Luzolo v. M.N.R., docket 97-2000-UI

Date: 19991209

Docket: 97-2000-UI

BETWEEN:

LUA-NZAMBI ACKE LUZOLO,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

(Delivered orally from the bench at Montréal, Quebec, on August 24, 1999, and amended at Ottawa, Ontario, on December 9, 1999)

Lamarre, J.T.C.C.

[1] This is an appeal from a decision made by the Minister of National Revenue ("Minister") under the old Unemployment Insurance Act ("UIA") and the Employment Insurance Act ("EIA"), finding that the appellant did not hold insurable employment while in the employ of 9008-7834 Québec Inc. ("payer") during the period from January 30, 1996, to February 7, 1997. The only reason given by the Minister is that the appellant did not hold an employment authorization issued by Citizenship and Immigration Canada permitting him to work in Canada during the period in issue. As the appellant did not hold such an authorization, the Minister relied on section 18 of the Immigration Act (R.S.C. 1985, c. I-2) and on articles 9 and 1385 ff. of the Civil Code of Québec in arguing that the contract between the appellant and the payer was absolutely null and therefore could not constitute a contract of service within the meaning of the UIA and the EIA.

[2] The facts on which the Minister relied in making his decision are set out in paragraph 6 of the Reply to the Notice of Appeal. Those facts are not disputed by the appellant and they read as follows:

[TRANSLATION]

(a) the payer operates a boning business;

(b) the appellant has had refugee status since November 21, 1995;

(c) Citizenship and Immigration Canada officials issued him an employment authorization for the following periods:

from March 6 to December 6, 1995;

from February 17, 1997 to February 16, 1998;

(d) the appellant did not have a valid employment authorization during the period in issue.

[3] The appellant relies on the Federal Court of Appeal's decision in Kathleen Still v. M.N.R., [1998] 1 F.C. 549, in arguing his right to receive unemployment insurance benefits even though he did not hold an employment authorization during the year in issue. In that case, Ms. Still, who was an American citizen and had been legally admitted to Canada, had accepted employment as a domestic without first obtaining the employment authorization prescribed by the Immigration Act. At the time she obtained this employment, she was awaiting review of her application for permanent resident status. After being laid off, she applied for benefits under the UIA and her claim was denied on the ground that she had broken the law by working without an employment authorization.

[4] Subsection 18(1) of the Immigration Regulations, 1978, SOR/78-172 (amended by SOR/89-80, s. 1; 95-353, s. 6) provides that no person, other than a Canadian citizen or permanent resident, shall engage or continue in employment in Canada without a valid and subsisting employment authorization. However, as stated by Robertson J.A. of the Federal Court of Appeal in Still, there is no express penalty for a breach of this provision.

[5] At common law, a contract which is either expressly or impliedly prohibited by statute is normally considered to be void ab initio. That is to say that, prima facie, neither party is entitled to seek the courts' aid. In Ms. Still's case, the employment she had held was governed by an illegal contract since it violated section 18 of the Immigration Act.

[6] After conducting a thorough review of the common law doctrine of illegality, Robertson J.A. rejects the classical approach under which a person who is party to a contract which is subject to a statutory prohibition may not be granted relief by the courts.

[7] Robertson J.A. subscribes instead to the theory that, where a contract is prohibited by statute, the courts should be free to determine the consequences of a violation of that statute. He also adheres to the principle which, in his view, best expresses the statutory doctrine of illegality in the federal context. He writes as follows at page 578:

[48] . . . where a contract is expressly or impliedly prohibited by statute, a court may refuse to grant relief to a party when, in all of the circumstances of the case, including regard to the objects and purposes of the statutory prohibition, it would be contrary to public policy, reflected in the relief claimed, to do so.

[8] While mindful of the fact that a party should not be granted relief if that has the effect of undermining the objects of the two federal statutes in question (in this case the Immigration Act and the UIA), Robertson J.A. concludes that to the extent that Ms. Still was in good faith, it was in the public interest to grant her unemployment insurance benefits. On the basis that the UIA must be construed liberally (Abrahams v. Attorney General of Canada, [1983] 1 S.C.R. 2), he held that the underlying objectives of the restrictions provided for in the Immigration Act are not undermined if unemployment insurance benefits are granted to a person who has legally entered Canada and who moreover held employment which, had it not been for the employment authorization issue, would have been considered insurable within the meaning of the UIA.

[9] In Robertson J.A.'s view, Ms. Still was not subject to any penalty under the Immigration Act for the statutory breach and he asks the following question at page 581 of his reasons for judgment:

[55] . . . If the Immigration Act is only concerned with those who knowingly fail to obtain a work permit, why should this Court impose a penalty amounting to thousands of dollars in benefits?

[10] He therefore concludes, having regard to the objectives of the UIA and the fact that Ms. Still was a legal immigrant and had acted in good faith, that she could not be deprived of her right to unemployment insurance benefits for reasons of illegality. He felt that denying benefits in the circumstances would constitute a penalty disproportionate to the offence.

[11] As I emphasized at the hearing, the decision in Still was rendered in accordance with common law principles. We are dealing here, however, with a civil law matter. Judge Archambault of this Court has previously delivered two decisions on this very question in Saad v. Canada, [1997] T.C.J. No. 644 (Q.L.) and Kante v. M.N.R., [1997] T.C.J. No. 463 (Q.L.), in which he came to a conclusion contrary to that of the Federal Court of Appeal. Relying on the provisions of the Civil Code of Québec, Judge Archambault held that working without an employment authorization rendered the contract of employment null and void. Accordingly, he concluded that an invalid contract of employment could not result in insurable employment within the meaning of the UIA.

[12] In my opinion, the decision in Still, which was rendered after those in Saad and Kante, resolves the issue both in civil law and in common law. At this point, I believe it appropriate to cite Robertson J.A.'s remarks in Still at page 576:

[44] I think it also important to note that the common law of illegality can vary from province to province. There is no seminal jurisprudence on this issue that has yet emanated from the Supreme Court of Canada. Each case turns on its facts within a particular statutory framework. Arguably, this Court should be applying the common law doctrine of illegality as understood and applied in each province. In theory, the legal consequences flowing from a person's failure to obtain a work permit, as required under the Immigration Act, could be dependent on the common law of the province in which the employment contract arose. Given the bijuridical nature of the Federal Court, we cannot lose sight of the fact that cases originating from Quebec are to be decided under the illegality provisions found within the Civil Code of Québec [S.Q. 1991, c. 64]. Article 13 in force when Bank of Toronto v. Perkins, supra, was decided has been recast as Article 9 of the new Civil Code. Article 1413 of that Code provides that: "A contract whose object is prohibited by law or contrary to public order is null": See also Articles 1412 and 1418. (To date, Tax Court decisions emanating from Quebec, and pertaining to the issue before us, make no reference to any civil law jurisprudence.)

[45] It is true that this Court need only decide the issue of legality in the federal context and nothing we decide with respect to the validity or enforceability of a contract of employment is binding on the provincial courts. Nonetheless, I believe that the Federal Court should strive to promote consistency in decision making with respect to entitlement to unemployment insurance benefits.

[13] In my view, the civil law principles with respect to nullity of a contract, as to either its formation or its object, do not on the face of it differ from common law principles. In this regard, one need only read the analysis in Still and compare it with the relevant provisions of the Civil Code of Québec, that is, articles 9, 1371 to 1375, 1385 and 1412 to 1418, which read as follows:

BOOK ONE

PERSONS

TITLE ONE

9. In the exercise of civil rights, derogations may be made from those rules of this Code which supplement intention, but not from those of public order.

BOOK FIVE

OBLIGATIONS

TITLE ONE

OBLIGATIONS IN GENERAL

CHAPTER I

GENERAL PROVISIONS

1371. It is of the essence of an obligation that there be persons between whom it exists, a prestation which forms its object, and, in the case of an obligation arising out of a juridical act, a cause which justifies its existence.

1372. An obligation arises from a contract or from any act or fact to which the effects of an obligation are attached by law.

An obligation may be pure and simple or subject to modalities.

1373. The object of an obligation is the prestation that the debtor is bound to render to the creditor and which consists in doing or not doing something.

The debtor is bound to render a prestation that is possible and determinate or determinable and that is neither forbidden by law nor contrary to public order.

1374. The prestation may relate to any property, even future property, provided that the property is determinate as to kind and determinable as to quantity.

1375. The parties shall conduct themselves in good faith both at the time the obligation is created and at the time it is performed or extinguished.

CHAPTER II

CONTRACTS

SECTION III

FORMATION OF CONTRACTS

§ 1. – Conditions of formation of contracts

I – GENERAL PROVISION

1385. A contract is formed by the sole exchange of consents between persons having capacity to contract, unless, in addition, the law requires a particular form to be respected as a necessary condition of its formation, or unless the parties require the contract to take the form of a solemn agreement.

It is also of the essence of a contact that it have a cause and an object.

V – OBJECT OF CONTRACTS

1412. The object of a contract is the juridical operation envisaged by the parties at the time of its formation, as it emerges from all the rights and obligations created by the contract.

1413. A contract whose object is prohibited by law or contrary to public order is null.

VI – FORM OF CONTRACTS

1414. Where a particular or solemn form is required as a necessary condition of formation of a contract, it shall be observed; it shall also be observed for modifications to the contract, unless they are only accessory stipulations.

1415. A promise to enter into a contract is not subject to the form required for the contract.

§ 2. – Sanction of conditions of formation of contracts

I – NATURE OF NULLITY

1416. Any contract which does not meet the necessary conditions of its formation may be annulled.

1417. A contract is absolutely null where the condition of formation sanctioned by its nullity is necessary for the protection of the general interest.

1418. The absolute nullity of a contract may be invoked by any person having a present and actual interest in doing so; it is invoked by the court of its own motion.

A contract that is absolutely null may not be confirmed.

[14] In Damian Daniel Haule v. M.N.R., [1998] T.C.J. No. 1079, which is similar to the instant case, Judge Lamarre Proulx analyzed the provisions of the Civil Code of Québec in relation to the failure to comply with section 18 of the Immigration Regulations. In so doing, she also concurred in the Federal Court of Appeal's decision in Still, writing as follows:

[22] It was found by Robertson J.A., for the purposes of the Immigration Act and the Employment Insurance Act, that it was not necessary to sanction the non-compliance within section 18 of the Immigration Regulations, 1978, by the nullity of the contract for the protection of the general interest when that non-compliance occurred in good faith. The non-compliance that had occurred in the Still case was exactly of the same nature as the non-compliance in the case at bar. The Federal Court of Appeal being a tribunal above our Court and having jurisdiction in interpreting the federal acts such as the Immigration Act and the Employment Insurance Act, I feel bound by the rule of the stare decisis to its finding that compliance with section 18 of the Immigration Regulations, 1978, is not necessary for the protection of the general interest. Therefore, I conclude that the Appellant's contract of employment is not absolutely null within the meaning of article 1417 of the Civil Code of Québec since it is a requirement of that article that the condition of formation be sanctioned by its nullity where it is necessary for the protection of the general interest.

[15] I therefore conclude that Still must serve as a reference both in the common law provinces and in the Province of Quebec. I would emphasize in this regard that, in the context of the interpretation of two federal statutes, one of which being the UIA, it is appropriate, as Robertson J.A. observed, to promote consistency in decision making with respect to entitlement to unemployment insurance benefits. However, this does not mean that decisions rendered under federal statutes must necessarily apply with respect to the validity or enforceability of a contract of employment under a provincial statute.

[16] In that context, as was held in Still, it is up to the courts to determine the consequences of a violation of a statute, if that statute prohibits the formation of a contract. According to Robertson J.A., the good faith of the party seeking relief is thus of considerable importance.

[17] Applying this principle to the instant case, I must decide whether the appellant may be characterized as a legal immigrant who acted in good faith. Having heard the evidence, I find that the appellant proved his good faith.

[18] He entered Canada from the Democratic Republic of the Congo (formerly Zaire) on January 17, 1995, and claimed refugee status at that time. He then looked for industrial employment. The employer who was prepared to hire him at the time told him that he had to secure an employment authorization, which he obtained on March 6, 1995. His authorization expired on December 6, 1995 (Exhibit A-1). The appellant was unfortunately unable to get the job in question as the position had already been filled when he received his employment authorization. On November 21, 1995, the Immigration and Refugee Board granted the appellant political refugee status under subsection 69.1(9) of the Immigration Act (Exhibit A-2). The appellant testified that he thought he no longer needed to take additional steps in order to get a job and that he was no longer under any statutory immigration restrictions. His employment with the payer began on January 30, 1996 and ended on February 7, 1997. The payer never informed him that he was obliged to obtain a new employment authorization. At the end of this period of work, the appellant filed a claim for benefits under the UIA and the EIA. He was denied benefits because he had worked without an employment authorization. After receiving this new information, the appellant filed an application for a second employment authorization, which was granted to him on February 17, 1997, and was to expire on February 16, 1998 (Exhibit A-3).

[19] Apart from the employment authorization issue, the Minister does not dispute the fact that the employment in question met all the requirements for insurability.

[20] The evidence does not show, as it did in Still, whether unemployment insurance premiums were paid. However, the Minister did not raise this point and merely relied on the absence of a work permit in denying the appellant benefits.

[21] In my view, the evidence did not show that this is a case in which relief must be denied in order to preserve the integrity of the legal system (see McLachlin J.'s reasons for judgment in Hall v. Hébert, [1993] 2 S.C.R. 159).

[22] I therefore find that the employment held by the appellant during the period from January 30, 1996, to February 7, 1997, was insurable employment within the meaning of the UIA and the EIA. Accordingly, the appeal is allowed and the Minister's decision is vacated.

Signed at Ottawa, Canada, this 9th day of December 1999.

"Lucie Lamarre"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 11th day of September 2000.

Erich Klein, Revisor