Garland v. M.N.R.

, 2005 TCC 176

2005-03-03
Docket: 2004-3281(CPP)
2004-3282(EI)
BETWEEN:
DOUGLAS R. GARLAND,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeals heard on February 11, 2005, at Calgary, Alberta, by
The Honourable Justice Campbell J. Miller
Appearances:
For the Appellant: The Appellant himself
Counsel for the Respondent: Scott McDougall
____________________________________________________________________
JUDGMENT
The appeals pursuant to subsection 103(1) of the Employment Insurance Act and section 28 of
the Canada Pension Plan are allowed and the decision of the Minister of National Revenue on
the appeal made to him under section 91 of the Act and the determination of the Minister on the
application made to him under section 27.1 of the Plan are vacated on the basis that the
Appellant was engaged in insurable employment or pensionable employment with Can West Ltd.
for the period October 16, 1996 to October 17, 1997 within the meaning of paragraphs 5(1)(a) of
the Act and 6(1)(a) of the Plan.
Signed at Ottawa, Canada, this 3rd day of March, 2005.
"CampbellJ. Miller"
Miller J.


Citation: 2005TCC176
Date: 20050303
Docket: 2004-3281(CPP)
2004-3282(EI)
BETWEEN:
DOUGLAS R. GARLAND,
Appellant,
And
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Miller J.
[1] The Minister of National Revenue (the Minister) decided that Mr. Douglas Garland was
not employed under a contract of service with Can Test Ltd. (Can Test) for the period October
16, 1996 to October 17, 1997. The Minister did not elaborate in his response to Mr. Garland, but
it was clear at trial that the Minister holds a view that because Mr. Garland obtained employment
with Can Test under an assumed name, and with a social insurance number (SIN) that he
illegally obtained under that name, the contract is void ab initio. Mr. Garland worked at Can Test
for four years under the name of Matthew Kemper Hartley. He maintains he performed such
work under a valid contract of service. I agree with him.
[2] Mr. Garland is in his mid-forties. He suffers from attention deficient disorder (ADD). It
was clear that he was agitated throughout the trial, but it was also apparent that he was an
intelligent individual. Mr. Garland attended medical school in Alberta for one year until he
suffered a breakdown. He also seems to have been traumatized by causing what he described as a
horrific accident due to falling asleep at the wheel.
[3] Mr. Garland produced his own amphetamines. This somehow came to the attention of the
Royal Canadian Mounted Police (RCMP). In 1992, they raided Mr. Garland's parents' farm. Mr.
Garland was charged with an offence under, he believes, the Food and Drug Act. He was
released on bail. At this point he acknowledged that he made some not very well thought out
decisions. He skipped the province of Alberta and moved to Vancouver. He assumed the name of
a deceased individual, Matthew Hartley. In May 1993 he applied for a SIN under this assumed
name. He had his own SIN in his own name since 1980. He also applied for a driver's license
under the name Matthew Hartley. Indeed, Mr. Garland conducted all his activities in Vancouver
under the name Matthew Hartley.
[4] Mr. Garland responded to an ad in the Vancouver newspaper and successfully applied for
a job with Can Test. He applied under his new identity, claiming to have a BSc. degree. He
explained in Court that he considered his year in medical school qualified him to make this
claim. Mr. Garland was a coordinator in the company's trace organics department, testing
pesticides, herbicides and organic compounds. He rose to become a supervisor of 30 or more
employees, but found he was unable to cope, and he suffered another breakdown in late 1997. He
was dismissed in October 1997. He considered a wrongful dismissal suit. He obtained
employment insurance benefits under the name Matthew Hartley.
[5] Subsequent to his dismissal Mr. Garland took courses on how to seek employment after a
breakdown. He found part-time work with the British Columbia Institute of Technology. The
RCMP eventually caught up to Mr. Garland, and he was arrested in May 1999. He pleaded guilty
to all drug offences and all offences in connection with the assumed identity. He served time in
prison.
[6] Human Resources Development Canada (HRDC) requested a ruling with regards to Mr.
Garland's employment with Can Test. In December 2003 the Vancouver Island Tax Services
office ruled Mr. Garland was not in insurable employment. Mr. Garland appealed to the Minister.
The Minister decided Mr. Garland was not employed under a contract of service with Can Test.
Mr. Garland expressed concern that in none of the communications was it made clear why his
work was not considered to be under a contract of service. Also, apart from receiving copies of
cases from the Department of Justice, he never discussed the rationale for the government's
position with anyone from the Department of Justice. This is regrettable.
[7] The issue is whether Mr. Garland's work with Can Test was under a valid contract of
service. There is no question Mr. Garland worked as an employee of Can Test for approximately
four years. There is also no question that there was nothing illegal about the substance, object or
terms of the contract. The question is whether Mr. Garland's entering the contract under an
assumed name and with a SIN obtained contrary to the provisions of the Employment Insurance
Act (the Act)[1] renders the contract void ab initio and therefore a nullity for the purposes of
subsection 5(1) of the Act, which reads in part:
5(1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers, under any express or implied
contract of service or apprenticeship, written or oral, whether the earnings of the employed
person are received from the employer or some other person and whether the earnings are
calculated by time or by the piece, or partly by time and partly by the piece, or otherwise; ...
[8] The Respondent was unable to find any case exactly on point but referred me to several
cases dealing with immigrants working without work permits. I find the Federal Court of Appeal
case of Still v. M.N.R.[2] particularly helpful. Justice Robertson went through a careful review of
the law of the illegality of contracts and moved away from what he described as the classical
approach to a more principled approach:
43 The second reason for rejecting the classical model is that it fails to account for the
reality that today a finding of illegality is dependent, not only on the purpose underlying the
statutory prohibition, but also on the remedy being sought and the consequences which flow
from a finding that a contract is unenforceable. It must be remembered that the law of illegality
arose out of a live controversy between parties to an allegedly illegal contract. In this case, there
is no live controversy between contracting parties and the ramifications of declaring an
employment contract illegal are too far-reaching. ... The fact that so many statutes predicate
entitlement or eligibility on an existing contract of service is reason enough for any court to
decline the invitation to automatically declare any employment contract invalid on grounds of
illegality, and more so if the declaration is based on the tenets of the classical doctrine of
illegality.
...
46 ... As the doctrine of illegality is not a creature of statute, but of judicial creation, it is
incumbent on the present judiciary to ensure that its premises accord with contemporary values.
...
[9] The first issue to be determined is whether, indeed, the contract is illegal, either based on
common law or statute law. Then, even if found to be an illegal contract, consider the objects of
the employment insurance legislation and the particular circumstances of each case to determine
if the illegality renders the contract void ab initio.
[10] Is the contract illegal? First, from a common-law perspective, does a contract entered
under an assumed identity render the contract illegal? This depends on whether the mistake goes
to the individual's attributes or to the individual's very identity. In Lake v. Simmons,[3] Viscount
Holdane wrote:
Jurists have laid down, as I think rightly, the test to be applied as to whether there is such a
mistake as to the party as is fatal to there being any contract at all, or as to whether there is an
intention to contract with a de facto individual, which constitutes a contract that may be induced
by misrepresentation so as to be voidable but not void [...] Pothier (Trait des Obligations,
section 19) lays down the principle thus, in a passage adopted by Fry, J. in Smith v. Wheatcroft
[(1878) 9 ch. D. 223, at 230.].
Does error in regard to the person with whom I contract destroy the consent and annul the
agreement? I think that this question ought to be decided by a distinction. Whenever the
consideration of the person with whom I am willing to contract enters as an element into the
contract which I am willing to make, error with regard to the person destroys my consent, and
consequently annuls the contract. ... On the contrary, when the consideration of the person which
whom I thought I was contracting does not enter at all into the contract, and I should have been
equally willing to make the contract with any person whatever as with whom I thought I was
contracting, the contract ought to stand.
[11] It comes down to this. Was the exact identity of Mr. Garland material? No, it was not. It is
not akin to a contract, for example, where the province of Alberta contracts to have Pavarotti
perform at their one hundredth anniversary celebration, and instead get some unknown performer
claiming to be Pavarotti. Can Test simply needed someone to work in the laboratory - they did
not seek a particular one individual: it was not Mr. Garland's identity that caused Can Test to hire
him. Where the mistake goes to attributes and not identity and the contract is induced by
misrepresentation or even fraud, the remedy is that such contract is voidable. It is not void ab
initio. Further, it would be voidable at the option of Can Test, not the government of Canada.
This does not excuse Mr. Garland for the misrepresentation; he would remain liable to Can Test
for any common law remedies for fraud. Based on common law principles, I find there was a
valid contract of service for the four years Mr. Garland was employed by Can Test.
[12] Was the contract illegal due to some breach of a statutory requirement? As noted earlier,
paragraphs 141(1)(a) and (b) set out two prohibitions of the Act:
(i) no person with a SIN shall knowingly apply for another SIN; and
(ii) no person shall present a SIN with the intent to deceive any person.
A breach of either of these provisions is a summary conviction offence subject to fine or
imprisonment. Do these provisions expressly or impliedly render an employment contract illegal,
by reliance upon an illegally obtained SIN? Certainly not expressly. The provisions do not state
"no contract shall be entered into using a SIN relied upon in contravention of paragraphs
141(1)(a) or (b)". The result of breaching paragraphs 141(1)(a) or (b) is a fine or imprisonment.
The provision is silent as to the effect on an employment contract. Indeed, paragraph 141(1)(a)
has no reference to a contract with a third party; it is simply illegal to apply for a second SIN.
[13] Paragraph 141(1)(b), however, does address the real possibility of an employee deceiving
an employer. Does this then imply that if an employee does so deceive an employer in
contravention of paragraph 141(1)(b) that the ensuing contract is illegal? The thrust of the
prohibition is not to keep Mr. Garland from working. Neither can it be to preclude another
Canadian from gaining employment, least of all the deceased Matthew Hartley. Mr. Garland, as a
Canadian citizen, could and did work. Nothing in any legislation made it unlawful for him to do
so. What he could not do was deceive or defraud an employer into thinking he was someone else
by the use of a false SIN. I come full circle, falling back on common-law principles to find that
such deceit would only render the contract voidable. So, the implication, if any, of the statutory
prohibition in paragraph 141(1)(b) on the legality of an employment contract is that it is
voidable, but not illegal.
[14] If I am wrong in this view of the impact of the Employment Insurance Act prohibitions on
the contract itself, and it is illegal, then I look to Justice Robertson's principled approach in the
Still case. I find that an illegal contract is not always void ab initio. The Federal Court of Appeal
in Still stated:
56 Having regard to objects of the Unemployment Insurance Act, the fact that the applicant
is a legal immigrant to this country and that she acted in good faith, I am not prepared to
conclude that she is disentitled to unemployment insurance benefits on the ground of illegality. I
recognize that the object of the statutory prohibition is a compelling one, but that in the
circumstances of this case the penalty imposed is disproportionate to the breach. Allowing the
applicant to claim benefits would not invite people to come to Canada and work illegally. ...
57 Undoubtedly, there will be a few who would prefer to see the classical model of the
illegality doctrine applied to the issue at hand. Admittedly, that approach promotes certainty in
the law and ease of administration, at least for the Unemployment Insurance Commission. But a
uniform approach, while convenient, carries with it the risk of undue rigidity. There are
occasions, and this is one, where certainty must give way to flexibility, as Lord Mansfield would
surely agree. ...
[15] In the more recent Supreme Court of Canada case of Transport North American Express
Inc. v. New Solutions Financial Corp.,[4] the majority had this to say on the doctrine of
illegality:
40 Thus, the appropriate approach is to vest the greatest possible amount of remedial
discretion in judges in courts of first instance. The spectrum of available remedies runs from a
court holding contracts in violation of s. 347 void ab initio, in the most egregious and abusive
cases, according to the criteria identified in Thomson, supra, to notional severance. In the
determination of where along the spectrum a particular contract lies, the considerations identified
in Thomson by Blair J.A. should be referred to and analysed carefully. Although Blair J.A. was
considering the desirability of severing illegal interest from principal, the same factors are
helpful in determining whether to reduce illegal interest to a legal level.
There are circumstances before me that move me along the spectrum of possible remedies, as
alluded to by the Supreme Court of Canada, away from finding the contract void ab initio.
Firstly, the legislation itself. What Mr. Garland did was wrong, but the employment insurance
legislation specifically provides for the consequences of such wrongness. And, although it was
not made clear in any detail at trial as to the extent of Mr. Garland's penalties as they pertained
specifically to the employment insurance legislation, it was clear that he went to jail upon
pleading guilty to offences in connection with the assumed identity. A denial of benefits is not a
further pecuniary penalty that he should suffer. This seems entirely disproportionate to the
offence, for which he has already paid the price.
[16] Secondly, I do not classify Mr. Garland's actions as egregious and abusive, as they pertain
to the employment contract itself. I am mindful of Mr. Garland's state of health. His attention
deficient disorder contributed to some muddled thinking. His reliance on the false SIN was to
escape the reach of the RCMP. As he acknowledged, it was not a bright idea. But, vis--vis his
employment with Can Test, the employer got what it sought - someone who could perform the
work, and did so for a period of four years, four years during which both employer and employee
paid into the employment insurance program.
[17] The Supreme Court of Canada in Transport North American Express Inc.,[5] though
dealing with the issue of severance of an illegal portion of a contract, went on to state:
42 As outlined above, in Thomson, Blair J.A. identified four considerations relevant to the
determination of whether public policy ought to allow an otherwise illegal agreement to be
partially enforced rather than being declared void ab initio in the face of illegality in the contract:
1. whether the purpose or policy of s. 347 would be subverted by severance;
2. whether the parties entered into the agreement for an illegal purpose or with an evil
intention;
3. the relative bargaining positions of the parties and their conduct in reaching the
agreement;
4. the potential for the debtor to enjoy an unjustified windfall.
Applying those factors to the case before me I find:
(i) the purpose of section 141 of the Employment Insurance Act is not subverted by
finding the contract is voidable rather than void ab initio;
(ii) while Mr. Garland assumed the name to avoid detection, he did not enter the
employment agreement with any evil intention - he simply needed to work in a job for which he
was qualified;
(iii) Can Test and Mr. Garland's bargaining positions were in no way impacted by the
assumed identity; and
(iv) this is not a question of any unjustified windfall. Mr. Garland could have worked
under his own name. He gained no additional earnings from Can Test by use of an assumed
name.
[18] Mr. Garland contravened the employment insurance legislation and paid the price. He
also worked for four years doing what he was supposed to do, actually increasing his job
responsibilities. This troubled man should not be precluded from receiving benefits from a
program into which he and his employer paid on the basis of the illegality of the contract. I
recognize the public policy for the classical approach to the illegality of contract principle that no
Court should help someone who bases his cause on an illegal act. However, the modern doctrine
allows a trial judge to exercise discretion in weighing the public's interest versus the individual's
interest. I exercise that discretion in this case in favour of Mr. Garland by finding his contract of
employment with Can Test was not void ab initio but was voidable, and as such was a legitimate
contract of service.
[19] The appeals are allowed and the decisions vacated on the basis that Mr. Garland was
engaged under a valid contract of service from October 16, 1996 to October 17, 1997.
Signed at Ottawa, Canada, this 3rd day of March, 2005.
"CampbellJ. Miller"
Miller J.


CITATION: 2005TCC176
COURT FILE NO.: 2004-3281(CPP), 2004-3282(EI)
STYLE OF CAUSE: Douglas R. Garland and
The Minister of National Revenue
PLACE OF HEARING: Calgary, Alberta
DATE OF HEARING: February 11, 2005
REASONS FOR JUDGMENT BY: The Honourable Justice Campbell J. Miller
DATE OF JUDGMENT: March 3, 2005
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Scott McDougall
COUNSEL OF RECORD:
For the Appellant:
Name: N/A
Firm: N/A
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada



[1] 141(1) No person
(a) who has been assigned a Social Insurance Number shall knowingly make an application
to be again assigned a Social Insurance Number, whether the person gives information that is the
same as or different from that contained in their previous application on which the Social
Insurance Number had been assigned;
(b) shall, with intent to defraud or deceive any person, present, loan or use a Social
Insurance Number or Social Insurance Number card;
[2] 1997 6379 (FCA), [1998] 1 F.C. 549.
[3] [1927] A.C. 481 at page 501.
[4] 2004 SCC 7 , [2004] 1 S.C.R. 249.
[5] supra.