) and (r) to (t)
and provided clarifications concerning the rest.
[6] The evidence
disclosed that the appellant’s tasks consisted of walking through the woods to
identify logging sites, laying out roads and seeing that they were maintained
to ensure they were drivable. He had to assign each logger to a jobsite and see
to transporting the lumber to the Domtar paper mill. He supervised the workers.
He worked more than 50 hours a week, from Monday to Friday, sometimes on
Saturday, and occasionally in the evening, if necessary, to ensure that the lumber
was hauled. On the other hand, he did not have to follow a strict schedule.
[7] The appellant
told the investigators that, when the payer’s shareholder was absent, he saw to
everything. He had a power of attorney to sign the payer’s cheques and used it
to sign the cheques for the payer’s expenses as well as the employees’ pay
cheques.
[8] The worker, the
appellant, endorsed the $10,000 line of credit that the payer had negotiated
with a lending institution and he endorsed the loan jointly and severally with
his son.
[9] According to the
evidence, the appellant received weekly remuneration of $500, but he waited
until after the period at issue, namely, on December 28, 2000, to write his own
pay cheque in the amount of $7,332.20. According to him, he did this to give
the payer a chance.
[10] In addition, the
appellant received two pays in cash at the beginning of the period at issue for
helping the payer, without pay, to prepare for the season’s work.
[11] The payer’s other
employees were paid once a week by cheque.
[12] The Minister
provided reasons for his decision under the provisions of paragraphs 5(2)(i)
and 5(3)(b) of the Employment Insurance Act (the “Act”)
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):
[...]
(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.
[13] It is appropriate,
then, to consider the legality of the exercise of the Minister’s discretion in
light of the circumstances described, such as the remuneration paid, the
duration and the nature and importance of the work performed by the appellant.
[14] The analysis of
the circumstances required by paragraph 5(3)(b) of the Act supports
the incontrovertible conclusion that the payer and the appellant would not have
entered into a similar contract of employment if they had been dealing with
each other at arm’s length.
[15] One need only
remember that the appellant provided services without pay to the payer and
signed a guarantee to assist the payer financially and also endorsed the line
of credit. In addition, he signed the payer’s cheques, the employees’ pay
cheques and his own pay cheque. Moreover, he waited until the end of the period
at issue to write his own pay cheque for the period at issue.
[16] It must be added
that the appellant was not bound by a strict work schedule. However, his
remuneration was fixed regardless of the number of hours of work.
[17] When the payer’s
sole shareholder was absent during the period at issue, the appellant’s
services as the person in charge and supervisor of the employees were needed
for the activities of the payer’s business.
[18] It should be noted
that, with the exception of a few clarifications provided by the appellant
specifically concerning his duties with the payer, the evidence fell short of
establishing that the Minister’s assumptions were false.
[19] With regard to the
subparagraphs denied by the appellant, this Court did not hear any evidence or
read any document that convincingly refuted or contradicted the contents of
these subparagraphs. The same is true for the subparagraphs to which the
appellant wanted to add clarifications.
[20] The evidence
adduced by the appellant added certain details that were used to provide minor
corrections to the assumptions on which the Minister relied. However, this
evidence was used only to make a few corrections, which, although relevant, did
not rise to the level necessary to lessen their import.
[21] The appellant requested
that the Court intervene and reverse the Minister’s decision. However, almost
all of the Minister’s assumptions continued to be persuasive despite the
appellant’s evidence.
[22] It is true that
this Court, in certain circumstances, has the power to intervene in the
Minister’s exercise of his discretion under paragraph 5(3)(b) of the Act,
but the Federal Court of Appeal, in Canada (Attorney General) v.
Jencan Ltd. (C.A.), [1998] 1 F.C. 187, marked out the limits of this
power in setting out the criteria for this Court’s intervention as follows:
The decision of this Court in Tignish,
supra, requires that the Tax Court undertake a two-stage inquiry when hearing
an appeal from a determination by the Minister under subparagraph 3(2)(c)(ii).
At the first stage, the Tax Court must confine the analysis to a determination
of the legality of the Minister's decision. If, and only if, the Tax Court
finds that one of the grounds for interference are established can it then
consider the merits of the Minister's decision. As will be more fully developed
below, it is by restricting the threshold inquiry that the Minister is granted
judicial deference by the Tax Court when his discretionary determinations under
subparagraph 3(2)(c)(ii) are reviewed on appeal. Desjardins J.A., speaking for
this Court in Tignish, supra, described the Tax Court's circumscribed
jurisdiction at the first stage of the inquiry as follows:
Subsection 71(1) of the Act provides that
the Tax Court has authority to decide questions of fact and law. The applicant,
who is the party appealing the determination of the Minister, has the burden of
proving its case and is entitled to bring new evidence to contradict the facts
relied on by the Minister. The respondent submits, however, that since the present
determination is a discretionary one, the jurisdiction of the Tax Court is
strictly circumscribed. The Minister is the only one who can satisfy himself,
having regard to all the circumstances of the employment, including the
remuneration paid, the terms and conditions and importance of the work
performed, that the applicant and its employee are to be deemed to deal with
each other at arm's length. Under the authority of Minister of National Revenue
v. Wrights' Canadian Ropes Ltd., contends the respondent, unless the Minister
has not had regard to all the circumstances of the employment (as required by
subparagraph 3(2)(c)(ii) of the Act), has considered irrelevant factors, or has
acted in contravention of some principle of law, the court may not interfere.
Moreover, the court is entitled to examine the facts which are shown by
evidence to have been before the Minister when he reached his conclusion so as
to determine if these facts are proven. But if there is sufficient material to
support the Minister's conclusion, the court is not at liberty to overrule it
merely because it would have come to a different conclusion. If, however, those
facts are, in the opinion of the court, insufficient in law to support the
conclusion arrived at by the Minister, his determination cannot stand and the
court is justified in intervening.
[23] In light of this,
especially the evidence received, the appellant’s admissions and the
contradictions between the evidence at the hearing and the earlier statements,
this Court fails to see that intervention on its part is warranted.
[24] The onus was on
the appellant to prove his case and he could adduce new evidence to refute the
facts on which the Minister relied. He did not do so; he did not discharge his
onus.
[25] Consequently, the
appeal is dismissed and the Minister’s decision is confirmed.
Signed
at Grand-Barachois,
New Brunswick, this 28th day of March 2003.
D.J.T.C.C.
Translation certified
true
on this 30th day of
January 2004.
Leslie
Harrar, Translator
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