Date: 19981207
Docket: 98-238-UI
BETWEEN:
JOHANNE ASPIROT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Charron, D.J.T.C.C.
[1] This appeal was heard at New Carlisle, Quebec on October 7, 1998 to determine whether the appellant held insurable employment within the meaning of the Unemployment Insurance Act and the Employment Insurance Act (the "Act") during the periods from June 18 to September 15, 1995, from June 17 to September 6, 1996 and from June 2 to August 22, 1997 when she worked for Lisette Aspirot (the payer).
[2] By letter dated December 23, 1997, the respondent informed the appellant that this employment was not insurable because she and the payer were not dealing with each other at arm's length.
Summary of Facts
[3] The facts on which the respondent relied in making his decision are stated in paragraph 5 of the Reply to the Notice of Appeal as follows:
[TRANSLATION]
(a) the payer has operated a gas station and convenience store for more than 20 years; (admitted)
(b) the appellant is the payer's daughter; (admitted)
(c) the appellant, her spouse and their daughter, born on November 18, 1995, lived with the appellant's parents; (admitted)
(d) she pays no rent or board; (admitted)
(e) she has worked for the payer for 18 years; (admitted)
(f) the payer's business is located approximately 400 metres from the payer's residence; (admitted)
(g) the business was open from 8:00 a.m. to 11:00 p.m., seven days a week; (admitted)
(h) the appellant was the payer's only paid employee; (admitted subject to amplification)
(i) the payer's husband also helped out at the convenience store, but without pay; (admitted subject to amplification)
(j) the appellant was remunerated for a number of weeks corresponding to the minimum required to qualify for unemployment insurance benefits; (admitted subject to amplification)
(k) the payer claims that she hired her daughter in the summer because there was more work (admitted subject to amplification)
(l) the payer's turnover is not higher during the summer than during the rest of the year; (admitted subject to amplification)
(m) the appellant claims that she could not work the rest of the year because she had to take care of her daughter while receiving unemployment insurance benefits; (denied as drafted)
(n) to be entitled to unemployment benefits, a person must be available to work; (denied as drafted)
(o) the payer claims that she cleaned her residence thoroughly in the summer, that is during the period when her daughter was working for the business, and she explained that, during the other nine months, she worked in the business while her daughter took care of the house, whereas the appellant claims that she worked in the business with her mother. (admitted subject to amplification)
[4] The appellant admitted that all the subparagraphs of paragraph 5 of the Reply to the Notice of Appeal were true, except those she denied or of which she had no knowledge, as indicated in parentheses at the end of each subparagraph.
Lisette Aspirot's Testimony
[5] Lisette Aspirot has operated a convenience store and gas station with her husband Joseph in Paspébiac since 1979. In 1980, the parents had to seek the help of their daughter Johanne as a result of an excess of work. Since October 20, 1992, Joseph has been receiving his pension and working for Lisette for nothing. Lisette has hired other persons as necessary, including Léandre Deraiche. She did so during months when business was booming and they sold as much as $33,000 worth of gasoline. Sales fluctuated between $20,000 and $25,000 in 1995, $17,000 and $20,000 in 1996 and 1997 and $875 and $6,000 in 1998. Fortunately the convenience store enabled the family to survive. In the last three years, Johanne worked only 12 or 13 weeks a year because it was so boring. This was moreover the number of weeks she had worked since 1981. The business was open from 8:00 a.m. to 11:00 p.m., seven days a week. Johanne worked the shift from 8:00 a.m. until noon and from 1:00 to 5:00 p.m., whereas Lisette worked from 1:00 to 9:00 p.m. and Joseph from 5:00 until 9:00 p.m. If Johanne was absent, Joseph replaced her from 8:00 a.m. until noon. In his free time, Joseph did repairs and renovations in the store or house or cut firewood. Johanne was paid by cheque and had Saturdays and Sundays off. The payer offered her customers credit: some paid by the week, others by the month, and others did not pay at all. Johanne did the bookkeeping and kept track of the credit. When Johanne worked at the cash, her parents or one of her aunts babysat her child. On December 12, 1997, Lisette made a written declaration which reads as follows:
[TRANSLATION]
My daughter Johanne has worked at the convenience store since 1979. Since 1995, it has been agreed that I would hire her only during the summer holidays, from June to September each year. I could have employed her before the holidays because there was work for her, but the agreement was that she would work during the holidays. She worked from 8:00 a.m. to 5:00 p.m., Monday to Friday, as a clerk-cashier at the convenience store. In 1997, I hired her on June 2 because I knew that my daughter would be starting classes in Chandler on August 25 of that year. Consequently, I laid her off on August 22. She could have worked at her job before June and after September in 1995, 1996 and 1997 (Exhibit I-1).
Johanne was laid off by her mother when there was work so that she could take her hairdressing classes. Johanne was the only paid employee and the payer intended eventually to give her the business. In any case, the payer has only one other daughter, who shows no interest in the store.
Johanne Aspirot's Testimony
[6] Johanne is a hairdresser but sometimes worked as a cashier at her parents' store. She also kept the books of account, placed orders, handled the credit, stocked the shelves, sold Loto-Québec tickets, served customers, did the cleaning and washed the floor. On November 18, 1996, Johanne had a daughter, whom she took to the store with her when she went to work. If necessary, she had her babysat by her mother or her two aunts, who adored the child. Johanne lived with her parents and did not pay board. When she was not working in the store, she cleaned the house the rest of the year. In 1995, Johanne witnessed her grandmother's murder by her son and she is still traumatized by it, but this never prevented her from working. During the periods in issue, the appellant's spouse lived with her at the home of his in-laws, Lisette and Joseph. He left on December 2, 1997.
Analysis of the Facts in Relation to the Act
[7] The respondent admits that the appellant was bound to the payer by a contract of service. For this reason, he only alleges a non-arm's length relationship in support of his Reply to the Notice of Appeal. The question now arises as to whether the appellant would have received such high remuneration if she had been dealing with the payer at arm's length.
[8] Subsection 3(2) and paragraph 5(2)(i) of the Act read in part as follows:
(2) Excepted employment is
. . .
(c) subject to paragraph (d), employment where the employer and employee are not dealing with each other at arm's length and, for the purposes of this paragraph,
(i) the question of whether persons are not dealing with each other at arm's length shall be determined in accordance with the provisions of the Income Tax Act, and
(ii) where the employer is, within the meaning of that Act, related to the employee, they shall be 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 . . . .
[9] Under section 251 of the Income Tax Act, related persons are deemed not to deal with each other at arm's length. Where persons are related to each other, there cannot be insurable employment unless the Minister of National Revenue is satisfied otherwise in accordance with the above-quoted subparagraph 3(2)(c)(ii) and paragraph 5(2)(i) of the Act.
[10] The Federal Court of Appeal has rendered a number of important decisions respecting the application of paragraph 3(2)(c) of the Act.
[11] In the first of these decisions, Tignish Auto Parts Inc. v. M.N.R. (185 N.R. 73), dated July 25, 1994, the Federal Court of Appeal cited counsel for the respondent, in whose opinion it concurred:
Under the authority of Minister of National Revenue v. Wrights' Canadian Ropes Ltd., contends the respondent, unless the Minister has not had regard to all the circumstances of the employment (as required by subparagraph 3(2)(c)(ii) of the Act), has considered irrelevant factors, or has acted in contravention of some principle of law, the court may not interfere. Moreover, the court is entitled to examine the facts which are shown by evidence to have been before the Minister when he reached his conclusion so as to determine if these facts are proven. But if there is sufficient material to support the Minister's conclusion, the court is not at liberty to overrule it merely because it would have come to a different conclusion. If, however, those facts are, in the opinion of the court, insufficient in law to support the conclusion arrived at by the Minister, his determination cannot stand and the court is justified in intervening.
[12] There are thus four tests which the Tax Court of Canada can apply in deciding whether it is justified in intervening:
the Minister of National Revenue
(1) has not had regard to all the circumstances;
(2) has considered irrelevant factors;
(3) has acted in contravention of some principle of law; or
(4) has based his decision on insufficient facts.
[13] In Ferme Émile Richard et Fils Inc. (178 N.R. 361) of December 1, 1994, the Federal Court of Appeal summarized Tignish Auto Parts Inc. as follows:
. . . As this court recently noted in Tignish Auto Parts Inc. v. Minister of National Revenue, July 25, 1994, A-555-93, F.C.A., not reported, an appeal to the Tax Court of Canada in a case involving the application of s. 3(2)(c)(ii) is not an appeal in the strict sense of the word and more closely resembles an application for judicial review. In other words, the court does not have to consider whether the Minister's decision was correct: what it must consider is whether the Minister's decision resulted from the proper exercise of his discretionary authority. It is only where the court concludes that the Minister made an improper use of his discretion that the discussion before it is transformed into an appeal de novo and the court is empowered to decide whether, taking all the circumstances into account, such a contract of employment would have been concluded between the employer and employee if they had been dealing at arm's length.
[14] The appellant submits that the respondent did not have regard to all the circumstances in excepting her employment from insurable employment. The respondent did not consider the murder of her grandmother by her son.
[15] On this point, in Attorney General of Canada v. Jencan Ltd. (1997), 215 N.R. 352, Isaac C.J. of the Federal Court of Appeal, writing for the Court, held as follows:
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.
[16] The evidence shows that it is incorrect to say that the appellant was the only employee who received remuneration: Léandre Deraiche worked for a salary.
[17] The payer says that, since she has worked for her, Johanne has worked only 12 or 13 weeks a year, the minimum required to qualify for unemployment insurance benefits.
[18] Subparagraph 5(k) of the Reply to the Notice of Appeal states that Lisette says she hired her daughter in the summer because there was more work. In her declaration (Exhibit I-1), she states that she could have employed her before the holidays because there was work for her, but the agreement was that she would work during the holidays. In 1995, sales were virtually the same throughout the year. It was only in 1998 that they declined sharply.
[19] The appellant claims that she could not work the rest of the year because she had to take care of her daughter while receiving unemployment insurance benefits. When Johanne was laid off, her mother claims that it was because there was no more work, but this is false: she was laid off so that she could attend her hairdressing classes.
[20] The payer testified that Johanne took care of the house while her mother worked in the business for nine months. Johanne attended to the convenience store during the summer, while her mother did the cleaning, took a vacation and babysat the little girl.
[21] It seems clear from the evidence adduced and the documents filed by the parties that the respondent had regard to virtually all the circumstances, ruled out irrelevant factors, acted in accordance with the recognized principles of law and based his decision on sufficient facts; in view of the many contradictions contained in the evidence and considering that the rest of the evidence is sufficient to justify the respondent's decision that the parties would not have entered into a similar contract if they had been dealing with each other at arm's length, the appeal is dismissed and the Minister's decision is confirmed.
Signed at Ottawa, Canada, this 7th day of December 1998.
"G. Charron"
D.J.T.C.C.
Translation certified true on this 28th day of February 2001.
Stephen Balogh, Revisor
[OFFICIAL ENGLISH TRANSLATION]
98-238(UI)
BETWEEN:
JOHANNE ASPIROT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on October 7, 1998, at New Carlisle, Quebec, by
the Honourable Deputy Judge G. Charron
Appearances
Counsel for the Appellant: G. Nadon
Counsel for the Respondent: A. Saheb-Ettaba
JUDGMENT
The appeal is dismissed and the Minister's decision confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 7th day of December 1998.
|
"G. Charron" |
D.J.T.C.C.
Translation certified true
on this 28th day of February 2001.
Stephen Balogh, Revisor
[OFFICIAL ENGLISH TRANSLATION]