Citation: 2013 TCC 9
Date: 20130111
Dockets: 2012-1811(EI)
2012-1812(EI)
BETWEEN:
KULWANT KAUR SMAGH,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
and
BETWEEN:
2012-1812(EI)
ROOP SINGH SMAGH,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe D.J.
[1]
The appellant Kulwant Kaur Smagh
(Kulwant Kaur) and the appellant Roop Singh Smagh (Roop Singh) each appealed
from a decision – dated April 12, 2012 – by the Minister of National Revenue (
the “Minister”) in which the employment of Kulwant Kaur with Roop Singh for the
period June 22, 2009 to September 11, 2009 was held not to constitute insurable
employment because the Minister was not satisfied pursuant to paragraph 5(2)(i)
of the Employment Insurance Act ( the “Act”) that a substantially
similar contract of employment would have been entered into if the parties had
been dealing with each other at arm’s length.
[2]
Counsel agreed the appeals be
heard together and a certified Punjabi to English, English to Punjabi
interpreter – Satpal Singh Gill – was required to interpret only a few phrases
during the testimony of Roop Singh.
[3]
Roop Singh testified he is engaged
in the construction business in Osoyoos, British Columbia. Previously, he had
been a fruit grower and operator of a packing house carrying on business - in
Oliver, B.C. - in a partnership with his brother since 1994. During the
relevant period, he operated Sun Star Fruit Packers (Sun Star) as a sole
proprietorship. In 1997, his wife – Kulwant Kaur – began working for that
entity and - in 2001 - there was an audit by the predecessor of Canada Revenue
Agency (CRA). It was determined that she was engaged in insurable employment
with the partnership. Roop Singh stated that one day between 2000 and 2004,
Kulwant Kaur took his truck to drive their son to school because he had missed
the bus. She was involved in an accident with a motorcyclist. Unfortunately,
there was no insurance on the truck and she had not spoken with Roop Singh
prior to driving it. The motorcyclist made a claim for damages which proceeded
slowly but by 2008 the time had come for the matter to be resolved. After some
negotiation, it was agreed the damages attributable to the accident were in the
sum of $17,836.00. Roop Singh stated that in accordance with the business
policies and procedures of the Insurance Corporation of British Columbia (ICBC), he was required to pay that amount – on October 3, 2008 – as failure to do so would have
resulted in the cancellation of his British Columbia operator’s license. He
discussed the situation with Kulwant Kaur and she accepted responsibility for
the accident and for having driven the uninsured truck without his knowledge
and permission. She proposed that she continue to work for the orchard/packing
house business and that amounts could be taken from her net pay until Roop
Singh had recovered the full cost of the settlement paid to ICBC. Roop Singh stated it was not unusual for him to advance funds to a grower or a worker and
to be repaid later in the year when the grower sold his fruit or the worker
received the balance of his or her earnings at the end of the season. Filed as
Exhibit A-1, a photocopy of a Business Account Statement (Statement) displayed
copies of cheques issued by Roop Singh on the account of Sun Star to a grower –
Sidhu – in the sums of $1035.00 and $20,000.00, respectively, both dated January 2, 2009. The smaller cheque was in payment of fruit purchased from Sidhu in 2008
and the larger cheque was an advance against fruit purchases during the 2009
season. Filed as Exhibit A-2, were two photocopied Statement pages with various
cheques issued on the business account to several individuals in various
amounts. Cheques written on August 27, 2009 and August 28, 2009 - in the sums of $1000.00 and $710.00, respectively - to two workers represented an advance
against future earnings. A cheque in the sum of $10,000 – dated September 1, 2009 – was an advance payment to a cherry grower. On another page of a
Statement - Exhibit A-3 - there are copies of cheques written by Roop Singh to
two individuals who had worked for him earlier and were employed again for the
2009 season. A photocopied sheet of several cheque stubs was filed as Exhibit
A-4. Roop Singh stated the entry dated October 9, 2005, recorded a loan of $5,000.00 to Sidhu who had worked for him for 10 years and needed money to make a
deposit on the purchase of his own orchard. A stub – dated November 6, 2007 – recorded a cheque in the sum of $15,765.00 issued to Gill - an apple grower - as an
advance against future delivery of product. Roop Singh stated he recorded the
hours worked by Kulwant Kaur and a payroll sheet – Exhibit A-5 – had been
prepared which showing gross earnings for the relevant period in the sum of
$10,800.00, based on an hourly rate of $15.00. The net earnings in the sum of
$8,709.10 were retained by Roop Singh and applied toward the amount owed to him
in relation to the ICBC settlement payment. He stated he had told the
interviewer at the CRA Penticton office that Kulwant Kaur’s hours of work had
been recorded. In 2009, the fruit growing season ended on September 11 and all
workers were laid off. There was a maximum of 18 to 20 workers employed during
the season to pick apples, cherries, grapes and plums but only 12 or 13 were
required to harvest peaches. Roop Singh stated Kulwant Kaur worked as a
Supervisor and had various responsibilities over and above that of an ordinary
worker. She also had a British Columbia driver’s licence which he understood
would have been suspended had he not made the payment to ICBC.
[4]
In cross-examination by counsel
for the respondent, Roop Singh stated he had taken the position at the outset
that any damages paid by him as a result of the accident would result in a debt
owed to him by Kulwant Kaur. He identified a Statement – Exhibit A-6 – and
stated that the entry dated October 3 - cheque #461 in the sum of $17,836.00 -
represented the payment to ICBC. He considered that in making the payment he
was advancing a loan to Kulwant Kaur and, although she was his wife, she was
also a longtime employee who agreed to continue to work for his business until
the debt was repaid. He agreed that no interest was charged on the loan but he
had never charged interest on any loan to a worker or grower. He stated that a
handwritten time sheet – Exhibit A-7 - had been maintained for Kulwant Kaur
showing she had worked a total of 720 hours during the relevant period and that
a 60-hour to 70-hour work week was not abnormal in the orchard industry. Also,
it was normal to work every day during the relatively short season. Roop Singh
stated he sold the packing house in 2010 and Kulwant Kaur went to work for
another employer and continued to pay him a certain sum from each pay cheque in
order to retire the balance of the debt. Roop Singh stated it was common in the
industry to advance payment to reliable growers and also to trusted workers. He
advanced the sum of $1000.00 – Exhibit A-2 - to a worker – Singh – about 15
days before the end of the season when final payment – in the ordinary course –
otherwise would have been due. A cheque in the sum of $1200.00 – Exhibit A-3 –
was an advance to a worker for pruning, an activity that would not be
undertaken until the winter months. Workers were not paid any overtime.
Roop Singh stated he does not recall the extent of the questions asked by the
interviewer at the CRA office in Penticton and does not remember discussing the
subject of loans to other workers. He stated it is normal in the industry to
make advances to workers – if requested – and to pay all remaining wages at the
end of the season. Except for itinerant workers who pick fruit for a day or two
– or for a few hours - all other wages are paid by cheque. A worker who acted
as Foreman earned $13.00 an hour and other workers were paid either $10.00 or
$11.00. Some workers – pickers - were paid on the basis of piecework. Roop
Singh stated his arrangement with Kulwant Kaur concerning the monies owed to
him was verbal as were all other transactions whereby loans or advances were
made to growers or workers. On rare occasions, he had advanced a worker a small
sum and was out of pocket when that person did not show up for work the next
morning. Roop Singh acknowledged that although people borrowed money from him
for various reasons, he would not have paid – directly - a third-party debt for
any other worker on the basis that he would be repaid by retaining the worker’s
net wages from ongoing employment.
[5]
Kulwant Kaur Smagh did not
testify. Both appellants closed their case.
[6]
The respondent did not call any
evidence.
[7]
Counsel for the appellants
submitted the evidence disclosed that the factors considered by the Minister
pursuant to the relevant provision of the Act did not reveal any marked
departure from a non-arm’s length relationship with a non‑related worker
with respect to remuneration paid, the terms and conditions of employment and
its duration, and the nature and importance of the work performed. Counsel
acknowledged that the financial arrangement between Roop Singh and Kulwant Kaur
as both husband and wife and as employer and employee was exceptional, perhaps
unique in this field of jurisprudence. However, they had concluded their
agreement after having discussed the matter of the payment by Roop Singh to ICBC because the accident had subjected him to liability for damages in his capacity as
registered owner of the vehicle driven by Kulwant Kaur. Without paying the
amount demanded by ICBC, both their driver’s licences could have been subject
to suspension and the impact on the business and their personal lives would
have been substantial. Counsel submitted there is no doubt that Kulwant Kaur
was employed during the relevant period and had been so employed for about 15
seasons either by her husband or – earlier – by her husband and her
brother-in-law when the business was operated as a partnership. Counsel
submitted that having regard to all the circumstances of the employment, the
origin of the debt to Roop Singh and the method of repayment by Kulwant Kaur
from her wages should not exclude her from the category of insurable
employment. Counsel referred to the evidence where it was common for Roop Singh
to advance money not only to reliable growers but also to employees who had
worked for him earlier. He even advanced money to a worker months before the
pruning work would be performed. He did not charge any interest to any borrower
and all loans were verbal in nature.
[8]
Counsel for the respondent
conceded the employment of Kulwant Kaur by Roop Singh was genuine during the
relevant period and that the work was performed. Further, he advised the
Minister does not take issue with the remuneration of $15.00 per hour since
Kulwant Kaur was an experienced worker who carried out supervisory duties.
Except for the loan-repayment agreement between the parties, the other terms
and conditions of employment were consistent with non-related workers as was
the duration of the work which was dictated by the usual cycle of growing and harvesting
common to the fruit growing industry in that area. Counsel acknowledged the
evidence did not disclose anything abnormal concerning the nature and
importance of the work performed by Kulwant Kaur. However, the testimony of
Roop Singh was unequivocal that he would not have entered into an arrangement
with any non-related worker whereby he would have paid off – directly – a debt
owed to a third party and received repayment by retaining money from earned net
wages. Counsel submitted the Minister was entitled to decide that the unusual
financial arrangement between Roop Singh - as a related employer - and his wife
Kulwant Kaur as employee - was sufficiently aberrant to disqualify her from
insurable employment. In counsel’s view of the evidence, it was tantamount to a
trump card. In effect, it constituted an overarching factor that, having regard
to the totality of the circumstances of the employment, affected the nature of
the employment relationship to the extent that her employment was not
insurable. Counsel submitted that the relevant jurisprudence applied to the
facts in the within appeals required each decision issued by the Minister to
each appellant to be confirmed.
[9]
The relevant provisions
of the Act are paragraphs 5(1)(a) and 5(2)(i) and subsection
5(3) which read 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;
…
(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.
[10]
In the case of Porter
v. Canada (Minister of National Revenue - M.N.R.), [2005] T.C.J. No. 266;
2005 TCC 364, Campbell, J. reviewed the comments of Justice Archambault in Bélanger
v. Canada (Minister of National Revenue - M.N.R.), 2005 CarswellNat 3971;
2005 TCC 36 and those of Justice Bowie in Birkland v. Canada (Minister of
National Revenue - M.N.R.), [2005] T.C.J. No. 195; 2005 TCC 291 wherein both discussed the function of this Court in the context of the decision
of the Federal Court of Appeal in Légaré, supra, and subsequent
decisions of that Court. At paragraphs 12 and 13 of her Judgment, Justice
Campbell stated:
12 The Tax Court's
mandate, in Employment Insurance cases as set out in the cases of Légaré and
Pérusse, was recently reaffirmed by Letourneau J. in Livreur Plus Inc. v.
Canada, [2004] F.C.J.
No. 267 at paragraphs 12, 13 and 14:
12. As already mentioned, the Minister assumed in
support of his decision the existence of a number of facts obtained by inquiry
from workers and the business he considered to be the employer. Those facts are
taken as proven. It is for the person objecting to the Minister's decision to
refute them.
13. The function of a Tax Court of Canada judge
hearing an appeal from the Minister's decision is to verify the existence and
accuracy of those facts and the assessment of them by the Minister or his
officials, and after doing so, to decide in light of that whether the
Minister's decision still seems to be reasonable: Légaré v. Canada (Minister
of National Revenue -- M.N.R.), [1999] F.C.J.
No. 878; Pérusse v. Canada (Minister of National Revenue --
M.N.R.), [2000] F.C.J.
No. 310; Massignani v. Canada (Minister of National Revenue),
2003 FCA 172;
Bélanger v. Canada (Minister of National Revenue), 2003 FCA 455.
In fact, certain material facts relied on by the Minister may be refuted, or
the view taken of them may not stand up to judicial review, so that because of
their importance the apparent reasonableness of the Minister's decision will be
completely destroyed or seriously undermined.
14. In exercising this function the judge must
accord the Minister a certain measure of deference, as to the initial
assessment, and cannot simply substitute his own opinion for that of the
Minister unless there are new facts or evidence that the known facts were
misunderstood or wrongly assessed: Pérusse v. Canada (Minister of National
Revenue - M.N.R.) supra, paragraph 15.
13 In summary, the function of this
Court is to verify the existence and accuracy of the facts relied upon by the
Minister, consider all of the facts in evidence before the Court, including any
new facts, and to then assess whether the Minister's decision still seems
"reasonable" in light of findings of fact by this Court. This
assessment should accord a certain measure of deference to the Minister.
[11]
The Amended Reply to each Notice
of Appeal (Amended Reply) – at paragraph 7(n) of the assumptions of fact
states:
. . .
7. n) the Appellant
did not track the Worker’s hours worked;
. . .
[12]
I am satisfied that Roop Singh did
record the hours worked by Kulwant Kaur and that the handwritten foolscap sheet
– Exhibit A-7 – is accurate. Other than that, the assumptions in each Amended
Reply remain intact.
[13]
The fact situation in these
appeals is peculiar and odds are it will not re-occur in the context of an
appeal from a decision by the Minister pursuant to the relevant provisions of
the Act.
[14]
The remuneration was reasonable in
view of Kulwant Kaur’s experience and responsibilities and so were the majority
of the terms and conditions of her employment. The duration was dictated – as
usual – by the fruit season and she was laid off at the same time as unrelated
workers. All her net earnings were retained by Roop Singh and applied against
the agreed amount of her debt to him. During the season, some non-related
workers received a loan or an advance but final settlement and payment of the
balance of wages took place at the end of the season, a practice common to the
industry in that region. During the relevant period, there was no significant
variance with respect to the nature and importance of the work performed by
Kulwant Kaur when compared with non-related workers.
[15]
When the employer and employee are
deemed to be related for purposes of the Act, the default position is
that the employment is not insurable unless the Minister deems them to be
dealing at arm’s length notwithstanding their related status.
[16]
In the case of Docherty
v. Minister of National Revenue, [2000] T.C.J. No. 690, I commented – at
paragraph 25 as follows:
[25] The
template to be utilized in making a comparison with arm’s length working
relationships does not require a perfect match. That is recognized within the
language of the legislation because it refers to a “substantially similar
contract of employment”. Any time the parties are related to each other within
the meaning of the relevant legislation, there will be idiosyncrasies arising
from the working relationship, especially if the spouse is the sole employee or
perhaps a member of a small staff. However, the object is not to disqualify
these people from participating in the national employment insurance scheme
provided certain conditions have been met. To do so without valid reasons is
inequitable and contrary to the intent of the legislation.
[17]
The debt owed by
Kulwant Kaur to Roop Singh and the subsequent agreement between them concerning
the method of repayment was inextricably bound up in their employer/employee
relationship. If Kulwant Kaur had borrowed the amount needed to pay ICBC from a financial institution and - even if Roop Singh had to co-sign the loan - she could
have made payments directly to the lender in specific amounts during a certain
term. In this way, the participation of Roop Singh would have been primarily as
a husband even though the source of funds to repay the loan to the financial
institution during the relevant period would have been wages earned by her as
an employee of his sole proprietorship. However, she could have retained
control over her earnings. I appreciate that Roop Singh found himself between
the proverbial rock and a hard place but the nature of their agreement did not
constitute a mere idiosyncrasy. Instead, it constituted the core of their
employment relationship. Roop Singh was forthright when he acknowledged that he
would not have entered into a similar loan and repayment arrangement with any
non-related worker. His generous nature caused him to make non-interest‑bearing
loans to growers and to advance money to reliable workers against future wages.
He loaned a substantial sum of money - $5000.00 - to an employee who wanted to
buy an orchard. The arrangement between Roop Singh and Kulwant Kaur does not
fit within the pattern of the loans made - or advance wages paid - to
non-related workers and other parties. That agreement was unique and would not
have existed if the parties had not been related. Would a non-related worker
have agreed that an employer could apply every cent of net wages - earned from
720 hours of work – to discharge a debt? To ask the question is to answer it.
[18]
The appellants acted in
good faith to resolve a thorny issue. The work was performed as it had been in
the past. Roop Singh sold his orchard and packing house business in 2010.
Kulwant Kaur found employment with another fruit grower and paid him regularly
from her earnings to reduce the balance of her debt.
[19]
Were I clothed with the
jurisdiction to decide these appeals de novo, I may have been tempted to
find in favour of the appellants in light of their longstanding
employer/employee relationship and the otherwise normal nature of the
employment during the relevant period in the context of the orchard industry.
Because the within fact situation constituted a one-off, that alone could have
fuelled such an inclination. However, these musings are simply speculative, of
the sort indulged in by those armchair quarterbacks or wannabe skips who – from
the comfort of their couches – would have targeted a different receiver in the
dying seconds of the 4th quarter or called a different shot in the
10th end of a Brier final.
[20]
Having regard to the
evidence and the relevant jurisprudence, I am satisfied each of the decisions
issued by the Minister is reasonable. There was no evidence of bad faith or any
consideration of irrelevant factors. The Minister did not fail to take into
account all of the relevant circumstances. The Minister assumed the worker’s
hours had not been recorded but there was no evidence that the handwritten
record had been produced earlier. In any event, that matter in itself is not
significant and does not affect the validity of the decisions issued by the
Minister which in light of all the evidence remain reasonable. I cannot find
any valid reasons to support a different conclusion.
[21]
Each decision of the
Minister is confirmed and each appeal is dismissed.
Signed at Sidney, British Columbia, this 11th day of January
2013.
"D.W. Rowe"
Email this Content