Date: 20000310
Docket: A-722-97
OTTAWA, Ontario, Friday, March 10, 2000.
| CORAM: MARCEAU J.A. |
DESJARDINS J.A.
DÉCARY J.A.
BETWEEN:
LYNE PÉRUSSE,
Applicant,
- and -
MINISTER OF NATIONAL REVENUE,
Respondent.
JUDGMENT
The application is allowed, the impugned decision is quashed and the matter is referred back to the Tax Court of Canada to be again decided by another judge and on the basis of a re-hearing.
The applicant shall be entitled to her costs.
| Louis Marceau J.A. |
Certified true translation
Martine Brunet, LL. B.
Date: 20000310
Docket: A-722-97
| CORAM: MARCEAU J.A. |
DESJARDINS J.A.
DÉCARY J.A.
BETWEEN:
LYNE PÉRUSSE,
Applicant,
- and -
MINISTER OF NATIONAL REVENUE,
Respondent.
Hearing held at Québec, Quebec on Thursday, January 20, 2000.
Judgment rendered at Ottawa, Ontario on Friday, March 10, 2000.
REASONS FOR JUDGMENT BY: MARCEAU J.A.
CONCURRING REASONS BY: DÉCARY J.A.
DISSENTING REASONS BY: DESJARDINS J.A.
Date: 20000310
Docket: A-722-97
| CORAM: MARCEAU J.A. |
DESJARDINS J.A.
DÉCARY J.A.
BETWEEN:
LYNE PÉRUSSE,
Applicant,
- and -
MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
MARCEAU J.A.
[1] This application for judicial review is from a decision by a judge of the Tax Court of Canada made pursuant to the provisions of the Unemployment Insurance Act as it stood before being replaced by the Employment Insurance Act in 1996. The impugned decision was to dismiss the appeal brought by the claimant (here the applicant) against two determinations by the Minister of National Revenue, according to which the employment held by her in the law firm of her de facto spouse for five periods of a number of weeks in 1992, 1993, 1994, 1995 and 1996 was held not to be insurable. These determinations by the Minister were made pursuant to the authority conferred on him by s. 61(3)(a) of the Act and based on s. 3(2)(c); reading the latter indicates at once what is at issue:
| 3. (2) Excepted employment is . . .
|
3. (2) Les emplois exclus sont les suivants: . . .
|
[2] The applicant had argued in the Tax Court of Canada, first, that the determinations could not validly be based on the exclusionary provisions contained in s. 3(2) of the Act since these provisions were unconstitutional; and then, that in any case the determinations were not consistent with the facts. The judge refused to rule summarily on the constitutional argument on the ground that notice to the Attorneys General of Canada and the provinces, required by the rules in cases of constitutional challenges, had not been given, although he thought it proper to express his opinion on the argument's non-validity nevertheless; he then undertook to examine at length the argument that there was no basis for the determinations and dismissed it.
[3] The applicant based her application for review of the decision rendered against her on the same grounds, except that she took care to make her constitutional challenge valid and the Attorney General of Canada intervened to oppose her arguments. The Court must therefore rule on this first legal point before examining the second argument based on analysis of the facts, if necessary.
The constitutional challenge
[4] This is not the first time that s. 3(2)(c) of the Act has been the subject of a challenge based on s. 15 of the Canadian Charter of Rights and Freedoms on the ground that it creates inequality based on sex or civil or marital status. Already in 1994 Judge Archambault, in Yvette Thivierge v. Minister of National Revenue,1 concluded after lengthy reasons that it was not possible to speak of discrimination based on sex or civil status, and his decision has subsequently been followed several times, in particular by the trial judge here, and was used by the Attorney General as an argument in his submission. This Court has itself recently had to rule on the point in Murphy's Enterprises Ltd. et al. v. Minister of National Revenue,2 and it dismissed the argument of invalidity. However, it so happens that, and I say so with respect, Judge Archambault's reasoning does not seem to me to be fully satisfactory and in the judgment in Murphy's this Court gave no reason in support of its conclusion to dismiss. Also, even if I agreed fully with the opinion expressed that the legislative provisions in question were constitutional, I feel it is better to try and explain my reasoning.3
* * *
[5] When in 1999 Parliament decided to moderate the fundamental and "irremediable" rule that excluded from insurable employment any employment of a person by his or her spouse (the former s. 3(2)(c)), it chose to do so by altering its legislative technique to make the fundamental exclusion remediable. This required the adoption of rules which were difficult to draft, difficulties which the transition from one language to another did not reduce. First, a new technique was chosen by laying down the basic rule that any employment between an employer and an employee would be excluded when as expressed in the French version "il y avait entre eux un lien de dépendance", a somewhat ambiguous way of translating the much more direct English phrase "they were not dealing at arm's length". That is what s. 3(2)(c) states. It was of course then necessary to specify when persons would be regarded as having such a "lien de dépendance", or in the English phrase "would not be dealing at arm's length". In this connection s. 3(2)(c)(i) refers to the Income Tax Act, which has long provided in s. 251(1): first, that "related persons" are deemed not to be dealing with each other at arm's length when they enter into a contract, "related persons" being taken to mean (according to s. 251(2)):
| 251. (2) For the purposes of this Act, "related persons", or persons related to each other, are
. . . |
251. (2) Aux fins de la présente loi, des "personnes liées" ou des personnes liées entre elles, sont
. . . |
and, second, that "unrelated" persons may occasionally be regarded as not dealing at arm's length in view of the special conditions in which their dealings took place.4 So the legislative technique is different from what it was previously, in that the exclusion does not apply to the spouses directly but to all persons who are "related"; however, because of the presumption established by s. 251(2)(a) of the Income Tax Act, the exclusion relating to the spouses remains the same, unless an exception to the peremptory nature of the presumption is adopted. That is the function of s. 3(2)(c)(ii), which provides that the Minister (already from administrative necessity given the function of first deciding on the eligibility of employment (s. 61(3)(a))) may, after analysing all of the circumstances, consider that related persons within the meaning of the Income Tax Act were actually dealing at arm's length with respect to the particular employment contract they have concluded between themselves. The wording gives the principal circumstances to be taken into account in arriving at this conclusion, circumstances which all relate to the terms of the contract and its conditions of performance.
[6] It can readily be seen that, in this s. 3(2)(c)(ii) describing the procedure to be followed in arriving at the conclusion that a contract between related persons was not unduly influenced by their relationship (and so is covered), Parliament applied essentially the approach adopted by the courts in concluding that unrelated persons were in fact not acting at arm's length in concluding a particular contract (which accordingly should be excepted). This finding, Judge Archambault maintained in his decision in Thivierge, suffices to protect the provision from any constitutional challenge based on s. 15 of the Charter as "It is . . . the terms and conditions of a given employment [whether between related persons or not] which determine the eligibility of an employment, not the personal characteristics of the employee". He summed up his thinking clearly in a passage quoted and adopted by the trial judge:5
| A reading of paragraph 3(2)(c) of the Act as a whole leads me to conclude that the exception of employment is not made on the basis of a personal characteristic, whether it be sex, marital status or family status, but rather on the basis of the very terms and conditions of the contract of employment. If the terms and conditions of the contract of employment are those that persons dealing at arm's length would have accepted, the employment constitutes insurable employment, whether the employee be female or the wife of the person who controls the employer. It is the terms and conditions of the contract of employment that determine whether there is insurable employment. Since there is no inequality based on personal characteristics, subsection 15(1) of the Charter cannot be argued in respect of paragraph 3(2)(c) of the Act. |
[7] It seems to me, with respect, that these comments, proper though they may be, do not affect the constitutional argument. The inequality mentioned as a reason for unconstitutionality does not arise from the exception or final acceptance of the employment, which it is true is determined in all cases by the terms of the contract of employment. The inequality complained of arises from the process adopted in deciding on the exception or acceptance. In one case, review is required in all circumstances and must be made on the basis of a presumption that the employment is excepted, which implies that doubt will count against the claimant, while in the other, the review is highly exceptional and the presumption works in the opposite direction, which means that any doubt is resolved entirely in the claimant's favour.
[8] The real response to the constitutional challenge is that none of the conditions for application of s. 15 of the Charter as laid down by the Supreme Court, especially in its leading decision in Law v. Canada (M.E.I.),6 is present in the case at bar. The differential treatment in the procedure is not based on a personal characteristic of the claimants in question, it does not limit access by anyone to the benefits of the Act since any contract regarded as genuine will be covered, and finally the dignity of the individual is not affected.
[9] The distinction is made between related and unrelated persons, related persons being physical or artificial persons associated with each other by some existential link resulting: in the case of physical persons, from consanguinity, adoption or legal or (since 1993) de facto marriage; in the case of artificial persons, from the relationship between their controlling bodies. It seems to me that what is considered is a factual relationship, not some personal or individual characteristic of the persons involved. Related persons within the meaning of the Act clearly do not form a special group of individuals united by some common feature, still less a traditionally disadvantaged group. Moreover, the differential treatment exists only in procedural terms, it is made necessary by the need to ensure that the contract is genuine and it should not normally result in any substantive detriment. Finally, legislation seeking to ensure that the employer-employee relationship between two individuals has remained separate and apart from the relationship already existing between those individuals could not be regarded as demeaning their human dignity.
[10] The constitutional challenge, in my view resulting solely from what might roughly speaking be called a requirement of caution in accepting as genuine and proper a contract of employment concluded between two already related persons, cannot stand. If the wording could be interpreted as giving the Minister a purely discretionary authority to accept or disallow the contract, and it appears to have been understood that way by some people, the constitutional challenge might perhaps be more forcefully maintained. However, that is not the case, and this observation leads me to the second aspect of the application.
The challenge to the judge's conclusion drawn from the facts
[11] The applicant testified at length before the Tax Court of Canada judge to explain the work she did and attempt to persuade him that, in each of the periods in question, her employment was genuine and not affected by her relations with one of the counsel in the firm. Unfortunately, for reasons which are difficult to understand, she was the only one to provide an explanation. Most importantly, she was met by testimony by Commission investigators, who after questioning her undertook in their report to assess the importance of the duties she had performed and to estimate the time that might be required to perform them. Reading the transcript of this testimony leaves one with a feeling of dissatisfaction. What emerged from the hearing before the judge does not lead one to any necessary conclusion: too many questions remain unanswered. I need only note in passing that one of the periods in question is prior to the amendment made to the Income Tax Act to treat de facto spouses like legal spouses (amendment to s. 252(4)(a), S.C. 1994, c. 7, Schedule VIII, s. 140(3)), but it is as if this was not taken into account and the approach appears to have remained the same throughout, subject to an unaltered overall view. There is another point. The Commission's investigation does not appear to have been recommenced in order to decide on the second claim for 1996: the facts accumulated for the earlier claims undoubtedly appeared sufficient; yet in that year the applicant's de facto spouse was no longer practising in partnership but on his own, and had apparently extended his activities so as to add those of a financial advisor, in which the applicant, by her studies and training, might have been required to take on new responsibilities.
[12] In any event, bearing in mind that anyone presiding over a judicial proceeding is inevitably profoundly influenced first in his conduct of the hearing and second, most importantly, in his assessment of what conclusion may be drawn from it, by the view which he may have of what is actually at issue, I have to say with respect that in my opinion the trial level hearing does not seem to have proceeded in a satisfactory way.
[13] It is clear from reading the reasons for the decision that, for the presiding judge, the purpose of his hearing was to determine whether the Minister, in the well-known expression, had exercised "properly" the discretion conferred on him by the Act to "recognize the non-exception" of a contract between related persons. He therefore had to consider whether the decision was made in good faith, based on the relevant facts disclosed by a proper hearing, not under the influence of extraneous considerations. Accordingly, at the outset, at p. 2 of his reasons, the judge wrote:7
| The determination at issue in the instant appeal results from the discretionary authority provided for by the provisions of s. 3(2)(c) of the Act, which reads as follows: |
. . . . .
| The appellant was required to discharge the burden of proof, on the balance of probabilities, that the respondent in assessing the matter had not observed the rules applicable to ministerial discretion, and if this could not be done this Court would not have no basis for intervening. |
And finally, his conclusion at p. 14:8
| So far as the appeal is concerned, I cannot allow it as the appellant has not proven that the respondent exercised his discretion improperly. |
[14] In fact, the judge was acting in the manner apparently prescribed by several previous decisions. However, in a recent judgment this Court undertook to reject that approach, and I take the liberty of citing what I then wrote in this connection in the reasons submitted for the Court:9
| The Act requires the Minister to make a determination based on his own conviction drawn from a review of the file. The wording used introduces a form of subjective element, and while this has been called a discretionary power of the Minister, this characterization should not obscure the fact that the exercise of this power must clearly be completely and exclusively based on an objective appreciation of known or inferred facts. And the Minister's determination is subject to review. In fact, the Act confers the power of review on the Tax Court of Canada on the basis of what is discovered in an inquiry carried out in the presence of all interested parties. The Court is not mandated to make the same kind of determination as the Minister and thus cannot purely and simply substitute its assessment for that of the Minister: that falls under the Minister's so-called discretionary power. However, the Court must verify whether the facts inferred or relied on by the Minister are real and were correctly assessed having regard to the context in which they occurred, and after doing so, it must decide whether the conclusion with which the Minister was "satisfied" still seems reasonable. |
[15] The function of an appellate judge is thus not simply to consider whether the Minister was right in concluding as he did based on the factual information which Commission inspectors were able to obtain and the interpretation he or his officers may have given to it. The judge's function is to investigate all the facts with the parties and witnesses called to testify under oath for the first time and to consider whether the Minister's conclusion, in this new light, still seems "reasonable" (the word used by Parliament). The Act requires the judge to show some deference towards the Minister's initial assessment and, as I was saying, directs him not simply to substitute his own opinion for that of the Minister when there are no new facts and there is nothing to indicate that the known facts were misunderstood. However, simply referring to the Minister's discretion is misleading.
[16] I recognize that in his reasons the judge mentioned points of fact which could validate the Minister's conclusion. I further recognize that the applicant did not attempt to give a more sound foundation to her arguments before him. However, I still think that as conducted the hearing did not meet the requirements of justice and this Court has no choice but to intervene.
[17] I accordingly consider that the application should succeed, the impugned decision should be quashed and the matter should be referred back to the Tax Court of Canada for the appeal brought from the Minister's decision to be heard again. It might be more satisfactory, both for the judge who rendered the impugned decision and for the parties, if the matter was assigned to another judge.
[18] Finally, I do not think there is any reason to deprive the applicant of her costs.
| Louis Marceau J.A. |
Certified true translation
Martine Brunet, LL. B.
Date: 20000310
Docket: A-722-97
| CORAM: MARCEAU J.A. |
DESJARDINS J.A.
DÉCARY J.A.
BETWEEN:
LYNE PÉRUSSE,
Applicant,
- and -
MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
DÉCARY J.A.
[1] The facts, the issues and the relevant legislation are contained in the reasons of my two colleagues and there is no need to repeat them here.
[2] I consider, like my colleague Desjardins J.A., and for the reasons given by her, that the presumption of an exception which a de facto spouse must rebut under s. 3(2)(c)(ii) of the Unemployment Insurance Act before she can qualify for unemployment insurance benefits meets the first two criteria for application of s. 15(1) of the Canadian Charter of Rights and Freedoms ("the Charter") identified by Iacobucci J. in Law v. Canada (Minister of Employment and Immigration).10 The disputed legislation in fact makes a clear distinction between the applicant and other persons based on a personal characteristic and the applicant is the subject of different treatment based on listed or similar grounds.
[3] However, like my colleague Marceau J.A., I consider that this presumption does not meet the third criterion, that is, the differential treatment does not demean the applicant's human dignity. It seems to me that he is right to conclude in para. 9 of his reasons that [TRANSLATION] "legislation seeking to ensure that the employer/employee relationship between two individuals has remained separate and apart from the relationship already existing between those individuals cannot be regarded as demeaning their human dignity". I will explain.
[4] The applicant had a duty to establish that there was an infringement of s. 15(1) of the Charter. To do this, she had to discharge the burden described by Iacobucci J. in para. 83 as follows:
| . . . in some cases it will be relatively easy for a claimant to establish a s. 15(1) infringement, while in other cases it will be more difficult to locate a violation of the purpose of the equality guarantee. In more straightforward cases, it will be clear to the court on the basis of judicial notice and logical reasoning that an impugned law interferes with human dignity and thus constitutes discrimination within the meaning of the Charter. Often, but not always, this will be the case where a law draws a formal distinction in treatment on the basis of enumerated or analogous grounds, because the use of these grounds frequently does not correlate with need, capacity, or merit. It may be sufficient for the court simply to take judicial notice of pre-existing disadvantage experienced by the claimant or by the group of which the claimant is a member in order for such a s. 15(1) claim to be made out. In other cases, it will be necessary to refer to one or more other contextual factors. In every case, though, a court's central concern will be with whether a violation of human dignity has been established, in light of the historical, social, political, and legal context of the claim. In order to succeed under s. 15(1), it is up to the claimant to ensure that the court is made aware of this context in the appropriate manner. |
[5] It is important here to note that in the Tax Court of Canada the applicant expressed no opinion on a constitutional point, and, as Judge Tardif noted in his reasons, she indicated that "there was no specific or special evidence to submit". The judge dismissed the applicant's constitutional arguments forthwith, without even hearing the respondent Minister, with the result that there was before him, and in this Court, no evidence on the application of s. 15(1) of the Charter, nor of course on the justification allowed by s. 1. This, to begin with, was an approach hardly conducive to a thorough analysis of the applicant's constitutional arguments, and in my opinion the judge would have done better to refuse to consider them.
[6] Once in the Federal Court of Appeal, the applicant maintained her challenge and this time gave the necessary notice on the constitutional question. The question is thus before this Court, although in my view it does not have to be answered by the Court precisely because of the lack of factual foundation facing the Court. What is more, it would appear that the question, which refers only to s. 3(2)(c)(ii) of the Unemployment Insurance Act, can hardly be answered without deciding on the validity of s. 251(1)(a) and (2)(a) of the Income Tax Act, which has not been the subject of any official challenge. As my fellow judges have nevertheless decided to answer the question raised and there is a lack of agreement, I feel obliged to answer it as well.
[7] Iacobucci J. indicated that the focus of the inquiry regarding s. 15(1) of the Charter was "both subjective and objective". He went on to say:11
| The relevant point of view is that of the reasonable person, in circumstances similar to those of the claimant, who takes into account the contextual factors relevant to the claim. |
[8] As appears from the comments of Iacobucci J., there are cases in which it is "relatively easy" to show that there was an infringement of s. 15(1) and where the "it will be clear to the court on the basis of judicial notice and logical reasoning that an impugned law interferes with human dignity". At the same time, there are cases where the evidence will be "more difficult" and the plaintiff will have to "ensure that the court is made aware of" the historical, social, political and legal context of the claim.
[9] I do not think this is a "straightforward case" allowing me to form an "subjective and objective" viewpoint favourable to the applicant based solely on my judicial knowledge and legal reasoning. On the contrary, I feel that in view of the nature and scope of the right affected by the impugned legislation, this is a situation in which, to use the words of Iacobucci J. at para. 74 of his reasons, it will be necessary to "evaluat[e] not only the economic but also the constitutional and societal significance attributed to the interest or interest adversely affected" and to "consider whether the distinction restricts access to a fundamental social institution, or affects `a basic aspect of full membership in Canadian society'".
[10] In the case at bar and in the absence of any background evidence, the distinction does not really limit access to unemployment insurance benefits. The Act does not deprive a spouse of his or her rights because he or she is a spouse: what it does is to ensure that a spouse has no more rights by virtue of being a spouse than if he or she were not one. It is intended to ensure, by setting up an objective control mechanism -- "the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed" (s. 3(2)(c)(ii) of the Unemployment Insurance Act) -- that the existence of family ties does not compromise the equality of everyone under the unemployment insurance system.
[11] I do not think that persons connected by family ties, and so subject to natural and legal obligations to each other, could reasonably be surprised or upset that Parliament felt the need to determine, where a contract of service is concerned, whether such ties, perhaps even without their knowledge, could have influenced the working conditions laid down. Subjecting a couple in a given case to a routine review does not demean its dignity, "marginalize", "ignore" or "devalue" it, to use the language of Iacobucci J. at para. 53 of his reasons. The fact that persons live as couples has a decisive effect on our society in many respects, and if legislation sometimes favours and sometimes does not favour a couple does not by itself mean that the couple will feel at times positively and at other times adversely affected.
[12] In short, providing against the risks resulting from the laws of human nature does not demean the dignity of a spouse. There is no breach here of s. 15(1) of the Charter.
[13] For the rest, I concur in the opinion of Marceau J.A. and would dispose of this case as he suggests.
| Robert Décary J.A. |
Certified true translation
Martine Brunet, LL.B.
Date: 20000310
Docket: A-722-97
| CORAM: MARCEAU J.A. |
DESJARDINS J.A.
DÉCARY J.A.
BETWEEN:
LYNE PÉRUSSE,
Applicant,
- and -
MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
DESJARDINS J.A.
[1] I do not share my colleague Marceau J.A.'s opinion that s. 3(2)(c) of the Unemployment Insurance Act does not infringe the conditions for application of s. 15 of the Canadian Charter of Rights and Freedoms as explained by the Supreme Court of Canada in Law v. Canada (M.E.I.).12
[2] On the contrary, I conclude that s. 3(2)(c) is in breach of the Charter, specifically in light of the Law case.
[3] I should mention at the outset that we are concerned only with the constitutionality of s. 3(2)(c) of the Unemployment Insurance Act, read together with s. 251(1)(a) and (2)(a) of the Income Tax Act. The issue does not turn on the concept of "unrelated persons" covered by s. 251(1)(b) of the Income Tax Act, nor that of corporations dealt with by s. 251(2)(b) of the Income Tax Act.
[4] For greater certainty, I set out the relevant legislation:
| Unemployment Insurance Act: 3. (2) Les emplois exclus sont les suivants: ...
|
| 3. (2) Excepted employment is ...
|
| Income Tax Act: 251. (1) Pour l'application de la présente loi:
|
251. (1) For the purposes of this Act,
|
| (2) Aux fins de la présente loi, des « personnes liées » ou des personnes liées entre elles, sont
|
(2) For the purposes of this Act, "related persons", or persons related to each other, are
|
[5] Section 3(2)(c) of the Unemployment Insurance Act and s. 251(1)(a) and 2(a) of the Income Tax Act, read together, have the following effect: contracts of employment signed between persons connected by blood relationship, marriage or adoption are excepted from the scope of the Unemployment Insurance Act unless those persons (who are deemed not to be dealing with each other at arm's length) establish to the Minister's satisfaction that it is reasonable to conclude that the contracts signed by them are substantially similar to those that would have been signed by persons not thus connected by blood relationship, marriage or adoption.
[6] The appellant challenged s. 3(2)(c) of the Unemployment Insurance Act on the ground that she and everyone else not dealing with their employers at arm's length are required to assume this special burden of proof simply because their civil or marital status is different from those of other unemployment insurance claimants, who only have to present evidence that they have a contract of service with their employers. She argued that this is discrimination based on her marital status since she is compelled to persuade the Minister of National Revenue 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, she would have entered into a substantially similar contract of employment with the employer if she had been dealing at arm's length.
[7] Accordingly, the appellant submitted, everyone not dealing at arm's length [TRANSLATION] "starts with an unfavourable presumption on the part of the Minister of National Revenue's representative and is discriminated against compared with other Canadians".13
[8] How are we to explain such legislation?
[9] In 1988 this Court, in Druken v. Canada,14 affirmed a decision of the Canadian Human Rights Tribunal that invalidated the old ss. 3(2)(c) and 4(3)(d) of the Unemployment Insurance Act and s. 14(a) of the Regulations. Those sections excepted the work of an employee for a company if that employee, his or her spouse or both together controlled over 40% of the company's shares. The Tribunal had concluded that those sections were unjustified discrimination within the meaning of the Canadian Human Rights Act. It noted the absence of any evidence indicating the existence of widespread abuses in this area of human activity. In its view, any refusal had to be based on the facts of each case. The Act could not be applied broadly to a given social group.15
[10] The federal government decided to amend the Act. When Bill C-21 was tabled in the House of Commons on June 1, 1989, adding the present s. 3(2)(c) of the Unemployment Insurance Act, the Minister of Employment and Immigration explained the scope of the new provision. In Thivierge v. Canada (Minister of National Revenue -- M.N.R.),16 Judge Archambault of the Tax Court of Canada noted that the English version of the explanations given by the responsible Minister expressed the scope of the new provisions most clearly. Like him, I will cite the English version, which reads as follow:
| Unemployment Insurance coverage for employer relatives |
| Currently, individuals hired by their spouse or relatives are not considered to be dealing "at arm's length" from their employer and therefore are unable to contribute to, or benefit from, Unemployment Insurance. |
| The Bill proposes that workers who are related to their employer be covered by Unemployment Insurance if they are dealing "at arm's length". If they work under the same sort of employment contracts as other workers who are not related to the employer, their employment will be insured and they will pay premiums. This means that if they become unemployed they will also be able to claim any benefits they are qualified for. Factors such as the pay, conditions, length, type and importance of their work will be used to decide whether or not their employment is insurable. |
[11] In Thérèse Chrétien v. The Minister of National Revenue,17 Judge Archambault explained his own understanding of the scope of the provision:
| This provision seems to me to be in the nature of an anti-avoidance measure to counter abuse by certain individuals who take undue advantage of this Act which is social in nature. Parliament seems to have assumed that the relations between persons not dealing at arm's length are not conducive to the establishment of reasonable economic relations for the purposes of the application of this Act. However, it gave the authorities a way out in those cases where taxpayers clearly act in good faith. The courts have a duty to monitor this administrative power to ensure that the Minister of National Revenue respects the principles of natural justice. |
| Among other things, this means that the authorities have a duty to act in each case to determine whether the presumption of non-arm's length dealing may be rebutted, to provide individuals with an opportunity to assert their point of view and adduce all relevant facts in support of their claims and, finally, to provide the reasons for his determination in a timely manner so that individuals are able to discharge their onus of proof. |
[12] The Act assumes that persons so related by blood, marriage or adoption are more likely to be able, and to want, to abuse the Unemployment Insurance Act. Parliament therefore authorized the Minister to scrutinize contracts of employment signed by such persons, something which he does not do for other claimants, unless of course there are reasons to think that there has been a fraud against the Act. It is this additional burden of proof to which the appellant objects.
[13] There are those, like my colleague Marceau J.A., who see this as a [TRANSLATION] "requirement of caution". Others regard it as administrative nuisance in the analysis of their cases, a discriminatory administrative nuisance because Parliament assumes a priori that all individuals falling within that group can and will abuse the system.
[14] On what basis should we assess this additional burden required of individuals who are deemed to have non-arm's-length dealing?
[15] Law provides us with all the criteria.
[16] In Law Iacobbucci J. noted, at para. 30, that there are three key elements to a discrimination claim under s. 15(1) of the Charter: differential treatment, an enumerated or analogous ground and discrimination in a substantive sense involving factors such as prejudice, stereotyping and disadvantage. He added, in para. 39, that a court called upon to determine a discrimination claim under s. 15(1) should make three broad inquiries, which are set out by him in paragraph (3) of his summary of the guidelines in para. 88 of his reasons. It thus states:
| Accordingly, a court that is called upon to determine a discrimination claim under s. 15(1) should make the following three broad inquiries: |
| (A) Does the impugned law (a) draw a formal distinction between the claimant and others on the basis of one or more personal characteristics, or (b) fail to take into account the claimant's already disadvantaged position within Canadian society resulting in substantively differential treatment between the claimants and others on the basis of one or more personal characteristics? |
| (B) Is the claimant subject to differential treatment based on one or more enumerated and analogous grounds? |
| and |
| (C) Does the differential treatment discriminate, by imposing a burden upon or withholding a benefit from the claimant in a manner which reflects the stereotypical application of presumed group or personal characteristics, or which otherwise has the effect of perpetuating or promoting the view that the individual is less capable or worthy of recognition or value as a human being or as a member of Canadian society, equally deserving of concern, respect, and consideration? |
Shortly before, in the same para. 88, he stated that the first issue is concerned with the question of whether the law causes differential treatment. The second and third issues are concerned with whether the differential treatment constitutes discrimination in the substantive sense intended by s. 15(1) of the Charter.
[18] We should note at the outset that although the issue turns only on a presumption, which creates a burden of proof, that presumption is set out in legislation which, like other legislation, is subject to the provisions of the Charter. Its importance should not be minimized, even though it is a rebuttable presumption in that a claimant in good faith can ordinarily succeed in overturning this presumption. The purpose of the impugned provision is the scrutiny to which persons deemed to be related at the time of a benefit claim are subjected.
[19] In terms of the first test set out by Iacobucci J. at para. 39 of Law, the presumption that persons considered to be related are deemed to have entered into a contract on the most favourable basis, at the expense of the Unemployment Insurance Act, is based on a personal characteristic of the claimants, namely blood, marriage or adoption. Parliament entertains "suspicions" about them on this basis. Its concern is as to what they may have done illegally and it requires detailed proof from them of the features of their contract. It undertakes a special investigation and requires comparison of their contracts with other contracts, because of the personal characteristics of such persons, some of which, such as blood, are unalterable.
[20] As to the second test developed by Iacobucci J., there is no longer any doubt, since the Supreme Court of Canada's judgment in Miron v. Trudel, that marital status is an analogous ground of discrimination within the meaning of s. 15 of the Charter.18
[21] Finally, as to the third test, the imposition of an additional burden of proof reflects the existence of a stereotype. In Law Iacobucci J., at para. 64, explained that a stereotype may be described as a misconception whereby a person or a group is unfairly portrayed as possessing undesirable traits, or traits which the group, or at least some of its members, do not possess.
[22] In M. v. H.,19 Gonthier J., dissenting, summarized his understanding of the concept of a stereotype as follows:
| As Iacobucci J. noted in Law, supra, at para. 64, generally speaking, a stereotype is an inaccurate generalization made with reference to a personal characteristic. Specifically, it involves the attribution of a characteristic or set of characteristics to a group, which is then imputed to the individual members of that group because of their membership in it. One takes a preconceived or fixed notion about a group of individuals identified by a personal characteristic, and assumes that all individuals identified by that personal characteristic fit that preconceived idea. In invoking a stereotype, one either attributes characteristics which are not present, or fails to take into account characteristics which are present. Either way, one is failing to treat an individual as he or she really is. |
| (My emphasis.) |
[23] It is not necessary here, as Iacobucci J. said in Law,20 to demonstrate the existence of historic disadvantage in order to establish a breach of s. 15(1) of the Charter. The existence of historic disadvantage is an important, but not conclusive, indication.
[24] The impugned provision in the case at bar also demeans human dignity. I reproduce the following definition, taken from Law:21
| Human dignity means that an individual or group feels self-respect and self-worth. It is concerned with physical and psychological integrity and empowerment. Human dignity is harmed by unfair treatment premised upon personal traits or circumstances which do not relate to individual needs, capacities, or merits. It is enhanced by laws which are sensitive to the needs, capacities, and merits of different individuals, taking into account the context underlying their differences. Human dignity is harmed when individuals and groups are marginalized, ignored, or devalued, and is enhanced when laws recognize the full place of all individuals and groups within Canadian society. Human dignity within the meaning of the equality guarantee does not relate to the status or position of an individual in society per se, but rather concerns the manner in which a person legitimately feels when confronted with a particular law. |
(My emphasis.)
[25] The appellant used as a basis for comparison the treatment given to other unemployment insurance claimants as compared to her own and the treatment reserved for her category. This basis for comparison seems to me to be quite appropriate and consistent with the Supreme Court of Canada's judgment in Law22. I will explain.
[26] In Law Iacobucci J. noted, at para. 59, that the determination of an appropriate comparitor, and the evaluation of the contextual factors which determine whether legislation has the effect of demeaning a claimant's dignity must be conducted from the perspective of the claimant. However, he added that the focus of the discrimination inquiry is both subjective and objective: subjective in so far as the right to equal treatment is an individual right, asserted by a specific claimant with particular traits and circumstances; and objective in so far as it is possible to determine whether the individual claimant's equality rights have been infringed only by considering the larger context of the legislation in question, and society's past and present treatment of the claimant and of other persons or groups with similar characteristics or circumstances. According to Iacobucci J. the objective component means that it is not sufficient, in order to ground a s. 15(1) claim, for a claimant simply to assert, without more, that his or her dignity has been adversely affected by a law.
[27] The subjective test is obviously met in the case at bar. However, what about the objective assessment of the circumstances?
[28] Some people may argue that what the appellant is complaining of is not a substantive detriment, that benefits are not automatically denied to her, that she is entitled to them just as all other Canadians in a similar situation would be. However, those who make this argument cannot ignore the appellant's duty to establish the normality of her contract as compared to others in a similar situation.
[29] In my opinion, minimizing this difference is to ignore it: yet the difference is quite real. The s. 3(2)(c) presumption raises a doubt in the mind of the administrator responsible for implementing the Act. The presumption requires the appellant and those in her group to justify themselves. There is no legislative reason to explain the addition of this further burden of proof, except the fact that Parliament has a suspicion based on a stereotype. This is not a situation in which the government may have reasonable grounds to believe that there was a contract of a preferential nature in a given situation, but is a legal presumption that does not necessarily correspond to reality and that covers a particular social group.
[30] A reasonable person may be surprised by such a presumption. Moreover, it does not exist for "unrelated" persons within the meaning of s. 251(1)(b) of the Income Tax Act, since in such a case the Act provides that the question of whether unrelated persons are dealing at arm's length is a question of fact. The presumption also does not exist for other unemployment insurance claimants, who only have to prove that their contract is one of service. Consequently, a reasonable person on examining the relevant factors may conclude that this differential treatment objectively demeans the dignity of the individual as defined in Law.
[31] I therefore conclude that s. 3(2)(c) of the Unemployment Insurance Act is contrary to s. 15(1) of the Charter, as explained by the Supreme Court of Canada in Law.
[32] The respondent explained to the Court that he did not have to present proof of justification under s. 1 of the Charter to the Tax Court of Canada because the claimant had not given notice of a constitutional question to the Attorneys General as required by s. 57 of the Federal Court Act. The respondent objected, but his objection was taken under advisement. The Tax Court of Canada judge finally dismissed the constitutional argument, noting that he was relying on his Court's decision in Thivierge v. Canada (Minister of National Revenue).23
[33] The respondent submitted that this approach had the disadvantage of depriving him of an opportunity to intervene and to submit evidence for purposes of s. 1 of the Charter. He asked the Court, if it concludes that there was a breach of s. 15(1) of the Charter, to direct that the matter be returned to the Tax Court of Canada for a re-hearing, in which he could submit proof of justification for purposes of s. 1 of the Charter.
[34] I would accordingly allow the application for judicial review, quash the decision of the Tax Court of Canada and refer the matter back to it on the basis that s. 3(2)(c) of the Unemployment Insurance Act is in breach of s. 15(1) of the Charter. I would direct the Tax Court of Canada to proceed with a re-hearing dealing with s. 1 of the Charter.
[35] Costs to follow.
| Alice Desjardins J.A. |
Certified true translation
Martine Brunet, LL. B.
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| FILE: A-722-97 |
| STYLE OF CAUSE: LYNE PÉRUSSE |
and
MINISTER OF NATIONAL REVENUE
| PLACE OF HEARING: Québec, Quebec |
| DATE OF HEARING: January 20, 2000 |
| REASONS FOR JUDGMENT BY: MARCEAU J.A. |
| CONCURRING REASONS BY: DÉCARY J.A. |
| DISSENTING REASONS BY: DESJARDINS J.A. |
| DATED: March 10, 2000 |
APPEARANCES:
| Guy Cavanagh FOR THE APPLICANT |
| Valérie Tardif FOR THE RESPONDENT |
Guy Laperrière
SOLICITORS OF RECORD:
| Cavanagh & Lacroix FOR THE APPLICANT |
New Richmond, Quebec
| Morris Rosenberg FOR THE RESPONDENT |
Deputy Attorney General of Canada
Ottawa, Ontario
__________________1 [1994] T.C.J. No. 876.
2 Unreported judgment of July 3, 1996, file A-188-95.
3 Especially as the question has lost none of its urgency, since these provisions of the old Unemployment Insurance Act were substantially reproduced in the new Employment Insurance Act at s. 5(2) and (3).
4 Section 251(1) reads as follows:
| 251. (1) For the purposes of this Act, (a) related persons shall be deemed not to deal with each other at arm's length; and (b) it is a question of fact whether persons not related to each other were at a particular time dealing with each other at arm's length. | 251. (1) Pour l'application de la présenteloi : a) des personnes liées sont réputées avoir entre elles un lien de dépendance; b) la question de savoir si des personnes non liées entre elles n'avaient aucun lien de dépendance à un moment donné est une question de fait. |
5 At p. 2 of his reasons, appeal case, pp. 333-34.
6 [1999] 1 S.C.R. 497.
7 Appeal case, p. 334.
8 Ibid., p. 337.
9 Francine Légaré v. M.N.R., case No. A-392-98, and Johanne Morin v. M.N.R., case No. A-393-98, dated May 28, 1999, not reported, at para. 4.
10 [1999] 1 S.C.R. 497.
11 Ibid., para. 88, at 550.
12 [1999] 1 S.C.R. 497.
13 Appellant's memorandum, titled [TRANSLATION] "notice of constitutional question", p. 6, para. 36.
14 [1989] 2 F.C. 24 (C.A.).
15 Druken v. Canada (Employment and Immigration Commission), [1987] C.H.R.D. No. 7, No. T.D. 7/87.
16 [1994] T.C.J. No. 876.
17 Tax Court of Canada 93-853(UI), November 12, 1993.
18 Miron v. Trudel, [1995] 2 S.C.R. 418, as explained by McLachlin J. at para. 150.
19 [1999] 2 S.C.R. para. 224.
20 [1999] 1 S.C.R. 497, para. 65.
21 [1999] 1 S.C.R. 497, at para. 53.
22 See Law v. Canada, [1999] 1 S.C.R. 497, at para. 58.
23 [1994] T.C.J. No. 876.