Date: 20010119
Docket: 2000-2373-EI
BETWEEN:
JASON MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
Docket: 2000-2374-EI
JAMES MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
Docket: 2000-2375-EI
JONATHAN MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
ROWE, D.J.T.C.C.
[1] The Minister of National Revenue (the "Minister") - by letters dated February 24, 2000 - decided the employment of each appellant with Milbrandt Homes Ltd. (MHL) during the period from January 1, 1999 to October 1, 1999 was insurable employment pursuant to a contract of service and the Minister was satisfied each appellant would have entered into a substantially similar contract of employment had they been dealing with MHL - the payor - at arm's length. Counsel for all appellants and counsel for the respondent agreed the appeals could be heard on common evidence.
[2] Doreen Miller testified she resides in Saskatoon, Saskatchewan and that - on October 31, 1973 - she and her husband - Edward Miller - incorporated Milbrandt Homes Ltd., details of which were set forth on the document - Exhibit A-1 - obtained from the Corporate Registry of the Province of Saskatchewan. She stated she and Edward Miller continued to operate MHL - a construction company engaged in residential housing - and used space in their own residence as a business office. Doreen Miller confirmed that at all material times, the common voting shares of MHL were owned as follows: Jason Miller - 16%; James Miller - 16%; Jonathan Miller - 16% and Golden Key Estates Ltd. (Golden Key) owned the remaining 52%. In turn, Doreen Miller and Edward Miller together - in equal proportion - owned 100% of the voting shares of Golden Key. All the appellants are brothers and Doreen Miller and Edward Miller are their mother and father. At all times, the directors of MHL were Jason Miller, James Miller, Jonathan Miller, Edward Miller, Doreen Miller, Lisa Miller, Anna Marie Miller and Semyra Miller. Doreen Miller stated she handled the banking and bookkeeping duties for MHL and on September 30, 1999 additional corporate profit was divided among shareholders and cheques were issued in the amounts shown in the photocopies filed as Exhibit A-2. Doreen Miller and her husband, Edward Miller, each received the sum of $6,401.75. Anna Marie Miller received a cheque in the sum of $18,776.25 and her husband - James Miller - was paid the sum of $26,387.80. Jason Miller received the sum of $26,387.80 and his wife - Lisa Miller - received a cheque in the amount of $18,776.25. The cheque from MHL to Jonathan Miller was in the sum of $26,387.80 and the amount of $18,776.25 was paid to his wife -Semyra Miller. The notation on all of the cheques - each dated March 27, 2000 - indicated the payment was by way of bonus. Attached to the list of photocopied cheques - Exhibit A-2 - was a sheet upon which a deposit slip had been reproduced indicating each cheque - issued as a bonus to each recipient as noted above - formed part of the total deposit - dated April 3, 2000 - into the corporate bank account of MHL at the National Bank of Canada in Saskatoon. The amounts paid out as bonuses were included in the deposit of the sum of $148,552.78. Doreen Miller stated she and her husband - Edward Miller - were the major shareholders in MHL through their ownership of Golden Key but her sons - the appellants - made all the major decisions and operated MHL in the course of carrying out the construction business as though they were the majority owners. Doreen Miller stated that bonus cheques would not have been issued to shareholders had they not been related to the Miller family. Similar bonuses had been paid out to the same individuals by MHL cheques dated December 28, 1999 as set forth on a sheet - Exhibit A-3 - and all of these cheques - except the one payable to Jonathan Miller - were also deposited on December 30, 1999 into the MHL business bank account. The bonuses comprising the list set forth in Exhibit A-3 - were paid out prior to the year end and the wives of the appellants were all Directors of MHL although none of them held any shares in that corporation. However, Doreen Miller stated she regarded the return of the bonus cheques by Anna Marie Miller, Lisa Miller and Semyra Miller - for purposes of deposit in the payor's bank account - as shareholder's loans and recorded them, as such, in the company books.
[3] In cross-examination, Doreen Miller stated MHL is supported by Golden Key - the corporation owned equally by herself and her husband - and if it "pulled out" of MHL, then it would be difficult for MHL to continue operations. All of the tools, equipment and vehicles needed to carry on the construction business are owned by MHL while Golden Key is involved in the rental business and owns two apartments.
[4] Jason Miller - age 30 - testified he is an appellant in the within appeal and is President of MHL. His duties include the financing, pricing and tendering on bids. He makes decisions concerning day-to-day operations of the company and is paid a salary of $3,000.00 per month together with bonuses in amounts which are not based on his personal performance but are calculated by the corporate accountant, based on the annual profitability of the corporation. Jason Miller stated that in the event he required money he merely withdrew it from the MHL business account and charged the amount against the balance of his shareholder's loan. He would discuss with his two brothers any withdrawal from the MHL bank account. Each brother - together with their mother, Doreen Miller - had signing authority and the banking authorization required any two of their signatures to issue a cheque on the MHL account. Jason Miller stated he had placed a mortgage - in the sum of $110,000.00 - on his personal residence in order to secure a loan for business purposes - to MHL - from a financial institution. Filed as Exhibit A-4, was a copy of a caveat filed by the lender against the property of Jason Miller claiming an interest therein, as mortgagor. Jason Miller stated that if one of the appellants were to leave the company, the remaining two would merely take over the duties of the departing family member until another person was hired. In his opinion, it would cost MHL additional money because a new person - not related to the Miller family - would require overtime and holiday pay and, even though this individual would not receive as much by way of bonuses as members of the Miller family, neither would that person be willing to merely have that bonus cheque deposited into the coffers of MHL. He stated it was difficult to take holidays during the summer months but if any of the brothers did so they would still receive their normal monthly pay cheque from MHL. The busy construction season extended from April through December and while there was often some work to do after that, it was during this slow period the appellants took time off.
[5] In cross-examination, Jason Miller stated that although he and his two brothers each owned 16% of the shares of MHL for a total of 48% between them, they regarded themselves as the actual owners of the corporation. The intention of the Miller family is that when Golden Key withdraws from the shareholding of MHL, he and his two brothers will then each own 33 1/3% of the shares. MHL purchases the tools, equipment and vehicles required to carry on the construction business and the MHL logo is displayed on the vehicles. All costs related to the construction business are paid directly by MHL. Jason Miller stated he and his brothers discuss business matters but - as President of MHL - he is required to perform many tasks and it would be difficult to train someone else to undertake those duties. From time to time, he relies on advice from his father but the actual operation of MHL is carried on by him and his brothers. In addition to receiving a regular monthly salary, each brother withdraws the sum of $800 per month from their shareholder's loan account. He stated he could not imagine a situation where his parents - as majority owners of MHL through their corporate vehicle, Golden Key - would ever fire him. He stated he had applied for employment insurance benefits in 1997.
[6] James Miller - age 27 - testified he is an appellant and held the position of Vice-President in MHL. He is in charge of on-site construction and supervises tradesmen, hires workers and deals with customers who purchase the homes built by the company. In the event corporate profit exceeds the sum of $200,000.00, then he - along with other family members - receives a bonus and the cheque is then endorsed by him and deposited into the MHL bank account. He referred to Exhibit A-4 and indicated the caveat also applied to land owned by him and was filed as security for a term loan to MHL by National Bank. Originally, he had a mortgage on his house in the sum of $50,000.00 but increased it to $110,000.00 in order to provide adequate security for the loan to MHL. He stated each brother performed two or three jobs at the same time, including physical work on site as well as ongoing management decisions which commenced with the purchase - by MHL - of a piece of land which they determined was suitable for purposes of development. In his opinion, a non-related person would be entitled to receive overtime pay and would - obviously - retain any bonuses paid to him by the corporation and would not be likely to allow any amount so paid to be returned to the company. The method of operation followed by the appellants in the course of operating the construction business is to locate a suitable piece of land, arrange financing for the purchase, retain an architect and then carry on the process of obtaining approval from the appropriate regulatory authority. Following the issuance of the relevant permit, the actual construction is commenced and the most recent MHL project was a 100-unit condominium. In terms of the ultimate withdrawal of Golden Key from MHL, he believed there were documents setting forth that understanding. Major corporate decisions are made in consultation with his brothers and MHL reimburses him for any expenditures made by him on behalf of the company. On occasion, the monthly payment of $800.00 received by him and usually attributable to a reduction in his own shareholder's loan balance will be recorded as applying to the shareholder's loan account in the name of his wife, Anna Marie Miller.
[7] Counsel for the respondent did not cross-examine.
[8] Jonathan Miller - age 23 - testified he is an appellant and held the office of Secretary-Treasurer in MHL. He attends at the company business office once or twice a week and looks after the bookkeeping and records. The remainder of the time he works on site. Although he only has owned his own home since last year, he stated he is prepared to mortgage it in order to secure any necessary financing to MHL. In 1999, over a period of 2 1/2 months, he built his own home and during this time he received his regular monthly salary - $2,500.00 - from MHL. He stated he receives this same amount whether he works more or less hours within any given pay period. His mother - Doreen Miller - for the past 25 years had done the company administrative duties for which he is now responsible and if he were not available to do the actual construction work on MHL projects then someone else would have to be hired but would not be paid for not working and would also be laid off during the slow period.
[9] In cross-examination, Jonathan Miller stated he has worked for MHL for seven years and received employment insurance benefits in 1997. He stated he had applied for benefits on another occasion but was refused on the basis he was still performing services for MHL.
[10] Stan Morin testified that for the past one and one-half years he has been a Canada Pension Plan/Employment Insurance Rulings Officer with Canada Customs and Revenue Agency (CCRA) and had been employed with Revenue Canada - the predecessor - in Saskatoon for six years. In reviewing the matter concerning the appellants, he found them to have been employed by MHL pursuant to a contract of service. In his opinion, any risk they incurred was in the context of being shareholders of MHL and did not arise from their working relationship. He regarded the remuneration as reasonable within the standards of the construction industry and the work performed by the appellants was required by the payor. The bonuses paid to the appellants were on the basis of them being shareholders and/or directors of the company and not as workers.
[11] In cross-examination, Stan Morin agreed a salaried employee is often not bound by hourly time restraints in the same way as an hourly worker.
[12] Counsel for the appellants submitted the evidence disclosed the majority shareholders - Doreen Miller and Edward Miller - received a small proportion - between 8% and 21% - of the bonuses issued by MHL even though they were entitled to 52% via their holdings in Golden Key. In his view, the evidence had established that the disproportionate payments to their sons - the appellants - and to their wives were undertaken only because they were related to the payor. In addition, counsel pointed out the appellants received regular pay whether more or less hours were worked within a particular period and could even continue to receive a normal pay cheque when not working for the company. In his submission, it is not possible to separate the appellants' identity as shareholders in MHL from their employment as is it all based on the family relationship.
[13] Counsel for the respondent countered by submitting the decisions of the Minister were well within the bounds permitted by the relevant jurisprudence and there was no need for any intervention by the Court.
[14] The Minister decided the appellants were related to the payor within the meaning of section 251 of the Income Tax Act, the provision utilized by paragraph 5(3)(a) of the Employment Insurance Act (the "Act") as the mechanism for determing the question whether persons are dealing with each other at arm's length. There is no dispute arising from this finding. Similarly, there is no doubt the appellants were employed by the payor pursuant to a contract of service.
[15] Pursuant to paragraph 5(2)(i) of the Act, insurable employment does not include "employment if the employer and employee are not dealing with each other at arm's length". At this point - without more - the appellants - all brothers - employed by a corporation controlled by their parents would fall into the category of excluded employment or - more precisely - employment that was not included in the category of insurable employment. However, that is not the end of the process and the Minister is required by paragraph (3)(b) of Section 5 of the Act to examine certain indicia of the said employment in accordance with the language of the provision as follows:
"(b) if the employer is, within the meaning of that Act, related to the employee, they are deemed to deal with each other at arm's length if the Minister of National Revenue is satisfied 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, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length."
[16] The first matter to be decided is whether or not there is any basis disclosed by the evidence for me to intervene in the decision of the Minister.
[17] In the case of Crawford and Company Ltd. and M.N.R., reported, [1999] T.C.J. No. 850 (QL), a decision of Porter, D.J.T.C.C. issued December 8, 1999, Judge Porter considered the appeals of three employees of the corporation, of whom two were brothers, falling into the category of related persons within the meaning of the Income Tax Act. The remaining appellant was not a related person to the corporation and this required a separate examination of the facts as no discretion had been exercised by the Minister pursuant to paragraph 5(3)(b) of the Employment Insurance Act. The analysis undertaken by Judge Porter, as it pertained to the two brothers is extensive, and is relevant to the requisite analysis undertaken in the within appeal. For that reason, I am quoting extensively from the Crawford judgment because it accords with my understanding of the law and the facts in that case are substantially similar to the within appeal. At page 21, commencing at paragraph 58, Judge Porter stated:
[58] In the scheme established under the EI Act, Parliament has made provision for certain employment to be insurable, leading to the payment of benefits upon termination, and other employment which is "not included" and thus carrying no benefits upon termination. Employment arrangements made between persons, who are not dealing with each other at arm's length, are categorized as not included. Brothers and corporations controlled by them are deemed not to be dealing with each other at arm's length pursuant to subsection 251(1) of the Income Tax Act, which governs the situation. Quite clearly the original purpose of this legislation was to safeguard the system from having to pay out a multitude of benefits based on artificial or fictitious employment arrangements, see the comments of the Federal Court of Appeal in Paul v. The Minister of National Revenue, (A-223-86) unreported, where Hugessen J. said:
We are all prepared to assume, as invited by appellant's counsel, that paragraph 3(2)(c) of the Unemployment Insurance Act, 1971, and subsection 14(a) of the Unemployment Insurance Regulations have for at least one of their purposes the prevention of abuse of the Unemployment Insurance Fund through the creation of so-called "employer-employee" relationships between persons whose relationship is, in fact, quite different. That purpose finds obvious relevance and rational justification in the case of spouses who are living together in a marital relationship. But even if, as appellant would have us do, we must look only at spouses who are legally separated and may be dealing at arm's length with one another, the nature of their relationship as spouses is such as, in our view, to justify excluding from the scheme of the Act the employment of one by the other.
...
We do not exclude the possibility that the provisions may have other purposes, such as a social policy decision to remove all employment within the family unit from the operation of the Unemployment Insurance Act, 1971, as was suggested by respondent's counsel.
[59] The harshness of this situation has however been tempered by paragraph 5(3)(b) of the EI Act, which provides for such employment between related persons to be deemed to be at arm's length and thus in turn to be treated as insurable employment, if it meets all the other provisions, where the Minister is satisfied having regard to all the circumstances of the employment, including the remuneration paid, theterms and conditions, the duration and the nature and importance of the work performed, that it is reasonable to conclude that they would have entered into a substantially similar contract if they had (in fact) been dealing with each other at arm's length.
[60] It may be helpful to reframe my understanding of this section. For people related to each other the gate is closed by the statute to any claim for insurance benefits unless the Minister can be satisfied that in effect the employment arrangement is the same as that which unrelated persons, that is persons who are clearly at arm's length, would have made. If it is a substantially similar contract of employment, Parliament has deemed it to be only fair that it should be included in the scheme. However, the Minister is the gatekeeper. Unless he is so satisfied the gate remains closed, the employment remains excepted and the employee is not eligible for benefits.
[61] Subsection 93(3) of the EI Act deals with appeals to and the determination of questions by the Minister. It requires that "the Minister shall decide the appeal within a reasonable time after receiving it and shall notify the affected persons of the decision".
[62] Thus, the Minister has no discretion whether or not to decide the question. He is required by law to do so. If he is not satisfied, the gate remains closed and the employee is not eligible. If however he is satisfied, without more ado or any action on the part of the Minister (other than notification of the decision) the employee becomes eligible for benefits, provided he is otherwise qualified. It is not a discretionary power in the sense that if the Minister is satisfied he may then deem the employment to be insurable. He must "determine the question" and depending on that determination the law deems the employment to be either at arm's length or not at arm's length. In this sense the Minister has no discretion to exercise in the true sense of the word, for in making his decision he must act quasi-judicially and is not free to choose as he pleases. The various decisions of the Federal Court of Appeal on this issue reveal that the same test applies as to a myriad of other officials making quasi-judicial decisions in many different fields. See Tignish Auto Parts Inc. v. M.N.R., 185 N.R. 73, Ferme Émile Richard et Fils Inc. v. M.N.R., 178 N.R. 361, Attorney General of Canada and Jencan Ltd., (1997) 215 N.R. 352 and Her Majesty the Queen and Bayside Drive-in Ltd., (1997) 218 N.R. 150."
[18] In the case of Adolfo Elia v. M.N.R., [1997] F.C.J. No. 316 (QL), a decision of the Federal Court of Appeal dated March 3, 1998, at page 2 of the certified translation Pratte, J.A. stated:
"Contrary to what the judge thought, it is not necessary, in order for the judge to be able to exercise that power, for it to be established that the Minister's decision was unreasonable or made in bad faith having regard to the evidence before the Minister. What is necessary is that the evidence presented to the judge establish that the Minister acted in bad faith, or capriciously or unlawfully, or based his decision on irrelevant facts or did not have regard to relevant facts. The judge may then substitute his decision for that of the Minister."
[19] In Légaré v. Canada (Minister of National Revenue), [1999] F.C.J. No. 878 - another decision of the Federal Court of Appeal - Marceau, J.A. speaking for the Court stated at page 2 of the judgment:
"In this matter, the Court has before it two applications for judicial review against two judgments by a judge of the Tax Court of Canada in related cases heard on the basis of common evidence which raise yet again the problems of interpretation and application of the saving provision, subparagraph 3(2)(c)(ii). I say yet again because since its passage in 1990, several decisions of the Tax Court of Canada and several judgments of this Court have already considered what workable meaning could be given to subparagraph 3(2)(c)(ii). In reading the text, the problems it poses beyond its deficient wording are immediately obvious, problems which essentially involve the nature of the role conferred on the Minister, the scope of the Minister's determination and, by extension, the extent of the Tax Court of Canada's general power of review in the context of an appeal under section 70 et seq. of the Act.
While the applicable principles for resolving these problems have frequently been discussed, judging by the number of disputes raised and opinions expressed, the statement of these principles has apparently not always been completely understood. For the purposes of the applications before us, we wish to restate the guidelines which can be drawn from this long line of authority, in terms which may perhaps make our findings more meaningful.
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."
[20] The assumptions of fact relied on by the Minister are set forth in paragraph 3 of each Reply to Notice of Appeal and - with minor adaptations - are the same with respect to each appellant. The assumptions contained in subparagraphs (a) through to (l) recited the structure of the payor corporation, set forth the positions held by the appellants and stated the banking authorization concerning the corporate bank account. During the period in question - January 1 to October 1, 1999 - Jason Miller and James Miller each earned a salary in the sum of $2,500.00 per month - paid every 2 weeks - and each received a bonus in the sum of $19,510.00 on December 28, 1999. Jonathan Miller received a salary of $2,500.00 per month and was issued a bonus cheque on December 28, 1999 in the sum of $23,134.50. The Minister assumed the bonuses of Jason Miller and James Miller to have been in the sum of $25,500.00 and the bonus to Jonathan to have been in the sum of $36,000.00. The difference is probably due to the amount of income tax withheld in each instance by the payor. The bonus system was designed on the basis MHL had to earn a profit of more than $200,000.00 per year prior to any distribution to directors or shareholders. The Minister also considered that each appellant was covered under a disability insurance plan in case he was unable to perform services for the payor. The Minister also relied on the fact that at no time during the relevant period did any appellant not receive his regular pay. The hours of work of each appellant were not recorded and the work week varied between 30 and 60 hours during the summer and about 30 hours a week during the winter, depending on the amount of work required to be done. Jonathan Miller - during 2 1/2 months in the summer of 1999 - worked at building his own personal residence and was still paid his regular salary and the Minister acknowledged he had taken a holiday in the summer and was also able to take extra days off on long weekends. The Minister also assumed that none of the appellants made any major decisions - including matters of finance - without discussion with the others and that decisions were taken only if the parties were unanimous. With respect to Jason Miller, the Minister assumed the corporation had paid him wages in the sum of $68,748.00 in 1996, then reduced payment in the form of wages to the sum of $32,243.00 in 1998 together with a bonus in the amount of $9,300.00. In addition, Jason Miller collected employment insurance benefits in those years in the amounts of $6,768.00 and $3,668.00, respectively. At paragraph 3(hh) of the Reply to Jason Miller's appeal, the Minister relied on the assumption that - in 1999 - the wages for senior managers in the construction industry in Saskatoon ranged from $37,000.00 to $78,000.00 per year. The Minister - at paragraph 3(ii) of the same Reply - acknowledged that the appellant had stated he and his brothers, James Miller and Jonathan Miller, operated MHL - the corporation - with a single mind in a similar fashion to a company owned 100% by one person and that each of them enjoy the benefits and responsibilities of an owner rather than an employee. In considering whether the wages paid to James Miller were reasonable, the Minister relied on the fact that - in 1996 - he had been paid wages in the amount of $68,854.00 and - in 1998 - had received the sum of $32,243.00 in wages together with a bonus in the amount of $9,300.00. In 1996 and 1998, James Miller received employment insurance benefits in the amounts of $6,768.00 and $4,032.00, respectively. In 1999, the Minister assumed that wages for construction managers in the construction industry - in Saskatoon - earned between $31,000.00 and $67,000.00 per year. With respect to Jonathan Miller, the Minister considered that MHL had paid him wages - in 1998 - in the sum of $25,883.00 together with a bonus in the amount of $36,000.00. In that year, he also collected employment insurance benefits in the sum of $3,064.00. The Minister assumed that - in 1999 - wages for a bookkeeper in Saskatoon ranged between $12,000.00 and $34,000.00 per year. The Minister took into account the fact Jonathan Miller also performed services on the job site and that if he were unavailable to perform those duties another person would have to be hired but his mother - Doreen Miller - could take over his bookkeeping duties. Similarly, if either James Miller or Jason Miller were to leave employment at MHL, the remaining brothers could assume those responsibilities in the interim but another person would be required to fulfil the duties previously carried out by the departing member. The facts relating to risk incurred by James Miller and Jason Miller in pledging their personal residences to a lender in order to secure a loan to MHL were regarded by Stan Morin - of CCRA - as an obligation arising out of their identity as shareholders of the corporation. In addition, he regarded payment of the bonuses, not as being connected to work performance, but rather having been paid solely on the basis of them being directors and/or shareholders in MHL. At the conclusion of the examination of the circumstances surrounding the employment of each appellant with the payor, the Minister - in each instance - decided their employment was insurable because of being satisfied that each appellant would have entered into a substantially similar contract of employment with the payor if they had been dealing with each other at arm's length.
[21] A peculiar aspect of the within appeals is that payments - described on the cheques as bonuses - were paid in 1999 and 2000 to the wives of the appellants. Since they were not employees or shareholders of the corporation, the bonuses must have been based on their capacity as Directors of MHL. A strange accounting concept was disclosed by the evidence when James Miller stated that, although he usually drew the sum of $800.00 per month out of his shareholder's loan account - on occasion - the same amount was paid to him by MHL, not from that account but from his wife's "shareholder's loan account". Anna Marie Miller was not a shareholder in MHL or in Golden Key, the corporation that held 52% of the outstanding shares in MHL. According to the bonus cheques forming part of Exhibit A-3, on December 28, 1999, Doreen Miller and Edward Miller each received a net bonus - from MHL - in the sum of $18,591.50. Neither of them were direct shareholders in MHL and their influence on that corporation arose from each owning 50% of Golden Key. However, according to the deposit slip forming part of said exhibit, those cheques were part of the deposit - on December 30, 1999 - into National Bank for the benefit of MHL. The notation on the said deposit slip was that the contribution from Doreen Miller and Edward Miller was also attributable to a shareholder's loan. In using the method of paying money to the Directors of MHL - once the $200,000.00 profit limit had been attained - it is apparent the controlling shareholders - through Golden Key - elected this particular method for the benefit of the corporation, probably in relation to certain higher rates being payable by corporations past that amount. In paying bonuses to the wife of each appellant, there was a recognition that these persons - not being employees of MHL - would participate in a process of receiving funds from the corporation in accordance with accounting decisions required as a matter of corporate policy, including the return of the cheques to Doreen Miller for deposit - three days later - into the payor's bank account.
[22] In Craig Brothers Limited et al. v. M.N.R. - 95-991(UI) - I heard the appeal of a corporation and family members who, although not related to the corporation in accordance with the Income Tax Act, were considered to be in insurable employment by the Minister because they were dealing at arm's length with the corporation, as a matter of fact. The evidence in that case disclosed the two Craig brothers and the other family members treated the corporation like a family bank and each appellant who was the manager of one of the corporation's stores could take out money at will from the corporation account. I found the managers - as members of the extended Craig family - and the corporation to have been inextricably intertwined so that the business was carried out in accordance with family values rather than adhering to procedures demanded even by a flexible corporate structure. Business policy was set by virtue of being members of the family rather than on the basis of being directors of the corporation. I concluded the individual appellants to have been in excluded employment by virtue of not dealing at arm's length with the corporation.
[23] In the case of David Putter v. M.N.R. - 1999-457(EI) - heard together with the appeals of Daniel Putter v. M.N.R. - 1999-456(EI) - and Equinox Industries Ltd. v. M.N.R. - 1999-458(EI) - I considered the situation of two brothers working over an extended period of time in a family business and concluded that they were not employed in insurable employment. At page 16 - paragraph 18 - I wrote the following:
"I do not intend to reiterate the evidence in the within appeals because I have examined it in the course of the process leading up to my decision to intervene. It is reasonable to conclude that after 21 years and 15 years with the corporation, David and Daniel Putter, respectively, were not employed under circumstances - including consideration of their payment of salary (below industry standard), the amount of work performed, lack of holiday time, the ability to control their remuneration, the absence of any need to follow dictates of corporate structure in accordance with majority shareholding by others and, over the course of many years, putting themselves at personal risk for company debt, clearly established they would not have entered into a similar contract of employment with Equinox if they had been dealing with the corporation at arm's length. It strikes me it is difficult - on an objective basis - to assess whether it is reasonable to conclude that the parties would have entered into a substantially similar contract of employment unless there is some evidence before the Minister as to comparable salaries or working conditions within the same - or related - industry. There is obviously room for using a yardstick against which a particular employment is to be measured because the alternative would be to permit the parties themselves to put forward the proposition that, notwithstanding the deviation from normal business practices in a similar marketplace, they still would have entered into the contract of employment on a purely subjective basis. Certainly, that is how the process works when the shoe is on the other foot and benefits have been denied to claimants because their conditions of work for a related employer do not - when all the facts have been considered - measure up to the usual or normal conditions that applied - or could be expected to apply - to non-related workers under a substantially similar contract of employment."
[24] In the within appeals, the Minister did have reference to the yardstick referred to above and the assumptions in that regard were not challenged. Unlike the fact situation in Craig Brothers, supra, there was adherence to corporate structure and while there were some peculiarities in the method of labelling and recording payments as some sort of bonuses and then noting - on deposits to MHL with regard to the cheques issued to the wives of the appellants - that the transaction was to form part of a shareholder's loan account, there was not a concerted effort to ignore the legal or practical effect of operating a business through a corporation. In the within appeals, 52% of the shares of MHL were held by another corporation - Golden Key - which was owned by the appellants' parents. There was no solid evidence of any agreement in place concerning the effect of the withdrawal of Golden Key from its participation in MHL and it was conceded Golden Key's involvement was vital to the continuation of the construction business. Unless and until it could be proven that Doreen and Edward Miller were holding those shares merely as trustees for the benefit of their sons, then the normal interpretation of corporate structure and the ensuing effect on various parties must be observed. While there may be occasions in which it is not possible to characterize the conduct of an individual as to whether it was attributable to being an employee or a director/shareholder of the payor corporation, in this instance, the Minister considered the matter and concluded the risk of James Miller and Jason Miller arose as a consequence of being shareholders in the corporation and was not directly related to their employment. Jonathan Miller - not being the owner of real property until mid-1999 - had not been called upon to pledge any personal assets as security for the MHL loan.
[25] The fact that employment insurance benefits had been paid in earlier years to the appellants is not particularly significant, except it does indicate the concept of collectiveness - to the point of near total unity with MHL - the corporation - as opposed to regarding it as a separate legal entity fulfilling the role of an ordinary employer paying the required premiums pursuant to the Employment Insurance Act - is relatively new to the Miller family. In the case of The Minister of National Revenue v. Emily Standing, 147 N.R. 238, Stone J.A. at pp. 239-240 stated:
"...There is no foundation in the case law for the proposition that such a relationship may exist merely because the parties choose to describe it to be so regardless of the surrounding circumstances when weighed in the light of the Wiebe Door test." (87 DTC 5025)
[26] In the within appeals, there remained independence of thought and purpose between the appellants and the corporation and each of them owned only 16% of the shares in MHL. As a matter of law, each one was subject to discharge and all three could have been ousted by virtue of their parents - through Golden Key - exercising their rights flowing from ownership of 52% of the shares in MHL. Protection against involuntary withdrawal from the workplace - and the ability to provide benefits to laid-off workers - has always been the raison d'être of the national unemployment/employment insurance scheme. I cannot find on the evidence that the Minister ignored any facts which could lead to the conclusion that there was no adverse economic interest between each appellant and the payor. Certainly, Jonathan Miller - being the youngest and least experienced worker - received a lesser salary than his brothers. He was also in the process of completely taking over the administrative duties associated with the business that had been performed by Doreen Miller for 25 years and performed some duties on the job site.
[27] I point out that in considering this matter, it is not my function to substitute my opinion for that of the Minister. Whether or not I would have arrived at the same conclusion in the first instance is irrelevant. The relevant jurisprudence requires the threshold for any intervention to be established as a consequence of finding the Minister acted in bad faith, capriciously or unlawfully, or based the decision on irrelevant facts or ignored relevant facts.
[28] Having considered the evidence as a whole, I cannot find the Minister to have been in error in concluding the appellants were employed in insurable employment with the payor during the relevant period and the decisions dated February 24, 2000 are confirmed. The appeal of each appellant is hereby dismissed.
Signed at Sidney, British Columbia, this 19th day of January 2001.
"D.W. Rowe"
D.J.T.C.C.
COURT FILE NO.: 2000-2373(EI)
STYLE OF CAUSE: Jason Miller and M.N.R.
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: November 21, 2000
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge D.W. Rowe
DATE OF JUDGMENT: January 19, 2001
APPEARANCES:
Counsel for the Appellant: Brent R. Hillestad
Counsel for the Respondent: Suzanne Lalonde
COUNSEL OF RECORD:
For the Appellant:
Name: Brent R. Hillestad
Firm: Leland Kimpinski
Saskatoon, Saskatchewan
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
COURT FILE NO.: 2000-2374(EI)
STYLE OF CAUSE: James Miller and M.N.R.
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: November 21, 2000
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge D.W. Rowe
DATE OF JUDGMENT: January 19, 2001
APPEARANCES:
Counsel for the Appellant: Brent R. Hillestad
Counsel for the Respondent: Suzanne Lalonde
COUNSEL OF RECORD:
For the Appellant:
Name: Brent R. Hillestad
Firm: Leland Kimpinski
Saskatoon, Saskatchewan
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE NO.: 2000-2375(EI)
STYLE OF CAUSE: Jonathan Miller and M.N.R.
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: November 21, 2000
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge D.W. Rowe
DATE OF JUDGMENT: January 19, 2001
APPEARANCES:
Counsel for the Appellant: Brent R. Hillestad
Counsel for the Respondent: Suzanne Lalonde
COUNSEL OF RECORD:
For the Appellant:
Name: Brent R. Hillestad
Firm: Leland Kimpinski
Saskatoon, Saskatchewan
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2373(EI)
BETWEEN:
JASON MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeals of James Miller (2000-2374(EI)) and Jonathan Miller (2000-2375(EI)) on November 21, 2000, at Saskatoon, Saskatchewan, by
the Honourable Deputy Judge D.W. Rowe
Appearances
Counsel for the Appellant: Brent R. Hillestad
Counsel for the Respondent: Suzanne Lalonde
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 19th day of January 2001.
|
"D.W. Rowe" |
D.J.T.C.C.
2000-2374(EI)
BETWEEN:
JAMES MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeals of Jason Miller (2000-2373(EI)) and Jonathan Miller (2000-2375(EI)) on November 21, 2000, at
Saskatoon, Saskatchewan, by
the Honourable Deputy Judge D.W. Rowe
Appearances
Counsel for the Appellant: Brent R. Hillestad
Counsel for the Respondent: Suzanne Lalonde
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 19th day of January 2001.
|
"D.W. Rowe" |
D.J.T.C.C.
2000-2375(EI)
BETWEEN:
JONATHAN MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeals of Jason Miller (2000-2373(EI)) and James Miller (2000-2374(EI)) on November 21, 2000, at
Saskatoon, Saskatchewan, by
the Honourable Deputy Judge D.W. Rowe
Appearances
Counsel for the Appellant: Brent R. Hillestad
Counsel for the Respondent: Suzanne Lalonde
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 19th day of January 2001.
|
"D.W. Rowe" |
D.J.T.C.C.