[OFFICIAL ENGLISH TRANSLATION]
2001-1743(EI)
BETWEEN:
GESTION LE MONTAGNAIS INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on June 4, 2002, at Québec, Quebec, by
the Honourable Deputy Judge J.F. Somers
Appearances
Counsel for the Appellant: Pierre-C. Gagnon
Counsel for the Respondent: Vlad Zolia
JUDGMENT
The appeal is dismissed and the Minister's decision is confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 15th day of August 2002.
|
"J.F. Somers" |
D.J.T.C.C.
Translation certified true
on this 9th day of June 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020815
Docket: 2001-1743(EI)
BETWEEN:
GESTION LE MONTAGNAIS INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was heard at Québec, Quebec, on June 4, 2002.
[2] The appellant is appealing from a decision by the Minister of National Revenue ("the Minister") finding that the employment held by the worker, Claude Ménard, while employed by the appellant during the period at issue, from January 1 to December 31, 1999, was insurable because it met the requirements for a contract of service and because there was an employer-employee relationship between the appellant and the worker.
[3] Subsection 5(1) of the Employment Insurance Act reads in part as follows:
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;
. . .
[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 purposes 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); and
. . .
[6] The burden of proof is on the appellant, and it must show on a balance of probabilities that the Minister's decision is unfounded in fact and in law. Each case turns on its own facts.
[7] In making his decision, the Minister relied on the following facts, all of which have been admitted:
[TRANSLATION]
(a) the appellant was incorporated on January 13, 1993;
(b) the appellant's voting shareholders were:
Gilles Ménard 20% of the shares
Réjean Ménard 20% of the shares
Jean-Roch Ménard 20% of the shares
the worker 20% of the shares
Clermont Blouin 20% of the shares
(c) the worker is the brother of Gilles, Réjean and Jean-Roch Ménard and the brother-in-law of Clermont Blouin;
(d) the appellant carried on a restaurant and catering business;
(e) the appellant had 20 to 27 employees;
(f) the appellant's restaurant was operated year-round in Sainte-Anne-de-Beaupré;
(g) the worker was the restaurant's manager;
(h) the worker's duties involved looking after day-to-day management, supervising the staff and ensuring that the business ran smoothly;
(i) the worker did not have a fixed schedule but generally took Thursdays and Fridays off;
(j) the worker was paid a regular salary of $1,600 every two weeks by direct deposit;
(k) the worker's salary was reasonable given his duties and responsibilities;
(l) the worker worked for the appellant year-round;
(m) the appellant had an active corporate life and held shareholders' and directors' meetings every three or four weeks;
(n) the worker had to report to and obtain the consent of the other shareholders for the business' important decisions;
(o) like all the other shareholders, the worker guaranteed the appellant's loans and credit lines in proportion to the shares he held;
(p) the worker had no risk of financial loss or chance of profit;
(q) the worker used the tools and equipment owned by the appellant;
(r) the worker's work was an integral part of the appellant's activities.
[8] The only witness heard in this case was Gilles Ménard, the worker's brother and a shareholder in the appellant along with other members of the same family and Clermont Blouin.
[9] The witness stated that, from 1994 to 1999, the worker, Claude Ménard, managed a restaurant operated by the appellant in Ste-Anne-de-Beaupré.
[10] Gilles Ménard explained that the five shareholders referred to in the Reply to the Notice of Appeal were shareholders in three companies. In 1995, the worker, Claude Ménard, was the manager of the restaurant and was directly responsible for running it and hiring employees. The other four shareholders were simply investors in the company.
[11] Gilles Ménard asked the Minister to rule on the insurability of Claude Ménard's employment for 1993 when he was working for the appellant.
[12] On the basis of a questionnaire that she completed and signed after obtaining information from Gilles Ménard, Pierrette Lecompte determined that Claude Ménard's employment with Gestion Le Montagnais Inc. in 1993 was uninsurable because it did not meet the requirements of paragraph 3(1)(a) of the Unemployment Insurance Act and because it was excepted under paragraph 3(2)(a) of the Act.
[13] According to the witness, Claude Ménard's conditions of employment in this case were the same as in 1993.
[14] For the purposes of this case, that is, for the period at issue, counsel for the appellant admitted that Claude Ménard's employment was insurable.
[15] Counsel raised just one question of law, namely, the application of the doctrine of legitimate expectations.
[16] Professor Geneviève Cartier of the law faculty of Université de Sherbrooke explained this doctrine as follows in (1992), 23 R.D.U.S. 75:
[TRANSLATION]
In its most widely accepted formulation, this doctrine prescribes that administrative authorities must comply with natural justice or procedural fairness not only when they make a decision that affects individual rights, privileges or interests but also each time that such an act adversely affects an individual's "legitimate expectations".
[17] According to counsel for the appellant, the Supreme Court examined and commented on this concept in Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services), 2001 S.C.C. 41, File No. 27022.
[18] A number of decisions were submitted for the purposes of this case, but there is no need to look at all of them. The courts seem to have consistently held that administrative authorities are not bound by administrative decisions.
[19] In Blackmore v. M.N.R., NR 519, the learned judge stated:
Legally, I am bound to say that notwithstanding any mistake or error or wrong advice on the part of the personnel of the Commission, the Commission is not prevented from seeking to carry out the provisions of the Unemployment Insurance Act, 1971. This has been held repeatedly by Umpires in the past. There is the well established principle that an estoppel will not arise, when the conditions of a statute are not met. Put tritely, estoppel does not lie against the Crown and, further, estoppels of all kinds are subject to the general rule that they cannot override the law of the land.
[20] In Ludco Enterprises Ltd. v. Canada, [1993] F.C.J. No. 1299, dated December 3, 1993, Dubé J. of the Federal Court of Canada stated the following:
. . . nonetheless, as noted earlier, the case law has clearly established that the Minister is not bound by his earlier assessments, or by his earlier policies, or by his representations or the representations of his agents, or by the treatment he gives or has given to other taxpayers. The Minister's duty is to apply the Act as it stands. The Act authorizes the Minister to amend his assessments and requires that he make assessments in accordance with the provisions of the Act. Moreover, in an appeal from an assessment the Court is limited to the remedies provided by the Act and cannot give a declaratory judgment.
[21] In Hrab v. Canada, [1996] T.C.J. No. 128, dated February 14, 1996, Judge Teskey of this Court stated the following:
Estoppel does not apply to different taxation years. Each year is separate and distinct. The Appellant's 1992 appeal is separate and apart from his 1991 appeal. The evidence before me in the 1992 appeal and the underlying facts that have been adduced are different. The first Order of Hawkins J. was not interpreted in the 1991 decision.
[22] In the case at bar, the appellant is using a so-called decision made by an administrative authority on the uninsurability of the employment of the worker, Claude Ménard, while he was employed by the appellant in 1993.
[23] A "Canada Pension Plan and Unemployment Insurance Ruling Report" from Revenue Canada Customs, Excise and Taxation dated July 14, 1994, was filed in evidence as Exhibit A-1. It should be noted that the document is called a "ruling report" ["rapport d'opinion" in French] and that it was signed by a coverage officer, not an appeals officer. It explains Claude Ménard's working conditions while he was employed by the appellant in 1993.
[24] The report's conclusion reads as follows:
[translation]
Employment uninsurable since it does not meet requirements of paragraph 3(1)(a) of the Unemployment Insurance Act and since employment excepted under paragraph 3(2)(d) of Unemployment Insurance Act for 1993.
[25] It is important to point out that paragraph 3(1)(a) of the Unemployment Insurance Act is now paragraph 5(1)(a) of the Employment Insurance Act and that the ruling was based on paragraph 3(2)(d) of the Unemployment Insurance Act, which reads as follows:
(d) the employment of a person by a corporation if the person controls more than forty per cent of the voting shares of that corporation;
[26] It should be noted that, in this case, the Minister's decision on the insurability of the worker's employment was not based on paragraph 3(2)(d), now paragraph 5(2)(b) of the Employment Insurance Act.
[27] Under the Delegation of Powers or Duties (Part III Unemployment Insurance Act) Regulations dated June 11, 1992, SOR/92-378, the Director, Appeals Division, may exercise the Minister's powers. Section 5 of the Regulations reads as follows:
The Director, Appeals and Referrals Division, the Director, Policy and Programs Division, the Chief, Determination and Appeals Section, or an officer holding the position of Chief of Appeals in a District Office of the Department of National Revenue, Taxation, may exercise the powers or perform the duties of the Minister under sections 61 and 71 of the Act.
[28] Based on these regulations, the coverage officer's conclusion is not a decision but an opinion; indeed, the name of the report in French is "rapport d'opinion".
[29] In Simard v. Canada (Minister of National Revenue - M.N.R.), T.C.C., No. 95-2846(UI), October 31, 1996 ([1996] A.C.I. no 1561), Judge St-Onge of this Court stated the following:
[translation]
Under section 64 of the Act, only the Minister of National Revenue has jurisdiction to make a decision on the insurability of the appellant's employment, and it is that decision that conclusively settles the issue of the insurability of employment. Any other decision is merely a position or opinion. Only the Minister of National Revenue has jurisdiction to make a decision on the insurability of employment.
[30] This Court finds that the Minister did not actually make a decision that the worker's employment for 1993 was uninsurable.
[31] Only the Minister of National Revenue or the Minister's delegate has jurisdiction to make a decision on the insurability of Claude Ménard's employment.
[32] The appellant has admitted all the facts alleged in the Reply to the Notice of Appeal. The worker therefore held insurable employment during the period at issue, since that employment met the requirements for a contract of service.
[33] The appeal is dismissed and the Minister's decision is confirmed.
Signed at Ottawa, Canada, this 15th day of August 2002.
|
"J.F. Somers" |
D.J.T.C.C.
Translation certified true
on this 9th day of June 2003.
Sophie Debbané, Revisor
Cases cited: Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services),2001 S.C.C. 41, No. 27022
Blackmore v. M.N.R., NR 519
Ludco Enterprises Ltd. v. Canada, [1993] F.C.J. No. 1299
Hrab v. Canada, [1996] T.C.J. No. 128
Regulations SOR/92-378
Simard v. Canada (Minister of National Revenue - M.N.R.), T.C.C., No. 95-2846(UI), October 31, 1996 ([1996] A.C.I. no 1561)