Date: 20010302
Docket: 2000-3725-EI, 2000-3726-CPP
BETWEEN:
BIOLIN RESEARCH INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1] These appeals were heard together on common evidence at Saskatoon, Saskatchewan on February 21, 2001. Alvin Ulrich, President of the Appellant ("Biolin"), was the only witness.
[2] The Appellant has appealed decisions dated July 14, 2000 that Biolin "was not an agricultural enterprise, nor was it engaged in agriculture as defined by the Canada Pension Plan Regulations and the Employment Insurance Regulations" respecting short term employees whom it hired for various forms of field work.
[3] Paragraphs 9 to 11 inclusive in 2000-3725(EI) read:
9. The Minister further decided that the employment of Dave Porter, Gail McKinney, Faith Veikle, Aaron Warner, Todd Baronowsky, Tim Coolican, Pete Giebrecht, Jean McKay and Pat Sterling (hereinafter the "Workers") by the Appellant was not excluded employment as the Appellant was not an agricultural enterprise, nor was it engaged in agriculture, within the meaning of section 9 of the Employment Insurance Regulations.
10. In deciding as he did, the Minister relied on the following assumptions of fact:
(a) the facts admitted above;
(b) the Appellant operates a Fibre-Flax research facility, conducting research on planting and caring for flax, harvesting the crop and determining its uses;
(c) during the 1998 and 1999 taxation years, the Appellant grew the flax which was used in its research;
(d) except for a minimal amount of flax seed which the Appellant considers as an unusable by-product, the Appellant does not sell any of the flax it produces;
(e) the Appellant intends to eventually realize a profit from the processing of flax into useable products such as linen and paper;
(f) at no time during the 1989 or 1999 taxation years was the Appellant directly involved or otherwise engaged in the activity of farming;
(g) during the 1998 and 1999 taxation years, the Workers were hired by the Appellant to perform such duties as taking readings on plot samples growing in the field, hand pulling ¼ acre of flax for retting and loading bales;
(h) except for the employment of Faith Veikle in the 1998 taxation year and Gail McKinney in the 1999 taxation year, the Workers were each employed by the Appellant for less than seven days in each year;
(i) Faith Veikle was employed by the Appellant for a total of 8 days in the 1998 taxation year;
(j) Gail McKinney was employed by the Appellant for a total of 9 days in the 1999 taxation year; and
(k) Faith Veikle and Gail McKinney were both remunerated solely in cash by the Appellant.
B. ISSUE TO BE DECIDED
11. The issue to be decided is whether the Workers were engaged in excluded employment with the Appellant.
Paragraphs 9 and 10(h) in 2000-3726(CPP) vary from the EI matter. They read:
9. The Minister further decided that the employment of Gail McKinney, Faith Veikle, Aaron Warner and Todd Baronowsky (hereinafter the "Workers") by the Appellant was excepted employment as the Workers were not employed in agriculture or an agricultural enterprise within the meaning of section 2 of the Canada Pension Plan Regulations.
10. In deciding as he did, the Minister relied on the following assumptions of fact:
...
(h) the Workers were each employed by the Appellant for less than twenty-five working days in each year.
[4] In his testimony, Mr. Ulrich did not take issue with assumptions 10(b), (e), (g), (h), (i), (j), excepting (k) wherein he believed everyone was remunerated by cheque. With respect to the remaining assumptions, by subparagraph, the Court finds:
10(d) The Appellant did sell some considerable volume of flax seed from time to time including one sale of $17,000 worth of flax seed in 1999.
10(f) The Appellant custom farmed some large acreages of flax from time to time including 1998, when it produced the flax seed that it sold in 1999 for $17,000. It also produced and sold other flax seed from time to time to various other purchasers and produced considerable amounts of flax straw which it is presently storing.
[5] The question properly raised by the decisions is whether the Appellant was conducting an "agricultural enterprise". Section 9 of the Employment Insurance Regulations respecting this question reads:
9. (1) The definitions in this subsection apply in this section.
"agriculture" means the operations of farming that are carried out for the benefit of any person who is a farmer and, without limiting the generality of the foregoing, includes
(a) where carried out on a farm
(i) clearing land for cultivation,
(ii) cultivation of the soil,
(iii) conservation of the soil, including the construction, maintenance and operation of tile drainage systems, ditches, canals, reservoirs or waterways exclusively for the purposes of farming,
(iv) harvesting, storing or grading any natural product of farming,
(v) preparing land for the growing and harvesting of wild berries,
(vi) raising bees and producing honey,
(vii) breeding or raising animals or birds, or producing eggs,
(viii) dairy farming and the processing of milk, butter or cheese that is produced on that farm, and
(ix) producing maple sap, maple syrup or maple sugar; and
(b) where carried out on or off a farm
(i) offering for sale or selling any of the products of the operations referred to in subparagraphs (a)(i) to (ix), if the offering for sale or selling is incidental to those operations, and
(ii) exhibiting, advertising, assembling, freezing, storing, grading, preparing, processing, packing and transporting the products described in sub-paragraph (i), if those operations are incidental to the offering for sale or selling described in that subparagraph. (agriculture)
"agricultural enterprise" means the business of agriculture carried on for the benefit of any person who is a farmer. (entreprise agricole)
"horticulture" means the following operations and includes all the services incidental to the carrying out of those operations, if the services are performed at the place where the operations are carried on:
(a) the propagating, producing, raising or harvesting of
(i) vegetables, flowers, shrubs or ornamental grasses, and
(ii) seeds, seedlings, grafts or cuttings of vegetables, flowers, shrubs or ornamental grasses; and
(b) landscape gardening where it is incidental to the carrying out of
(i) any of the operations described in paragraph (a), or
(ii) agriculture. (horticulture)
(2) The employment of a person by an employer in agriculture, an agricultural enterprise or horticulture that would otherwise be insurable is excluded from insurable employment if the person is employed by the employer in that employment for
(a) less than seven days in a year; or
(b) seven days or more in a year and is not remunerated in cash by the employer for any part of that employment.
Thus an "agricultural enterprise" is a business (enterprise carried on with a reasonable expectation of profit) operation of farming carried out on or off a farm [9(1)(b)(i)], may have selling incidental to harvesting, storing or grading of a farming product [9(1)(a)(iv)] and to assembling, grading, preparing, processing and packing products of the operations [9(1)(b)(ii)]. It must be for the benefit of a farmer, but not, apparently for the agricultural "enterpriser" only, rather for any person who is a farmer [9(1)].
[6] Section 2 of the Canada Pension Plan Regulations differs in some material respects from Section 9 of the Employment Insurance Regulations. There follows an itemization of the differences:
2(2) "agriculture" means the operation of farming when carried on on a farm for the benefit of an individual or other person who is a farmer
(a) the clearing of land for the purposes of farming
(b) quotes 9(a)(ii)
(c) quotes 9(a)(iii)
(d) harvesting, storing or grading (etc.)
(e) some differences from (v)
(f) some differences from (vi)
(g) some differences from (vii)
(h) some differences from (viii)
(i) quotes (9)(a)(ix) when carried on on a farm for the benefit of an individual or other person who is a farmer and includes
(j) the offering for sale or selling, off the farm for the benefit of such farmer, of any of the products of the operations previously described in this definition where such offering for sale or selling is incidental to those operations, and
(k) the exhibiting, advertising, assembling, freezing, storing, grading, processing, packing and transporting, off the farm for the benefit of such farmer, of the products described in paragraph (j) where the exhibiting, advertising, assembling, freezing, storing, grading, processing, packing or transporting is incidental to the offering for sale or selling described in that paragraph;
"agricultural enterprise" means the business of agriculture carried on for the benefit of an individual or other person who is a farmer; ...
"horticulture" means
(a) the operations relating to the breeding, producing, raising or harvesting of
(i) legumes, flowers, shrubs or ornamental grasses, and
(ii) seeds, seedlings, grafts and cuttings of legumes, flowers, shrubs or ornamental grasses, and ...
These differences from Section 9 of the Employment Insurance Regulations not only must have a different meaning, there must also be a reason and a purpose for the differences. Otherwise they would not be worded differently. One difference is that the Canada Pension Plan deals with both employees and with other individuals. In addition, under subparagraphs 2(2)(j) and (k) of the Canada Pension Plan Regulations, these operations must be carried on for the benefit "of such farmer"; namely, the Appellant either on or off of a farm.
[7] Mr. Ulrich said that Biolin was incorporated in about 1996 in Saskatchewan to develop a new source of fibre from flax for textiles. One of its original shareholders, a Hong Kong firm, was buying flax fibre in Belgium and France, shipping it to China where it was processed into cloth and clothing, whereupon that shareholder then wholesaled the cloth goods around the world. Then Biolin was to find a suitable flax for growing flax fibre in Western Canada. The fibre would be extracted for shipment to China. This shareholder contributed substantial capital to Biolin for this purpose until it went into receivership in the course of a market drop in Hong Kong in 1998. Since then Biolin's operations have been very limited and it has relied on a few research grants to finance what it has done.
[8] In cross-examination, Mr. Ulrich admitted that Biolin was incorporated for research and development and not for the purpose of farming. It wanted to show farmers how to produce good quality flax fibre.
[9] Biolin purchased European seed and produced some of its own and paid farmers, "research farms" and the University of Saskatchewan at the Kernan farm to seed, cultivate and harvest the flax. It hired the Workers in question to work on and in the planted fields, usually on randomly chosen plots of about one metre square, by weeding them; pulling flax plants at various stages of development; counting flax stems; picking, drying and bagging samples of plants and straw; and loading round bales (2-3 metres in diameter) or square bales (about 1 metre x ½ metre x ½ metre).
[10] The straw and fibres were chopped, sorted and processed. Biolin then tested samples in laboratories; sold seed; seeded some seed itself under custom farming contracts; and tested straw in laboratories or with at least one flax straw processor in Manitoba. Unfortunately, it did not obtain a sufficient volume of investment money to complete its research for the appropriate variety of flax and the processing "recipe". As a result, there is as yet no investment in a flax straw fibre processing plant which costs in excess of one million dollars.
[11] Nonetheless, the Court is of the view that the activity expected to make a profit and had a reasonable expectation of profit, so that it was a business. But that is not what the Minister quarrels with. Rather, the Respondent's argument is that the Appellant was not farming or engaged in an agricultural enterprise. The Appellant argued that it was farming. Certainly some operations on these types of farms described constituted "custom farming". Moreover, when the Workers in question were loading bales, they were working in farming operations as they are normally understood. The preponderance of their work was in the remaining activities described in paragraph [9]. Respecting them, the question is, was the Appellant engaged in an "agricultural enterprise"?
[12] In the Court's view, the Appellant's activities constituted an agricultural enterprise and the Appellant and the Workers were engaged in an agricultural enterprise, because:
1. The operations were operations of farming. In the course of a year all farmers do some or all of these operations, whatever kind of grain they are growing.
2. They were carried out for the benefit of any person who is a farmer, and for the benefit of the Appellant as well.
3. They were carried out both on and off a farm.
4. Sale or selling seeds and straw was incidental to the operations both at the time and in the future.
5. They included assembling, storing, grading, processing, packing and transporting flax seed and flax straw.
6. All of the work done by the Workers that was described in Court, was field work on the various farms.
[13] For these reasons, the Court finds respecting appeal number 2000-3725(EI):
1. Faith Veikle was employed for 8 days in 1998 and Gail McKinney was employed for 9 days in 1999 and they were remunerated by cheque by the Appellant.
2. Randy Cowan was not an employee;
3. Those persons described in Schedule A to the Reply who are not described in this paragraph were employed by the Appellant for less than 7 days in 1998 and 1999 in an agricultural enterprise and were in excluded employment.
[14] Respecting appeal number 2000-3726(CPP) the first question is whether the operations were carried on on a farm. From the evidence, all of the operations except chopping, and processing flax straw and fibres were carried on on one or anther of three types of farms on which the Appellant custom farmed. In terms of time spent, the evidence indicates that none of the employees in question worked for the Appellant off of a farm. Their work was field work on the farms.
[15] Paraphrasing the words of the Canada Pension Plan Regulations, Section 2, the Appellant's operations were custom farming by cultivating the soil (b); and producing, harvesting, storing or grading of flax seeds and flax straw (d). It still has a great number of bales in storage. These operations were carried on for its own benefit and for that of other farmers. They included storing, grading, processing, packing and transporting off the farm for the Appellant's benefit (k) the products of the operations described in (b) and (d) above. The offering for sale and selling of flax seed was incidental to these operations. In the future (or, if they had been fortunate, at that time) the offering for sale and selling of the flax straw and fibres was incidental to these operations.
[16] Therefore, respecting appeal number 2000-3726(CPP):
1. Randy Cowan was not an employee.
2. The employees whose duties remain in dispute between the parties and described in Schedule A to the Reply were engaged in excepted employment.
[17] For these reasons the appeals are allowed and the decisions appealed from are varied in accordance herewith. The Appellant is awarded those costs to which it is entitled pursuant to statute.
Signed at Ottawa, Canada, this 2nd day of March, 2001.
"D.W. Beaubier"
J.T.C.C.
COURT FILE NO.: 2000-3725(EI) and 2000-3726(CPP)
STYLE OF CAUSE: Biolin Research Inc. v. The Minister of National Revenue
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: February 21, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge D. W. Beaubier
DATE OF JUDGMENT: March 2, 2001
APPEARANCES:
Agent for the Appellant: Alvin Ulrich
Counsel for the Respondent: Helene Lee
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-3725(EI)
BETWEEN:
BIOLIN RESEARCH INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on February 21, 2001 at Saskatoon, Saskatchewan by
the Honourable Judge D.W. Beaubier
Appearances
Agent for the Appellant: Alvin Ulrich
Counsel for the Respondent: Helene Lee
JUDGMENT
The appeal is allowed and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 2nd day of March, 2001.
|
"D.W. Beaubier" |
J.T.C.C.
2000-3726(CPP)
BETWEEN:
BIOLIN RESEARCH INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on February 21, 2001 at Saskatoon, Saskatchewan by
the Honourable Judge D.W. Beaubier
Appearances
Agent for the Appellant: Alvin Ulrich
Counsel for the Respondent: Helene Lee
JUDGMENT
The appeal is allowed and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 2nd day of March, 2001.
|
"D.W. Beaubier" |
J.T.C.C.