Date: 20090313
Docket: A-351-08
Citation: 2009
FCA 68
CORAM: DESJARDINS
J.A.
LÉTOURNEAU
J.A.
TRUDEL J.A.
BETWEEN:
THE ATTORNEY GENERAL OF CANADA
Applicant
and
ELLEN L. MASON
Respondent
REASONS FOR JUDGMENT
DESJARDINS J.A.
[1]
This
is an application for judicial review of the decision of an Umpire (R.C.
Stevenson) which allowed an appeal by the respondent from a decision of the
Board of Referees (the Board).
[2]
The
Board unanimously upheld a determination of the Canada Employment Insurance
Commission (the Commission) to allocate earnings which the respondent declared
on her 2002 and 2003 income tax returns as self-employment income for the
taxation years 2002 and 2003.
[3]
The
respondent worked at Vida Wellness Spa in Vancouver from February 18, 2002 to August 6, 2002. On August 12, 2002 she applied
for unemployment insurance benefits. She received benefits from August 11, 2002 to February 8, 2003.
[4]
In
2006, through the earnings match program, the Commission learned that the
respondent had declared self-employment income on her income tax returns for
the taxation years 2002 and 2003. The respondent did not declare any of her
work or earnings during the time she received unemployment insurance benefits.
[5]
In
May 2006, the Commission wrote a letter to the respondent requesting copies of
her tax returns for 2002 and 2003 and other documents relating to her business
income. In June 2006, the Commission contacted the respondent to request any
records she had of her income and expenses. The respondent indicated that she
only had her tax returns but that she would try to obtain further records.
[6]
On
June 14, 2006 the respondent wrote a letter to the Commission providing copies
of her 2002 and 2003 tax returns. She did not provide other records.
[7]
On
her 2002 tax return, the respondent reported gross business income of $19,630
less business expenses of $25,128.21 (including capital cost allowance of
$146.34) for a net loss of $5,498.22. On her 2003 tax return, the respondent
reported gross business income of $30,621.16 less expenses of $7,085.81
(including capital cost allowance of $250.04) for a net income of $11,530.55.
[8]
The
respondent claimed that the business income she reported in 2002 and 2003 consisted
of residual payments of commission or their equivalent from USANA, a direct
marketing network she was involved in prior to her claim for benefits. The
respondent did not provide any supporting documentary evidence from her own
records, from USANA or from the accountants who prepared her tax returns.
[9]
The
Commission concluded that the business income from USANA constituted earnings
pursuant to section 35 of the Employment Insurance Regulations, (SOR/96-332) (the
Regulations), and allocated the money under subsection 36(6) of the
Regulations, which pertains to self-employment income. Since the respondent did
not provide any particulars as to when the payments were received, the Commission
allocated the amounts reported as annual income in 2002 and 2003 over the 52
weeks of each year in dispute, and, since the respondent did not provide any
specifics, it made a general allowance of 25% of the gross business income for
operating expenses.
[10]
The
Commission allocated $14,722 of the 2002 income at $283 weekly and $22,966 of
the 2003 income at $442 weekly. This allocation resulted in an overpayment of
$2,146.
[11]
The
respondent appealed the Commission’s decision.
[12]
The
Umpire allowed the appeal on the basis of a passage from the Commission’s
representations to the Board which he assumed was a concession from the
Commission. The Umpire stated at page 4 of his decision:
If, in fact,
the business income received and reported by Ms. Mason in 2002 and 2003 was
generated by service performed, or arose from transactions that occurred,
before 2002 it was not subject to allocations during those years. In its
representations to the Board of Referees the Commission said Ms. Mason
“received monies without having worked.” I read that as a concession
that the monies were not generated by services or transactions during the time
Ms. Mason was receiving unemployment benefits. On that basis her appeal should
be allowed.
[Emphasis
added.]
[13]
The
Umpire added a provisional alternative that if the Commission did not so
concede, the respondent had not discharged the onus on her to prove that
services were not performed or transactions did not occur during 2002 and 2003.
[14]
With
respect to the expenses deducted by the respondent and the corresponding
allocation of earnings by the Commission, he then stated at page 4 of his
decision:
The Board of
Referees did not consider whether the Commission was correct when it decided
that the allocation should be based on 75% of the gross income Ms. Mason
reported. It
is my view that if the Commission accepts the gross figure for self-employment
income on an income tax return the onus is on the Commission to prove that the
amounts claimed for expenses are not legitimate rather than on the claimant to
prove their validity or accuracy. See my decision in CUB 67641A.
The Board of
Referees erred in law when it failed to consider and apply subsection 35(10) of
the Employment Insurance Regulations. As Ms. Mason had a net
business income loss in 2002 there were no earnings to be allocated during that
year. In 2003 her net income, before deducting capital cost allowance, was
$11,530.55 or $221.74 per week. One-half of that amount, i.e. $110.87 should
have been allocated to the week of December 29, 2002 and $221.74 to each of the
weeks of January 5, 12, 19, 26 and February 2, 2003. Provisionally, therefore,
the matter should be remitted to the Commission to adjust the allocation and
the resulting overpayment.
[Emphasis
added.]
[15]
The
passage from the Commission’s representations to the Board, which the Umpire
interpreted as a concession, reads as follows:
Sums received
from an employer are presumed to be earnings and must therefore be allocated
unless the amount falls within an exception in subsection 35(7) of the
Regulations or the sums do not arise from employment. In the present case,
the claimant received monies without having worked in the form of commissions
or residuals from direct marketing. These monies are earnings to be allocated
to the weeks of the transactions when known per regulation 36(19)(b).
Otherwise, it the Commission may seek to allocate the period of earnings over
the tax year where self employment earnings were declared per section 36(6)
which was done in this case.
[Emphasis
added.]
[16]
There
is no evidence on the record, in the Board’s decision or in the Umpire’s
decision which suggests that the Commission or the applicant made a concession
before the Board or the Umpire. The possible existence of a concession was made
by the Umpire on his own initiative. It had not been raised by the parties at
the proceedings. Consequently, they did not have the opportunity to address
this issue in their submissions.
[17]
In
doing as he did, the Umpire breached the rule of procedural fairness within the
meaning of subsection 18.1(4)(b) of the Federal Courts Act (the Act). He
also ignored the ruling of this Court in Attorney General of Canada v.
Badwal, [1998] F.C.J. No. 1697 (F.C.A.) according to which an Umpire is not
and cannot be seized of an argument unless it had been raised before the Board
(See also Attorney General of Canada v. Garg, 2004 FCA 410).
[18]
This
breach in itself warrants the intervention of this Court.
[19]
But,
as mentioned above, the Umpire took the unusual step of making a provisional alternative,
namely, that if a concession had not been made by the applicant, then the
respondent had failed to meet her burden of proof. His finding on this point is
in harmony with section 48 of the Employment Insurance Act (S.C. 1996,
c. 23), which reads:
|
Claim
Procedure
Claim
required
48.
(1) No benefit period shall be established
for a person unless the person makes an initial claim for benefits in
accordance with section 50 and the regulations and proves that the person is
qualified to receive benefits.
Information required
(2)
No benefit period shall be established unless the claimant supplies
information in the form and manner directed by the Commission, giving the
claimant’s employment circumstances and the circumstances pertaining to any
interruption of earnings, and such other information as the Commission may
require.
Notification
(3)
On receiving an initial claim for benefits, the Commission shall decide
whether the claimant is qualified to receive benefits and notify the claimant
of its decision.
|
Procédure de
présentation des demandes
Nécessité
de formuler une demande
48.
(1) Une personne ne peut faire établir une période de prestations à son
profit à moins qu’elle n’ait présenté une demande initiale de prestations conformément
à l’article 50 et aux règlements et qu’elle n’ait prouvé qu’elle remplit les
conditions requises pour recevoir des prestations.
Renseignements
requis
(2)
Aucune période de prestations ne peut être établie à moins que le prestataire
n’ait fourni, sous la forme et de la manière fixées par la Commission, des
précisions sur son emploi et sur la raison de tout arrêt de rémunération,
ainsi que tout autre renseignement que peut exiger la Commission.
Notification
(3)
Sur réception d’une demande initiale de prestations, la Commission décide si
le prestataire remplit ou non les conditions requises pour recevoir des
prestations et lui notifie sa décision.
|
[20]
Since
the respondent did not provide supporting evidence which would have indicated
the dates of these transactions, the Commission and the Board could reasonably
infer that they were earnings following transactions which occurred during the
benefit period 2002 and 2003 as per subsection 36(6) of the Regulations, which
reads:
|
(6) The
earnings of a claimant who is self-employed in employment other than farming,
or the earnings of a claimant that are from participation in profits or
commissions, shall be allocated to the week in which the services that
gave rise to those earnings are performed and, where the earnings arise from
a transaction, they shall be allocated to the week in which the transaction
occurred.
|
(6) La
rémunération du prestataire qui est un travailleur indépendant exerçant un
emploi non relié aux travaux agricoles ou la rémunération du prestataire qui
provient de sa participation aux bénéfices ou de commissions est répartie
sur la semaine où ont été fournis les services qui y ont donné lieu ou, si la
rémunération résulte d’une opération, sur la semaine où l’opération a eu
lieu.
|
[Emphasis
added.]
[21]
The said earnings
will therefore be allocated pursuant to subsection 36(6) of the Regulations.
[22]
With
respect to the calculation and allocation of the earnings, the applicant filed
with the Court the following consent to judgment on behalf of the Commission:
a. The
Employment Insurance Commission (the “Commission”) agrees with the Umpire’s
Provisional Alternative in CUB 68737A.
b. The
Commission agrees with the Umpire’s calculation of the earnings to be allocated
under sections 35 and 36 of the Employment Insurance Regulations.
c. For 2002, no
earnings should be allocated during that year, based on the Respondent’s
expenses.
d. For 2003,
earnings should be allocated based on the Respondent’s net income for that year
(after deduction for expenses) = $11,530.55 or $221.74 per week.
e. As noted by
the Umpire, one-half of that amount, i.e. $110.87 should be allocated to the
week of December 29, 2002 and $221.74 to each weeks of January 5, 12. 19 and 26
and February 2, 2003.
[23]
Consequently,
I would allow this application for judicial review, I would set aside the
decision of the Umpire and I would refer the matter back to the Chief Umpire or
his designate for a redetermination on the basis that the earnings were
received from transactions which occurred during the benefit period 2002 and
2003 and that the earnings shall be calculated and allocated in accordance with
the above consent to judgment.
[24]
I
would allow no costs since the applicant seeks none.
"Alice
Desjardins"
“I
agree.
Gilles Létourneau J.A.”
“I
agree.
Johanne
Trudel J.A.”
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