How Rotfleisch & Samulovitch Undertook a Judicial Review of CERB, CRB (COVID-19) Benefits for a Self-Employed Musician—and Triumphed Over CRA

Case Overview:

The client was a self-employed musician who applied in good faith for a number of COVID-19 benefits released by the Federal Government of Canada, including the Canada Emergency Response Benefit (“CERB”) and Canada Recovery Benefit (“CRB”). The musician’s business was almost entirely halted due to COVID-19 lockdown restrictions on public performances.

The Canada Revenue Agency had initiated a review of the musician’s entitlement to those benefits. The musician’s benefits were denied at first review and second review because the musician purportedly failed to satisfy the minimum threshold of $5,000 in net income prior to the beginning of the COVID-19 pandemic.

However, the Canada Revenue Agency agents reviewing the musician’s case failed to provide a meaningful time to respond to requests and provided no reasons for rejecting the musician’s supporting documents showing at least $5,000 in net income during the relevant periods. The Canada Revenue Agency’s attempts to reach the musician were limited to a handful of phone calls.

The musician self-filed a Notice of Application for judicial review with the Federal Court, but mistakenly filed supporting evidence with those pleadings. The musician subsequently missed the deadline to serve supporting documents for that judicial review Application. Rotfleisch & Samulovitch was retained to bring the Application back on track, and to preserve the musician’s legal rights.

The Problem:

The Minister of National Revenue is granted the authority under law to verify an applicant’s eligibility for the CERB and CRB. If the Minister of National Revenue determines a person was not entitled to receive an income support payment, the Minister can choose to deny eligibility for those benefits. The Canada Revenue Agency exercises these powers on the Minister’s behalf.

Discretionary decisions of the Minister can be challenged by way of judicial review to Federal Court. With judicial review, the Federal Court is not responsible for reconsidering, reweighting, or reassessing information reviewed by a decision-maker.  Rather, the Federal Court must evaluate if the decision made was reasonable after weighing the rationale provided by a decision-maker against available evidence. The Federal Court is also empowered to protect the procedural fairness of a review process. If a decision was unreasonable or a proceeding was procedurally unfair, the Federal Court can “quash” that decision, and send the case back for a redetermination. The Federal Court cannot make a decision for the Minister and can only require the Minister to reconsider the matter with additional guidance.

Judicial review is a fast process. Within 30 days of filing a Notice of Application, the Applicant must serve and file any affidavits and supporting evidence. Failing to meet any deadlines under the Federal Courts Rules can result in an Application being dismissed. And the right to extend deadlines is very limited.

Our Approach

Our Canadian tax litigation lawyers immediately contacted the Department of Justice Canadian tax lawyer assigned to our client’s file, and negotiated an extension of time to serve the client’s affidavit and supporting evidence.

We also undertook a thorough review of the client’s evidence, and filed a Rule 317 Request to obtain the full tribunal record reviewed by the Canada Revenue Agency agents who denied the client’s benefits. On reviewing those materials, it was discovered those agents had never actually contacted the client as suggested in their file notes. The client could produce phone records corroborating that phone calls purportedly made by the Canada Revenue Agency’s agents had never occurred, and that purported voicemails had never been left at the client’s phone number. While the evidentiary record at judicial review is usually constrained to what the decision-maker had available at the time, this evidence highlighted procedural defects not found in the tribunal record and was admissible.

We then immediately pushed for a settlement with the Department of Justice to have our client’s file sent back for a new review by an independent agent. We executed the Minutes of Settlement to obtain a new review, and filed a Notice of Discontinuance with the Federal Court shortly after, ending the Application.

The Result

The client’s file was sent back for a redetermination on its merits, with a new opportunity to submit supporting documents and to respond to further requests for information. In doing so, the musician was saved the full costs of a hearing before the Federal Court, while obtaining the exact remedy our client sought.

Lessons Learned

1. Federal Court timelines for judicial review are unforgiving. Always make sure deadlines are met.
2. The certified tribunal record is crucial for any judicial review case. The Federal Court rarely considers fresh evidence at a judicial review hearing. All supporting documents that can be submitted should be submitted on time during the initial review process to develop the tribunal record early.
3. A hearing is not always required to win. Settlement can present a path to victory for a fraction of the cost.
4. Do not undertake court proceedings without at a minimum advice from a tax lawyer and generally without fully retaining a lawyer to act on your behalf.