Garland v. M.N.R.

Garland v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-03-03 Neutral citation 2005 TCC 176 File numbers 2004-3281(CPP) Judges and Taxing Officers Campbell J. Miller Subjects Canada Pension Plan Employment Insurance Act Decision Content Docket: 2004-3281(CPP) 2004-3282(EI) BETWEEN: DOUGLAS R. GARLAND, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeals heard on February 11, 2005, at Calgary, Alberta, by The Honourable Justice Campbell J. Miller Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Scott McDougall ____________________________________________________________________ JUDGMENT The appeals pursuant to subsection 103(1) of the Employment Insurance Act and section 28 of the Canada Pension Plan are allowed and the decision of the Minister of National Revenue on the appeal made to him under section 91 of the Act and the determination of the Minister on the application made to him under section 27.1 of the Plan are vacated on the basis that the Appellant was engaged in insurable employment or pensionable employment with Can West Ltd. for the period October 16, 1996 to October 17, 1997 within the meaning of paragraphs 5(1)(a) of the Act and 6(1)(a) of the Plan. Signed at Ottawa, Canada, this 3rd day of March, 2005. "CampbellJ. Miller" Miller J. Citation: 2005TCC176 Date: 20050303 Docket: 2004-3281(CPP) 2004-3282(EI) BETWEEN: DOUGLAS R. GARLAND, Appellant, And THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Miller J. [1] The Minister of National Revenue (the Minister) decided that Mr. Douglas Garland was not employed under a contract of service with Can Test Ltd. (Can Test) for the period October 16, 1996 to October 17, 1997. The Minister did not elaborate in his response to Mr. Garland, but it was clear at trial that the Minister holds a view that because Mr. Garland obtained employment with Can Test under an assumed name, and with a social insurance number (SIN) that he illegally obtained under that name, the contract is void ab initio. Mr. Garland worked at Can Test for four years under the name of Matthew Kemper Hartley. He maintains he performed such work under a valid contract of service. I agree with him. [2] Mr. Garland is in his mid-forties. He suffers from attention deficient disorder (ADD). It was clear that he was agitated throughout the trial, but it was also apparent that he was an intelligent individual. Mr. Garland attended medical school in Alberta for one year until he suffered a breakdown. He also seems to have been traumatized by causing what he described as a horrific accident due to falling asleep at the wheel. [3] Mr. Garland produced his own amphetamines. This somehow came to the attention of the Royal Canadian Mounted Police (RCMP). In 1992, they raided Mr. Garland's parents' farm. Mr. Garland was charged with an offence under, he believes, the Food and Drug Act. He was released on bail. At this point he acknowledged that he made some not very well thought out decisions. He skipped the province of Alberta and moved to Vancouver. He assumed the name of a deceased individual, Matthew Hartley. In May 1993 he applied for a SIN under this assumed name. He had his own SIN in his own name since 1980. He also applied for a driver's license under the name Matthew Hartley. Indeed, Mr. Garland conducted all his activities in Vancouver under the name Matthew Hartley. [4] Mr. Garland responded to an ad in the Vancouver newspaper and successfully applied for a job with Can Test. He applied under his new identity, claiming to have a BSc. degree. He explained in Court that he considered his year in medical school qualified him to make this claim. Mr. Garland was a coordinator in the company's trace organics department, testing pesticides, herbicides and organic compounds. He rose to become a supervisor of 30 or more employees, but found he was unable to cope, and he suffered another breakdown in late 1997. He was dismissed in October 1997. He considered a wrongful dismissal suit. He obtained employment insurance benefits under the name Matthew Hartley. [5] Subsequent to his dismissal Mr. Garland took courses on how to seek employment after a breakdown. He found part-time work with the British Columbia Institute of Technology. The RCMP eventually caught up to Mr. Garland, and he was arrested in May 1999. He pleaded guilty to all drug offences and all offences in connection with the assumed identity. He served time in prison. [6] Human Resources Development Canada (HRDC) requested a ruling with regards to Mr. Garland's employment with Can Test. In December 2003 the Vancouver Island Tax Services office ruled Mr. Garland was not in insurable employment. Mr. Garland appealed to the Minister. The Minister decided Mr. Garland was not employed under a contract of service with Can Test. Mr. Garland expressed concern that in none of the communications was it made clear why his work was not considered to be under a contract of service. Also, apart from receiving copies of cases from the Department of Justice, he never discussed the rationale for the government's position with anyone from the Department of Justice. This is regrettable. [7] The issue is whether Mr. Garland's work with Can Test was under a valid contract of service. There is no question Mr. Garland worked as an employee of Can Test for approximately four years. There is also no question that there was nothing illegal about the substance, object or terms of the contract. The question is whether Mr. Garland's entering the contract under an assumed name and with a SIN obtained contrary to the provisions of the Employment Insurance Act (the Act)[1] renders the contract void ab initio and therefore a nullity for the purposes of subsection 5(1) of the Act, which reads in part: 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; ... [8] The Respondent was unable to find any case exactly on point but referred me to several cases dealing with immigrants working without work permits. I find the Federal Court of Appeal case of Still v. M.N.R.[2] particularly helpful. Justice Robertson went through a careful review of the law of the illegality of contracts and moved away from what he described as the classical approach to a more principled approach: 43 The second reason for rejecting the classical model is that it fails to account for the reality that today a finding of illegality is dependent, not only on the purpose underlying the statutory prohibition, but also on the remedy being sought and the consequences which flow from a finding that a contract is unenforceable. It must be remembered that the law of illegality arose out of a live controversy between parties to an allegedly illegal contract. In this case, there is no live controversy between contracting parties and the ramifications of declaring an employment contract illegal are too far-reaching. ... The fact that so many statutes predicate entitlement or eligibility on an existing contract of service is reason enough for any court to decline the invitation to automatically declare any employment contract invalid on grounds of illegality, and more so if the declaration is based on the tenets of the classical doctrine of illegality. ... 46 ... As the doctrine of illegality is not a creature of statute, but of judicial creation, it is incumbent on the present judiciary to ensure that its premises accord with contemporary values. ... [9] The first issue to be determined is whether, indeed, the contract is illegal, either based on common law or statute law. Then, even if found to be an illegal contract, consider the objects of the employment insurance legislation and the particular circumstances of each case to determine if the illegality renders the contract void ab initio. [10] Is the contract illegal? First, from a common-law perspective, does a contract entered under an assumed identity render the contract illegal? This depends on whether the mistake goes to the individual's attributes or to the individual's very identity. In Lake v. Simmons,[3] Viscount Holdane wrote: Jurists have laid down, as I think rightly, the test to be applied as to whether there is such a mistake as to the party as is fatal to there being any contract at all, or as to whether there is an intention to contract with a de facto individual, which constitutes a contract that may be induced by misrepresentation so as to be voidable but not void [...] Pothier (Traité des Obligations, section 19) lays down the principle thus, in a passage adopted by Fry, J. in Smith v. Wheatcroft [(1878) 9 ch. D. 223, at 230.]. Does error in regard to the person with whom I contract destroy the consent and annul the agreement? I think that this question ought to be decided by a distinction. Whenever the consideration of the person with whom I am willing to contract enters as an element into the contract which I am willing to make, error with regard to the person destroys my consent, and consequently annuls the contract. ... On the contrary, when the consideration of the person which whom I thought I was contracting does not enter at all into the contract, and I should have been equally willing to make the contract with any person whatever as with whom I thought I was contracting, the contract ought to stand. [11] It comes down to this. Was the exact identity of Mr. Garland material? No, it was not. It is not akin to a contract, for example, where the province of Alberta contracts to have Pavarotti perform at their one hundredth anniversary celebration, and instead get some unknown performer claiming to be Pavarotti. Can Test simply needed someone to work in the laboratory - they did not seek a particular one individual: it was not Mr. Garland's identity that caused Can Test to hire him. Where the mistake goes to attributes and not identity and the contract is induced by misrepresentation or even fraud, the remedy is that such contract is voidable. It is not void ab initio. Further, it would be voidable at the option of Can Test, not the government of Canada. This does not excuse Mr. Garland for the misrepresentation; he would remain liable to Can Test for any common law remedies for fraud. Based on common law principles, I find there was a valid contract of service for the four years Mr. Garland was employed by Can Test. [12] Was the contract illegal due to some breach of a statutory requirement? As noted earlier, paragraphs 141(1)(a) and (b) set out two prohibitions of the Act: (i) no person with a SIN shall knowingly apply for another SIN; and (ii) no person shall present a SIN with the intent to deceive any person. A breach of either of these provisions is a summary conviction offence subject to fine or imprisonment. Do these provisions expressly or impliedly render an employment contract illegal, by reliance upon an illegally obtained SIN? Certainly not expressly. The provisions do not state "no contract shall be entered into using a SIN relied upon in contravention of paragraphs 141(1)(a) or (b)". The result of breaching paragraphs 141(1)(a) or (b) is a fine or imprisonment. The provision is silent as to the effect on an employment contract. Indeed, paragraph 141(1)(a) has no reference to a contract with a third party; it is simply illegal to apply for a second SIN. [13] Paragraph 141(1)(b), however, does address the real possibility of an employee deceiving an employer. Does this then imply that if an employee does so deceive an employer in contravention of paragraph 141(1)(b) that the ensuing contract is illegal? The thrust of the prohibition is not to keep Mr. Garland from working. Neither can it be to preclude another Canadian from gaining employment, least of all the deceased Matthew Hartley. Mr. Garland, as a Canadian citizen, could and did work. Nothing in any legislation made it unlawful for him to do so. What he could not do was deceive or defraud an employer into thinking he was someone else by the use of a false SIN. I come full circle, falling back on common-law principles to find that such deceit would only render the contract voidable. So, the implication, if any, of the statutory prohibition in paragraph 141(1)(b) on the legality of an employment contract is that it is voidable, but not illegal. [14] If I am wrong in this view of the impact of the Employment Insurance Act prohibitions on the contract itself, and it is illegal, then I look to Justice Robertson's principled approach in the Still case. I find that an illegal contract is not always void ab initio. The Federal Court of Appeal in Still stated: 56 Having regard to objects of the Unemployment Insurance Act, the fact that the applicant is a legal immigrant to this country and that she acted in good faith, I am not prepared to conclude that she is disentitled to unemployment insurance benefits on the ground of illegality. I recognize that the object of the statutory prohibition is a compelling one, but that in the circumstances of this case the penalty imposed is disproportionate to the breach. Allowing the applicant to claim benefits would not invite people to come to Canada and work illegally. ... 57 Undoubtedly, there will be a few who would prefer to see the classical model of the illegality doctrine applied to the issue at hand. Admittedly, that approach promotes certainty in the law and ease of administration, at least for the Unemployment Insurance Commission. But a uniform approach, while convenient, carries with it the risk of undue rigidity. There are occasions, and this is one, where certainty must give way to flexibility, as Lord Mansfield would surely agree. ... [15] In the more recent Supreme Court of Canada case of Transport North American Express Inc. v. New Solutions Financial Corp.,[4] the majority had this to say on the doctrine of illegality: 40 Thus, the appropriate approach is to vest the greatest possible amount of remedial discretion in judges in courts of first instance. The spectrum of available remedies runs from a court holding contracts in violation of s. 347 void ab initio, in the most egregious and abusive cases, according to the criteria identified in Thomson, supra, to notional severance. In the determination of where along the spectrum a particular contract lies, the considerations identified in Thomson by Blair J.A. should be referred to and analysed carefully. Although Blair J.A. was considering the desirability of severing illegal interest from principal, the same factors are helpful in determining whether to reduce illegal interest to a legal level. There are circumstances before me that move me along the spectrum of possible remedies, as alluded to by the Supreme Court of Canada, away from finding the contract void ab initio. Firstly, the legislation itself. What Mr. Garland did was wrong, but the employment insurance legislation specifically provides for the consequences of such wrongness. And, although it was not made clear in any detail at trial as to the extent of Mr. Garland's penalties as they pertained specifically to the employment insurance legislation, it was clear that he went to jail upon pleading guilty to offences in connection with the assumed identity. A denial of benefits is not a further pecuniary penalty that he should suffer. This seems entirely disproportionate to the offence, for which he has already paid the price. [16] Secondly, I do not classify Mr. Garland's actions as egregious and abusive, as they pertain to the employment contract itself. I am mindful of Mr. Garland's state of health. His attention deficient disorder contributed to some muddled thinking. His reliance on the false SIN was to escape the reach of the RCMP. As he acknowledged, it was not a bright idea. But, vis-à-vis his employment with Can Test, the employer got what it sought - someone who could perform the work, and did so for a period of four years, four years during which both employer and employee paid into the employment insurance program. [17] The Supreme Court of Canada in Transport North American Express Inc.,[5] though dealing with the issue of severance of an illegal portion of a contract, went on to state: 42 As outlined above, in Thomson, Blair J.A. identified four considerations relevant to the determination of whether public policy ought to allow an otherwise illegal agreement to be partially enforced rather than being declared void ab initio in the face of illegality in the contract: 1. whether the purpose or policy of s. 347 would be subverted by severance; 2. whether the parties entered into the agreement for an illegal purpose or with an evil intention; 3. the relative bargaining positions of the parties and their conduct in reaching the agreement; 4. the potential for the debtor to enjoy an unjustified windfall. Applying those factors to the case before me I find: (i) the purpose of section 141 of the Employment Insurance Act is not subverted by finding the contract is voidable rather than void ab initio; (ii) while Mr. Garland assumed the name to avoid detection, he did not enter the employment agreement with any evil intention - he simply needed to work in a job for which he was qualified; (iii) Can Test and Mr. Garland's bargaining positions were in no way impacted by the assumed identity; and (iv) this is not a question of any unjustified windfall. Mr. Garland could have worked under his own name. He gained no additional earnings from Can Test by use of an assumed name. [18] Mr. Garland contravened the employment insurance legislation and paid the price. He also worked for four years doing what he was supposed to do, actually increasing his job responsibilities. This troubled man should not be precluded from receiving benefits from a program into which he and his employer paid on the basis of the illegality of the contract. I recognize the public policy for the classical approach to the illegality of contract principle that no Court should help someone who bases his cause on an illegal act. However, the modern doctrine allows a trial judge to exercise discretion in weighing the public's interest versus the individual's interest. I exercise that discretion in this case in favour of Mr. Garland by finding his contract of employment with Can Test was not void ab initio but was voidable, and as such was a legitimate contract of service. [19] The appeals are allowed and the decisions vacated on the basis that Mr. Garland was engaged under a valid contract of service from October 16, 1996 to October 17, 1997. Signed at Ottawa, Canada, this 3rd day of March, 2005. "CampbellJ. Miller" Miller J. CITATION: 2005TCC176 COURT FILE NO.: 2004-3281(CPP), 2004-3282(EI) STYLE OF CAUSE: Douglas R. Garland and The Minister of National Revenue PLACE OF HEARING: Calgary, Alberta DATE OF HEARING: February 11, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice Campbell J. Miller DATE OF JUDGMENT: March 3, 2005 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Scott McDougall COUNSEL OF RECORD: For the Appellant: Name: N/A Firm: N/A For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] 141(1) No person (a) who has been assigned a Social Insurance Number shall knowingly make an application to be again assigned a Social Insurance Number, whether the person gives information that is the same as or different from that contained in their previous application on which the Social Insurance Number had been assigned; (b) shall, with intent to defraud or deceive any person, present, loan or use a Social Insurance Number or Social Insurance Number card; [2] [1998] 1 F.C. 549. [3] [1927] A.C. 481 at page 501. [4] [2004] 1 S.C.R. 249. [5] supra.