Date: 20020522
Docket: 2001-1614-EI
BETWEEN:
ERIC BABINEAU O/A BABINEAU KITCHEN CABINETS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Savoie, D.J.T.C.C.
[1] This is an appeal from a decision by the Minister of National Revenue (the "Minister") that the Worker, Marcel Babineau, was not employed in insurable employment with the Appellant for the periods from June 29, 1998 to November 20, 1998, from June 14, 1999 to December 3, 1999 and from May 1, 2000 to September 8, 2000 (the "periods in question").
[2] The Minister informed the Worker and the Appellant that it had been decided that the Worker's engagement with the Appellant during the periods in question was not insurable employment for the reason that the Worker's employment was excepted employment as the Worker and the Appellant were not dealing with each other at arm's length within the meaning of paragraph 5(2)(i) of the Employment Insurance Act (the "Act").
[3] This appeal was heard in Moncton, New Brunswick, on March 11, 2002.
[4] In rendering his decision, the Minister relied on the following assumptions of fact:
a) the Appellant is the sole proprietor of a cabinet-making business;
b) the Appellant also does some renovations;
c) the Appellant operates year-round when work is available;
d) the Worker is the Appellant's son;
e) the Worker has worked with the Appellant as a carpenter's helper since about 1996;
f) the Worker was not a licensed carpenter;
g) the Worker's duties consisted of picking up supplies and framing, sanding and finishing kitchen cabinets;
h) the Worker was paid the following weekly wages based on 40 hours:
i) $450 throughout 1998 until the 6th of September, 1999 and
ii) $530 from the 6th of September 1999 and throughout 2000;
i) the median wage for labourer in the construction trades in the Appellant's area was $9.50 in 1999 and $10.47 in 2000;
j) during the periods in question the Worker's salary which was $11.25 and $13.25 an hour was higher than the labour market median for his area;
k) the Worker's wages were excessive for the work performed and for his qualifications;
l) the Worker's wage increased in 1999, an increase of 17.7%, was substantially more than the average wage increase of 2.2 % in Canada for the year;
m) the Worker's wage was increased because he purchased a house;
n) the Worker worked outside the periods in question without remuneration;
o) the Worker is related to the Appellant within the meaning of the Income Tax Act;
p) the Worker was not dealing with the Appellant at arm's length;
q) having regard to all 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 Worker and the Appellant would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length.
[5] The Appellant admitted subparagraphs 6 a) to j), m) and o). He denied subparagraphs p) and q) and ignored subparagraph 6 l).
[6] With respect to subparagraphs k), m) and n), the Appellant testified that his son, the Worker, threatened to quit his employment with him unless he was remunerated at a better rate. He stated that his son was worth the additional pay and that he did not want to lose him as an employee. He admitted that the purchase of a new house was a factor in the increase but added that he was more qualified than initially and had taken on more responsibilities. The Appellant admitted that his son Marcel did some work outside the periods in question without remuneration. He explained that his son was building an apartment in the payor's residence and also used his truck to transport building materials both for himself and his father, for which he was not paid. The Payor paid all of the expenses for his truck which was used by his son to haul materials for both of them.
[7] Mr. G.E. Williams, Appeals officer for Canada Customs and Revenue Agency (CCRA), based his recommendation to the Minister on three principal grounds. First, in support of the argument that the rate of wage increase for the Worker in 1999 greatly exceeded the average rate increase of 2.2% in Canada for that year. The figures quoted by the Appeals Officer in his testimony were never challenged by the Appellant, and indeed were admitted by him at the hearing.
[8] Secondly, Mr. Williams viewed the fact that the terms of employment between the Payor and the Worker made no provision for vacation pay as another factor which added support for the conclusion arrived at by the Minister.
[9] Thirdly, he viewed as significant the volume of the work done by the Worker outside the periods of employment, all of which was done for the Payor without remuneration. This was partially admitted at the hearing by the Appellant. What is more important, however, is that this is supported by the documents received in evidence as Exhibits I-1 to I-6.
[10] The onus lies on the Appellant to disprove the assumptions of fact relied upon by the Minister in his decision. To the extent that they are not disproved, they are taken to be recognized by the Appellant: (see Elia v. Canada (Minister of National Revenue - M.N.R.), [1998] F.C.J. No. 316.) The Appellant did not discharge that onus.
[11] The evidence of the Appellant at the hearing did not significantly reduce the impact of the case of the Minister, even when considering alone the assumptions of fact of the Minister.
[12] There are circumstances under which the Court could intervene but it is only when the Minister's determination lacks a reasonable evidentiary foundation. The duty of this Court, indeed the very jurisdiction and power of this Court, has been very well described by the Federal Court of Appeal in Canada (Attorney General) v. Jencan Ltd. (1997) 215 N.R. 352. In that regard the following excerpts from that decision are most appropriate and relevant to the determination of the issue before the Court:
...The Tax Court is justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii) - by proceeding to review the merits of the Minister's determination - where it is established that the Minister: (i) acted in bad faith or for an improper purpose or motive; (ii) failed to take into account all of the relevant circumstances, as expressly required by paragraph 3(2)(c)(ii); or (iii) took into account an irrelevant factor.
...
The Deputy Tax Court Judge, however, erred in law in concluding that, because some of the assumptions of fact relied upon by the Minister had been disproved at trial, he was automatically entitled to review the merits of the determination made by the Minister. Having found that certain assumptions relied upon by the Minister were disproved at trial, the Deputy Tax Court Judge should have then asked whether the remaining facts which were proved at trial were sufficient in law to support the Minister's determination that the parties would not have entered into a substantially similar contract of service if they had been at arm's length. If there is sufficient material to support the Minister's determination, the Deputy Tax Court Judge is not at liberty to overrule the Minister merely because one or more of the Minister's assumptions were disproved at trial and the judge would have come to a different conclusion on the balance of probabilities. In other words, it is only where the Minister's determination lacks a reasonable evidentiary foundation that the Tax Court's intervention is warranted An assumption of fact that is disproved at trial may, but does not necessarily, constitute a defect which renders a determination by the Minister contrary to law. It will depend on the strength or weakness of the remaining evidence. The Tax Court must, therefore, go one step further and ask itself whether, without the assumptions of fact which have been disproved, there is sufficient evidence remaining to support the determination made by the Minister. If that question is answered in the affirmative, the inquiry ends. But, if answered in the negative, the determination is contrary to law, and only then is the Tax Court justified in engaging in its own assessment of the balance of probabilities...
[13] The Jencan decision above referred to stands for the proposition that this Court is justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii) only if it was established that the Minister exercised his discretion in a manner that was contrary to law.
[14] In my assessment of the evidence, I have found nothing to suggest that the Minister: (i) acted in bad faith or for an improper purpose or motive; (ii) failed to take into account all of the relevant circumstances, as required by the Act; or (iii) took into account an irrelevant factor.
[15] The criteria for reviewing the Minister's determination set out in Jencan (supra) have not been met. In this two-step exercise set out in Jencan, the Appellant has not reached the second one where the Court will ask itself whether there is sufficient evidence to support the determination made by the Minister.
[16] Consequently, the appeal is dismissed and the Minister's decision is confirmed.
Signed at Grand-Barachois, New Brunswick, this 22nd day of May 2002.
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"S.J. Savoie" |
D.J.T.C.C.
COURT FILE NO.: 2001-1614(EI)
STYLE OF CAUSE: Eric Babineau o/a Babineau Kitchen Cabinets and M.N.R.
PLACE OF HEARING: Moncton, New Brunswick
DATE OF HEARING: March 11, 2002
REASONS FOR JUDGMENT BY: the Honourable Deputy Judge S.J. Savoie
DATE OF JUDGMENT: May 22, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Philippe Dupuis
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-1614(EI)
BETWEEN:
ERIC BABINEAU O/A BABINEAU KITCHEN CABINETS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on March 11, 2002 at Moncton, New Brunswick, by
the Honourable Deputy Judge S.J. Savoie
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Philippe Dupuis
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Grand-Barachois, New Brunswick, this 22nd day of May 2002.
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"S.J. Savoie" |
D.J.T.C.C.