Federal Court of Appeal Decisions

Date: 20020529

Docket: A-353-01

Neutral citation: 2002 FCA 219

CORAM:        STONE J.A.

ROTHSTEIN J.A.

SEXTON J.A.

BETWEEN:

                                                                                   

                        

THE ATTORNEY GENERAL OF CANADA

Applicant

- and -

PHILIP GAULEY

Respondent

Heard at Toronto, Ontario, on Wednesday, May 15, 2002.

Judgment delivered at Ottawa, Ontario, on Wednesday, May 29, 2002.

REASONS FOR JUDGMENT BY:                                                                                       STONE J.A.

CONCURRED IN BY:                                                                                                 ROTHSTEIN J.A.

            SEXTON J.A.

Date: 20020529

Docket: A-353-01

Neutral citation: 2002 FCA 219

CORAM:        STONE J.A.

ROTHSTEIN J.A.

SEXTON J.A.

BETWEEN:

                              

THE ATTORNEY GENERAL OF CANADA

Applicant

- and -

PHILIP GAULEY

Respondent

REASONS FOR JUDGMENT

STONE J.A.

[1]                 This is an application to review and set aside a decision of an Umpire dated April 25, 2001, made pursuant to the Employment Insurance Act, SC 1996 c. 23, dismissing an appeal from the Board of Referees reducing to zero penalties imposed by the Commission pursuant to subsection 38(1) of the Act.

[2]                 Effective November 8, 1998, the respondent established a claim for employment insurance benefits with the Commission. Between March 24,1999 and July 3, 1999, while the respondent was receiving benefits, he worked for two different employers, earning $1,121.90 from the first employment and $6,075.00 from the second. The Commission allocated the earnings to the periods worked, thus creating overpayment of benefits totalling $1,122.00 for the period March 24, 1999 to April 13, 1999 and $4,104.00 for the period April 14, 1999 to July 3, 1999. The total penalties of $10,452.00 was arrived at by doubling the amount of each overpayment.

[3]                 On November 17, 2000, the respondent appealed the penalties to the Board of Referees pursuant to subsection 114(1) of the Act. In its decision of December 14, 2000, the Board of Referees stated in part:

In this case the claimant readily admits to knowingly making false or misleading statements in regards to his reporting work and earnings while collecting benefits.

...

The Board feels the Commission did not exercise its discretion judiciously in that it did not take into account all of the relevant factors to decide the quantum of the penalty. We agree the Commission did not take into account all of the dire circumstances prevailing at this time in the claimant's personal life which probably would explain his predicament and reaction or inaction at the time. We refer to CUB 37871A where reference is made to the May 27, 1997 Line Morin decision (A-681-96) on page 2 of the first paragraph where the Commission merely used a mathematical formula to determine the penalty, in short for not exercising its discretion in a proper manner. In the case at hand it appears there were mitigating circumstances that were not considered in that the claimant does not deny his error but being in an extreme financial squeeze puts himself at the mercy of the Commission. The claimant is employed in seasonal occupations, earning a salary below the poverty line, has a student loan to repay, a car payment and is about to get married. To further his financial commitment would only be counter productive. We feel it to be more beneficial to get this person back on track in his life.

...

The Board agrees with the decision to claim the two overpayments but to rescind the penalties. The appeal is therefore allowed.

[4]                 The decision of the Board of Referees to rescind the penalties was appealed by the Commission to the Umpire pursuant to section 115 of the Act. In its written representations to the Umpire, the Commission indicated a willingness to recalculate the penalties for a total of $2,613.00 having regard to the fact that the Commission had failed to advise the Board of Referees that this was the respondent's second offence and in recognition of the mitigating circumstances brought to light before the Board of Referees. The Umpire rejected the appeal and allowed the decision of the Board of Referees to stand on the basis that it accorded with jurisprudence of this Court to the effect that, as he put it, the Board of Referees possessed the power "to set aside the Commission's decision on the quantum of the penalty if it found that relevant considerations were ignored" and, accordingly, that it could reduce the penalties to zero in the light of mitigating circumstances disclosed by the evidence.

[5]                 No submissions were addressed to the Court with respect to the appropriate standard by which the Umpire's decision not to interfere with the decision of the Board of Referees is to be reviewed by this Court. As I have indicated, by deciding as he did the Umpire determined that the Board of Referees had a discretionary power under its statutory mandate to reduce the penalties to zero. Accordingly, as the issue before the Umpire involved interpretation of the Act the appropriate standard of review in the circumstances is that of correctness: Black v. Canada (Employment Insurance Commission), 2001 FCA 255, at paragraph 27, Canada (Attorney General) v. Sveinson, 2001 FCA 315, at paragraphs 13 and 14.

[6]                 Subsections 38(1) and (2) of the Act read in part:

38. (1) The Commission may impose on a claimant, or any other person acting for a claimant, a penalty for each of the following acts or omissions if the Commission becomes aware of facts that in its opinion establish that the claimant or other person has ... (c) knowingly failed to declare to the Commission all or some of the claimant's earnings for a period determined under the regulations for which the claimant claimed benefits; ... (2) The Commission may set the amount of the penalty for each act or omission at not more than ...

38. (1) Lorsqu'elle prend connaissance de faits qui, à son avis, démontrent que le prestataire ou une personne agissant pour son compte a perpétré l'un des actes délictueux suivants, la Commission peut lui infliger une pénalité pour chacun de ces actes : ... (c) omettre sciemment de déclarer à la Commission tout ou partie de la rémunération reçue à l'égard de la période déterminée conformément aux règlements pour laquelle il a demandé des prestations; ... (2) La pénalité que la Commission peut infliger pour chaque acte délictueux ne dépasse pas : ...

[7]                 As has been noted, subsection 38(1) of the Act bestows on the Commission a discretionary power to impose a monetary penalty in a given case, and to set the "amount" thereof pursuant to subsection 38(2).

[8]                 The powers of the Board of Referees are spelled out in general terms in subsection 114(1) of the Act, namely, to hear an appeal from a decision of the Commission with respect to a claim for benefits under the Act. The extent of the powers of the Board of Referees under subsection 114(1) is not expressly limited by the statute. However, relatively recent decisions of this Court with respect to the imposition of a penalty by the Commission pursuant to section 38 or predecessor sections have clarified that the Board of Referees has jurisdiction to intervene in such a discretionary decision and to make the decision the Commission should have made (Morin v. Attorney General of Canada (1996), 134 D.L.R. (4^th) 724 (F.C.A.)), where the Board finds that the Commission took into account an irrelevant consideration or failed to have regard to a relevant consideration (Attorney General of Canada v. Dunham, [1997] 1 F.C. 462 (C.A.)). In this latter case, the Court also clarified that in making its decision the Board of Referees may consider not only the evidence that was before the Commission but also any additional evidence laid de novo before the Board of Referees. The Board of Referees in that case determined to reduce the quantum of the penalty solely on the basis of evidence that was before the Commission itself. The Court viewed this as an error and referred the matter back to the Board of Referees with a direction that it decide whether "the quantum of the penalty was determined by the Commission without regard for a relevant consideration" having regard to any additional evidence adduced before the Board of Referees.

[9]                 In the present case, the Court is asked to rule that the powers of the Board of Referees in an appeal under subsection 114(1) of the Act, while generous, does not extend to entirely wiping out a penalty imposed by the Commission pursuant to subsection 38(1) where, as here, the Commission's decision to impose the penalties is not questioned. It is not suggested that the Commission should have exercised its discretion pursuant to subsection 41.1(1) instead of imposing monetary penalties. The sole issue, therefore, is whether the Board of Referees in the face of evidence of mitigating circumstances erred in reducing the penalties from the amounts set by the Commission to zero.

[10]            The very concept of the imposing of a "penalty" pursuant to subsection 38(1) indicates that something more than zero was contemplated, as it seems intended to permit some degree of monetary punishment of the claimant. Blacks Law Dictionary, 4^th edition, gives a definition of "penalty" as "money recoverable by virtue of statute imposing a payment by way of punishment". Similarly, The Concise Oxford Dictionary, 9^th edition, defines "penalty" as "1. a punishment, esp. a fine, for a breach of law, contract, etc. 2. a disadvantage, loss, etc., esp. as a result of one's own actions...". Thus to speak of a "zero penalty" would appear to be an oxymoron. It is to be noted as well from subsection 38(2) of the Act that the "amount" of the penalty may be fixed by the Commission. The Concise Oxford Dictionary, supra, defines the word "amount" as "a quantity, esp. the total of a thing or things in number, size, value, extent, etc.". When we speak of a "zero amount" we mean the figure of "0" or "nought". "Zero" is so defined in the same dictionary and also as "no quantity or number; nil".

[11]            As noted, the Act allows for two remedies for certain wilful acts or omissions by claimants, a monetary penalty (subsection 38.1(1)) or a non-monetary warning (subsection 41.1(1)). By reducing the monetary penalties to zero the Board of Referees has wiped out in their entirety the amounts which the Commission in its discretion fixed. In a case such as this where the Commission's power to impose the monetary penalties is not questioned, reducing the penalties to zero would have the effect of completely nullifying the exercise of that power under subsection 38(1). In my view, the case law does not extend the Board's powers that far, but only that the Board may vary the quantum of a penalty in the light of any mitigating circumstances it may find to exist. A penalty imposed by the Commission that is reduced to zero by the Board of Referees amounts to no penalty at all and, in reality, is a usurpation of power that resides exclusively in the Commission under subsection 38(1). Where, however, mitigating circumstances are shown to the Board of Referees, the Board may reduce the quantum of the penalty to an amount that it considers commensurate with those circumstances. See e.g., Turgeon v. Commission de l'emploi et de l'immigration du Canada (1997), 212 N.R. 247 (F.C.A.).

[12]            Accordingly, I am satisfied that the Umpire erred in interpreting the Board's statutory mandate as permitting the reduction of the penalties to zero. I would therefore allow the application, set aside the decision of the Umpire and refer the matter back to the Chief Umpire or to an Umpire designated by him for re-hearing and re-determination on the basis that the Board of Referees lacked the power to reduce the amount of the penalties to zero.

"A.J. STONE"

                                                                                                              J.A.

"I agree

    Marshall Rothstein J.A."

"I agree

    J. Edgar Sexton J.A."