Date: 20010604
Docket: A-27-00
Neutral citation: 2001 FCA 181
CORAM: RICHARD C.J.
ROTHSTEIN J.A.
SEXTON J.A.
BETWEEN:
COLIN MURPHY
MARION MURPHY
MYRTLE MURPHY SMITH
RAYLYNN MURPHY
RONALD SMITH
WILSON MURPHY JR.
Applicants
- and -
MINISTER OF NATIONAL REVENUE
Respondent
HEARD at St. John's, Newfoundland, on Monday, May 28, 2001
JUDGMENT delivered at Ottawa, Ontario, on Monday, June 4, 2001
REASONS FOR JUDGMENT DELIVERED BY: ROTHSTEIN J.A.
CONCURRED IN BY: RICHARD C.J.
SEXTON J.A.
Date: 20010604
Docket: A-27-00
Neutral citation: 2001 FCA 181
CORAM: RICHARD C.J.
ROTHSTEIN J.A.
SEXTON J.A.
BETWEEN:
COLIN MURPHY
MARION MURPHY
MYRTLE MURPHY SMITH
RAYLYNN MURPHY
RONALD SMITH
WILSON MURPHY JR.
Applicants
- and -
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR JUDGMENT
ROTHSTEIN J.A.
[1] This is a judicial review of a decision of Deputy Judge Somers of the Tax Court of Canada, in which he dismissed an appeal from decisions of the Minister of National Revenue which determined that the applicants were excepted from insurable employment under the Unemployment Insurance Act, R.S.C. 1985, c. U-1, as amended as the applicants and the employer were not dealing with each other at arm's length. The relevant years are 1991 and 1992.
[2] The parties agree, and subsection 61(3) of the Unemployment Insurance Act provides, that a decision as to whether a person is employed in insurable employment is made by the Minister of National Revenue.
[3] In this case, decisions were initially made that the applicants were engaged in insurable employment in 1991 and 1992 with Murphys Enterprises Ltd. On July 23, 1993, it was decided that the 1991 and 1992 employment was not insurable. The reasons given were that the applicants were not employed at arm's length as required by paragraph 3(2)(c) of the Unemployment Insurance Act. The applicants applied under subsection 61(3) of the Unemployment Insurance Act for a determination of this question by the Minister of National Revenue. On December 16, 1993, they were advised that it had been decided that their employment was not insurable as no valid contract of service existed under an employer/employee relationship, that they were not employed at arm's length, and that it was not reasonable to assume that they would have entered into a substantially similar arrangement had they not been related to their employer.
[4] It was the December 16, 1993 decision that the applicants unsuccessfully appealed to the Tax Court.
[5] The applicants first say that there was no jurisdiction in the Minister, once having decided they were employed in insurable employment, subsequently making a decision they were not. Under subsection 61(3), where a question arises in relation to a claim for benefit under the Unemployment Insurance Act, as to whether a person is or was employed in insurable employment, an application to the Minister for determination of the question may be made by the Commission or by the employer or employee. Under subsection 3(1), insurable employment is employment that is not excepted employment. Under subsection 3(2), excepted employment is employment where the employer and employee are not dealing with each other at arm's length provided that
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(c) [...]
(i) the question of whether persons are not dealing with each other at arm's length shall be determined in accordance with the provisions of the Income Tax Act, and
(ii) where the employer is, within the meaning of that Act, related to the employee, they shall be deemed to deal with each other at arm's length if the Minister of National Revenue is satisfied that, having regard to all 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;
[...]
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c) [...]
(i) la question de savoir si des personnes ont entre elles un lien de dépendance étant déterminée en conformité avec la Loi de l'impôt sur le revenu,
(ii) l'employeur et l'employé, lorsqu'ils sont des personnes liées entre elles, au sens de cette loi, étant réputés ne pas avoir de lien de dépendance si le ministre du Revenu national est convaincu qu'il est raisonnable de conclure, compte tenu de toutes les circonstances, notamment la rétribution versée, les modalités d'emploi ainsi que la durée, la nature et l'importance du travail accompli, qu'ils auraient conclu entre eux un contrat de travail à peu près semblable s'ils n'avaient pas eu un lien de dépendance;
[...]
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[6] It is the Minister of National Revenue that is to decide whether employers and employees not dealing with each other at arm's length, are, nonetheless, to be deemed to be dealing with each other at arm's length and therefore the employment considered insurable. Nothing in subsection 3(2) or subsection 61(3) indicates that the Minister may not reverse a decision upon application by the Commission or an employee or employer. Even counsel for the applicants concedes that if new facts come to the attention of the Minister, he may make a decision as to insurable employment different from a previous decision. That appears to be the case here. While the Minister, in the decision of December 16, 1993, does not provide extensive reasons, the clear inference is that he obtained information which he did not originally have that caused him to conclude that the applicants were not engaged in insurable employment.
[7] A second argument made by the applicants is that the Minister has an obligation to call evidence in support of his assumptions in his reply to a notice of appeal. The Minister has no such obligation. The procedure in contesting an insurability ruling by the Minister is the same as contesting an assessment by the Minister under the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1. The Minister may assume facts in his pleading in the Tax Court and they will be accepted unless questioned by the appellant. The onus is on the appellant to refute the assumptions advanced by the Minister in his or her pleading. There is no obligation on the Minister to prove his assumptions unless and until they are questioned by the appellant in evidence.
[8] Third, the applicants allege that the Deputy Tax Court Judge erred in concluding that they did not refute the Minister's assumptions. However, the Deputy Judge appears to have extensively canvassed the evidence. He made numerous detailed credibility findings against the applicants, found some of their evidence implausible, and did not accept the explanations given by them to justify disparate salaries between arm's length and non-arm's length employees. He was entitled to make these findings on the evidence before him and I see no palpable or overriding error that would justify this Court interfering with his findings.
[9] The judicial review should be dismissed with costs.
"Marshall Rothstein"
J.A.
"I agree
J. Richard C.J."
"I agree
J. Edgar Sexton J.A."
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