Executive Summary: Key Legal and Evidentiary Issues

• Judicial review concerned whether a Canada Revenue Agency (CRA) benefits officer reasonably denied Vickie Ste-Marie’s entitlement to 27 periods of the Canada Recovery Benefit (PCRE) based on income-eligibility concerns.

• Central evidentiary dispute focused on whether corrected information about Ste-Marie’s 2019 self-employment income, including a revised T2125 adjusting vehicle expenses, established that she met the $5,000 minimum income threshold.

• The court held that the CRA officer failed to deal fairly with the request to suspend the second-level review to allow filing of an amended 2019 tax return and a corrected T2125, undermining procedural fairness.

• The decision was found unreasonable because it did not adequately explain why the T2125 and accountant’s information could not, at least prima facie, support eligibility for the PCRE income requirement.

• Statutory and policy context—PCRE as emergency social-support legislation and the Income Tax Act’s allowance for amended returns—favoured a more flexible and purposive approach to errors in prior tax filings.

• Remedy granted was to set aside the CRA decision and remit the matter to a different CRA benefits compliance officer, with Ste-Marie given a fixed period to submit additional supporting documents, and no costs awarded.

Facts and outcome of the case

Background and the Canada Recovery Benefit

The case involves Vickie Ste-Marie, a self-employed worker who applied for and received the Canada Recovery Benefit (Prestation canadienne de relance économique, PCRE) for multiple two-week periods between 27 September 2020 and 23 October 2021. The PCRE was created under the Loi sur les prestations canadiennes de relance économique to provide temporary income support to employees and self-employed individuals directly affected by the COVID-19 pandemic, subject to meeting an income threshold of at least $5,000 from designated sources over specified pre-benefit periods. Ste-Marie’s applications were initially approved automatically, and benefits were paid without a contemporaneous validation by a CRA officer.

Initial CRA review and overpayment decision

On 4 August 2022, the CRA selected Ste-Marie’s file for review to determine whether she had in fact been eligible for the PCRE for the claimed periods. During this first review, she did not submit documents to support her entitlement. On 10 August 2022, a CRA officer concluded she was ineligible for all requested PCRE periods and issued a notice of debt for approximately $24,578, representing alleged overpayments. Ste-Marie only learned of this recovery notice on 30 October 2023, at which time she contacted the CRA, explained she had not seen the earlier correspondence, and requested that CRA communications be sent by paper mail because she did not routinely use her online account.

Second-level review and the accountant’s involvement

Ste-Marie then pursued a second-level review through her accountant, Charles Duchesne. On 4 January 2024, he submitted a request for reconsideration along with an explanatory income table covering the relevant 12-month period before the start of her PCRE claims. Duchesne and his firm communicated by telephone with the CRA benefits compliance officer (the “officer”) in November 2024. They explained that Ste-Marie’s former accountant, who had since died, had made an error in her 2019 tax return, specifically on form T2125 (Statement of Business or Professional Activities) dealing with vehicle expenses. According to Duchesne, all vehicle costs—including personal-use amounts—had been placed as fully deductible business expenses in the wrong section of the T2125. When he recalculated the 2019 business income by properly allocating vehicle expenses based on business kilometres, the net business profit rose to about $8,690 instead of roughly $4,515, which would put Ste-Marie above the $5,000 income threshold relevant to PCRE eligibility. Duchesne indicated that he intended to correct Ste-Marie’s 2019 tax return and asked the officer to hold or suspend the second-level review to permit the filing of this amended return.

Communication issues over the T2125 and the CRA decision

The officer acknowledged in her own affidavit and in internal CRA notes that Duchesne raised the misstatement of vehicle expenses and that she requested a copy of the T2125 for 2019. The internal notes recorded that Duchesne said “any government agent” would see the error in the expenses and that he would fax the T2125 the same day. The notes also show that the officer understood she was awaiting documents to validate the income. Duchesne’s evidence was that he asked that the file be put on hold so the corrected T2125 and amended return could be prepared. There was some confusion about exactly which version of the T2125 the officer expected, but she ultimately received only the original T2125 showing net self-employment income of about $4,515, not the corrected version. Without clearly responding to the requested suspension or offering a defined opportunity to file the amended form, the officer proceeded to decide the second-level review on 5 December 2024. She concluded that, because the corrected T2125 had not yet been filed and because the alleged prior accounting error did not, in her view, make Ste-Marie retroactively meet the $5,000 net income criterion, Ste-Marie remained ineligible for all 27 PCRE periods. The CRA then issued a written decision on 7 January 2025 maintaining the earlier overpayment determination.

Legal framework and standard of review

Ste-Marie brought an application for judicial review in the Federal Court against the Attorney General of Canada, representing the CRA. The key issue was whether the CRA officer’s decision on the second-level review was reasonable and whether the process respected procedural fairness. The court applied the presumptive standard of reasonableness to the merits of the administrative decision, consistent with the Supreme Court’s framework in Vavilov, while analysing procedural fairness as a separate question, without deference, focused on whether Ste-Marie had a fair opportunity to present her case and respond to the evidence in light of the consequences for her. The broader statutory context also mattered: the PCRE legislation is remedial social-benefit legislation aimed at providing rapid income support to those affected by the pandemic, while the Income Tax Act permits taxpayers to amend prior returns, including to correct honest mistakes in deductions or income reporting.

Assessment of procedural fairness and reasonableness

The court viewed the dispute as arising largely from a misunderstanding between Duchesne and the CRA officer about the timing and nature of the T2125 the officer expected. Both acknowledged that a T2125 for 2019 was to be provided by the end of the day of their telephone discussion, but Duchesne’s uncontroverted evidence was that he asked for the file to be put on hold so that a corrected T2125 and amended return could be prepared. The court accepted this version and found that the officer, at minimum, ought to have answered whether the reconsideration would be suspended and explicitly given Duchesne a meaningful chance to submit the corrected T2125 that she herself had indicated she needed. On the substantive side, the court held that the impugned decision lacked adequate justification. The officer did not explain why, in the circumstances and with an identified good-faith accounting error, the existing T2125 and explanatory information could not at least provisionally support the conclusion that Ste-Marie had earned more than $5,000 in self-employment income. The officer’s bare statement that asserting a past accounting error “does not” make the claimant meet the threshold was found to be insufficient in light of the remedial purpose of the PCRE scheme and the tax law’s express recognition that returns can be corrected after filing. These gaps rendered the decision both procedurally unfair and substantively unreasonable.

Ruling and overall outcome

The court allowed the application for judicial review brought by Vickie Ste-Marie against the Attorney General of Canada. It set aside the CRA officer’s decision denying Ste-Marie’s entitlement to the PCRE and remitted the matter to a different CRA benefits compliance officer for a fresh determination. As part of the remedy, the court directed that Ste-Marie be given 30 days from the date of judgment to file any additional documents she considers necessary to support her eligibility, including any amended tax documents. No damages were awarded, and the court ordered that the matter proceed without costs in favour of any party.