Benjamin c. M.R.N.

Benjamin c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2005-03-22 Neutral citation 2005 TCC 210 File numbers 2004-4210(EI) Judges and Taxing Officers Pierre R. Dussault Subjects Employment Insurance Act Decision Content Docket: 2004-4210(EI) BETWEEN: NORMAND BENJAMIN, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard March 14, 2005, at Montréal, Quebec Before: The Honourable Justice Pierre R. Dussault Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Emmanuelle Faulkner ____________________________________________________________________ JUDGMENT The appeal, under subsection 103(1) of the Employment Insurance Act, regarding a decision by the Minister of National Revenue dated October 6, 2004, for the 2003 year is allowed and the assessment of employment insurance premiums is vacated. Signed at Ottawa, Canada, this 22nd day or March 2005. "P. R. Dussault" Dussault J. Translation certified true on this 24th day of October 2005. Elizabeth Tan, Translator Citation: 2005TCC210 Date: 20050322 Docket: 2004-4210(EI) BETWEEN: NORMAND BENJAMIN, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Dussault J. [1] This is an appeal of an assessment for employment insurance premiums in the amount of $1,281.78 including penalties and interest, against Fermes Normand Benjamin inc. (the "Payer") for the 2003 year. According to this assessment, the Appellant held insurable employment with the Payer. [2] Paragraphs 6 to 8 of the Reply to the Notice of Appeal state the assumptions of fact and the conclusions of the Minister of National Revenue ("Minister"). They read as follows: [translation] 6. To render his decision, the Minister determined that the employment insurance premiums were payable since the Appellant held employment with the Payer under a contract for services, and relied on the following assumptions of fact: (a) the Payer, incorporated in 1988, operates a dairy, pig and grain farm; (b) the farm has around 120 bovines, including 60 milking cows and around 265 early-weaning sows; (c) the Payer cultivates wheat, corn, soybeans and fodder; (d) the Appellant rendered services to the Payer; (e) during the summer season, the Appellant takes care of the pigs and the pig sty, works in the fields and repairs the buildings and machinery, and in the winter season, he takes care of the pigs and repairs the machinery to be ready in the spring; (f) the Appellant works seven days a week, generally from 6:00 a.m. to 6:00 p.m. and does not account for his hours of work; (g) the Payer's board of directors makes all the major decisions; (h) to carry out his work, the Appellant uses the Payer's equipment and machinery; (i) the Appellant received a set yearly salary, and was paid by check; (j) the Appellant was covered by the Payer's group insurance (prescription drug insurance and health care); 7. Moreover, the Appellant and the Payer were related persons within the meaning of the Income Tax Act because: (a) during the year in question, the Payer's voting shares were distributed as follows: -the Appellant: 36.67% of shares, -Fernande Bricault: 23.33% of shares, -Pascal Benjamin: 20% of shares, -David Benjamin: 20% of shares; (b) Fernande Bricault is the Appellant's spouse; (c) Pascal Benjamin and David Benjamin are the Appellant's sons; (d) the Appellant was a member of a related group that controlled the Payer; 8. The Minister also determined that the Appellant and the Payer were deemed to have an arm's length relationship in terms of this employment because he was convinced that it was reasonable to conclude that the Appellant and the Payer would have concluded a substantially similar contract of employment between them had they been dealing at arm's length, given the following circumstances: (a) the Appellant provided his services to the Payer all year; (b) the Appellant's duties are directly related to the Payer's activities; (c) the Appellant received a fixed annual salary of $24,000. [3] The facts stated in paragraphs 6 and 7 were admitted. The Appellant is challenging the Minister's decision stated in paragraph 8, although he admits the facts set out in subparagraphs 8(a), (b) and (c) are true. [4] The Appellant and his spouse, Fernande Bricault, testified. [5] The Appellant stated that he worked seven days a week, from 6:00 a.m. to 7:00 or 8:00 p.m. every day, and no one would work for a salary of $24,000 a year for so many hours. He explained that the company was his, and his salary was set by the accountant who has always been the same. According to figures he says he received from his counsel and the Union des producteurs agricoles ("UPA"), work at 35 hours a week earns wages varying between $35,000 to $38,000 a year. [6] In her testimony, Fernande Bricault stated that the $35,000 a year salary for 35 hours of work a week was the reference salary used for the Canadian Agricultural Income Stabilization Program ("CAIS") to establish production costs. According to her no one on farms except the large companies paid wages that high and sometimes people only make $10,000 a year. Moreover, she explained that the Payer had hired an agricultural worker five or six years earlier who was paid $450 a week for a five-year period. However, according to her, he was never made to work 70 to 80 hours a week, as her spouse did, for a yearly salary of $24,000. Additionally, an hour for lunch and an hour for dinner, holidays, every second weekend off and two weeks' summer holiday were to be added, which represents working conditions that are very different from those of the Appellant who worked seven days a week with no annual leave until recently. It also seems that the Appellant's salary has been the same for many years and the decision was made to increase their sons' salaries instead; they also work for the Payer and one currently earns $450 a week and the other $325 a week. According to Ms. Bricault, the Payer cannot pay higher salaries and the decision was made to give them raises rather than increasing the Appellant's salary because they would be taking over the company, whereas she and the Appellant were heading towards retirement. As she said, in these conditions, sacrifices must be made. [7] Counsel for the Respondent felt the Minister improperly exercised his discretion because there are no elements of comparison. However, she feels that the analysis of all the circumstances of the Appellant's employment submitted as evidence, the premium paid, the employment conditions, and the duration, nature and importance of the work accomplished all make it reasonable to conclude that the Payer and the Appellant would have concluded a substantially similar contract of employment between them had they been dealing at arm's length. Counsel for the Respondent claims that it is the Appellant's interest as the Payer's shareholder that led him to not allow himself to take leave on holidays or take annual leave. [8] I disagree with counsel for the Respondent's position. If the $24,000 a year salary was not unusual as the evidence showed, then it must be acknowledged that the Appellant's overall working conditions, the hours of work, lack of holidays, weekends, vacation, or increase in wages, all result from the fact that the Payer is operating a family business and the Appellant is the main shareholder. His interest in the viability of the company, the concern he and his spouse, Ms. Bricault, had that their sons take over the company, and their need to make some sacrifices are motivations that cannot be ignored and that undoubtedly led to the Appellant's working conditions. I do not believe that it can be reasonably found that the Appellant's working conditions would have been substantially similar if he and the Payer had been dealing at arm's length. [9] As a result of the above, the appeal is allowed and the assessment of employment insurance premiums is vacated. Signed at Ottawa, this 22nd day of March 2005. "P. R. Dussault" Dussault J. Translation certified true on this 24th day of October 2005. Elizabeth Tan, Translator CITATION: 2005TCC210 COURT FILE No.: 2004-4210(EI) STYLE OF CAUSE: NORMAND BENJAMIN AND MNR PLACE OF HEARING: Montreal, Quebec DATE OF HEARING: March 14, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice Pierre R. Dussault DATE OF HEARING: March 22, 2005 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Emmanuelle Faulkner COUNSEL OF RECORD: For the Appellant: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario