Date: 20010302
Docket: 2000-3725-EI, 2000-3726-CPP
BETWEEN:
BIOLIN RESEARCH INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1]
These appeals were heard together on common evidence at
Saskatoon, Saskatchewan on February 21, 2001. Alvin Ulrich,
President of the Appellant ("Biolin"), was the only
witness.
[2]
The Appellant has appealed decisions dated July 14, 2000 that
Biolin "was not an agricultural enterprise, nor was it
engaged in agriculture as defined by the Canada Pension Plan
Regulations and the Employment Insurance
Regulations" respecting short term employees whom it
hired for various forms of field work.
[3]
Paragraphs 9 to 11 inclusive in 2000-3725(EI) read:
9.
The Minister further decided that the employment of
Dave Porter, Gail McKinney, Faith Veikle, Aaron Warner,
Todd Baronowsky, Tim Coolican, Pete Giebrecht, Jean McKay
and Pat Sterling (hereinafter the "Workers") by the
Appellant was not excluded employment as the Appellant was not an
agricultural enterprise, nor was it engaged in agriculture,
within the meaning of section 9 of the Employment Insurance
Regulations.
10.
In deciding as he did, the Minister relied on the following
assumptions of fact:
(a)
the facts admitted above;
(b)
the Appellant operates a Fibre-Flax research facility, conducting
research on planting and caring for flax, harvesting the crop and
determining its uses;
(c)
during the 1998 and 1999 taxation years, the Appellant grew the
flax which was used in its research;
(d)
except for a minimal amount of flax seed which the Appellant
considers as an unusable by-product, the Appellant does not sell
any of the flax it produces;
(e)
the Appellant intends to eventually realize a profit from the
processing of flax into useable products such as linen and
paper;
(f)
at no time during the 1989 or 1999 taxation years was the
Appellant directly involved or otherwise engaged in the activity
of farming;
(g)
during the 1998 and 1999 taxation years, the Workers were hired
by the Appellant to perform such duties as taking readings on
plot samples growing in the field, hand pulling ¼ acre of
flax for retting and loading bales;
(h)
except for the employment of Faith Veikle in the 1998 taxation
year and Gail McKinney in the 1999 taxation year, the Workers
were each employed by the Appellant for less than seven days in
each year;
(i)
Faith Veikle was employed by the Appellant for a total of 8 days
in the 1998 taxation year;
(j)
Gail McKinney was employed by the Appellant for a total of 9 days
in the 1999 taxation year; and
(k)
Faith Veikle and Gail McKinney were both remunerated solely in
cash by the Appellant.
B.
ISSUE TO BE DECIDED
11.
The issue to be decided is whether the Workers were engaged in
excluded employment with the Appellant.
Paragraphs 9 and 10(h) in 2000-3726(CPP) vary from the EI
matter. They read:
9.
The Minister further decided that the employment of
Gail McKinney, Faith Veikle, Aaron Warner and
Todd Baronowsky (hereinafter the "Workers") by the
Appellant was excepted employment as the Workers were not
employed in agriculture or an agricultural enterprise within the
meaning of section 2 of the Canada Pension Plan
Regulations.
10.
In deciding as he did, the Minister relied on the following
assumptions of fact:
...
(h)
the Workers were each employed by the Appellant for less than
twenty-five working days in each year.
[4]
In his testimony, Mr. Ulrich did not take issue with assumptions
10(b), (e), (g), (h), (i), (j), excepting (k) wherein he believed
everyone was remunerated by cheque. With respect to the remaining
assumptions, by subparagraph, the Court finds:
10(d) The Appellant did
sell some considerable volume of flax seed from time to time
including one sale of $17,000 worth of flax seed in 1999.
10(f) The Appellant
custom farmed some large acreages of flax from time to time
including 1998, when it produced the flax seed that it sold in
1999 for $17,000. It also produced and sold other flax seed from
time to time to various other purchasers and produced
considerable amounts of flax straw which it is presently
storing.
[5]
The question properly raised by the decisions is whether the
Appellant was conducting an "agricultural enterprise".
Section 9 of the Employment Insurance Regulations
respecting this question reads:
9. (1) The definitions in this subsection apply in this
section.
"agriculture" means the operations of farming that
are carried out for the benefit of any person who is a farmer
and, without limiting the generality of the foregoing,
includes
(a) where carried out on a farm
(i) clearing land for cultivation,
(ii) cultivation of the soil,
(iii) conservation of the soil, including the construction,
maintenance and operation of tile drainage systems, ditches,
canals, reservoirs or waterways exclusively for the purposes of
farming,
(iv) harvesting, storing or grading any natural product of
farming,
(v) preparing land for the growing and harvesting of wild
berries,
(vi) raising bees and producing honey,
(vii) breeding or raising animals or birds, or producing
eggs,
(viii) dairy farming and the processing of milk, butter or
cheese that is produced on that farm, and
(ix) producing maple sap, maple syrup or maple sugar; and
(b) where carried out on or off a farm
(i) offering for sale or selling any of the products of the
operations referred to in subparagraphs (a)(i)
to (ix), if the offering for sale or selling is incidental
to those operations, and
(ii) exhibiting, advertising, assembling, freezing, storing,
grading, preparing, processing, packing and transporting the
products described in sub-paragraph (i), if those operations
are incidental to the offering for sale or selling described in
that subparagraph. (agriculture)
"agricultural enterprise" means the business of
agriculture carried on for the benefit of any person who is a
farmer. (entreprise agricole)
"horticulture" means the following operations and
includes all the services incidental to the carrying out of those
operations, if the services are performed at the place where the
operations are carried on:
(a) the propagating, producing, raising or harvesting
of
(i) vegetables, flowers, shrubs or ornamental grasses, and
(ii) seeds, seedlings, grafts or cuttings of vegetables,
flowers, shrubs or ornamental grasses; and
(b) landscape gardening where it is incidental to the
carrying out of
(i) any of the operations described in paragraph (a),
or
(ii) agriculture. (horticulture)
(2) The employment of a person by an employer in agriculture,
an agricultural enterprise or horticulture that would otherwise
be insurable is excluded from insurable employment if the person
is employed by the employer in that employment for
(a) less than seven days in a year; or
(b) seven days or more in a year and is not remunerated
in cash by the employer for any part of that employment.
Thus an "agricultural enterprise" is a business
(enterprise carried on with a reasonable expectation of profit)
operation of farming carried out on or off a farm
[9(1)(b)(i)], may have selling incidental to harvesting,
storing or grading of a farming product [9(1)(a)(iv)] and
to assembling, grading, preparing, processing and packing
products of the operations [9(1)(b)(ii)]. It must be for
the benefit of a farmer, but not, apparently for the agricultural
"enterpriser" only, rather for any person who is a
farmer [9(1)].
[6]
Section 2 of the Canada Pension Plan Regulations differs
in some material respects from Section 9 of the Employment
Insurance Regulations. There follows an itemization of the
differences:
2(2)
"agriculture" means the operation of farming when
carried on on a farm for the benefit of an individual or other
person who is a farmer
(a)
the clearing of land for the purposes of farming
(b)
quotes 9(a)(ii)
(c)
quotes 9(a)(iii)
(d)
harvesting, storing or grading (etc.)
(e)
some differences from (v)
(f)
some differences from (vi)
(g)
some differences from (vii)
(h)
some differences from (viii)
(i)
quotes (9)(a)(ix) when carried on on a farm for the
benefit of an individual or other person who is a farmer and
includes
(j)
the offering for sale or selling, off the farm for the benefit of
such farmer, of any of the products of the operations previously
described in this definition where such offering for sale or
selling is incidental to those operations, and
(k)
the exhibiting, advertising, assembling, freezing, storing,
grading, processing, packing and transporting, off the farm for
the benefit of such farmer, of the products described in
paragraph (j) where the exhibiting, advertising, assembling,
freezing, storing, grading, processing, packing or transporting
is incidental to the offering for sale or selling described in
that paragraph;
"agricultural enterprise" means the business of
agriculture carried on for the benefit of an individual or other
person who is a farmer; ...
"horticulture" means
(a)
the operations relating to the breeding, producing, raising or
harvesting of
(i)
legumes, flowers, shrubs or ornamental grasses, and
(ii)
seeds, seedlings, grafts and cuttings of legumes, flowers, shrubs
or ornamental grasses, and ...
These differences from Section 9 of the Employment
Insurance Regulations not only must have a different meaning,
there must also be a reason and a purpose for the differences.
Otherwise they would not be worded differently. One difference is
that the Canada Pension Plan deals with both employees and
with other individuals. In addition, under subparagraphs
2(2)(j) and (k) of the Canada Pension Plan
Regulations, these operations must be carried on for the
benefit "of such farmer"; namely, the Appellant either
on or off of a farm.
[7]
Mr. Ulrich said that Biolin was incorporated in about 1996 in
Saskatchewan to develop a new source of fibre from flax for
textiles. One of its original shareholders, a Hong Kong firm, was
buying flax fibre in Belgium and France, shipping it to China
where it was processed into cloth and clothing, whereupon that
shareholder then wholesaled the cloth goods around the world.
Then Biolin was to find a suitable flax for growing flax fibre in
Western Canada. The fibre would be extracted for shipment to
China. This shareholder contributed substantial capital to Biolin
for this purpose until it went into receivership in the course of
a market drop in Hong Kong in 1998. Since then Biolin's
operations have been very limited and it has relied on a few
research grants to finance what it has done.
[8]
In cross-examination, Mr. Ulrich admitted that Biolin was
incorporated for research and development and not for the purpose
of farming. It wanted to show farmers how to produce good quality
flax fibre.
[9]
Biolin purchased European seed and produced some of its own and
paid farmers, "research farms" and the University of
Saskatchewan at the Kernan farm to seed, cultivate and harvest
the flax. It hired the Workers in question to work on and in the
planted fields, usually on randomly chosen plots of about
one metre square, by weeding them; pulling flax plants at
various stages of development; counting flax stems; picking,
drying and bagging samples of plants and straw; and loading round
bales (2-3 metres in diameter) or square bales (about 1 metre x
½ metre x ½ metre).
[10] The straw
and fibres were chopped, sorted and processed. Biolin then tested
samples in laboratories; sold seed; seeded some seed itself under
custom farming contracts; and tested straw in laboratories or
with at least one flax straw processor in Manitoba.
Unfortunately, it did not obtain a sufficient volume of
investment money to complete its research for the appropriate
variety of flax and the processing "recipe". As a
result, there is as yet no investment in a flax straw fibre
processing plant which costs in excess of one million
dollars.
[11]
Nonetheless, the Court is of the view that the activity expected
to make a profit and had a reasonable expectation of profit, so
that it was a business. But that is not what the Minister
quarrels with. Rather, the Respondent's argument is that the
Appellant was not farming or engaged in an agricultural
enterprise. The Appellant argued that it was farming. Certainly
some operations on these types of farms described constituted
"custom farming". Moreover, when the Workers in
question were loading bales, they were working in farming
operations as they are normally understood. The preponderance of
their work was in the remaining activities described in paragraph
[9]. Respecting them, the question is, was the Appellant engaged
in an "agricultural enterprise"?
[12] In the
Court's view, the Appellant's activities constituted an
agricultural enterprise and the Appellant and the Workers were
engaged in an agricultural enterprise, because:
1.
The operations were operations of farming. In the course of a
year all farmers do some or all of these operations, whatever
kind of grain they are growing.
2.
They were carried out for the benefit of any person who is a
farmer, and for the benefit of the Appellant as well.
3.
They were carried out both on and off a farm.
4.
Sale or selling seeds and straw was incidental to the operations
both at the time and in the future.
5.
They included assembling, storing, grading, processing, packing
and transporting flax seed and flax straw.
6.
All of the work done by the Workers that was described in Court,
was field work on the various farms.
[13] For these
reasons, the Court finds respecting appeal number
2000-3725(EI):
1.
Faith Veikle was employed for 8 days in 1998 and Gail McKinney
was employed for 9 days in 1999 and they were remunerated by
cheque by the Appellant.
2.
Randy Cowan was not an employee;
3.
Those persons described in Schedule A to the Reply who are not
described in this paragraph were employed by the Appellant for
less than 7 days in 1998 and 1999 in an agricultural enterprise
and were in excluded employment.
[14]
Respecting appeal number 2000-3726(CPP) the first question is
whether the operations were carried on on a farm. From the
evidence, all of the operations except chopping, and processing
flax straw and fibres were carried on on one or anther of three
types of farms on which the Appellant custom farmed. In terms of
time spent, the evidence indicates that none of the employees in
question worked for the Appellant off of a farm. Their work was
field work on the farms.
[15]
Paraphrasing the words of the Canada Pension Plan
Regulations, Section 2, the Appellant's operations
were custom farming by cultivating the soil (b); and producing,
harvesting, storing or grading of flax seeds and flax straw
(d). It still has a great number of bales in storage. These
operations were carried on for its own benefit and for that of
other farmers. They included storing, grading, processing,
packing and transporting off the farm for the Appellant's
benefit (k) the products of the operations described in (b) and
(d) above. The offering for sale and selling of flax seed was
incidental to these operations. In the future (or, if they had
been fortunate, at that time) the offering for sale and selling
of the flax straw and fibres was incidental to these
operations.
[16]
Therefore, respecting appeal number 2000-3726(CPP):
1.
Randy Cowan was not an employee.
2.
The employees whose duties remain in dispute between the parties
and described in Schedule A to the Reply were engaged in excepted
employment.
[17] For these
reasons the appeals are allowed and the decisions appealed from
are varied in accordance herewith. The Appellant is awarded those
costs to which it is entitled pursuant to statute.
Signed at Ottawa, Canada, this 2nd day of March, 2001.
"D.W. Beaubier"
J.T.C.C.
COURT FILE
NO.:
2000-3725(EI) and 2000-3726(CPP)
STYLE OF
CAUSE:
Biolin Research Inc. v. The Minister of National Revenue
PLACE OF
HEARING:
Saskatoon, Saskatchewan
DATE OF
HEARING:
February 21, 2001
REASONS FOR JUDGMENT
BY:
The Honourable Judge D. W. Beaubier
DATE OF
JUDGMENT:
March 2, 2001
APPEARANCES:
Agent for the
Appellant:
Alvin Ulrich
Counsel for the
Respondent:
Helene Lee
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-3725(EI)
BETWEEN:
BIOLIN RESEARCH INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on February 21, 2001 at Saskatoon,
Saskatchewan by
the Honourable Judge D.W. Beaubier
Appearances
Agent for the
Appellant:
Alvin Ulrich
Counsel for the
Respondent:
Helene Lee
JUDGMENT
The
appeal is allowed and the decision of the Minister is varied in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 2nd day of March, 2001.
J.T.C.C.
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