2000-2256(EI)
BETWEEN:
ANTHONY MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on June 5, 6, 7, 8 and August 27, 28, 29 and 30, 2001
at Charlottetown, Prince Edward Island by
the Honourable Judge Gordon Teskey
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Dany Leduc
Dominique Gallant
JUDGMENT
The appeal is dismissed and the Minister's decision is confirmed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 26th day of September, 2001.
|
"Gordon Teskey" |
J.T.C.C.
Date: 20010926
Docket: 2000-2256(EI)
BETWEEN:
ANTHONY MILLER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
TeskeyJ.
[1] The Appellant appealed to the Minister of National Revenue (the "Minister") from a ruling that he was not employed in insurable employment while engaged by Agpro Services Inc. (the "Payor") for the period from May 28, 1998 to October 24, 1998 (the "period in question") within the meaning of the Employment Insurance Act (the "Act").
[2] By letter dated February 4, 2000, the Minister informed the Appellant that his appeal of the ruling was denied, in that he determined that the Appellant's engagement with the Payor during the period in question was not insurable employment, but was excepted employment as the Appellant and the Payor were not dealing with each other at arm's length within the provisions of paragraph 5(2)(a) of the Act. It is from this determination the Appellant appeals to this Court.
[3] Paragraph 5(1) of the Act determines what is insurable employment subject to paragraph 5(2). Paragraph 5(2) excludes employment that is not at arm's length. Paragraph 5(3) provides an exception to paragraph (2) above where the Minister deems the employment to be at arm's length having regard to all the terms of the contract. The relevant portions of paragraph 5(1), (2) and (3) read:
5(1) Subject to subsection (2), insurable employment 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;
...
5(2) Insurable employment does not include
...
(i) employment if the employer and employee are not dealing with each other at arm's length.
5(3) For the purposes of paragraph (2)(i),
(a) the question of whether persons are not dealing with each other at arm's length shall be determined in accordance with the Income Tax Act; and
(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.
[4] It is noted that paragraphs 3(1)(a) and 3(2) of the old Unemployment Insurance Act (the "Old Act"), for all intents and purposes means the same as the above provisions.
[5] The leading Federal Court of Appeal decision on the provisions under the Old Act is a decision dated June 24, 1997 by Isaac C.J., as he then was, in Attorney General of Canada v. Jencan Ltd., [1998] 1 F.C. 187. He said in paragraphs 24 and 25 thereof:
The Minister's determination under paragraph 3(1)(a) that the worker's employment is not pursuant to a contract of service is a quasi-judicial decision subject, on appeal, to independent review by the Tax Court. In contrast, this Court established in Tignish, supra, that the Tax Court must exhibit a higher degree of judicial deference in reviewing a determination by the Minister under subparagraph 3(2)(c)(ii). As will be seen, it is only where the Tax Court concludes that the Minister exercised his discretion in a manner contrary to law that the Tax Court should pass to a review of the merits of the Minister's determination under this latter provision.
In Canada v. Schnurer Estate, this Court made it clear that, on appeal, the Tax Court must consider whether there is a sufficient factual foundation for the Minister's determination on either or both of the grounds advanced by the Minister. The Tax Court must, therefore, review each of the grounds separately in the light of the evidence. Firstly, was the employment pursuant to an express or implied contract of service? If not, the employment is not insurable unless it falls within one of the exceptions to paragraph 3(1)(a) in subsection 4(1) or in a regulation enacted pursuant to subsection 4(2). Secondly, if it is employment under a contract of service or if it is otherwise insurable under section 4, is it "excepted employment" within the meaning of subsection 3(2)?
and at paragraph 29:
... The critical issue in this application for judicial review is whether the Deputy Tax Court Judge erred in law in interfering with the discretionary determination made by the Minister under subparagraph 3(2)(c)(ii). This provision gives the Minister the discretionary authority to deem "related persons" to be at arm's length for the purposes of the UI Act where the Minister is of the view that the related persons would have entered into a substantially similar contract of service if they had been at arm's length.
and again, at paragraph 31:
The decision of this Court in Tignish, supra, requires that the Tax Court undertake a two-stage inquiry when hearing an appeal from a determination by the Minister under subparagraph 3(2)(c)(ii). At the first stage, the Tax Court must confine the analysis to a determination of the legality of the Minister's decision. If, and only if, the Tax Court finds that one of the grounds for interference are established can it then consider the merits of the Minister's decision. As will be more fully developed below, it is by restricting the threshold inquiry that the Minister is granted judicial deference by the Tax Court when his discretionary determinations under subparagraph 3(2)(c)(ii) are reviewed on appeal. ...
and again, at paragraphs 33 and 34:
Section 70 provides a statutory right of appeal to the Tax Court from any determination made by the Minister under section 61, including a determination made under subparagraph 3(2)(c)(ii). The jurisdiction of the Tax Court to review a determination by the Minister under subparagraph 3(2)(c)(ii) is circumscribed because Parliament, by the language of this provision, clearly intended to confer upon the Minister a discretionary power to make these determinations. The words "if the Minister of National Revenue is satisfied" contained in subparagraph 3(2)(c)(ii) confer upon the Minister the authority to exercise an administrative discretion to make the type of decision contemplated by the subparagraph. Because it is a decision made pursuant to a discretionary power, as opposed to a quasi-judicial decision, it follows that the Tax Court must show judicial deference to the Minister's determination when he exercises that power. Thus, when Décary J.A. stated in Ferme Émile, supra, that such an appeal to the Tax Court "more closely resembles an application for judicial review", he merely intended, in my respectful view, to emphasize that judicial deference must be accorded to a determination by the Minister under this provision unless and until the Tax Court finds that the Minister has exercised his discretion in a manner contrary to law.
If the Minister's power to deem "related persons" to be at arm's length for the purposes of the UI Act is discretionary, why, one might ask, does the right of appeal to the Tax Court under section 70 apply to subparagraph 3(2)(c)(ii) at all? The answer is that even discretionary powers are subject to review to ensure that they are exercised in a judicial manner or, in other words, in a manner consistent with the law. It is a necessary incident of the rule of law that all powers granted by Parliament are of an inherently limited nature. In D. R. Fraser and Co., Ld. v. Minister of National Revenue, Lord Macmillan summarized the legal principles which ought to govern such review. He stated:
The criteria by which the exercise of a statutory discretion must be judged have been defined in many authoritative cases, and it is well settled that if the discretion has been exercised bona fide, uninfluenced by irrelevant considerations and not arbitrarily or illegally, no court is entitled to interfere even if the court, had the discretion been theirs, might have exercised it otherwise.
...
and again, at paragraphs 36 and 37:
Thus, by limiting the first stage of the Tax Court's inquiry to a review of the legality of ministerial determinations under subparagraph 3(2)(c)(ii), this Court has merely applied accepted judicial principles in order to strike the proper balance between the claimant's statutory right to have a determination by the Minister reviewed and the need for judicial deference in recognition of the fact that Parliament has entrusted a discretionary authority under this provision to the Minister.
On the basis of the foregoing, the Deputy Tax Court Judge was justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii) only if it was established that the Minister exercised his discretion in a manner that was contrary to law. And, as I already said, there are specific grounds for interference implied by the requirement to exercise a discretion judicially. The Tax Court is justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii) - by proceeding to review the merits of the Minister's determination - where it is established that the Minister: (i) acted in bad faith or for an improper purpose or motive; (ii) failed to take into account all of the relevant circumstances, as expressly required by paragraph 3(2)(c)(ii); or (iii) took into account an irrelevant factor.
and again, at paragraphs 41, 42 and 43:
An important point needs to be made here. While all interested parties, including the worker and the respondent, are given the opportunity to make submissions to a Revenue Canada appeals officer prior to a determination by the Minister under subsection 61(3) of the UI Act, there is no opportunity to respond to the evidence collected by the appeals officer or to make submissions directly to the Minister prior to his determination. It was, presumably, in recognition of this fact that Parliament provided claimants with an appeal as of right from a determination by the Minister under section 70. On appeal, the facts relied upon by the Minister in making his determination are treated as assumptions, or allegations, of fact. Although the claimant, who is the party appealing the Minister's determination, has the burden of proving its case, this Court has held unequivocally that the claimant is entitled to bring new evidence at the Tax Court hearing to challenge the assumptions of fact relied upon by the Minister.
Thus, while the Tax Court must exhibit judicial deference with respect to a determination by the Minister under subparagraph 3(2)(c)(ii) - by restricting the threshold inquiry to a review of the legality of the Minister's determination - this judicial deference does not extend to the Minister's findings of fact. To say that the Deputy Tax Court Judge is not limited to the facts as relied upon by the Minister in making his determination is not to betray the intention of Parliament in vesting a discretionary power in the Minister. In assessing the manner in which the Minister has exercised his statutory discretion, the Tax Court may have regard to the facts that have come to its attention during the hearing of the appeal. As Desjardins J.A. stated in Tignish:
... the court is entitled to examine the facts which are shown by evidence to have been before the Minister when he reached his conclusion so as to determine if these facts are proven. But, if there is sufficient material to support the Minister's conclusion, the court is not at liberty to overrule it merely because it would have come to a different conclusion.
Subparagraph 3(2)(c)(ii) specifies that, in determining whether the worker and the respondent would have entered into a substantially similar contract of service if they had been at arm's length, the Minister must consider "all the circumstances of the employment", including: the remuneration paid to the worker; the terms and conditions of the employment; the duration of the employment; and the nature and importance of the work performed. ...
and again, at paragraphs 50, 51 and 52:
The Deputy Tax Court Judge, however, erred in law in concluding that, because some of the assumptions of fact relied upon by the Minister had been disproved at trial, he was automatically entitled to review the merits of the determination made by the Minister. Having found that certain assumptions relied upon by the Minister were disproved at trial, the Deputy Tax Court Judge should have then asked whether the remaining facts which were proved at trial were sufficient in law to support the Minister's determination that the parties would not have entered into a substantially similar contract of service if they had been at arm's length. If there is sufficient material to support the Minister's determination, the Deputy Tax Court Judge is not at liberty to overrule the Minister merely because one or more of the Minister's assumptions were disproved at trial and the judge would have come to a different conclusion on the balance of probabilities. In other words, it is only where the Minister's determination lacks a reasonable evidentiary foundation that the Tax Court's intervention is warranted. An assumption of fact that is disproved at trial may, but does not necessarily, constitute a defect which renders a determination by the Minister contrary to law. It will depend on the strength or weakness of the remaining evidence. The Tax Court must, therefore, go one step further and ask itself whether, without the assumptions of fact which have been disproved, there is sufficient evidence remaining to support the determination made by the Minister. If that question is answered in the affirmative, the inquiry ends. But, if answered in the negative, the determination is contrary to law, and only then is the Tax Court justified in engaging in its own assessment of the balance of probabilities. Hugessen J.A. made this point most recently in Hébert, supra. At paragraph 5 of his reasons for judgment, he stated:
In every appeal under section 70 the Minister's findings of fact, or "assumptions", will be set out in detail in the reply to the Notice of Appeal. If the Tax Court judge, who, unlike the Minister, is in a privileged position to assess the credibility of the witnesses she has seen and heard, comes to the conclusion that some or all of those assumptions of fact were wrong, she will then be required to determine whether the Minister could legally have concluded as he did on the facts that have been proven. That is clearly what happened here and we are quite unable to say that either the judge's findings of fact or the conclusion that the Minister's determination was not supportable, were wrong. [Emphasis added.]
The Deputy Tax Court Judge erred in law in failing to determine whether the Minister could have legally concluded as he did on the facts as proved before him. Consequently, he was not in a position at law to come to his own conclusion on the balance of probabilities. In short, by reviewing the merits of the determination without first concluding that the Minister exercised his discretion in a manner that was contrary to law, the Deputy Tax Court Judge failed to exhibit the degree of judicial deference required when reviewing ministerial determinations under subparagraph 3(2)(c)(ii).
In reaching this conclusion, I am not unmindful of the fact that the Deputy Tax Court Judge found two of the assumptions which supported the Minister's determination to have been disproved at trial. However, having found that the Deputy Tax Court Judge failed to determine whether or not there remained sufficient evidence to support the Minister's determination, it is not for us to decide this question on an application for judicial review since we do not have the authority, ...
[6] The Federal Court of Appeal, dealing with these same provisions, gave an oral judgment the following March in Elia v. Canada, [1998] F.C.J. No. 316. Therein, Pratte J.A. said at paragraphs 2 and 3:
... 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.
... the well-settled rule that the allegations in the reply to the notice of appeal, in which the Minister states the facts on which he based his decision, must be assumed to be true as long as the appellant has not proved them false.
[7] In the Reply to the Notice of Appeal, paragraph 6 deals with the facts assumed by the Minister when making his determination. In order, they read:
a) the Payor was a corporation duly registered in the Province of Prince Edward Island on or about August 25, 1983;
b) during the period in question, the Payor's shares were owned as follows:
the Appellant Pres. 759 sh.
Phillips Miller (Appellant's brother) V.P. 624 sh.
Jacqueline Nelder Secr. 24 sh.
Carmen Miller (Appellant's spouse) 325 sh.
Corey Miller (Appellant's son) 733 sh.
Heidi Miller (Appellant's daughter) 300 sh.
Teresa Miller (Appellant's sister-in-law) 2 sh.
Karl Kenny 733 sh.
c) the Appellant has been involved with the Payor since the incorporation;
d) the Payor's business consisted of cleaning, disinfecting and whitewashing farm buildings;
e) the Payor operates approximately from May to October or November each year;
f) the Appellant's duties consisted of general work in the Payor's shop, of making the paint or whitewash, of doing repairs, of solving problems and of keeping the operation going;
g) the Appellant's salary is reported as $500 per week;
h) the Appellant's weekly salary has fluctuated over the years as follows:
1998 $500
1997 $400
1996 $600
1995 $800
i) The duration of the Appellant's period of employment has fluctuated over the years in apparent relation to the yearly requirements for him to qualify for unemployment benefits, as follows:
Reported Required
1998 920 hours 910 hours
1997 490 hours 420 or 454 hours
1996 14 weeks 12 or 14 weeks
1995 13 weeks 12 weeks
j) in 1998, Stephane Galaise Payor's salesman was named manager during his period of employment from May 3rd to August 29th;
k) the Appellant was also manager of the Payor's operations during the season;
l) on the Payor's books, there is a shareholder loan outstanding from the Appellant for $81,408 since 1983; it has a repayment schedule of $6,788.41 in yearly instalments plus interest;
m) the payments made to the Appellant in the form of cheques, cash and through use of a direct charge card, of which the charges were paid for by the Payor;
n) the payments made to the Appellant by the Payor consisted of a combination of payments for wages, loan repayment and rent;
o) the documentary evidence provided is insufficient to determine whether the Appellant received all his wages;
p) all money deposited in the Payor's business bank account is automatically transferred to a personal account in the name of the Appellant and the Payor's secretary and accountant;
q) the Appellant paid the Receiver General from a personal joint account between himself and his spouse;
r) the Appellant allowed his sons the use of the Payor's money when they were not employed by the Payor;
s) the Payor operates from the Appellant's personal residence;
t) the Payor's business phone number is the same as the Appellant's personal phone number which is registered in his spouse's name;
u) the Appellant claimed a rental loss on his 1998 tax return which resulted from the Payor's use of the Appellant's office and building;
v) the Appellant performed services for the Payor outside the period in question without remuneration;
w) the Payor continued to operate after the period in question and had employees on the payroll until November 14, 1998.
x) the Appellant is related to the Payor within the meaning of the Income Tax Act;
y) the Appellant is not dealing with the Payor at arm's length;
[8] Before I deal with these assumed facts, I would like to comment in general on the witnesses.
[9] There were five witnesses called by the Appellant who were Government of Canada employees and one employee of the Province of Prince Edward Island, namely:
Susan Afflect (Afflect) Insurance Program Advisor,
Human Resources Development Canada ("HRDC")
Laurena Wooldridge (Wooldridge) Investigator and Control Officer,
HRDC
Darlene Doiron (Doiron) Senior Business Agent,
Canada Custom and Revenue Agency
("CCRA")
Rosemary Ford (Ford) Collection Officer,
CCRA
Walter McDonald (McDonald) Chief of Appeal,
CCRA
Sheila MacNerim (MacNerim) Secretary, Corporation Division,
Department of Community Services
P.E.I.
[10] I find that all six of these witnesses handled themselves in the witness box in a professional manner and their evidence is accepted. In particular, Ford's evidence was given calmly, dispassionately, carefully referring to her file so as not to make a mistake or in any way mislead. CCRA can be very proud of this very capable and deliberate employee. These comments also apply to McDonald. There is absolutely no evidence that any of these employees acted in bad faith or for an improper purpose or motive, in fact, their testimony demonstrates that they take their job seriously and acted with the utmost good faith with no ulterior motive or purpose.
[11] Thus, I now must determine if McDonald, using Ford's report:
(a) failed to take into account all the relevant circumstances, as required by paragraph 5(3)(b); or
(b) took into account irrelevant factors.
[12] As Pratte J.A. said in Elia above, it is the well settled rule that the assumptions of fact made by the Minister must be assumed true, as long as the Appellant has not proven them false.
[13] I list those assumptions by letter which were either admitted or confirmed by the evidence or no acceptable evidence was given to refute them: (a), (c), (g), (h), (j), (k), (l), (m), (n), (o), (p), (q), (t), (x) and (y).
[14] Although the facts in (l), (o), (p) and (q) are accurate, I want to comment on each:
(l) Exhibit A-27 is a balance sheet for the Payor, as at December 31, 1994. Under the heading "Notes Payable", are two figures, namely $7,735 and $93,869 with the following notation:
"payable to shareholders, non interest bearing, no set terms of repayment"
There is no mention of shareholder loan in the Minute Book in 1995. There is the following in the Shareholders Book:
"Directors meeting 04 November 1996. Resolution: that, as of 01 August 1996, shareholder balances of over $10,000 to be repaid on a yearly schedule based upon the length of the term of incurrence with interest."
There is not any subsequent mention of the Appellant's loan in the Shareholders Book after the above. The Appellant produced a schedule of shareholder balance repayment (Exhibit A-42) which reads as follow:
BEG INT PRINC TOTAL END
DATE BALANCE EXP PYMT PAYMENT BALANCE
01 AUG 96 95,037.71
31 DEC 96 95,037.71 791.98 6,788.41 7,580.39 88,249.30
31 DEC 97 98,249.30 1,764.99 6,788.41 8,553.39 81,460.39
31 DEC 98 81,460.89 1,629.22 6,788.41 8,417.63 74,672.49
31 DEC 99 74,672.49 1,493.45 6,788.41 8,261.86 67,884.08
31 DEC 00 67,884.08 1,357.68 6,788.41 8,146.09 61,095.67
31 DEC 01 61,095.67 1,221.91 6,788.41 8,010.32 54,307.26
31 DEC 02 54,307.26 1,086.15 6,788.41 7,874.55 47,516.86
31 DEC 03 47,518.86 950.38 6,788.41 7,738.78 40,730.45
31 DEC 04 40,730.45 814.61 6,788.41 7,603.02 33,942.04
31 DEC 05 33.942.04 678.84 6,788.41 7,467.25 27,153.63
31 DEC 06 27,153.63 543.07 6,788.41 7,331.48 20,365.22
31 DEC 07 20,365.22 407.30 6,788.41 7,195.71 13,576.82
31 DEC 08 13,576.82 271.54 6,788.41 7,059.94 6,788.41
31 DEC 09 6,788.41 135.77 6,788.41 6,924.16 0.00
13,146.88 95,037.71 108,184.59
The balance sheet as at December 31, 1997 in regards to the $81,408 loan states: "payable to shareholder, interest bearing no set terms of repayment".
The balance sheet as at November 30, 1998 states: "Anthony Miller loan :- interest at 4% payable in equal yearly installment of $6,788.41 plus interest. Loan incurred over 13 years from 1989 to 1996 to finance company."
It is noted that the schedule produced only shows interest at the rate of two percent per annum. Thus, the figure in assumption paragraph l) of $81,408 is the approximate amount of the loan as of January 1st, 1998 after applying the payment of $6,766.41 of principal, which was supposed to have been paid on December 31, 1997.
(o) Although this is a conclusion, I concur and even after the hearing, when the Appellant had the opportunity to produce books and records to demonstrate that they were clear and proper, he failed to produce any original records and what records were produced were insufficient and impossible to reconcile;
(p) Both the Appellant and his brother claim the reason for this was unreasonably high service charges by the Bank of Nova Scotia on a corporate account. Although this may be partially true, I cannot believe that it was the only reason. The Bank of Nova Scotia corporate account was seized by Revenue Canada for non payment of GST. Under the current scheme, money coming into the corporate account is immediately transferred out so that a garnishee would obtain nothing. On the other hand, the cheques that pay all current expenses and wages look like a corporate cheque, notwithstanding the account was in the Appellant's and Nelder's name. Thus, a creditor (who had received a cheque from the Payor and then successfully sued the Payor, then, on a writ of execution against the Payor) who attempted to seize the account would get nothing as the account was not the Payor's. This linking of the accounts held potential creditors off and only the pumps and vehicles of the Payor which have very little value could be seized.
(q) Although this is a fact, the Appellant was able to demonstrate that the corporation did in fact pay him and his spouse the money (Exhibit A-20). The August 18, 1998 cheque was made out to the Appellant, the July 3, 1999 cheque was made out to his spouse, and the third cheque dated September 24, 1998 was made out to cash. I conclude when the Appellant, on behalf of the Payor, made the settlement with Revenue Canada for these arrears of GST, gave personal post-dated cheques rather than corporate cheques because he did not know if the corporation would have the funds when the agreed upon payment were to be made . Thus by giving personal cheques Revenue Canada would receive payments as agreed upon. The Payor reimbursed the Appellant with these three cheques.
[15] Dealing with those assumptions of fact by letter which were partially correct containing what I consider immaterial errors are:
(b) Karl Kenny only held 133 shares and not 733 as stated. The Appellant was the Vice-President and Phillip was the President;
(d) The word "whitewashing" is wrong and should have read "painting";
(f) The word "whitewashing" should not have been in this statement.
[16] Before dealing with the balance of the assumptions of fact, I wish to discuss and review, in a general way, the evidence given by the witnesses for the Appellant not already mentioned and my conclusions about their testimony.
[17] Stephane Galaise's ("Galaise") parents have been close friends with the Appellant and his wife for many years, he is also the Appellant's godson. His testimony was vague and hesitant. When asked if he received all his wages, he replied: "I would imagine."; when asked how, the answer was "Cheques mostly", that probably varied week to week.
[18] The corporate resolutions of the Payor of April 13, 1998 and April 16, 1998 set out the rate of pay at 13 percent and set out his duties. The Payor's payroll shows $750 for each and every week worked, except for two $60 entries for the last two weeks of September. He could not say why he did not work for two weeks in June. When the pay is reconciled by the cheques, (part of Exhibit A-13), it shows a very different story.
|
|
S.Galaise |
|
|
|
|
|
|
DATE |
GROSS |
NET |
|
CHEQUES DATE |
AMT |
# |
|
May 09 |
750 |
519.51 |
|
27-May |
100 |
2259 |
|
May 16 |
750 |
519.51 |
|
June 12 |
500 |
2053 |
|
May 23 |
750 |
519.51 |
|
June 12 |
40 |
2054 |
|
May 30 |
750 |
519.51 |
|
Jun-12 |
713.5 |
2276 |
|
June 06 |
750 |
519.51 |
|
Jun-18 |
350 |
2067 |
|
June 13 |
|
|
|
Jul-07 |
200 |
2115 |
|
June 20 |
|
|
|
Jul-10 |
300 |
2133 |
|
June 27 |
750 |
519.51 |
|
Jul-11 |
522.99 |
2159 |
|
Jul-04 |
750 |
519.51 |
|
Jul-20 |
522.99 |
2163 |
|
Jul-11 |
750 |
519.51 |
|
Jul-25 |
522.99 |
2192 |
|
Jul-18 |
750 |
519.51 |
|
Aug-01 |
522.99 |
2215 |
|
Jul-25 |
750 |
519.51 |
|
Aug-08 |
522.99 |
2231 |
|
Aug-01 |
750 |
519.51 |
|
Jul-18 |
522.99 |
2174 |
|
Aug-08 |
750 |
519.51 |
|
Aug-28 |
422.99 |
2313 |
|
Aug-15 |
750 |
519.51 |
|
Aug-15 |
522.99 |
2245 |
|
Aug-22 |
750 |
519.51 |
|
Oct-02 |
150 |
2363 |
|
Aug-29 |
750 |
519.51 |
|
Sep-22 |
200 |
2346 |
|
Sep-05 |
|
|
|
Sep-10 |
200 |
2338 |
|
Sep-12 |
|
|
|
|
|
|
|
Sep-19 |
60 |
58.38 |
|
|
|
|
|
Sep-26 |
60 |
58.38 |
|
|
|
|
|
Oct-03 |
0 |
|
|
|
|
|
|
Oct-10 |
0 |
|
|
|
|
|
|
Oct-17 |
0 |
|
|
|
|
|
|
|
Total |
7909.41 |
|
|
6837.42 |
|
|
|
|
|
|
Cash J. |
139.09 |
|
|
|
|
|
|
|
6976.51 |
|
|
|
|
|
|
932.90 |
|
|
When the Cash Journal is checked, Galaise only received $139.09 in cash. Thus, the Payors records show he was shorted by $932.90 of the alleged pay. From this, I conclude that although Galaise was paid on a commission basis, the payroll was set up as $750 per week for some ulterior purpose.
[19] The only 1998 financial statement for the Payor is as of November 30; it shows revenues of $137,960. When each job is completed, the crew picks up a cheque for the work, however, for analysis, I will use a figure of $150,000 (Phillip Miller says $145,000) for the full year. The total wage cost should be 13 percent of the contracts performed as sales commissions, and 13 percent as wages for the work performed by the employees doing the painting together with the wages for the Appellant, Nelder and those of Wayne Frances, that were based on an hourly rate and not a percentage:
(13 percent of $150,000 twice equals $39,000) $39,000
Appellant's wages 23 x 500 11,500
Nelder's wages 600 x 13 = 7,800
Wayne's wages 64 x 4 = 256
8,056
Total $ 58,556
[20] The Balance Sheet as of November 30, 1998 shows wages for the period of $91,972. The amount of $58,556, even acknowledging that does not take into account the employer's portion of EI and CPP premiums and demonstrate a very significant shortfall. I put very little weight, if any, on Galaise's testimony as he was not a credible witness. This also demonstrates that the records of the Company do not reconcile nor coincide with the oral testimony.
[21] Philip Miller's testimony was a disaster. He had an accident in June of 1995 and has not been employed since that date. He does own 17 percent of the issued shares of the Payor and does have something less than $2,000 invested in the Payor. I do not accept any of his testimony. He is confined to a wheelchair and could not answer many basic questions in cross-examination and was obviously trying to be helpful to his brother.
[22] Jackie Nelder ("Nelder"), a chartered accountant, was called as a witness only after I advised the Appellant in strong terms that I would probably draw a conclusion in her absence that her testimony would be detrimental. She was the only truly impartial witness in this hearing, since she left the Payor in 1999, and moved away from the community and now has a full time job elsewhere.
[23] I would have thought that the Appellant would have had all original documents here in Court so that she could refresh her memory. This was not available and therefore, she had to answer many questions with "I do not remember" or "I do not know".
[24] I accept as factual when she said that her boss was the Appellant, and that he opened the office for her when she worked and managed the Payor to a certain extent at all times.
[25] She said all employees at times had to wait for their pay if there was a shortage of funds and that the Appellant waited the longest to receive his pay. She also stated that she had nothing to do with the setting of the Appellant's wages. I accept this as factual. The Appellant, as his brother tried to convince me, that the Appellant's wages were set by the Board of Directors. I am satisfied the Appellant set his own wages and his alleged period of employment.
[26] As far as the Appellant's testimony, I accept some and believe that at times, the whole story did not come out. I believe him to be a hardworking intelligent individual who believes that he should be entitled to benefits under the Act. I cannot accept his testimony in full where it conflicts with Nelders or with some of the written documentation.
[27] Both the Appellant and Nelder at the best were not careful in many aspects. The Appellant swore an Affidavit on the 6th day of April 1998, wherein the first paragraph reads: "I am the President". He shrugs this off as saying boiler plate and that he did not notice this. However, this Affidavit was used in a court action by the Payor in another proceeding. This affidavit was used and misleed the Tax Court Judge hearing that proceeding. This drives me to be hesitant to accept his testimony at face value where not corroborated or if his testimony was not helpful to his appeal.
[28] Nelder's work was not of a good professional standard and a review of many of the exhibits prepared by her substantiates this, particularly Exhibit A-3, where it reads: "Statement of earning for year ended November 30, 1998". Anyone reading this would infer that the Payor's year end was November 30. She admitted the offending words of "year ended" should not have been there and words such as "as of" should have been used. She was unable to explain why legal fees are shown as an asset in the same statement.
[29] As for the balance of the assumptions made by the Minister, I will now deal with them.
Paragraph (i)
[30] This was a rather important assumption which was wrong. In actual fact, the number of hours required in 1997 was also 910 hours. Nine hundred and ten hours are required for first time receivers of benefits. As the Appellant's request for benefits in 1996 was denied, he would have been considered a first time applicant in 1997. Many workers were unaware of this and I conclude that the Appellant believed he only needed the 420 to 454 hours in 1997 to qualify.
[31] It was never explained why the Appellant worked 920 hours in 1998 and only 490 hours in 1997 when the volume of business in 1998 was only up about 15 percent and the job obligations was the same. I conclude that the Appellant's stated period of work was only for the purpose of claiming benefits under the Act and that his actual number of hours of work is entirely different both as to amount and compensation.
Paragraph (r)
[32] Corey Miller did work for the Payor, or at least was shown on the payroll for weeks ending October 3 and October 10. Cash payments were made as follow:
DATE AMOUNT
June 12, 1998 51.40
June 22, 1998 88.00
September 3, 1998 100.00
September 18, 1998 60.00
November 6, 1998 120.00
Only the first payment was satisfactorily explained.
[33] Troy Miller was never employed by the Payor in 1998. The cash payments to him are:
DATE AMOUNT
July 16, 1998 120.00
September 3, 1998 100.00
September 18, 1998 60.00
It should be noted that these last two items have been placed in the wrong column of the cash journal by Nelder. There were no documents produced to back up the books of the Payor and the bookkeeping was sadly lacking.
Paragraph (s)
[34] This is only partly true. It is accurate for the first part of the year and that on or about June 19, 1998, the Payor passed a resolution to rent and occupy a new building and office located on the Appellant's land near his home.
Paragraph (u)
[35] The Appellant agreed to this statement but added that the loss was created by renovations or improvement to the building. No statement of his rental business was adduced to show how the expenses were proportioned or if there was an actual loss or what was claimed as current expenses may have actually been capital expenses.
Paragraph (w)
[36] This is true but the Appellant claims no supervision was required. I believe that the Appellant did whatever was necessary during the whole year, including the bookkeeping after the barn painting ceased for the year.
[37] Thus, I am satisfied that the Minister took into consideration all the relevant circumstances and at the same time, did not take into consideration irrelevant facts. I make these findings knowing that some of the facts were not accurate and some not completely accurate but that there were sufficient facts, after taking away the inaccurate facts, for the Minister to make a determination.
[38] The Appellant is the driving force behind the Payor. It is his company for all intents and purposes. The office of President or Vice-President is neither here nor there. He is the brain and the management behind the whole operation. Accepting his testimony on the history of the Payor, it is obvious that he alone has been the driving force of the Payor and it's heart and soul.
[39] There is not an employee dealing with an employer at arm's length that would loan his employer in excess of $90,000 (paid down to $81,000), rent to his employer premises that created a loss and work as hard and diligently as the Appellant. I specifically find that the Appellant was in essence the Chief Executive Officer as he had de facto control of the company.
[40] The Appellant put the $90,000 into the Payor mostly in the first two years of operation. There is no documentation as to the terms. It was not until 1996 that repayment was started and then the Appellant received only two percent per annum interest was paid on the loan, which interest is not enforceable, which the balance sheet says four percent per annum and the director resolution just reads interest but does not set the rate.
[41] There is nothing to prevent him from calling the loan, taking over the assets, and under a different name to continue the business.
[42] I would have found exactly as the Minister did after hearing all the evidence, in 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 not reasonable to conclude that the Appellant and the Payor would have entered into a substantially similar contract of employment, if they had been dealing at arm's length.
[43] The Appellant challenged the validity of these sections under the Charter of Rights and Freedom (the "Charter"). In essence, his argument was that all applicants for EI benefits that are in a non arm's length employment do not have the same right of appeal that other claimants have that were denied benefits, or employers who believe that their workforce are all hired pursuant to contracts for services and the CCRA determine that the workforce are employees pursuant to contracts of service. It is the judicial deference with respect to a determination by the Minister, pursuant to those paragraphs that the Appellant argues, which places him and similar applicants for benefits at a disadvantage.
[44] I feel compelled to acknowledge that I have a great deal of sympathy for the Appellant's position. Having heard many appeals under these provisions in both the Old Act and this Act, the judicial deference places unsuspecting appellants in a very difficult position that they do not understand. In an attempt to get evidence that would assist the Appellant herein, he called five employees of the federal government to the stand, not knowing what they would say, not having interviewed them in the hope that a conclusion could be drawn that the Minister made an error in law.
[45] The decision of the Federal Court of Appeal in Perussev. Canada, [2000] F.C.J. No. 310 (Q.L.) is an answer to this challenge. Desjardins J.A. did dissent from Marceau and Décary's reasons and did find these provisions in breach of the Charter.
[46] I do believe it is unfair to applicants for employment benefits when the contract of employment is non-arm's length to face the daunting task of defeating the Minister's determination because of the judicial deference that has to be given it. This is especially so as most applicants in this category cannot afford legal counsel. In this hearing, several days were wasted with the Appellant calling witnesses from HRDC and CCRA. This, of course, should have occurred on discovery but the Appellant could not afford the cost. It would be much better and way less expensive, if a clause was inserted right after paragraph 5(3)(b) to the effect that the Minister's decision in paragraph 5(3)(b) shall be deemed not to be ministerial discretion and an appeal to the Tax Court of Canada on rulings by the Minister should proceed as a normal appeal.
[47] In this appeal, the result would still be the same as indicated above, except that what turned out to be a seven and a half day hearing, would have at the most been a two-day hearing. The Appellant would have felt that he was being treated the same as other applicants for benefits that have been refused. The extra cost-saving, both at the trial level and the CCRA level, would be substantial. This difficulty should be removed in the interest of fairness and the saving of tax dollars.
[48] For these reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 26th day of September, 2001.
|
"Gordon Teskey" |
J.T.C.C.
COURT FILE NO.: 2000-2256(EI)
STYLE OF CAUSE: Anthony Miller and Her Majesty the Queen
PLACE OF HEARING: Charlottetown, Prince Edward Island
DATE OF HEARING: June 5, 6, 7, 8 and August 27, 2001
REASONS FOR JUDGMENT BY: the Honourable Judge Gordon Teskey
DATE OF JUDGMENT: September 26, 2001
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Mr. Dany Leduc (Justice Montreal)
Dominique Gallant (Justice Halifax)
COUNSEL OF RECORD:
Counsel for the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada