CUB 14085
TRADUCTION
Dated September 1, 1987
ISSUE: Earnings - Regulation 57(6)(b)
APPELLANT: Claimant
DECISION: Dismissed
CLAIMANT: Conrad CÔTÉ
DECISION
MARCEL L. JOYAL, UMPIRE:
On August 19 and September 10, 1986 the Employment and Immigration Commission allocated certain earnings of the claimant - appellant from the operation of Ferme Conrad Côté Inc. The Commission held that this income was earnings within the meaning of sections 57 and 58 of the Unemployment Insurance Regulations. This decision involved a considerable overpayment of benefits.
During the years 1982, 1983, 1984 and 1985 the claimant was an employee at the Baie Saint-Paul golf course. This employment lasted from early May to late September in each year.
During the periods from October to April in each year the claimant received unemployment insurance benefits. His regular reports submitted to the Commission always indicated that he did not receive earnings.
An investigation undertaken later showed that over the years the claimant carried on a business under the name of Ferme Conrad Côté Inc., the certificate of incorporation of which was issued on November 19, 1981. He held 60 per cent of the shares in this company and the balance of 40 per cent was registered in his wife's name.
The company's assets consisted of a quota for the production and marketing of eggs. This quota had been transferred to the company by Moise Côté, a pensioner, on December 21, 1981 for consideration of $45,000. On August 23, 1984 the company purchased the land necessary for egg production for a sum of $5,000.
During the years in question the company apparently made considerable sales and certain profits. These were shown in the balance sheets prepared by the auditors and included in the record.
For any income from an operation of this kind the Unemployment Insurance Act, 1971 provides special treatment in subsection 57(6) of the Unemployment Insurance Regulations. This subsection, which deals with earnings to be taken into account in determining whether there is an interruption of earnings, reads as follows:
57.(6) For the purposes of subsection (2), "earnings" includes,
(a) in the case of a claimant who is not self-employed, only that amount of his income remaining after deducting
(i) expenses incurred by him for the direct purpose of earning that income, and
(ii) the value of any consideration supplied by him;
(b) in the case of a claimant who is self-employed in farming, only thirty-five per cent of his gross returns from,
(i) farming transactions, and
(ii) any subsidies he receives under any federal or provincial program;
(c) in the case of a claimant who is self-employed other than in farming, only the amount remaining from his gross returns from that employment after deducting the operating expenses, other than capital expenditures, incurred therein; and
(d) in any case, the value of board, living quarters and other benefits of any kind received by a claimant form or on behalf of his employer in respect of his employment.
It is indeed paragraph 57(6)(b) of the Regulations that applies to the extent that the claimant can be said to be self-employed in farming. The formula used does not involve calculating in detail the net income from the agricultural operation but rather applying a fixed formula setting net income at thirty-five per cent of gross returns.
This was the basis on which the Commission determined the claimant's earnings. At the same time the Commission allocated them in accordance with subsection 58(7) of the Regulations.
According to the claimant, the farming operations were not profitable. After operating the farm for three years, he sold his quota and his hens in April or May 1985.
Following the decisions of the Commission, which established an over-payment of about $18,000, the board of referees, which heard the claimant's appeal, upheld them. The reasons are stated in the board's decision, Exhibit 18:
The evidence in the record as it stands shows that the claimant operates a farm and that he owns sixty per cent of the shares. At the hearing before us the claimant's representative, Daniel Martineau, Advocate, explained that the claimant was a shareholder with sixty per cent of the shares but this did not imply in any way that he was the owner or co-owner of the said company. He also added that Ferme Conrad Côté was an entity quite distinct from the individual himself.
However, although the claimant alleges that the farm was not sufficiently profitable for him to make a living and draw a salary from it, the tests to be considered in determining the claimant's income are laid down in section 57(6)(b) of the Regulations, which provides: "In the case of a claimant who is self-employed in farming, only thirty-five per cent of his gross returns from farming transactions, and any subsidies he receives under any federal or provincial program".
The board of referees has concluded that the claimant was not able to show at the hearing that he had no direct interest in his farming operation.
Given the foregoing, the board of referees unanimously upholds the decision of the Commission and dismisses the appeal.
At the hearing of the appeal before the Umpire learned counsel for the applicant raised the following arguments:
1. The board of referees did not take into account subsection 43(2) of the Regulations, which provides that a claimant who is self-employed and whose employment is so minor in extent that he would not normally follow it as a principal means of livelihood is not deemed to work a full working week.
2. It is the responsibility of the Commission to prove that the claimant falls within subsection 56(6) of the Regulations and the Commission failed to discharge this onus.
3. The refusal of the Office du crédit agricole du Québec [Quebec Farm Credit Board] to give subsidies to the claimant (Exhibit 12.3) because he could not be recognized as making farming his principal occupation proved the claimant's assertion that paragraph 57(6)(b) of the Regulations did not apply to him.
4. If we consider the dictionary definition of farming, we find that it does not include the raising of chickens and the production of eggs.
5. The business was carried on by Ferme Conrad Côté Inc. and it was consequently not the claimant who operated it.
To deal first with the last argument, it should be noted that, because of his holding of sixty per cent of the shares in his company, the claimant is engaged in the operation of the business in a co-adventure within the meaning of section 43 of the Regulations. An examination of the balance sheets shows clearly that it was he who provided the company with the necessary funds for the purpose of its assets and met its other financial needs from time to time.
Further,more, the interpretation that must be given to sections 43 and 57 enables a Court to pierce the "corporate veil", eliminate the technicalities of corporate law that give a company a separate legal personality from that of its shareholders in order to determine the reality of a case.
Finally, I venture to suggest that the claimant's legal situation is covered by subsection 57(11) of the Regulations, which reads as follows:
57.(11) Where the remuneration of a claimant is not pecuniary or is only partly pecuniary and all or part of the non-pecuniary remuneration consists of any consideration other than living quarters and board furnished by the employer, the value of that consideration shall be included in determining his income.
As the owner of sixty per cent of the shares the claimant has an interest in the business that may find expression in the payment of dividends, salaries or bonuses or simply in an increase in the company's net worth through an accumulation of undistributed profits. It all comes down to the same thing.
The fourth argument of counsel for the claimant seems to me to conflict with his third. If he must rely on Exhibit 12.3 which declares the claimant to be ineligible for the farm credits system because farming was not his principal occupation, he must at the same time recognize that the raising of hens and the production of eggs, in the view of the Office du crédit agricole constitute a farming operation. In any event, if no definition of farming can be found in section 43 or section 57, we may determine the scope of this expression by referring to paragraph 16(2)(g) of the Regulations. It is true that the definition in this paragraph exists only for the purposes of section 16, but it may be added to other elements of interpretation to assist us in determining the meaning. For the authors of the Robert and Larousse dictionaries, it may well be that the word farming is limited to the clearing of land but I venture to suggest that in Canada the meaning of this occupation has long since gone beyond the clearing of the few acres of snow that were there in the 18th century.
I am also forced to say that the first argument of counsel for the claimant conflicts with the statement of the claimant in Exhibit 5. For a claimant to be able to rely on subsection 43(2) of the Regulations, he must devote so little time to the occupation that he would not normally regard it as his principal means of livelihood. A reading of Exhibit 5 indicates the contrary. I accordingly find that, even if it were established that the claimant was not a farmer, he could not be given the protection of subsection 43(2).
It remains for me to consider the argument raised by counsel for the claimant concerning the onus of proof on the Commission in cases such as this. He referred to CUB 10322 in support. However, this onus is not greater than in all situations where a person has to prove his allegations. It is not evidence that has to be beyond a reasonable doubt. The principal of the preponderance of probability applies.
On this point the board of referees found that the onus of proof had been discharged. Whether or not we agree with this finding, it is clearly based on the facts stated in the record and the claimant's admissions. A number of factors to be found elsewhere, in the Income Tax Act for example, for determining whether farming operations are carried on and the principal occupation of the owner are reflected in evidence in the record: the purchase of a production quota, investments of capital, purchases and sales of hens, maintenance of hen houses, purchase and disposal of capital properties are all factors reflected in the company's balance sheets which showed business activity exceeding a mere hobby.
It is possible that on the facts a board of referees with different members would have reached a different conclusion. However, to the extent that the finding of fact is not erroneous within the meaning of paragraph 95(c) or made in a perverse or capricious manner or without regard for the material before the board, an Umpire may not intervene. I must accordingly dismiss the claimant's appeal.
The claimant owes a considerable sum of money in overpayments of benefits. He apparently received benefits in several periods. The retroactive effect of a situation of this kind places a burden on the claimant that is not particularly relieved by the profits he may have succeeded in obtaining from his business during these periods. The lump-sum formula in paragraph 57(6)(b) of the Regulations for determining the income of a farmer may in certain circumstances create a totally fictitious and unreal situation.
I shall take the liberty in this situation to suggest to the Commission that it take these realities into account when it considers recovering this debt. Since I do not know the claimant's current income or his net worth, I cannot make a specific recommendation to the Commission concerning its exercise of the discretion it has under section 60 of the Regulations. I would nevertheless recommend that it take into account the particular circumstances of the case and the observations that I have made.
UMPIRE