Date: 20030529
Docket: A-175-02
Citation: 2003 FCA 242
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
NATIONAL BANK OF CANADA
Respondent
Hearing held at Montréal, Quebec, on May 29, 2003.
Judgment delivered from the bench at Montréal, Quebec, on May 29, 2003.
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date: 20030529
Docket: A-175-02
Citation: 2003 FCA 242
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
NATIONAL BANK OF CANADA
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec, on May 29, 2003)
LÉTOURNEAU J.A.
[1] This is an application for judicial review by the Attorney General of Canada of a decision of the Tax Court of Canada dated February 21, 2002. In that decision, the Tax Court of Canada held that the remuneration received by Ms. Messier-Lafleur, an employee of the National Bank of Canada, did not constitute insurable earnings within the meaning of subsections 2(1) of the Employment Insurance Act, S.C. 1996, c. 23 (Act) and the Insurable Earnings and Collection of Premiums Regulations, SOR/97-33 (Regulations).
[2] This remuneration totalling $16,677 was paid to Ms. Messier-Lafleur under a short- and long-term disability insurance plan from November 28, 1997, to November 28, 1998. The benefits were paid weekly by the Manufacturers Life Insurance Company (Financière Manuvie) to the respondent.
[3] In our view, the decision of this Court in Université Laval v. Canada (Minister of National Revenue), 2002 FCA 171, dated May 3, 2002, is applicable in this case, and accordingly the application for judicial review must be allowed. In that case, this Court enunciated the following principles:
(1) The expression "in respect of" such employment, which qualifies earnings paid by the employer and which is found in subsection 2(1) of the Regulations is particularly broad;
(2) There can be insurable earnings within the meaning of the Regulations even where the employee has not performed any services;
(3) Benefits paid by an employer under a wage loss indemnity plan constitute insurable earnings within the meaning of the Act and the Regulations, while benefits paid by a third party insurer are excluded from the definition;
(4) The French word "verser", which was translated in English by "pay" ("payer") is more general than the French word "payer" to which the Supreme Court of Canada gave a broad meaning in Canadian Pacific Limited v. A.G. Canada, [1986] 1 S.C.R. 678, at page 687; and
(5) Wage loss benefits are paid by an employer under a contract of employment where the following indicia exist, which are not necessarily exhaustive: the wage loss insurance plan is entirely paid for by the employer, the employment relationship continues to exist during the disability, the benefits payable are increased if there is a salary increase during the disability period, the benefits are paid by the employer during normal pay periods for the first 52 weeks of disability and thereafter by the insurer and lastly, the employer determines eligibility for the benefits and signs the cheques.
[4] It seems clear to us from our review of that judgment that it is not necessary for all these indicia to exist in order to conclude that the benefits are paid by the employer under a contract of employment.
[5] In this case, a number of the above-noted indicia are present. Like the contract between Université Laval and Assurance-Vie Desjardins, the contract between the respondent and Financière Manuvie is an ASO contract, i.e. for administrative services only, and not an insurance contract in the normal sense of the term. In other words, Financière Manuvie did not act as an insurer, but merely as the administrator of the respondent's group insurance policy. Financière Manuvie only represents the respondent, which is in no way relieved of its obligations as the employer: see applicant's record, page 42, the definition of an ASO contract (Administrative Services Only).
[6] In addition, the group insurance plan is entirely funded by the respondent and it bears the costs and financial risks of the plan. Legal proceedings must be brought against the employer, not against Financière Manuvie. Lastly, the respondent and Ms. Messier-Lafleur were bound and governed by an employment contract during the period of disability.
[7] Despite all these indicia, the respondent nonetheless relies on two points to distinguish the Université Laval decision from this case: it submits that, unlike the situation in Université Laval, Financière Manuvie and not the respondent determines eligibility for benefits, and Financière Manuvie pays the wage loss benefits to the employee. The respondent therefore concludes that the benefits were not paid by the employer, but by the insurer.
[8] We are unable to agree with the respondent's submission that the benefits are paid by the insurer because, as already noted, Financière Manuvie did not act as the insurer in this case, but as the administrator of the employer's plan. Moreover, the fact that the cheques were issued by Financière Manuvie in its role as administrator of the respondent's group insurance plan does not in any way change the financial reality: the amounts representing the benefits paid to the claimant were paid by the employer, in this case the respondent. The payments were accordingly paid by the respondent through its administrator. In addition, the overview of the plan's coverage provides that "[TRANSLATION] the weekly benefit payment is taxable because the cost of coverage is borne, in whole or in part, by the employer": see applicant's record, page 52.
[9] The other point of distinction is that a person's eligibility for benefits under the plan is not determined by the respondent.
[10] In making this submission, the respondent relies on the Employers' Directives of the Minister of Revenue. These Directives are found in an annual employers' guide about payroll deductions: Employers' Guide to Payroll Deductions (97-98 and 98-99) (Guide). This Guide was not submitted to us, but it appears that the Department considers as necessary for the wage loss benefits to be subject to employment insurance premiums that the eligibility for benefits be determined by the employer.
[11] Obviously, this Court is not bound by this Guide in interpreting the legal principle and consequently the definition of the concept of insurable earnings. That being said, with all due respect to the respondent, we do not see an inconsistency between the facts of this case and the statement in the Guide concerning the determination by the employer of eligibility for benefits. Not only is Financière Manuvie not an insurer, it is also not a third party, and certainly not a third party insurer. In fact, it acts on behalf of and in the name of the employer who is bound by its decisions. As indicated in several places in the contract, it is the agent of the employer, and accordingly the decision of Financière Manuvie as to eligibility for benefits is, in fact and in law, the decision of the employer.
[12] The Tax Court of Canada did not have the benefit of this Court's decision in Université Laval when making its decision, and it erred with respect to the definition of insurable employment set out in the Act and the Regulations and with respect to the legal status of Financière Manuvie. In so doing, it made an error in law that warrants our intervention. If it had applied correct legal principles to the facts in dispute, the only conclusion it could have reached was that the benefits received by Ms. Messier-Lafleur were benefits paid by the respondent "in respect of such employment", and were therefore insurable earnings.
[13] For these reasons, the application for judicial review will be allowed with costs, the decision of the Tax Court of Canada dated February 21, 2002, will be set aside and the matter will be returned to the Chief Judge of the Tax Court of Canada or to his designate, for a new determination on the basis that the appeal by the respondent must be dismissed with costs.
"Gilles Létourneau"
J.A.
Certified true translation
Mary Jo Egan, LLB
FEDERAL COURT OF CANADA
APPEAL DIVISION
SOLICITORS OF RECORD
DOCKET: A-175-02
STYLE OF CAUSE: ATTORNEY GENERAL OF CANADA and
NATIONAL BANK OF CANADA
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: May 29, 2003
REASONS FOR JUDGMENT OF THE COURT:
(DESJARDINS, LÉTOURNEAU, NOËL JJ.A.)
DELIVERED FROM THE BENCH BY: LÉTOURNEAU J.A.
DATED: May 29, 2003
APPEARANCES:
Anne-Marie Boutin FOR THE APPLICANT
Marie-Hélène Jetté FOR THE RESPONDENT
SOLICITORS OF RECORD:
Morris Rosenberg FOR THE APPLICANT
Deputy Attorney General of Canada
Montréal, Quebec
Ogilvy Renault FOR THE RESPONDENT
Montréal, Quebec
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