Picard c. M.R.N.

Picard c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-03-08 Neutral citation 2004 TCC 134 File numbers 1999-4845(EI) Judges and Taxing Officers Paul Bédard Subjects Employment Insurance Act Decision Content Docket: 1999-4845(EI) BETWEEN: JEAN-CLAUDE PICARD, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on February 3, 2004, at Sept-Îles, Quebec Before: The Honourable Justice Bédard Appearances: Counsel for the Appellant: François Landry Counsel for the Respondent: Sylvain Ouimet ____________________________________________________________________ JUDGMENT The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 8th day of March 2004. "Paul Bédard" Bédard J. Translation certified true on this 14th day of January 2005. Jacques Deschênes, Translator Citation: 2004TCC134 Date: 20040308 Court File No.: 1999-4845(EI) BETWEEN: JEAN-CLAUDE PICARD, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Bédard J. [1] Jean-Claude Picard has appealed a decision of the Minister of National Revenue ("the Minister") that his employment by Lise Tremblay ("the payor") during the periods in issue, specifically May 6 to September 7, 1996, June 2 to October 4, 1997, and July 6 to October 3, 1998, is excluded from insurable employment within the meaning of the Employment Insurance Act ("the Act") because Mr. Picard was not dealing with Ms. Tremblay at arm's length. [2] Subsection 5(1) of the Act reads in part as follows: 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; . . . [3] Subsections 5(2) and 5(3) of the Act read in part as follows: (2) Insurable employment does not include . . . (i) employment if the employer and employee are not dealing with each other at arm's length. (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] Section 251 of the Income Tax Act reads in part as follows: Section 251: Arm's length (1) For the purposes of this Act, (a) related persons shall be deemed not to deal with each other at arm's length; . . . (2) Definition of "related persons" - For the purpose of this Act, "related persons", or persons related to each other, are (a) individuals connected by blood relationship, marriage or common-law partnership or adoption; . . . [5] The Minister's decision is based on the following statements of fact set out in paragraph 6 of the Reply to the Notice of Appeal, which were admitted or denied as the case may be: [TRANSLATION] (a) The payor has been operating a family agricultural enterprise since 1990 under the business name "Jardins Gallix Enr." (denied) (b) From 1985 to 1990, the appellant operated the business. He sold it to his spouse in 1990. (denied as written) (c) The payor has nine greenhouses and grows flowers and tomatoes; all the assets of the operation were transferred to her name. (admitted with clarifications) (d) During the busy season, which is January for tomatoes and March for flowers, the payor hires 10-12 people. (denied) (e) The appellant works for the payor as a manager; he supervises the other workers and does a little of everything for the business. (admitted in part) (f) The appellant is the only owner of a parcel of land on which the payor grows strawberries and raspberries. (denied) (g) The appellant, as manager, claims that he replaces the payor when the work becomes too heavy for her alone, but he renders services for the payor during the entire season, i.e. before and after the periods in issue. (denied) (h) Both parties acknowledge that the appellant renders services outside the periods in issue. (denied) (i) When he was remunerated, the appellant's gross pay varied from $624 to $655 per week, without regard to the hours actually worked. (denied) (j) The appellant was generally paid by cheque; the cheques contain several irregularities: (denied) - The cheques are often cashed a long time (up to six months) after being issued by the payor. - The appellant received two full paycheques during the week of June 23 to June 29, 1996, but cannot provide an explanation for this. - From August 25 to September 7, 1996, the appellant was purportedly paid cash. - Many of the appellant's paycheques are deposited into the account used solely for the hypothec on the house, which is in the payor's name. - Two of the appellant's paycheques were deposited directly into the payor's personal account. (k) The appellant's purported periods of employment do not coincide with the periods during which he actually worked. (denied) Analysis [6] The Federal Court of Appeal has defined the role of Tax Court judges under the Act on several occasions. This role does not permit a judge to substitute his or her discretion for that of the Minister, but does carry with it the obligation to "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 . . . decide whether the conclusion with which the Minister was "satisfied" still seems reasonable."[3] [7] In other words, before deciding whether the conclusion with which the Minister was satisfied stills seems reasonable, I must, in light of the evidence before me, verify whether the Minister's allegations appear well-founded, in whole or in part, having regard to the factors set out in paragraph 5(3)(b) of the Act. [8] It should be noted from the outset that Mr. Picard and the payor are the only people who testified at the hearing. [9] The evidence discloses that the payor operated an agricultural enterprise under the name Jardins Gallix Enr. during the years 1996, 1997 and 1998. At that time, the payor grew flowers and tomatoes in her greenhouses. She also grew strawberries and raspberries. In addition, she operated a garden centre on the same land, which enabled her, among other things, to sell what her growing operations produced. [10] Mr. Picard's uncontradicted and credible testimony disclosed that he worked an average of six days a week, ten hours a day, during the periods in issue. His gross weekly pay for this work varied from $624 to $655. His primary function was to supervise the payor's employees, but he checked the heating and ventilation system (among other things), took care of flower deliveries and prepared the fields. He occasionally assisted the payor at the garden centre. In other words, he was the payor's right-hand man and did a little of everything for the business. Mr. Picard considered the periods in issue very active for the business and believed that the payor had a great need for his services. [11] At the hearing, Mr. Picard acknowledged that he worked an average of two hours a week on a volunteer basis for the payor. He did not deny the answers to questions 18 and 19 on the statutory declaration he provided to Human Resources Development Canada (Exhibit I-1). His answer to question 19 states that when things were going badly, he might work up to 15 hours a week on a volunteer basis during the month preceding and following each of the periods in issue. [12] The evidence also disclosed that Mr. Picard deposited his August 3, 1996, August 10, 1996, August 17, 1996 and September 17, 1996, paycheques in December 1996 at the request of the payor, who did not have enough funds to honour them. Mr. Picard deposited his July, August and September 1997 paycheques in October 1997 for the same reason. [13] At the hearing, Mr. Picard did not deny depositing several paycheques into the bank account used solely to pay down the hypothec on the house that belonged to the payor. He testified that he did so because he was a surety in respect of the hypothec. In fact, he tendered Exhibit A-4, a copy of the loan instrument, which states that he is a surety. [14] Further, Mr. Picard did not deny that he deposited two paycheques into the payor's personal bank account. As justification, he simply said, straightforwardly, that it is normal for one spouse to help out the other. [15] With respect to the Minister's assertion that Mr. Picard received two paycheques for the period of June 26 to June 29, 1996, Mr. Picard testified that has no recollection of this, and that if it did occur, it was undoubtedly a mistake. [16] As for the Minister's allegations that he was paid in cash for the period of August 25, 1996, to September 7, 1996, Mr. Picard explained forthrightly that he cashed the cheques using the petty cash from the garden centre booth. He added that he did this because he would otherwise have been forced to drive 53 km to his credit union to get cash on that occasion. [17] In my opinion, the evidence discloses that Mr. Picard did indeed work for the agricultural enterprise throughout his periods of employment, that he worked 60 hours a week, and that his pay was based on this 60-week average. The evidence also disclosed that the periods in issue fell within the business' busy periods and that Mr. Picard's pay was within the applicable range given the responsibilities that the payor entrusted to him and his experience. In my opinion, this disposes conclusively of paragraphs (i) and (k) of the Minister's allegations; neither of the two paragraphs establishes non-arm's length dealing. [18] I find that the Minister erred in considering almost exclusively the nature, duration and importance of the work done outside the periods of employment in issue and the way in which Mr. Picard used his paycheques. This brings us to paragraphs (g), (h) and (j) of the Minister's allegations. [19] The evidence certainly disclosed that Mr. Picard worked on a volunteer basis for the payor outside the periods in issue - occasionally up to 15 hours. [20] However, what Mr. Picard did outside his periods on employment is of little relevance in my view, since it was not alleged, in the case at bar, that the wages paid during the period of employment took account of the work done outside those periods, or that Mr. Picard included, in the hours counted toward his insurable employment, the hours that he worked outside the periods of employment, or that work done outside his periods of employment was included in the work done during those periods. The fact that Mr. Picard worked on a volunteer basis outside the periods in issue may indicate that he would not have done that volunteer work if he had not been the payor's spouse. As Décary J.A. stated in Théberge v. Canada (M.N.R.), [2002] F.C.J. No. 464 (QL): . . . However, that is not the work we are concerned with, and the judge erred by taking it into account in the absence of any indication that the insurable employment at issue was subject to special terms and conditions that were attributable services being rendered outside the period of employment. [21] In my view, Mr. Picard's use of his paycheques is of little relevance to the case at bar and is not determinative. By occasionally depositing his paycheques into his spouse's bank account, Mr. Picard was simply fulfilling his obligation to contribute to household expenses. I do not see how Mr. Picard's deferral of certain paycheque deposits, in order to assist the payor's business temporarily, can lead to an inference that his insurable employment was subject to special terms and conditions that the payor would not have been granted to an employee with whom she was dealing at arm's length. [22] In light of the evidence before me, after considering the factors set out in paragraph 5(3)(b) of the Act and verifying whether the Minister's allegations are well-founded, I find that the conclusion with which the Minister was satisfied is unreasonable. [23] For these reasons, the appeal must be allowed and the Minister's decision is vacated. Signed at Ottawa, Canada, this 8th day of March 2004. "Paul Bédard" Bédard J. Translation certified true on this 14th day of January 2005. Jacques Deschênes, Translator [3] Légaré v. Canada (Minister of National Revenue), [1999] F.C.J. No. 878 (QL), at paragraph 4.