IN THE MATTER of the UNEMPLOYMENT INSURANCE ACT
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IN THE MATTER of a claim for benefits by
GEORGE KLASSEN
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IN THE MATTER of an appeal to an Umpire by the
Claimant from the decision of a Board of Referees given at
New Westminster, British Columbia on June 26, 1998.
DECISION
THE HONOURABLE R. E. SALHANY, Q.C., UMPIRE
This appeal was heard at Vancouver, British Columbia on Wednesday, September 27, 2000 in conjunction with the appeals of Anna Klassen, Katherine Klassen, Adrien Cyr, Leslie Taylor, Gordon Hampton and Allen Hampton because all of the issues in all seven cases arise out of the same business operation and are essentially the same. The background of this case is as follows.
Pacific Coast Cedar Products Ltd. is a limited company carrying on business in Maple Ridge, British Columbia. Fifty percent of the shares of the company are held by First Klass Holdings Ltd., 33.33% of the shares are held by H.T.H. Holdings Ltd. and 16.66% of the shares are held Adrien Cyr. The shares of First Klass Holdongs are held as follows: 12.5% by Klassen Enterprises Ltd., a limited company which is owned equally by Richard and Patricia Klassen; 25% by Anna Klassen and 12.5% by Katherine Klassen. The shares of H.T.H. Holdings are divided equally among Allen Hampton, Gordon Hampton and Leslie Taylor. A search of the corporate records of Pacific Coast reveals that as of May 13, 1996, George Klassen was the president and a director of the company, Gordon Hampton was the secretary and a director of the company and Adrien Cyr, Anna Klassen, Katherine Klassen and Leslie Taylor were directors.
What is important to note at this stage is that George Klassen was not a direct or indirect shareholder of Pacific Coast. Although Allan Hampton was an indirect shareholder, he was not a director of the company.
The general allegations of the Commission are that, beginning on August 30, 1993 and ending in August of 1996, the appellants filed false claims for benefits indicating that, as employees of Pacific Cedar, they were subject to periodic lay-offs and as a result received employment benefits when, in fact, they were actually working. The Commission ruled that the appellant's were not entitled to the benefits paid, ordered the benefits to be repaid and imposed penalties for making false or misleading statements.
The appellants appealed to a Board of Referees who heard all of the appeals together and gave a single judgment covering all appeals. The Board dismissed all of the appeals with respect to the issue of repayment. However, on the issue of misrepresentation, they allowed the appeals of Allen Hampton, Gordon Hampton, Leslie Taylor and Adrien Cyr "regarding their application forms in 1996."
Before turning to the reasons of the Board of Referees, I wish to make some preliminary observations. There were seven claimants seeking a review by the Board of Referees of the decision of the Commission denying them benefits, claiming a recovery of benefits already paid and imposing substantial fines for allegedly making false statements to obtain those benefits. Although all of the appellants were employed by and, with the exception of George Klassen, had a financial interest in Pacific Coast Cedar Products Ltd., they were entitled to have the issues pertaining to their claim for benefits individually considered. My review of the judgment and the voluminous material filed with respect to each appellant leads me to the conclusion that the Board of Referees fell into error by lumping all of the appellants together.
Of particular significance is the Board's conclusion with respect to issue of misrepresentation, which I propose to deal with first. Although the Board concluded that four of the appellants (whom I have listed above) could have been confused on how to complete their application forms "based on advice received from Employment Insurance", there is no indication in the reasons why those appellants were confused and not the others. Nor is there any reasons given why the appeal is allowed only with respect to their application forms in 1996.
I recognize that Boards of Referees are laymen and their reasons should not be too critically scrutinized by appellate courts for error. However, each appellant is entitled to have his or her individual case carefully considered. The issues in this case are important to the appellants and critical to any future claim for benefits which they may make. A finding of false misrepresentation carries serious consequences, not only for the penalty which they may be required to pay, but for the right to make a claim in the future. The authorities are clear that a finding of false misrepresentation is not one to be made lightly. The allegation must be specific and the finding based on evidence. Although the onus upon the Commission is not as onerous as that upon the Crown in a criminal case, there must be a clear finding that the statement was made "knowingly and deliberately." Thus, there is always the danger where allegations of false statements are considered collectively instead of separately, that the finding will be made on the basis of collective association instead of individual conduct.
It is fundamental to our system of justice that a litigant in a judicial proceeding be told why his or her evidence has been rejected by the presiding tribunal. There are at least three good reasons why this is critical to our justice system. The first is that findings of credibility without reasons smack of arbitrary justice and cause litigants to lose faith in the justice system. Secondly, the requirement for reasons imposes upon the tribunal the obligation to focus on the critical issues in the case. Finally, but no less important, is the fact that the appellate tribunal is entitled to know why the tribunal made a particular finding in order to determine whether it fell into error.
THE ISSUE OF PENALTY
Although the Board concluded that with respect to the appellants, "A. Hampton, G. Hampton, L. Taylor and A. Cyr, there could well have been confusion based on advice from Employment Insurance on how to complete their application forms and they did not knowingly misrepresent themselves", the Board went on to allow their appeal only with respect to their 1996 application forms. No reason is given why they restricted their conclusion to those appellant's 1996 applications. Ironically, after concluding that they did not "knowingly misrepresent themselves", the Board went on to find that the "claimants knowingly made their false statements and their version of events lack credibility." Who were the "claimants" they were referring to when they made this seemingly inconsistent finding? Was it the remaining claimants? Was it all of the claimants? The Board then goes on to say that "the claimants made a calculated decision to subsidize their business by taking layoffs and collecting Employment Insurance benefits not once but twice." Again, who were the claimants. In my view, the conclusions reached by the Board against all of the appellants based on these findings cannot stand.
The Board goes on to say that in reaching their "decisions", they have focused on
"1) First statements.
2) Credibility.
3) Balance of probabilities, and asks itself the question: If there had been no Employment Insurance system, what decisions would the claimants have made?"
Here again the Board, in my respectful view, fell into a number of errors. First of all, the claimants were lumped together without considering the evidence relating to them specifically. Secondly, the responsibility of a judge is to consider all of the evidence and not "focus" only on certain evidence. Finally, they are not to ask themselves speculative questions on "Balance of Probabilities" but to look carefully at all of the evidence against each appellant and to consider whether the statements which that claimant made was not only false, but "knowingly and deliberately" false.
I would allow the appeal on the question of penalty and send it back to a Board of Referees differently constituted to consider the case of each appellant individually (with the exception of those appellants whose appeal was allowed with respect to their 1996 application since there was no appeal by the Commission) except for the fact that there is a more serious question which must be considered. What statement or statements are the appellant's alleged to have made falsely? The letter dated February 10, 1997 from J. Lethbridge, Insurance Agent to each appellant alleges that they gave false or misleading statements, as follows: "Contrary to what you have told us, we have learned that you have been operating a business." Another letter dated the same date from the same agent, for example, to the appellant George Klassen says, "Contrary to what you have told us, we have learned that you are a director of West Coast Cedar products and are related to the employers. As such, you were involved in a business relationship with your employer." Although the letter erroneously refers to West Coast Cedar Products instead of Pacific Coast Cedar Products, I place no significance on that. What I consider to be significant is the fact that the alleged false statement relates to the question of whether he was "operating a business." The Board, however, made its finding on the question "Did you work?" to which each appellant answered "no".
In my view, it was not open for the Board to consider that particular question. As I said earlier, an allegation that a claimant made a false statement in order to obtain benefits has serious consequences. It should be stated clearly to enable a claimant to meet the allegation. The Commission should not be entitled to allege that a claimant gave a false or misleading statement with respect to a particular question and then change that question on appeal to the Board. Accordingly, I would allow all of the appeals on the issue of penalty and set the penalties imposed aside.
THE ISSUE OF WHETHER THE APPELLANTS WERE UNEMPLOYED
The Board of Referees found that the appellants were not unemployed because "their involvement in their business was major in extent, the shareholders had made a considerable investment ($700,000 in personal loans) in the business, the business is on-going and in an industry in which each claimant has considerable experience and contacts." Here again the Board proceeded to lump all of the appellants togther and failed to deal, in their reasons, with the status of each appellant individually. Although they considered the involvement of the appellants in the business to be major, they did not indicate in their reasons how each appellant was involved. Again, although there is a statement that they had made a considerable investment in the business, the statement "$700,00 in personal loans" means nothing unless we are told how much each appellant contributed. In the absence of findings of fact on the critical evidence which the Board considered in reaching their conclusion with respect to each appellant, I am unable to determine whether their finding is perverse and unsupported by the evidence.
THE ISSUE OF AVAILABILITY
In concluding that all of the appellants were unavailable for work, the Board of Referees noted the evidence that the appellants met "at their place of employment each day to scan the newspapers and discuss jobs ‘over coffee’." However, the Board found that this did not meet the test of an active job search which they outlined earlier in the judgment. I agree with the Boards assessment of what constitutes an active job search. Again, however, the Board seems to be lumping all of the appellants together, particularly when it "does not find the claimant's statement credible when they say they would take other work if it were offered. It does not seem reasonable given their large financial investment and the difficult economic times that they would leave the day-to-day management of the business to minor employees." Again the question arises - Did the Board find all seven appellants not credible or were they tarred with a collective brush? Although the appellants indicated that they would take other employment under certain conditions, if offered, the Board found none would leave the day to day management to minor employees. Again, in my respectful view, the Board failed to consider the availability of each appellant individually.
Accordingly, I have reluctantly come to the conclusion that all seven appeals must be allowed and the matters remitted to a Board of Referees differently constituted to consider the issues of whether the appellants were employed at the time that they applied for benefits, and, if not, whether they were available for employment.
Counsel for the appellants, Mr. Ehrlich asked for directions with respect to certain claims that may have been disallowed, namely, a claim for sick benefits made by Allan Hampton, a claim made by Gordon Hampton and a claim for maternal benefits made by Katherine Klassen. Ms. Richardson, for the Commission assisted with respect to the first two claims and advised that she would provide Mr. Ehrlich with information relating to the last claim. In the circumstances, I need not give any directions.
R. E. Salhany
Umpire
Dated at Kitchener, Ontario this 12th day of October, 2000
2011-01-10