Date: 20001023
Dockets: 1999-3627-EI,
1999-3957-EI,
BETWEEN:
CLARENCE GODIN,
YVON GODIN
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent
Reasonsfor Judgment
Watson, D.J.T.C.C.
[1] These appeals were heard on common evidence at Bathurst, New Brunswick, on October 13, 2000.
[2] The appellants are appealing decisions by the Minister of National Revenue ("the Minister") dated May 27, 1999, according to which the employment they held with N.Y.C. Construction Ltée, the payer, during the periods at issue, namely from March 10 to October 19, 1997, and February 26 to October 16, 1998, in Yvon Godin's case, and from February 24 to November 14, 1997, and February 13 to October 31, 1998, in Clarence Godin's case, is excluded from insurable employment within the meaning of the Employment Insurance Act on the ground that they and the payer were not dealing with each other at arm's length.
[3] The applicable statutory provisions are found in subsections 5(2) and (3) of the Employment Insurance Act and section 251 of the Income Tax Act.
[4] Subsections 5(2) and (3) of the Employment Insurance Act read in part as follows:
(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 paragraph (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.
[5] Section 251 of the Income Tax Act reads in part as follows:
Section 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 persons". For the purpose of this Act, "related persons", or persons related to each other, are
(a) individuals connected by blood relationship, marriage or adoption;
(b) a corporation and
(i) a person who controls the corporation, if it is controlled by one person,
(ii) a person who is a member of a related group that controls the corporation, or
(iii) any person related to a person described in subparagraph (i) or (ii) . . . .
[6] In Ferme Émile Richard et Fils Inc. v. M.N.R., 178 N.R. 361, Décary J.A. of the Federal Court of Appeal clearly stated that, in applying subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act (now paragraph 5(3)(b) of the Employment Insurance Act), what must be considered is whether the Minister's decision "resulted from the proper exercise of his discretionary authority", and that the appellant must first present "evidence of wilful or arbitrary conduct by the Minister, evidence which is generally not easy to obtain".
[7] In Her Majesty the Queen v. Bayside Drive-In Ltd. (1997), 218 N.R. 150, a decision signed on July 25, 1997, Isaac C.J. of the Federal Court of Appeal stated:
At the threshold stage of the inquiry, review by the Tax Court is confined to ensuring that the Minister has exercised his discretion in a lawful manner. If, and only if, the Minister has exercised his discretion in a manner contrary to law can the Tax Court then proceed to a review of the merits of the determination.
[8] In Maple Lodge Farms v. Government of Canada, [1982] 2 S.C.R. 2, the Supreme Court of Canada stated the following at pages 7-8:
. . . It is, as well, a clearly-established rule that the courts should not interfere with the exercise of a discretion by a statutory authority merely because the court might have exercised the discretion in a different manner had it been charged with that responsibility. Where the statutory discretion has been exercised in good faith and, where required, in accordance with the principles of natural justice, and where reliance has not been placed upon considerations irrelevant or extraneous to the statutory purpose, the courts should not interfere.
[9] In making his decisions, the Minister relied on the following allegations of fact in Clarence Godin's appeal:
[TRANSLATION]
(a) the payer is a corporation that has been duly incorporated in the province of New Brunswick since May 26, 1989, or thereabouts, and whose shareholders are:
Yvon Godin (the appellant's brother) 33%
Clarence Godin (the appellant) 33%
Nicholas Godin (the appellant's father) 34%
(b) the payer operates a residential and commercial construction business;
(c) the payer operates all year round, depending on the work available;
(d) the appellant's work for the payer involved making estimates, handling orders, taking deliveries and doing carpentry work;
(e) Yvon Godin, the appellant's brother, did more or less the same work and also looked after the payer's books;
(f) the appellant's father said that he was not actively involved in the day-to-day operation of the payer;
(g) for his carpentry work, the appellant was paid a weekly salary of $750.00 for 45 hours;
(h) the appellant prepared estimates and sought out contracts for the payer without being paid;
(i) during the periods at issue, in addition to the 45-hour weeks, the appellant was entered on the payer's payroll record at $133.28 for eight weeks in 1997 and five weeks in 1998;
(j) eight hours of work are indicated for the weeks referred to in subparagraph (i), whether the appellant worked one, two or three days during the week;
(k) during certain periods, work was performed without the payer having either the appellant or any other employee listed on its payroll record;
(l) the payer's payroll record does not accurately show when the appellant worked for the payer;
(m) the hours of work noted on the payroll record do not accurately reflect the number of hours actually worked by the appellant;
(n) the appellant and the payer are related persons within the meaning of the Income Tax Act;
(o) the appellant and the payer are not dealing with each other at arm's length;
(p) 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 not reasonable to conclude that the appellant and the payer would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length.
[10] The Minister relied on similar allegations of fact in Yvon Godin's appeal.
[11] At the hearing, the appellants admitted the facts alleged in subparagraphs (a) to (e) and (g) to (o) and denied those alleged in subparagraphs (f) and (p).
[12] The burden of proof is on the appellants. They must show on the balance of evidence that the Minister's decisions are unfounded in fact and in law. Each case turns on its own facts.
[13] It would seem that, before ruling on the case in accordance with the powers conferred on it by section 104 of the Employment Insurance Act, the Court must first decide the following question: have the appellants been able to discharge their burden of proving on the balance of evidence that the Minister's decisions resulted from "wilful or arbitrary conduct" or an exercise of his discretion that was "contrary to law" in circumstances where he was not "satisfied" that it was "reasonable to conclude" that the employer and the employee "would have entered into a substantially similar contract of employment" if they had not been deemed not to deal with each other at arm's length under paragraph 251(1)(a) of the Income Tax Act?
[14] Having regard to all the circumstances of the case, particularly the testimony, the admissions and the documentary evidence, I am satisfied that the appellants have not been able to prove on the balance of evidence that the Minister acted wilfully or arbitrarily or in a manner contrary to law in making his decisions.
[15] The appellants' employment during the periods at issue is therefore excluded from insurable employment under subsection 5(2) of the Employment Insurance Act.
[16] The appeals are dismissed and the Minister's decisions dated May 27, 1999, are confirmed.
[17] The appellants testified honestly and openly at the hearing and demonstrated that they acted in good faith when they applied for employment insurance benefits for 1997 and 1998, given that they had been making the same applications since 1989 and been considered insurable from 1989 to 1996. Their employment was the same during those previous years and was with the same payer as during the periods at issue.
[18] In these rather exceptional circumstances, I am strongly recommending that the Commission review these cases in the light of subsection 56(1) of the Employment Insurance Regulations, which reads in part as follows:
56. (1) . . . an amount owing under section 43 . . . or 65 of the Act may be written off by the Commission if
. . .
(f) the Commission considers that, having regard to all the circumstances,
. . .
(ii) the repayment of the . . . amount would result in undue hardship to the debtor.
(iii)
Signed at Ottawa, Canada, this 23rd day of October 2000.
"D.R. Watson"
D.J.T.C.C.
Translation certified true on this 30th day of November 2001.
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-3627(EI)
BETWEEN:
CLARENCE GODIN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Yvon Godin (1999-3957(EI)) on October 13, 2000, at Bathurst, New Brunswick, by
the Honourable Deputy Judge D.R. Watson
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Vlad Zolia
JUDGMENT
The appeal is dismissed and the Minister's decision confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 23rd day of October 2000.
|
"D.R. Watson" |
D.J.T.C.C.
Translation certified true
on this 30th day of November 2001.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
1999-3957(EI)
BETWEEN:
YVON GODIN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Clarence Godin (1999-3627(EI)) on October 13, 2000, at Bathurst, New Brunswick, by
the Honourable Deputy Judge D.R. Watson
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Vlad Zolia
JUDGMENT
The appeal is dismissed and the Minister's decision confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 23rd day of October 2000.
|
"D.R. Watson" |
D.J.T.C.C.
Translation certified true
on this 30th day of November 2001.
Erich Klein, Revisor