Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on eligibility for Canada Recovery Benefit based on interpretation of net vs. gross self-employment income.

• Applicant claimed gross income over $5,000 but CRA required proof of net income as per statutory definition.

• CRA determined net self-employment income for relevant years was negative, disqualifying the applicant.

• Judicial review assessed whether the CRA’s decision met the legal standard of reasonableness under the Vavilov framework.

• Court held there was no evidence supporting applicant’s claim of an agreement with CRA to retain some payments.

• Applicant’s misunderstanding of eligibility rules, though shared by others, did not alter the binding statutory requirements.

Facts and outcome of the case

Irina Morozova, a self-employed interior designer, applied for and received the Canada Recovery Benefit (CRB) for several eligibility periods during the COVID-19 pandemic. The CRB was intended to provide financial assistance to workers affected by the pandemic. Ms. Morozova’s entitlement to the benefit came under review by the Canada Revenue Agency (CRA), which found she had failed to prove the necessary minimum of $5,000 in net employment or self-employment income. While she submitted gross income invoices totaling over $5,000, the CRA emphasized that the statutory definition under the Canada Recovery Benefits Act (CRBA) requires income to be calculated net of expenses.

Multiple reviews were conducted by the CRA between 2021 and 2022. Despite opportunities to submit further documentation, Ms. Morozova’s net self-employment income was shown to be negative in both 2019 and 2020. She challenged the CRA’s interpretation of the income threshold, asserting that the requirement had shifted mid-program from gross to net income. She also claimed to have reached an informal agreement with a CRA officer to retain earlier payments if she conceded later ineligibility.

The Federal Court rejected Ms. Morozova’s arguments. Justice Simon Fothergill clarified that the CRBA had always required net income, and that any confusion arising from CRA guidance did not supersede the statutory definition. The Court found no evidence of an enforceable agreement between the applicant and CRA officers and ruled that the decision to deny CRB was reasonable. The application for judicial review was dismissed, no damages or costs were awarded, and the case was formally concluded with the respondent styled as the Attorney General of Canada rather than the CRA.