Date: 19991214
Docket: 97-1479-UI
BETWEEN:
ROGER REHBERG,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Cain, D.J.T.C.C.
[1] This is an appeal by Roger Rehberg, hereinafter referred to as the “Appellant”, from a ruling of the Minister of National Revenue, hereinafter referred to as the “Respondent” dated September 8, 1997, that the employment of the Appellant by George David Rehberg, hereinafter referred to as the “Payor”, sole proprietor of Navy View Construction, hereinafter referred to as the “Business”, from October 21, 1993 to March 10, 1994, was not insurable employment as the Appellant and the Payor were not dealing with each other at arm’s length.
Decision
Respondent’s Assumptions
[2] The Respondent firstly submitted that the Appellant’s engagement with the Payor was not insurable employment for the reasons that the engagement was exempted employment as the Appellant and the Payor were not dealing at arm’s length with each other within the meaning of paragraph 3(2)(c) of the Unemployment Insurance Act.
[3] In the alternative, the Respondent secondly submitted that the Appellant was not engaged by the Payor under a contract of service during the period in question as the actual owners and operators of the proprietorship were the Appellant and his spouse.
[4] In support of his first submission the Respondent, in his Reply to the Notice of Appeal, relied on the following assumptions:
“(a) the business was involved in the provision of painting and contracting services;
(b) the Appellant and his spouse, Donna Rehberg, allege that William Hewitt was the owner and operator of the business;
(c) the Appellant’s spouse was the only person to have signing authority on the business bank account;
(d) cheques were issued that were signed by the Appellant;
(e) the Appellant’s alleged duties were painting;
(f) the Appellant was allegedly paid at the rate of $500.00 per week based on a 40-hour week;
(g) the Appellant did not receive all of the wages allegedly owed to him;
(h) the Appellant and his spouse were the only workers engaged by the alleged Payor during the period in question;
(i) the Appellant performed his alleged duties at his personal residence and used his personal vehicle in the performance of his duties;
(j) the Appellant was not reimbursed for the use of his residence or his vehicle;
(k) cheques allegedly for wages issued to the Appellant during the period in question, do not correspond to the amounts reported for that period on the Record of Employment issued by the alleged Payor;
(l) the Appellant performed services for the alleged Payor prior to and subsequent to the period in question while engaged by another Payor;
(m) the Appellant was not required to maintain a record of the hours worked;
(n) the Appellant was free to hire help if he required it;
(o) the Appellant was related to the alleged Payor within the meaning of the Income Tax Act;
(p) the Appellant was not dealing with the alleged Payor at arm’s length;
(q) 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 not reasonable to conclude that the Appellant and the alleged Payor would have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length.”
[5] In support of his second submission the Respondent relied on the following assumptions:
"(a) George David Rehberg (the “alleged Payor”) did not obtain ownership of the proprietorship until after April 15, 1994;
(b) before April 16, 1994, the business was allegedly the proprietorship of William Hewitt who was not involved in any manner in the management or control of the operations of the business;
(c) before April 16, 1994, the alleged Payor was not involved in any manner in the management or control of the operations of the business;
(d) before April 16, 1994, all decisions relating to the management, control and day-to-day operations of the business were made by the Appellant or his spouse Donna Rehberg;
(e) the Appellant’s spouse registered the Payor for Goods and Services tax purposes indicating herself as a partner.”
Analysis of Assumptions
[6] The Appellant agreed by his evidence with the assumptions set out in paragraphs (a), (b), (e), (f), (m) and (n) of the Respondent’s first submission but only as they applied to his association with William Hewitt (hereinafter referred to as “Hewitt”) as owner and operator of the Business but did not admit any of the other assumptions therein contained.
[7] The Appellant by his evidence did not admit any of the assumptions set out in the second or alternative submission of the Respondent.
[8] In Hickman Motors Limited v. The Queen, [1997] 2 S.C.R. 336, the Supreme Court of Canada outlined the principles applicable when a person challenges the assumptions made by the Respondent. In that case the Court was dealing with assumptions made by the Respondent in making an assessment in a tax matter. The principles apply equally well to assumptions made by the Respondent in a ruling under the Unemployment Insurance Act. The Supreme Court determined that the onus was on the Appellant to lead sufficient evidence to “demolish” the assumptions made by the Respondent. The Court said, that to “demolish” the assumptions, it was only necessary that the Appellant lead sufficient evidence to establish a prima facie case.
[9] A prima facie case is one supported by evidence with such a degree of probability in its favour that it must be accepted if believed by the Court unless it is rebutted or the contrary is proved. It may be contrasted with conclusive evidence which excludes the possibility of the truth of any other conclusion than the one established by that evidence.
[10] The Court will deal firstly with the assumptions made by the Respondent in the first submission.
Analysis of assumptions (a) to (n) inclusive in support of first submission
[11] In respect to paragraphs (c) and (d), the Appellant did not remember whether he had signing authority or not but two of the cheques shown in Exhibit R-1, No. 16 dated May 26, 1993 made payable to a supplier and No. 20 on May 28, 1993 made payable to the Appellant and labeled “salary” were purportedly signed by the Appellant and his late wife. The Court says “purportedly” because during all of his evidence the Appellant had difficulty even identifying his own signature or cheques on the face thereof made payable to him. The signature “Donna Rehberg” which appears on these two cheques is different than in previous cheques identified as having been signed by her. The Appellant identified cheque No. 43, dated September 7, 1993 and payable to the Appellant’s son Roger T. Rehberg for $600 as having been signed by Donna Rehberg. That cheque is found on page 1 of Exhibit R-1. The above two cheques in May were written at a time some five (5) months before the Appellant was allegedly engaged by Hewitt. The Appellant offered no explanation for his association with Hewitt at this time.
[12] In respect to paragraphs (g) and (k), the only evidence led by the Appellant to verify that he was a salaried employee of the Payor was the Record of Employment (Exhibit A-1) showing a total of $10,000 received during the period in question and that he received that salary in cash. The portion of that amount to be allocated to 1993 would, by the Court’s calculation, be $5,300. However, Exhibit R-1 shows the following amounts paid to the Appellant during 1993 by the Business:
Page 22 - Cheque No. 20 May 28, 1993 $500
Page 15 - Cheque No. 27 June 1, 1993 1,760
Page 1 - Cheque No. 28 June 3, 1993 500
Page 23 - Cheque No. 11 August 6, 1993 189
Page 22 - Cheque No. 10 September 3, 1993 1,000
Page 22 - Cheque No. 36 September 29, 1993 1,500
$5,449
[13] In addition, the Appellant received cheque No. 36 dated June 10, 1993 for $2,985 (Exhibit R-1, page 14) which was repayment of a loan made by the Appellant to the Business. Presumably the amount included interest and that should have been included in income. Also, the Appellant received cheque No. 84 on February 11, 1994 for $300 and cheque No. 97 on February 23, 1994 for $300 the notation on the first being “Sub C” and the second “hand cash receipts”. These cheques are found in Exhibit R-1 at pages 9 and 16 respectively. These last two represent the only cheques paid by the Business to the Appellant during the period in question.
[14] The Appellant offered no explanation in respect to his association with the Business during the period May through September of 1993 but clearly the T4 1993 Statement of Remuneration Paid did not accurately represent his total remuneration from the Business, being deficient, by the Court’s calculation, by $5,449.
[16] And again it must be pointed out that many of the signatures on these cheques, as examination will reveal, purportedly signed by Donna Rehberg, are signed by a signature different than the signature identified as hers.
[17] In respect to paragraph (h), the cheques in Exhibit R-1 show that there were several people on the payroll of the Payor and the Appellant supplied names of those workers whose names correspond to those on the cheques. The Court accepts that evidence.
[18] In respect to paragraph (i), the Appellant testified that he worked on the jobs of the Business either as a supervisor or in performance of the actual work. He further testified that he used his own vehicle and would have been given a few dollars here and there by Hewitt for gas.
[19] In respect to paragraph (j), the Appellant could not remember whether he was paid rent for the use of his property or not.
[20] In respect to (k), the cheques referred therein were two cheques issued in February and were labelled for items other than salary.
[21] In respect to (l), the Appellant testified that the Business during the period in question was owned by Hewitt and that while he worked for Hewitt he was also on first call for a company controlled by his wife and he worked for that company as well during the period in issue.
Analysis of Assumptions (o) to (q) in Respondent’s First Submission and Assumptions (a) to (e) in Respondent’s Second Submission.
[22] The Court will deal with the assumptions contained in paragraphs (o), (p) and (q) of the first submission and the assumptions contained in paragraphs (a) to (e) inclusive at the same time because the evidence as it relates to those assumptions is similar.
[23] In respect to the assumptions contained in paragraphs (o), (p) and (q) of the first submission and paragraph (a) of the second submission, if the Payor was George David Rehberg, the Appellant would be related to George David Rehberg for the purposes of the Income Tax Act. Section 251 of the Income Tax Act reads in part as follows:
“(1) For the purposes of this Act,
(a) related persons shall be deemed not to deal with each other at arm’s length; and
...”
Subsection 251(2) of the Income Tax Act reads in part as follows:
“(2) Relationship defined. For the purpose of this Act, "related persons", or persons related to each other, are
(a) individuals connected by blood relationship,
...”
[24] If George David Rehberg was the proprietor of the Company, then clearly the Appellant’s association would not be at arm’s length. The evidence of the Appellant was that during the time in issue the sole proprietor of Navy View Construction was Hewitt.
[25] The Appellant introduced in evidence a photocopy of a hand written Declaration of Change in Partnership marked as Exhibit A-4. The certificate is sworn by George David Rehberg and reads as follows:
“I, the undersigned, being the only Partner of Navy View Construction hereby make oath and declare:
1. That I am the full age of nineteen years:
2. That I am carrying on business at residence 3 Fernhill Rd, Dart. N.S., mailing address P.O. Box 28091 RPO, Tacoma, Dartmouth Nova Scotia, Postal Code B2W 6E2 for the following purposes and objects, namely: Painting & Construction trades, 3 Fernhill Rd. Dartmouth N.S.
3. That since the last filing of a declaration relating to the partnership under the Partnerships and Business Names Registration Act, the following ceased to be a member as of the date indicated:
Name Date Signature
William Hewitt March 16/94 (sgd) Wm Hewitt
4. As from March 16 1994 I am the only member of the said business:
Name Full residential address (including Postal Code)
George David Rehberg 59 McCormicks Lane
Eastern Passage, Halifax Co. N.S.
B3G 1A2
Mailing Address: Navy View Construction, P.O. 28091,
RPO, Tacoma Dartmouth, Nova Scotia,
Postal Code B3G 1M7
Sworn to at Halifax
in the County of Halifax
in the Province of Nova Scotia
this 16 day of March
A.D., 1994
Before me,
(Sgd) G Pauls (Sgd) George David Rehberg
Gloria Pauls A Commissioner of the
Supreme Court of Nova Scotia”
[26] The Declaration is in respect to a change in partnership. The certificate indicates that a previous declaration relating to the partnership was filed under the Statute. No copy of that declaration was tendered in evidence. The assumption of the Respondent is that George David Rehberg was the sole proprietor but was not involved in any of the management functions of the Business. A certified copy of the previous declaration showing William Hewitt to be the sole proprietor of the business in the time period in question together with evidence that no change had occurred within the time period would have been prima facie proof of that fact. George David Rehberg could have been called to testify as to who the previous members of the partnership were. I will say more about that later in these reasons.
[27] In respect to paragraphs (b), (c), (d) and (e) of the second submission, the Appellant led the following evidence.
[28] The Appellant was a veteran member of the construction trade. He operated a construction company called Seebreeze Construction in the late 80’s or early 90’s. This company stopped doing business and he then created a company called Recho Construction which his late wife controlled and which conducted business from time to time thereafter and was operating during the time period in issue in this appeal.
[29] Around 1993 the Appellant met Hewitt who was the owner and operator of Navy View Construction, a firm that was, inter alia, able to successfully bid and obtain contracts with the Department of National Defence for the renovation and repair of military facilities. Little evidence was led in respect to Hewitt except that he was a carpenter and painter and sometimes worked on the jobs with the employees including the Appellant. The Appellant could not remember when he last saw Hewitt, whether it was in 1993 or 1994.
[30] He and Hewitt entered into a working arrangement whereby the Appellant would be paid $500 a week while either working or supervising workers on the job irrespective of the number of hours worked. To ensure that he would be paid, the Appellant insisted that his wife Donna Rehberg, who died unexpectantly in May of 1999, be made bookkeeper, be the authorized signing officer for all cheques and that the office of the business be located in his home. Hewitt agreed.
[31] He knew little or nothing about the financial dealings of the Business and he never discussed that aspect with his wife. He was paid by cash and because the Business did not always receive its revenue on time, payment of his salary was sometimes delayed.
[32] Evidence of a witness under oath is entitled to some weight and cannot be swept away simply by the judge saying he disbelieves a witness. A judge has a wide discretion as to the evidence that he will accept but it is not an absolute discretion and a judge should indicate his or her reason for rejecting the evidence he or she does not accept. In R. v. Norman, 87 CCC (3rd) 148, a decision of the Ontario Court of Appeal, the Court referred to this question of witnesses and credibility and I quote:
“In White v. R., [1947] S.C.R. 89 CCC 148, the Senior Mr. Justice Estey at page 151 discussed the issue of credibility. He said it is one of fact and cannot be determined by following a set of rules. He said in part:
It is a matter in which so many humane characteristics, both the strong and the weak, must be taken into consideration. The general integrity of the witness, his powers to observe, his capacity to remember and his accuracy in statement are important. It is also important to determine whether he is honestly endeavouring to tell the truth, whether he is sincere or frank or whether he is biased, reticent or evasive. All these questions must be answered from the observation of the witness’s general conduct and demeanour in determining the question of credibility.”
[33] Except where otherwise hereinabove stated to the contrary, I disbelieve the evidence of the Appellant as it relates to the time in issue for the following reasons.
[34] He testified that he began his association with the Payor on October 21, 1993 when in fact he was lending money to the Payor as early as June 1993. His wife, who was part of the arrangement when the Appellant and the Payor made their alleged agreement in October, was writing cheques for the business prior to June 1993. Why would he have not admitted the earlier association? Why would he not have included that time in his application for benefits? Why would he testify that the arrangement was made in October 1993 when it appears to have been made in May 1993 or before? One obvious inference is that he was involved with Hewitt in a scheme other than a contract of service and one that was non-arm’s length.
[35] He tendered a T4 1993, Statement of Remuneration Paid, issued by the Business showing total earnings from the Business for that year to be $5,500. The evidence shows an additional $5,449 was received by the Appellant from the Business at a time other than during the period in issue. Why were not these money’s declared? If they were part of the $5,500 then they would not have been earned in the period in question.
[36] I clearly got the impression that the Appellant was not honestly endeavouring to tell the truth. He was evasive and usually answered question, the answers of which would have been to his prejudice, with a reply that he did not remember. He was experienced in the construction trade and had operated two businesses before he became involved with the Payor or Hewitt. His suggestion that he did not know anything of the finances of the Payor’s or Hewitt’s Business is not worthy of belief. He had advanced loans to the Business and in order to make certain that he received his weekly salary of $500, irrespective of the number of hours worked, actually had the total financial administration of the Business moved to his home and in the absolute control of he and his late wife. The Appellant signed cheques but could not remember whether he had signing authority with his wife.
[37] The Appellant testified that he could not remember dates. He presumed that the dates shown on the Record of Employment (Exhibit A-1) were correct since the Record was signed by Hewitt. A review of the following evidence makes it highly improbable that the signature was in fact that of Hewitt’s.
[38] The Appellant introduced in evidence a copy of a work order for work to be done by Hewitt for one Veronica Smith (Exhibit A-3) in support of the fact that the Business was owned by Hewitt. The work order is signed “Wm Hewitt”.
[39] The signature on the work order and on the Declaration clearly appear to be the same and it appears that the usual signature of Hewitt was “Wm Hewitt”. However, the signature on the Record of Employment (Exhibit A-1) is signed “William Hewitt” and the signature is in a totally different script than that which appears on the work order and Declaration. If Hewitt signed the Record why did he make his signature so dissimilar to the one he normally used?
[40] The Record of Employment must have been issued from the Appellant’s home where all the business records were kept and the inference must be drawn that it was prepared by the Appellant or the Appellant’s late wife or with their instructions. And the Record was issued approximately a month after Hewitt ceased to be a member of the business. It is questionable whether Hewitt was still in the area in April of 1994 since the Appellant testified that he could not remember when he last saw the Payor whether it was in 1993 or 1994.
[41] There is a well-recognized rule of evidence that the failure of a party or witness to give evidence, which was in the power of the party or witness to give and by which the facts might have been elucidated, justifies the Court in drawing the inference that the evidence of the party or witness would have been unfavourable to the party to whom the failure was attributed. The party against whom the inference operates may explain it away by showing circumstances which prevented the production of such a witness (see Murray v. Saskatchewan, [1952] 2 D.L.R. 499, at pages 505-506).
[42] The Appellant testified that his son Roger T. Rehberg and a brother named Wayne worked for Hewitt while he was so employed. In fact Roger T. Rehberg made in excess of $6,000 while so employed so he must have worked on most of the jobs the Business was involved in. The Appellant’s brother George ultimately became the sole proprietor of the Company. With the loss of his wife who would have been able to testify, clearly the Appellant should have called the son and brothers who would hopefully have been able to corroborate the Appellant’s testimony. The Court can only draw the inference that their testimony would not have supported the Appellant’s evidence.
[43] Counsel for the Appellant in his summation submitted that the Respondent had not led evidence to show that the Appellant’s wife registered the Business for Goods and Services purposes and indicated that she was a partner. But the onus is not on the Respondent to prove his assumptions but on the Appellant to “demolish” them, as the jurisprudence says, by prima facie evidence. If such was not the case the Appellant could have introduced a copy of the registration to demolish the assumption.
[44] There is clear evidence that Hewitt was involved in the Business or at least participated in the revenue between the months of August and December of 1993, (see cheques 09, 32, 126, and 200 on page 19 of Exhibit R-1), but there is no evidence that the cheques were cashed. There is no evidence of his participation after the month of December 1993.
[45] The Respondent’s assumption that Hewitt was not involved in any manner with the management and control of the operation of the Business and that the Appellant and his wife had the management and control of the day-to-day operations of the Business is not challenged by any evidence that the Court accepts.
[46] The Court finds that the Appellant was not engaged during the period in issue, namely October 21, 1993 to March 10, 1994 by the Business under a contract of service.
[47] The Appellant’s appeal is dismissed.
Signed at Rothesay, New Brunswick, this 14th day of December 1999.
“Murray F. Cain”
D.J.T.C.C.