Date: 20000523
Dockets: 1999-2161-EI; 1999-2165-EI; 1999-2269-EI; 1999-2279-EI; 1999-2277-EI
BETWEEN:
HAMID SHAKIBAIAN, 9017-4772 QUEBEC INC., MAJID SHAKIBAIAN, AFAGH RAZAVI,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
Reasons for Judgment
Cuddihy, D.J.T.C.C.
[1] These appeals were heard on common evidence at Quebec, (Quebec), on April 11, 2000.
I- The appeals
[2] These are appeals from three decisions by the Minister of National Revenue (the "Minister") of November 19, 1998, where it was determined that the employment of Hamid Shakibaian (the "Worker Hamid") from April 1, 1996 to January 4, 1997 and the employment of Majid Shakibaian (the "Worker Majid") from September 2, 1996 to September 5, 1997 while employed by 9017-4772 Quebec Inc. (the "Payor") and the employment of Afagh Razavi from June 24, 1991 to January 18, 1992 while employed by 1034 St-Jean Inc., (the "Payor St-Jean") were not insurable within the meaning of the Employment Insurance Act (the "new Act") which was previously known as the Unemployment Insurance Act (the "old Act") because, according to the Minister, the Appellants were not employed by the Payors pursuant to a contract of service.
II- The Facts
[3] In rendering his decisions the Minister relied on the facts and reasons outlined in the Respondent’s Replies to the Notices of Appeal.
[4] For the purpose of these appeals it will only be necessary to recite the facts as outlined in paragraph 6 of appeals numbers 1999-2161(EI), 1999-2279(EI) and 1999-2277(EI).
No. 1999-2161(EI):
"a) the Payer has been incorporated on March 8, 1995;
b) the shareholder of the Payer with the majority of voting shares would be Agnieska Chalupa;
c) Agnieska Chalupa was a friend and a business partner of the Appellant;
d) Majid Shakibaian is the brother of the Appellant;
e) the Payer did not respond to the written request of documents from the Respondent;
f) the Payer, among other corporations and registered trade names, was operating, in the mail St-Roch, a restaurant named "La Palmeraie";
g) on February 12, 1993, the Appellant doing business under "Marathon Canada" contracted a loan of $400,000 to operate the restaurant;
h) on March 21, 1994, the Appellant and Agnieska Chalupa opened a joint account in a branch of Bank of Montreal;
i) during the disputed period, the restaurant was closed;
j) the Payer has never produced any income tax returns;
k) for the year 1996, the Payer did remit a T4 slip to the Appellant for the amount of $10,080;
l) the Appellant was allegedly working as a cook
m) on January 14, 1997, the Payer issued a record of employment to the Appellant, for the period of April 1, 1996 to January 4, 1997 which indicated 40 weeks of work and a salary of $360 per week;
n) the record of employment is false;
o) the Payer and the Appellant made an arrangement to qualify the Appellant to receive unemployment benefits."
No. 1999-2279(EI):
"a) the Payer was incorporated on March 8, 1995;
b) the shareholder of the Payer with the majority of voting shares would be Agnieska Chalupa;
c) in his signed statement of October 20, 1997, the Appellant declared that he did not know Agnieska Chalupa;
d) Agnieska Chalupa was a friend of Hamid Reza Shakibaian, the brother of the Appellant;
e) the Payer did not respond to the written request of documents from the Respondent;
f) the Payer, among other corporations and registered trade names, was operating, in the mail St-Roch, a restaurant named "La Palmeraie";
g) during the disputed period, the restaurant was closed;
h) the Payer has never produced any income tax returns;
i) the Payer did not remit any T4 slips to the Appellant;
j) the Appellant has never declared revenues from the Payer;
k) the Appellant was allegedly the manager and counsellor of the business;
l) in his declaration of November 2, 1997, to the Respondent, the Appellant declared that he could not remember if he was paid all the time by the Payer;
m) on November 3, 1998, Agnieska Chalupa declared to the Respondent that the Appellant was working as a counsellor, he was not paid and that she did not sign the record of unemployment;
n) on September 11, 1997, a record of employment was issued to the Worker, for the period of September 2, 1996 to September 5, 1997 which indicated 1,890 hours of insurable employment and a total salary of $18,900;
o) the record of employment is false;
p) the Payer and the Appellant made an arrangement to qualify the Appellant to receive unemployment benefits."
No. 1999-2277(EI):
"a) the Payer has been incorporated on October 17, 1990;
b) the Payer was operating under the name of Gestion Shakiba;
c) the president of the Payer was Saeid Shakibaian;
d) the Appellant was the mother of Saeid Shakibaian;
e) the Payer, among other corporations and registered trade names, was operating two businesses in the mail St-Roch: a restaurant named "La Palmeraie" and a library-video club named "Best Sellers";
f) the Payer did not remit any T4 slips to the Appellant;
g) the Appellant has never declared revenues from the Payer;
h) on November 2, 1998, in his declaration to the Respondent, the Appellant declared that she was working as a security guard watching for shoplifters in the video store;
i) on January 21, 1992, the Payer issued a record of employment for the period of June 24, 1991 to January 18, 1992 that indicated 26 weeks of employment with a fixed salary of $313 per week and describing the occupation of the appellant as a cleaning clerk;
j) the Appellant did not work for the Payer;
k) the record of employment is false;
l) the Payer and the Appellant made an arrangement to qualify the Appellant to receive unemployment benefits."
[5] The Appellant Hamid Shakibaian, through his counsel in appeal No. 1999-2161(EI) as to paragraph 6 of the Reply to the Notice of appeal admitted the allegations in subparagraphs (b), (d) and (j) to (m). The allegations in subparagraphs (g), (h) and (i) were admitted with further explanations to be given at the hearing. The allegation in subparagraph (a) was ignored. The allegations in subparagraphs (c), (e), (f), (n) and (o) were denied.
[6] The Appellant Majid Shakibaian, through his counsel in appeal No. 1999-2279(EI) as to paragraph 6 of the Reply to the Notice of appeal admitted the allegations in subparagraphs (a), (b), (e), (j), (k) and (n). The allegations in subparagraphs (f), (g) and (l) were admitted with further explanations to be given at the hearing. The allegations in subparagraphs (c), (d), (i), (o) and (p) were denied. The allegations in subparagraphs (h) and (m) were ignored.
[7] The Appellant Afagh Razavi, through her agent and son, Majid Shakibaian, in appeal No. 1999-2277(EI) stated that she had nothing to say with regards to the allegations written in the Reply to the Notice of appeal and that she relies on the Court as to the decision to be rendered.
III- The law and analysis
1. Definitions of the Unemployment Insurance Act
"employment"
"employment" means the act of employing or the state of being employed.
"insurable employment"
"3.(1) Insurable employment is employment that is not included in excepted employment and is
(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;
..."
[8] The burden of proof is on the appellants.
[9] In Sylvie Desroches v. M.N.R. (A-1470-92), the Federal Court of Appeal indicated the function of the Tax Court of Canada judge, and I quote:
". . . However, in the final analysis, as this Court held in Attorney-General of Canada v. Jacques Doucet, it is the Minister's determination which is at issue, namely that the employment was not insurable because the applicant and the payer were not bound by a contract of service. The function of the Tax Court of Canada judge extended to considering the record and the evidence in its entirety. Accordingly, Marceau J.A., speaking for the Court, said the following in Doucet:
The judge had the power and duty to consider any point of fact or law that had to be decided in order for him to rule on the validity of that determination. This is assumed by s. 70(2) of the Act and s. 71(1) of the Act so provides immediately afterwards. .
The trial judge could go as far as deciding that there was no contract between the parties..."
[10] If there is any doubt in the interpretation, it must favour the taxpayer and there is nothing preventing a taxpayer from taking advantage of a social measure if the requirements of the Unemployment Insurance Act are met. In Attorney General of Canada v. Ludger Rousselle, a decision dated October 31, 1990 124 N.R. (A-1244-88), Hugessen, J.A. wrote as follows, at page 2:
“I do not think it is an exaggeration to say, in light of these facts, that if the respondents did hold employment this was clearly "convenience" employment, the sole purpose of which was to enable them to qualify for unemployment insurance benefits. These circumstances certainly do not necessarily prevent the employment from being insurable, but they imposed on the Tax Court of Canada a duty to look at the contracts in question with particular care; it is apparent that the motivation of the respondents was the desire to take advantage of the provisions of social legislation rather than to participate in the ordinary operation of the economic forces of the market place.” (The emphasis is mine.)"
[11] Each case stands on its own merits. The Appellants had to show on the balance of evidence that the Minister's decisions were incorrect. Subsections 70(2) and 71(1) of the Unemployment Insurance Act confer extensive remedial powers on the Tax Court of Canada. These powers enable the Court to settle any matter on the basis of the facts and to reverse, affirm or vary the determination by the Minister[1].
[12] It is also important to remember, "The object of the Act is to insure true employment."[2] "One of the fundamental elements to establish a real contract of service is the fixing of a salary according to the services rendered"[3].
[13] Hamid and Majid Shakibaian were heard in support of the appeals. The Appellant Afagh Razavi did not testify in her appeal.
[14] Exhibits A-1 and I-1 to I-12 were filed in the Court record.
[15] The Payor was incorporated on March 8, 1995.
[16] The majority shareholder of the Payor was Agnieska Chalupa. This person did not testify at the hearing.
Testimony of Hamid Shakibaian
[17] He filed exhibit A-1. This document was used to describe the food court service where the "worker Hamid" allegedly worked during the period under review. This food court was in a building at Complex Jean Lesage at 890 Boulevard Charest in Quebec city.
[18] This food court was previously owned by the "worker Hamid" for some years previous to 1996 and it was known as "La Palmeraie".
[19] He said that his brother Majid looked after the administration of La Palmeraie and that he (Hamid) did the cooking.
[20] He and his brother ran the business La Palmeraie for a couple of years.
[21] He explained that the administration of this complex changed hands on several occasions and led to much confusion as to the validity of leases and the operation of all the food service counters in the food court (Exhibit A-1).
[22] Agnieska Chalupa whom he had known for six or seven years worked at La Palmeraie for him. She worked at that time at the coffee doughnut counter.
[23] He said that Agnieska Chalupa would have incorporated a company in 1996, the Payor, in order to operate the coffee doughnut and pizza counters in the food court referred to earlier, in 1996.
[24] Agnieska Chalupa with the help of the "worker Majid" rented the two service counters in April of 1996.
[25] He said that he began working at these counters for Agnieska Chalupa in April or May until the end of the year 1996.
[26] The "worker Hamid" said he and his brother Majid began working for Agnieska Chalupa.
[27] He worked from 6:30 a.m. to 7:00 p.m., on Thursdays and Fridays.
[28] He was paid by Agnieska Chalupa. Mr. Saïd Sad would make out the cheques.
[29] He was paid $350.00 a week.
[30] He said that on January 21, 1997, the new manager of the Jean Lesage Complex, a Mr. Morency, locked the premises and put the furniture on the sidewalk.
[31] He said he received his pay cheques, which were issued by Agnieska Chalupa.
[32] He said, he also received his T4 slips and declared his income.
[33] When the group of food service counters closed he applied for unemployment insurance benefits.
[34] He said he does not agree that he should pay back the money he received for being unemployed.
[35] In cross-examination, he said that in 1994, 1995 and 1996, the administrator of La Palmeraie, was his brother, the "worker Majid".
[36] His brother administered the group of service counters under the name of a company, which he did not identify.
[37] He (Hamid) looked after the cooking.
[38] He was shown Exhibit I-1, a notarial deed dated February 12, 1993.
[39] He said that he never borrowed any money on the 12th of February 1993.
[40] He signed the document (Exhibit I-1) at the request of his brother Majid.
[41] He said, that his brother Majid never said to him for what purpose he was signing the deed (Exhibit I-1).
[42] He admitted having opened a joint account with Agnieska Chalupa on March 21, 1994, in a branch of the Bank of Montreal (Exhibit I-2).
[43] He explained that he asked Agnieska Chalupa, who at the time was his employee, to open the account because this bank branch was near his business premises. The account was used to deposit tips, lottery gains and to exchange money for the service counters. The account was opened for two or three months.
[44] He said that in 1994, 1995 and 1996, his brother Majid had an office upstairs on the 3rd floor of Complex Jean Lesage while he (Hamid) worked downstairs as the manager.
[45] In 1994, 1995 and 1996, his pay consisted of having his mortgage paid for the house he owned at 1315 Fitzgerald Street in Sillery, Quebec.
[46] He worked for Agnieska Chalupa from April 1996 until January 17, 1997.
[47] He said the food complex La Palmeraie closed in July or August of 1995. He was out of work from August 1995 till April of 1996.
[48] He said he stopped working for Agnieska Chalupa on January 17 or 19, 1997.
[49] He was paid $350.00 per week. He worked 5 days a week. He worked once in a while on Saturdays and never worked on Sundays. He is positive he was paid $350.00 a week.
[50] He was then shown a record of employment (Exhibit I-3), which he acknowledged. He said that the name of the company was changed at the end of the year 1996. He said he worked 40 weeks.
[51] He was then shown his application for benefits dated January 16, 1997 (Exhibit I-4). He identified his signature and stated that January 16, 1997 was the last day of work when he left the work premises.
[52] He was asked why he had indicated on his application (Exhibit I-4) that his pay was $360.00 gross a week and that he worked 36 hours a week, while he had just told the Court that he earned $350.00 weekly for close to 63 hours of work a week.
[53] He replied, that his answers were approximate, that when he filled out the form he did not think that it would make a difference. The answer he gave in French was: "J’ai marqué à peu près; quand j’ai rempli le formulaire j’ai pas pensé que ça changerait grand chose là-dedans".
[54] Then he was asked why if he worked 40 weeks at $360.00 a week, the total of his earnings should have been $14,400.00 but that his T4 slip indicated $10,080.00.
[55] His answer was to ask the accountant.
[56] He said that he was not an administrator and he wants no part in paperwork of that nature. The answer he gave in French was: "demandez au comptable; je suis pas bon dans l’administration et je veux rien savoir dans les papiers comme ça".
[57] He said he had never met with Stéphane Tremblay, an investigator with Human Resources Development Canada (HRDC). He saw this man for the first time in Court today.
[58] The Court questioned the witness in relation to the deed dated February 12, 1993.
[59] In the document (Exhibit I-1), there is a reference that he was doing business under the name "Marathon Canada".
[60] He replied that Marathon Canada was another company. He knew nothing about that and his brother never told him why he was signing the deed. In French his reply was: "c’est une autre compagnie. Je ne sais pas rien de ça et mon frère m’a jamais dit pourquoi il mettait mon nom au lieu du sien".
The evidence of Majid Shakibaian
[61] In 1991, he rented the food court La Palmeraie from a friend Laurent Gagnon.
[62] The purpose for renting these premises was to provide work for his brothers and family.
[63] The premises were rented by a company known as Marathon Canada. This last company was under the name of the "worker Hamid" for whom the "worker Majid" was acting.
[64] Marathon Canada would have owned the equipment of La Palmeraie in 1991 or 1992.
[65] A few years later the "worker Majid" helped to rent a place for Agnieska Chalupa. He helped her to rent two food service counters at the food complex mentioned earlier. He helped her set up the business and was paid $400.00 to $500.00 a week. He received his T4 slip.
[66] His brother Hamid worked for Agnieska Chalupa doing different things. She operated for 6 months to a year. The "worker Majid" had an office on the third floor of the same building. He had a separate lease, separate name, separate phone number. This lease was a verbal lease. He was paying $300.00 a month for 2 rooms.
[67] He was being paid by Agnieska Chalupa to help her out and to install and operate her business. He was the manager. He was just trying to help her out. He would receive $300.00 or $400.00 which represented money received to compensate for time he worked for her.
[68] In cross-examination, he said that he worked for the Payor on and off between September 1996 and September 1997.
[69] He was shown his record of employment (Exhibit I-5), which indicates a work period between September 2, 1996 to September 5, 1997 with insurable earnings of $18,900.00 for 1,890 hours of work.
[70] It was suggested to him that he did not work all the hours indicated on his record of employment. He replied that "I might have been there for 2 days, I may have gone for the week".
[71] He admitted that during the work period described in his record of employment, he was in prison for several weeks for unpaid taxes.
[72] He said that he worked 10 hours some weeks and 50 hours other weeks. During some weeks he was not present at all at the work place. He added, "I would decide myself the number of hours". Some weeks, he worked one day, other weeks, he worked five days.
[73] He said that Agnieska Chalupa or his brother Hamid would call him if his services were required.
[74] He identified his application for unemployment insurance benefits (Exhibit I-6).
[75] He said he was operating in the premises of La Palmeraie.
[76] He admitted that he indicated on his application that he was working 35 hours a week for a 5-day workweek.
[77] He said that he was available full time.
[78] He was asked what he did when he was not working for the Payor during the period under review. He replied that he was "searching to open up a retail business".
[79] He was asked why he answered "no" to question 38 F), on his application since he had admitted having been in jail. He replied: "perhaps I made a mistake".
[80] He was asked if he had a copy of the T4 slips from his employer. He replied: "not really".
[81] He was asked if he tried to find his T4 slips. He replied: "not really".
[82] He was asked whether he was paid for his services between September 2, 1996 to September 5, 1997. He replied: "they usually paid me".
[83] He was shown his income tax returns for 1994 and 1995 (Exhibits I-8 and I-9). He admitted having declared no income from employment for the years 1994 and 1995.
[84] He was shown statements of remuneration for 1997 (Exhibit I-12). These documents show revenues from employment for the Appellant in the amount of $74,680.00 from a Payor 9045-9959 Quebec Inc. He said that he did not know that company. He also said that the address of that Payor at 48 St-Joseph Street, East, Quebec, did not mean anything to him.
[85] He admitted living at 5 Cedar, Shannon, Quebec, from 1988 to 1997. In 1998, he went to stay at 1315 Fitzpatrick in Sillery, Quebec, with his parents.
[86] He said that his brother Hamid and Agnieska Chalupa started in April 1996 to operate the two food counter outlets. They operated under the numbered company 9017-4772 Quebec Inc., which is the Payor.
[87] Majid Shakibaian said that he helped them set up the company and helped them out. Although he helped out in April 1996 when the company was set up, his record of employment indicates that he started working for the Payor in September of 1996. He was asked whether he worked from April to September 1996 without pay. He replied: "I don’t know".
Final analysis as to the employment of Hamid and Majid Shakibaian
[88] The Appellants were required to establish on a balance of probabilities that the Minister was wrong when he decided that there was no employer/employee relationship between them and the Payor.
[89] The "worker Hamid" filed his record of employment (Exhibit I-3) and his application for benefits (Exhibit I-4).
[90] The record of employment of the "worker Hamid" states he worked as a cook for the employer 9017-4772 Quebec Inc., for 40 weeks, at a salary of $720.00 bi-weekly for a total of $7,632.00. The last day of work was the January 4, 1997.
[91] In his application for benefits the "worker Hamid" states the employer was "Restaurant La Palmeraie" and that he worked 6 days a week for 36 hours a week at $360.00 a week.
[92] In his evidence, the "worker Hamid" said he worked for a company that belonged to Agnieska Chalupa who was a former employee. He would have worked close to 63 hours a week at $360.00 a week and worked for 40 weeks.
[93] If the worker earned $360.00 a week for 40 weeks, his earnings should have been $14,400.00 and not what was indicated on his T4 slips, an allegation admitted by the worker Hamid in subparagraph 6(k) of the Reply.
[94] Furthermore, the "worker Hamid" filed a record of employment indicating the Payor as 9017-4772 Quebec Inc. In his application for benefits he identifies the Payor as"Restaurant La Palmeraie" which, according to the evidence, was formerly owned by him and was allegedly out of business during the period under review.
[95] The "worker Majid" filed a record of employment (Exhibit I-5) indicating his occupation as "Directeur Général" of the Payor. His work period began on September 2, 1996 and would have terminated on September 5, 1997. His insurable earnings were $18,900.00 for a total of 1,890 hours of work.
[96] In his application for unemployment benefits he indicated the employer as "La Palmeraie". He would have worked 35 hours a week, five days a week and was paid $1,350.00 every two weeks or $675.00 a week. Why in his evidence, did he state earning $400.00 to $500.00 a week?
[97] The worker failed to indicate to the Respondent in his application for benefits (Exhibit I-6) that he was in jail for several weeks during the period under review.
[98] He also revealed to the Court that he decided himself the hours he would work. He said that some weeks he worked one day and other weeks five days.
[99] He said that Agnieska Chalupa or his brother would call him when his services were required.
[100] This evidence could certainly indicate to the Minister that if he was the "Directeur Général" of the Payor and paid a much higher salary than his brother the "worker Hamid", how is it that it would be his brother or Agnieska Chalupa that would call him if his services were required?
[101] Furthermore, the "worker Majid" said that he helped Agnieska Chalupa to open the business of the Payor in April 1996. If he was the "Directeur Général" why would he only start work in September 2, 1996, some five months later?
[102] It was also revealed by the "worker Hamid" that he was hired as a cook and was laid off on January 4, 1997 because of lack of work and the Payor was closed down.
[103] If the "worker Hamid" was laid off and the Payor closed, how was it that the "worker Majid" was still on the payroll until September 9, 1997, some eight months later? If the Payor was not closed in January 1997 who replaced the "worker Hamid" as a cook?
[104] It was admitted by the "worker Majid" that the Payor did not respond to the written request of documents from the Respondent and never produced any income tax returns.
[105] The contradictions revealed by the evidence could not escape the attention of the Minister.
[106] The evidence of both workers must be viewed with caution.
[107] The workers have not succeeded in dispelling the serious allegations of the Respondent that led him to conclude that their employments were not insurable.
[108] I must adopt the arguments of Me Crépin as if recited at length herein.
[109] The Appellants Hamid and Majid Shakibaian cannot succeed in their appeals.
Final analysis as to the employment of Afagh Razavi
[110] This Appellant was present at the hearing on April 11, 2000.
[111] The son of the Appellant, Majid Shakibaian, after conferring with his mother stated to the Court that she had nothing to say with regards to the allegations contained in the Reply to the Notice of appeal.
[112] He further stated that she relied on the Court as to the decision to be rendered.
[113] None of the allegations of the Minister were dispelled and no evidence was put forward to challenge in any way the assumptions of fact alleged by the Minister.
[114] This appeal under such circumstances must be dismissed.
IV- Decision
[115] The appeals are dismissed for the reasons stated herein and the decisions of the Minister are confirmed.
Signed at Dorval, Quebec, this 23rd day of May 2000.
"S. Cuddihy"
D.J.T.C.C.