Perusse v. M.N.R.

Perusse v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2003-05-09
Neutral citation
2003 TCC 313
File numbers
1999-4382(EI), 1999-4386(EI), 1999-4391(EI), 96-2427(UI)
Judges and Taxing Officers
François M. Angers
Subjects
Employment Insurance Act
Decision Content
Dockets: 96‑2427(UI)
1999-4382(EI)
1999‑4386(EI)
1999‑4391(EI)
BETWEEN:
LYNE PÉRUSSE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeals heard on December 2, 3, 4, 5, and 6, 2002, at New Carlisle, Quebec
Before: The Honourable Justice François Angers
Appearances:
Counsel for the Appellant:
Guy Cavanagh
Counsel for the Respondent:
Valérie Tardif
Chantal Jacquier
____________________________________________________________________
JUDGMENT
The appeals are dismissed and the Minister's decisions are confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of May 2003.
"François Angers"
J.T.C.C.
Translation certified true
on this 13th day of May 2004.
Sharlene Cooper, Translator
Citation: 2003TCC313
Date: 20030509
Dockets: 96‑2427(UI)
1999‑4382(EI)
1999‑4386(EI)
1999‑4391(EI)
BETWEEN:
LYNE PÉRUSSE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Angers, J.T.C.C.
[1] These appeals were heard on common evidence at New Carlisle, Quebec. They are appeals from decisions of the Minister of National Revenue (the "Minister") that the Appellant did not hold insurable employment with Guy Cavanagh (the "Payor") during the periods from June 22 to September 11, 1992, from May 3 to July 23, 1993, from April 18 to July 8, 1994, from April 10 to July 7, 1995, and from March 4 to May 31, 1996, in Docket 96‑2427(UI) (hereinafter "2427"); from January 6 to May 30, 1997, in Docket 1999‑4382(EI) (hereinafter "4382"); and from June 16 to December 26, 1997, in Docket 1999‑4386(EI) (hereinafter "4386"). Docket 1999‑4391(EI) (hereinafter "4391") is an appeal from a decision of the Minister that the Appellant did not hold insurable employment with 9055‑2159 Québec Inc. (hereinafter "9055 Qué. Inc."), during the period from December 29, 1997, to May 29, 1998.
[2] In Docket 2427, the Minister determined that the Appellant's employment during the periods at issue was not insurable under paragraph 3(2)(c) of the Unemployment Insurance Act (UIA), because the Appellant and the Payor were not dealing with each other at arm's length and, if they had been dealing with each other at arm's length, the terms and conditions of employment would not have been the same.
[3] In rendering his decision in this case, the Minister relied on the following assumptions of fact, which the Appellant admitted or denied as indicated:
[translation]
(a) The Payor practises law without a partner; (denied)
(b) He employs two legal secretaries, one who works approximately 35 weeks per year and one who works approximately 18 weeks per year; (admitted)
(c) The Appellant is the Payor's common‑law spouse; (admitted)
(d) They have three children who were ten, seven and four years of age in the summer of 1996; (admitted)
(e) The Appellant has worked for the Payor as an office clerk since 1987; (admitted)
(f) Her duties mainly consisted of:
bookkeeping,
preparing annual financial statements,
preparing income tax returns,
preparing statistics;
(denied)
(g) She worked full‑time for 11 to 13 weeks per year and four hours per week for the remainder of the year; (admitted)
(h) She received weekly remuneration of $700, for 32.5 hours of work in 1992 and 1993, and for 35 hours the following years; (denied)
(i) She earned $80 for weeks in which she worked four hours; (admitted)
(j) The legal secretaries earned $350 to $400 per week for weeks of 32.5 to 35 hours; (admitted)
(k) The Appellant claims to have spent three weeks full‑time preparing the income tax returns, whereas, employed full‑time on June 22, 1992, May 3, 1993, and April 18, 1994, the Payor's federal tax returns for 1991, 1992 and 1993 were filed on April 30, 1992, April 12, 1993 and April 29, 1994; (denied)
(l) The Payor's financial statements show the following income:
Gross Income
Net Income
As at 30/6/92
$130,965
$34, 009
As at 30/6/93
$106,982
$19, 645
As at 30/6/94
$105,396
$13, 796
As at 30/6/95
$141,630
$50,740
(admitted)
(m) The Appellant's duties did not require the hiring of a full‑time employee for 10 to 13 weeks per year; (denied)
(n) The number of workweeks for each of the years at issue correspond to the minimum number of weeks the Appellant required to qualify for unemployment insurance benefits; (denied)
(o) For each period, she received unemployment insurance benefits until the day on which she started working full‑time again; (admitted)
(p) The Appellant's salary was too high for her assigned duties; (denied)
(q) The Appellant had a de facto non‑arm's length relationship with the Payor under the Income Tax Act for the period at issue from June 22 to September 11, 1992, in view of the aforementioned circumstances; (denied)
(r) In addition, for the subsequent periods at issue, it is not reasonable to conclude under the aforementioned circumstances that the Appellant would have entered into a substantially similar contract of employment if she had been dealing with the Payor at arm's length. (denied)
[4] In Docket 4382, the Minister determined that the Appellant's employment during the period at issue was not insurable under paragraph 5(2)(i) and subsection 5(3) of the Unemployment Insurance Act ("UIA") because the Appellant and the Payor were not dealing with each other at arm's length and, upon examining the terms and conditions of employment, that the parties would not have entered into a substantially similar contract if they had been dealing with each other at arm's length.
[5] In rendering his decision in this case, the Minister relied on the following assumptions of fact, which the Appellant admitted or denied as indicated:
[translation]
(a) The Payor has operated a general law office since July 13, 1987, and since July 13, 1992, he has also operated a financial planning office. (admitted)
(b) On October 3, 1997, following the incorporation of "9055‑2159 Québec Inc.," the Payor's operations were split: Guy Cavanagh operates the general law office and the corporation operates the financial planning and management office. (admitted)
(c) The Payor has a business office in New Richmond, Quebec, and when his law office opened in 1997, he hired the Appellant, his common‑law spouse, as an office clerk. (admitted)
(d) The Payor operates his law office year round. (admitted)
(e) From 1987 to 1992, the Appellant held the position of office clerk on a continuous part‑time or full‑time basis. (admitted)
(f) From 1992 to May 30, 1997, including the period at issue, the Appellant held the positions of office clerk, on a continuous part‑time or full‑time basis, and of financial planning assistant during the full‑time periods. (admitted)
(g) For the period at issue, the Appellant was listed on the Payor's payroll for 18 full‑time weeks, at $700 gross per week, and for two part‑time weeks, at $80 per week. (admitted)
(h) During the period at issue, the Appellant received a fixed weekly salary of $700 for 32.5 hours per week (in the summer) or 35 hours per week during the remaining weeks; when she worked part‑time, she worked four hours per week and she received a weekly salary of $80. (admitted)
(i) The Payor supervised the Appellant regardless of whether she was working as an office clerk or planning assistant. (admitted)
(j) During the period at issue, the Payor hired Ms. Josée Audet as a legal secretary; she received weekly remuneration of $420 for 35 hours of work. (admitted)
(k) The Payor also employed Ms. Louisa Bujold as a legal secretary, from the beginning of June until the end of November 1997, paying her $420 per week for 32.5 or 35 hours per week. (admitted)
(l) The Appellant was laid off on May 30, 1997, and the Payor hired Ms. Bujold full‑time upon the Appellant's departure. (admitted)
(m) Unlike the two legal secretaries he hired exclusively for the full‑time periods, the Payor could list the Appellant as full‑time or part‑time. (admitted)
(n) The Appellant received weekly remuneration of $700, whereas the two legal secretaries received weekly remuneration of $420 for the same number of hours. (admitted)
(o) The Appellant was listed on the Payor's payroll as part‑time, full‑time or was laid off regardless of the Payor's periods of activity or income. (denied)
(p) The Appellant rendered services to the Payor year round; however, she was only paid for certain periods. (denied)
[6] In Docket 4386, the Minister determined that the Appellant's employment during the period at issue was not insurable, for the same reasons as those for Docket 4382. In rendering his decision, the Minister relied on the following assumptions of fact, which the Appellant admitted or denied as indicated:
[translation]
(a) The Payor has operated a general law office since July 13, 1987, and since July 13, 1992, he has also operated a financial planning office. (admitted)
(b) On October 3, 1997, following the incorporation of "9055‑2159 Québec Inc.," the Payor's operations were split: Guy Cavanagh operates the general law office and the corporation operates the financial planning and management office. (admitted)
(c) The Appellant worked for the Payor's law office until December 26, 1997, and she started being paid by the corporation on December 29, 1997. (admitted)
(d) The Payor has a business office in New Richmond, Quebec, and when his law office opened in 1987, he hired the Appellant, his common‑law spouse, as an office clerk. (admitted)
(e) The Payor operates his law office year round. (admitted)
(f) From 1987 to 1992, the Appellant held the position of office clerk on a continuous part‑time or full‑time basis. (admitted)
(g) From 1992 until the end of November 1997, the Appellant held the positions of office clerk, on a continuous part‑time or full‑time basis, and of financial planning assistant during the full‑time periods; starting on January 1, 1997, the Appellant also performed secretarial work. (admitted)
(h) During the period at issue, the Appellant was listed on the Payor's payroll as follows:
- From June 16 to November 28, 1997: four hours per week, except for the week of September 1‑5, for which 6 hours were listed.
- From December 1‑19: full‑time, 40 hours per week.
- From December 22‑26: four hours.
(denied)
(i) During the period at issue, the Appellant received a fixed weekly salary of $700 for 32.5 hours per week (in the summer) or 35 hours per week during the remaining weeks; as of December 1, 1997, her hours increased to 40 hours per week; when she worked part‑time, she received a salary of $20 per hour. (admitted)
(j) The Payor supervised the Appellant regardless of whether she was working as an office clerk or planning assistant. (denied)
(k) From January to the beginning of June 1997, the Payor hired Josée Audet as a legal secretary; she received weekly remuneration of $420 for 35 hours of work. (admitted)
(l) During the period at issue, the Payor hired Louisa Bujold as a legal secretary, from the beginning of June until the end of November 1997, paying her $420 per week for 32.5 or 35 hours per week. (admitted)
(m) The Appellant was laid off on May 30, 1997, and the Payor hired Ms. Bujold full‑time upon the Appellant's departure. (admitted)
(n) Unlike the two legal secretaries he hired exclusively for the full‑time periods, the Payor could list the Appellant as full‑time or part‑time. (admitted)
(o) The Appellant received weekly remuneration of $700, whereas the two legal secretaries received weekly remuneration of $420 for the same number of hours. (admitted)
(p) The Appellant was listed on the Payor's payroll as part‑time, full‑time or was laid off regardless of the Payor's periods of activity or income. (denied)
(q) The Appellant rendered services to the Payor year round; however, she was only paid for certain periods. (denied)
[7] Finally, in Docket 4391, the Minister determined that the Appellant's employment during the period at issue was not insurable, for the same reasons as in Dockets 4382 and 4386, except that in this case, the Payor is 9055 Qué. Inc., the only share of which is held by Fiducie ACMAP, of which Mr. Cavanagh is the sole director. In rendering his decision, the Minister relied on the following assumptions of fact, which the Appellant admitted or denied as indicated:
[translation]
(a) Guy Cavanagh has operated a general law office since July 13, 1987, and since July 13, 1992, he has also operated a financial planning office. (admitted)
(b) On October 3, 1997, following the incorporation of the Payor, Mr. Cavanagh's operations were split: Guy Cavanagh operates the general law office and the Payor operates a financial planning and management office. (admitted)
(c) The Payor's sole shareholder is Fiducie ACMAP, which holds the only Class "A" common voting share; Mr. Cavanagh is the sole director of the trust, the beneficiaries of which are the three minor children of Mr. Cavanagh and the Appellant. (admitted)
(d) The Appellant worked for Mr. Cavanagh's law office until December 26, 1997, and she started being paid by the Payor on December 29, 1997. (admitted)
(e) As of December 29, 1999, the Appellant performed all of the duties previously associated with Mr. Cavanagh's law office, as well as the same duties for the Payor. (admitted)
(f) As of December 29, 1997, Mr. Cavanagh's law office no longer engaged personnel, because from that point on the Payor assumed its management. (admitted)
(g) Mr. Cavanagh has a business office in New Richmond, Quebec, and when his law office opened in 1987, he hired the Appellant, his common‑law spouse, as an office clerk. (admitted)
(h) Mr. Cavanagh's law office and the financial planning and management office are operated year round. (admitted)
(i) From 1987 to 1992, the Appellant held the position of office clerk on a continuous part‑time or full‑time basis for Mr. Cavanagh. (admitted)
(j) From 1992 until the end of November 1997, the Appellant held the positions of office clerk, on a continuous part‑time or full‑time basis, and of financial planning assistant during the full‑time periods; starting on January 1, 1998, the Appellant also performed secretarial work. (denied)
(k) During the period at issue, the Appellant was listed on the Payor's payroll as follows:
- From December 29, 1997 to January 2, 1998, for a total of four hours.
- From January 5 to May 29, 1998, full‑time, 40 hours per week.
(denied)
(l) During the period at issue, the Appellant received a fixed weekly salary of $700 for 40 hours per week; when she worked part‑time, she received a salary of $20 per hour. (admitted)
(m) The Payor supervised the Appellant regardless of whether she was working as an office clerk or planning assistant. (admitted)
(n) Mr. Cavanagh hired Louisa Bujold as a legal secretary, from the beginning of June until mid‑October, paying her $420 per week for 32.5 or 35 hours per week. (admitted)
(o) Unlike the two legal secretaries Mr. Cavanagh hired exclusively for the full‑time periods, he could list the Appellant as full‑time or part‑time. (admitted)
(p) The Appellant received weekly remuneration of $700, whereas the two legal secretaries received weekly remuneration of $420 for the same number of hours. (admitted)
(q) The Appellant was listed on the Payor's payroll as part‑time, full‑time or was laid off regardless of the Payor's periods of activity or income. (denied)
(r) The Appellant rendered services to Mr. Cavanagh and to the Payor year round; however, she was only paid for certain periods. (denied)
[8] In all of these appeals, the Appellant maintains that paragraph 3(2)(c) of the UIA, as well as paragraph 5(2)(i) and subsection 5(3) of the EIA are discriminatory and infringe the right to equality guaranteed under section 15 of the Canadian Charter of Rights and Freedoms ("Charter"), which reads as follows:
15.(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
[9] It is important to note that Docket 2427 involves a new trial held in accordance with a Federal Court of Appeal judgment dated March 10, 2000. The Federal Court of Appeal ruled on the constitutional issue raised by the Appellant and it concluded that there was no breach of subsection 15(1) of the Charter. In this case, the Appellant not only raised this issue during the new trial, which was ordered by the Federal Court of Appeal, but also during the subsequent appeals before this Court. In this case, notice was given to the federal and provincial Attorneys General, in accordance with the Federal Court Rules. I will come back to the constitutional issue later in my reasons.
[10] The fact that the Appellant and the Payor are common‑law spouses is admitted for all of the periods at issue. Thus, there was a non‑arm's length relationship between them during these years, including those in which the Payor was a corporation controlled by Mr. Cavanagh. In 1992, the Act did not refer to common‑law spouses. Thus, the Minister argues that during this year, there was a de facto non‑arm's length relationship. As the Appellant admitted, she and the Payor have three children, who were ten, seven and four years of age in the summer of 1996.
[11] The Payor has been practising law since 1982 and he operates a forestry business. In 1987, he opened his own office and hired one full‑time legal secretary. Needing someone to do the bookkeeping and to perform other accounting duties for his law office and his business, he decided, upon consultation, that it would be less expensive for him to pay someone 18 to 20 dollars per hour to work on‑site than it would be to hire an accounting firm at a cost of 50 dollars per hour. Therefore, he decided to hire his spouse. The latter has a Doctorate in Industrial Relations from Université Laval; she was doing contract work for the university at the time and she was earning between $700 and $1,000 per week. He not only felt that his spouse could provide technical assistance, he also believed that her training could be useful to him when dealing with cases involving the negotiation of collective agreements or the CSST. Thus, she became a resource person. She has worked a number of weeks a year for the Payor since 1987. During the years at issue in these appeals, she worked for eleven weeks in 1992, twelve weeks in 1993 and 1994, thirteen weeks in 1995 and 1996, twenty‑one weeks in 1997, thirty‑one weeks in 1998 and forty‑three weeks in 1999. The number of hours worked per week varied between thirty‑two and thirty‑five hours. For the remainder of the year, the Appellant worked four hours per week, at an hourly rate of twenty dollars. She has worked full‑time since 2000.
[12] The Payor testified that he had wanted to hire the Appellant for the entire year during the years at issue in these appeals; however, this was not feasible due to his sales figures. In this regard, he filed Exhibit A‑1, showing his total gross income for each of the years at issue, including the years in which he incorporated his company and began providing financial planning services.
[13] When she was hired in 1987, the Appellant was paid $530 per week. For all of the periods at issue, her salary was $700 per week. She was paid $20 per hour during the weeks in which she worked four hours. According to the Payor, the Appellant was an important resource person in addition to having the necessary accounting skills. Her salary was set upon consultation with an accounting firm.
[14] The Payor filed in evidence the Appellant's curriculum vitae, the activity report that the Appellant prepared and her degree. Then he summarized the work she performed during each of the periods at issue.
[15] In 1992, the Appellant's mandate was to redo the billing for a number of the Payor's cases in order to specify the time he had spent on those cases. In addition, she helped the Payor with other cases and she did the accounting. During the eleven weeks that she worked, her hours of work were from 8:30 a.m. to noon and from 1:30 p.m. to 4:30 p.m. During this period, she performed her work at the office. The Payor emphasized that during all of the periods at issue, the Appellant did not receive any employment benefits other than those set out by law, as was the case with his other employees.
[16] The Payor explained that during 1993, 1994 and 1995, the Appellant came to work for him to meet the needs of his law office and to help him with some of his cases. When he became a financial planner, the Appellant's workload increased, which explains the increase in the number of workweeks until 1997. She had to prepare questionnaires and perform other duties relating to the financial planning services the Payor provided. She continued to do the accounting and she worked as a legal secretary in December 1997. He explained that the Appellant was three employees in one. During the last period at issue, she worked thirty‑one weeks to complete the duties the Payor had assigned her. During the last period, the incorporation of 9055‑2159 Québec Inc. created extra work for the Appellant, which explains her additional workweeks.
[17] On cross‑examination, the Payor testified that he spent approximately 25% to 30% of his time on financial planning services and that this percentage remained the same from 1992 to 1998. His services in this area are mainly associated with his law practice cases concerning separations, claims for damages and debt management for his clients. He explained that, when she was at the office, the Appellant's work consisted of analyzing financial data with him. Furthermore, he specified that he analyzed the data alone in her absence. He obtained information from clients; subsequently, the Appellant prepared the necessary balance sheets and financial statements. He acknowledged that the Appellant is not a financial planner and that there were no off‑peak periods during the year. This work was continuous, although some months were busier than others.
[18] The Payor still had a full‑time legal secretary. Their hours of work were the same as those of the Appellant and their salary varied between $350 and $400 per week. The legal secretaries' work was shared between two employees who were sharing the weeks. They never worked at the same time. One of the legal secretaries had a college diploma and the other had completed three years of studies.
[19] Exhibit I‑1, tab 15, is the Appellant's request with regard to the insurability of her employment in Docket 2427, for the periods from 1992 to 1995. The Appellant's position title is office clerk. In this document, she described the duties she was required to carry out during the four‑hour workweeks and her duties for the weeks in which she worked full‑time. The duties the Appellant was required to carry out on a continuous basis, that is, four hours per week, included accounts receivable, accounts payable, quarterly GST and QST reports, payroll, bookkeeping, human resources management and bookkeeping for the trust account. The duties to be performed during the 35‑hour workweeks, or 32.5‑hour weeks in the summer, included preparing income tax returns, financial statements and statistics, updating various aspects of the Payor's practice, human resources management, special studies such as surveys, and remaining current in terms of computers and financial planning.
[20] The Payor acknowledged that he communicated with his debtors personally, in spite of the fact that, according to Exhibit I‑1, tab 15, this duty was assigned to the Appellant. He was unable to specify when the Appellant completed her duties when she worked part‑time, that is, four hours per week. He referred to one four‑hour evening per week. Subsequently, he acknowledged that the time sheets in Exhibit I‑1, tab 33, indicated one hour per evening, four evenings per week. He said that he talked to the Appellant to decide which evening she had to work. In the end, he admitted that her schedule was flexible. The Payor was unable to determine the amount of time required to complete each of the duties the Appellant performed when she worked four hours per week; the time specified was an estimate of the amount of time spent on each task.
[21] With regard to the duties performed year round, he was unable to specify the amount of time spent on each of the duties described. He acknowledged that the income tax returns had to be completed prior to May 1 every year. The financial statements had to be ready by March 30 every year, and after 1996, they had to be ready by December 31 every year.
[22] Statistical information was used to divide the various fields of the Payor's practice and to identify the clients' place of residence in order to target advertising more effectively. However, for 1992‑1998, he could not say during which years the statistics at issue had been prepared. The Payor admitted that the Appellant collected less data over the years, due to her workload. The Payor could not identify the amount of time devoted to this heading.
[23] The Payor admitted that the Appellant had to complete the duties listed under the heading [translation] "updating" during her four‑hour workweeks rather than when she worked full‑time, as it was necessary to complete these duties year round. They included accounts receivable, credit card accounts and the filing of invoices. In spite of this admission, the Payor maintained that the Appellant did not accumulate the work that should be done when she was working part‑time in order to do it when she was working full‑time.
[24] The heading [translation] "Human Resources Management" is a duty that the Appellant performed when she worked full‑time. The Payor testified that this mainly involved ensuring the quality of the written and spoken French used at the office. He testified that he performed this duty in the Appellant's absence. He confirmed that the Appellant was responsible for occupational health and safety and he gave as an example that she was responsible for the height of the chairs and computer screens. He stated that the Appellant evaluated the secretary on a daily basis.
[25] The Payor was unable to describe what the heading [translation] "special studies" involved, except he remembered that in 1992, the Appellant had drafted a report for one of his clients, which apparently required one to two workweeks to complete.
[26] The second last heading of annual duties performed during the Appellant's full‑time work periods is entitled [translation] "Information on New Developments." The Payor testified that in 1996 he asked the Appellant to study accounting software for his law office. He could not specify the amount of time she spent on this task and the project was later abandoned.
[27] The Payor testified that in 1993, he asked the Appellant to study a training course on financial planning. Already holding the title of financial planner, he wanted to upgrade his skills so that in 1997, he was able to introduce himself as such. The Appellant's work consisted of studying and summarizing the content of two volumes entitled "Successful Investing & Money Management." The Payor claimed to have studied them as well. The Appellant performed the work; however, she spread it out over three years, that is, from 1993 to 1995. She performed the work during the full‑time employment periods.
[28] In 1996, the Payor enrolled in a course entitled [translation] "Personal Financial Planning Synthesis" provided by the Institut québécois de planification financière. It involved the scheduled study and submission of a series of modules; it also involved studying two cases submitted by the Institut. Although she was not enrolled in the course, the Appellant studied and prepared each of the modules for the Payor. The first module was submitted on February 14, 1996, and the last one was submitted on June 28, 1996. Furthermore, in 1997 and 1998, the Appellant prepared a checklist, questionnaires and forms, making it easier to open files and compile information obtained from the Payor's clients. On January 29, 1997, the Payor received his certification as a financial planner.
[29] From December 1‑19, 1997, the Appellant replaced the Payor's secretary. Subsequently, the Payor's corporation hired her for the period from January 6 to May 30, 1998, to perform her usual duties. Josée Audet was the secretary during the same period. According to the Payor, the Appellant was laid off on May 31, 1996, and on May 30, 1997, because her services were no longer required. However, he could not explain why the layoffs occurred on those dates. He claimed that the Appellant worked based on the requirements of his office.
[30] On cross‑examination, Counsel for the Respondent inquired about the Payor's net income for each of the years at issue. The amounts in question are as follows.
Year
Gross Income
Net Income
1992
$154,507
$47,016
1993
$96,180
$21,807 ($27,212 following the audit)
1994
$99,180
$23,833 ($29,989 following the audit)
1995
$164,147
$34,953 ($46,352 following the audit)
1996
$108,499
1997
$111,225
$26,435
1998
$154,192
$48,403
[31] The Appellant testified that she was hired by her common‑law spouse, the Payor, when his office opened in 1987, to help organize the law office. At that time, her salary was set at $530 per week. In 1990, she earned $640 per week, and during the periods at issue, she earned $700 per week. For the purposes of this case, the Appellant filed in evidence a summary of the duties she performed for the Payor for each of the periods at issue. This document is filed as Exhibit A‑8.
[32] According to her testimony and the summary at issue, the Appellant was responsible for regular and continuous duties, which she performed four hours per week during most of the periods. During the thirty‑two and thirty‑five hour workweeks, it seems as though the Appellant was assigned to specific projects, in addition to her regular work that required four hours per week.
1992
[33] The period of employment at issue is June 22 to September 11, 1992, or eleven weeks. This work period was necessary in order to carry out the duties associated with the fiscal year end, June 30. The Appellant testified that she also worked on the Payor's cases. In one particular case, her abilities made it possible to resolve the issue at hand. In addition, the Appellant had to redo the billing for a number of the Payor's cases, some of which required one month of work. In September 1992, the Payor acquired the title of financial planner and the Appellant had to make the appropriate preparations. She also spent time organizing the Payor's library.
1993
[34] The period is May 3 to July 23, 1993, or twelve weeks. The fiscal year still ended on June 30 and the Appellant prepared annual financial statements. During her full‑time work period, the Appellant studied and summarized the first seven lessons of the Hume Publishing Company Ltd. study program (Exhibit A‑6) entitled "Successful Investing & Money Management." The Appellant claimed that she had to become familiar with financial planning in order to provide services to the law office's clientele. Thus, she had to update her skills. As a result, she summarized various economic indicators as well as certain documents for the Payor. Furthermore, the Appellant performed this work during the periods from 1993 to 1995. In addition, she explained the amount of time she spent on each of her duties when she worked part‑time.
1994
[35] The period is April 18 to July 8, or twelve weeks. During the weeks in which she worked full‑time, her work consisted of studying and summarizing lessons 8 to 15 of the Hume study program, continuing her training in economics and summarizing texts.
1995
[36] The period is April 10 to July 7, or thirteen weeks. She completed the same two duties as in 1994, that is, studying and summarizing lessons 16 to 19 and lesson 26 of the Hume study program, and continuing her economics training. According to the Appellant, the Payor told her that it was not necessary to complete lessons 27 to 31 of the program. In 1995, the Appellant had to prepare two financial statements because the fiscal year‑end date had changed.
1996
[37] The period is March 4 to May 31, or thirteen weeks. During this full‑time work period, the Appellant had to become familiar with tax and financial planning in order to provide services to the law office. The Appellant and the Payor had to complete thirteen modules, study two cases and summarize the modules during the period from February 5 to May 30. Thus, they completed this work together; in addition, she continued her training in economics and in financial mathematics methods.
1997
[38] The period is January 6 to January 24, for four hours per week, and January 27 to May 30, full‑time, or eighteen weeks. As Exhibit A‑3, the Appellant filed in evidence an activity report for this period. The Payor's financial planning service was established at the beginning of 1997. Thus, the Appellant prepared standard forms for opening files and for collecting information from clients to develop strategies; in short, she prepared everything necessary to providing the services. In addition, the Appellant wrote newspaper advertorials.
[39] The Appellant returned to work full‑time from December 1‑19, 1997. She carried out her duties as office clerk and she worked as a legal secretary, because Ms. Bujold had to leave the office. Thus, she had agreed to assist the Payor during this period.
[40] On October 3, 1997, the Payor formed a management company, 9055 Que. Inc., which did not start doing business until January 1, 1998. Thus, during the period from December 29, 1997, to May 29, 1998, the Appellant worked for this company for one four‑hour workweek and for twenty‑one forty‑hour workweeks. She returned to work from June 15 to October 16, 1998. She performed three functions during the period at issue: office clerk, financial planning assistant and legal secretary.
[41] The Appellant testified that she has seen all kinds of things since 1993. Prior to that year, she was entitled to unemployment/employment insurance benefits, as were all Canadian citizens. Ever since amendments to the Act changed the insurability of employment in cases involving a non‑arm's length relationship, the Appellant has been denied this benefit. Now, she must satisfy the Minister that an actual contract of service exists and that the terms and conditions of employment are no different than they would be for an unrelated person. The Appellant explained that when she went to the Human Resources Development Canada office in 1993, she was reminded to indicate that she had been hired by her spouse. Apparently, the individual made this remark in a dry, reproachful tone of voice, as the individual was acquainted with the Appellant.
[42] In addition, the Appellant testified that she was outraged by the comments appearing in the report of Jean Blais, an insurability officer with Human Resources Development Canada. This comment alluded to the fact that people would like to work for their spouse for 10 to 12 weeks. The Appellant described the difficulties she had encountered in her efforts to find employment and she explained the reality that women face in securing employment in the Gaspé Peninsula. In addition, the Appellant described a conversation with Gilles Turgeon, an Appeals Officer with CCRA, concerning the fact that she worked for her husband who is an attorney. The Appellant felt as though this meant she did not need unemployment insurance benefits.
[43] In addition, Jean Blais's report points out that the fact that the Payor is representing the Appellant free of charge is a determining factor with regard to a non‑arm's length relationship. She was humiliated by these comments. Overall, she argued that the officers' work was not carried out in accordance with established practice and that they did not review her case objectively.
[44] On cross‑examination, the Appellant seemed somewhat uncertain with regard to the amount of time required to prepare the financial reports and to collect the information required for their preparation, both for the Payor's law office and for their forestry and farm businesses. She was also uncertain as to whether or not this work was carried out when she was working part‑time or full‑time. In addition, the Appellant acknowledged that during the periods in which she worked part‑time, she performed her duties at her home after the children were in bed.
[45] Furthermore, the Appellant was unable to specify how her time was divided between her duties as a legal secretary, and those as a financial planning assistant and an office clerk during the years at issue. In addition, she was unable to specify the amount of time she spent studying the thirty‑one lessons of the Hume study program, or the reason it took her three years to do so, as well as summarizing an economics book that the Payor had not read. It is important to note that all of the Appellant's applications for unemployment/employment insurance benefits indicate a lack of work as the reason for separation.
[46] Gilles Turgeon is the Appeals Officer who was responsible for the Appellant's case for the periods from 1992 to 1996. This case was forwarded to him following a disagreement with regard to a ruling made by an officer from Human Resources Development Canada concerning the insurability of the employment. He received the Appellant's file for the periods from 1992 to 1995 in June 1996, and two weeks later, he received the file for 1996. He obtained the agreement of the Payor, who is also Counsel for the Appellant, to the effect that the interviews and information collected for the four years at issue also apply to 1996. He obtained this agreement through a discussion with the Payor on July 24, 1996.
[47] Mr. Turgeon filed his report in evidence. He interviewed the Appellant and the Payor, as well as the other stakeholders in the case. In addition, he consulted a statistician, an attorney and an auditor at the Revenue Canada office. He reviewed the documentation relevant to the case and he analyzed the time that the Appellant may have devoted to her duties. This information was obtained through interviews with the Appellant and the Payor, and mainly concerned task‑sharing between the part‑time work periods and the full‑time work periods and the periods of the year during which certain tasks were completed, such as taxes, as well as the amount of time devoted to these tasks. He submitted this information to his consultants for the purpose of conducting a comparative analysis.
[48] Furthermore, Mr. Turgeon reviewed the Appellant's salary, comparing it to the duties she performed, and he compared the entire situation having regard to the size of the business and the salary paid to other office employees in the province of Quebec. He questioned the duration of employment during the periods from 1992 to 1996, when it might have been more logical to hire the Appellant part‑time year round, and full‑time during peak periods, particularly since the business is operated year round. He also questioned the nature and importance of the work, as his analysis led him to determine that it was not necessary to use the accounting services of a full‑time employee for ten to thirteen weeks from year to year.
[49] On cross‑examination, Mr. Blais's competence and the way in which he carried out his work were called into question, as was the lack of resources the department made available to him. Mr. Blais denied suggesting that he would like to have the Appellant's job, claiming that such a comment would not be appropriate at the start of such an investigation.
[50] Jean‑Pierre Gauthier is a CGA who works as an auditor for the Canada Customs and Revenue Agency. He was mandated to analyze the Appellant's duties as well as the Payor's accounting system, and to audit the Payor's income tax returns for 1992 to 1995 inclusive. He met with the Payor and spent three and a half days at the Payor's office. Based on his analysis, he determined that the Payor's accounting, both at the law office and at the forestry business, would require a fast, experienced employee to work part‑time, ten hours per week. Mr. Gauthier did not analyze the time the Appellant may have spent working as a financial planning assistant.
[51] Jean Vézina is the Appeals Officer who was responsible for the periods at issue in 1997 and 1998. He filed his reports in evidence and testified concerning their content. He had telephone conversations with the Payor (Counsel for the Appellant) in which the Payor confirmed that the Appellant performed the same work from January to May 1997 as she had during the preceding years. The Payor informed the officer that the extra duties were added to her existing duties, that is, those of a legal secretary. Mr. Vézina was informed that a management company had been formed, the sole shareholder of which is a trust that is managed by the Payor. In addition, Mr. Vézina examined the documentation used by Appeals Officer Jean Blais during the prior periods.
[52] On cross‑examination, it was revealed that the witness is not a task analysis specialist and that his employer does not provide him with any means of evaluating and analyzing this factor.
[53] In this case, the Appellant must show, on a balance of probabilities, that the Minister exercised his discretion improperly in determining that, having regard to all the circumstances, the Payor and the Appellant would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. According to the Federal Court of Appeal in Canada v. Jencan, [1997] F.C.J. No. 876, [1998] 1 F.C. 187, the Appellant must establish that the Minister acted in bad faith or for an improper purpose or motive, that he failed to take into account all of the relevant circumstances, as expressly required by paragraph 3(2)(c)(ii) of the UIA and paragraph 5(3)(b) of the EIA, or that he took into account an irrelevant factor.
[54] In Légaré v. M.N.R., [1999] F.C.J. No. 878, the Federal Court of Appeal summarized the role of the Minister and that of the Court. Marceau J., summed it up as follows at paragraph 4:
The Act requires the Minister to make a determination based on his own conviction drawn from a review of the file. The wording used introduces a form of subjective element, and while this has been called a discretionary power of the Minister, this characterization should not obscure the fact that the exercise of this power must clearly be completely and exclusively based on an objective appreciation of known or inferred facts. And the Minister's determination is subject to review. In fact, the Act confers the power of review on the Tax Court of Canada on the basis of what is discovered in an inquiry carried out in the presence of all interested parties. The Court is not mandated to make the same kind of determination as the Minister and thus cannot purely and simply substitute its assessment for that of the Minister: that falls under the Minister's so‑called discretionary power. However, the Court must verify whether the facts inferred or relied on by the Minister are real and were correctly assessed having regard to the context in which they occurred, and after doing so, it must decide whether the conclusion with which the Minister was "satisfied" still seems reasonable.
[55] The question of whether persons have a non‑arm's length relationship, under the UIA and the EIA, must be determined in accordance with the Income Tax Act (ITA). Section 251 deals with the issue of related persons, because related persons do not deal with each other at arm's length. Under section 251, there is an irrebuttable presumption that persons connected by marriage or by common‑law partnership are related persons within the meaning of the ITA. However, this presumption did not include common‑law spouses prior to 1993, when the ITA was amended to include them among related persons (subsection 252(4) of the ITA, applicable after 1992). Therefore, the Respondent cannot use this presumption for the first period at issue in this case. Thus, he must show that the parties were, in fact, not dealing with each other at arm's length. Paragraph 251(1)(c) of the ITA may apply, with the effect that common‑law spouses are not dealing with each other at arm's length, insomuch as the evidence submitted proves such.
[56] In François Fournier v. M.N.R., 91 DTC 743, Dussault J. of this Court appropriately summarized the concept of a non‑arm's length relationship between unrelated persons when he said:
When the parties to a transaction act in concert, when they have similar economic interests or they act with a common intent, it is generally admitted that they are not dealing at arm's length.
[57] There is no presumption to the effect that common‑law spouses do not deal with each other at arm's length. It must be proved that they have acted in concert with a common economic interest, within the context of the employment at issue and not within the context of their life together.
[58] In Lapointe v. M.N.R., [1995] T.C.J. No. 1551, Tremblay J., referred to paragraph 3(2)(c) of the UIA, stating at paragraph 76 that its purpose "is that we be satisfied that the contract of employment contains reasonable terms and conditions, between parties – the employer and employee – with separate interests." Further on, he writes at paragraph 79 that "in the context of paragraph 3(2)(c), the parties will be deemed to be dealing with each other at arm's length and not to have a de facto non‑arm's length relationship if they have entered into a contract of employment the terms and conditions of which are similar to those that would normally be adopted by parties dealing with each other at arm's length." Obviously, these terms and conditions are those found in a contract of employment: the nature of the work, the remuneration paid, the terms and conditions, the duration and the importance of the work performed.
[59] In this case, it must be determined whether there is a de facto arm's length relationship. Therefore, it is appropriate to consider what took place outside the period at issue. As such, it is possible to consider the fact that during the periods prior to 1992, the Appellant's employment was deemed to be insurable within the meaning of paragraph 3(1)(a) of the UIA.
[60] Other considerations include the fact that the Appellant and the Payor have been common‑law spouses since 1980, and they have three children from this relationship, born in 1985, 1988 and 1991. The Appellant has worked for the Payor/spouse since 1987. In 1992, she worked for him four hours per week, with the exception of a twelve‑week period in which she worked full‑time. The same scenario is repeated the following years, except that the full‑time work periods have increased over the years.
[61] Undoubtedly, the Appellant performed the work and carried out the duties she described. Undeniably, she helped the Payor/spouse establish his law office, provide services to his clients and manage all aspects of the office. Such support is highly commendable. Furthermore, I agree that a law office such as this requires weekly work for bookkeeping and maintaining up‑to‑date accounts. Every year, it is necessary to prepare financial statements and income tax returns, to issue T4 slips and to evaluate performance. The amount of time spent completing each of these duties may vary depending on the employee's skills and the company's business volume.
[62] In this case, considering the evidence at trial, including the size of the law office, its sales figures, the number of employees and the work description during the part‑time and full‑time employment periods, it is difficult to accept the Appellant's claim that she is able to complete all of her duties within the time allotted during each of these periods. All of the evidence relating to the amount of time devoted to the duties during the part‑time work period leads me to determine that it would take more than four hours per week to complete these duties, especially since the work was being performed for one hour per day, in the evening after the children were in bed. Moreover, every year, a period of ten to thirteen weeks is required to perform the year‑end duties, financial statements, income tax returns, statistics and other duties that were described; this period seems too long. In fact, extra duties were added, such as the compilation of invoices in 1992, and the study of thirty‑two financial planning lessons and an economics book, spread over a three‑year period. However, according to the claims for unemployment insurance benefits, each work stoppage was due to a lack of work. Nothing in the evidence suggests that this approach is justified.
[63] The Appellant's salary is another factor to be considered in relation to the Payor's business and the characteristics of his law office. Undoubtedly, the Appellant's skills warrant substantial remuneration, which could even exceed the salary she received from the Payor. However, in the circumstances of this case, it is important to remember that the Payor needed someone to do his bookkeeping and accounting and, according to his testimony, it would be less costly for him to have someone working for him that it would be to hire an accounting firm. In my opinion, as confirmed in the Appeals Officer's report, an e