Desjardins v. Canada (Attorney General), 2004 FC 600

                                                                                                                                  Date: 20040423

                                                                                                                             Docket: T-1074-02

Citation: 2004 FC 600

OTTAWA, ONTARIO, THE 23rd DAY OF APRIL 2004

PRESENT:      THE HONOURABLE MR. JUSTICE MARTINEAU

BETWEEN:

RICHARD DESJARDINS

Applicant

- and -

ATTORNEY GENERAL OF CANADA, representing the

EMPLOYMENT INSURANCE COMMISSION OF CANADA -

HUMAN RESOURCES DEVELOPMENT CANADA

Respondent

REASONS FOR ORDER AND ORDER

[1]         On May 14, 2002, the Employment Insurance Commission of Canada (the Commission) formally requisitioned the applicant's current employer to pay the Receiver General of Canada 30% of the applicant's net income to be debited from his salary (the garnishment). It was indicated at the time that the applicant's debt amounted to $20,578.25 (the amount claimed). The issue in this case is whether the proceedings for recovery of the amount claimed, including the garnishment, were validly taken by the Commission; the applicant challenges their validity.

[2]         The respondent submits that the recovery proceedings were and remain valid until the full payment in satisfaction of the amount claimed. The respondent explains that this amount corresponds to the balance of the applicant's debt, which is composed of the following items:

(a)         $11,808.00 (the disputed amount), which corresponds to the overpayment of benefits that were paid by the Commission to the applicant beginning October 4, 1993, (the first period); and

(b)         $7,584.00, which corresponds to the overpayment of benefits that were paid by the Commission to the applicant beginning November 21, 1994, (the second period), and $3,160.00, which corresponds to the penalty imposed by the Commission on the applicant for false statements during the second period (as reduced on September 7, 2000, by the Board of Referees pursuant to the applicant's appeal); the total of the latter two amounts comes to $10,744.00 (the undisputed amount).

[3]         The garnishment was carried out under subsections 126(4) and (5) of the Employment Insurance Act, S.C. 1996, c. 23. These provisions read:

[4]         The applicant concedes that his debt could include any balance outstanding on the undisputed amount, an amount that he has in fact paid as a result of the recovery proceedings. But he submits that the claim addressed to the disputed amount is out of time and that the Commission is refusing in this respect to comply with the Board of Referees' decision in his favour. Through this application for judicial review, he is asking this Court to declare that the garnishment for the excess over the undisputed amount is contrary to law, and to order the repayment of any amount that has been collected in excess of the undisputed amount.

[5]         The background to this claim may be summarized as follows.

[6]         On January 10, 1997, the Commission decided to reconsider the applicant's claims for benefit for the two aforementioned periods, and at the same time it decided to impose penalties for false and misleading statements. In this instance, it is not necessary to discuss the decisions concerning the second period.

[7]         More particularly, in a letter dated January 10, 1997, the Commission notified the applicant that he would have to repay any amount to which he was not entitled and in addition pay a penalty of $5,865.00. The Commission's decision reads as follows:

[translation]

We have examined your claim for benefit and it is our opinion that you have knowingly made 17 false or misleading statements. Contrary to what you had stated, we have learned that you were working for yourself.

Consequently, you will have to repay any amount to which you were not entitled and in addition pay a penalty of $5,865.00. This penalty is imposed because, in the Commission's opinion, you have knowingly made false or misleading statements. No cheque will be sent to you before the amount owing is fully repaid.

Have you made other false or misleading statements in the past? If so, you will avoid penalties or prosecution if you so inform us promptly, unless an investigation is already under way. Please note that if we discover other false statements, this could result in heavier fines or prosecution.

If you have some additional information that could alter this decision or if you wish further particulars, please contact us. For faster service, please ensure that you provide us with your social insurance number.

If you do not agree with our decision, which is based on the Unemployment Insurance Act, you have the right to appeal within 30 days following receipt of this notice. If you wish to appeal it, please follow the directions attached hereto.

[My emphasis]

[8]         As this notice indicates, the imposition of the penalty of $5,865.00 and the demand for repayment of the overpayment made to the applicant are based on the Commission's finding that the applicant had knowingly made 17 false or misleading statements.

[9]         In separate decisions issued on the same day, the Commission also notified the applicant:

(a)         that it had cancelled his claim for benefit for the first period, as Revenue Canada had decided that his employment was not insurable (on January 15, 1999, the Revenue Canada decision was upheld by the Tax Court of Canada; on March 20, 2000, an application for judicial review of the latter decision was dismissed by the Federal Court of Appeal);

(b)         that it could not pay him any benefits for the first period because he controlled his hours of work and he had not proved his availability.

[10]       On February 6, 1997, the applicant filed an appeal from the decisions made by the Commission.

[11]       On September 7, 2000, the Board of Referees allowed the applicant's appeal and rescinded "the decision" of the Commission. The Board of Referees' decision reads as follows:

[translation]

At issue here is whether the claimant knowingly made 17 false statements and whether a penalty of $5,865.00 should be imposed on him.

The Commission has the burden of proof (CUB 23647).

The Commission has not produced any proof of the statements it claims are false (exhibit 12.2, 1st paragraph). The Board of Referees must conclude that there is no false statement. Furthermore, absent any false statement, this case is out of time (s. 33 E.I. Act).

The Board of Referees unanimously allows the appeal and rescinds the decision of the Commission.                                                                          [My emphasis]

[12]       This decision of the Board of Referees was upheld by an umpire on July 6, 2001. There was no application for judicial review from the umpire's decision, so the Board of Referees' decision is final and is binding on the parties. Accordingly, the applicant submits that there is no legal basis for the recovery proceedings in relation to the first period. On the one hand, the decision of January 10, 1997, was rescinded by the Board of Referees. On the other hand, any claim covering the disputed amount is out of time. And that is what was decided in a final decision by the Board of Referees dated September 7, 2000.

[13]       The respondent challenges the interpretation that the applicant gives to the decision of the Board of Referees, which, it says, was limited to setting aside the penalty of $5,865.00. The respondent is also of the opinion that the comment that "[the] case is out of time" is obiter dictum. The respondent further argues that in the wake of the dismissal of the applicant's appeal from the negative decision of Revenue Canada, he voluntarily abandoned his appeal from the Commission's decisions other than the appeal against the imposition of a penalty of $5,865.00.

[14]       The applicant's submissions seem to me to be well-founded.

[15]       The Board of Referees clearly rescinded the decision of January 10, 1997, reported in paragraph 7 of these reasons. And the claim for repayment of the overpayment contained in that decision is based on the premise that the applicant (knowingly) made 17 false or misleading statements, which is clearly not the case in this instance. By allowing the applicant's appeal and rescinding "the decision" of the Commission, therefore, the Board of Referees rescinded all of the measures contained in that decision, which includes not only the imposition of a penalty of $5,865.00 but also the demand for repayment of any overpayment claimed from the applicant for the first period. Also, the fact that the applicant has apparently abandoned the appeal he had filed against the other decisions of the Commission, as the respondent submits, is not determinative in my opinion.

[16]       Whatever the case, no evidence of the abandonment alleged by the respondent was placed in the Court file, as required by the rules of this Court. I note as well that this is hearsay evidence, which in this case is not a sufficient guarantee of reliability. On the other hand, in the present state of the record, I am unable to determine whether the Board of Referees did in fact take note of the alleged abandonment and act on it. In this case, assuming the position that is most favourable to the respondent, it could not be anything more than a partial abandonment, and this cannot be determined with certainty. The respondent had the onus of adducing the best evidence of the alleged abandonment. But the conflicting documentation to which the Court was referred is subject to divergent interpretations. In this regard, my preference is to limit myself to the content of the letter dated June 16, 2000, sent by the applicant's counsel to the Commission, which states that he does not wish to withdraw his appeal and that he wishes to continue the proceedings before the Board of Referees.

[17]       To the extent that there was a false statement, the Commission did in fact have a period of reconsideration of 72 months, instead of the usual period of 36 months. Section 43 of the Unemployment Insurance Act, R.S.C. 1985, c. U-1 (the UIA), which then applied, reads:

[18]       However, the Commission's power to impose a penalty where it thinks the claimant has knowingly made a false or misleading statement is given to it under subsection 33(1) of the UIA, in which case the penalty imposed on the claimant must be imposed within the 36-month period under subsection 33(4) of the UIA. The latter provisions are as follows:

[19]       There are some significant differences between subsection 33(1) of the UIA and subsection 43(6) of the UIA. For example, subsection 43(6) simply refers to a false or misleading statement, while subsection 33(1) requires that the person making the statement "knew" it was false or misleading. On the other hand, if the Commission decides not to exercise the discretion it has under subsection 33(1) to impose a penalty, there is nothing to prevent it from reconsidering a false or misleading statement within the time prescribed in subsection 43(6) of the UIA: Canada (Attorney General) v. Pilote, [1998] F.C.J. No. 1923 (F.C.A.) (QL).

[20]       Furthermore, sections 33 and 43 of the UIA must be read in conjunction with section 35 of that Act, which provides:

[21]       Thus, the amount of the penalty and/or overcharge becomes a liquid debt payable from the time when the claimant is legally notified of the exact amount to be repaid, in which case the period for recovery of this debt is limited to 72 months under subsection 35(4) of the UIA: Canada (Attorney General) v. Laforest, [1988] F.C.J. No. 546 (F.C.A.) (QL); and Brière v. Canada (Employment and Immigration Commission), [1988] F.C.J. No. 551, at para. 67 (F.C.A.) (QL). I note here that no evidence was submitted of the date at which the Commission legally notified the applicant that the disputed amount had become payable (the decisions of January 10, 1997, do not specify the amount of the overpayment claimed from the applicant).

[22]       This being said, when the normal 36-month period for reconsideration under subsection 43(1) of the UIA has expired and the Commission specifically wishes to avail itself of the extension of time established in subsection 43(6) of the UIA, where its decision is appealed, the Commission must demonstrate to the Board of Referees that the exception provided in that provision applies. In this regard, I am of the opinion that the Commission must have more than a mere suspicion that there was a false or misleading statement. Indeed, the Commission cannot act arbitrarily without any evidence before it or on the basis of erroneous or unverified information. Otherwise, subsection 43(1) of the UIA would be of no effect, which is clearly contrary to the intention expressed by Parliament that the normal period for reconsideration is 36 months and not 72 months.

[23]       However, as it was pointed out earlier, the Board of Referees made a final decision that there had not been any false statement in relation to the first period. On the one hand, the Commission could not impose a penalty of $5,865.00 on the applicant, for the two conditions provided in subsection 33(1) of the UIA (false or misleading nature of the statement and mens rea) were not fulfilled in this case. On the other hand, the condition under subsection 43(6) of the UIA (false or misleading nature) was not fulfilled either. Consequently, the reconsideration of the claim for benefit necessarily had to be conducted within the usual period of 36 months under subsection 43(1) of the UIA. But this period had expired when, in January 1997, the Commission reconsidered the claim for benefit for the first period. The file on the claim was therefore out of time. Moreover, the Board of Referees clearly states in its decision: "absent any false statement, this case is out of time (s. 33 E.I. Act)."

[24]       In my opinion, and contrary to the respondent's submission, that was no mere obiter dictum. Nor do I think that the reference in the decision to section 33 of the UIA is determinative. The decision must be read as a whole. We do not require that the members of a Board of Referees be jurists. Their decisions need not have the legal precision of a court judgment. But the comment that "absent any false statement, this case is out of time" is in this case meaningless unless is it linked to the condition in subsection 43(6) of the UIA, which requires a false statement (in fact, under subsection 33(4) of the UIA no penalty may be imposed after 36 months from the date on which the false or misleading statement was made).

[25]       A claimant may, through an application for judicial review, have this Court verify the lawful validity of any recovery proceeding. The Commission must act in accordance with the Act. In this case, the Commission had to comply with the unanimous decision of the Board of Referees that there was no false statement concerning the first period. Also, the file in relation to any claim covering the first period was out of time. Consequently, the Commission cannot take recovery proceedings against the applicant for the purpose of obtaining repayment of the disputed amount. Moreover, according to the uncontradicted evidence in this case, the applicant has fully paid the penalty and repaid the overpayment that were claimed from him by the Commission for the second period. Accordingly, the garnishment cannot be maintained and the applicant is entitled to be repaid any amount that has been collected over and above the undisputed amount. In view of the result, the applicant shall be entitled to costs against the respondent.

ORDER

FOR THESE REASONS, IT IS ORDERED:

1.          The application for judicial review is allowed with costs against the respondent;

2.          The recovery proceedings undertaken by the Commission, including the garnishment, to obtain payment of the disputed amount are invalid, unlawful and contrary to the Act;

3.          The applicant shall be repaid any amount that has been collected over and above the undisputed amount; and

4.          The expressions "garnishment", "disputed amount" and "undisputed amount" used in this order have the same meaning as the meaning attributed to them in paragraphs 1 and 2 of the reasons for order.

                        "Luc Martineau"

                                Judge

Certified true translation

Suzanne Gauthier, C.Tr., LL.L.

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:                                                        T-1074-02

STYLE:                                                            RICHARD DESJARDINS v.

ATTORNEY GENERAL OF CANADA

PLACE OF HEARING:                                  QUÉBEC, QUEBEC

DATE OF HEARING:                                    MARCH 9, 2004

REASONS FOR ORDER

AND ORDER:                                                THE HONOURABLE MR. JUSTICE MARTINEAU

DATED:                                                          APRIL 23, 2004

APPEARANCES:

DENIS GINGRAS                                                                   FOR THE APPLICANT

PAUL DESCHÊNES                                                                FOR THE RESPONDENT

SOLICITORS OF RECORD:

GINGRAS, VALLERAND, BARMA,

LAROCHE, AMYOT

QUÉBEC, QUEBEC                                                                FOR THE APPLICANT

MORRIS ROSENBERG

DEPUTY ATTORNEY GENERAL OF CANADA                   FOR THE RESPONDENT