Date: 20220603

Dockets: T-835-21

T-845-21

Citation: 2022 FC 817

[ENGLISH TRANSLATION]

Ottawa, Ontario, June 3, 2022

PRESENT: Mr. Justice Pamel

BETWEEN:

NICK MALTAIS

Applicant

and

THE ATTORNEY GENERAL OF CANADA

Respondent

JUDGMENT AND REASONS

I. Overview

[1] The applicant, Nick Maltais, is an octogenarian working as a real estate broker who received the Canada Emergency Response Benefit [CERB] and the Canadian Recovery Benefit [CRB] in 2020. Mr. Maltais was reviewed by the Canada Revenue Agency [CRA], and a CRA benefits processing officer [officer] concluded on December 15, 2020, that Mr. Maltais was ineligible for the CERB and the CRB and that he should repay the payments he had already received. Following a second review of his CERB and CRB applications, the CRA confirmed Mr. Maltais’s ineligibility on April 16, 2021.

[2] Mr. Maltais has made two applications for judicial review of the April 16, 2021, decisions as to his ineligibility for the CERB (T-835-21) and the CRB (T-845-21). I have heard these applications together and this decision applies to both applications for judicial review. Mr. Maltais argues that he meets the various eligibility criteria for the CERB and the CRB and that CRA officials did not respect Parliament’s intent by applying the eligibility criteria too strictly. He adds that the CRA failed to observe the principles of procedural fairness by not giving him the opportunity to speak with officers about the decisions made in his regard.

[3] In my opinion, the CRA’s decisions are reasonable and the CRA has not failed to observe the principles of procedural fairness. Accordingly, and for the reasons that follow, I dismiss the applications.

II. Background

[4] In 1997, Mr. Maltais purchased a saw manufacturing company that was forced to close in the wake of the softwood lumber dispute of the 2000s; Mr. Maltais had to assume the total loss of his capital, approximately $400,000, in the form of a debt owed to directors. Subsequently, in 2009, the company, now known as Groupe Conseil Immobilier Québec Inc [the company], began operating as a real estate agency with four real estate brokers. Over the years, and when the agency’s revenues allowed it, Mr. Maltais withdrew from the company amounts as partial refunds of past losses that he could carry forward for 20 years and that were owed to him as non-taxable income, thereby reducing his current losses. In addition, Mr. Maltais states that he had to perform brokerage contracts himself to make up for the clearly insufficient income from the 10% sales commission he received on transactions performed by his agency’s real estate brokers.

[5] Mr. Maltais reported no work-related income for the 2016, 2017, and 2018 tax years, having been satisfied that his corporate income was being reported as reimbursed losses rather than taxable salary. However, according to his tax return filed on June 30, 2020, Mr. Maltais received $6,000 in income for 2019, having paid himself $500 per month in three $2,000 payments, for a total of $6,000 for the year.

[6] Given his age (he was 81 at the time), the COVID-19 pandemic in 2020 was a concern for Mr. Maltais, who did not leave his home for fear of becoming infected. As a result, Mr. Maltais was no longer able to continue his duties as a real estate broker, which largely consists of showing properties to potential buyers, and so he stopped taking brokerage contracts. Taking advantage of the lockdown, Mr. Maltais took a refresher course offered to real estate brokers to obtain his mortgage broker’s license.

[7] Following the government’s announcement of emergency assistance for workers directly affected by the COVID-19 pandemic, Mr. Maltais applied for the CERB on April 8, 2020, and received payments for the seven four-week periods from March 15, 2020, through September 26, 2020, for a total of $14,000. Mr. Maltais also submitted an application to obtain the CRB in October 2020 for the two two-week periods from September 27, 2020, through October 24, 2020, for a total of $2,000. Mr. Maltais claims that although he applied for the CRB, he did not actually receive any payments. The Minister challenges these statements, but whether or not Mr. Maltais did receive any CRB payments is not determinative of the applications for judicial review.

[8] On November 5, 2020, a CRA officer began a review of Mr. Maltais’s CERB and CRB applications. In a telephone conversation between the officer and Mr. Maltais, Mr. Maltais stated that he had been working as a real estate broker at the beginning of 2020 and continued to work thereafter, but that his company’s sales had declined significantly. These are the officer’s notes from the telephone conversation:

[translation]

Discussion: The [applicant] stated that he was working in early 2020, he is a real estate broker. He owns a small real estate agency; Groupe Conseil Immobilier Qc. His work office is at home. He stated that 4 brokers work for his agency. He stated that he is paid about $500.00 per month. I asked him if he has always been paid. He stated that he has. He gets paid when the company makes money, otherwise he was making withdrawals on the company’s losses. He repeated that he reported $6,000.00 in 2019. I told him that he has no other such entries on his other tax returns, even though he says he was paid. He stated that he took it whenever he wanted. In 2020, he continued to work, but sales were down significantly. I asked him about the real estate market. He mentioned that there was a misperception in Quebec City, people were buying, but there were fewer houses for sale.

[9] The officer asked Mr. Maltais to send her his bank statements to show that he had received at least $5,000 from his company in 2019 as well as his bank statements for 2020. The officer called Mr. Maltais back on December 3 and December 9, 2020, to warn him that the documents he had submitted were not sufficient and gave him additional time to send the required documents. On December 12, 2020, the officer confirmed that she had received all the documents and proceeded to analyze his file.

[10] On December 17, 2020, the officer sent two letters to Mr. Maltais notifying him that he was ineligible for the CERB and the CRB because he had not earned at least $5,000 in employment or self-employment income in 2019 (or 2020 for the CRB) or in the 12 months prior to the date of his first application. Here are the officer’s notes dated December 15, 2020, regarding her decision:

[translation]

The [applicant] reported $6,000.00 of income on line 104 of his 2019 return filed in June 2020.

The [applicant] [did] not report any employment-related income in 2018, 2017, 2016.

So, it is not reasonable for the [applicant] to decide to pay himself an amount to qualify for the CERB/CRB. Also, since the [applicant] was not paying himself before, it is not possible to say that he had a drop in income. I should refer the [applicant] to the CEWS [Canada Emergency Wage Subsidy]. Also the [applicant] mentioned that he was paying his brokers before himself and he was not paid in 2020, so that is his personal choice to not pay himself, the company had liquidities during the periods requested.

[11] Essentially, the officer’s decision is based on the fact that Mr. Maltais made a strategic decision to allocate a portion of the funds he derived from his company in 2019 as taxable salary as well as a future partial deduction of his available losses, simply to meet the 2019 income threshold necessary to meet the requirements of the CERB and CRB programs, when in the past he would have allocated these funds only as a refund of pending losses.

[12] On January 4, 2021, Mr. Maltais submitted a request for a second review of his file. On April 16, 2021, another CRA officer sent Mr. Maltais two letters notifying him that he was ineligible for the CERB because he had not ceased working or had his hours reduced as a result of COVID-19 and that he was also ineligible for the CRB because he was not working for a reason other than COVID-19. As a result, the CRA required Mr. Maltais to repay the CERB and CRB payments he had received. The officer detailed the reasoning for his decisions in a report:

[translation]

THE [APPLICANT] SAYS HE WAS UNABLE TO PAY HIMSELF A SALARY IN 2020 BECAUSE OF COVID, BUT HE DID NOT PAY HIMSELF IN THE PREVIOUS YEARS EITHER, SO WE CANNOT SAY IT WAS DUE TO THE PANDEMIC.

THE REAL ESTATE BROKERAGE INDUSTRY DID NOT CEASE DURING THE PANDEMIC.

OFFICIALLY, THE [APPLICANT] WAS NOT WORKING WHEN THE PANDEMIC HIT (LAST SALARY HE PAID HIMSELF WAS IN AUGUST 2019), SO WE CAN’T SAY HE STOPPED WORKING BECAUSE OF COVID. EVEN IF HE PAID SALARIES TO HIS BROKERS AND THAT POSSIBLY HAD AN IMPACT ON THE FACT THAT HE DID NOT PAY HIMSELF A SALARY IN 2020, THAT WAS ULTIMATELY HIS OWN CHOICE, AS AN EMPLOYER, SO HE DID THIS VOLUNTARILY.

[13] On May 16, 2021, Mr. Maltais filed two applications for judicial review of the two April 16, 2021, decisions. His applications seek the following declarations and orders:

1. A declaration that the CRA’s determinations of ineligibility for the CERB and the CRB are patently unreasonable and unenforceable;

2. An order setting aside the CRA’s decisions of April 16, 2021;

3. An order to restore Mr. Maltais to the situation he was in prior to the April 16, 2021, decisions;

4. An order directing the CRA to analyze Mr. Maltais’s file according to the applicable law and the facts of the case;

5. An order directing the CRA to send any future decision in Mr. Maltais’s file, noting the existence of a right of review, if any, and the applicable time limit for appealing the decision; and

6. An order directing the CRA to remit to Mr. Maltais the amounts to which he would be entitled if he made a retroactive application for the CRB.

III. Legislative framework

A. The Canada Emergency Response Benefit

[14] The CERB was established by the Canada Emergency Response Benefit Act, SC 2020, c 5, s 8 [CERBA], assented to on March 25, 2020, to provide financial support to employed and self‑employed workers directly affected by the COVID-19 pandemic. Under subsection 5(1) of the CERBA, the CERB was made available for the period of March 15, 2020, to October 3, 2020. Subsections 6(1) and 6(2) provided the eligibility criteria for receiving the CERB:

[15] Section 2 of the CERBA defines “worker”:

B. The Canada Recovery Benefit

[16] The CRB was introduced by the Canadian Recovery Benefits Act, SC 2020, c 12, s 2 [CRBA], assented to on October 2, 2020, to provide financial assistance to employed and self‑employed workers directly affected by the COVID-19 pandemic and not entitled to Employment Insurance benefits. The CRB was offered for the period from September 27, 2020, to October 23, 2021. Subsection 3(1) of the CRBA provided the eligibility criteria for receiving the CRB, as follows:

IV. Issues

[17] The applications for judicial review raise three issues:

1. Is the new evidence that Mr. Maltais submitted to the Court admissible?

2. Are the April 16, 2021, determinations that Mr. Maltais is ineligible to receive the CERB and the CRB unreasonable?

3. Did the CRA breach the principles of procedural fairness by failing to provide Mr. Maltais with an opportunity to respond to the officer’s concerns?

V. Standard of review

[18] The appropriate standard of review for a review of a CRA officer’s decision is reasonableness (Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 at paras 16–17 [Vavilov]). The Court’s role is to examine the administrative decision maker’s reasoning process and the outcome to determine whether the decision is “based on an internally coherent and rational chain of analysis and . . . is justified in relation to the facts and law that constrain the decision maker” (Vavilov at para 85).

[19] Regarding the issue of procedural fairness, the Court is required to ask “whether the procedure was fair having regard to all of the circumstances”, and the ultimate question is “whether the applicant knew the case to meet and had a full and fair chance to respond” (Canadian Pacific Railway Company v Canada (Attorney General), 2018 FCA 69 at paras 54, 56; Fortier v Canada (Attorney General), 2022 FC 374 at para 15 [Fortier]).

VI. Analysis

A. The new evidence submitted by Mr. Maltais to this Court is not admissible

[20] In support of his applications for judicial review, Mr. Maltais filed two affidavits accompanying the same exhibits that were not submitted to the administrative decision maker as part of the adjudication process. The respondent objects to the admission of these exhibits on the basis that they constitute inadmissible new evidence. The exhibits in question are as follows:

• Schedule 4 (“Corporation Loss Continuity and Application”) to the income tax return of Groupe Conseil Immobilier Québec Inc. for the taxation year ending August 31, 2018, constituting Exhibit “A” to the affidavits submitted by Mr. Maltais;

• The document entitled “Continuité des pertes autres qu’en capital” [non-capital loss continuity] of Groupe Conseil Immobilier Québec Inc., constituting Exhibit “B” to the affidavits submitted by Mr. Maltais;

• The T4A slip for the year 2020 in the name of Mr. Maltais, constituting Exhibit “I” to the affidavits submitted by Mr. Maltais.

[21] It is well known that when an application for judicial review is made to the Court, the Court must limit itself to the evidentiary record before the administrative decision maker. There are three exceptions to this general rule: where the new evidence (1) provides general background that might assist the Court in understanding the issues relevant to the judicial review; (2) is necessary to bring to its attention procedural defects; and (3) highlights the complete absence of evidence before the administrative decision maker (Tsleil-Waututh Nation v Canada (Attorney General), 2017 FCA 128 at paras 97–98). The documents in question were not before the officer who made the April 16, 2021, decisions. Further, Mr. Maltais has not shown me that the new exhibits he attached to his affidavits fall within any of the exceptions set out by the Federal Court of Appeal in Tsleil-Waututh Nation. Accordingly, I will not consider these documents on judicial review of the officer’s decisions. In any event, it seems to me that these documents would have had no bearing on those decisions. First, Mr. Maltais notes in his affidavit that the $2,000 in line 202 of the T4A slip is an amount that the CRA added to his taxable income without first notifying him and discussing it with him. However, line 202 of the T4A is actually the amount he received for the CRB. Secondly, Mr. Maltais explains in his affidavit that for the past several years, when the company’s liquidities have permitted it, he has been using the non-capital losses of his saw manufacturing company to [translation] “pay himself back for the advances” of money he made to the latter company. This information has no impact on Mr. Maltais’s eligibility for the CERB and the CRB.

B. The April 16, 2021, determinations that Mr. Maltais is ineligible to receive the CERB and the CRB are not unreasonable

[22] Mr. Maltais raises the point that the intent of the CERB and the CRB was to provide a flexible program to financially assist all workers affected by the COVID-19 pandemic and that the officers did not respect Parliament’s intent by applying the eligibility criteria too strictly. He adds that the officers did not believe he was working because of his advanced age.

[23] I am not convinced by Mr. Maltais’s arguments. The criteria for obtaining the CERB and the CRB are clearly set out in the CERBA and the CRBA, and the officer assessed Mr. Maltais’s file against these criteria and against the evidence submitted by Mr. Maltais, namely personal and company bank statements, screenshots of a transaction system and copies of cheques. The evidence shows that Mr. Maltais informed the CRA that he did not stop working in 2020, but that he changed the way he worked. Before me, he stated that because of COVID-19, he had to work strictly from home and could not show properties to clients, and that he therefore suffered a reduction in income because of the forced limitation on his ability to make a living.

[24] The problem appears to be that Mr. Maltais decided, for his own reasons, to take funds from the company in prior years, making it difficult, if not impossible, for the CRA to link any change in the way Mr. Maltais worked in 2020 to a reduction in his employment income. After all, the CERB and CRB are supposed to be income support allowances for loss of income for reasons related to COVID-19. If a person cannot link their loss of income to the pandemic, I don’t see how they can qualify for the program. I am not satisfied, on the basis of the evidence provided, that Mr. Maltais, whether employed or self-employed, ceased working for reasons related to COVID-19 and, as a result, did not receive income from employment or self-employment.

[25] It makes perfect sense that when there was money left in the company, Mr. Maltais preferred reimbursing himself for his outstanding debt in the form of non-taxable income rather than using the funds from the corporation to pay himself a salary. When asked about this, he told me that for 2019, he preferred reporting the funds he was taking out of the corporation as “income from employment or self-employment” because he wanted to retain a portion of the losses for future tax purposes. He is certainly free do to this as a small business owner, but it is not possible to then conclude that when he, whether employed or self-employed, ceases working, he is not receiving income from that employment or self-employment because of the arrival of the pandemic. The officer determined that Mr. Maltais was ineligible for the CERB because he did not cease working for reasons related to COVID-19 and that he was ineligible for the CRB because he did not work for reasons other than COVID-19. The officer detailed his reasoning in his report: he noted that, according to Mr. Maltais’s tax returns, Mr. Maltais had not paid himself a salary in previous years (with the exception of 2019) and that he therefore could not conclude that Mr. Maltais had been unable to pay himself a salary for 2020 because of COVID-19. Further, he noted that the real estate brokerage industry did not pause during the pandemic. As the boss of the company, his decision not to pay himself a salary in 2020 had therefore been voluntary, and I see nothing unreasonable in the officer’s decision.

[26] In fact, Mr. Maltais appears to be claiming that any salary he decided to pay himself from the corporation was not supposed to be directly related to his work as a real estate agent. He stated the following in his affidavit filed in support of these applications, clarifying his statement to the CRA that he was not seeking employment: [translation] “When I say I am not seeking employment, it is because I have a job that is not gainful employment, but it is also employment and I could no longer show properties, a significant part of my job”. Before me, Mr. Maltais argued that it is sufficient for him to show a reduction in his work, without necessarily linking that reduction to a loss of income. I do not agree.

[27] The officer’s reasoning, in my view, is coherent and based on the evidence in the record, namely, the tax returns for the years 2016 to 2019 and the bank statements submitted by Mr. Maltais. The burden was on Mr. Maltais to demonstrate the unreasonableness of the CRA’s decisions by persuading the Court that there are sufficiently serious shortcomings in the decisions such that they cannot be said to exhibit the requisite degree of justification, intelligibility and transparency (Vavilov at para 100). Given the evidence on the record and the reasons above, I am not satisfied that he has met his burden.

C. The CRA did not fail to observe the principles of procedural fairness

[28] Although he did not argue this point before me, Mr. Maltais argues in his Notice of Application that the April 16 decisions [translation] “made no reference to the existence of a right of review” and that [translation] “at no time was [he] given the opportunity to discuss [the] decision made, no information was requested of him, and no request based on any analysis was made of him”.

[29] I do not believe that the CRA failed to observe the principles of procedural fairness. First, the letters of April 16, 2021, clearly mention a right of review, stating that if Mr. Maltais disagreed with the outcome of the second review, he could [translation] “apply to the Federal Court for judicial review”, a right that Mr. Maltais availed himself of and which is the subject of these judicial reviews. Second, the ultimate question to be asked is whether Mr. Maltais was heard and had the opportunity to know the case to meet (Fortier at paras 15–16). I am of the view that, unlike the situation in Fortier, Mr. Maltais was given an opportunity to address the CRA’s concerns about his ineligibility for the CERB and the CRB. In Fortier, the applicant was not given an opportunity to explain to the officer conducting the second eligibility review after the officer contacted his employer to obtain the reason for the termination of his employment contract. In this case, Mr. Maltais spoke with the CRA officer who issued the December 15, 2020, decisions on several occasions, the CRA officer asking him to demonstrate that he had received at least $5,000 from his company in 2019 and asking questions about his employment status. Mr. Maltais was also given the opportunity to provide evidence to demonstrate that he met the eligibility requirements. The officer conducting the second review of his applications did not seek any outside evidence to which Mr. Maltais did not have an opportunity to respond.

VII. Conclusion

[30] I dismiss the applications.

 

JUDGMENT in T-835-21 and T-845-21

THE COURT orders that the applications for judicial review are dismissed.

“Peter G. Pamel”

Certified true translation

Johanna Kratz

FEDERAL COURT

SOLICITORS OF RECORD

DOCKETS:		T-835-21 AND T-845-21
STYLE OF CAUSE:		NICK MALTAIS v THE ATTORNEY GENERAL OF CANADA
PLACE OF HEARING:	HEARD VIA VIDEOCONFERENCE
DATE OF HEARING:	APRIL 21, 2022
JUdGMENT AND REASONS:	PAMEL J.
DATED:	JUNE 3, 2022

APPEARANCES:

Nick Maltais	FOR THE APPLICANT (ON HIS OWN BEHALF)
Emmanuel Jilwan	FOR THE RESPONDENT

SOLICITORS OF RECORD:

Attorney General of Canada Montréal, Quebec

FOR THE RESPONDENT