Porter v. M.N.R.

Porter v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-06-09 Neutral citation 2005 TCC 364 File numbers 2004-2972(EI) Judges and Taxing Officers Diane Campbell Subjects Employment Insurance Act Decision Content Docket: 2004-2972(EI) BETWEEN: KRISTIN A. PORTER, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and ADVANCE CLAIMS SERVICE LTD., Intervenor. _______________________________________________________________ Appeal heard on November 4 and 5, 2004 at Vancouver, British Columbia Before: The Honourable Justice Diane Campbell Appearances: For the Appellant: The Appellant herself Counsel for the Respondent: Agent for the Intervenor: Pavanjit Mahil C. David Porter _______________________________________________________________ JUDGMENT The appeal is allowed and the decision of the Minister is varied in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 9th day of June 2005. "Diane Campbell" Campbell J. Citation: 2005TCC364 Date: 20050609 Docket: 2004-2972(EI) BETWEEN: KRISTIN A. PORTER, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and ADVANCE CLAIMS SERVICE LTD., Intervenor. REASONS FOR JUDGMENT CampbellJ. [1] On September 30, 2003, the Minister of National Revenue (the "Minister") issued a ruling which denied the Appellant's employment insurance ("EI") benefit claim in respect to her employment with Advance Claims Service Ltd. ("Advance"), a company wholly owned by her husband, David Porter, for the period July 24, 2002 to July 15, 2003 (the "Period"). The Appellant appealed and on May 25, 2004 the Minister confirmed that the Appellant was not employed by Advance in insurable employment for the Period as she was not dealing with Advance at arm's length. It is from this determination that the Appellant has appealed. David Porter, her husband, appeared on behalf of the Intervenor. [2] The Appellant started working in the insurance industry as a receptionist as soon as she finished high school. She worked for several companies and eventually gained experience in the claims department, working both as an independent adjuster and then as a claims examiner. She explained that an independent adjuster works for a number of insurance companies investigating, negotiating and settling their claim files, while a claims examiner works for only one insurance company attending to their claim files and in addition overseeing those files being handled by independent adjusters. [3] In July 2001, the Appellant's first child was born and she went on maternity leave. When the leave ended, her former employer would not employ her on a part-time basis. It was at this same time that her husband's company, Advance, was negotiating a short-term service contract with Economical Mutual Insurance Company ("Economical"). Advance was in the business of handling insurance claims on behalf of insurance companies and Economical required the part-time services of a claims examiner for approximately 21.5 hours per week for about three months. Advance submitted the names and résumés of several potential qualified candidates, including the Appellant's name. Based on her education and experience as a claims examiner in the industry, Economical chose to work with the Appellant. This was the commencement of the Appellant's employment with Advance in July 2002. [4] Economical paid Advance $4,000.00 per month for the services of the Appellant. Advance paid the Appellant at the rate of $3,000.00 per month (roughly $35.00 per hour) to work as a claims examiner exclusively for Economical for 21.5 hours per week. The Appellant worked flexible hours at Economical taking direction from and reporting to Janet Stalmans, the claims manager at Economical. She was provided with a work station and computer at the office of Economical but given the option of working from her home. She estimated she worked approximately 75% of her time at their offices but toward the end of the contract it was 100% of the time. At the end of three months, her contract was extended and she worked for Economical until February 2003, a total of seven months. Janet Stalmans confirmed the Appellant's testimony concerning working conditions and her employment at Economical. [5] When the contract with Economical ended in late February 2003, the Appellant began to work directly for Advance, at which point the terms and conditions of her employment changed substantially. During this second period of her employment, the Appellant now took direction from and was responsible to Advance rather than Economical. The title of her job changed from that of claims examiner (as it had been at Economical) to that of independent adjuster. Her weekly hours were reduced to 14 hours but she continued to be paid $3,000.00 per month. In addition to her work as an independent adjuster, she also performed some administrative work and some receptionist duties. Although there was some conflicting evidence regarding the last date that she worked, her Record of Employment (Exhibit A-7) indicated that it was July 15, 2003. This was also the date on which her second son was born. [6] There are two issues in this appeal. They are: (1) Having regard to all of the circumstances of the Appellant's employment, including the remuneration paid, the terms and conditions, the duration and the nature and the importance of the work performed, was it reasonable for the Minister to conclude that the parties would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length, pursuant to paragraph 5(3)(b) of the Employment Insurance Act (the "Act")? (2) Can the period of employment be divided into two separate periods of employment where one period may qualify as insurable employment? [7] The assumptions of fact upon which the Minister relied are set out at paragraph 7 of the Reply to the Notice of Appeal. They are as follows: a) Advance's business is to handle insurance claims on behalf of insurance companies; b) David Porter ("Porter") is the sole shareholder of Advance; c) the Appellant is Porter's wife; d) Economical Mutual Insurance Company ("Economical") was a client of Advance; e) the Appellant provided her services to Economical; f) the Appellant's duties with Economical were to examine claims, daily mail, processing payments, and closing files; g) the Appellant worked at the offices of Economical and from her home; h) the Appellant had at least ten years experience in the insurance field; i) the Appellant had a one year old child at home during the Period; j) the Appellant was required to work 21.5 hours per week for Economical; k) the Appellant worked three days per week; l) the Appellant reported on her application for benefits that she worked 5 days a week and 40 hours per week; m) neither the Appellant or Advance kept track of the number of hours worked by the Appellant; n) the Appellant was paid semi-monthly based on a rate of $3,000.00 per month; o) Advance's contract with Economical ended in March of 2003; p) the Appellant's employment with Advance continued after the contract with Economical ended in mid March of 2003; q) when working for Advance, the Appellant did not have scheduled day care for her one year old child; r) neither the Appellant nor Advance had any idea how many hours the Appellant actually worked for Advance; s) in March of 2003, the Appellant reduced her hours down to approximately 14 hours per week; t) the Appellant received the same amount of pay both prior to and after March 2003 when her workload was reduced; u) the Appellant's record of employment indicates that she worked until July 15, 2003; and v) the Appellant had her second child on July 15, 2003. [8] The Appellant and Mr. Porter, on behalf of the Intervenor, agreed with all but seven of the Minister's assumptions. They denied or clarified assumptions (l), (m), (n), (q), (r), (t) and (u) as follows: Assumption (l): The Appellant did report in her Application for Benefits (Exhibit R-2) that she worked five days per week for 40 hours each week. Several months later in the Worker's Questionnaire (Exhibit R-1) dated February 1, 2004, the Appellant indicated that she worked 21.5 hours per week for three days per week. In cross-examination the Appellant testified that she simply made an error in the Application for Benefits form. The Record of Employment (Exhibit A-7) indicated that the Appellant worked for 2040 hours or 40 hours per week from July 24, 2002 to July 15, 2003. Several months later in the Payor's Questionnaire (Exhibit R-3) dated February 27, 2004, Mr. Porter indicated that the Appellant worked 21.5 hours per week for three days per week. Mr. Porter testified that he never saw the Record of Employment and both he and the Appellant stated that Advance's bookkeeper must have made an error in completing this form and that where the record listed the total insurable hours per week as 2040, the hours should have been 802. The bookkeeper was not called to testify. An Amended Record of Employment dated May 11, 2004 (Exhibit A-8) listed the total insurable hours as 802. The evidence was that this Amended Record was based on the number of files on which the Appellant worked and a "modest estimate" of the amount of time the Appellant would have spent on each file. Assumption (m): The Appellant denied this assumption and stated that she recorded her work hours between July 23, 2002 and September 23, 2002 in an Excel Worksheet (Exhibit A-2), which was consistent with the response given in her Questionnaire. She discontinued this practice when Janet Stalmans, her manager at Economical, advised her that it was not necessary. Ms. Stalmans testified that she did not recall if she saw the timesheet or not but that Economical did not require the Appellant to track her hours. She stated that Economical's only concern was that the work was being completed satisfactorily. When the Appellant returned to the offices of Advance in late February 2003 to work she did not record her hours. Mr. Porter stated that Advance did not require her to track her hours for the following reasons: (1) in the insurance industry, independent adjusters are expected to do their job with little or no supervision; (2) the Appellant was qualified for this work and Advance was pleased with her performance; and (3) Advance was being paid on a "flat fee basis" for the telephone adjusting which the Appellant did. Assumption (n): The Appellant agreed with this assumption but stated that the amount was reasonable for this type of work. Rhyannon Martin, a claims examiner for Aviva with similar experience as that of the Appellant, testified that her personal salary is currently $4,100.00 per month. Ms. Stalmans stated that Economical pays its in-house claims examiners between $48,000.00 and $52,000.00 per year or $4,000.00 to $4,300.00 per month plus benefits. The Appellant submitted invoices (Exhibit A-11) showing that Economical paid Advance $4,000.00 per month for her services together with a statement (Exhibit A-1) signed by Ms. Stalmans stating that "...the work was commensurate with the amount of time being used to examine and the amount that we were paying for the service", and that she recognized that she was "paying a bit of a premium for the service but that is the usual way that a short term contract worked". Regarding pay structure, there was evidence that claims examiners usually earn a salary whereas independent adjusters usually bill hourly or work for an adjusting company that bills by the hour, in which case it would be likely that the independent adjuster would be remunerated by commission and not salary. It appeared that Advance has employed nine independent adjusters over the years and that generally they were paid by commission. Some of these individuals worked at the same time as the Appellant. According to Mr. Porter's evidence, both the Appellant and a Mr. Boyle received a salary. Two other independent adjusters also received a salary but only temporarily for a period of three to six months to assist them in starting. They were then put on commission. Also Liz Brownrigg, the individual, who according to Mr. Porter was hired to replace the Appellant, is paid on a commission basis as a part-time independent adjuster. There was further evidence that Mr. Porter approached an unrelated claims examiner, Rhyannon Martin, regarding the possibility of working for Advance in a similar position as the Appellant. Ms. Martin testified that she and Mr. Porter discussed the possibility of employment with Advance for three days per week at $3,000.00 per month at the offices of Wilson Beck Insurance. This was corroborated by a statement signed by Bob Ball, Senior VP at Wilson Beck (Exhibit A-15). Ms. Martin testified that Mr. Porter told her he would hire her on a two or three-year contract so that if the subcontract with Wilson Beck terminated, she would continue to work directly for Advance. However the specific terms, conditions and pay with Advance itself were never discussed and in the end this arrangement was not pursued. Assumption (q): The Appellant disputed this and argued that her son was in day care for an average of three days per week from August 2002 to March 2003, that is, for the duration of the contract with Economical, and for one day per week for the period March 2003 to July 2003 when she worked at Advance. With respect to the first period, she submitted a letter signed by Sandra Meyer (Exhibit A-5) that stated that she cared for the Appellant's son for an average of three days per week from August 2002 to March 2003. Copies of receipts (Exhibit A-3) were also submitted showing amounts paid to Ms. Meyer for the months July 2002 to December 2002. The Appellant said the receipts for January and February 2003 were missing. However she submitted a copy of her 2003 tax return summary which showed a claim for child care expenses of $627.00. With respect to the period of her work after she left Economical, the Appellant stated that her mother-in-law cared for her son every Wednesday from March 2003 to July 2003. An undated statement signed by Brenda Porter stating that she cared for her grandson every Wednesday during this period was submitted as Exhibit A-6. However there was conflicting evidence from Colleen Hendrickson, a Canada Revenue Agency (CRA) rulings officer, who testified that during a telephone conversation with the Appellant, she stated that Brenda Porter cared for her son "maybe a couple of times per month" (Transcript page 211). Assumption (r): The Appellant denies that she did not know the hours she worked for Advance. She started to track her hours for Economical but was told after several months not to continue. She stated that she worked 21.5 hours per week while at Economical. Ms. Stalmans corroborated this. The Appellant did not track her hours at Advance but stated that she worked at least 14 hours per week. She worked these 14 hours during the Wednesday, when her mother-in-law kept her son, and also during her son's nap times and after her husband got home from work. Mr. Porter submitted a bordereau (Exhibit A-14) from Advance that showed that the Appellant worked on 11 files in 2003 when working directly for Advance. He testified that she also worked on additional files, not indicated in this bordereau. It did not show when the Appellant worked on these 11 files or how much time she spent on each file but Mr. Porter stated that each file would require a minimum of three hours of work to complete and in most cases it would take longer. There was also conflicting evidence concerning the Appellant's vacation benefits. The employer was unclear whether the Appellant was entitled to vacation pay or paid vacation. There was evidence that the Appellant took two or three weeks of holidays in March 2003 with salary, suggesting that she had paid vacation. However, Mr. Porter, in the Payor's Questionnaire, stated that the Appellant had no paid vacation and that it was likely included in her salary. He submitted in evidence that this was likely just a misunderstanding on his part respecting the meaning of "paid vacation" and "vacation pay". Assumption (t): The Appellant admitted that her pay remained the same after she left Economical in late February 2003 although her work hours were reduced at Advance. However she stated that this was due to the fact that her position with Advance shifted from a claims examiner, where the adjusting was done for only one insurance company (Economical) to that of an independent adjuster, where adjusting is done for more than one company. She submitted that an independent adjuster is paid at a higher rate. Ms. Stalmans testified that claims examiners are generally paid a salary and are paid less than independent adjusters, who bill by the hour. Rhyannon Martin, an experienced claims examiner for Aviva, testified that a move from claims examiner to independent adjuster would be considered a "lateral move" where an employee wanted more flexibility respecting hours and work location. She did not know which position earned more. She stated that independent adjusting firms usually bill between $65.00 to $85.00 per hour plus expenses but she was not sure what the firms paid their adjusters. Assumption (u): The Appellant agreed that the Record of Employment (Exhibit A-7) did indicate that the last day worked was July 15, 2003 but admitted, in cross-examination, that she did not work until that date because that was the date of the birth of her second child. She stated that her last day worked must have been July 14, 2003. In contrast, Carmen Vivash, the CPP/EI appeals officer, testified that the Appellant told her she finished work on the Thursday or Friday of the preceding week. Ms. Hendrickson, the rulings officer, testified that Mr. Porter told her that the Appellant's employment ended in May or June of 2003. According to Ms. Hendrickson, Mr. Porter advised her that the Record of Employment indicated July 15, 2003 as the last date perhaps because the Appellant was on holidays or perhaps because her last day may have been later than May or June 2003. Analysis: [9] Paragraph 5(2)(i) of the Act specifically excludes from insurable employment those situations where the employer and employee are not dealing with each other at arm's length. However where parties are related and consequently deemed to be dealing at non-arm's length, as in this case, under paragraph 5(3)(b) of the Act, the Minister may nevertheless deem them to be dealing at arm's length if he is satisfied that the parties would have entered into a substantially similar contract of employment had they been dealing with each other at arm's length. The earlier cases[1] decided by the Federal Court of Appeal held that the decision of the Minister could not be interfered with unless it could be shown that in the course of formulating the decision, the Minister had improperly used his discretionary power because: (a) he acted in bad faith or for an improper purpose or motive, (b) failed to take into account all of the relevant circumstances, or (c) took an irrelevant factor into account. [10] Therefore this Court could not simply substitute its decision for that of the Minister unless it was shown that the Minister had erred in law in respect to one or more of (a), (b) or (c) referred to above. If however an Appellant could convince the Court that the Minister had committed one or more of these errors, then this Court was to proceed to a de novo determination pursuant to what is now paragraph 5(3)(b), [formerly subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act] thereby substituting its own determination, based on all the facts before it, in lieu of that of the Minister. [11] This was commonly referred to as the two stage inquiry. The decision of Légaré v. Canada, [1999] F.C.J. No. 878 in 1999 has created controversy over the validity of the two stage inquiry and consequently the approach to be used by this Court. My colleagues, Justice Archambault in Bélanger v. Canada, [2003] F.C.J. No. 1774 and Justice Bowie in Birkland v. Canada, [2005] T.C.J. No. 195 have recently discussed this Court's function in light of the decision in Légaré as well as a number of decisions[2] of the Federal Court of Appeal since Légaré. Justice Bowie, beginning at paragraph 3 of his judgment, made the following observations, in what I believe is an excellent summary of the present state of the law: [3] In 1999 the Federal Court of Appeal revisited the matter in Légaré v. Canada. [See Note 4 below] Marceau J.A., speaking for himself and Desjardins and Noël JJ.A., said there at paragraph 4: Note 4: [1999] F.C.J. No. 878. 4. 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. That judgment has spawned some debate as to whether it represents a new point of departure in the jurisprudence, or simply a gloss on the law as established in the earlier cases. Support for the former view may be found in some decisions of the Federal Court of Appeal, [See Note 5 below] and for the latter view in some others. [See Note 6 below]. Still others are consistent with either view. [See Note 7 below] My colleague Archambault J. has recently discussed the subject quite fully in Bélanger v. M.N.R. [See Note 8 below] I do not propose to add to that debate, except to point out that Marceau J.A. himself seems to have been of the view that Légaré had overruled the earlier cases when ten months later, in Pérusse, he wrote the following two paragraphs, concurred in by Décary J.A., who had delivered the judgment in Ferme Émile Richard: Note 5: Pérusse v. Canada, [2000] F.C.J. No. 310; Valente v. Canada, 2003 FCA 132; Massignani v. Canada (Minister of National Revenue), 2003 FCA 172; and Denis v. Canada(Minister of National Revenue), 2004 FCA 26. Note 6: Candor Enterprises Ltd. v. Canada(Minister of National Revenue), 2000 CanLII 16690 (F.C.A.); Quigley Electric Ltd.v. Canada (Minister of National Revenue), 2003 FCA 461; Théberge v. Canada(Minister of National Revenue), 2002 FCA 123. Note 7: Gagnon v. Canada(Attorney General), 2001 FCA 292; Staltari v. Canada(Attorney General), 2003 FCA 448. Note 8: 2003 FCA 455. 13. It is clear from reading the reasons for the decision that, for the presiding judge, the purpose of his hearing was to determine whether the Minister, in the well-known expression, had exercised "properly" the discretion conferred on him by the Act to "recognize the non-exception" of a contract between related persons. He therefore had to consider whether the decision was made in good faith, based on the relevant facts disclosed by a proper hearing, not under the influence of extraneous considerations. Accordingly, at the outset, at p. 2 of his reasons, the judge wrote: The determination at issue in the instant appeal results from the discretionary authority provided for by the provisions of s. 3(2)(c) of the Act, which reads as follows: . . . The appellant was required to discharge the burden of proof, on the balance of probabilities, that the respondent in assessing the matter had not observed the rules applicable to ministerial discretion, and if this could not be done this Court would not have no basis for intervening. And finally, his conclusion at p. 14: So far as the appeal is concerned, I cannot allow it as the appellant has not proven that the respondent exercised his discretion improperly. 14. In fact, the judge was acting in the manner apparently prescribed by several previous decisions. However, in a recent judgment this Court undertook to reject that approach, and I take the liberty of citing what I then wrote in this connection in the reasons submitted for the Court. Marceau J.A. then quoted paragraph 4 of his reasons for judgment in Légaré. 4. At this point it is sufficient simply to state my understanding of the present state of the law, which I derive principally from paragraph 4 of Légaré (reproduced above) and from the following passage from the judgment of Richard C.J., concurred in by Létourneau and Noël JJ.A., in Denis v. Canada. [See Note 9 below] Note 9: Supra, at para. 5. 5. The function of the Tax Court of Canada judge in an appeal from a determination by the Minister on the exclusion provisions contained in subsections 5(2) and (3) of the Act is to inquire into all the facts with the parties and the witnesses called for the first time to testify under oath, and to consider whether the Minister's conclusion still seems reasonable. However, the judge should not substitute his or her own opinion for that of the Minister when there are no new facts and there is no basis for thinking that the facts were misunderstood (see Pérusse v. Canada (Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 310, March 10, 2000). This Court's role, as I understand it now, following these decisions, is to conduct a trial at which both parties may adduce evidence as to the terms upon which the Appellant was employed, evidence as to the terms upon which persons at arm's length doing similar work were employed by the same employer, and evidence relevant to the conditions of employment prevailing in the industry for the same kind of work at the same time and place. Of course, there may also be evidence as to the relationship between the Appellant and the employer. [See Note 10 below] In the light of all that evidence, and the judge's view of the credibility of the witnesses, this Court must then assess whether the Minister, if he had had the benefit of all that evidence, could reasonably have failed to conclude that the employer and a person acting at arm's length would have entered into a substantially similar contract of employment. [See Note 11 below] That, as I understand it, is the degree of judicial deference that Parliament's use of the expression "... if the Minister of National Revenue is satisfied ..." in paragraph 5(3)(b) accords to the Minister's opinion. [See Note 12 below] Note 10: See paragraph 5(3)(a) of the Act and sections 251 and 252 of the Income Tax Act. Note 11: Some appeals are brought from the Minister's determination that the employee was engaged on arm's length terms, with a view to having the employment determined not to be insurable because the employer or the employee or both of them do not wish to participate in the employment insurance scheme. I will say nothing about such cases, as different considerations may apply to them: see C & B Woodcraft Ltd. v. Canada (Minister of National Revenue) 2004 TCC 477 at paragraphs 9 to 13; and Actech Electrical Limited v. M.N.R. 2004 TCC 572 at paragraph 17 where two different views of the statutory scheme have been expressed, both of them obiter dicta. Note 12: This formulation of the test does not deal with the possibility of a finding of bad faith or improper motive on the part of the Minister. This subject has not been addressed in the cases subsequent to Jencan and Bayside and is no doubt best left until such a case arises. I agree with Justice Bowie's summary respecting the present role of this Court in such appeals. [12] The Tax Court's mandate, in Employment Insurance cases as set out in the cases of Légaré and Pérusse, was recently reaffirmed by Letourneau J. in Livreur Plus Inc. v. Canada, [2004] F.C.J. No. 267 at paragraphs 12, 13 and 14: 12. As already mentioned, the Minister assumed in support of his decision the existence of a number of facts obtained by inquiry from workers and the business he considered to be the employer. Those facts are taken as proven. It is for the person objecting to the Minister's decision to refute them. 13. The function of a Tax Court of Canada judge hearing an appeal from the Minister's decision is to verify the existence and accuracy of those facts and the assessment of them by the Minister or his officials, and after doing so, to decide in light of that whether the Minister's decision still seems to be reasonable: Légaré v. Canada (Minister of National Revenue - M.N.R.), [1999] F.C.J. No. 878; Pérusse v. Canada (Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 310; Massignani v. Canada (Minister of National Revenue), 2003 FCA 172; Bélanger v. Canada (Minister of National Revenue), 2003 FCA 455. In fact, certain material facts relied on by the Minister may be refuted, or the view taken of them may not stand up to judicial review, so that because of their importance the apparent reasonableness of the Minister's decision will be completely destroyed or seriously undermined. 14. In exercising this function the judge must accord the Minister a certain measure of deference, as to the initial assessment, and cannot simply substitute his own opinion for that of the Minister unless there are new facts or evidence that the known facts were misunderstood or wrongly assessed: Pérusse v. Canada(Minister of National Revenue - M.N.R.) supra, paragraph 15. [13] In summary, the function of this Court is to verify the existence and accuracy of the facts relied upon by the Minister, consider all of the facts in evidence before the Court, including any new facts, and to then assess whether the Minister's decision still seems "reasonable" in light of findings of fact by this Court. This assessment should accord a certain measure of deference to the Minister. [14] In light of these observations of the current state of the law, I turn now to the facts in this appeal. [15] Let me deal first with the second issue which is whether the Period consists of two separate and distinct periods of employment rather than just one. If there are in fact two periods of employment, the first would be the Appellant's employment with Economical (July 2002 to February 2003) and the second would be her employment with Advance (March 2003 to July 2003). The Appellant did not plead this directly but the Intervenor argued that the Minister is estopped from denying that the first seven-month period of her employment with Economical was insurable since the CRA officials "...had no difficulty accepting the work that was performed through the contract that Advance had with Economical". (Intervenor's Written Submissions at unnumbered page 4). [16] There are several factors which initially suggest that there may be only one employment period here. Firstly, all of the documentation indicates that the period of employment was from July 24, 2002 to July 15, 2003. Despite conflicting evidence concerning the July 15, 2003, date of termination, it is clear that the Appellant worked for Advance from July 2002 to sometime in the summer of 2003. The Application for Benefits completed by the Appellant herself, the Records of Employment (both original and amended) completed by the accountant for Advance, the questionnaires completed by both the Appellant and David Porter and the Notice of Appeal itself suggest one period of employment. However this does not necessarily mean that there cannot actually be two distinct periods of employment. I believe it is not uncommon for an employee to stay with the same company but to change their job position which by its very nature would import new and different terms and conditions peculiar to that new position. [17] Secondly, the fact that the Appellant did not argue two separate periods (except for the Intervenor's comments contained in the Written Submissions), does not preclude me from finding the existence of two contracts since it is a question to be properly determined by this Court. [18] Thirdly, during the seven-month period of employment with Economical, the Appellant also worked on a few files for Advance that were not related to Economical (Testimony of David Porter, Transcript pages 137-138). However I do not consider it unreasonable to conclude that the first contract required that the Appellant work 21.5 hours as a claims examiner with Economical plus the occasional file for Advance when it was necessary. [19] It is not disputed that the Appellant and Advance "are related" as determined in accordance with section 251 of the Income Tax Act. The Appellant's employer, Advance, is wholly owned by the Appellant's husband and as such the Appellant and Advance are deemed not to be dealing with each other at arm's length. The evidence was clear that during the Appellant's work period with Economical, she was working approximately 21.5 hours or three days per week and that the work she performed for Economical was real and authentic and for the most part in the field of her expertise. The Appellant's testimony was fully corroborated by Janet Stalmans, her supervisor/manager at Economical, who monitored her work. Ms. Stalmans testified that she was satisfied with the Appellant's qualifications, with the quality and quantity of the work she performed and the amount of money Advance charged Economical for her services. The evidence and documentation submitted by the Appellant also support the fact that the Appellant's son was in day care for the three days per week during the period she worked for Economical. In addition it was Economical that freely chose the Appellant from among a number of qualified contenders proposed by Advance. Also when she returned to work directly for Advance, she was doing a completely different job than she had done at Economical. There is little controversy regarding the period she worked for Economical, on behalf of Advance. I therefore find that this is a separate and distinct employment period. During this time, although the Appellant and Advance, are related within the meaning of section 251, having regard to all of the circumstances of the employment, the remuneration paid, the terms and conditions, the duration and nature and importance of the work performed, it is not unreasonable to conclude that the parties would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. I believe it is very telling here that if Economical had chosen someone on the list, other than the Appellant, the evidence suggests that that individual would have worked pursuant to the exact same terms, conditions and remuneration under the agreement with Advance as those that applied to the Appellant. [20] The second employment period, when the Appellant returned to work directly for Advance, is far more contentious. [21] When the Appellant completed the contract which Advance had with Economical, she returned to work with Advance doing primarily telephone adjusting together with some administrative duties and occasionally filling in for the receptionist. She was not required to track her hours at either Economical or Advance and Mr. Porter offered an explanation for this [see my review of assumption (m)]. While Ms. Stalmans was able to verify that, although the Appellant did not track her hours, she completed her assigned workload to the satisfaction of Economical, there is no such independent third party to verify that the required work was actually completed at Advance. Mr. Porter did submit a bordereau, or log of files, from Advance indicating that she worked on at least 11 files. His evidence indicated that she also worked on a few other files. However this log failed to show when the Appellant worked or how much time she spent on a particular file. Mr. Porter testified that the minimum time to complete a file would be three hours. If therefore, in light of Mr. Porter's evidence, one assumes that the Appellant worked on a total of 16 files and that each file took seven hours to complete, this amounts to a total of 112 hours for the period March 2003 to July 2003. This is the equivalent of seven hours per week or half the hours she claimed to have worked at Advance and based on Mr. Porter's evidence, this is based on liberal figures. Thus, if the Appellant worked as she claimed, that is, 14 hours per week, then she spent approximately half her time working as an adjuster and spent the remaining half of her time doing a combination of administrative work and filling in for the receptionist. Although her hours reduced from 21.5 to 14 per week when she returned to work at Advance in March 2003, she continued to receive the same salary of $3,000.00 monthly. Both the Appellant and Mr. Porter argued that this rate of pay which equates to $35.00 per hour was in line with industry standards for claims examiners having similar education and experience as the Appellant. This was corroborated by the evidence of two witnesses (Ms. Stalmans and Ms. Martin), who were both experienced claims examiners. While this explains the level of compensation for the period that the Appellant worked at Economical, it raises issues in respect to the period March 2003 to July 2003 when the Appellant worked at Advance, working 14 hours per week or 7.5 fewer hours per week than at Economical at the same salary of $3,000.00 per month. This equates to a salary increase of approximately $19.00 per hour or 54%. Both the Appellant and Mr. Porter explained that this was due to the fact that the Appellant's position with Advance changed from claims examiner to independent adjuster, where this latter position commanded a significantly higher salary within the industry. Although there was some third party evidence that suggested independent adjusters sometimes earn more than claims examiners, the evidence did not support such a significant difference. In any event, without something more concrete, I simply do not accept that independent adjusters are paid approximately 54% more than claims examiners for doing the same or similar work. I am supported in my conclusion here by the fact that the Appellant in her period of working with Advance was doing a combination of independent adjusting, administrative work and filling in for the receptionist. In addition there was evidence that claims examiners typically are paid by salary while independent adjusters are generally paid by commission. The Appellant, even though she changed positions from claims examiner at Economical to independent adjuster at Advance, continued to receive a salary. Although there is some third party evidence that Mr. Porter approached an unrelated claims examiner, Rhyannon Martin, concerning the possibility of entering into an employment arrangement similar to that of the Appellant's, there was no evidence respecting specific hours, remuneration and work conditions that might exist between Advance itself and Ms. Martin in the event her subcontract with Wilson Beck was terminated. Therefore the Minister's determination was reasonable that an employer such as Advance would not have agreed to such a significant premium increase in pay if the parties had been dealing at arm's length. [22] Mr. Porter testified that Advance had enough work to occupy the Appellant after the contract with Economical ended. However Advance did not hire anyone to replace the Appellant when she left in July 2003 until Liz Brownrigg was hired in November 2003. This raises the issue of whether there was in fact sufficient work to support the Appellant's continued employment with Advance after her work at Economical ended. [23] The Respondent relied to a great extent upon the inconsistencies between the hours actually worked and the hours claimed by the Appellant. The Application for Benefits and the original Record of Employment indicated that the Appellant worked 40 hours per week while the Worker's and Payor's questionnaires submitted several months later indicated that she worked 21.5 hours per week. In subsequent telephone conversations with two CRA officers, the Appellant stated that she worked 21.5 hours per week for the first seven months and 14 hours per week thereafter. Both the Appellant and Mr. Porter attributed the initial discrepancies to errors made by the Appellant and Advance's bookkeeper, and to the fact that the hours indicated were merely "a modest estimate" since her hours were not officially recorded. Aggravating the credibility issue is the fact that Advance failed to provide any documentation to CRA to substantiate the work performed by the Appellant despite several requests to do so by Carmen Vivash. No detailed evidence was ever provided to demonstrate how the revised number of hours, contained in the amended Record of Employment (Exhibit A-8), was calculated. The bookkeeper who completed the ROE did not give evidence. There is nothing further before me than what was before the Minister. Clear evidence to substantiate this work was not provided to CRA officials or to this Court. [24] There was also conflicting evidence respecting the start and end dates of the employment period. In addition Mr. Porter was unclear about the Appellant's vacation benefits and if and when she took holidays. Third party evidence suggests that claims examiners and independent adjusters, with the experience that the Appellant had, enjoy considerable autonomy. It appears that their employers are far more concerned with the quality and quantity of work completed than with the specific hours worked. Yet, in this case, Advance produced very little evidence supporting the amount of work that the Appellant actually completed. It is not obvious here that Advance was concerned with the quantum of work completed. It appears unlikely that an employer would hire an unrelated employee on salary without setting up a system for tracking the amount of work completed. Otherwise how would an employer determine if such an arrangement would be profitable? In addition it would seem reasonable that an employer should know the particulars of an employee's vacation. [25] Consequently, for all these reasons, I am satisfied that the Minister's conclusion, that the Appellant was not in insurable employment for the period March 2003 to July 15, 2003, is reasonable. Based on the facts respecting this period, there is no basis for me to draw any different conclusion than the Minister has. [26] The appeal is allowed and the decision of the Minister is varied on the basis that there are two separate and distinct periods of employment with Advance; the first period, July 24, 2002 to February 2003, qualifies as insurable employment; the second period, March 2003 to July 15, 2003, will not qualify as insurable employment. Signed at Ottawa, Canada, this 9th day of June 2005. "Diane Campbell" Campbell J. CITATION: 2005TCC364 COURT FILE NO.: 2004-2972(EI) STYLE OF CAUSE: Kristin A. Porter and The Minister of National Revenue and Advance Claims Service Ltd. PLACE OF HEARING Vancouver, British Columbia DATES OF HEARING November 4 and 5, 2004 REASONS FOR JUDGMENT BY: the Honourable Justice Diane Campbell DATE OF JUDGMENT June 9, 2005 APPEARANCES: For the Appellant: The Appellant herself Counsel for the Respondent: Pavanjit Mahil Agent to the Intervenor: C. David Porter COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1]Tignish Auto Parts v. Canada (M.N.R.), [1994] F.C.J. No. 1130 (FCA); La Ferme Émile Richard et Fils Inc. v. M.N.R. (1995) 178 N.R. 361; Canada (A.G.) v. Jencan, [1997] F.C.J. No. 876 (FCA); Bayside Drive-In Ltd.. v. Canada(M.N.R.), [1997] F.C.J. No. 1019 (FCA). [2] Pérusse v. Canada, [2000] F.C.J. No. 310. Valente v. Canada, [2003] F.C.A. 132. Massignani v. Canada, [2003] F.C.J. No. 542. Denis v. Canada, [2004] F.C.A. 26.