Date: 20010926
Docket: 2000-2256(EI)
BETWEEN:
ANTHONY MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
TeskeyJ.
[1] The Appellant appealed to the
Minister of National Revenue (the "Minister") from
a ruling that he was not employed in insurable employment while
engaged by Agpro Services Inc. (the "Payor") for
the period from May 28, 1998 to October 24, 1998
(the "period in question") within the meaning of the
Employment Insurance Act
(the "Act").
[2] By letter dated February 4,
2000, the Minister informed the Appellant that his appeal of the
ruling was denied, in that he determined that the Appellant's
engagement with the Payor during the period in question was not
insurable employment, but was excepted employment as the
Appellant and the Payor were not dealing with each other at
arm's length within the provisions of
paragraph 5(2)(a) of the Act. It is from this
determination the Appellant appeals to this Court.
[3] Paragraph 5(1) of the
Act determines what is insurable employment subject to
paragraph 5(2). Paragraph 5(2) excludes employment that
is not at arm's length. Paragraph 5(3) provides an
exception to paragraph (2) above where the Minister deems
the employment to be at arm's length having regard to all the
terms of the contract. The relevant portions of
paragraph 5(1), (2) and (3) read:
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;
...
5(2) Insurable employment does
not include
...
(i)
employment if the employer and employee are not dealing with each
other at arm's length.
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.
[4] It is noted that
paragraphs 3(1)(a) and 3(2) of the old
Unemployment Insurance Act
(the "Old Act"), for all intents and
purposes means the same as the above provisions.
[5] The leading Federal Court of
Appeal decision on the provisions under the Old Act is a
decision dated June 24, 1997 by Isaac C.J., as he then
was, in Attorney General of Canada v. Jencan Ltd., [1998]
1 F.C. 187. He said in paragraphs 24 and
25 thereof:
The Minister's determination under paragraph
3(1)(a) that the worker's employment is not pursuant
to a contract of service is a quasi-judicial decision subject, on
appeal, to independent review by the Tax Court. In contrast, this
Court established in Tignish, supra, that the Tax
Court must exhibit a higher degree of judicial deference in
reviewing a determination by the Minister under subparagraph
3(2)(c)(ii). As will be seen, it is only where the Tax
Court concludes that the Minister exercised his discretion in a
manner contrary to law that the Tax Court should pass to a review
of the merits of the Minister's determination under this
latter provision.
In Canada v. Schnurer Estate, this Court made it clear
that, on appeal, the Tax Court must consider whether there is a
sufficient factual foundation for the Minister's
determination on either or both of the grounds advanced by the
Minister. The Tax Court must, therefore, review each of the
grounds separately in the light of the evidence. Firstly, was the
employment pursuant to an express or implied contract of service?
If not, the employment is not insurable unless it falls within
one of the exceptions to paragraph 3(1)(a) in subsection
4(1) or in a regulation enacted pursuant to subsection 4(2).
Secondly, if it is employment under a contract of service or
if it is otherwise insurable under section 4, is it
"excepted employment" within the meaning of
subsection 3(2)?
and at paragraph 29:
... The critical issue in this application for judicial review
is whether the Deputy Tax Court Judge erred in law in interfering
with the discretionary determination made by the Minister under
subparagraph 3(2)(c)(ii). This provision gives the
Minister the discretionary authority to deem "related
persons" to be at arm's length for the purposes of the
UI Act where the Minister is of the view that the related
persons would have entered into a substantially similar contract
of service if they had been at arm's length.
and again, at paragraph 31:
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. ...
and again, at paragraphs 33 and 34:
Section 70 provides a statutory right of appeal to the Tax
Court from any determination made by the Minister under section
61, including a determination made under subparagraph
3(2)(c)(ii). The jurisdiction of the Tax Court to review a
determination by the Minister under subparagraph
3(2)(c)(ii) is circumscribed because Parliament, by the
language of this provision, clearly intended to confer upon the
Minister a discretionary power to make these determinations. The
words "if the Minister of National Revenue is
satisfied" contained in subparagraph 3(2)(c)(ii)
confer upon the Minister the authority to exercise an
administrative discretion to make the type of decision
contemplated by the subparagraph. Because it is a decision made
pursuant to a discretionary power, as opposed to a quasi-judicial
decision, it follows that the Tax Court must show judicial
deference to the Minister's determination when he exercises
that power. Thus, when Décary J.A. stated in Ferme
Émile, supra, that such an appeal to the Tax Court
"more closely resembles an application for judicial
review", he merely intended, in my respectful view, to
emphasize that judicial deference must be accorded to a
determination by the Minister under this provision unless and
until the Tax Court finds that the Minister has exercised his
discretion in a manner contrary to law.
If the Minister's power to deem "related
persons" to be at arm's length for the purposes of the
UI Act is discretionary, why, one might ask, does the
right of appeal to the Tax Court under section 70 apply to
subparagraph 3(2)(c)(ii) at all? The answer is that even
discretionary powers are subject to review to ensure that they
are exercised in a judicial manner or, in other words, in a
manner consistent with the law. It is a necessary incident of the
rule of law that all powers granted by Parliament are of an
inherently limited nature. In D. R. Fraser and Co., Ld. v.
Minister of National Revenue, Lord Macmillan summarized the
legal principles which ought to govern such review. He
stated:
The criteria by which the exercise of a statutory discretion
must be judged have been defined in many authoritative cases, and
it is well settled that if the discretion has been exercised
bona fide, uninfluenced by irrelevant considerations and
not arbitrarily or illegally, no court is entitled to interfere
even if the court, had the discretion been theirs, might have
exercised it otherwise.
...
and again, at paragraphs 36 and 37:
Thus, by limiting the first stage of the Tax Court's
inquiry to a review of the legality of ministerial determinations
under subparagraph 3(2)(c)(ii), this Court has merely
applied accepted judicial principles in order to strike the
proper balance between the claimant's statutory right to have
a determination by the Minister reviewed and the need for
judicial deference in recognition of the fact that Parliament has
entrusted a discretionary authority under this provision to the
Minister.
On the basis of the foregoing, the Deputy Tax Court Judge was
justified in interfering with the Minister's determination
under subparagraph 3(2)(c)(ii) only if it was established
that the Minister exercised his discretion in a manner that was
contrary to law. And, as I already said, there are specific
grounds for interference implied by the requirement to exercise a
discretion judicially. The Tax Court is justified in interfering
with the Minister's determination under subparagraph
3(2)(c)(ii) - by proceeding to review the merits of the
Minister's determination - where it is established that the
Minister: (i) acted in bad faith or for an improper purpose or
motive; (ii) failed to take into account all of the relevant
circumstances, as expressly required by paragraph
3(2)(c)(ii); or (iii) took into account an irrelevant
factor.
and again, at paragraphs 41, 42 and 43:
An important point needs to be made here. While all interested
parties, including the worker and the respondent, are given the
opportunity to make submissions to a Revenue Canada appeals
officer prior to a determination by the Minister under
subsection 61(3) of the UI Act, there is no
opportunity to respond to the evidence collected by the appeals
officer or to make submissions directly to the Minister prior to
his determination. It was, presumably, in recognition of this
fact that Parliament provided claimants with an appeal as of
right from a determination by the Minister under section 70. On
appeal, the facts relied upon by the Minister in making his
determination are treated as assumptions, or allegations, of
fact. Although the claimant, who is the party appealing the
Minister's determination, has the burden of proving its case,
this Court has held unequivocally that the claimant is entitled
to bring new evidence at the Tax Court hearing to challenge the
assumptions of fact relied upon by the Minister.
Thus, while the Tax Court must exhibit judicial deference with
respect to a determination by the Minister under
subparagraph 3(2)(c)(ii) - by restricting the
threshold inquiry to a review of the legality of the
Minister's determination - this judicial deference does not
extend to the Minister's findings of fact. To say that the
Deputy Tax Court Judge is not limited to the facts as relied upon
by the Minister in making his determination is not to betray the
intention of Parliament in vesting a discretionary power in the
Minister. In assessing the manner in which the Minister has
exercised his statutory discretion, the Tax Court may have regard
to the facts that have come to its attention during the hearing
of the appeal. As Desjardins J.A. stated in Tignish:
... 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.
Subparagraph 3(2)(c)(ii) specifies that, in determining
whether the worker and the respondent would have entered into a
substantially similar contract of service if they had been at
arm's length, the Minister must consider "all the
circumstances of the employment", including: the
remuneration paid to the worker; the terms and conditions of the
employment; the duration of the employment; and the nature and
importance of the work performed. ...
and again, at paragraphs 50, 51 and 52:
The Deputy Tax Court Judge, however, erred in law in
concluding that, because some of the assumptions of fact relied
upon by the Minister had been disproved at trial, he was
automatically entitled to review the merits of the determination
made by the Minister. Having found that certain assumptions
relied upon by the Minister were disproved at trial, the Deputy
Tax Court Judge should have then asked whether the remaining
facts which were proved at trial were sufficient in law to
support the Minister's determination that the parties would
not have entered into a substantially similar contract of service
if they had been at arm's length. If there is sufficient
material to support the Minister's determination, the Deputy
Tax Court Judge is not at liberty to overrule the Minister merely
because one or more of the Minister's assumptions were
disproved at trial and the judge would have come to a different
conclusion on the balance of probabilities. In other words, it is
only where the Minister's determination lacks a reasonable
evidentiary foundation that the Tax Court's intervention is
warranted. An assumption of fact that is disproved at trial may,
but does not necessarily, constitute a defect which renders a
determination by the Minister contrary to law. It will depend on
the strength or weakness of the remaining evidence. The Tax Court
must, therefore, go one step further and ask itself whether,
without the assumptions of fact which have been disproved, there
is sufficient evidence remaining to support the determination
made by the Minister. If that question is answered in the
affirmative, the inquiry ends. But, if answered in the negative,
the determination is contrary to law, and only then is the Tax
Court justified in engaging in its own assessment of the balance
of probabilities. Hugessen J.A. made this point most recently in
Hébert, supra. At paragraph 5 of his reasons
for judgment, he stated:
In every appeal under section 70 the Minister's findings
of fact, or "assumptions", will be set out in detail in
the reply to the Notice of Appeal. If the Tax Court judge,
who, unlike the Minister, is in a privileged position to assess
the credibility of the witnesses she has seen and heard, comes to
the conclusion that some or all of those assumptions of fact were
wrong, she will then be required to determine whether the
Minister could legally have concluded as he did on the facts that
have been proven. That is clearly what happened here and we
are quite unable to say that either the judge's findings of
fact or the conclusion that the Minister's determination was
not supportable, were wrong. [Emphasis added.]
The Deputy Tax Court Judge erred in law in failing to
determine whether the Minister could have legally concluded as he
did on the facts as proved before him. Consequently, he was not
in a position at law to come to his own conclusion on the balance
of probabilities. In short, by reviewing the merits of the
determination without first concluding that the Minister
exercised his discretion in a manner that was contrary to law,
the Deputy Tax Court Judge failed to exhibit the degree of
judicial deference required when reviewing ministerial
determinations under subparagraph 3(2)(c)(ii).
In reaching this conclusion, I am not unmindful of the fact
that the Deputy Tax Court Judge found two of the assumptions
which supported the Minister's determination to have been
disproved at trial. However, having found that the Deputy Tax
Court Judge failed to determine whether or not there remained
sufficient evidence to support the Minister's determination,
it is not for us to decide this question on an application for
judicial review since we do not have the authority, ...
[6] The Federal Court of Appeal,
dealing with these same provisions, gave an oral judgment the
following March in Elia v. Canada, [1998] F.C.J.
No. 316. Therein, Pratte J.A. said at paragraphs 2 and
3:
... it is not necessary, in order for the judge to be able to
exercise that power, for it to be established that the
Minister's decision was unreasonable or made in bad faith
having regard to the evidence before the Minister. What is
necessary is that the evidence presented to the judge establish
that the Minister acted in bad faith, or capriciously or
unlawfully, or based his decision on irrelevant facts or did not
have regard to relevant facts. The judge may then substitute his
decision for that of the Minister.
... 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.
[7] In the Reply to the Notice of
Appeal, paragraph 6 deals with the facts assumed by the
Minister when making his determination. In order, they read:
a) the Payor
was a corporation duly registered in the Province of Prince
Edward Island on or about August 25, 1983;
b) during the
period in question, the Payor's shares were owned as
follows:
the Appellant
Pres.
759 sh.
Phillips Miller (Appellant's brother)
V.P.
624 sh.
Jacqueline Nelder
Secr.
24 sh.
Carmen Miller (Appellant's
spouse)
325 sh.
Corey Miller (Appellant's
son)
733 sh.
Heidi Miller (Appellant's
daughter)
300 sh.
Teresa Miller (Appellant's
sister-in-law)
2 sh.
Karl
Kenny
733 sh.
c) the
Appellant has been involved with the Payor since the
incorporation;
d) the
Payor's business consisted of cleaning, disinfecting and
whitewashing farm buildings;
e) the Payor
operates approximately from May to October or November each
year;
f) the
Appellant's duties consisted of general work in the
Payor's shop, of making the paint or whitewash, of doing
repairs, of solving problems and of keeping the operation
going;
g) the
Appellant's salary is reported as $500 per week;
h) the
Appellant's weekly salary has fluctuated over the years as
follows:
1998
$500
1997
$400
1996
$600
1995
$800
i) The
duration of the Appellant's period of employment has
fluctuated over the years in apparent relation to the yearly
requirements for him to qualify for unemployment benefits, as
follows:
Reported
Required
1998
920
hours
910 hours
1997
490
hours
420 or 454 hours
1996
14
weeks
12 or 14 weeks
1995
13
weeks
12 weeks
j) in
1998, Stephane Galaise Payor's salesman was named manager
during his period of employment from May 3rd to August
29th;
k) the
Appellant was also manager of the Payor's operations during
the season;
l) on
the Payor's books, there is a shareholder loan outstanding
from the Appellant for $81,408 since 1983; it has a repayment
schedule of $6,788.41 in yearly instalments plus interest;
m) the payments made
to the Appellant in the form of cheques, cash and through use of
a direct charge card, of which the charges were paid for by the
Payor;
n) the
payments made to the Appellant by the Payor consisted of a
combination of payments for wages, loan repayment and rent;
o) the
documentary evidence provided is insufficient to determine
whether the Appellant received all his wages;
p) all money
deposited in the Payor's business bank account is
automatically transferred to a personal account in the name of
the Appellant and the Payor's secretary and accountant;
q) the
Appellant paid the Receiver General from a personal joint account
between himself and his spouse;
r) the
Appellant allowed his sons the use of the Payor's money when
they were not employed by the Payor;
s) the Payor
operates from the Appellant's personal residence;
t) the
Payor's business phone number is the same as the
Appellant's personal phone number which is registered in his
spouse's name;
u) the
Appellant claimed a rental loss on his 1998 tax return which
resulted from the Payor's use of the Appellant's office
and building;
v) the
Appellant performed services for the Payor outside the period in
question without remuneration;
w) the Payor
continued to operate after the period in question and had
employees on the payroll until November 14, 1998.
x) the
Appellant is related to the Payor within the meaning of the
Income Tax Act;
y) the
Appellant is not dealing with the Payor at arm's length;
[8] Before I deal with these assumed
facts, I would like to comment in general on the witnesses.
[9] There were five witnesses called
by the Appellant who were Government of Canada employees and one
employee of the Province of Prince Edward Island, namely:
Susan
Afflect
(Afflect)
Insurance Program Advisor,
Human Resources Development Canada ("HRDC")
Laurena
Wooldridge (Wooldridge)
Investigator and Control Officer,
HRDC
Darlene
Doiron
(Doiron)
Senior Business Agent,
Canada Custom and Revenue Agency
("CCRA")
Rosemary Ford
(Ford)
Collection Officer,
CCRA
Walter
McDonald
(McDonald)
Chief of Appeal,
CCRA
Sheila
MacNerim
(MacNerim)
Secretary, Corporation Division,
Department of Community Services
P.E.I.
[10] I find that all six of these witnesses
handled themselves in the witness box in a professional manner
and their evidence is accepted. In particular, Ford's
evidence was given calmly, dispassionately, carefully referring
to her file so as not to make a mistake or in any way mislead.
CCRA can be very proud of this very capable and deliberate
employee. These comments also apply to McDonald. There is
absolutely no evidence that any of these employees acted in bad
faith or for an improper purpose or motive, in fact, their
testimony demonstrates that they take their job seriously and
acted with the utmost good faith with no ulterior motive or
purpose.
[11] Thus, I now must determine if McDonald,
using Ford's report:
(a) failed to take into account
all the relevant circumstances, as required by
paragraph 5(3)(b); or
(b) took into account irrelevant
factors.
[12] As Pratte J.A. said in Elia
above, it is the well settled rule that the assumptions of fact
made by the Minister must be assumed true, as long as the
Appellant has not proven them false.
[13] I list those assumptions by letter
which were either admitted or confirmed by the evidence or no
acceptable evidence was given to refute them: (a), (c), (g), (h),
(j), (k), (l), (m), (n), (o), (p), (q), (t), (x) and (y).
[14] Although the facts in (l), (o), (p) and
(q) are accurate, I want to comment on each:
(l) Exhibit A-27 is a
balance sheet for the Payor, as at December 31, 1994. Under
the heading "Notes Payable", are two figures, namely
$7,735 and $93,869 with the following notation:
"payable to shareholders, non interest bearing, no set
terms of repayment"
There is no mention of shareholder loan in the Minute Book in
1995. There is the following in the Shareholders Book:
"Directors meeting 04 November 1996. Resolution: that, as
of 01 August 1996, shareholder balances of over $10,000 to
be repaid on a yearly schedule based upon the length of the term
of incurrence with interest."
There is not any subsequent mention of the Appellant's
loan in the Shareholders Book after the above. The Appellant
produced a schedule of shareholder balance repayment
(Exhibit A-42) which reads as follow:
BEG
INT
PRINC
TOTAL
END
DATE
BALANCE
EXP
PYMT
PAYMENT BALANCE
01 AUG
96
95,037.71
31 DEC
96
95,037.71
791.98
6,788.41
7,580.39
88,249.30
31 DEC
97
98,249.30
1,764.99
6,788.41
8,553.39
81,460.39
31 DEC
98
81,460.89
1,629.22
6,788.41
8,417.63
74,672.49
31 DEC
99
74,672.49
1,493.45
6,788.41
8,261.86
67,884.08
31 DEC
00
67,884.08
1,357.68
6,788.41
8,146.09
61,095.67
31 DEC
01
61,095.67
1,221.91
6,788.41
8,010.32
54,307.26
31 DEC
02
54,307.26
1,086.15
6,788.41
7,874.55
47,516.86
31 DEC
03
47,518.86
950.38
6,788.41
7,738.78
40,730.45
31 DEC
04
40,730.45
814.61
6,788.41
7,603.02
33,942.04
31 DEC
05
33.942.04
678.84
6,788.41
7,467.25
27,153.63
31 DEC
06
27,153.63
543.07
6,788.41
7,331.48
20,365.22
31 DEC
07
20,365.22
407.30
6,788.41
7,195.71
13,576.82
31 DEC
08
13,576.82
271.54
6,788.41
7,059.94
6,788.41
31 DEC
09
6,788.41
135.77
6,788.41
6,924.16
0.00
13,146.88
95,037.71
108,184.59
The balance sheet as at December 31, 1997 in regards to
the $81,408 loan states: "payable to shareholder,
interest bearing no set terms of repayment".
The balance sheet as at November 30, 1998 states:
"Anthony Miller loan :- interest at 4%
payable in equal yearly installment of $6,788.41 plus interest.
Loan incurred over 13 years from 1989 to 1996 to finance
company."
It is noted that the schedule produced only shows interest at
the rate of two percent per annum. Thus, the figure in assumption
paragraph l) of $81,408 is the approximate amount of the
loan as of January 1st, 1998 after applying the
payment of $6,766.41 of principal, which was supposed to
have been paid on December 31, 1997.
(o) Although this is a conclusion, I
concur and even after the hearing, when the Appellant had the
opportunity to produce books and records to demonstrate that they
were clear and proper, he failed to produce any original records
and what records were produced were insufficient and impossible
to reconcile;
(p) Both the Appellant and his brother
claim the reason for this was unreasonably high service charges
by the Bank of Nova Scotia on a corporate account. Although this
may be partially true, I cannot believe that it was the only
reason. The Bank of Nova Scotia corporate account was seized
by Revenue Canada for non payment of GST. Under the current
scheme, money coming into the corporate account is immediately
transferred out so that a garnishee would obtain nothing. On the
other hand, the cheques that pay all current expenses and wages
look like a corporate cheque, notwithstanding the account was in
the Appellant's and Nelder's name. Thus, a creditor (who
had received a cheque from the Payor and then successfully sued
the Payor, then, on a writ of execution against the Payor) who
attempted to seize the account would get nothing as the account
was not the Payor's. This linking of the accounts held
potential creditors off and only the pumps and vehicles of the
Payor which have very little value could be seized.
(q) Although this is a fact, the
Appellant was able to demonstrate that the corporation did in
fact pay him and his spouse the money (Exhibit A-20).
The August 18, 1998 cheque was made out to the Appellant,
the July 3, 1999 cheque was made out to his spouse, and the
third cheque dated September 24, 1998 was made out to cash.
I conclude when the Appellant, on behalf of the Payor, made the
settlement with Revenue Canada for these arrears of GST, gave
personal post-dated cheques rather than corporate cheques because
he did not know if the corporation would have the funds when the
agreed upon payment were to be made . Thus by giving personal
cheques Revenue Canada would receive payments as agreed upon. The
Payor reimbursed the Appellant with these three cheques.
[15] Dealing with those assumptions of fact
by letter which were partially correct containing what I consider
immaterial errors are:
(b) Karl Kenny only held 133 shares
and not 733 as stated. The Appellant was the
Vice-President and Phillip was the President;
(d) The word "whitewashing"
is wrong and should have read "painting";
(f) The word
"whitewashing" should not have been in this
statement.
[16] Before dealing with the balance of the
assumptions of fact, I wish to discuss and review, in a general
way, the evidence given by the witnesses for the Appellant not
already mentioned and my conclusions about their testimony.
[17] Stephane Galaise's
("Galaise") parents have been close friends with the
Appellant and his wife for many years, he is also the
Appellant's godson. His testimony was vague and
hesitant. When asked if he received all his wages, he replied:
"I would imagine."; when asked how, the answer
was "Cheques mostly", that probably
varied week to week.
[18] The corporate resolutions of the Payor
of April 13, 1998 and April 16, 1998 set out the rate
of pay at 13 percent and set out his duties. The Payor's
payroll shows $750 for each and every week worked, except for two
$60 entries for the last two weeks of September. He could not say
why he did not work for two weeks in June. When the pay is
reconciled by the cheques, (part of Exhibit A-13), it
shows a very different story.
|
|
S.Galaise
|
|
|
|
|
|
|
DATE
|
GROSS
|
NET
|
|
CHEQUES
DATE
|
AMT
|
#
|
|
May 09
|
750
|
519.51
|
|
27-May
|
100
|
2259
|
|
May 16
|
750
|
519.51
|
|
June 12
|
500
|
2053
|
|
May 23
|
750
|
519.51
|
|
June 12
|
40
|
2054
|
|
May 30
|
750
|
519.51
|
|
Jun-12
|
713.5
|
2276
|
|
June 06
|
750
|
519.51
|
|
Jun-18
|
350
|
2067
|
|
June 13
|
|
|
|
Jul-07
|
200
|
2115
|
|
June 20
|
|
|
|
Jul-10
|
300
|
2133
|
|
June 27
|
750
|
519.51
|
|
Jul-11
|
522.99
|
2159
|
|
Jul-04
|
750
|
519.51
|
|
Jul-20
|
522.99
|
2163
|
|
Jul-11
|
750
|
519.51
|
|
Jul-25
|
522.99
|
2192
|
|
Jul-18
|
750
|
519.51
|
|
Aug-01
|
522.99
|
2215
|
|
Jul-25
|
750
|
519.51
|
|
Aug-08
|
522.99
|
2231
|
|
Aug-01
|
750
|
519.51
|
|
Jul-18
|
522.99
|
2174
|
|
Aug-08
|
750
|
519.51
|
|
Aug-28
|
422.99
|
2313
|
|
Aug-15
|
750
|
519.51
|
|
Aug-15
|
522.99
|
2245
|
|
Aug-22
|
750
|
519.51
|
|
Oct-02
|
150
|
2363
|
|
Aug-29
|
750
|
519.51
|
|
Sep-22
|
200
|
2346
|
|
Sep-05
|
|
|
|
Sep-10
|
200
|
2338
|
|
Sep-12
|
|
|
|
|
|
|
|
Sep-19
|
60
|
58.38
|
|
|
|
|
|
Sep-26
|
60
|
58.38
|
|
|
|
|
|
Oct-03
|
0
|
|
|
|
|
|
|
Oct-10
|
0
|
|
|
|
|
|
|
Oct-17
|
0
|
|
|
|
|
|
|
|
Total
|
7909.41
|
|
|
6837.42
|
|
|
|
|
|
|
Cash J.
|
139.09
|
|
|
|
|
|
|
|
6976.51
|
|
|
|
|
|
|
932.90
|
|
|
When the Cash Journal is checked, Galaise only received
$139.09 in cash. Thus, the Payors records show he was shorted by
$932.90 of the alleged pay. From this, I conclude that although
Galaise was paid on a commission basis, the payroll was set up as
$750 per week for some ulterior purpose.
[19] The only 1998 financial statement for
the Payor is as of November 30; it shows revenues of
$137,960. When each job is completed, the crew picks up a cheque
for the work, however, for analysis, I will use a figure of
$150,000 (Phillip Miller says $145,000) for the full year.
The total wage cost should be 13 percent of the contracts
performed as sales commissions, and 13 percent as wages for
the work performed by the employees doing the painting together
with the wages for the Appellant, Nelder and those of
Wayne Frances, that were based on an hourly rate and not a
percentage:
(13 percent of $150,000 twice equals
$39,000)
$39,000
Appellant's
wages
23 x
500
11,500
Nelder's
wages
600 x 13 =
7,800
Wayne's
wages
64 x 4
=
256
8,056
Total
$ 58,556
[20] The Balance Sheet as of
November 30, 1998 shows wages for the period of $91,972. The
amount of $58,556, even acknowledging that does not take into
account the employer's portion of EI and CPP premiums and
demonstrate a very significant shortfall. I put very little
weight, if any, on Galaise's testimony as he was not a
credible witness. This also demonstrates that the records of the
Company do not reconcile nor coincide with the oral
testimony.
[21] Philip Miller's testimony was a
disaster. He had an accident in June of 1995 and has not been
employed since that date. He does own 17 percent of the
issued shares of the Payor and does have something less than
$2,000 invested in the Payor. I do not accept any of his
testimony. He is confined to a wheelchair and could not answer
many basic questions in cross-examination and was obviously
trying to be helpful to his brother.
[22] Jackie Nelder
("Nelder"), a chartered accountant, was called as a
witness only after I advised the Appellant in strong terms that I
would probably draw a conclusion in her absence that her
testimony would be detrimental. She was the only truly impartial
witness in this hearing, since she left the Payor in 1999, and
moved away from the community and now has a full time job
elsewhere.
[23] I would have thought that the Appellant
would have had all original documents here in Court so that she
could refresh her memory. This was not available and therefore,
she had to answer many questions with "I do not
remember" or "I do not know".
[24] I accept as factual when she said that
her boss was the Appellant, and that he opened the office for her
when she worked and managed the Payor to a certain extent at all
times.
[25] She said all employees at times had to
wait for their pay if there was a shortage of funds and that the
Appellant waited the longest to receive his pay. She also stated
that she had nothing to do with the setting of the
Appellant's wages. I accept this as factual. The Appellant,
as his brother tried to convince me, that the Appellant's
wages were set by the Board of Directors. I am satisfied the
Appellant set his own wages and his alleged period of
employment.
[26] As far as the Appellant's
testimony, I accept some and believe that at times, the whole
story did not come out. I believe him to be a hardworking
intelligent individual who believes that he should be entitled to
benefits under the Act. I cannot accept his testimony in
full where it conflicts with Nelders or with some of the written
documentation.
[27] Both the Appellant and Nelder at the
best were not careful in many aspects. The Appellant swore an
Affidavit on the 6th day of April 1998, wherein the first
paragraph reads: "I am the President". He
shrugs this off as saying boiler plate and that he did not notice
this. However, this Affidavit was used in a court action by the
Payor in another proceeding. This affidavit was used and misleed
the Tax Court Judge hearing that proceeding. This drives me to be
hesitant to accept his testimony at face value where not
corroborated or if his testimony was not helpful to his
appeal.
[28] Nelder's work was not of a good
professional standard and a review of many of the exhibits
prepared by her substantiates this, particularly
Exhibit A-3, where it reads: "Statement of
earning for year ended November 30, 1998". Anyone
reading this would infer that the Payor's year end was
November 30. She admitted the offending words of
"year ended" should not have been there and
words such as "as of" should have been used. She
was unable to explain why legal fees are shown as an asset in the
same statement.
[29] As for the balance of the assumptions
made by the Minister, I will now deal with them.
Paragraph (i)
[30] This was a rather important assumption
which was wrong. In actual fact, the number of hours required in
1997 was also 910 hours. Nine hundred and ten hours are
required for first time receivers of benefits. As the
Appellant's request for benefits in 1996 was denied, he would
have been considered a first time applicant in 1997. Many workers
were unaware of this and I conclude that the Appellant believed
he only needed the 420 to 454 hours in 1997 to qualify.
[31] It was never explained why the
Appellant worked 920 hours in 1998 and only 490 hours
in 1997 when the volume of business in 1998 was only up about
15 percent and the job obligations was the same. I conclude
that the Appellant's stated period of work was only for the
purpose of claiming benefits under the Act and that his
actual number of hours of work is entirely different both as to
amount and compensation.
Paragraph (r)
[32] Corey Miller did work for the
Payor, or at least was shown on the payroll for weeks ending
October 3 and October 10. Cash payments were made as
follow:
DATE
AMOUNT
June 12,
1998
51.40
June 22,
1998
88.00
September 3,
1998
100.00
September 18,
1998
60.00
November 6,
1998
120.00
Only the first payment was satisfactorily explained.
[33] Troy Miller was never employed by the
Payor in 1998. The cash payments to him are:
DATE
AMOUNT
July 16,
1998
120.00
September 3,
1998
100.00
September 18,
1998
60.00
It should be noted that these last two items have been placed
in the wrong column of the cash journal by Nelder. There were no
documents produced to back up the books of the Payor and the
bookkeeping was sadly lacking.
Paragraph (s)
[34] This is only partly true. It is
accurate for the first part of the year and that on or about
June 19, 1998, the Payor passed a resolution to rent and
occupy a new building and office located on the Appellant's
land near his home.
Paragraph (u)
[35] The Appellant agreed to this statement
but added that the loss was created by renovations or improvement
to the building. No statement of his rental business was adduced
to show how the expenses were proportioned or if there was an
actual loss or what was claimed as current expenses may have
actually been capital expenses.
Paragraph (w)
[36] This is true but the Appellant claims
no supervision was required. I believe that the Appellant did
whatever was necessary during the whole year, including the
bookkeeping after the barn painting ceased for the year.
[37] Thus, I am satisfied that the Minister
took into consideration all the relevant circumstances and at the
same time, did not take into consideration irrelevant facts. I
make these findings knowing that some of the facts were not
accurate and some not completely accurate but that there were
sufficient facts, after taking away the inaccurate facts, for the
Minister to make a determination.
[38] The Appellant is the driving force
behind the Payor. It is his company for all intents and purposes.
The office of President or Vice-President is neither here
nor there. He is the brain and the management behind the whole
operation. Accepting his testimony on the history of the Payor,
it is obvious that he alone has been the driving force of the
Payor and it's heart and soul.
[39] There is not an employee dealing with
an employer at arm's length that would loan his employer in
excess of $90,000 (paid down to $81,000), rent to his employer
premises that created a loss and work as hard and diligently as
the Appellant. I specifically find that the Appellant was in
essence the Chief Executive Officer as he had
de facto control of the company.
[40] The Appellant put the $90,000 into the
Payor mostly in the first two years of operation. There is no
documentation as to the terms. It was not until 1996 that
repayment was started and then the Appellant received only two
percent per annum interest was paid on the loan, which interest
is not enforceable, which the balance sheet says four percent per
annum and the director resolution just reads interest but does
not set the rate.
[41] There is nothing to prevent him from
calling the loan, taking over the assets, and under a different
name to continue the business.
[42] I would have found exactly as the
Minister did after hearing all the evidence, in 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 not reasonable
to conclude that the Appellant and the Payor would have entered
into a substantially similar contract of employment, if they had
been dealing at arm's length.
[43] The Appellant challenged the validity
of these sections under the Charter of Rights and Freedom
(the "Charter"). In essence, his argument
was that all applicants for EI benefits that are in a non
arm's length employment do not have the same right of appeal
that other claimants have that were denied benefits, or employers
who believe that their workforce are all hired pursuant to
contracts for services and the CCRA determine that the workforce
are employees pursuant to contracts of service. It is the
judicial deference with respect to a determination by the
Minister, pursuant to those paragraphs that the Appellant argues,
which places him and similar applicants for benefits at a
disadvantage.
[44] I feel compelled to acknowledge that I
have a great deal of sympathy for the Appellant's position.
Having heard many appeals under these provisions in both the
Old Act and this Act, the judicial deference places
unsuspecting appellants in a very difficult position that they do
not understand. In an attempt to get evidence that would assist
the Appellant herein, he called five employees of the federal
government to the stand, not knowing what they would say, not
having interviewed them in the hope that a conclusion could be
drawn that the Minister made an error in law.
[45] The decision of the Federal Court of
Appeal in Perussev. Canada, [2000] F.C.J.
No. 310 (Q.L.) is an answer to this challenge.
Desjardins J.A. did dissent from Marceau and
Décary's reasons and did find these provisions in
breach of the Charter.
[46] I do believe it is unfair to applicants
for employment benefits when the contract of employment is
non-arm's length to face the daunting task of defeating
the Minister's determination because of the judicial
deference that has to be given it. This is especially so as
most applicants in this category cannot afford legal counsel. In
this hearing, several days were wasted with the Appellant calling
witnesses from HRDC and CCRA. This, of course, should have
occurred on discovery but the Appellant could not afford the
cost. It would be much better and way less expensive, if a clause
was inserted right after paragraph 5(3)(b) to the
effect that the Minister's decision in
paragraph 5(3)(b) shall be deemed not to be
ministerial discretion and an appeal to the Tax Court of Canada
on rulings by the Minister should proceed as a normal appeal.
[47] In this appeal, the result would still
be the same as indicated above, except that what turned out to be
a seven and a half day hearing, would have at the most been a
two-day hearing. The Appellant would have felt that he was
being treated the same as other applicants for benefits that have
been refused. The extra cost-saving, both at the trial
level and the CCRA level, would be substantial. This difficulty
should be removed in the interest of fairness and the saving of
tax dollars.
[48] For these reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 26th day of September,
2001.
J.T.C.C.
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