[1] This is an application for judicial review of a decision of a Board of Referees that was affirmed by an Umpire which held the Applicant liable for a penalty under section 38(1)a of the Employment Insurance Act S.C. 1996, c. 23 on the basis that he knowingly made certain representations that were "false or misleading".

[2] There is no dispute about the falsity of the representations he made to the effect that he was not "working" during a time when he was actively attempting to obtain clients to buy insurance. His evidence was that, since he made no money as an insurance salesman and since he felt that he was merely looking for employment or "prospecting" for clients during that time, he could honestly state that he was not "working".

[3] The Board of Referees dismissed his appeal holding that he had violated the section explaining:

"Conclusion: It is the unanimous decision of the Board of Referees to dismiss the appeal of Mr. Mootoo. Although Mr. Mootoo was credible in his explanation of there being no intent to mislead, as in Cub22326 (Statner) the Applicant wrongly answered very simple questions he report to the Commission (Exhibit 2-1). The Applicant explained those incorrect answers as having no intent to deceive or mislead however the Applicant had a legal obligation to educate himself as to the intent of the question. This he did not do. The question was "Did you work". The answer was no. The Board felt that the case of Catherine Gates judgment # A-600-94 supported the penalty that has been assessed as the intent is not relevant."

[Emphasis Added]

[4] The Umpire affirmed this decision stating:

"In this case, the claimant's explanation for giving incorrect answers was that he thought he did not have to report his work trying to sell life insurance as he did not make any money doing so and that his activity was paramount to searching for employment. He stated, and was believed by the Board on that issue, that he had no intent to mislead but had simply not understood that he had to declare his work." ....

"In the present case, the Board made a finding that the claimant had knowingly made a false or misleading declaration as he had incorrectly answered obvious questions. They added that, if these questions, that should be obvious, were not so to the claimant, he should have inquired. This is a finding that is well supported by the jurisprudence."

[Emphasis Added]

[5] In my view, this decision cannot stand. In order to be subject to a penalty under section 38(1)a it is not enough for the representation to be false or misleading; it must be made by the

Applicant with the knowledge that it is false or misleading. In Canada (A.G.) v. Gates, [1995] 3 F.C. 17 (C.A.) and Canada (A.G.) v. Purcell, [1996] 1 F.C. 644 (F.C.A.), this Court made clear that the knowledge of the Applicant concerning the falsity of the offending statement had to be decided on a subjective basis. In Purcell this Court declared:

"The Board must decide on a balance of probabilities that the particular claimant subjectively knew that a false or misleading statement had been made. In other words, the standard is not what the so-called reasonable unemployment insurance claimant would know. Obviously there can be no such person. Linden, J.A. went on to explain at 21:

'In deciding whether there was subjective knowledge by a claimant, however, the Commission or Board may take into account common sense and objective factors. In other words, if a claimant claims to be ignorant of something that the who whole world knows, the fact finder could rightly disbelieve that claimant and find that there was in fact, subjective knowledge, despite the denial. Not to know the obvious; therefore, might properly lead to an inference that the claimant is lying. This does not make the test objective: it does, however, take into account objective matters in coming to a decision on subjective knowledge. If, in the end, the trier of fact is of the view that the claimant really did not know that the representation was false, there is no violation of subsection 33(1).'

In Gates the Court also referred to the jurisprudence developed by Umpires respecting the burden of proof. According to that jurisprudence, the initial onus is on the Commission to prove that a claimant knowingly made a false or misleading statement. Once it appears from the evidence, however, that a claimant has wrongly answered a very simple question or questions on a report card the burden shifts to claimant to explain why the incorrect answers were given."

[6] Where as here the Board of Referees believed that the claimant had no intent to mislead, that is the end of the penalty issue. The requirement that the claimant have subjective knowledge that his statements were false was not met.

[7] When the Board wrote that the Applicant "had a legal obligation to educate himself as to the intent of the question," it erred in law. This statement indicates that the Board was using an objective standard not the subjective one. This error of law is subject to review on a correctness standard (see Budhai v. Canada (A.G.), [2002] F.C.J. No. 1089 (F.C.A.).

[8] As far as the disposition is concerned, it is not necessary to remit the matter for a new hearing, because the Board, in making the finding of fact that the Applicant was "credible" and that there was "no intent to mislead", demonstrated that it did not think that the Applicant knowingly made "false or misleading" representations. The Board believed that the claimant did not subjectively intend to mislead. Hence the basis for the penalty was absent and the decision must be set aside.

[9] The application will be allowed, and the decision of the Umpire will be set aside, and the matter will be remitted to the Chief Umpire to be decided in accordance with these reasons.

"A. M. Linden"

J.A.

"I agree

Marshall Rothstein"

"I agree

B. Malone"

FEDERAL COURT OF APPEAL

Names of Counsel and Solicitors of Record

DOCKET: A-438-02

STYLE OF CAUSE: STEPHEN MOOTOO

Applicant

- and -

THE MINISTER OF HUMAN RESOURCES DEVELOPMENT

Respondent

PLACE OF HEARING: TORONTO, ONTARIO

DATE OF HEARING: MONDAY, MAY 5^th, 2003

REASONS FOR JUDGMENT BY:LINDEN J.A.

CONCURRED IN BY: ROTHSTEIN J.A.

MALONE J.A.

DATED: TUESDAY, MAY 6^th, 2003

DELIVERED AT TORONTO, ONTARIO ON TUESDAY, MAY 6, 2003.

APPEARANCES BY: John McKean

David Little

For the Applicant

Sharon McGovern

For the Respondent

SOLICITORS OF RECORD: Hastings and Prince Edward Legal Services

Barrister and Solicitor

Toronto, Ontario

For the Applicant

Morris Rosenberg

Deputy Attorney General of Canada

For the Respondent

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Mootoo v. Canada (Minister of Human Resources Development), 2003 FCA 206

Citations2003 FCA 206

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2003 FCA 206