determinations under subparagraph 3(2)(c)(ii) are reviewed on appeal. Desjardins J.A.,
speaking for this Court in Tignish, supra, described the Tax Court's circumscribed jurisdiction
at the first stage of the inquiry as follows:
Subsection 71(1) of the Act provides that the Tax Court has authority to decide questions of
fact and law. The applicant, who is the party appealing the determination of the Minister, has
the burden of proving its case and is entitled to bring new evidence to contradict the facts
relied on by the Minister. The respondent submits, however, that since the present
determination is a discretionary one, the jurisdiction of the Tax Court is strictly circumscribed.
The Minister is the only one who can satisfy himself, having regard to all the circumstances of
the employment, including the remuneration paid, the terms and conditions and importance
of the work performed, that the applicant and its employee are to be deemed to deal with each
other at arm's length. Under the authority of Minister of National Revenue v. Wrights'
Canadian Ropes Ltd., contends the respondent, unless the Minister has not had regard to all
the circumstances of the employment (as required by subparagraph 3(2)(c)(ii) of the Act), has
considered irrelevant factors, or has acted in contravention of some principle of law, the court
may not interfere. Moreover, the court is entitled to examine the facts which are shown by
evidence to have been before the Minister when he reached his conclusion so as to determine
if these facts are proven. But if there is sufficient material to support the Minister's conclusion,
the court is not at liberty to overrule it merely because it would have come to a different
conclusion. If, however, those facts are, in the opinion of the court, insufficient in law to
support the conclusion arrived at by the Minister, his determination cannot stand and the
court is justified in intervening.
In my view, the respondent's position is correct in law...[4]
In Ferme Émile Richard v. M.N.R., this Court confirmed its position. In obiter dictum,
Décary J.A. stated the following:
As this court recently noted in Tignish Auto Parts Inc. v. Minister of National Revenue, July
25, 1994, A-555-93, F.C.A., ... an appeal to the Tax Court of Canada in a case involving the
application of s.3(2)(c)(ii) is not an appeal in the strict sense of the word and more closely
resembles an application for judicial review. In other words, the court does not have to
consider whether the Minister's decision was correct: what it must consider is whether the
Minister's decision resulted from the proper exercise of his discretionary authority. It is only
where the court concludes that the Minister made an improper use of his discretion that the
discussion before it is transformed into an appeal de novo and the court is empowered to
decide whether, taking all the circumstances into account, such a contract of employment
would have been concluded between the employer and employee if they had been dealing at
arm's length.[5]
Section 70 provides a statutory right of appeal to the Tax Court from any determination
made by the Minister under section 61, including a determination made under subparagraph
3(2)(c)(ii). The jurisdiction of the Tax Court to review a determination by the Minister under
subparagraph 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 of National Revenue is satisfied" contained in
subparagraph 3(2)(c)(ii) confer upon the Minister the authority to exercise an administrative
discretion to make the type of decision contemplated by the subparagraph. 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. Thus, when Décary J.A. stated in Ferme Émile, supra, that such an
appeal to the Tax Court "more closely resembles an application for judicial review", he merely
intended, in my respectful view, to emphasize that judicial deference must be accorded to a
determination by the Minister under this provision unless and until the Tax Court finds that
the Minister has exercised his discretion in a manner contrary to law.
If the Minister's power to deem "related persons" to be at arm's length for the purposes
of the UI Act is discretionary, why, one might ask, does the right of appeal to the Tax Court
under section 70 apply to subparagraph 3(2)(c)(ii) at all? The answer is that even
discretionary powers are subject to review to ensure that they are exercised in a judicial
manner or, in other words, in a manner consistent with the law. It is a necessary incident of
the rule of law that all powers granted by Parliament are of an inherently limited nature. In
