Canada (Minister of National revenue) v. Mastech Quantum Inc.

Canada (Minister of National revenue) v. Mastech Quantum Inc. Court (s) Database Federal Court of Appeal Decisions Date 2002-04-04 Neutral citation 2002 FCA 131 File numbers A-692-00 Notes Digest Decision Content Date: 20020404 Dockets: A-692-00 & A-693-00 Neutral citation: 2002 FCA 131 CORAM: RICHARD C.J. EVANS J.A. MALONE J.A. BETWEEN: THE MINISTER OF NATIONAL REVENUE Applicant and MASTECH QUANTUM INC. Respondent Heard at Toronto, Ontario, on February 6, 2002. Judgment delivered at Ottawa, Ontario, on April 4, 2002. REASONS FOR JUDGMENT BY: RICHARD C.J. CONCURRED IN BY: EVANS J.A. CONCURRING REASONS IN RESULT ONLY BY: MALONE J.A. Date: 20020404 Dockets: A-692-00 & A-693-00 Neutral citation: 2002 FCA 131 CORAM: RICHARD C.J. EVANS J.A. MALONE J.A. BETWEEN: THE MINISTER OF NATIONAL REVENUE Applicant and MASTECH QUANTUM INC. Respondent REASONS FOR JUDGMENT RICHARD C.J. Introduction [1] This is an application for judicial review of an order of the Tax Court of Canada [2000] T.C.J. No. 679 allowing the respondent's appeal from a determination by the Minister of National Revenue ("the Minister") that a worker ("Wallace") was engaged in insurable and pensionable employment under paragraph 6(g) of the Employment Insurance Act ("EI Act") Regulations and subsection 34(1) of the Canada Pension Plan ("CPP") Regulations. Background [2] The undisputed facts are as follows. During the relevant period, from January 1, 1996 to January 14, 1998, Silverside Computer Systems Inc. (Silverside) was a placement or employment agency, and Dofasco was a client of that agency. Wallace was placed in employment at Dofasco by Silverside, on terms and conditions which are analogous to a contract of service. Wallace performed the work as requested by Dofasco. [3] The respondent, Mastech Quantum Inc., is a successor to Silverside. [4] Silverside was a wholly-owned subsidiary of Quantum Information Resources Ltd. (Quantum). The payroll operations of various companies were centralized at Quantum and Quantum was compensated by Silverside for the payroll services it provided to Silverside. [5] Dofasco paid Silverside for Wallace's services. Silverside then remitted the payment from Dofasco in its entirety to Quantum. Quantum then issued a cheque to Wallace for the amount agreed upon by Wallace and Silverside. [6] The cheques from Quantum to Wallace bore the notation: "Silverside Computer systems Inc." or "Silverside Computer System Inc." Issue [7] At issue is whether, the Tax Court judge erred in finding that Silverside did not remunerate Wallace within the meaning of the applicable Regulations and in concluding that Wallace was not in insurable and pensionable employment. [8] The applicable provisions are paragraph 6(g) of the EI Act and subsection 34(1) of the CPP, which read as follows: 6. Employment in any of the following employments, unless it is excluded form insurable employment by any provision of these Regulations, is included in insurable employment: ... (g) Employment of a person who was placed in that employment by a placement or employment agency to perform services for and under the direction and control of a client of the agency, where that person is remunerated by the agency for the performance of those services. 6. Sont inclus dans les emplois assurables, s'il ne sont pas des emplois exclus conformément aux dispositions du présent règlement, les emplois suivants: ... g) l'emploi exercé par une personne appelée par une agence de placement à fournir des services à un client de l'agence, sous la direction et le contrôle de ce client, en étant rétribuée par l'agence. 34. (1) Where any individual is placed by a placement or employment agency in employment with or performance of services for a client of the agency and the terms or conditions on which the employment or services are performed and the remuneration thereof is paid constitute a contract of service, the employment or performance of services is included in pensionable employment and the agency or the client, whichever pays the remuneration to the individual, shall, for the purposes of maintaining records and filing returns and paying, deducting and remitting contributions payable by and in respect of the individual under the Act and these Regulations, be deemed to be the employer of the individual. 34. (1) Lorsqu'un personne est placée par une agence de placement pour la fourniture de services ou dans un emploi auprès d'un client de l'agence, et que les modalités régissant la fourniture des services et le paiement de la rémunération constituent un contrat de louage de services ou y correspondent, la fourniture des services est incluse dans l'emploi ouvrant droit à pension, et l'agence ou le client, quel que soit celui qui verse la rémunération, est réputé être l'employeur de la personne aux fins de la tenue de dossiers, de la production des déclarations, du paiement, de la déduction et du versement des contributions payables, selon la Loi et le présent règlement, par la personne en son nom. [emphasis added] [Je souligne] Analysis [9] The Shorter Oxford Dictionary (3rd Ed.) defines "remunerate" and "remuneration" as follows: 1. trans. to repay, requite, make some return for (services etc.) 2. to reward (a person); to pay (a person) for services rendered or work done, hence remuneration, reward, recompense, repayment, payment, pay. In the Black's Law Dictionary, (7th Ed.) "remuneration" is defined as: 1. Payment; compensation; 2. The act of paying or compensating. [10] The evidence before the Tax Court of Canada established that Quantum paid Wallace at Silverside's request and on Silverside's behalf for the discharge of Silverside's obligations to Wallace under the contract for services. This was acknowledged in evidence by Silverside's managing director. It was Silverside, not Quantum, who had an obligation to remunerate Wallace for the services he rendered. There clearly was a contract between Silverside and Wallace. There was no contract in evidence between Quantum and Wallace. [11] Quantum merely provided a payroll service to Silverside. It did not thereby "remunerate" Wallace for the performance of his services, nor did it "pay remuneration" to him. I note also that subsection 34(1) presumes that either the agency or the client will pay the remuneration and thus be deemed to be the employer of the individual. Since the client, Dofasco did not pay the remuneration for the purpose of the provision it must have been paid by the agency, Silverside. Disposition [12] In reaching his conclusion, the Tax Court judge did not properly construe and apply the applicable EI and CPP Regulations and in so doing committed an error of law. Based on the undisputed facts before the Court, the person placed in employment (Wallace) was remunerated by the agency (Silverside) for the performance of services under the direction and control of a client of the agency (Dofasco). [13] Accordingly, I would allow the application for judicial review with reasonable and proper costs pursuant to section 18.25 of the Tax Court of Canada Act, the decision of the Tax Court of Canada set aside and the matter referred back to the Tax Court for determination in accordance with these reasons. "J. Richard" Chief Justice "I agree John M. Evans J.A." MALONE J.A. (concurring in result only) Introduction [14] I concur in the result arrived at by the Chief Justice on this application for judicial review, but respectfully reach my conclusion on a different basis. My reasons follow. [15] In this application the Minister of National Revenue ("the Minister") seeks to set aside a judgment of a Judge of the Tax Court of Canada dated September 26, 2000, reported as [2000] T.C.J. No 679. That judgment allowed the respondent's appeal from determinations made by the Minister under paragraph 6(g) of the Employment Insurance Act ("EI Act") Regulations (formerly paragraph 12(1)(g) of the Unemployment Insurance Regulations) and subsection 34(1) of the Canada Pension Plan ("CPP") Regulations (collectively, "the Regulations"). [16] The Minister's determinations related to the provision of certain services by Glenn Wallace ("Wallace") in the period from January 1, 1996, to January 14, 1998. The Minister determined that Silverside Computer Systems Inc. ("Silverside"), an employment or placement agency with which Wallace had contracted, was required to pay EI premiums and CPP contributions in respect of what the Minister deemed to be Wallace's insurable and pensionable employment while placed at Dofasco Inc. ("Dofasco"). [17] The respondent Mastech Quantum Inc. is a successor corporation to Silverside. However, it is conceded that this change is immaterial and so, for the sake of clarity, I shall refer to the respondent by the name it bore at the material time, that being Silverside. [18] The issue here is whether, based on the legal relationship between Wallace and Silverside and the indirect payment to Wallace by Silverside's parent, the Tax Court judge erred in concluding that Wallace was not remunerated, or paid remuneration, by Silverside within the meaning of the Regulations and therefore not in insurable and pensionable employment. According to the respondent, the Minister's position offends the Supreme Court of Canada's interpretive guidelines in both Friesen v. Canada, [1995] 3 S.C.R. 1031, and 65302 British Columbia Ltd. v. R., [1999] 3 S.C.R. 804. Facts [19] In November of 1994, Wallace entered into a services agreement ("Services Agreement") with Silverside wherein he agreed to provide Silverside's clients with his computer services at an agreed hourly rate and as an independent contractor. During the relevant period Silverside entered into a client services agreement with Dofasco, agreeing to provide Wallace's professional services to Dofasco in exchange for a fee based on an hourly rate of pay. It is not disputed that Wallace was placed by Silverside at Dofasco and was under Dofasco's direction and control. [20] The Tax Court Judge found that the employment arrangement with Dofasco was analogous to a contract of service. Wallace invoiced Silverside on a weekly basis, and was paid an hourly fee as agreed with Silverside and not with Dofasco. Wallace provided Silverside with time sheets validated by Dofasco managers, and these time sheets were then sent to Silverside's parent, Quantum Resources Information Inc. ("Quantum"). Quantum paid Wallace using cheques entitled "Silverside Computer Systems Inc." [21] Payroll operations for various companies were centralized at Quantum and Quantum was compensated by Silverside for the payroll services provided. Dofasco did not pay Wallace, rather, Dofasco paid Silverside for Wallace's services, and Silverside then remitted the entire Dofasco payment to Quantum. [22] On May 7, 1997, Wallace requested a ruling as to his status under the Regulations. On January 14, 1998, the minister ruled that Silverside was required to pay EI and CPP premiums because Wallace's working relationship fell within the provisions of paragraph 6(g) and subsection 34(1), which are reproduced below. [23] Paragraph 6(g) of the Employment Insurance Act Regulations reads as follows: 6. Employment in any of the following employments, unless it is excluded from insurable employment by any provision of these Regulations, is included in insurable employment: ... (g) Employment of a person who was placed in that employment by a placement or employment agency to perform services for and under the direction and control of a client of the agency, where that person is remunerated by the agency for the performance of those services. [emphasis added] 6. Sont inclus dans les emplois assurables, s'ils ne sont pas des emplois exclus conformément aux dispositions du présent règlement, les emplois suivants : ... g) l'emploi exercé par une personne appelée par une agence de placement à fournir des services à un client de l'agence, sous la direction et le contrôle de ce client, en étant rétribuée par l'agence. [je souligne] [24] Subsection 34(1) of the CPP Regulations provides: 34.(1) Where any individual is placed by a placement or employment agency in employment with or performance of services for a client of the agency and the terms or conditions on which the employment or services are performed and the remuneration thereof is paid constitute a contract of service or are analogous to a contract of service, the employment or performance of services is included in pensionable employment and the agency or the client, whichever pays the remuneration to the individual, shall, for the purposes of maintaining records and filing returns and paying, deducting and remitting contributions payable by and in respect of the individual under the Act and these Regulations, be deemed to be the employer of the individual. [emphasis added] 34. (1) Lorsqu'une personne est placée par une agence de placement pour la fourniture de services ou dans un emploi auprès d'un client de l'agence, et que les modalités régissant la fourniture des services et le paiement de la rémunération constituent un contrat de louage de services ou y correspondent, la fourniture des services est incluse dans l'emploi ouvrant droit à pension, et l'agence ou le client, quel que soit celui qui verse la rémunération, est réputé être l'employeur de la personne aux fins de la tenue de dossiers, de la production des déclarations, du paiement, de la déduction et du versement des contributions payables, selon la Loi et le présent règlement, par la personne et en son nom. [je souligne] Tax Court Decision [25] The Tax Court Judge made no express finding that Quantum was the agent of Silverside, but instead applied the maxim expressio unius est exclusio alterius to the Regulations. He held that because subsection 5(1) of the EI Act refers to earnings received from the employer "or some other person", one can imply from the wording of paragraph 6(a) and subsection 34(1) that Parliament intended to exclude the payment of remuneration by anyone other than a placement or employment agency. In the result, since neither Silverside nor Dofasco had remunerated Wallace, Wallace was found by the Tax Court Judge not to be employed in pensionable or insurable employment. Preliminary Issues [26] Two preliminary issues were raised by the respondent. First, the Minister seeks judicial review of the Tax Court's determination that on the facts of this case, Quantum's payment of Wallace was improperly considered in light of the legal test imposed by the Regulations, i.e., whether Wallace's remuneration was paid to him by the placement agency. The respondent asserts that such an inquiry involves a question of fact or a question of mixed fact and law, rather than an error of law as is contemplated in subsection 18.1(4) of the Federal Court Act. Accordingly, this is said to be an improper case for judicial review. In my opinion, however, the issue is one of statutory interpretation, and the general rule is that the construction of any statutory provision is a question of law: Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., [1997] 1 S.C.R. 748 at para 36. Here, it was incumbent upon the Tax Court judge to interpret paragraph 6(g) and subsection 34(1) of the Regulations, which is without doubt a question of law, and accordingly there is no basis for the first objection. [27] The respondent also urges that it is inappropriate to seek judicial review of a Tax Court judgment when the central issue was not properly raised before that Court. It is said that the Minister in this case neither pleaded the "agency/conduit" issue nor the material facts necessary to support such findings. In particular, the respondent refers to the Minister's amended replies in the Tax Court record which allege only that Wallace was "remunerated by [Silverside]" and makes no reference to any material facts which might give rise to a legal conclusion on the "agency/ conduit" issue. [28] A review of the trial record indicates that Michael Leacey, the managing director of Silverside, was called as a witness by the respondent. He was questioned in both direct and in cross-examination as to the relationships and arrangements between Wallace, Silverside, Dofasco, and Quantum. In cross-examination, he acknowledged that Quantum paid Wallace at Silverside's request and on Silverside's behalf. Silverside also acknowledged at trial that the payments discharged its obligations to remunerate Wallace for his work. It was open to the Tax Court Judge to infer from these facts that Quantum was Silverside's agent to pay Wallace the remuneration promised by Silverside. [29] The general rule established by the Supreme Court of Canada in Athey v. Leonati, [1996] 3 S.C.R. 458 at paras 51-52 is that an appellant may not raise a point that was not pleaded or argued in the trial court unless all relevant evidence is in the record and prejudice will not result to the opposing party. Where, as here, sufficient relevant evidence is part of the record, and where the opposing party suffers no plausible prejudice, it would be an error for this Court to refuse to consider the agency argument, even though agency was not expressly pleaded in the court below. Accordingly, the second objection is also rejected. Analysis [30] In my view, the EI Act, its regulations, and its predecessors should be given such fair, large and liberal construction and interpretation as best attains its objective as social insurance legislation (Interpretation Act, R.S.C. 1955, c.21 s. 12). This follows the directives given by the Supreme Court of Canada in Abrahams v. Canada [1983] 1 S.C.R. 2 and Hills v. Canada, [1988] 1 S.C.R. 513 to the effect that since the overall social objective of the EI Act is to make benefits available to the unemployed, in order to eliminate inequities among Canadians, a liberal interpretation should be favoured. According to those cases, doubts arising from ambiguities should be resolved in favour of claimants. The same is true for the Canada Pension Plan, which is also a contributory plan, designed to provide social insurance for Canadians and which again must give rise to an expansive interpretation (see Granovsky v. Canada (MEI), [2000] 1 S.C.R. 703). [31] In my analysis, the Friesen and 65302 British Columbia Ltd. cases, supra, cited by the respondent, are inapplicable to this application for judicial review. The Friesen decision holds that in income tax cases one should not read words into the Income Tax Act where there is another acceptable interpretation readily available. The 65302 British Columbia Ltd. authority is also an income tax case directing that in an income tax dispute the Court should be reluctant to embrace unexpressed notions of policy or principle in the guise of statutory interpretation. Neither are of any assistance in interpreting social insurance legislation given the Hills and Abrahams decisions, supra. [32] On the facts of this case, it is clear that Silverside paid Wallace through the agency of Quantum and the Tax Court judge erred in law in not finding that Silverside and Quantum had created a principal and agent relationship between themselves. In this case, Quantum affected Silverside's legal position by discharging Silverside's legal liabilities and obligations to pay Wallace for his services, which resulted in an agency agreement that can be implied from the conduct of both Quantum and Silverside (see Fridman, The Law of Agency, 7th Edition (Toronto: Butterworths, 1966) at 11-12; 55-61). As indicated earlier, Silverside's managing director acknowledged in his evidence that Quantum paid Wallace at Silverside's request and on Silverside's behalf. Using a liberal interpretation, the relevant words of paragraph 6(g), "where that person is remunerated by the agency," and of subsection 34(1), "where...the agency pays the remuneration," are sufficiently encompassing to include these indirect payments by Silverside's agent. [33] I am also of the opinion that the Tax Court judge erred in law in applying the maximexpressio unius est exclusio alterius to the Regulations. This maxim of statutory interpretation, to express one thing is to exclude another, is referred to in Driedger on the Construction of Statutes, 3rd ed. Toronto: Butterworths, 1994 at 168, under the heading "the implied exclusion argument". Relying on a number of Supreme Court of Canada cases, the current author, Ruth Sullivan, suggests that if the result of accepting an implied exclusion argument would defeat the legislative purpose, or disrupt its apparent scheme, or otherwise lead to inappropriate results, the maxim is readily dismissed (supra, at 175. See: R. v. K.C. Irving, [1976] 2 S.C.R. 366 at 369-70; University of Saskatchewan v. C.U.P.E., [1978] 2 S.C.R. 830; Nicholson v. Haldimand Norfolk Regional Commissioners of Police, [1979] 1 S.C.R. 311 at 321-22). That is the case here. In my analysis, by applying the above maxim, the Tax Court Judge erroneously failed to consider the applicability of agency law to the Regulations, using the encompassing interpretation necessary to ensure that their broad policy objectives are obtained, namely, to provide social insurance benefits for Canadians. [34] I would allow the application for judicial review with reasonable and proper costs pursuant to section 18.25 of the Tax Court of Canada Act, the decision of the Tax Court of Canada set aside and the matter referred back to the Tax Court for determination. "B. Malone" J.A. FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-692-00 & A-693-00 STYLE OF CAUSE: The Minister of National Revenue v. Mastech Quantum Inc. PLACE OF HEARING: Toronto, Ontario DATE OF HEARING: February 6, 2002 REASONS FOR JUDGMENT: RICHARD C.J. CONCURRED IN BY: EVANS J.A. CONCURRING REASONS BY: MALONE J.A. DATED: April 4, 2002 APPEARANCES: Ms. Kelly Wayland Smith FOR THE APPLICANT Mr. Arnold H. Bornstein Mr. Jacques Bernier FOR THE RESPONDENT Mr. Martin Sorensen SOLICITORS OF RECORD: Morris Rosenberg, Deputy FOR THE APPLICANT Attorney General of Canada Bennett Jones LLP, FOR THE RESPONDENT Toronto, Ontario