Federal Court of Appeal Decisions

Date: 20020205

Docket: A-47-00

Ottawa, Ontario, February 5, 2002

CORAM:        DESJARDINS J.A.

DÉCARYJ.A.

NOËL J.A.

BETWEEN:

                                                                 ROGER WHITTON

                                                                                                                                                         Appellant

                                                                                  and

                                                 ATTORNEY GENERAL OF CANADA

                                                                                    

                                                                                                                                                     Respondent

                                                                         JUDGMENT

The appeal is allowed, the decision of the Trial Judge is set aside, and the application for a writ of mandamus is allowed. The Minister of Human Resources Development Canada is ordered to reinstate the pension payable to the appellant forthwith and to repay the benefits that have been withheld from the appellant since September 1996, with interest. Costs to the appellant at trial and on appeal.

                                                                                                                                            "Alice Desjardins"                                 

                                                                                                                                                                   J.A.

Certified true translation

Sophie Debbané, LL.B.

Date: 20020205

Docket: A-47-00

Neutral citation: 2002 FCA 46

CORAM:        DESJARDINS J.A.

DÉCARYJ.A.

NOËL J.A.

BETWEEN:

                                                                 ROGER WHITTON

                                                                                                                                                       Appellant

                                                                                 and

                                                ATTORNEY GENERAL OF CANADA

                                                                                   

                                                                                                                                                   Respondent

                                     Hearing held at Montréal, Quebec, on January 15, 2002.

                                  Judgment delivered at Ottawa, Ontario, on February 5, 2002.

REASONS FOR JUDGMENT BY:                                                                                     DÉCARY J.A.

CONCURRED IN BY:                                                                                                 DESJARDINS J.A.

                                                                                                                                                     NOËL J.A.

                                                                                                                                                                       

Date: 20020205

Docket: A-47-00

Neutral citation: 2002 FCA 46

CORAM:        DESJARDINS J.A.

DÉCARYJ.A.

NOËLJ.A.

BETWEEN:

                                                                 ROGER WHITTON

                                                                                                                                                       Appellant

                                                                                 and

                                                ATTORNEY GENERAL OF CANADA

                                                                                   

                                                                                                                                                   Respondent

                                                        REASONS FOR JUDGMENT

DÉCARYJ.A.

[1]         The issue in this appeal is whether the Minister of Human Resources Development Canada (the Minister) may refuse to pay old age security benefits (the benefits) to a person who is otherwise eligible on the ground that he suspects that the person has, himself, for twenty years, fraudulently cashed benefit cheques issued to the person's deceased mother. The disposition of the appeal will depend, in the final analysis, on the interpretation of sections 9(5) and 37 of the Old Age Security Act, R.S.C., 1985, c. O-9, as amended (the Act) and sections 26 and 27 of the Old Age Security Regulations, C.R.C., c.1246, as amended (the Regulations).

Facts

[2]         The facts are relatively simple. On January 10, 1989, the appellant, who was 65 at the time, filed an application for benefits under the Act. From September 1989 to September 1996, the appellant received basic old-age benefits plus a guaranteed income supplement established on the basis of his family and financial situation. His eligibility is not in issue in this appeal (Appeal Book, pp. 40 and 49).

[3]         In 1996, in the course of a project to audit benefits paid to persons aged 100 and over, the Department of Human Resources Development Canada (the Department) discovered that although the appellant's mother died in 1973, benefit cheques had been issued in her name by the Department and cashed from June 1973 to October 1993. The cheques cashed in this way totalled $123,388.51.

[4]         The Department conducted an internal investigation to determine how and by whom the cheques issued in Marie Whitton's name had been cashed. An investigator with the Department interviewed the appellant on three occasions: on May 27, 1996, and on June 3 and 5, 1996. The record does not indicate that the appellant was informed on those occasions of the specific purpose of those interviews. He was asked to provide his mother's death certificate and a sample of his own signature, which he did. A note in the investigator's file concerning the interview of June 5, 1996, states that [TRANSLATION] "to sum up, he admits all the facts in the file but from the outset he has refused to sign anything whatsoever" (Appeal Book, pp. 53-57). The report also states that [TRANSLATION] "there were three witnesses to our interview on June 3, 1996." In an affidavit filed in the Trial Division, the investigator stated that [TRANSLATION] "at the interviews with the appellant, he acknowledged receiving and cashing the cheques that were issued in his mother's name" (Appeal Book, p. 62). None of the witnesses to the interview on June 3, 1996, filed an affidavit.

[5]         On September 17, 1996, the Department informed the appellant [TRANSLATION] "that we have temporarily suspended your old-age security benefits since your case is currently under investigation in relation to the case of Marie Whitton" (Appeal Book, p. 36). It seems that this was the first time the appellant was informed that he was under investigation, and moreover that no details of the investigation were disclosed to him.

[6]         On December 13, 1996, through his counsel, the appellant challenged that decision, requested that the benefits be reinstated and asked for [TRANSLATION] "a complete copy of the file" (Appeal Book, p. 37). When she received no reply, counsel for the appellant wrote to the Department again on March 17, 1997, as follows:

[TRANSLATION]

It appears to us that under the Act, our client is entitled to know the precise reasons that led to the suspension of his benefits, the length of time that the decision will be in effect and the amount of any overpayment.

Moreover, in accordance with the fundamental rules, my client has the right to be heard (Appeal Book, p. 38)

[7]         On April 2, 1997, the Department replied to the letter of March 17, 1997. The letter stated that the case was still under investigation, and the Department was [TRANSLATION] "currently deciding whether proceedings would be taken against [the appellant]" (Appeal Book, p. 40). The letter also stated that [TRANSLATION] "we are not reviewing the initial decision regarding your client's pension eligibility; rather, we are assessing his involvement in that presumed fraud, in a total of $123,388.51." Until then, the appellant had not been informed of the amount at issue.

[8]         On October 16, 1997, counsel for the appellant inquired about the status of the case (Appeal Book, p. 43) and on November 4, 1997, the Department replied that the case was [TRANSLATION] "still under investigation" (Appeal Book, p. 42).

[9]         On February 13, 1998, counsel for the appellant served the Department with a demand to [TRANSLATION] " reinstate payment of benefits immediately" (Appeal Book, p. 45).

[10]       On February 16, 1998, the Department replied that it could not reinstate the payments since the appellant's case was [TRANSLATION] "still under investigation." The Department said that it was relying on subsections 9(5) and 37(2) of the Act (Appeal Book, p. 46).

[11]       On April 15, 1998, the Assistant Deputy Minister of the Department wrote to counsel for the appellant (Appeal Book, pp. 48-49). The case [TRANSLATION] "is currently under administrative investigation," he wrote, adding that [TRANSLATION] "these are public facts of which your client is fully aware." The letter stated that section 37 of the Act [TRANSLATION] "gives the Minister the authority to set off forthwith" and that subsection 9(5) of the Act gives the Minister additional authority to suspend payment of the pension. The Assistant Deputy Minister also refused counsel's request for a hearing under section 27.1 of the Act, for the following reasons:

[TRANSLATION]

As I pointed out, the administrative decisions made in this case to date do not relate to Mr. Whitton's eligibility for old age security benefits. Their purpose is rather to recover the money which your client has apparently appropriated. This measure is taken by the legal mechanism of set-off. Mr. Whitton is therefore not entitled to a hearing under that Act; this does not preclude him from notifying us of any new facts that could reestablish his entitlement to benefits.

[12]       On September 14, 1998, in reply to a letter dated September 10, 1998, in which counsel for the appellant wrote that [TRANSLATION] "it is high time that a decision be made" (Appeal Book, p. 50), the Department stated that the case was still under investigation [TRANSLATION] "by the Royal Canadian Mounted Police"(Appeal Book, p. 51). This is the first reference to a police investigation that appears in the record.

[13]       On April 21, 1999, the appellant applied under section 18 of the Federal Court Act for a writ of mandamus against the Minister ordering him to [TRANSLATION] "reinstate the pension owed to the applicant under the Old Age Security Act" and [TRANSLATION] to "repay to the appellant...the full amounts withheld since September 1996...with interest" (Appeal Book, p. 22).

[14]       On May 31, 1999, the Department wrote to the appellant to inform him that his benefits "are suspended because you are currently under investigation" and that the Department was applying set-off. The letter also stated:

[TRANSLATION]

I note also that you have been aware that this debt existed since the time when you admitted this. I also note that you have failed to take any steps to ensure that the amounts owed were returned. Accordingly, the set-off that applies from the time your account was suspended and the purpose of which is to recover overpayments, is made without prejudice to all rights and remedies that may be exercised against you shortly, to recover all the amounts that were payable forthwith the moment you collected them when you were not entitled to do so.

                                                                                                                     (Appeal Book, p. 60)

[15]       At some point in 1999, criminal proceedings were brought against the appellant. Those proceedings were not placed in evidence, but they were brought to the attention of the Trial Judge. It appears that on June 10, 1999, the appellant appeared in the Court of Quebec, Criminal and Penal Division, to answer to charges of fraud and uttering forged documents concerning the illegal cashing of benefit cheques issued to the appellant's mother (Appeal Book, p. 74). Those charges were laid under the Criminal Code and not under the Old Age Security Act. The appellant pleaded not guilty. The preliminary inquiry was set for May 2000.

[16]       On December 30, 1999, Rouleau J. dismissed the application for judicial review, essentially on the ground that a mandamus application was not the appropriate procedure since a decision had already been rendered on April 15, 1998. Rouleau J. observed, on the merits of the case, that the decision to suspend payment of the benefits appeared justified, that a set-off could be made even though the appellant had not been sued for recovery of a debt to Her Majesty, and that the appellant's admission had not been challenged. (The decision of the Trial Division is reported at [1999] F.C.J. No. 1925 (F.C.T.D.) and at (1999), 179 F.T.R. 189).

[17]       The facts on which argument in this Court was based differed from the facts presented before Rouleau J. The stakes are in fact of such significance to the appellant that the Court considered it to be necessary to accept the additional evidence which the parties wanted to introduce.

[18]       We now know that the charges laid against the appellant were withdrawn on April 25, 2000, even before the preliminary inquiry was held and after a pre-trial conference was held before Judge Céline Pelletier of the Court of Québec. The investigation by the Royal Canadian Mounted Police, as we were given to understand at the hearing, was apparently closed. Counsel for the Department was unable to tell us what stage the administrative investigation had reached.

[19]       We also know with certainty, from a supplementary sworn statement filed by the appellant in the Court of Appeal and at the examination which followed, that the appellant formally denied any involvement in the fraud and said that he had never admitted anything to the Department's investigator.

[20]       The Department also introduced, by a supplementary affidavit signed by its investigator, the cheques covering the period from October 1989 to October 1993 that were issued and cashed in the name of Marie Whitton. The investigator did not introduce the cheques that were issued and cashed between June 1973 and October 1989.

Statutory and Regulatory Provisions

[21]       The Department relied on subsection 9(5) and section 37 of the Act and on sections 26 and 27 of the Regulations. Sections 32 and 44 of the Act are also relevant. The current version of those provisions is reproduced below. The provisions have been amended a few times since the investigation began in 1996--see, with respect to the Act, S.C. 1995, c. 33, s. 23 and S.C. 1997, c. 40, s. 105, and with respect to the Regulations, C.R.C., c. 1246, SOR/96-521,

December 5, 1996, s. 14 and SOR/99-193, April 22, 1999, s. 2. Those provisions read as

follows:

                                       Old Age Security Act

                               Old Age Security Regulations

Analysis

[22]       There are two ways of approaching this case: the first, which was proposed by the appellant, is that the fraud committed here with respect to the benefits paid to the mother must be dealt with outside the context of the Old Age Security Act; the second, which was proposed by the Department, is that the Minister can rely on the powers conferred on him by that Act to suspend the payment of benefits to the appellant.

[23]       I have concluded that the approach suggested by the appellant is the correct one, and that even if we were to take the approach suggested by the Minister, the investigation done by the Department in this case violated the basic rules of administrative law so seriously that the decisions the Minister made against the appellant would be vitiated on their face.

1.        Suspension

[24]       Under subsection 9(5) of the Act, payment of the pension may be suspended "where a pensioner fails to comply with any of the provisions of this Act or the regulations". The English version leaves no doubt that the failure is a failure by the pensioner himself or herself, and the second part of the French version leads solely to this conclusion. Furthermore, suspension is not allowed if the alleged failure relates to an Act other than the Old Age Security Act, such as the Criminal Code, for example. The Department argued that there was a failure to comply with section 37 of the Act, which relates to overpayment. We will see later that this section is not applicable. The Department did not rely on any other provision of the Act. I note that under paragraph 44(1)(b) of the Act, the payee (le preneur) who negotiates a cheque to which he or she is not entitled is guilty of an offence. If Parliament had intended the fraudulent negotiation of a cheque by a person other than the payee to be an offence under the Act, it would have expressed itself otherwise.

[25]       Under section 26 of the Regulations, suspension is mandatory where it appears to the Minister that the beneficiary is ineligible, and optional "where it appears to him that further inquiry into the eligibility of the beneficiary is necessary". That section does not apply in this case since the appellant's eligibility is acknowledged by the Minister. I note, in passing, that under that section, the optional suspension lasts as long as the inquiry lasts, and if payment of the benefits resumes, the payment is retroactive.

2.        Set-Off

[26]       Section 37 of the Act, which the Minister relies on, concerns returning the amount "of the benefit payment to which the person is not entitled or...in excess of the amount to which the person is entitled". A "benefit payment to which the person is not entitled ...constitutes a debt due to Her Majesty and is recoverable at any time in the Federal Court or any other court of competent jurisdiction or in any manner provided by this Act." It is this excess amount which may be deducted, "in the prescribed manner," from any other amount payable to the recipient.

[27]       However, the appellant is not the recipient of the amounts that he allegedly appropriated by fraud. The benefits which he is accused of cashing are not benefits that were paid to him. The appellant never claimed to be entitled to the benefits payable to his mother and the record does not indicate that the appellant used the mechanism provided by the Old Age Security Act to fraudulently establish entitlement to any benefit for himself. The appellant, for all practical purposes, is suspected of cashing benefits that were mistakenly payable to his mother. He is no more being accused as a recipient than a person accused of appropriating another employee's salary would be accused as an employee. The appellant is a recipient only with respect to the benefits that are paid to him as a pensioner, and not only is there no overpayment in respect of these benefits, but there may be an underpayment since the Minister stopped paying him the benefits in September 1996.

[28]       The Department tried to rely on the decision of this Court in Brière v. Canada (Canada Employment and Immigration Commission), [1989] 3 F.C. 88 (C.A.). In that case, Brière applied for and received benefits under the Unemployment Insurance Act using false names. He also pleaded guilty to a charge of fraud in the Court of Sessions of the Peace. The Canada Employment and Immigration Commission sent him a notice of overpayment of benefits, but to the wrong address. The Commission then attached his salary. Brière argued that the attachment was illegal. The Court was asked to determine whether the Unemployment Insurance Act applied, and if so, whether Brière had received "notice" within the meaning of the Act.

[29]       On the first point, the only one that is relevant here, the Court unanimously concluded that the Unemployment Insurance Act did apply. I note the following paragraphs of the reasons of Marceau and Lacombe JJ.A.:

I should even say that I myself at one point wondered whether we did not have to acknowledge that the attachment was illegal on the ground that, in the circumstances of the case, the Commission was not authorized to rely, in seeking to recover its debt, on the provisions contained in this special Act which exceed those of the common law, for the administration of which Act it had been granted special prerogatives. Could the Commission not use these extraordinary powers only when it was dealing with a claimant or former claimant under the Act? I no longer hesitate, because it seems to me that while it is true that the respondent was never overtly a claimant, nonetheless he himself received monies paid as benefit, and the Commission's right to consider him accordingly as a claimant under fictitious names cannot be disputed. We must see Brière's situation as in the nature both of a thief who embezzled the Commission's funds to his own benefit and of a claimant who had benefits paid to him to which he was not entitled by making incorrect statements about his status and his activities. This hybrid situation gave the Commission a choice in enforcing its debt between applying to the common law civil courts, the only choice, incidentally, that would have been available to it in a pure and simple case of embezzled funds, and the remedy under the special provisions of the Unemployment Insurance Act, 1971, which Parliament provided for cases of overpayment to claimants on the basis of incorrect statements.

                                                                                        [Marceau J.A. (dissenting), pp. 98-99]

                                                                                                                            [Emphasis added]

Paragraph 2(1)(b) [as am. by S.C. 1976-77, c. 54, s. 26] of the Act defines a claimant as "a person who applies or has applied for benefit under this Act". It is indisputable that during the period from October 1, 1974 to March 15, 1976 the respondent applied for benefit under the Act, although he did so under false names, and that the Commission paid him monies under the same Act which could be nothing other than unemployment insurance benefits. In order thus to extract benefits from the Commission, the respondent submitted fictitious claims in the name of claimants who did not exist. In order to succeed in defrauding the Commission throughout this period, he had to make as many false and misleading statements or representations as he drew benefits, like any other "fake" unemployed person who claims benefits to which he is not entitled fraudulently in his own name, by stating falsely and deliberately that he was unemployed when he was not. The case is clearly covered by subsections 57(6) and 49(4) of the Act, which give the Commission two additional periods of thirty-six months each in order to reconsider claims and seek repayment of benefit paid on the basis of false or misleading statements or representations. Accordingly, when the Commission wishes to take proceedings in order to recover monies wrongfully taken from it and paid by it as unemployment insurance benefits, whatever the nature of the fraudulent manoeuvres used to obtain the benefits or the seriousness of the false or misleading statements or representations made in order to extort the benefits, it may proceed under the Unemployment Insurance Act, 1971. This is, moreover, how the Commission proceeded against the respondent. It considered him as a claimant and claimed from him the balance of what was owing to it, using the mechanism set out in the Act. There can be no doubt that the Commission could proceed under this Act in the circumstances.

[Lacombe J.A. (for the majority), pp. 111-112]

                                                                                                                            [Emphasis added]

[30]       On its face, that decision does not have the meaning that counsel for the Department attributes to it. In Brière, the benefits had been established in Brière's benefit, at his request, and they were paid to him in his ostensible capacity as claimant and in the manner prescribed by the Unemployment Insurance Act. He himself had cashed the cheques issued in his name as a claimant.

[31]       Brière's swindling had been brought tolight by Royal Canadian Mounted Police investigators who signed informations under the Criminal Code in criminal court. Brière pleaded guilty and was sentenced, inter alia, to repay the Commission the sum of $15,000. Once the criminal proceedings were concluded, the Commission decided to recover the amounts of which it had been defrauded in full (approximately $35,000). It retroactively cancelled the fictitious benefit periods from which Brière had fraudulently benefited, as the Act allowed it to do. The effect of that decision was to officially confirm that the amounts in question constituted an "overpayment" subject to recovery. The Commission then sent Brière a notice by mail notifying him of the outstanding balance on that overpayment. When there was no response to that notice, the Commission decided to attach Brière's salary, using the special authority conferred on it by the Act to seize by attachment without a court order.

[32]       In short, everything in Brière, from the establishment of the benefits to the notice of overpayment, had been done under the Unemployment Insurance Act and with respect to benefits that were established for the swindler himself, who had, moreover, admitted his crime.

[33]       No such thing was done in this case, or, in the words of Marceau J.A. in Brière, we do not have a "hybrid situation" here. Worse still, at this stage here, there is no "thief" whom we can legally characterize as such and no "recipient" who had the benefits in question paid to himself or herself in that capacity under the Old Age Security Act.

[34]       Since section 37 of the Act does not apply in this case, it is self-evident that section 27 of the Regulations, in its current or previous version, cannot apply either.

[35]       I therefore conclude that, in the circumstances of this case, the Minister could not rely on subsection 9(5) and section 37 of the Act to suspend payment of the pension and recover the amount owed by set-off.

3.        Mandamus

[36]       Mandamus is an appropriate remedy in this case. The appellant, whose eligibility is not contested, is entitled to his pension. The Minister, who has an obligation to pay him the pension, is illegally refusing to do so. The requirements for granting mandamus have been met (see Apotex Inc. v. Canada (Attorney General), [1994] 1 F.C. 158 (C.A.), at pages 182 et seq.). The Department argued that, instead, the appellant should have contested the Minister's decision to suspend in September 1996, or the decision to recover by set-off in April 1998. Even if it had been possible at the time to successfully challenge those decisions, the fact remains that today the appellant still has that right, the Minister has the obligation, the Minister is refusing to perform it, and the most expeditious and secure method available to the appellant is mandamus.

[37]       To conclude on this point, I will refer to section 32 of the Act, which was reproduced earlier. At this point, the Minister must be satisfied that, as a result of erroneous advice, the appellant has been denied benefits to which he would have been entitled. The Minister must take the necessary action to place the appellant to the position he would be in, had an administrative error not been made. The action that must be taken is to reinstate the pension forthwith and repay the benefits that were suspended, with interest.

The Investigation

[38]       I would add that even if the Minister had the authority under the Old Age Security Act to do what he did, in this case, the exercise of that authority was so inconsistent with the rules of administrative law that any decision by the Minister to suspend or deny payment or to recover by set-off would be invalid on its face.

[39]       Given that the Assistant Deputy Minister has even expressly denied the appellant the right to be heard and to have access to the case assembled against him, we have no choice but to conclude, in light of the evidence before us, that the investigation was, for all practical purposes, conducted without the appellant's knowledge. We also have no choice but to conclude that since, according to the Minister, the administrative investigation is still going on, no final decision can yet have been made, no debt owed to Her Majesty can yet have been established, and no set-off can yet have been carried out.

[40]       If, on the other hand, the Minister is of the view, despite what he says, that the investigation has been concluded and the decision has been made, that decision has still not been communicated to the appellant, who does not know the basis for it, and he is in no position whatsoever to challenge that decision even if it is obviously invalid.

Disposition

[41]       For these reasons, I am of the opinion that the appeal should be allowed, the decision of the Trial Judge set aside and the application for a writ of mandamus granted. I would order the Minister of Human Resources Development Canada to reinstate the pension payable to the

appellant forthwith and to repay the benefits that have been withheld from the appellant since September 1996, with interest. Costs to the appellant at trial and on appeal.

                                                                                                                                           "Robert Décary"                              

                                                                                                                                                                  J.A.

"I concur with these reasons.

     Alice Desjardins, J.A."

"I concur with these reasons.

     Marc Noël, J.A."

Certified true translation

Sophie Debbané, LL.B.

                                                    FEDERAL COURT OF APPEAL

                                                          SOLICITORS OF RECORD

COURT FILE NO.:                           A-47-00                         

STYLE OF CAUSE:                           Roger Whitton v. Attorney General of Canada

PLACE OF HEARING:           Montréal, Quebec

DATE OF HEARING:                       January 15, 2002

REASONS FOR JUDGMENT:       Robert Décary, J.A.       

CONCURRED IN BY:                      Alice Desjardins, J.A.

Marc Noël, J.A.

DATE OF REASONS:                       February 5, 2002

APPEARANCES:

Lise Ferland                                                                                    FOR THE APPELLANT

Nadia Hudon                                                                                   FOR THE RESPONDENT

SOLICITORS OF RECORD:

Ferland, Ouellet, Proulx                                                                 FOR THE APPELLANT

Montréal, Quebec

Morris Rosenberg                                                                           FOR THE RESPONDENT

Deputy Attorney General of Canada