Cyr Chevrier c. M.R.N.

Cyr Chevrier c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-10-29 Neutral citation 2004 TCC 568 File numbers 2003-4495(EI) Judges and Taxing Officers Paul Bédard Subjects Canada Pension Plan Decision Content Docket: 2003-4495(EI) BETWEEN: RÉJEANNE CYR CHEVRIER, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and SERGE CHEVRIER, Intervenor. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on August 12, 2004 at Hâvre-Aubert, Quebec Before: The Honourable Justice Paul Bédard Appearances: For the Appellant: The Appellant herself Counsel for the Respondent: Agathe Cavanagh For the Intervenor: The Intervenor himself ____________________________________________________________________ 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 29th day of October 2004. "Paul Bédard" Bédard J. Translation certified true on this 13th day of December 2004. Elizabeth Tan, Translator Citation: 2004TCC568 Date: 20041029 Docket: 2003-4495(EI) BETWEEN: RÉJEANNE CYR CHEVRIER, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and SERGE CHEVRIER, Intervenor. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Bédard J. [1] The Appellant is appealing from the decision of the Minister of National Revenue (the "Minister") that stated her employment with Serge Chevrier (the "Payer"), for the period May 26, 2003, to August 29, 2003, was not insurable employment within the meaning of the Employment Insurance Act (the "Act") because the Payer and the Appellant were not dealing at arm's length. [2] Subsection5(1) of the Act states, 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; ... [3] Subsections 5(2) and 5(3) of the Act state, in part: (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 subparagraph (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 states, in part: 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 person" 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 was based on the following presumptions of fact, as set out in paragraph 7 of the Reply to the Notice of Appeal: [translation] (a) the Payer lived in the basement of the Appellant's residence; (b) from August 2001, the Payer did not pay rent to the Appellant for housing; (c) according to the Guide des salaires des professions au Québec en 2002, the average salary for a childcare provider was $256.10 per week; (d) the Appellant set her own salary at $350 per week plus 4%; (e) the wages paid to the Appellant were unreasonable considering the market; (f) in November 2003, the Payer moved and found a daycare for his daughter; (g) after she was laid off, the Appellant continued to babysit her granddaughter, but was not in the Payer's salary book; (h) the alleged period of employment does not correspond to the actual employment period; (i) the Appellant's terms of employment were unreasonable; (j) the Appellant's alleged layoff of August 29, 2003, does not correspond to the needs of the Payer, but with the needs of the Appellant, in order to qualify for employment benefits; (k) the alleged period of employment was intended to accommodate the Appellant's needs to qualify for employment insurance rather than the Payer's actual needs; (l) the Appellant's alleged period of employment was unreasonable; (m) the Payer would not have allowed such employment conditions to the Appellant if they had been dealing at arm's length. [6] The Federal Court of Appeal has defined the role the Act confers on a justice of the Tax Court of Canada many times. This role does not allow for the justice's discretionary power to replace that of the Minister, but it 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."[1] [7] In other words, before deciding whether the conclusion with which the Minister was satisfied is reasonable to me, I must, in light of the evidence before me, verify whether the Minister's allegations are well-founded in whole or in part, considering the factors stated in paragraph 5(3)(b) of the Act. [8] The credibility of the Appellant and the Payer is not being questioned. They testified honestly, to the best of their knowledge, and very clearly. I must note that no one testified for the Respondent. [9] Since counsel for the Respondent acknowledged that the Appellant had employment under the terms of a contract for services, the question now is would the Payer and the Appellant have concluded such a contract if they had been dealing at arm's length. In other words, were the employment conditions more lucrative because the Appellant was the Payer's mother? Testimony [10] The testimony of the Appellant and the Payer showed that: (i) from August 2001 to November 2003, the Payer, his spouse and their little girl Anne-Virginie, born September 28, 2002, lived free of charge in the basement of the Appellant's residence; (ii) the Payer worked full time in computers at the CÉGEP de la Gaspésie/Les Îles; (iii) the Payer's spouse stayed home with Anne-Virginie until she found a job in May 2003, as a full-time archivist; (iv) hiring the Appellant was done only as a last resort. In fact, the Payer testified that after his spouse was no longer able to stay home with Anne-Virginie, he tried very hard to find a babysitter or a daycare space for his daughter. These efforts were in vain. He even offered $350 per week to Ms. Bourgeois, who first accepted to babysit Anne-Virginie, but then later refused. The Payer explained that the failure to find a daycare space was because of his daughter's age (6 months) and the lack of manpower in the Islands during the period in question. This was the only period of the year when nearly everyone worked in the Islands. He therefore had to resort to asking the Appellant to babysit his little girl. He testified that offered her $350 per week for her services, which were not only to babysit Anne-Virginie from 8:00 a.m. to 5:00 p.m. Monday to Friday, but also to clean the basement and prepare the evening meals. He stated that he had to offer this salary to the Appellant or she would not have accepted his offer. In her testimony, the Appellant confirmed the Payer's claim to this effect. She added that she had always worked during this period in previous years, and this was the only time of the year she could easily find work in the Islands for $350 per week. She added that if the Payer had offered her a lower salary, she would have declined the offer and worked elsewhere; (v) the Payer advised the Appellant on August 15, 2003, that he no longer required her services, since he though he had found a daycare space for Anne-Virginie for the beginning of September 2003. The Payer explained that on or around September 8, 2003, Marthe Chiasson told him that she would not babysit Anne-Virginie, taking in another child instead; (vi) in November 2003, the Appellant moved to Gros-Cap aux Îles and finally found a daycare space for Anne-Virginie. The Payer testified that during the period of September 1, 2003, to October 30, 2003, the Appellant, Claire Leblanc, his aunt and his mother-in-law voluntarily babysat Anne-Virginie for three days, ten weeks and four weeks, respectively. [11] Let us now review the Minister's allegations in light of the facts in evidence. I simply feel that subparagraphs (a) and (b) of the Minister's allegations are irrelevant because the evidence showed that the Appellant housed the Payer and his family in the basement of her residence, free of charge, from August 2001 to November 2003. [12] I feel that the Minister erred by relying too strongly on the fact that the Guide des salaires des professions au Québec en 2002 showed that the average salary for a child care provider was $256 per week. In my opinion, the Minister wrongly neglected the particular details of the situation; first, he did not consider the scarcity of workers in the Islands during the period in question or the Payer's inability to find a babysitter or a daycare space for his daughter, despite many attempts. The evidence clearly shows that the Payer had no other choice but to hire his mother and offer her such a salary. [13] Was the statistic the Minister cited the same in 2002 for a child care provider whose duties also included cleaning and preparing the evening meals? It would have been interesting to hear the answer from a representative of the Canada Customs and Revenue Agency. In my opinion, the Minister should have considered all the particular details of the situation before making a judgment, which was apparently not done. This, in my opinion, is conclusive regarding subparagraphs 7(c), (d) and (e) of the Minister's allegations. None of these leads to the reasonable conclusion that they were not dealing at arm's length. [14] Moreover, I refuse to conclude that the Appellant's dismissal did not correspond to the Payer's needs but with the Appellant's need to qualify for employment insurance benefits, and that the alleged period of employment was intended to meet the Appellant's need to qualify for employment insurance rather than the Payer's actual needs. Granted, the evidence showed that the Appellant worked the number of weeks required to maximize the rate of her employment insurance benefits; however, the Minister wrongly ignored the following facts submitted as evidence: (i) first, the Payer dismissed the Appellant because he thought he had found a daycare space for his daughter; (ii) after the Payer learned that the daycare space he thought he had found was no longer available, on or around September 8, 2003, he was still looking for a daycare space; (iii) up until the time the Payer found a daycare space, at the beginning of November 2003, the Appellant, the Payer's aunt and mother-in-law voluntarily babysat Anne-Virginie for three days, ten weeks and four weeks, respectively, in order to help out the Payer. Therefore, contrary to the Minister's allegations, the Appellant did not continue working for the Payer, even if only for three days. Moreover, the testimony of the Appellant and the Payer showed that the Payer's aunt and mother-in-law agreed to help him out because their seasonal employment was then over, and they were therefore available to do so. This, in my opinion, is conclusive regarding subparagraphs 7(f), (g), (h), (i), (j), (k) and (l) of the Minister's allegations. [15] In light of the evidence before me, after reviewing the factors stated in paragraph 5(3)(b) of the Act and after verifying the validity of the Minister's allegations, the conclusion with which the Minister was satisfied seems unreasonable to me. [16] For these reasons, the appeal is allowed and the decision of the Minister is vacated. Signed at Ottawa, Canada, this 29th day of October 2004. "Paul Bédard" Bédard J. Translation certified true on this 13th day of December 2004. Elizabeth Tan, Translator CITATION: 2004TCC568 COURT FILE NUMBER: 2003-4995(EI) STYLE OF CAUSE: Réjeanne Cyr Chevrier and M.N.R. and Serge Chevrier PLACE OF HEARING: Hâvre-Aubert, Quebec DATE OF HEARING: August 12, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice Paul Bédard DATE OF JUDGMENT: October 29, 2004 APPEARANCES: For the Appellant: The Appellant herself Counsel for the Respondent: Agathe Cavanagh For the Intervenor: The Intervenor himself COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada For the Intervenor: Name: Firm: [1] Légaré v. Canada (Minister of National Revenue - M.N.R.), [1999] F.C.J. No. 878 (Q.L.), paragraph 4.