Minister of National Revenue v. Jencan Ltd., (1997) 215 N.R. 352 (FCA)

• Judge: Isaac, C.J., Stone and McDonald, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: June 24, 1997
• Jurisdiction: Canada (Federal)
• Citations: (1997), 215 N.R. 352 (FCA)

MNR v. Jencan Ltd. (1997), 215 N.R. 352 (FCA)

MLB headnote and full text

Temp. Cite: [1997] N.R. TBEd. JL.019

Attorney General of Canada (applicant) v. Jencan Ltd. (respondent)

(A-599-96)

Indexed As: Minister of National Revenue v. Jencan Ltd.

Federal Court of Appeal

Isaac, C.J., Stone and McDonald, JJ.A.

June 24, 1997.

Summary:

The Minister of National Revenue deter­mined that Jenkins' employment with Jencan Ltd. was not insurable because: (1) there was no genuine contract of service (Unem­ployment Insurance Act, s. 3(1)(a)) and (2) the employment was not at arm's length and the parties would not have entered into a substantially similar contract of service if they had been at arm's length (s. 3(2)(c)(ii)). Jencan Ltd. appealed.

The Tax Court of Canada allowed the appeal and reversed the Minister's determi­nation. The Minister applied for judicial review.

The Federal Court of Appeal allowed the application, set aside the decision of the Tax Court and referred the matter to the Tax Court for a new hearing before a different judge in a manner consistent with its rea­sons.

Estoppel - Topic 1104

Estoppel in pais (by conduct) - Representation - By statement - Representations which do not found estoppel - The Minis­ter of National Revenue determined that Jenkins' employment with Jencan was not insurable - The Minister adopted assump­tions of fact used in a previous determi­nation involving the same parties because Jencan's main shareholder had informed an appeals officer that the terms and con­ditions of the employment were still "basically the same" - The Tax Court of Canada reversed the Minister's determi­nation - The Tax Court held that Jencan had disproved some of the assumptions of fact relied upon by the Minister - The Minister applied for judicial review, ar­guing, inter alia, that Jencan should not have been allowed to challenge the as­sumptions of fact at trial given Jencan's main shareholder's representation - The Federal Court of Appeal rejected the argu­ment holding that the preconditions for the application of the doctrine of estoppel by representation had not been made out - See paragraphs 43 to 49.

Unemployment Insurance - Topic 253

Insurable employment - Exceptions - Non arm's length dealing - Section 3(2)(c)(ii) of the Unemployment Insurance Act pro­vided how the Minister of National Reve­nue decided whether employment was at arm's length and thus insurable - The Federal Court of Appeal stated that the law with respect to s. 3(2)(c)(ii) required fur­ther clarification and set out the principles which could be derived from the authori­ties in the Federal Court of Appeal con­cerning the section - See paragraph 30.

Unemployment Insurance - Topic 253

Insurable employment - Exceptions - Non arm's length dealing - [See second to fifth Unemployment Insurance - Topic 1808 ].

Unemployment Insurance - Topic 257

Insurable employment - Exceptions - Employment under contract of service - [See first Unemployment Insurance - Topic 1808 ].

Unemployment Insurance - Topic 1808

Claims - Appeals - From decisions of minister - The Minister of National Revenue determined that Jenkins' employ­ment with Jencan was not insurable because, inter alia, there was no genuine contract of service (Unemployment In­surance Act, s. 3(1)(a)) - The Tax Court of Canada allowed Jencan's appeal and reversed the Minister's determination - The Minister applied for judicial review - The Federal Court of Appeal stated that the Minister's determination under s. 3(1)(a) was a quasi-judicial decision sub­ject, on appeal, to independent review by the Tax Court - There was no basis in law for interfering with the judge's reversal of the Minister's determination on this issue - It was open to him, on an in­dependent review, to find that the pre­ponderance of evidence supported the existence of a genuine contract of service between Jenkins and Jencan - See para­graphs 24 to 28.

Unemployment Insurance - Topic 1808

Claims - Appeals - From decisions of minister - The Minister of National Reve­nue determined that Jencan's employment was not insurable because, inter alia, the employment was not at arm's length (Un­employment Insurance Act, s. 3(2)(c)) - The Tax Court of Canada allowed Jencan's appeal and reversed the Minister's deter­mination - The judge concluded that, because some of the allegations relied upon by the Minister had been disproved at trial, he was entitled to review the merits of the Minister's determination - The Federal Court of Appeal allowed the Minister's judicial review application stating that the judge erred in law by re­viewing the merits of the determination without first determining whether or not there remained sufficient evidence to sup­port the Minister's determination - He failed to show the degree of judicial deference required when reviewing minis­terial determinations under s. 3(2)(c)(ii) - See paragraphs 29 to 51.

Unemployment Insurance - Topic 1808

Claims - Appeals - From decisions of minister - Section 3(2)(c)(ii) of the Un­employment Insurance Act provided how the Minister of National Revenue decided whether employment was at arm's length and thus insurable - The Federal Court of Appeal stated that "[t]he jurisdiction of the Tax Court to review a determination by the Minister under s. 3(2)(c)(ii) is circum­scribed because Parliament, by the lan­guage of this provision, clearly intended to confer upon the Minister a discretionary power to make these determinations. The words 'if the Minister is satisfied' con­tained in s. 3(2)(c)(ii) confer upon the Minister the authority to exercise an ad­ministrative discretion to make the type of decision contemplated by the section. Because it is a decision made pursuant to a discretionary power, as opposed to a quasi-judicial decision, it follows that the Tax Court must show judicial deference to the Minister's determination when he exercises that power." - See paragraph 33.

Unemployment Insurance - Topic 1808

Claims - Appeals - From decisions of minister - Section 3(2)(c)(ii) of the Un­employment Insurance Act provided how the Minister of National Revenue decided whether employment was at arm's length and thus insurable - The Federal Court of Appeal stated that "[t]he Tax Court is justified in interfering with the Minister's determination under s. 3(2)(c)(ii) - by proceeding to review the merits of the Minister's determination - where it is established that the Minister: (i) acted in bad faith or for an improper purpose or motive; (ii) failed to take into account all of the relevant circumstances, as expressly required by s. 3(2)(c)(ii); or (iii) took into account an irrelevant factor." - See para­graph 37.

Unemployment Insurance - Topic 1808

Claims - Appeals - From decisions of minister - Section 3(2)(c)(ii) of the Un­employment Insurance Act provided when the Minister of National Revenue would decide that employment was at arm's length and thus insurable - The Federal Court of Appeal stated that "... while the Tax Court must exhibit judicial deference with respect to a determination by the Minister under subsection 3(2)(c)(ii) - by restricting the threshold inquiry to a review of the legality of the Minister's determination - this judicial deference does not extend to the Minister's finding of fact ... In assessing the manner in which the Minister has exercised his statutory discretion, the Tax Court may have regard to the facts that have come to its attention during the hearing of the appeal." - See paragraph 42.

Cases Noticed:

Tignish Auto Parts Inc. v. Minister of National Revenue (1994), 185 N.R. 73 (F.C.A.), refd to. [para. 16].

Minister of National Revenue v. Schnurer Estate (1997), 208 N.R. 339 (F.C.A.), refd to. [para. 25].

Canada (Procureur général) v. Charbonneau (1996), 207 N.R. 299 (F.C.A.), refd to. [para. 27].

Canada (Attorney General) v. Jolyn Sport Inc., [1997] 214 N.R. 315; [1997] F.C.J. No. 512 (F.C.A.), refd to. [para. 28].

Ferme Emile Richard et Fils Inc. v. Ministre du Revenu national et al. (1994), 178 N.R. 361 (F.C.A.), refd to. [para. 32].

Fraser (D.R.) and Co. v. Minister of National Revenue, [1949] A.C. 24 (P.C.), refd to. [para. 34].

Boulis v. Minister of Manpower and Im­migration, [1974] S.C.R. 875, refd to. [para. 35].

Friends of the Oldman River Society v. Canada (Minister of Transport and Minister of Fisheries and Oceans), [1992] 1 S.C.R. 3; 132 N.R. 321, refd to. [para. 35].

Canada (Attorney General) v. Purcell, [1996] 1 F.C. 644; 192 N.R. 148 (F.C.A.), refd to. [para. 35].

Desroches v. Ministre du Revenu national (1994), 167 N.R. 316 (F.C.A.), refd to. [para. 40].

Aubut v. Minister of National Revenue (1990), 126 N.R. 381 (F.C.A.), refd to. [para. 41, footnote 2].

Borsellino et Salvo v. Ministre du Revenu national (1990), 120 N.R. 77 (F.C.A.), refd to. [para. 41, footnote 2].

Canada (Procureur général) v. Dunham (1996), 205 N.R. 289 (F.C.A.), refd to. [para. 42].

O'Grady v. Whyte, [1983] 1 F.C. 719; 42 N.R. 608 (F.C.A.), refd to. [para. 47].

Lidder v. Minister of Employment and Immigration, [1992] 2 F.C. 621; 136 N.R. 254 (F.C.A.), refd to. [para. 48].

Director of Investigation and Research, Competition Act v. Southam Inc. et al. (1997), 209 N.R. 20; 144 D.L.R.(4th) 1 (S.C.C.), refd to. [para. 50].

Canada v. Nuttall, [1997] F.C.J. No. 640 (F.C.A.), refd to. [para. 54].

Thibaudeau v. Minister of National Reve­nue, [1994] 2 F.C. 189; 167 N.R. 161 (F.C.A.), refd to. [para. 54].

Chan v. Minister of Employment and Immigration (1994), 79 F.T.R. 263 (T.D.), refd to. [para. 54].

Xie v. Minister of Employment and Im­migration (1994), 75 F.T.R. 125 (T.D.), refd to. [para. 54].

Ali v. Minister of Employment and Im­migration, [1994] 3 F.C. 73; 76 F.T.R. 182 (T.D.), refd to. [para. 54].

Statutes Noticed:

Unemployment Insurance Act, R.S.C. 1985, c. U-1, sect. 3(1)(a), sect. 3(2)(c)(i), sect. 3(2)(c)(ii) [para. 11]; sect. 61(3) [para. 7]; sect. 70, sect. 71(1) [para. 21].

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 251 [para. 12].

Authors and Works Noticed:

Halsbury's Laws of England (4th Ed. 1976), vol. 16, p. 1008 [para. 47].

Counsel:

Paul Plourde, for the applicant;

Michel Noel, for the respondent.

Solicitors of Record:

George Thomson, Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the applicant;

Noel O'Neill & Urquhart, Chatham, New Brunswick, for the respondent.

This application was heard on May 8, 1997, at Fredericton, New Brunswick, by Isaac, C.J., Stone and McDonald, JJ.A., of the Federal Court of Appeal.

The following decision of the Court of Appeal was delivered on June 24, 1997, by Isaac, C.J.