Executive Summary: Key Legal and Evidentiary Issues

• The CRA’s decision was challenged for lacking intelligibility and justification under the Vavilov framework.

• Applicant claimed to have reimbursed the $2,000 CERB advance by returning an uncashed EI cheque to Service Canada.

• CRA failed to address the Applicant’s core submission or explain why the reimbursement was insufficient.

• Service Canada confirmed receipt of the returned EI advance payment, but the CRA did not consider its relevance.

• No evidence existed that the Applicant owed Service Canada any funds, raising questions about the rationale for reimbursement demands.

• Court found that the CRA’s reasoning did not meet standards of transparency, justification, or responsiveness.

Facts and outcome of the case

Creusa Souza applied for Employment Insurance (EI) benefits at the onset of the COVID-19 pandemic, covering March 15 to April 11, 2020. During the same period, she also applied for and received a $2,000 advance payment under the Canada Emergency Response Benefit (CERB) by direct deposit. This overlap in benefit claims led the Canada Revenue Agency (CRA) to later determine that she was ineligible for CERB because she had concurrently received EI benefits, which is not permitted under the Canada Emergency Response Benefit Act.

In response, Souza explained that she had been confused about the eligibility requirements and believed she had resolved the issue by returning the $2,000 EI advance payment—received via cheque and never deposited—back to Service Canada. She contended that this act effectively reimbursed the federal government for the CERB amount received. However, the CRA insisted that she still owed repayment for the CERB payment and did not address her submission or provide reasons for rejecting the reimbursement approach she described.

The Federal Court found that the CRA’s decision was unreasonable, primarily because it did not meaningfully engage with Souza’s explanation or the underlying facts she presented. The Court emphasized that the CRA had failed to explain why her returned EI payment could not be applied as a reimbursement for the CERB advance. Furthermore, the agency did not demonstrate that the returned cheque addressed a separate debt or why it could not offset the CERB amount. As a result, the Court quashed the CRA’s decision and sent the matter back for redetermination.

Justice Régimbald concluded that the decision lacked the required justification, transparency, and intelligibility expected under administrative law principles established in Vavilov. The application for judicial review was granted without costs. The CRA was directed to reconsider Souza’s submission, particularly whether the returned cheque to Service Canada could satisfy her repayment obligation to the CRA for the CERB advance.