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  • Federal Court Decision #A-418-97 - THE ATTORNEY GENERAL OF CANADA v. CHILDS, ROBIN, M.




    Umpire's Decision:
    CUB 35899


    STONE, J.A.
    LINDEN, J.A.




    - and -



    Heard at Toronto, Ontario, on Wednesday, May 6, 1998

    (Judgment delivered at Ottawa, Ontario,
    on Tuesday, May 26, 1998);
    Rendered by


    [1] Two issues arise on this application for judicial review. The first is whether the respondent was self-employed pursuant to subsection 43(1) of the Unemployment Insurance Regulations (the Regulations) or, rather, whether his self-employment was so "minor in extent" as to allow him the benefit of the exemption in subsection 43(2). The second issue is whether the respondent knowingly made false or misleading statements in his application for benefits and as such is subject to a penalty imposed under subsection 33(1) of the Unemployment Insurance Act (the Act). The relevant provisions read as follows:

    The Regulations:

    43(1) Subject to subsection (2) and (3), where a claimant is
    (a) self-employed or engaged in the operation of a business on his own account or in partnership or a co-adventure, ...
    he shall be regarded as working a full working week.

    (2) Where a claimant is employed as described in subsection (1) and the employment is so minor in extent that a person would not normally follow it as a principal means of livelihood, he shall, in respect of that employment, not be regarded as working a full working week.

    The Act:

    33(1) Where the Commission becomes aware of facts that in its opinion establish that a claimant or any person on the claimant?s behalf has, in relation to a claim for benefit, made statements or representations that the claimant or person knew to be false or misleading or, being required under this Act or the regulations to furnish information, furnished information or made statements or representations that the claimant or person knew to be false or misleading, the Commission may impose on the claimant a penalty in respect of each false or misleading statement, representation or piece of information, but the penalty shall be not greater than an amount equal to three times the claimant?s weekly rate of benefit.

    [2] In 1991 and while employed with Branair Ltd. as an air conditioning repairman, the respondent incorporated a company called Wecan Heating & Air Conditioning. On January 31, 1993 his position with Branair was terminated and consequently the respondent applied for unemployment insurance benefits on February 1, 1993. On his application for benefits and on subsequent reporting cards, the respondent indicated that he was not self-employed. He received fifty weeks of benefits.

    [3] In July 1995 the Unemployment Insurance Commission (the "Commission") investigated the respondent's claim for benefits. During the investigation, the respondent was interviewed by Scott Hmiel of the Commission who took detailed notes of their conversation. The respondent challenges both the accuracy and admissibility of Mr. Hmiel's notes (the "Notes"). The Notes are significant to the extent that they indicate that the respondent admitted to having worked 2000 hours during 1993 and to his knowingly making false statements to the Commission. The respondent has consistently denied making those statements.

    [4] In a letter dated August 30, 1995, the Commission retroactively disentitled the respondent to benefits on the basis that he was self-employed and, therefore, deemed to be working a full working week during the period in question, pursuant to subsection 43(1) of the Regulations. The Commission further penalized the respondent for making 28 false and misleading statements on his original application for benefits and subsequent bi-weekly reporting cards. The respondent was required to repay all benefits received, totalling $21,500, along with a penalty of $12,040. The respondent appealed that decision to the Board of Referees.

    [5] With the purpose of countering the admissions contained in the Notes, the respondent submitted an affidavit to the Board in which he detailed the hours "he" billed throughout the benefit period. The respondent's weekly account provides as follows (NB: the account details hours billed in 47 weeks. Three weeks of the benefit period are not accounted for):

    Week Ending No. of Hours No. of Hours worked evening/weekend Week Ending No. of Hours No. of Hours worked evening/weekend
    Feb. 5 0 0 July 23 15.5 0.5
    Feb. 12 8.5 0 July 30 9.5 1
    Feb. 20 5 0 Aug. 7 16.5 0
    Feb. 26 2 0 Aug. 13 3 0
    Mar. 5 7 0 Aug. 20 1.5 0
    Mar. 12 5 0 Aug. 28 5.5 0
    Mar. 19 6 0 Sept. 4 4.5 0
    Mar. 26 17.5 2.5 Sept. 10 0 0
    Apr. 2 6.5 3 Sept. 18 9.5 0.5
    Apr. 9 9.5 2 Sept. 24 7 0
    Apr. 16 10 0 Oct. 1 0 0
    Apr. 23 1.5 0 Oct. 8 2 0
    Apr. 30 12 1.5 Oct. 15 23 8.5
    May 7 14.5 0 Oct. 22 15 1
    May 15 12 3.5 Oct. 30 47.5 13
    May 22 2.5 0 Nov. 5 26.5 0
    May 28 0 0 Nov. 13 49 16.5
    June 4 0 0 Nov. 19 72.5 31
    June 11 7.5 0 Nov. 26 35.5 10
    June 18 9 0 Dec. 3 27.5 2
    June 25 16 3.5 Dec. 11 15 2
    July 2 15 0.5 Dec. 17 14 4
    July 9 30 27 Dec. 24 17 0
    July 17 15.5 7

    Before the Board, the respondent conceded that he was self-employed during weeks 38 through 48 inclusive. This period was not the subject of any further appeal.

    [6] The Board dismissed the respondent's appeal in a decision dated January 8, 1995. The Board held the respondent to be self-employed during the entire benefit period. While the Board's Decision does not make specific reference to any case law, it does cite "Exhibit 12.3" in support of the six factors used to determine whether employment is "minor in extent". Exhibit 12.3 is the Commission's argument which relies on CUB 5454 (the Schwenk decision) as establishing the test for determining the applicability of the exception under subsection 43(2) of the Regulations. Therein, the Commission reviewed each of the six factors in relation to the respondent's situation. The Board further concluded that the respondent knew he had worked and failed to make the required disclosures. It was of the unanimous opinion that the respondent's credibility was in question . The respondent appealed the Board's decision to the Umpire.

    [7] The Umpire allowed the respondent's appeal in a decision dated April 28, 1997. He found that the only issue was whether the Board applied the correct test in finding that the respondent was self-employed. Whether or not he made false or misleading statements, and the Board's findings on credibility, depended on whether the respondent's efforts in regard to his business were "so minor" as to come within the exception to the general rule. In short, if the respondent was found not to be self-employed then he could not have made any false statements regarding same. [Quaere: Does the same hold true in regard to statements made pertaining to whether the respondent was in receipt of earnings?]

    [8] The Umpire concluded that the Board applied the wrong test in assessing self-employment by relying on the Schwenk decision. In Canada (A.G.) v. Jouan (1995), 122 D.L.R. (4th) 347 (F.C.A.) this Court held that of the six factors enunciated in the Schwenk decision, the most important and relevant factor is the time spent by a claimant on his business. The other factors (capital invested, financial success or failure, continuity of the enterprise, nature of the work as it relates to the claimant's ordinary occupation and the willingness to accept or seek other employment) are not relevant on their own but may assist in analyzing the total amount of time spent by a claimant on his or her business. For this reason the Umpire held the Board's reliance on Schwenk to be an error of law. The Umpire then went on to conclude that the respondent was not self-employed from weeks 1 to 22 and from weeks 24 to 37, inclusive. He was, however, self-employed for week 23 when he worked a total of thirty billable hours. As noted earlier, the respondent conceded that he was self-employed during weeks 38 to 48.

    [9] The Umpire further concluded that in assessing the respondent's credibility, the Board failed to apply the subjective test formulated in Canada (A.G.) v. Gates, [1995] 3 F.C. 17 (C.A.). The Umpire found that had the Board come to the correct conclusion on the self-employment issue, it would accordingly have reached a different conclusion on whether false or misleading statements were made. Since the respondent was only self-employed during week 23, for all other weeks he did not knowingly make false statements. Exercising his authority under section 81 of the Act, the Umpire set aside the decision of the Board. The Board's decision with respect to overpayment and penalty was upheld for week 23 only. [The Umpire's decision makes no reference to weeks 38 to 48.]


    [10] At the outset, I must point out that it is not accurate to speak of the respondent in terms of having been self-employed. I say this because he was employed by Wecan, a company which he and another individual had incorporated for the purpose of carrying on a joint business. That being said, the respondent's employment falls within the expression, "where a claimant is ... engaged in the operation of a business on his own account", found within subsection 43(1) of the Regulations. For the sake of consistency I shall continue to speak of the respondent in terms of his self-employment.

    [11] It is readily apparent that both the respondent and the Umpire are of the view that the issue of self-employment is to be determined on week-to-week basis. But in my respectful view, this cannot be so for several reasons. First, it is not a question of how many billable hours a claimant worked in any one week. It is a matter of general knowledge that such a figure does not represent the actual hours involved in the pursuit of a business venture. What is more relevant is the total number of hours worked. In any event, it is impractical to sanction a legal framework in which self-employment is determined by the number of hours a claimant works in any one week. To promote such an understanding would require the Boards of Referees to set the maximum number of hours a claimant is entitled to work in order to come within the "so minor" exception set out in subsection 43(1) of the Regulations. Moreover, that approach would lead to the absurd result that in one week a claimant would be deemed to be self-employed, but not in others. In my view, the week-to-week analytical framework being advocated is incompatible with the legislative scheme as a whole.

    [12] To be entitled to unemployment benefits a claimant must not be working. Subsection 10(1) of the Act provides, "[A] week of unemployment for a claimant is a week in which he does not work a full working week". At the same time, subsection 43(1) of the Regulations deems a claimant to be working a full week where he or she is self-employed unless the exception in subsection 43(2) applies: that is to say "the employment is so minor in extent that the person would not normally follow it as a means of livelihood." It is implicit in these provisions that Parliament adopted the position that a person who is actively pursuing his or her business interests cannot be considered to be actively pursuing replacement employment. As Marceau J.A. stated in Jouan, supra: "[T]he Act is designed to provide temporary benefits to those who are unemployed and actively seeking other work. It cannot be used to subsidize entrepreneurs who are starting their own businesses". Against this background, the true issue is whether the respondent was pursuing his work with Wecan as a means of earning his livelihood. That determination must be made in an objective fashion.

    [13] In my respectful view, the Umpire erred in concluding that the respondent's self-employment was "so minor in extent" that the exception to subsection 43(1) of the Regulations could be successfully invoked. First, by viewing the hours worked on a week-to-week basis, the Umpire applied the wrong test. Second, the facts fully support the conclusion reached by the Board. When viewed in their entirety, the time spent in 1993 by the respondent pursing his business is neither inconsequential nor indicative of one who was not pursuing his work with a view to providing his livelihood. This conclusion is supported not only by reference to the respondent's own account of hours billed, but also with reference to the supporting factors from Schwenk, supra. In 1992 the respondent made a capital contribution of $10,151. In 1993, Wecan earned approximately $112,000 in income, made purchases totalling $64,320, had expenses of $31, 936 and incurred a bank loan. The respondent individually earned a profit of $12,616 from the business in 1993. While the evidence shows that the respondent made twenty job applications with air conditioning repair companies, in addition to seeking employment he was also canvassing work for his company Wecan. In fact, contract work was all that resulted from the respondent's job search. Finally, any doubt on this issue is resolved definitively upon reference to a letter submitted by the respondent to the Commission after the interview with Mr. Hmiel (Exhibit 8, at 153 of Application Record). In that letter, the respondent acknowledges, "[I]n retrospect...I was technically self-employed". Having regard to all these factors, it reasonably follows that the respondent is not entitled to rely on the "so minor" exception set out in the Regulations. Therefore, the respondent must be deemed to have been self-employed for all fifty weeks of the benefit period, as was held by the Board, and required to repay benefits received. Thus, the only question left to be decided is whether the Board erred in concluding that he knowingly made false statements to the Commission.

    [14] During oral argument a great deal of discussion focused on whether Mr. Hmiel should have testified before the Board if his "Notes" were to be admissible or given any weight. In view of the fact that I am of the opinion that this matter must be referred back to the Board on the issue of credibility and, thus, of the possibility of the evidential issue being pursued before it, it is only proper that this Court address the latter issue.

    [15] Counsel for the Commission took the position that it would be untenable from an administrative vantage to require Commission employees to attend for cross-examination before the Board in cases where the Commission wishes to rely on notes made in respect of oral statements made by claimants during interviews with Commission staff. Counsel for the respondent focused on the financial consequences which await a claimant found to have knowingly made false statements, in this case over $12,000. Were the issue to be decided on these two factors only, I would have been inclined to side with the respondent. On further reflection, however, the Commission's position must prevail for the following reasons.

    [16] Under the Unemployment Insurance Act, neither the Board nor a claimant is entitled to subpoena witnesses and that legislation does not require Commission employees to attend hearings. It would seem to follow that this Court has no power to impose such a requirement. Moreover, it could be argued that if Commission employees were required to attend Board hearings for the purpose of cross-examination then so too should those who offer written submissions in support of a claimant's appeal before the Board. In the present case, for example, the respondent introduced unaudited financial statements prepared by his company's outside accountant together with character references. It seems to me that any attempt by this Court to require attendance of certain persons at a hearing of a Board, if their written statements are to be received into evidence or given any weight, would change dramatically the nature of Board proceedings and for the worse.

    [17] In concluding that Commission employees need not present themselves for cross-examination before a Board in circumstances where alleged admissions by claimants are found within notes prepared by the former, I do not want to be taken as holding that such written evidence of oral admissions must be accepted at face value. The Board is entitled to make a specific finding that a claimant was a credible witness notwithstanding conflicting statements found within notes taken by Commission staff during an interview. Such statements are intrinsically unreliable when not approved by claimants at the time made, but in the end it is the role of the Board to determine what weight, if any, should be given to same.

    [18] Returning to the Board's finding that the respondent had knowingly made false statements, it is clear that in assessing his credibility the Board misapplied Gates. It is not sufficient for a Board of Referees to simply state a claimant's credibility is "in question". Accordingly, the Board erred in law and the matter should have been remitted to the Board for redetermination on this issue alone. I take it as a matter of settled law that it is not the role of this Court on a judicial review application, nor that of an Umpire on an appeal from a Board, to make findings of credibility. An appeal to an Umpire is not a de novo proceeding where claimant's are entitled to testify on their own behalf: see Canada (A.G.) v. Taylor (1991), 81 D.L.R. (4th) 69 (F.C.A.). I should also state that the fact that the Board erred in finding the respondent was not credible does not lead to the opposite conclusion; that is to say, he was credible. Nor does such an error lead to the conclusion that the Commission failed to meet its burden of establishing that the respondent knowingly made false or misleading statements. In short, the Commission cannot be faulted for the errors of the Board.

    [19] For the above reasons, I am of the opinion that this judicial review application should be allowed and the decision of the Umpire dated April 28, 1997 set aside. The matter should be referred back to the Chief Umpire or his designate on the basis that the respondent was self-employed during the entire benefit period and that the umpire remit the matter to a differently constituted Board of Referees for redetermination of whether the respondent knowingly made false or misleading statements.

    " J.T. Robertson "


    "I agree.
    A.J. Stone, J.A."
    "I agree.
    A.M. Linden, J.A."