https://decisia.lexum.com/tcc-cci/decisions/en/item/307528/index.do
Kassawat v. M.N.R. (March 15, 2018 – 2018 TCC 54, Lafleur J.).
Précis: Mr. Kassawat was a civil engineer and had a job with Qualité 2K Plus K Ltée (the “Payor”) for the period from June 13, 2016 to March 31, 2017. The payor was 100% controlled by his wife. The Payor entered into a contract with Telus to provide engineering services. Telus honoured the contract and paid the agree contractual consideration but for some reason did not require Mr. Kassawat’s services during the period in question. As a consequence he was paid to do nothing during the period. The Minister held that he was not engaged in insurable employment since Mr. Kassawat and the Payor would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length. The Tax Court agreed with the Minister’s position and dismissed the appeal.
Decision: This was ultimately not a difficult decision for the Tax Court:
[55] Mr. Kassawat agreed that although the Payor was paid by Telus during the Period, Mr. Kassawat did not perform any work. According to the respondent, it is clear that Mr. Kassawat himself was hired and that a person dealing at arm’s length would not have entered into such a contract with the Payor. The Court agrees with this.
[56] In addition, Mr. Kassawat controlled all the Payor’s decisions. Mr. Kassawat’s testimony is clear: his spouse, who is the shareholder who holds all the Payor’s shares, did not take part in any decisions regarding the Payor or Mr. Kassawat’s work. Mr. Kassawat took care of all the Payor’s accounting and banking matters. Mr. Kassawat confirmed several times that his spouse was not involved in any way. It is clear that the Payor was used by Mr. Kassawat to obtain the management contract from Telus and that Mr. Kassawat made all of the Payor’s decisions. From all those facts, it is impossible to identify an arm’s-length relationship. The Court is of the view that a person dealing at arm’s length would not have entered into such an agreement.
Thus the appeal was dismissed.