Executive Summary: Key Legal and Evidentiary Issues

• CRA rejected invoices as insufficient proof of self-employment income without explaining why.

• Officer relied on bank statements despite context of cash-based payments.

• Failure to consider CERB Guidelines allowing invoices as acceptable proof.

• Inadequate assessment of applicant’s cleaning expenses and their impact on net income.

• Decision lacked contextual analysis of applicant’s personal and business circumstances.

• Court found reasoning circular and lacking a rational chain of analysis, rendering it unreasonable.

Facts and outcome of the case

Background
Fatana Mursal Khairy, a Canadian resident since 2015, applied for and received the Canada Emergency Response Benefit (CERB) from April to September 2020, totaling $14,000. Her income before applying came from hourly cleaning work for a bakery and other clients, occasional childcare services, and temporary positions through an employment agency, Altis HR. Much of her earnings were in cash. In 2023, the Canada Revenue Agency (CRA) reviewed her eligibility and concluded she had not met the requirement of earning at least $5,000 in employment or net self-employment income in 2019 or in the 12 months before applying. The CRA’s October 7, 2024 decision required her to repay the benefits.

CRA’s decision
The CRA officer rejected her invoices as insufficient proof without explaining why, suggesting other records such as a registered business number, contracts, or advertising materials would be needed. The officer also cited discrepancies between bank deposits and invoiced amounts, and uncertainty in calculating cleaning expenses. The officer concluded it was not possible to verify her net self-employment income met the $5,000 threshold.

Judicial review
Ms. Khairy challenged the decision, arguing that her invoices should have been accepted under the CRA’s CERB Guidelines and that the officer failed to consider her circumstances as a small, cash-based business operator. The Federal Court applied the Vavilov reasonableness standard and found the CRA’s decision deficient. The Court noted the officer gave no intelligible reason for rejecting the invoices, failed to consider evidence from the bakery and Altis HR, and adopted circular reasoning by requiring bank statements to verify invoices while dismissing the invoices for not aligning with those same bank statements. The Court also found that even the CRA’s highest estimated expenses still left her net income above the eligibility threshold.

Outcome
The Federal Court granted the judicial review, set aside the CRA’s decision, and remitted the matter to a different officer for redetermination. No costs or damages were awarded. Ms. Khairy was therefore the successful party, though the Court did not declare her eligible for CERB outright.