Executive Summary: Key Legal and Evidentiary Issues

• CRA's Second Review found the Applicant ineligible for 22 of 27 periods of the Canada Recovery Benefit due to an alleged failure to demonstrate a 50% income reduction caused by Covid-19

• Disregarding key evidence that border closures and reduced international travel directly impacted the Applicant's immigration consulting and translation businesses was deemed unreasonable

• Attribution of the Applicant's income decline to childcare responsibilities rather than the pandemic's effect on her businesses lacked transparency and intelligibility

• Employer paychecks and bank statements corroborating the Applicant's income were dismissed without adequate explanation, contrary to CRA's own policy on confirming Covid-19 benefits eligibility

• New evidence introduced during proceedings was admitted as it pertained to procedural matters rather than the underlying decision

• The Federal Court allowed the judicial review and remitted the matter for redetermination by a different CRA agent, without costs

Background and facts of the case

Masoumeh Kafshgarsouteh, a self-represented litigant, sought judicial review before the Federal Court of Canada of a decision made by the Canada Revenue Agency on April 12, 2024. The CRA had determined that she was ineligible for 22 of the 27 periods during which she received the Canada Recovery Benefit, a pandemic-era income support program for individuals adversely affected by Covid-19. The CRB required beneficiaries to show that, for reasons related to the pandemic, they were either not working or self-employed at the time of receiving the CRB, or had experienced a 50% drop in their average weekly income compared to the previous year under the Canada Recovery Benefits Act, SC 2020, c 12, s 2, s 3(1)(f). Between September 27, 2020 and October 9, 2021, Ms. Kafshgarsouteh applied for and received 27 instalments of the CRB. At the time, she had transitioned from working for an immigration consulting company to becoming self-employed, running her own translation and immigration consulting businesses from home. Her businesses relied on international tourists and students, and she primarily received payment through cash, cheque, or e-transfer.

The CRA review process

In a letter dated September 12, 2022, the CRA notified Ms. Kafshgarsouteh that her CRB eligibility was under review and invited her to submit supporting documents. Following an initial determination in a letter dated May 8, 2023 that she was ineligible, she requested a second review. From May 23, 2023 to February 9, 2024, Ms. Kafshgarsouteh submitted additional documents. These included letters describing her work during the relevant period, letters from her childcare provider specifying the dates on which they were closed, periodic paychecks from her previous employer from December 2019 to January 2021, invoices and expenses for her immigration consulting and translating businesses from various periods, and bank statements from October 2019 to September 2021. Several phone calls between Ms. Kafshgarsouteh and the reviewing CRA agent also took place. During those calls, she stated that her husband had stayed at home during the Covid-19 pandemic to take care of their two young children, and that while she was working from home, she also took care of their children — specifically, she sometimes had to make them lunch or help them with school when their daycare or school was closed.

The CRA's Second Review decision

In a letter dated April 12, 2024, the CRA determined that Ms. Kafshgarsouteh was ineligible for 22 of the 27 CRB periods. The letter stated that she was not working for reasons unrelated to Covid-19 and that she did not face a 50% reduction in her average weekly income compared to the previous year. The CRA's internal notes and report stated that there was insufficient documentation to include Ms. Kafshgarsouteh's income from her previous employer and that she had reduced income because she was caring for her children, not because of Covid-19.

The Court's analysis on the failure to engage with key submissions

Justice Ahmed found the Second Review's reasons unintelligible. The Court determined that the CRA failed to grapple with Ms. Kafshgarsouteh's central arguments — conveyed through both letters and phone calls — that her income loss was caused by Covid-19's impact on her businesses. Both letters she wrote to the CRA explained the impact of the pandemic on her translation and immigration consulting businesses due to border closures and decreasing international permit applications. At the hearing, she further explained that the closed borders during the pandemic greatly reduced tourism and allowed international students to avoid obtaining permits through pursuing online studies. She also noted that the pandemic affected her translation business because it restricted newcomers to Canada, who were her main clientele. The CRA agent had summarized her statements regarding Covid-19's impact on her business and confirmed that she continued to look for work throughout the pandemic. Despite this, the Second Review simply noted that Ms. Kafshgarsouteh "had the added responsibility of taking care of her two young children" to conclude her income was reduced for reasons unrelated to Covid-19. Although she readily admitted having to intervene on occasion to help settle her young children or make them lunch, she emphasized that her husband was the one who applied for benefits to take care of the children and that she "was trying hard to promote [her] immigration services while managing the kids at the same time." At the hearing, she submitted that her husband tried to keep their children focused on their online schooling during the pandemic while she spent long hours at her computer studying or looking for clients. The Court noted that this conclusion appeared to "apply a punitive effect on parents cooperating in taking care of their children during a chaotic time" and cited the precedent in Fentum v Canada (Attorney General), 2023 FC 857 at paragraph 20, where a CRB eligibility decision was found unreasonable because it disregarded evidence showing that the applicant had stopped working because Covid-19 had impacted his field of work as to prevent him from starting new employment.

The Court's analysis on documentary evidence

The Respondent conceded that the CRA's analysis regarding Ms. Kafshgarsouteh's eligibility for the CRB in Periods 7 and 8, from December 20, 2020 to January 16, 2021, was unreasonable because it failed to explain its findings of insufficient documentation in light of the bank statements and invoices for this period. The Court agreed, citing Yousof v Canada (Attorney General), 2023 FC 349 at paragraphs 25 and 35, which held that disregarding documents listed in the CRA's policy on Confirming Covid-19 Benefits Eligibility, such as bank statements, purporting to show the beneficiary's income without explanation is unreasonable. The Court went further, finding that the CRA also unreasonably disregarded the cheques from Ms. Kafshgarsouteh's employer from 2020 to 2021. She had provided cheques with dates, her name, the employer's name, and a description of the payment as a "paycheck" ranging from December 2019 to January 2021, along with bank statements from October 1, 2019 to September 30, 2021. Many of the amounts specified on the cheques corresponded to amounts deposited in her bank account around the same time. The CRA agent's notes simply stated that Ms. Kafshgarsouteh "lacks sufficient documentation" to prove her income from her previous employer, which the Court found lacked transparency.

Preliminary and procedural issues

The Court addressed several preliminary matters. The Style of Cause was amended to reflect the Attorney General of Canada as the proper Respondent rather than the CRA, pursuant to Rule 303 of the Federal Court Rules, because the decision under review was made by the CRA on behalf of the Minister of Employment and Social Development. Certain new documents introduced by Ms. Kafshgarsouteh were admitted as they related to procedural issues in the application rather than the underlying decision, consistent with the framework in Association of Universities and Colleges of Canada v Canadian Copyright Licensing Agency (Access Copyright), 2012 FCA 22 at paragraph 20. The Court also found the Respondent's deponent's affidavit admissible, as the deponent had reviewed the internal notes and was familiar with Ms. Kafshgarsouteh's case, which was sufficient to establish personal knowledge under Rule 81(1) of the Rules. The Court found no obstruction during the cross-examination. Additionally, the Court did not share Ms. Kafshgarsouteh's view that she was treated harshly, noting there was no evidence on the record to show discriminatory treatment or selective enforcement. The CRA agent had allowed her additional time to submit documents when she had a medical procedure in late January 2024, and a CRA agent spoke multiple times with her on the phone to clarify the process.

Ruling and outcome

Applying the reasonableness standard from Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, the Honourable Mr. Justice Ahmed found that the CRA's Second Review lacked the hallmarks of reasonableness — justification, transparency, and intelligibility. The application for judicial review was allowed in favour of Ms. Kafshgarsouteh, and the matter was remitted for redetermination by a different CRA agent. No exact monetary amount was awarded or ordered, as the decision pertained to the applicant's eligibility for benefit periods rather than a damages claim. The Court made no order as to costs.