Senous v. Fontaine, 2003 FC 1528

                                                                                                                                Date:    20031230

                                                                                                                           Docket:    T-2124-01

                                                                                                                    Citation:    2003 FC 1528

Ottawa, Ontario, December 30, 2003

PRESENT: THE HONOURABLE MR. JUSTICE BLANCHARD

BETWEEN:

                                                              HOURIA SENOUS

                                                                                                                                            Applicant

                                                                         - and -

                                                         BERNARD FONTAINE

                                                                           and

                                                         LAURENT DELBARRE

                                                                           and

                                                             BORIS DUBOILLE

                                                                           and

                                                              DARIO PERETTO

                                                                           and

                                         THE ATTORNEY GENERAL OF CANADA

                                                                                                                                      Respondents

                                            REASONS FOR ORDER AND ORDER

[1]                The case at bar is an application for judicial review of a decision by the Department of Human Resources Development Canada, Labour Directorate (HRDC) on November 6, 2001, which dismissed a motion in appeal regarding four payment orders issued on October 12, 2001. The applicant is also asking the Court to rule on the validity, applicability and constitutionality of subsection 251.11(2) and section 251.18 of the Canada Labour Code, R.S.C. 1985, c. L-2 (the Code).

FACTS

[2]                From June to December 2000, Houria Senous (the applicant) operated an aviation school at Mirabel known as the "Centre de formation aéronautique de Mirabel (CIFAM) Inc." (CIFAM).

[3]                According to the applicant, CIFAM only had three employees: Laurent Delbarre, Boris Duboille and Dario Peretto, who were flight instructors. The respondents argued that Bernard Fontaine, an accountant, was also an employee of CIFAM. The applicant alleged he was an independent contractor.

[4]                Messrs. Delbarre, Duboille, Peretto and Fontaine (the respondents) filed a complaint with HRDC, alleging that they had not been paid for overtime, legal holidays and annual leave (4%). Further, in early December 2000, they received a paycheck that was not honoured.

[5]                An initial letter was sent to CIFAM by the HRDC inspector responsible for the case, Lucette St-Jacques, on January 5, 2001, telling it of the complaints filed. The letter explained the allegations clearly and invited the applicant to respond, either by paying the amounts owed or by explaining, with supporting evidence, why there was no basis for the complaint.

[6]                This letter was not answered. The respondents resigned in early December and shortly after, according to the evidence in the record, the applicant was hospitalized for nervous depression. The applicant's cessation of work continued for medical reasons until late April.

[7]                In May the applicant took up the matter. She contacted Ms. St-Jacques, because she did not agree with the respondents' allegations. A lengthy exchange of telephone calls followed. The applicant alleged that Ms. St-Jacques insisted on having the explanations presented in the form of a letter from counsel. The applicant, who was receiving employment insurance benefits, tried to obtain legal aid. This was denied as it was the company CIFAM which was involved, not the applicant personally.

[8]                The applicant doubted Ms. St-Jacques' impartiality. She contacted the director, Pierre Rousseau. She finally met with him and Ms. St-Jacques on July 6, 2001. The applicant maintained that at that time she showed them several documents that indicated the respondents' allegations were false and taped telephone conversations establishing that one of the respondents was lying about his employee status.

[9]                According to the applicant, the documents showed that the employees were paid for all the hours worked, they could not have worked the alleged overtime, some of them were not employees at the time they were claiming overtime or legal holiday pay, and finally Mr. Fontaine had never been an employee of CIFAM.

[10]            The applicant alleged that both Mr. Rousseau and Ms. St-Jacques only took a cursory look at her documentation and did not make copies of it and that they appeared to admit that her position was sound and suggested that the matter would be closed on receipt of an explanatory letter from counsel.

[11]            The applicant alleged that she could not pay for the services of counsel and that legal aid was still being denied. She left several messages offering to submit the documentation with a letter she would write herself. There was no response to this offer.

[12]            The applicant said that on September 24, 2001, she received four payment orders addressed to CIFAM for the amounts due, namely a total of $9,640.38. As CIFAM did not react to the payment orders (neither payment nor appeal), HRDC sent four payment orders dated October 12, 2001, directly to the applicant as CIFAM director pursuant to section 251.18 of the Code, which makes a company's directors directly liable for wage debts and other benefits set out in the Code if the company does not appear able to pay them.

[13]            The Code provides in subsection 251.11(2) that in order to appeal a payment order an employer must pay the Minister an amount equal to that required under the payment order. The applicant alleged that Ms. St-Jacques told her that she could avoid compliance with the requirements of subsection 251.11(2) if she could show she was unable to pay the amount as she was an employment insurance recipient.

[14]            The applicant had fifteen days from October 18 to appeal. She sent a letter on October 30, with a document confirming she was an employment insurance recipient. She obtained legal aid on November 2, hired a lawyer on November 5 and left a message for Ms. St-Jacques the same day telling her of these facts.

[15]            On November 6, 2001, Ms. St-Jacques dismissed the appeal of October 30, because the applicant had not observed the condition of filing the disputed amount. The applicant is now seeking judicial review of this decision.

[16]            It should be added that there was a related proceeding, which the applicant did not mention. On January 14, 2002, Pierre Blais J. of the Federal Court heard a motion by the applicant for a stay of execution of the decision of November 6, 2001, until the Federal Court ruled on the constitutionality of the disputed provisions.

[17]            In that case (Senous v. Fontaine, [2002] F.C.J. No. 70), Blais J. concluded that it was not in the interests of justice to stay the payment orders and possible execution measures provided in the Code. In his view, the applicant had not satisfactorily established irreparable harm and the balance of convenience was in favour of payment of the debt mentioned in Part III of the Code.

PARTIES' ARGUMENTS

Applicant

[18]            The applicant alleged that the inquiry procedure leading to the disputed decision was incomplete, improper and invalid. In her submission, the inspector did not take all the evidence into account and acted in a biased, arbitrary and discriminatory manner. Further, she misled the applicant by indicating that she could appeal the payment orders without a prior deposit, and then denying her that right.

[19]            In the applicant's submission, HRDC rendered patently unreasonable decisions which were contrary to law when it issued the payment orders of October 12, 2001, and dismissed the applicant's appeal of November 6, 2001. HRDC did not observe the rules of natural justice and procedural fairness.

[20]            Additionally, the applicant maintained, section 251.18 and subsection 251.11(2) of the Code are invalid, inoperative and unconstitutional provisions. The Code gives the inspector broad discretion but does not in return provide the employer with an opportunity to challenge the validity or merits of the employees' complaints which prompted the inquiry.

[21]            Finally, and most importantly, the applicant alleged that being able to appeal only on payment of the amount mentioned in the payment order deprived the employer of its fundamental right to a fair and impartial determination of its rights and obligations, a right which the applicant submitted was protected by section 7 of the Canadian Charter of Rights and Freedoms (the Charter) and by paragraph 2(e) of the Canadian Bill of Rights.

Respondents

[22]            The Attorney General of Canada responded on behalf of the respondent employees and the HRDC. In the respondents' submission, the only question to be decided is the constitutionality of the impugned provisions, namely subsection 251.11(2) and section 251.18 of the Code.

[23]            The question can be resolved into three subquestions: are the provisions at issue valid, are they consistent with the Charter and are they applicable despite paragraph 2(e) of the Canadian Bill of Rights?

[24]            To begin with, the respondents maintained that the provisions are in fact valid. They were adopted by the Parliament of Canada in accordance with the powers conferred on it by section 91 of the Constitution Act, 1867, which makes the federal employer responsible to the federal government. Further, Parliament may enact legislative rules governing employees' working conditions.

[25]            Parliament further has the power to create a system for recovery of debts and to use machinery similar to that found in legislation creating artificial persons to impose personal obligations on directors, especially regarding the unpaid wages of employees. The imposition of a no-fault system of liability on employers subject to the Code is necessary to ensure that the Code's provisions are implemented.

[26]            Are the provisions contrary to the Charter? The respondents argued that they are not, since the Charter does not protect economic interests. It cannot be said that imposing a monetary condition on a right of appeal, in a regulatory situation, is an impairment of life, liberty and security of the person. Accordingly, the provisions cannot be said to be unconstitutional.

[27]            Further, the provisions would be fully justified if they had to be subjected to analysis under section 1, as being entirely customary in a free and democratic society. The courts often require security to ensure that court proceedings are not lightly initiated. The disputed condition exists to guarantee the payment of the debt in the event that the appeal is dismissed. Finally, provincial legislatures have established similar systems to ensure the recovery of unpaid wages from employers governed by provincial law.

[28]            Lastly, the respondents maintained that the provisions are not contrary to paragraph 2(e) of the Canadian Bill of Rights. The procedural fairness required by that provision is in fact protected in the Code by the very procedure which an inspector hearing a complaint must follow. Paragraph 2(e) does not in any way protect a right of appeal, or an unconditional right of appeal.

POINTS AT ISSUE

(1)        Should the application for judicial review be allowed?

(2)        Can sections 251.11 and 251.18 of the Canada Labour Code be declared invalid, unconstitutional or inapplicable?

LEGISLATION

ANALYSIS

(1)           Should the application for judicial review be allowed?

Standard of review

[29]            In any application for judicial review the first question that must be asked concerns the applicable standard of review. In recent years the Supreme Court of Canada has favoured a pragmatic and functional analysis, which means that the decisions of administrative tribunals should be considered in light of various factors to determine the applicable standard. In 2003 SCC 19">Dr. Q v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19, McLachlin C.J. summarized the importance of this approach for judicial review as follows:

In a case of judicial review such as this, the Court applies the pragmatic and functional approach that was established by this Court in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048, and gained ascendancy in Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, and Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982. The term "judicial review" embraces review of administrative decisions by way of both application for judicial review and statutory rights of appeal. In every case where a statute delegates power to an administrative decision-maker, the reviewing judge must begin by determining the standard of review on the pragmatic and functional approach. In Pushpanathan, this Court unequivocally accepted the primacy of the pragmatic and functional approach to determining the standard of judicial review of administrative decisions. Bastarache J. affirmed that "[t]he central inquiry in determining the standard of review exercisable by a Court of law is the legislative intent of the statute creating the tribunal whose decision is being reviewed" (para. 26). However, this approach also gives due regard to "the consequences that flow from a grant of powers" (Bibeault, at p. 1089) and, while safeguarding "[t]he role of the superior courts in maintaining the rule of law" (p. 1090), reinforces that this reviewing power should not be employed unnecessarily. In this way, the pragmatic and functional approach inquires into legislative intent, but does so against the backdrop of the court's constitutional duty to protect the rule of law. (para. 21)

[30]            Accordingly, two questions are at issue in the pragmatic and functional approach: examining the legislature's intention and the courts' constitutional duty to protect the rule of law.

[31]            McLachlin C.J. went on, at paragraph 26:

In the pragmatic and functional approach, the standard of review is determined by considering four contextual factors _ the presence or absence of a privative clause or statutory right of appeal; the expertise of the tribunal relative to that of the reviewing court on the issue in question; the purposes of the legislation and the provision in particular; and, the nature of the question _ law, fact, or mixed law and fact.

[32]            In Part III of the Code, the right of appeal is set out in section 251.11. In section 251.12, on receipt of an appeal the Minister appoints a referee to hear the appeal. The decision of the referee is final and not subject to review in any court, whether by way of injunction, certiorari, prohibition or quo warranto. In other words, the legislature chose to create a single route of appeal, and the privative clause making that appeal final is as clear and explicit as it could be.

[33]            Inspectors and referees appointed by the Minister are given significant powers: the legislature gives the inspector control over evidence and the referee control over his or her procedure. They are in a better position than a reviewing court to weigh the evidence.

[34]            The third factor concerns the purpose of the law. It is clear that in adopting these provisions the legislature intended to hold the employer responsible for payments owed to employees, to the point of lifting the corporate veil and making directors directly liable if the artificial entity was no longer able to discharge its obligations. Clearly, the intention was to protect the rights of workers. According to the respondent Minister, the purpose of the requirement that the amounts at issue be paid to the Minister of Labour was to limit dilatory appeals from dissatisfied employers.

[35]            Finally, the fourth factor to be used in determining the standard of review: the point at issue is above all a question of fact. The provisions are not open to interpretation. If the overtime was worked, it must be paid for. The question is whether the time was actually done, whether or not payments were made for services rendered by the employees to their employer.

[36]            The factors at issue all tend to indicate the greatest deference to be shown by the Court to any decision made by the Minister's representative. The Court will only intervene if the decision is patently unreasonable or if the rules of natural justice were infringed, which would deprive the decision-making body of its jurisdiction.

Decision and procedural fairness

[37]            The disputed decision is that of November 6, 2001, in which the Minister through the agency of inspector St-Jacques dismissed the appeal from the payment orders. In determining the rights and obligations of the two parties, procedural fairness could not intervene at this stage. The decision of November 6 is simply the application of subsection 251.11(2) of the Code: unless the applicant pays the amount owed to the Minister, she cannot appeal. In imposing that condition the inspector did not exceed her jurisdiction or deny the applicant's rights: she simply applied the law, as she is bound to do.

[38]            In her memorandum the applicant submitted that Lucette St-Jacques assured her [TRANSLATION] "that she only had to send her a letter of objection with the documents showing she was in fact an employment insurance benefit recipient, and then she would not have to make the deposit required by section 251.11 of the Canada Labour Code". Neither the applicant nor the respondents pursued this allegation at the hearing. Accordingly, I will deal with this point summarily.

[39]            The evidence in support of this argument is contained in paragraphs 40 and 41 of the applicant's affidavit. It is worth setting these out in full:

[TRANSLATION]

40.            I then telephoned Ms. St-Jacques to tell her that neither CIFAM nor I were able to make the deposit required in the payment orders pursuant to section 251.11 of the Canada Labour Code in order to appeal, and she advised me to send a written notice of appeal before expiry of the fifteen-day period from receipt of the last orders of payment, accompanied by documents showing that I was a recipient of employment insurance benefits, so that the appeal would be admitted regardless . . .

41.            In a later communication Lucette St-Jacques confirmed that I only had to send her a letter of objection with the documents showing that I was in fact an employment insurance benefit recipient and then I would not have to make the deposit required by section 251.11 of the Canada Labour Code . . .

[40]            The applicant was not cross-examined and the respondents filed no evidence in rebuttal. The applicant's evidence was accordingly not challenged. However, even if I accepted that the applicant relied on Ms. St-Jacques' statements, no harm was established. The fact remains that such an undertaking, if it can be described in that way, was contrary to the Code. The Code provides for no exemption from the strict requirement of subsection 251.11(2). Further, the point has no bearing on the critical question, since the evidence, namely the applicant's affidavit, clearly established that neither CIFAM nor the applicant was able to provide the deposit required in the payment orders pursuant to section 251.11.

[41]            If there was a breach of procedural fairness it would instead have to be found in the inquiry procedure. The Court must consider whether the applicant in fact had an opportunity to respond to the employees' allegations before the payment order was issued. We will return below to the question of whether the legislation itself infringes the fundamental rule of natural justice, the right to be heard by an impartial decision-maker.

[42]            The first payment order was issued on March 1, 2001, after Ms. St-Jacques' attempts to contact CIFAM or the applicant proved vain. When the applicant contacted Ms. St-Jacques in May, the case was suspended until the applicant submitted evidence which she said contradicted the respondents' allegations. A meeting was held in July 2001 with Ms. St-Jacques and the director Mr. Rousseau. The applicant had an opportunity to present her arguments and submit her evidence. Apparently, it was not sufficient to persuade Ms. St-Jacques or Mr. Rousseau. We have already determined on the findings of fact that the applicable standard is that of the patently unreasonable decision. There is no reason to think that the inquiry was not conducted carefully, taking all the evidence submitted into account.

[43]            In the record filed with the Court by the applicant, there is nothing that could persuade the Court that the respondents' claims are groundless. On either side the Court was given copies of cheques, pay slips and work schedules. For each of the applicants the pay appeared to be the same from one week to another and there was no mention of overtime. The respondents said that they worked overtime and submitted their schedules as evidence. There was no payment for legal holidays or vacation (in fact the applicant conceded this point, except for Mr. Fontaine). Additionally, the Court was given copies of cheques returned by the bank due to insufficient funds.

[44]            As regards Mr. Fontaine's status, we see in the record that his pay slips are the same as those of the other three: the employer retained an amount for the Quebec pension plan, federal tax and provincial tax. Lacking a signed document to indicate the contrary, the only documents submitted place him on the same level as the others, and the conclusion must necessarily be that he was also an employee.

[45]            The applicant maintained that she had evidence that the respondents did not work the overtime which they claimed to have worked. That evidence is not in the record.

[46]            The documents relating to Dario Peretto include documents (copies of bills and copies of cheques) which relate to a numbered company, the address of which is the same as that of Laurent Delbarre. Without further explanation, this evidence is of no value to the Court. Accordingly, based on the state of the evidence and the presumption of expertise applicable to the inspector appointed by the Minister, the Court is unable to say that the decision was patently unreasonable.

[47]            It seems clear that procedural fairness, which includes the right to be heard impartially, was observed. The applicant had an opportunity to submit her arguments and evidence to the Department, before the payment orders were again issued on September 18, 2001. The interview of July 6, 2001, took place in the presence of two officials. The inspector made a careful analysis of the schedules, pay slips and cheques submitted as evidence and then openly calculated how she arrived at the number of unpaid hours of overtime and the calculation of vacation and legal holidays. She relied both on the evidence at her disposal and on the wording of the Code. The course of the matter was in fact suspended while the applicant sought to persuade the Department of the validity of her objection. The amount claimed was not changed from March 1 to September 18, 2001. It was not until November 6, 2001, once the appeal had been dismissed, that the respondents were told that they could file their claim in the Federal Court for registration and implementation pursuant to section 251.15.

            (2)        Can sections 251.11 and 251.18 of the Canada Labour Code be declared invalid, unconstitutional or inapplicable?

[48]            Before considering the validity of the impugned provisions, the Court must first say a few words about the special system created by the Canada Labour Code for recovering monies owed by employers to employees.

[49]            The applicant appeared to object to the fact that there is a presumption of a debt and no-fault liability applicable to a director if the artificial entity is unable to pay the amounts owed.

[50]            The provisions in question do depart from the ordinary law in more than one respect. Moreover, the law governing labour relations in general departs from traditional private law rules, both in the common law and in the civil law. Similarly, the standards adopted under the federal and provincial systems to cover minimal working conditions of employees represent an intrusion by the government into freedom of contract. The government has long recognized, and the Supreme Court of Canada has many times confirmed this, that the employer-employee relationship is characterized by an inequality of power which the government will sometimes choose to correct by various measures that favour the employee. This explains the genesis of the Canada Labour Code.

[51]            In the case at bar the government adopted the provisions now being challenged to allow recovery of wages owed to employees. The government does not allow either the artificial entity or its director to avoid their obligations to employees.

Invalidity

[52]            As the Minister argued on the respondents' behalf, the Parliament of Canada has the power to make laws governing the working conditions of employees whose employers are subject to federal control. A provision that makes directors responsible for the debts of the artificial entity which they direct, although exceptional, in fact exists both in provincial legislation and in the federal statute authorizing the creation of artificial persons. Additionally, the legislature can intervene in situations it regards as unfair.

[53]            In this instance, the legislature chose to create a system of no-fault liability and to make an appeal conditional on deposit of the amount owed. The deposit of security is usual in certain types of litigation, such as injunctions or an extra-provincial application. In general the purpose of security is to protect the vulnerable party. There is nothing surprising in the government choosing to regard an employee as the vulnerable party.

Unconstitutionality

[54]            The applicant relied on section 7, arguing that there had been an infringement of her right to life, liberty and security of her person, contrary to the rules of fundamental justice.

[55]            The applicant did not explain how the rights guaranteed by section 7 had been infringed. Refusing to pay the security required by the Minister, so as to appeal from the decision, has only economic consequences: the applicant risks being ordered to pay her debts by execution, pursuant to section 251.15. The Supreme Court of Canada has many times repeated (Irwin Toy v. Attorney General of Quebec, [1989] 1 S.C.R. 927; Gosselin v. Quebec (Attorney General), [2002] 4 S.C.R. 429) that section 7 does not protect economic rights. Accordingly, it cannot be relied on when the penalty in question is financial in nature.

[56]            The courts have held that a right of appeal is not a right guaranteed by the Constitution. The Supreme Court of Canada (R. v. Meltzer, [1989] 1 S.C.R. 1764) and the Federal Court of Appeal (Huynh v. Canada, [1996] F.C.J. No. 494 (C.A.)) have held that an appeal is a creation of the law and that Parliament may choose whether to create it in a given system. In Huynh the Federal Court of Appeal noted that once Parliament is constitutionally able to choose whether to grant a right of appeal, it is just as capable of making that right subject to whatever conditions it chooses.                                

Inapplicability

[57]            The applicant further argued that the Code was inapplicable because it was contrary to the Canadian Bill of Rights. This protects the right to an impartial hearing, more expressly than the Charter, even where the civil obligations of one party are concerned. Can it be said that subsection 251.11(2) of the Code, by making an appeal subject to deposit of the amounts claimed, deprives "a person of the right to a fair hearing in accordance with the principles of fundamental justice for the determination of his rights and obligations"?

[58]            As we have already determined, an appeal is not a constitutional right. Consequently, applying the presumption that the legislature does not contradict itself, the "fair hearing" at issue here is not the appeal but the stage when the individual's rights or obligations are determined by the government. Impartiality, the fundamental aspect of natural justice, does not depend either on the appeal or the right to appeal. It applies at the time of the decision. As we saw earlier, there is nothing in the evidence leading the Court to believe that the applicant did not get an impartial review of the case at issue between herself and the respondents.

[59]            She was given an opportunity to present her evidence. She had an interview with the inspector and her hierarchical superior. The amounts were established in accordance with the evidence submitted and the applicable sections of the Act. There is nothing leading the Court to conclude that there was a lack of impartiality or that the applicant was deprived of her right to be heard. Consequently, I consider that the Code is applicable and is not contrary to the Canadian Bill of Rights.

CONCLUSION

[60]            For all these reasons, the application for judicial review cannot be allowed and sections 251.11 and 251.18 are valid, constitutional and applicable.

                                                                       ORDER

THE COURT ORDERS that:

1.         The application for judicial review is dismissed.

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.

                         FEDERAL COURT

Docket:    T-2124-01

BETWEEN:

                          HOURIA SENOUS

                                                                    Applicant

                                     - and -

                  BERNARD FONTAINE and

                  LAURENT DELBARRE and

                      BORIS DUBOILLE and

                      DARIO PERETTO and

     THE ATTORNEY GENERAL OF CANADA

                                                              Respondents

        REASONS FOR ORDER AND ORDER

                                                              FEDERAL COURT

                                                      SOLICITORS OF RECORD

DOCKET:                                                        T-2124-01

STYLE OF CAUSE:                                        Houria Senous v. Bernard Fontaine et al.

PLACE OF HEARING:                                  Montréal, Quebec

DATE OF HEARING:                                    November 3, 2003

REASONS [for order or judgment]:      Blanchard J.

DATE OF REASONS:                                    December 30, 2003

APPEARANCES:

Ronald Rodrigue                                                FOR THE APPLICANT

Raymond Piché                                                FOR THE RESPONDENTS

Liliane Bruneau

SOLICITORS OF RECORD:

Ronald Rodrigue                                                FOR THE APPLICANT

401 rue Laviolette, 2^e étage

St-Jérome, Québec     J7Y 2T2

Morris Rosenberg                                              FOR THE RESPONDENTS

Deputy Attorney General of Canada

Minister of Justice

200 ouest Boul. René-Lévesque

Montréal, Quebec     H2Z 1X4