Date: 20001218
Docket: 97-901-UI
BETWEEN:
RICK ORAM,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Cain, D.J.T.C.C.
[1] This is an appeal by the Appellant from a determination of the Respondent dated February 18, 1997 that the Appellant's employment by Charlottetown Inn Ltd., the Payor, from December 12 to December 30, 1994 was not insurable employment since there was no contract of service between the Payor and the Appellant or in the alternative that the Payor and the Appellant were not dealing with each other at arm's length in accordance with the provisions of the Unemployment Insurance Act (the "Act").
[2] In arriving at his determination, the Respondent relied on the following assumptions:
"(a) the Payor was a corporation, duly incorporated under the laws of the Province of Newfoundland;
(b) at all material times, all of the Payor's outstanding shares were owned by the following:
SHAREHOLDER % OF SHARES
Sandy Campbell 98%
Laverne Campbell 2%
(c) the Payor was a small inn with eight guest rooms and a dining room;
(d) the Payor did not issue a T4 slip to the Appellant for amounts allegedly earned during the period under review;
(e) during the period under review, the Appellant was in a relationship with Cherie Lee Campbell-Oram, the daughter of Sandy Campbell and Laverne Campbell, and they were married on October 5, 1996;
(f) the Appellant and Cherie Lee Campbell-Oram are the parents of a child, Bradley, born in November 1994;
(g) the Appellant is a bricklayer by trade;
(h) the Appellant was hired to cut and store firewood, remove a furnace and install a woodstove in the inn and to do maintenance work on the inn and on some apartments owned by the Payor;
(i) the Appellant determined his hours of work and rate of pay;
(j) the Appellant was not supervised by anyone on behalf of the Payor;
(k) the Appellant required 12 weeks of insurable employment to qualify for unemployment insurance benefits in 1995;
(l) the Appellant had secured a Record of Employment from Rossco Services Ltd. showing six insurable weeks from October 17, 1994 to November 24, 1994;
(m) the Appellant secured a Record of Employment from the Payor showing the three weeks included in the period under review;
(n) the Appellant then secured a Record of Employment from Alexander Campbell o/a Campbell's Construction showing three weeks of insurable employment from January 2, 1995 to January 20, 1995;
(o) Alexander Campbell is the brother of Cherie Lee Campbell-Oram and the son of Sandy Campbell and Laverne Campbell;
(p) the Respondent issued a determination on February 18, 1997 that the Appellant was not engaged in insurable employment with Alexander Campbell o/a Campbell's Construction for the period referred to in subparagraph (n);
(q) the Appellant entered into an artificial arrangement with the Payor and Alexander Campbell whereby the Appellant received Records of Employment showing sufficient weeks of insurable employment to enable him to qualify for unemployment insurance benefits whereby the Payor and Alexander Campbell were able to ensure the Appellant had an income;
(r) there was no contract of service between the Appellant and the Payor;
(s) the Appellant was factually not dealing with the Payor at arm's length."
[3] The Appellant admitted assumptions (a) to (c), (e) to (h) and (k) to (p) inclusive, but denied each and every other assumption set out above.
[4] From the evidence adduced the Court makes the following finding of facts.
[5] The Payor operates a small Inn in Charlottetown Newfoundland/Labrador a community on the Southeast coast of Labrador with a population of 312. The community is an outport in that it is only accessible by air or boat during the spring, summer and fall and only by air or skidoo in the winter.
[6] The main shareholder of the Payor was Sandy Campbell a retired employee of Newfoundland Hydro.
[7] Prior to the Cod Moratorium in 1992, the community thrived with the fishery. Following the Moratorium some fishermen fished other species, employment dropped off and a lot of the young people took advantage of the Tags program. Some moved away and others attempted to establish new businesses in the area. Those who remained received Moratorium cheques every two weeks. People in the fishery stayed out until October and when they returned busied themselves preparing for winter. Casual labour became scarce.
[8] In the summer of 1994 the Payor obtained a contract to cut two kilometres of roadway near Charlottetown. He was able to hire five people to cut and pile the wood. Approximately 40 cords of hardwood was set aside and piled at the construction area for use by the Payor in heating its Inn during the winter months. The contract was finished in early November and the employees made application for and went on unemployment insurance. The hardwood left on the site had to be cut and split, taken to the Inn and piled in the basement.
[9] The Payor had to wait until a foot of snow was on the ground to move the wood by sled and skidoo. By early December conditions were good and the Payor's attempts to hire local labour proved unsuccessful. Most were on unemployment and did not want to work.
[10] The Appellant was in a relationship with Sandy Campbell's daughter and that relationship had produced a child. They were not cohabiting but the daughter was returning to Charlottetown for Christmas with the child.
[11] In a conversation with the daughter, the Appellant learned that her father was having difficulty in finding someone to process the wood. The Appellant called Campbell and was informed that if he could get to Charlottetown from Gander where the Appellant was living, he could have the job and in addition he had other jobs at the Inn that required attention. The Appellant had worked at two jobs in the late summer and fall of 1994 for six weeks and was looking for more work so that he might ultimately get sufficient work to qualify for unemployment insurance benefits before winter set in if he was unable to find permanent employment.
[12] The Appellant arrived in Charlottetown on or about December 10th, 1994 and commenced work two days later. The Payor provided him with all the tools and equipment, took him to the site, explained what was to be done and agreed to pay him at the rate of $6.00 per hour for a 40-hour week.
[13] During the next three weeks the Appellant processed the wood, hauled it to the Inn and piled it in the wood storage area in the basement. A bricklayer by trade, he also worked on the furnace and chimney and did miscellaneous repairs in the interior of the Inn. The Payor was present and supervised the work. From time to time he was assisted by Alexander Campbell Jr. his girlfriend's brother.
[14] The Payor made the necessary deductions, paid the Appellant in cash as was the custom in Charlottetown, issued a Record of Employment showing three weeks work and a T4 slip for income tax purposes.
[15] The proper test to be applied in determining whether an employment relationship is one at arm's length is whether the dealings of the parties are consistent with the object and spirit of the provisions of the law (the Unemployment Insurance Act) and demonstrate a fair participation in the ordinary operation of the economic forces of the market place. (See Parrill et al. v. Canada (Minister of National Revenue, [1996] T.C.J. No. 1680, aff'd [1998] F.C.J. No. 836 F.C.A.) (QL).)
[16] The "economic forces of the market place" must be those that exist at the place where the employment occurs. This employment occurred at an outport in Newfoundland/Labrador with a population of 312 people most of whom at the time were either employed or on unemployment insurance and where even at the best of times available workers were scarce. One of the tasks to be performed was to repair a chimney and a furnace. The Appellant was a bricklayer by trade and was specially equipped to do the work. The Respondent submitted that the work performed by the Appellant was a variety of "odds and ends". The evidence discloses that the Appellant had to haul, cut and split 40 cords of hardwood and then pile them in a basement, hardly a task that one would describe as an "odd and end".
[17] The Respondent in argument set out the comment of Donaldson L.J. in Tanguay v. U.I.C., [1986] 68 N.R. 157 (F.C.A.) that:
"...this is an insurance scheme, however it may be funded, and that it is an insurance against unemployment. It is of the essence of insurance that the assured shall not deliberately create or increase the risk"
in support of his contention that the relationship between the Payor and the Appellant was an artificial one contrived to permit to qualify for benefits when the qualifications in support of such benefits were created by a relationship not supported by a contract of service.
[18] Tanguay (supra) has limited application. It must be remembered that the facts in Tanguay (supra) involved a group of employees who left their jobs in order to permit younger workers to replace them. The group in turn applied for unemployment insurance benefits which were refused because the group by their action were "creating" or "increasing" a "risk" that did not exist. They could have continued to work but decided to create an unemployment status that did not exist.
[19] It cannot be argued that the Appellant in this case was creating or increasing any risk to the insurance scheme when he accepted the employment of the Payor. He was merely attempting to accumulate sufficient work so that if he was ever unemployed in the future he would be able to take advantage of the benefits for which the scheme of unemployment insurance was created. He was not entitled as of right to benefits even with the minimum work requirements. He still had to be available for work and if work in his trade was available he would have to take it or lose his right to benefits under the Act. The case has no application to an employee who is involved in bona fide employment and at the same time incidentally accumulates qualifications for benefits.
[20] Every person who takes a job in seasonal employment can be said to "create" or "increase" the "risk" under the Act since they know that at the end of the season the only income available to them will come from the Fund.
[21] 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 Minister of National Revenue. In that case the Court was dealing with assumptions made by the Minister in making an assessment in a tax matter. The principles apply equally as well to assumptions made by the Minister under the Act.
[22] The following is a summary of those principles:
That it was trite law that in taxation, the standard of proof is the civil balance of probabilities and that within that balance there can be varying degrees of proof required in order to discharge the onus depending on the subject matter.
That the Minister in making assessments proceeds on assumptions and the initial onus is on the taxpayer to destroy the Minister's assumptions in the assessment. The initial burden on the taxpayer is to demolish the exact assumptions of the Minister but not more.
That the initial onus of demolishing the Minister's assumptions is met where the Appellant makes out at least a prima facie case and the law is settled that unchallenged and uncontradicted evidence demolishes the Minister's assumptions.
That where the Minister's assumptions have been demolished by the Appellant, the onus shifts to the Minister to rebut the prima facie case made out by the Appellant and to prove the assumptions.
That where the burden has shifted to the Minister and the Minister adduces no evidence the taxpayer is entitled to succeed.
[23] A prima facie is one supported by evidence which raises 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 the evidence.
[24] The key assumptions on which the Respondent based his determination are (d), (i), (j), (q), (r) and (s). The evidence adduced by the Appellant which the Court accepts created a prima facie case and effectively demolishes those assumptions. The Appellant established a prima facie case and the Respondent led no evidence to challenge or contradict that prima facie case.
[25] The Appellant's evidence supports a valid contract of service between the Appellant and the Payor. The hours of work were set by the Payor and the Payor, through its agent Sandy Campbell, supervised the Appellant during the full term of his employment.
[26] The evidence supports a finding that the Payor and the Appellant were dealing at arm's length.
[27] The employment of the Appellant by the Payor was consistent with the object and spirit of the Act. It represented a continuation of the attempt by the Appellant to obtain work to accumulate sufficient credits to qualify for unemployment insurance benefits in the event that he could not subsequently obtain permanent employment. His two previous attempts had been thwarted by circumstances beyond his control. Firstly he worked for a bridge company in Gander that went bankrupt. Secondly he took a job in a service station but was laid off due to a shortage of work.
[28] His employment by the Payor also demonstrated a fair participation in the ordinary operation of the economic forces of the market place, a market place isolated from the mainstream of economic activity with little or no available work force.
[29] From the submissions made by the Respondent it seems clear to the Court that he was basing his assumptions on the Appellant's relationship with the controlling shareholder's daughter, the father of her child and their subsequent marriage, the time of year, and his subsequent employment by the daughter's brother. Clearly, these are on their face suspicious but the Minister's assumptions must be based on relevant circumstances and not on suspicions. The Respondent in this case was required to call cogent evidence to support his assumptions and in particular that the employment of the Appellant was a sham and an artificial arrangement designed only to permit him to make application for benefits some three months down the road. No such evidence was led nor was any evidence led by way of cross-examination of the Appellant that would challenge or contradict his direct testimony.
[30] The appeal is allowed and the decision of the Minister is vacated.
Signed at Rothesay, New Brunswick, this 18th day of December 2000.
"Murray F. Cain"
D.J.T.C.C.
COURT FILE NO.: 97-901(UI)
STYLE OF CAUSE: Rick Oram and M.N.R.
PLACE OF HEARING: Goose Bay, Labrador, Newfoundland
DATE OF HEARING: June 7, 2000
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge
Murray F. Cain
DATE OF JUDGMENT: December 18, 2000
APPEARANCES:
Counsel for the Appellant: Don Singleton
Counsel for the Respondent: Scott McCrossin
Dominique Gallant
COUNSEL OF RECORD:
For the Appellant:
Name: Don Singleton
Firm: Singleton & Company
Goose Bay, Labrador, Newfoundland
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
97-901(UI)
BETWEEN:
RICK ORAM,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on June 7, 2000 at Goose Bay, Labrador, Newfoundland, by
the Honourable Deputy Judge Murray F. Cain
Appearances
Counsel for the Appellant: Don Singleton
Counsel for the Respondent: Scott McCrossin
Dominique Gallant
JUDGMENT
The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Rothesay, New Brunswick, this 18th day of December 2000.
|
"Murray F. Cain" |
D.J.T.C.C.