[1995] 3 F.C. 17
A-600-94
The Attorney General of Canada (Applicant)
v.
Catherine Gates (Respondent)
Indexed as: Canada (Attorney General) v. Gates (C.A.)
Court of Appeal, Strayer, MacGuigan and Linden JJ.A.—Vancouver May 5; Ottawa, May 12, 1995.
Unemployment insurance — Unemployment Insurance Act, s. 33 imposing penalty where claimant knowingly makes false or misleading statement — Commission finding breach of s. 33 when claimant, who had started small business while in receipt of benefits but received no salary, commission, indicated had not worked — “Knew to be false or misleading” imposing subjective test of knowledge — Umpire erred in holding s. 33 requiring intention to deceive.
This was an application for judicial review of an Umpire’s reversal of a decision of the Board of Referees under the Unemployment Insurance Act. The claimant started a small business while in receipt of U.I. benefits. Although personally involved, she did not receive any salary or commission. The Commission found that by indicating on her bi-weekly report cards that she had not worked she had violated section 33 of the Act, under which a penalty may be imposed where a claimant has made a statement that she knew to be false or misleading. The Board of Referees held that it was the claimant’s responsibility to educate herself as to the meaning of “Did you work?”. The Umpire held that the statement must be made knowingly with the general intent to deceive or mislead. He held that there had been an innocent misunderstanding.
Held, the application should be allowed.
“Knew to be false or misleading” requires a subjective test in determining whether the requisite knowledge was present. Had Parliament intended that an objective standard be used, it would have included the words “had reason to know”. This does not mean that anyone may escape a penalty under subsection 33(1) merely by proclaiming a lack of knowledge. The Commission or the Board must evaluate the evidence about knowledge and make findings of fact and credibility. In deciding whether there was subjective knowledge, the Commission or Board may take into account common sense and objective factors. Not knowing the obvious might properly lead to the inference that the claimant was lying. This does not make the test objective. It does take into account objective matters in coming to a decision on subjective knowledge. If the trier of fact is of the view that the claimant really did not know that the representation was false, there is no violation of subsection 33(1). The fact finder must decide on the balance of probabilities that the claimant subjectively knew that the report was false in order to penalize him or her. It is possible, though unlikely, for a claimant to be truly ignorant of some fact, even a simple one, when nearly everyone would know it.
There is no legal obligation to educate oneself, though practically, if one does not do so, he may not be believed when professing ignorance of some obvious fact. The Umpire correctly set aside the Board’s decision, but erred in describing the mental element required for a finding of knowledge. He went too far and added an element of confusion whereby boards of referees might erroneously conclude that a mental element in addition to knowledge is required: an intention to deceive. This was a fundamental error and the matter had therefore to be returned to a Board for reconsideration.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Unemployment Insurance Act, R.S.C., 1985, c. U-1, s. 33(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
McDonald v. Canada (Employment & Immigration Commission) (1991), 81 D.L.R. (4th) 736; 50 Admin. L.R. 258; 131 N.R. 389 (F.C.A.); Zysman v. Canada (Employment and Immigration Commission), [1994] F.C.J. No. 1357 (C.A.) (QL); R. v. Mac’s Liquid Disposal (1982) Ltd. (1987), 2 C.E.L.R. (N.S.) 89 (Ont. C.A.); Chan (1982), CUB 6661A; Marshall (1993), CUB 22326.
APPLICATION for judicial review of an Umpire’s decision that Unemployment Insurance Act, section 33 (under which the Commission may impose a penalty where a claimant has made a statement that he knew to be false or misleading), required an intention to deceive. Application allowed.
COUNSEL:
Leigh A. Taylor for applicant.
Terry J. Hewitt for respondent.
SOLICITORS:
Deputy Attorney General of Canada for applicant.
Columbia Square Law Office, New Westminster, British Columbia, for respondent.
The following are the reasons for judgment rendered in English by
Linden J.A.: The main task of this Court on this application is to clarify the meaning of subsection 33(1) of the Unemployment Insurance Act [R.S.C., 1985, c. U-1], which reads:
33. (1) Where the Commission becomes aware of the facts that in its opinion establish that a claimant or any person on his behalf has, in relation to a claim for benefit, made a statement or representation that he knew to be false or misleading or, being required under this Act or the regulations to furnish information, furnished any information or made any representation that he knew to be false or misleading, the Commission may impose a penalty on that claimant not greater than an amount equal to three times his weekly rate of benefit.
This is clearly a penalty provision permitting the Commission to impose a financial sanction, in addition to requiring the claimant to repay the money incorrectly received. However, it does not create a criminal offence. Consequently, the onus of proof that rests upon the Commission is to establish on a balance of probabilities, not beyond a reasonable doubt, that the claimant “made a statement or representation that he knew to be false or misleading”. Purely innocent representations do not subject the claimant to a penalty, even though any money paid in error must be repaid. Mr. Justice MacGuigan has explained this in McDonald v. Canada (Employment & Immigration Commission) (1991), 81 D.L.R. (4th) 736 (F.C.A.), at page 742 as follows:
Section 33(1) of the Act … does not create an offence but rather gives the Commission the authority to impose an administrative penalty of three times the weekly rate of benefit. The use of the word “knowingly” is insufficient by itself to impute an offence requiring the full criminal standard of proof, but rather has the effect of saving innocent misrepresentations from penalties.
This much is clear, but there has been some confusion and disagreement in the cases concerning the meaning of the concept of knowledge in this situation. In my view, the words “knew to be false or misleading” requires a subjective test in determining whether the requisite knowledge is present. If Parliament had intended that an objective standard be used, it would have included the words “had reason to know”, as is often done in legislation. This was recognized by Mr. Justice Marceau in Zysman v. Canada (Employment and Immigration Commission), [1994] F.C.J. No. 1357 (C.A.) (QL), at page 4 where he indicated that “a subjective knowledge of the falsehood on the part of the speaker was crucial”. It is also consistent with the law in the field of environmental protection where penalties were provided for those who “knowingly” gave false information. In R. v. Mac’s Liquid Disposal (1982) Ltd. (1987), 2 C.E.L.R. (N.S.) 89, the Ontario Court of Appeal explained as follows [at page 92]:
A reading of s. 145 and Pt. V of the Environmental Protection Act demonstrates that the onus placed on the Crown is limited to proving that the statement was false and was known to be false to the maker …. [Section 145] makes it clear that the word “knowingly” is used to indicate only that the maker of the false statement must know it to be false. No more should be read into the section.
In a similar vein, subsection 33(1) allows for the imposition of a financial penalty, which implies that some improper (though not criminal) conduct has taken place, that is, knowingly to misrepresent facts.
This does not mean that anyone may escape a penalty under subsection 33(1) merely by proclaiming a lack of knowledge. Protestations of ignorance are all too common in these cases. People often say they do not know something, when they in fact do. They do not have to be believed. Even the criminal law has developed a doctrine of “wilful blindness” to aid courts in resolving these factual questions.
The unemployment insurance system does not exist to provide a salary for all those who wish to start a new business and say they do not believe that doing so is working. Despite professed ignorance, the Commission and the Board of Referees, depending on the evidence and common sense, may disbelieve these claimants and decide that there was in fact knowledge of falsity.
The evidence about knowledge must be evaluated by the Commission or the Board and findings of fact and credibility made. It may not be enough to say that the claimant was not credible or that credibility is “in doubt”; more may be required of the fact-finder. This has been recognized by Mr. Justice MacGuigan in McDonald, supra, where he stated [at pages 743-744]:
I cannot, however, take such a benign view of the effect of the board’s finding of non-credibility with respect to the issue of misrepresentation. Merely disbelieving the applicant’s testimony is not a sufficient basis for the board’s conclusion that he knowingly made false or misleading statements. There is another element of proof required, relating to his state of mind, one on which the onus, as I have already said, rests with the Commission. The board’s finding that the applicant’s credibility was “in doubt” does not amount to a finding that the Commission has discharged its burden….
In deciding whether there was subjective knowledge by a claimant, however, the Commission or Board may take into account common sense and objective factors. In other words, if a claimant claims to be ignorant of something that the whole world knows, the fact finder could rightly disbelieve that claimant and find that there was, in fact, subjective knowledge, despite the denial. Not to know the obvious, therefore, might properly lead to an inference that the claimant is lying. This does not make the test objective; it does, however, take into account objective matters in coming to a decision on subjective knowledge. If, in the end, the trier of fact is of the view that the claimant really did not know that the representation was false, there is no violation of subsection 33(1). That it is possible for honest confusion to arise as to the meaning of the word “work” can be seen from Mr. Justice Cattanach’s reasons in Chan (CUB 6661A, September 23, 1982) to the effect that voluntary work and work in the garden are not considered to be “work” for our purposes.
Mr. Justice Strayer has explained the situation in Marshall (CUB 22326, January 23, 1993) as follows:
While the onus is initially on the Commission to prove that a claimant knowingly made a false or misleading statement in order to uphold the imposition of a penalty, once it appears from the evidence that the claimant has wrongly answered very simple questions on the report cards the burden, as a practical matter, shifts to the claimant to explain why those incorrect answers were given.
“As a practical matter” this is so, but the explanation offered may be readily acceptable. It depends on the evidence, the circumstances and the fact finders determination on the basis thereof. (See for example Zysman v. Canada (Employment and Immigration Commission), supra). Thus, the fact-finder must decide on the balance of probabilities that the claimant subjectively knew that the report was false in order to penalize him or her. It is possible, though unlikely, for a claimant to be truly ignorant of some fact, even a simple one, when nearly everyone would know it.
Turning now to the facts of this case, the claimant, while in receipt of unemployment insurance benefits, started a small company called Inky Printers. Although personally involved, along with others, in the business, she did not receive any money as salary or commission. In filling out her bi-weekly report cards she stated that she had not worked. The Commission found that in doing so she violated subsection 33(1), the Board of Referees affirmed, but the Umpire reversed the decision of the Board.
The Umpire reviewed the decision of the Board of Referees, saying:
Did the Board err with respect to its findings as to the claimant’s representation? The fact that she was not receiving any remuneration does not necessarily mean that she was not working for the purpose of the Act; the statement made must have a quality of wilful deception attached to it.
I am prepared to allow the appeal because I am satisfied that, before s. 33 is made to apply, the statement must be made knowingly with the general intent to deceive or mislead, and there must be the existence of an intention to deceive. I do not ascribe a criminal burden of proof to s. 33; I simply conclude that there was a misunderstanding on the part of the claimant, and the misunderstanding is well documented on the record.
The Board erred in not applying itself to the facts before it and in concluding that even an innocent misunderstanding can lead to misrepresentation under s. 33 of the Act. I am satisfied that the error of the Board is sufficiently serious to warrant my intervening in the circumstances and reaching the decision the Board ought to have reached in the first instance. The appeal will, accordingly, be allowed and the decision of the Board will be rescinded insofar as the issue of misrepresentation is concerned.
The reasons given by the board of referees do contain a misconception about the meaning of the word “know”, as it is used in subsection 33(1). Its reasons include the following:
The Board has reviewed the docket and considered new evidence presented and marked as Exhibits #26.1 and #26.2, and finds that it is the responsibility of the claimant when applying to be supported by public funds to educate herself as to what “Did you work?” means. Being actively engaged in building a business is work and does entail that she control her own hours. The question was not, “Are you gainfully employed?” but “Did you work?”
The Board feels that the question is stated simply enough….
It may be that the Board meant to say merely that they did not believe the claimant and felt that she knew the report was false. If that was what they had said it would have been unimpeachable. But it did not say that; it is implied that there is a legal obligation upon claimants to educate themselves. In doing so, the Board appeared to utilize an objective standard in deciding whether there was knowledge in the claimant. This, in my view, was erroneous. There is no legal obligation to educate oneself, though, practically, if one does not do so, he or she may not be believed when he or she professes ignorance of some obvious fact and may be properly penalized pursuant to subsection 33(1) on the basis that there was subjective knowledge of falsity. Therefore, it was appropriate for the Umpire to set aside the decision of the Board.
In my view, however, the Umpire went beyond where he should have gone in describing the mental element required for a finding of knowledge, as set out in McDonald, supra. It may be that he meant only to explain more fully what he meant by knowledge in using the words “with the general intent to deceive or mislead and there must be the existence of an intention to deceive”. However, in my view, he added an element of confusion whereby the Commission and boards of referees might conclude erroneously that an additional mental element is required in addition to knowledge, that is, an intention to deceive. As was said in Mac’s Liquid, supra [at page 92]:
The word “knowingly” usually suggests an offence is one of mens rea rather than strict liability. Nevertheless, where Parliament and the Legislature have wished to identify or require an additional element of dishonesty to that of the knowledge of the falsity, those bodies have utilized words such as “fraudulently”, “wilfully”, or “with intent” that it should be acted upon:….
This was a fundamental error and, hence, the decision of the Umpire must be set aside, the matter must be remitted to an umpire to be sent back to a Board of Referees for reconsideration in accordance with these reasons.
Strayer, J.A.: I agree.
MacGuigan, J.A.: I agree.