Martin Service Station Ltd. v. Minister of National Revenue, [1977] 2 SCR 996

Supreme Court of Canada

Martin Service Station Ltd. v. Minister of National Revenue, [1977] 2 S.C.R. 996

Date: 1976-05-05

Martin Service Station Ltd. Appellant;

and

The Minister of National Revenue Respondent;

and

The Attorney General of Newfoundland Intervener.

1975: June 18 and 19; 1976: May 5.

Present: Laskin C.J. and Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.

ON APPEAL FROM THE FEDERAL COURT OF APPEAL

Constitutional law—Unemployment insurance—Insurable employment resulting from a contract of service—Regulations extending the scope of insurable employment—Unemployment Insurance Act, 1955 (Can.), c. 50, s. 26(1)(d)—Unemployment Insurance Act, 1971, 1970-71-72 (Can.), c. 48, s. 4(1)(c)—British North America Act, s. 91(2A).

Appellant owns motor vehicles that are used as taxis. Respondent, the Minister of National Revenue, considered the drivers of these vehicles to be subject to the Unemployment Insurance Act and assessed appellant for a total of $49,476.92 in premiums for these drivers. This amount was claimed in accordance with the Unemployment Insurance Regulations adopted pursuant to s. 26(1)(d) of the Unemployment Insurance Act of 1955 and s. 4(1)(c) of the Unemployment Insurance Act, 1971. Appellant contended that these provisions of the Acts, which authorize the Unemployment Insurance Commission to make Regulations to include in insurable employment self-employment or employment not under a contract of service, are ultra vires the Parliament of Canada. Heald J., acting as an Umpire under the Unemployment Insurance Act, 1971, referred the constitutional question to the Federal Court of Appeal pursuant to s. 28(4) of the Federal Court Act. Since the Federal Court of Appeal held that the said regulations were intra vires, appellant obtained leave from that Court to appeal to this Court.

Held: The appeal should be dismissed.

Even if one accepts the contention that the jurisdiction of Parliament under s. 91(2A) of the British North America Act must be qualified by an insurance aspect, it

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does not at all follow that self-employed persons can never incur any insurable risk of unemployment. Moreover, the impugned Regulations are limited in extent and are not contrary to the general intention of the Act, which continues to be directed at persons under a contract of service. However, in order to avoid allowing some persons to evade the Act by giving their contractual relationship a form other than that of a contract of service, the Unemployment Insurance Commission may make Regulations to include certain kinds of employment that do not result from a contract of service in insurable employment, where “the nature of the work performed… is similar to the nature of the work performed by persons employed in insurable employment”. Even leaving out of account any possible intention to evade the Acts, these persons, such as the taxi drivers in the case at bar, are exposed to the risk of being deprived of work whether they are self-employed or employed under a contract of service. This risk is insurable under a scheme of compulsory public insurance provided that scheme generally conforms to the nature of an insurance scheme, including protection against risk and a system of contributions.

It is true that the original Canadian legislation, whether enacted before or after the amendment of the Constitution, as well as contemporaneous British legislation on unemployment insurance, was strictly limited to the coverage of persons employed under a contract of service. Legislative history provides only a starting point, however, and is seldom conclusive in determining the nature of a legislative competence, which is essentially dynamic. Since the Regulations contested in the case at bar are true unemployment insurance legislation, their constitutional validity is not affected by the fact that they affect civil rights other than those which are governed by a contract of service.

R. v. Scheer Ltd., [1974] S.C.R. 1046, applied.

APPEAL from a judgment of the Federal Court of Appeal[1], which had declared certain Regulations enacted under the Unemployment Insurance Act to be valid. Appeal dismissed.

J.A. Robb, Q.C., and Peter R. O’Brien, for the appellant.

P.M. Olivier, Q.C., for the respondent.

W.G. Burke-Robertson, Q.C., for the intervenor.

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The judgment of the Court was delivered by

BEETZ J.—This is an appeal by leave of the Federal Court of Appeal from a judgment of the same which answered in the negative the following question referred to that Court pursuant to s. 28(4) of the Federal Court Act, (1970-71-72 (Can.), c. 1), by Mr. Justice Heald, acting as an Umpire under the Unemployment Insurance Act, 1971, (1970-71-72 (Can.), c. 48, ss. 92, 93):

“On the basis of the Agreed Statement of Facts filed herein, bearing date September 24, 1973, and bearing the signature of counsel for both parties, is section 26(1)(d) of the Unemployment Insurance Act 1955 and section 4(1)(c) of the Unemployment Insurance Act 1971, ultra vires the Parliament of Canada in that they authorize the Unemployment Insurance Commission to make Regulations to include in insurable employment, self employment or employment not under a contract of service?”.

In this Court, the Attorney General of Newfoundland was granted leave to intervene and, together with Respondent, supported the validity of the two impugned enactments. No other province sought leave to intervene.

The agreed statement of facts mentioned in the question referred to the Federal Court of Appeal reads as follows:

1. Appellant owns a certain number of motor vehicles in Montreal which are used for the purpose of carrying passengers for hire.

2. Pursuant to the provisions of the Unemployment Insurance Act, 1971, the Minister of National Revenue has assessed the Appellant for unemployment insurance premiums with respect to the drivers of its motor vehicles in the total sum of $49,476.92, including penalties for the years 1969, 1970, 1971 and 1972, the whole as appears from a copy of the notices of assessments for the said years attached hereto as exhibit 1.

3. The amounts assessed for the years 1969, 1970 and 1971 are claimed as amounts owing by virtue of Regulation 64B of the Unemployment Insurance Regulations approved by Order-in-Council P.C. 1966-610 dated April 4, 1966 as amended by Order‑in-Council P.C. 1968-1181 dated June 19, 1968 which reads in part as follows:

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“64B. (1) Except for employment that is excepted employment, the employment of every person who

a) is employed in driving any taxi, commercial bus, school bus or other vehicle that is used by a business or public authority for carrying passengers, and

b) is not the owner of the vehicle or the proprietor or operator of the business or public authority that uses the vehicles for carrying passengers,

shall be included in insurable employment notwithstanding that such employment may be self-employment or employment not under a contract of service.

(2) The operator or proprietor of a business or a public authority that uses a vehicle described in subsection (1) for carrying passengers shall, for all the purposes of the Act and these Regulations, be deemed to be the employer of every person whose employment is included in insurable employment pursuant to subsection (1).”

4. The said Regulation 64B was adopted under the authority of section 26(1)(d) of the Unemployment Insurance Act of 1955, as amended (Statutes of Canada, 1955, c. 50).

5. The assessment for the year 1972 is based on Regulation 53(e) of the Unemployment Insurance Regulations adopted on December 17th, 1971 (P.C. 1971-2795-SOR/DORS 657). It reads as follows:

“53. Employment in any of the following employments, unless it is excepted employment under subsection 3(2) of the Act or excepted from insurable employment by any other provision of these Regulations, is included in insurable employment:

e) employment of a person as a driver of any taxi, commercial bus, school bus or any other vehicle that is used by a business or public authority for carrying passengers, where that person is not the owner of the vehicle or the proprietor or operator of the business or public authority.”

6. The said Regulation 53 was adopted under the authority of section 4(1)(c) of the Unemployment Insurance Act, 1971.

7. It is the Appellant’s main submission that section 26(1)(d) of the Unemployment Insurance Act of 1955 and section 4(1)(c) of the 1971 Act are ultra vires the Parliament of Canada in that they authorize the Commission to make regulations to include in insurable

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employment, employment that is not under a contract of service, and that the assessments levied against it are for this reason null and void.

8. Subsidiarily, Appellant submits that even if the provisions of the Acts on which the assessments are based are intra vires, Regulations 64B and 53 are inapplicable to it because it is not in the business of carrying passenger within the meaning of the said Regulations but in the business of leasing motor vehicles for use as taxis.

9. The subsidiary argument of the Appellant raises issues of fact which the parties would like to see left for determination until the main constitutional issue has been finally resolved.

The constitutional issue is a narrow one; the learned Umpire gave it the form of a theoretical question relating to two specific enactments; the answer to this question must not only be confined to those enactments: it must also be given for the sole purpose of solving the practical issue which is before the Umpire.

The system of unemployment insurance set up under the Unemployment Insurance Act, 1955, now repealed, and the Unemployment Insurance Act, 1971, contemplates the establishment of a fund or of an account fed in part by premiums levied upon employers and employees and in part by money supplied by Parliament. It benefits persons engaged in “insurable employment”, such employment being, as a rule, employment under a contract of service. However, s. 26(1)(d) of the Act of 1955 and s. 4(1)(c) of the Act of 1971, the two enactments the constitutionality of which is questioned by appellant, enable the Unemployment Insurance Commission to extend the scope of “insurable employment”:

26. (1) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment,

(d) any employment if it appears to the Commission that the nature of the work performed by persons employed in that employment is similar to the nature of the work performed by persons employed in insurable employment. Unemployment Insurance Act, 1955, c. 50.

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4. (1) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment,

…

(c) any employment that is not employment under a contract of service if it appears to the Commission that the terms and conditions of service of and the nature of the work performed by persons employed in that employment are similar to the terms and conditions of service of and the nature of the work performed by persons employed under a contract of service. Unemployment Insurance Act, 1971, c. 48.

This Court had to consider s. 26(1)(d) of the Unemployment Insurance Act, 1955, in The Queen v. Scheer Ltd.[2], where it was held that Regulation 64B was authorized by s. 26(1)(d). The constitutional validity of the latter enactment itself was not however in question. Spence J., who delivered the unanimous judgment of the Court summarized the history of the legislation and regulations up to that date. I cannot do better than to quote part of his summary, at p. 1048:

The Parliament of Canada by Statutes of Canada 1935, c. 38, enacted the Employment and Social Insurance Act. The ultra or intra vires character of that statute was referred to the Supreme Court of Canada by Order in Council made on the 5th of November 1935, and this Court, by a majority judgment upon such reference, reported in [1936] S.C.R. 427, held that the statute was ultra vires as being in pith and substance a statute in relation to the civil rights of employers and employed in each province. The Reference was appealed to the Privy Council and the judgment of the Supreme Court of Canada was affirmed in a judgment reported in [1937] A.C. 355. Lord Atkin giving judgment for Their Lordships said at p. 365:

“There can be no doubt that, prima facie, provisions as to insurance of this kind, especially where they affect the contract of employment, fall within the class of property and civil rights in the Province, and would be within the exclusive competence of the Provincial Legislature”.

He concluded his reasons with the statement:

“In the present case, Their Lordships agree with the majority of the Supreme Court in holding that in pith and substance this Act is an insurance Act affecting the

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civil rights of employers and employed in each Province, and as such is invalid”.

Thereafter, in 1940, the British North America Act was amended by adding in s. 91 a new heading designated as Number 2A simply in the words “Unemployment Insurance”. Following that, the statute previously declared invalid was re-enacted…

It would appear… that up till 1946 the statute was concerned only with those who were bound as employers or employees under a contract of service. However, in the year 1946, by 10 Geo. VI, c. 68, Parliament added s. 14A which I quote hereafter:

“14A. The Commission may, by special order, declare that the terms and conditions of service of, and the nature of the work performed by a person or group or class of persons who are not employed under a contract of service are so similar to the terms and conditions of service of, and the nature of the work performed by, a group or class of persons who are employed under a contract of service as to result in anomalies or injustices in the operation of the Act, and there upon the person or group or class of persons in respect of whom the declaration is made shall be deemed to be employed under a contract of service for the purposes of this Act.”

It will be seen that by this amendment for the first time Parliament enlarged the scope of the statute so that the Commission could, under the circumstances set out in s. 14A, include in the coverage of the statute some persons who were not employed under a contract of service.

The old act was replaced by a new statute in 1955, Statutes of Canada, 1955, c. 50, s. 26(1)(d) of which is quoted above.

In 1956, the Unemployment Insurance Act, 1955 was amended to enable the Unemployment Insurance Commission to include employment in fishing as insurable employment even though fishermen were not the employees of any other persons. (Statutes of Canada, 1956, c. 50.)

The Unemployment Insurance Act, 1955 was included in the Revised Statutes of Canada 1970, as c.U. 2 now replaced by the Unemployment Insurance Act, 1971, s. 4(1)(c) of which is also quoted above.

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Appellant contends that s. 26(1)(d) of the Act of 1955 and s. 4(1)(c) of the Act of 1971 go beyond the power of Parliament to make laws relating to Unemployment Insurance in that they authorize the Unemployment Insurance Commission to include employment not under a contract of service in insurable employment. The main submissions advanced in support of that proposition, as I understand them, are as follows: the jurisdiction of Parliament under s. 91(2A) of the Constitution is limited by the insurance aspect of that jurisdiction; insurance necessarily involves an element of risk, that is the possibility of an event the occurrence or non-occurrence of which is beyond the control of the person insured; there is no risk of unemployment in the case of self-employed persons who alone decide whether they will continue to employ themselves; assuming there is a risk of unemployment in their case, it is not an insurable risk as they have such control over their own activity that it is impossible to determine when they are employed or unemployed with the precision required for the operation of a plan which undertakes to make payments in times of unemployment; the only way to determine the jurisdiction of Parliament with any degree of accuracy is to confine it to insurance against the unemployment of employees under a contract of service; to hold otherwise would empower Parliament to move into the fields of unemployment assistance, minimum wage maintenance and other areas of social security reserved to the provinces; appellant’s position is reinforced, as it contends, by the fact that the Employment and Social Insurance Act, 1935 (Can.), c. 38, declared ultra vires by this Court and by the Judicial Committee, and re-enacted under a different title after the 1940 constitutional amendment, covered only employees under a contract of service; similarly, a contemporaneous British Statute such as the Act to consolidate the Unemployment Insurance Acts, 1920 to 1934, (1935) 25 Geo. V, c. 8 clearly distinguished between unemployment insurance, which was limited to covering employees under a contract of service, and unemployment assistance; the wording of s. 91(2A) of the British North America Act, 1867 is indicative of the intent to limit the jurisdiction of

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Parliament to the first category.

Even if one accepts, as I am prepared to do, appellant’s contention to the effect that the jurisdiction of Parliament under s. 91(2A) of the Constitution, considered apart from other powers of Parliament, must be qualified by an insurance aspect, it does not at all follow, in my view, that self-employed persons can never incur any insurable risk of unemployment or that in enacting s. 26(1)(d) of the Act of 1955 and s. 4(1)(c) of the Act of 1971, Parliament has deviated from the insurance approach.

In Scheer Ltd., (at p. 1054), Spence J., had already noted that

“the power to extend granted by s. 26(1)(d), is a very limited power. It only extends to any employment if it appears to the Commission that the nature of the work performed by persons in that employment is similar to the nature of the work performed by persons engaged in insurable employment”.

The limits of s. 4(1)(c) of the Act of 1971 would appear to be even more strict as similarity in the terms and conditions of service are also required. In this respect, s. 4(1)(c) resembles s. 14A added to the old act in 1946 by 10 Geo. VI, c. 68. It has not been argued that, for the purpose of this case, anything turns on the difference in wording between s. 26(1)(d) of the Act of 1955 and s. 4(1)(c) of the Act of 1971. But the limited extent of both enactments expresses the will of Parliament to continue the scheme of the Acts which remains generally directed at persons under a contract of service. In order to avoid paying contributions under the Acts, some persons might however elect to give to their contractual relationships a form other than that of a contract of service; the impugned enactments, in so far as they enable the Unemployment Insurance Commission to reach such persons, pertain to the category of enforcement provisions and are clearly intra vires. But, even leaving out of account any possible intention to evade the Acts, if conditions become such that those who have a contract of employment to per-

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form a given type of work find themselves unemployed, it is most likely that those who perform the same type of work, although they be self-employed, will also find themselves out of work because of the same conditions. It is mainly to protect the latter against this risk of unavailability of work and involuntary idleness that the Acts are extended. Whether they be self-employed or employed under a contract of service, taxi drivers and bus drivers for instance are exposed to the risk of being deprived of work. This risk is, in my opinion, an insurable one, at least under a scheme of compulsory public insurance which was never expected to function on a strict actuarial basis provided it generally conformed to the nature of an insurance scheme, including protection against risk and a system of contributions.

A cardinal principle of both the Act of 1955 (ss. 59 and 60) and the Act of 1971 (ss. 40 and 41) is that the loss of employment which is insured against be involuntary; claimants are disqualified if they lose their employment by reason of their own misconduct, if they voluntarily leave their employment without cause or if they neglect to avail themselves of an opportunity for suitable employment. The two impugned enactments, as I read them, are subject to that principle and, accordingly, persons whose employment is included in insurable employment although they are not employed under a contract of service are not entitled to benefits if their idleness is voluntary or, in other words, if their unemployment is not the result of the risk insured against. Penalties can also be imposed upon those who obtain benefits without being entitled to them. In my view, the complexities possibly involved in applying the law to those whose employment is not under a contract of service do not of themselves make the law ultra vires.

That the scheme contemplated by the two Acts is of a contributory nature has not been denied or discussed in the case at bar where the very object

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of the litigation is the levying of contributions allegedly owed by Appellant. It cannot therefore be argued, for the purpose of this case at least, that Parliament purported to enter the field of free unemployment assistance. The question might conceivably arise as to whether there is a point at which the scheme would cease to be an insurance scheme because the unemployment insurance fund or the unemployment insurance account are no longer substantially fed by contributions. This question has not been raised.

It is quite true that the old Canadian Act, the re-enactment of which was made possible after the amendment of the Constitution, together with contemporaneous British legislation relating to unemployment insurance, were strictly limited to the coverage of persons employed under a contract of service. But this simply happened to represent the legislative policy of the time, and it was perhaps easier to administer. Legislative history provides a starting point which may prove helpful in ascertaining the nature of a given legislative competence; but, as is shown by the history of legislation relating to bankruptcy and insolvency and by the interpretation of the jurisdiction of Parliament in this matter, it is seldom conclusive as to the scope of that competence for legislative competence is essentially dynamic.

It is true also that the Judicial Committee found the Unemployment and Social Insurance Act, 1935 ultra vires of Parliament because it interfered with the contract of service as well as with insurance. That happened to be the case under that legislation. However as was pointed out by Spence J., in Scheer Ltd., (at p. 1052):

I find nothing… in the judgment of Lord Atkin in the Judicial Committee which would confine his judgment in reference to the ultra vires character of the statute to one which dealt only with master and servant relationship and, on the other hand, I think that a contract between a taxi cab owner and a person who operated that taxi cab under a contract other than a contract of service would be equally a contract dealing with the property and civil rights of the parties and interference with it by virtue of federal legislation would be equally ultra vires.

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If one comes to the conclusion, as I do, that s. 26(1)(d) of the Act of 1955 and s. 4(1)(c) of the Act of 1971, are true unemployment insurance legislation, their constitutional validity is not affected by the fact that they affect civil rights other than those which are governed by a contract of service.

I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Stikeman, Elliott, Tamaki, Mercier & Robb, Montreal.

Solicitor for the respondent: D.S. Thorson, Ottawa.

Solicitors for the intervenor: Burke-Robertson, Chadwick & Ritchie, Ottawa.