Narvie v. M.N.R.

Narvie v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2006-07-07 Neutral citation 2006 TCC 368 File numbers 2005-3542(EI) Judges and Taxing Officers Sylvio J. Savoie Subjects Employment Insurance Act Decision Content Docket: 2005-3542(EI) BETWEEN: NATHAN NARVIE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on May 11, 2006, at Beresford, New Brunswick Before: Savoie D.J. Appearances: Agent for the Appellant: Steve Narvie Counsel for the Respondent: Alain Gareau ____________________________________________________________________ JUDGMENT The appeal is dismissed and the Minister's decision is confirmed in accordance with the attached Reasons for Judgment. Signed at Grand-Barachois, New Brunswick, this 7th day of July 2006 « Savoie D.J. » Savoie D.J. Citation: 2006TCC368 Date: 20060707 Docket: 2005-3542(EI) BETWEEN: NATHAN NARVIE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Savoie D.J. [1] This is an appeal from a decision of the Minister of National Revenue (the "Minister") whereby he determined that the Appellant did not hold insurable employment while working for Steve Narvie (the "Payor"), from May 9 to May 21, 2005. Furthermore, the Minister determined that the employment of the Appellant with the Payor was an excluded employment under paragraph 5(2)(i) of the Employment Insurance Act (the "Act") because the Appellant and the Payor were not dealing with each other at arm's length. [2] In reaching his decision, the Minister relied on the following assumptions of fact: 9.(a) the Payor owned a fishing vessel and had participated in the lobster fishery since 2001; (b) the Payor is the Appellant's father; (c) the Appellant was engaged as a deckhand on the Payor's fishing vessel; (d) the duties of a deckhand included checking the oil and the fuel on the vessel, lifting traps from the water, cleaning, baiting and re-setting the traps, measuring and preparing the lobster for market, unloading the boat and re-stocking bait for the next day's outing; (e) the Payor's typical week of fishing was approximately 10 hours a day for 6 days or 60 hours per week; (f) the Appellant was not responsible for any of the expenses incurred in making the catch; (g) in 2005, the lobster fishing season (the "2005 season") was from May 1 to June 30; (h) during the 2005 season the Payor engaged deckhands, as follows: Period Number and brief description of deckhand(s) May 2 - May 28/05 Deckhand # 2 May 9 - May 21/05 Deckhand # 1 plus the Appellant May 30 - June 30/05 Deckhand # 2 (i) the Appellant was not hired to replace another worker; (j) the Appellant was not replaced when his engagement with the Payor ended; (k) during the previous lobster fishing seasons the Payor fished with one hired deckhand in each season; (l) other than for the period under appeal, the Payor fished with one hired deckhand during the 2005 season; (m) the Payor's gross earnings for the period under appeal, while there were 2 deckhands working, were $9,085 or an average of $4,542.50 per week; (n) he Payor's gross earning after the period under appeal, while there was one deckhand working, were $28,726.55 or an average of $4,787.76 per week; (o) the Appellant and the Payor had an agreement whereby the Appellant would work for just enough to qualify for Employment Insurance benefits (the "benefits"); and (p) the Appellant needed an additional 110 hours to qualify for benefits and during the period under appeal, he worked 120 hours; 10. The Minister now relies on the following additional assumption of fact: (a) the Appellant had accumulated 892 insurable hours and needed 18 additional insurable hours to qualify for benefits rather than 110 hours as stated in paragraph 9(p) above. [3] At the hearing, the Appellant admitted all of the Minister's assumptions of fact except those set out in subparagraphs i) and j). However, he was unable to prove that these assumptions were wrong. On the contrary, these were proven at the hearing. [4] It was established by the evidence that the Appellant was hired by the Payor, his father, in order to qualify him for the benefits under the employment insurance regime. This was candidly admitted by both the Appellant and the Payor in their statement to the investigators and under oath at the hearing. [5] The evidence is clear that the Payor had no need for a second deckhand, the Appellant, during the relevant period. Indeed, the Payor admitted at the hearing that he engaged in lobster fishing and that since 2003 his only requirement is for one single deckhand. [6] The onus of proof is on the Appellant. He has not discharged that onus. [7] The case of Elia v. Canada (Minister of National Revenue - (M.N.R.), [1998] A.C.F. No. 316 stands for the proposition that the assumptions of fact of the Minister set out in the Reply to the Notice of Appeal and upon which he has based his determination must be taken to be admitted unless they have been specifically proven wrong by the Appellant. This, the Appellant has failed to do. [8] In reaching his determination, the Minister relied on paragraphs 5(2)(i) and 5(3)(b) of the Act and on section 251 of the Income Tax Act. [9] The Minister submits that the Appellant was not engaged by the Payor in insurable employment within the meaning of the Act for the period under appeal since the said employment was excluded employment within the meaning of paragraph 5(2)(i) of the Act, because the Appellant and the Payor are related and were therefore not dealing with each other at arm's length. [10] The Minister further submits that, considering all the facts pursuant to paragraph 5(3)(b) of the Act, it was reasonable for him to conclude that the Appellant and the Payor would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length since the arrangement between them was artificial and was made solely for the purpose of qualifying the Appellant for employment insurance benefits. [11] It will be useful here to reproduce the relevant provisions of the Act which are applicable to the situation under review. They are the following: INSURABLE EMPLOYMENT 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), (b) if the employer is, within the meaning of the 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. [12] As mandated under paragraph 5(3)(b), the Minister has examined the circumstances of the employment of the Appellant. Let us examine those circumstances. REMUNERATION PAID [13] It was established that the Appellant performed services for the Payor both prior to and after the period under review without remuneration. [14] Furthermore, the evidence disclosed that the Appellant was hired as a second deckhand on the fishing boat and received a salary as such, regardless of the fact that his services were not needed. Since 2003, the Payor engaged in lobster fishing with one deckhand only. It was also proven that the Payor's gross revenue with two deckhands did not exceed the revenue earned with the help of one single deckhand. [15] This certainly supports the conclusion that the Payor would not have hired a second deckhand on those terms, or at all, if he and the Appellant had been dealing with each other at arm's length. TERMS AND CONDITIONS [16] The Payor hired the Appellant when, as was proven, he had no need for his services. He admitted the Appellant could leave his employment after having accumulated sufficient working hours to qualify for employment insurance benefits. DURATION [17]The period under review is from May 9 to May 21, 2005. The lobster season is from May 1 to June 30 each year. The Appellant testified that he worked for the Payor prior to and after the period in question without remuneration. The Appellant left his employment once he had accumulated sufficient working hours to qualify for employment benefits and both the Appellant and the Payor confirmed this in their statement and testimony. It was also confirmed by both the Appellant and the Payor that this was the agreement between them at the outset. It is difficult to conceive that such an arrangement would have been entered into between the Payor and the Appellant if they had been dealing with each other at arm's length. [18]The evidence made it clear that the services of the Appellant were not essential to the Payor's economic activity. It bears repeating that the economic undertaking of the Payor could be carried out quite adequately with the help of one single deckhand. [19]The nature of the arrangement under which the Appellant was employed is exactly the kind of scheme that runs contrary to the stated intention of the Employment Insurance Legislation as interpreted by the decisions of this Court and the Federal Court of Appeal. [20]The Appellant has failed to demonstrate the advisability of this Court's intervention. On the contrary, such an intervention would be ill-founded. [21]The Minister has correctly conducted his analysis under the Act and his conclusion, even in light of the evidence produced at the hearing, is still well founded. [22]Consequently, the appeal is dismissed and the decision of the Minister is confirmed. Signed at Grand-Barachois, New Brunswick, this 7th day of July 2006 "Savoie D.J." Savoie D.J. CITATION: 2006TCC368 COURT FILE NO.: 2005-3542(EI) STYLE OF CAUSE: NATHAN NARVIE AND M.N.R. PLACE OF HEARING: Beresford, New Brunswick DATE OF HEARING: May 11, 2006 REASONS FOR JUDGMENT BY: The Honorable S.J. Savoie Deputy Judge DATE OF JUDGMENT: July 7, 2006 APPEARANCES: Agent for the Appellant: Steve Narvie Counsel for the Respondent: Alain Gareau COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada