CUB 29211

IN THE MATTER of an appeal to an Umpire by the claimant
from a decision by the Board of Referees given at
Sherbrooke, Quebec, on June 18, 1993.

The claimant appeals the decision of the Board of Referees upholding the Commission officer's decision to the effect that she made 18 statements about her earnings that she knew to be false or misleading.

On April 8, 1991, Ms. Dunham filed an initial claim for benefit which took effect on April 21. The Commission subsequently discovered that the claimant had worked for various employers during the course of her benefit period. A verification of the employers' payrolls and the claimant's unemployment insurance report cards revealed that she had not declared any income. When questioned by a Commission officer, Ms. Dunham merely responded that she did not know what had happened.

The Commission determined that the claimant had made 18 statements that she knew to be false or misleading and imposed a penalty of $3,762. The situation also resulted in an overpayment of $5,145.

The claimant appeared before the Board of Referees accompanied by her representative. The representative pointed out to the Board members that the number of false statements was incorrect, since the claimant had declared her earnings for the weeks of January 19 and 26, 1992. The Board agreed to reduce the penalty to $3,553 for the 17 false statements. The appeal was dismissed in all other respects.

Counsel for the claimant appealed the Board of Referees' decision on the ground that the Board had refused to hear his client's testimony, stating that the testimony would change nothing and that, whatever the circumstances in which the false statements had been made, the power to impose penalties is vested only in the Commission. Counsel also argued that the Board was wrong in stating that it had no jurisdiction to review the amount of the penalties imposed.

At the hearing before the Umpire in Sherbrooke on June 28, 1995, counsel confirmed that he was not contesting the overpayment but only the penalty imposed. He submitted two arguments and attacked mainly the discretion conferred on the Commission under section 33 of the Unemployment Insurance Act, which states that the Commission may impose penalties in respect of false or misleading statements. He also attacked the Commission's guidelines for its officers. Joyal J. refers to these guidelines in his decision in CUB 21413:

The Commission's policy when it imposes penalties is to claim 100% of the benefit rate for each infringement committed in the case of a first offence. If the offence is repeated, the penalty imposed is 200% of the benefit rate for each infringement. The claimant had already had a penalty of 100% of the benefit rate imposed on him for offences of which he was informed on July 11, 1990.

One of the two main arguments is that, since the Federal Court of Appeal's recent decision to withdraw our discretion in respect of penalties imposed by the Commission, the result is an administrative decision which is in no way subject to judicial review. This runs directly counter to the principle that any substantive decision made by an administrative tribunal or board must be subject to judicial review.

Counsel for the claimant also submits that Parliament, in drafting the legislation as it did, decided that the penalty could not exceed 300% of the value of the benefits. However, no minimum was imposed; the penalty could therefore be 5% or 10%. When these guidelines are applied, discretion is again removed, creating the risk of error in a decision which should be taken in a judicial manner.

I was referred to the decision by the Federal Court of Appeal in The Attorney General of Canada v. Stephen Smith, dated February 9, 1994. The reasons are very brief. In this case, as in the case before me, the Commission imposed a penalty under subsection 33(1) of the Act. Clearly, in Smith, the Umpire reduced the penalties. Décary J. underlined in subsection 33(1):

... the Commission may not [sic] impose a penalty on that person not greater than an amount equal to three times his weekly rate of benefit.

We would apply, here, the same reasoning as that adopted by this Court with respect to subsection 55(10) [now subsection 41(10)] of the Act. See Attorney General of Canada v. Desjardins [1981] 1 F.C. 220 (F.C.A.); Attorney General of Canada v. Findenigg [1984] 1 F.C. 65 (F.C.A.); Harbour v. Unemployment Insurance Commission (1986), 64 N.R. 267 (F.C.A.).

Counsel argued that the decisions referred to by the Court of Appeal in Smith, namely Desjardins, Findenigg and Harbour, related to subsection 41(10) of the Act.

Desjardins refers to a situation in which the Commission had decided that the claimant was not entitled to the benefits she was claiming. At page 221, the Court wrote:

In so deciding, the umpire appears to have committed an error of law. The extraordinary power referred to in s 55(10) is conferred only on the Commission, which may exercise it when, "in its opinion", the circumstances warrant. The umpire therefore exceeded his jurisdiction when he exercised this power himself because, in his view, the Commission should have exercised it.

The same theme is restated in Findennig in which Thurlow J., writing for the Court, expressed the following at page 70:

... Further, as the Board could not exercise the authority of the Commission under subsection 55(10), it should have referred the matter back to the Commission to carry out its function under that subsection.

In Harbour, the same theme is again restated. Reference is again made to subsection 55(10) [now 41(10)] in this case in which the claimant had not submitted his application on time and it was determined that the Commission had refused to exercise its discretion by waiving a condition of entitlement.

Counsel for the claimant acknowledged to me that he was convinced that the Court of Appeal, in interpreting the discretionary power conferred on the Commission under section 33, and in comparing it to the same discretionary power conferred under subsection 41(10), did not sufficiently analyze the matter. Under subsection 41(10), the Commission is granted discretion in situations where claimants do not qualify for benefits because they do not meet one of the qualifying conditions; the Commission has the discretion to waive or vary the conditions and grant benefits. This is a discretionary power that the Commission exercises for the benefit of the claimant. However, the discretionary power conferred by section 33 involves the imposition of a penalty which is in no way subject to judicial review. There is an enormous difference between a privilege that can be granted and a penalty that is imposed for which there is no remedy available to the claimant. It seems unwarranted for a Commission officer to be able to decide unilaterally on the rate of the penalty, whether it be 100%, 200% or 300%, since that decision is not subject to judicial review.

Counsel then returned to the issue of the guidelines governing the rate of penalties, that is 100%, 200% or 300%. He referred to Denault J.'s decision in Boulay, CUB 20766, in which the judge compared the two sections. In his opinion, under subsection 33(1), if a person knowingly makes a false or misleading statement or representation, the Commission may impose a penalty. In his opinion, under subsection 41(10), the Commission may waive or modify conditions in order to grant benefits. At page 7 of his decision, Denault J. wrote:

Moreover, I feel that the analogy between subsection 33(1) and 41(10) of the Act should only be drawn with care since subsection 41(10) authorizes the Commission to waive or vary the conditions or requirements of this section or the regulations "for the benefit of the claimant" while subsection 33(1), on the other hand, is designed to penalize him for making a false or misleading statement. The very different objective pursued by the Commission in exercising these powers conferred on it by Parliament and the effects on the claimant lead me to believe, contrary to the submissions of counsel for the Commission, that the similarity in the wording of these provisions does not require us to interpret them in the same way. I feel, in effect, that if, on the one hand, the board of referees cannot exercise the discretionary power to impose a penalty in the Commission's stead, on the other hand, there is nothing to prevent it from cancelling or reviewing this penalty to the extent that the decision in NIXON allows it to conduct a judicial review of a discretionary power of the Commission within the framework laid down by the decision in CHARTIER, that is, when it feels that the Commission has "exercised its discretion arbitrarily by considering factors that were irrelevant or failing to consider factors that were relevant". Outside this framework, I feel that the board of referees does not have the power to force the Commission to cancel a penalty, modify the amount or even to recommend that the Commission vary it, when it is not required to accept this recommendation.

In my opinion, Denault J. asked the right question; he should have perhaps referred back to the Court of Appeal's decision in Findennig, where at pages 70 and 71, Thurlow J. wrote:

... The power to waive under subsection 55(10) is vested only in the Commission and when it is invoked by a claimant it must be exercised by the Commission. It must be exercised by that body having regard to the circumstances of the particular case and it goes without saying that it must be exercised fairly and not arbitrarily.

...

Nowhere is there any provision defining what powers are exercisable by the Board in disposing of an appeal that has been asserted to it. In particular there is nothing similar to section 96 [repealed and superseded by S.C. 1976-77, chap. 54, s. 56] which outlines and confers a variety of powers that are exercisable by an Umpire on an appeal to him from the Board. I do not think, however, that the absence of such a provision can be taken as meaning that the Board has no powers to exercise. Parliament, in providing for appeals to such a Board, must be taken to have intended to confer an effective right of appeal and implicitly to have authorized the Board to give any decision that in the circumstances of the case before it is necessary to ensure that the result is in accordance with the law.

Counsel stated that he had rarely read comments or observations by the Commission clearly showing whether all the circumstances had been taken into account or whether the guidelines had simply been followed, imposing a penalty of 100% for a first offence, a penalty of 200% for a second offence, and a penalty of 300% for a third offence. Counsel added that Parliament, when setting a maximum of three times the rate of benefits, did not impose a minimum.

Section 33 of the Unemployment Insurance Act confers on the Commission the discretionary power to impose a penalty in respect of each false or misleading statement made knowingly by a claimant.

There are well-established principles governing the exercise of this type of discretionary power by the body to which it has been delegated under the Act: that body must act in good faith; it must consider all the relevant factors and not allow itself to be influenced by those which are not; it must not promote objectives which are not pertinent to the spirit of the enabling statute; and it must not act in an arbitrary or abusive manner.

In the case of section 33, the Commission adopted a general policy according to which it imposes a penalty equivalent to 100% of the claimant's weekly benefit rate for the first offence, 200% for the second offence and 300% for any subsequent offence.

The Commission is entitled to adopt guidelines of this nature, but it cannot apply these percentages automatically in all cases. In exercising its discretionary power to impose a penalty under section 33, it must comply with the above-noted principles, that is to say it must consider all the relevant factors and ignore those which are not, and it cannot act in an arbitrary or abusive manner. There may very well be extenuating circumstances that it must take into account when a claimant makes a false or misleading statement, and it must examine the specific circumstances of each case in order to determine with certainty whether any such circumstances exist. Extenuating circumstances take various forms and they may vary considerably from one claimant to another.

In any event, every time the body to which a discretionary power has been delegated under the Act exercises that power, its actions may be the subject of a review in order to guarantee that it has not abused that power and that it has adhered to the above-noted principles. In some cases the inquiry takes the form of a judicial review. Often, Parliament seeks to curb abuses by conferring a right of appeal.

The discretionary power of the Canada Employment and Immigration Commission to impose a penalty pursuant to subsection 33(1) of the Unemployment Insurance Act may be examined on appeal, first by a board of referees then by an umpire. These appellate jurisdictions have the right to examine the facts that have been established by the evidence. If there is sufficient evidence to support the Commission's finding, neither the board nor the umpire may set aside that finding merely because they would have reached a different conclusion if they had ruled on the matter in the first instance.

However, if the board of referees or the umpire considers that the facts are not sufficient in law to support the Commission's finding, the latter's decision cannot stand. If the Commission has exercised its discretionary power wrongly, in that it has imposed a penalty without regard to the relevant factors or because it has based its decision on factors which were not relevant, the board of referees or the umpire is entitled to set aside its decision.

This principle is well established in the case law. Wright's Canadian Ropes Ltd. v. Minister of National Revenue, [1947] 1 D.L.R. 721 (P.C.) concerns the discretionary power of this minister to refuse a deduction for expenses. In the appeal relating to the exercise of this discretionary power, Lord Greene made the following comments (pp. 730-731):

... unless it be shown that the Minister has acted in contravention of some principle of law the Court, in their Lordships' opinion, cannot interfere: the section makes the Minister the sole judge of the fact of reasonableness or normalcy and the Court is not at liberty to substitute its own opinion for his ...

The Court is, in their Lordships' opinion, always entitled to examine the facts which are shown by evidence to have been before the Minister when he made his determination. If those facts are in the opinion of the Court insufficient in law to support it the determination cannot stand. In such a case the determination can only have been an arbitrary one. If, on the other hand, there is in the facts shown to have been before the Minister sufficient material to support his determination the Court is not at liberty to overrule it merely because it would itself on those facts have come to a different conclusion. As has already been said, the Minister is by the subsection made the sole judge of the fact of reasonableness and normalcy but as in the case of any other judge of fact there must be material sufficient in law to support his decision.

(Emphasis added)

The same principle was stated by Viscount Simon, Lord Chancellor, in Charles Osenton & Co. v. Johnston, [1942] A.C. 130, 138, which La Forest J. quoted, in approving it, in Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, 76-77:

The law as to the reversal by a court of appeal of an order made by the judge below in the exercise of his discretion is well-established, and any difficulty that arises is due only to the application of well-settled principles in an individual case. The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge. In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified.

(Emphasis added)

Consequently, it is clear that appellate jurisdictions must not intervene in the exercise of a discretionary power by the body to which it has been delegated under the Act, except where the conclusion is unreasonable or it has resulted from the examination of irrelevant or erroneous factors, or an erroneous principle, or because a relevant factor has been given insufficient or no weight.

That does not, however, answer the question as to what an umpire has jurisdiction to do once he has ruled that the Commission has exercised in an irregular manner the discretionary power conferred on it by subsection 33(1). The Court of Appeal stated its position on this matter in The Attorney General of Canada v. Smith (A-330-93, February 9, 1994), in which it says at page 3:

We wish to add that in any event the Umpire did not have jurisdiction to reduce the penalty imposed by the Commission. In relation to decisions involving the exercise of discretion on the part of the Commission, under subsection 33(1), the Umpire exceeds his jurisdiction when he substitutes his own point of view for that of the Commission. At best, had the Umpire properly found that the Board of Referees had committed a reviewable error in not overturning the decision of the Commission, his only power would have been to remit the matter back to the Board of Referees with an indication of the reasons why the decision of the Commission should be made anew.

With respect, I do not think that this is a correct formulation of the applicable law. The scope of an appeal depends on various factors: the text of the provision conferring the discretionary power in question, the purpose of the discretionary power and the reason for which it is granted as well as the specific circumstances in which it was exercised. In fact, the scope of the review that an appellate jurisdiction may conduct with respect to the exercise of a discretionary power depends on the interpretation of each statutory provision. In some cases, it can properly be considered that the statutory provision conferring the right of appeal does empower the appellate jurisdiction to substitute its point of view for that of the competent authority which has made the decision if it is convinced that the decision was erroneous, even though it must show deference to the body to which the power has been delegated under the Act and which made the initial decision.

The powers of umpires sitting in appeal are set out in section 81 of the Unemployment Insurance Act:

81. An umpire may decide any question of law or fact that is necessary for the disposition of any appeal taken pursuant to section 80 and may dismiss the appeal, give the decision that the board of referees should have given, refer the matter back to the board of referees for rehearing or redetermination in accordance with such directions as he considers appropriate or confirm, rescind or vary the decision of the board of referees in whole or in part.

(Italics added)

In passing this provision, Parliament was unquestionably conferring a very wide power of appeal on umpires. In my opinion, once an umpire is convinced that the decision of a board of referees which confirmed a penalty imposed by the Commission pursuant to subsection 33(1) cannot be upheld, the power to "vary the decision of the board of referees in whole or in part" which is conferred on it by section 81 means that he has jurisdiction to examine the evidence and decide the matter on the facts as proven.

In fact, the Court of Appeal's decision in Tignish Auto Parts Inc. v. Minister of National Revenue (1994), 25 Admin. L.R. (2d) 1, reinforces this point of view. In this decision, the task was to determine the scope of the jurisdiction of the Tax Court of Canada in its review of the exercise of the discretionary power conferred on the Minister by subparagraph 3(2)(c)(ii) of the Unemployment Insurance Act. The Minister maintained before the Court of Appeal that because the decision it had to make was discretionary, the jurisdiction of the Tax Court of Canada was strictly circumscribed.

The Court of Appeal analyzed subsection 70(2) of the Unemployment Insurance Act, pursuant to which the Tax Court of Canada was exercising its jurisdiction, in order to determine what type of decision it could render. This subsection provides as follows:

70. (2) On an appeal under this section, the Tax Court of Canada may reverse, affirm or vary the determination, may vacate, confirm or vary the assessment or may refer the matter back to the Minister for reconsideration and reassessment, and shall thereupon in writing notify the parties to the appeal of its decision and the reasons therefor.

(Italics added)

Once the Tax Court is of the view that the Minister's determination cannot stand, its power to "vary" under subsection 70(2) of the Act implies it can exercise fully the powers given to the Minister by the Act. There is, in my view, no reason to distinguish between a quasi-judicial decision rendered by the Minister, such as one based on paragraph 3(1)(a) for instance, and a discretionary one based on subparagraph 3(2)(c)(ii). The Tax Court, at this stage, is in a de novo situation. It is empowered to analyze and assess the evidence anew in light of the various criteria contained in subparagraph 3(2)(c)(ii) and must decide the matter itself on the facts as proven.

(Emphasis added)

I do not see why the same reasoning does not apply to the powers conferred on umpires by section 81 of the Act. The terms used in both sections clearly indicate Parliament's intent to confer a wide power of appeal on the appellate jurisdictions concerned. In fact, the wording in section 81 expressly confers on umpires the power to give the decision that should have been given.

In any case, if the term "vary" in subsection 70(2) of the Unemployment Insurance Act means that the Tax Court of Canada is in a de novo situation, regardless of whether it is a discretionary decision by the Minister which is the subject of the review, there can be no reason to attribute a different meaning to this term in section 81 of the Act. Following the reasoning of the Court of Appeal in Tignish Auto Parts, it is clear that an umpire hearing an appeal involving the exercise by the Commission of the discretionary power conferred on it by section 33 of the Act also finds himself in a de novo situation and, consequently, is "empowered to analyze and assess the evidence anew" and decide the matter on the facts as proven.

Consequently, since I am not convinced that the Commission considered all the circumstances in the present case in determining the amount of the penalty imposed under section 33, I intend to exercise the powers conferred on umpires by section 81 and give the decision that the Board of Referees should have given. The evidence clearly points to the existence of extenuating circumstances which justify the reduction in the amount of the penalty and which the Commission did not consider when it exercised its discretionary power.

For these reasons, the Board's decision to the effect that the claimant made a false and misleading statement is upheld, but its decision regarding the penalty is set aside. The penalty shall be set at $850. The claimant's appeal is dismissed in all other respects.