Federal Court of Appeal - Gray v. Canada (Minister of National Revenue)

[1] This is an application for judicial review of a decision of the Tax Court of Canada which confirmed a decision of the Minister which held that the applicant's employment during seven relevant periods was excepted from and not included in insurable employment within the meaning of subsection 3(2) of the Unemployment Insurance Act, R.S.C. 1985, c. U-1, and paragraph 5(2)(i) and subsection 5(3) of the Employment Insurance Act, S.C. 1996, c. 23, because the parties were not dealing at arm's length. The seven relevant periods were the years 1991 to 1998 with the exception of 1995.

[2] Since both provisions of the Unemployment Insurance Act and the Employment Insurance Act are to the same effect, the relevant provisions of the Employment Insurance Act will be the only ones reproduced here. Paragraph 5(2)(i) and subsection 5(3) of the Act read:

5. (2) Insurable employment does not include

[...]

(i) employment if the employer and employee are not dealing with each other at arm's length.

5. (2) N'est pas un emploi assurable:

[...]

i) l'emploi dans le cadre duquel l'employeur et l'employé ont entre eux un lien de dépendance.

5. (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. (3) Pour l'application de l'alinéa (2)i):

a) la question de savoir si des personnes ont entre elles un lien de dépendance est déterminée conformément à la Loi de l'impôt sur le revenu;

b) l'employeur et l'employé, lorsqu'ils sont des personnes liées au sens de cette loi, sont réputés ne pas avoir de lien de dépendance si le ministre du Revenu national est convaincu qu'il est raisonnable de conclure, compte tenu de toutes les circonstances, notamment la rétribution versée, les modalités d'emploi ainsi que la durée, la nature et l'importance du travail accompli, qu'ils auraient conclu entre eux un contrat de travail à peu près semblable s'ils n'avaient pas eu de lien de dépendance.

[Emphasis added]

[3] The applicant submits with the assumptions on which the Minister relied on in his reply to the notice of appeal were largely irrelevant and that the Minister was not entitled to compare the various remunerations given during the previous years, but that he could only inquire into the remunerations in the year of the employment in question. The applicant also submits that the fact that the applicant worked for the payor outside of his remuneration period did not amount, in the circumstances of the case at bar, to an important factor to be relied on. (See Roy v. Minister of National Revenue, [1999] 2 C.T.C. 246).

[4] The Court recognizes that the object of the review is an inquiry into a given employment. This does not preclude, however, a comparison with remunerations in other years for the same employment. This is evident from the terms of the relevant provisions of the Act which allow the Minister to have regard to "all the circumstances".

[5] With regard to the applicant's second argument, the weight to be given to relevant factors is for the Tax Court judge to assess and not a matter for this Court to reassess.

[6] For these reasons, the application for judicial review will be dismissed with costs.

"Alice Desjardins"

J.A.

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-706-00

STYLE OF CAUSE: RAYMOND GRAY v. THE MINISTER OF NATIONAL REVENUE

PLACE OF HEARING: Halifax, Nova Scotia

DATE OF HEARING: January 28, 2002

REASONS FOR JUDGiVIENT OF THE COURT:Desjardins, Rothstein, Noel, JJA

RENDERED FROM THE BENCH BY: Desjardins J.A.

APPEARANCES:

Mr. Bruce S. Russell FOR THE APPLICANT

SOLICITORS OF RECORD:

McInnes Cooper FOR THE APPLICANT Halifax. Nova Scotia

Mr. Morris Rosenber,-= ¹1-OR THE RESPONDLNIT Deputy Attorney General oCCanada

Ottawa, Ontario

Mr. Marcel Prevost 1^-UR THE RESPONDENT Mr. John Bodurtha