Federal Court of Appeal Decisions

     A-96-96

CORAM:      HUGESSEN J.A.

     DÉCARY J.A.

     ROBERTSON J.A.

B E T W E E N :

     THE ATTORNEY GENERAL OF CANADA

     Applicant

     - and -

     JOLYN SPORT INC.

     Respondent

     Heard at Ottawa, Ontario, Thursday, April 24, 1997.

     Judgment rendered from the Bench, April 24, 1997.

REASONS FOR JUDGMENT OF THE COURT

DELIVERED BY:      HUGESSEN J.A.

     A-97-96

CORAM:      HUGESSEN J.A.

     DÉCARY J.A.

     ROBERTSON J.A.

B E T W E E N :

     THE ATTORNEY GENERAL OF CANADA

     Applicant

     - and -

     CAROLE HÉBERT

     Respondent

     Heard at Ottawa, Ontario, Thursday, April 24, 1997.

     Judgment rendered from the Bench, April 24, 1997.

REASONS FOR JUDGMENT OF THE COURT

DELIVERED BY:      HUGESSEN J.A.

     A-96-96

CORAM:      HUGESSEN J.A.

     DÉCARY J.A.

     ROBERTSON J.A.

B E T W E E N :

     THE ATTORNEY GENERAL OF CANADA

     Applicant

     - and -

     JOLYN SPORT INC.

     Respondent

     A-97-96

     THE ATTORNEY GENERAL OF CANADA

     Applicant

     - and -

     CAROLE HÉBERT

     Respondent

     REASONS FOR JUDGMENT OF THE COURT

     (Delivered from the Bench at Ottawa, Ontario

     Thursday, April 24, 1997)

HUGESSEN J.A.

     The only issue raised by the Attorney General on these applications is an alleged failure by the Tax Court judge to follow the proper procedure for appeals from ministerial determinations made pursuant to subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act¹. Paragraph 3(2)(c) reads:

3. ... (2) Excepted employment is ... (c) subject to paragraph (d), employment where the employer and employee are not dealing with each other at arm's length and, for the purposes of this paragraph,      (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 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;

3. ... (2) Les emplois exclus sont les suivants: ... c) sous réserve de l'alinéa d), tout emploi lorsque l'employeur et l'employé ont entre eux un lien de dépendance, pour l'application du présent alinéa: (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;

     The applicant submits that this Court's decision in Tignish Auto Parts Inc. v. Minister of National Revenue², as confirmed by an obiter dictum in Ferme Émile Richard et Fils Inc. c. Le Ministère du revenu national et al³, requires the Tax Court to undertake a two stage inquiry, first into the legality of the Minister's decision, and subsequently, if grounds for interference by the Court are established, into whether the decision was wrong. To this point the Attorney General has it right; he goes on, however, to submit that in the first stage the Tax Court is bound by the Minister's findings of fact but that in the second it is not.

     This latter submission, in our view, misunderstands what was decided in Tignish. In that case, Desjardins J.A. speaking for the Court said:

Subsection 71(1) of the Act provides that the Tax Court has authority to decide questions of fact and law. The applicant, who is the party appealing the determination of the Minister, has the burden of proving its case and is entitled to bring new evidence to contradict the facts relied on by the Minister. The respondent submits, however, that since the present determination is a discretionary one, the jurisdiction of the Tax Court is strictly circumscribed. The Minister is the only one who can satisfy himself, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions and importance of the work performed, that the applicant and its employee are to be deemed to deal with each other at arm's length. Under the authority of Minister of National Revenue v. Wrights' Canadian Ropes Ltd., contends the respondent, unless the Minister has not had regard to all the circumstances of the employment (as required by subparagraph 3(2)(c)(ii) of the Act), has considered irrelevant factors, or has acted in contravention of some principle of law, the Court may not interfere. Moreover, the Court is entitled to examine the facts which are shown by evidence to have been before the Minister when he reached his conclusion so as to determine if these facts are proven. But if there is sufficient material to support the Minister's conclusion, the Court is not at liberty to overrule it merely because it would have come to a different conclusion. If, however, those facts are, in the opinion of the Court, insufficient in law to support the conclusion arrived at by the Minister, his determination cannot stand and the Court is justified in intervening.

In my view, the respondent's position is correct in law ...

[At page 77]

[Emphasis added]

     The underlined words make it clear in our view that the Tax Court is not bound by the Minister's findings of fact. That is also a necessary inference from the text of section 70 and subsection 71(1):

70.(1) The Commission or a person affected by a determination by, or a decision on an appeal to, the Minister under section 61 may, within ninety days after the determination or decision is communicated to him, or within such longer time as the Tax court of Canada on application made to it within those ninety days may allow, appeal from the determination or decision to that Court in the manner prescribed. (2) On an appeal under this section, the Tax Court of Canada may reverse, affirm or vary the determination, may vacate, confirm or vary the assessment or may refer the matter back to the Minister for reconsideration and reassessment, and shall thereupon in writing notify the parties to the appeal of its decision and the reasons therefor. 71. (1) The Minister and the Tax Court of Canada have authority to decide any question of fact or law necessary to be decided in determining any question or reconsidering any assessment required to be determined or reconsidered under section 61 to 70 and to decide whether a person may be or is affected thereby, and, except as provided in this Act, the decision of the Minister, or the decision of the Tax Court of Canada, as the case may be, is final and binding for all purposes of this Act.

70. (1) La Commission ou une personne que concerne le règlement d'une question par le ministre ou une décision sur appel au ministre, en vertu de l'article 61, peut, dans les quatre-vingt-dix jours de la communication du règlement ou de la décision ou dans le délai supplémentaire que peut accorder la Cour canadienne de l'impôt sur demande à elle présentée dans ces quatre-vingt-dix jours, interjeter appel devant la Cour canadienne de l'impôt de la manière prescrite. (2) Sur appel interjeté en vertu du présent article, la Cour canadienne de l'impôt peut infirmer, confirmer ou modifier le règlement de la question, peut annuler, confirmer ou modifier l'évaluation ou peut renvoyer l'affaire au ministre pour qu'il l'étudie de nouveau et fasse une nouvelle évaluation; dès lors, elle est tenue de notifier par écrit sa décision et ses motifs aux parties à l'appel. 71. (1) Le ministre et la Cour canadienne de l'impôt ont le pouvoir de décider toute question de fait ou de droit qu'il est nécessaire de décider pour régler une question ou reconsidérer une évaluation qui doit être réglée ou reconsidérée en vertu des articles 61 ou 70, ainsi que de décider si une personne est ou peut être concernée et, sauf disposition contraire de la présente loi, la décision du ministre ou de la Cour canadienne de l'impôt, selon le cas, est définitive et obligatoire à toutes les fins de la présente loi.

     In every appeal under section 70 the Minister's findings of fact, or "assumptions", will be set out in detail in the reply to the Notice of Appeal. If the Tax Court judge, who, unlike the Minister, is in a privileged position to assess the credibility of the witnesses she has seen and heard, comes to the conclusion that some or all of those assumptions of fact were wrong, she will then be required to determine whether the Minister could legally have concluded as he did on the facts that have been proven. That is clearly what happened here and we are quite unable to say that either the judge's findings of fact or the conclusion that the Minister's determination was not supportable, were wrong.

     The applications will be dismissed.

     "James K. Hugessen"

     J.A.

     FEDERAL COURT OF APPEAL

     A-96-96

B E T W E E N :

     THE ATTORNEY GENERAL OF CANADA

     Applicant

     - and -

     JOLYN SPORT INC.

     Respondent

     REASONS FOR JUDGMENT OF THE COURT

     FEDERAL COURT OF APPEAL

     A-97-96

B E T W E E N :

     THE ATTORNEY GENERAL OF CANADA

     Applicant

     - and -

     CAROLE HÉBERT

     Respondent

     REASONS FOR JUDGMENT OF THE COURT

__________________

¹      R.S.C. 1985, c. U-1

²      (1994), 185 N.R. 72 (C.A.F.)

³      (1995), 178 N.R. 361 (C.A.F.)