Federal Court Sets Aside CRA Decision Due to Consumer Proposal Oversight

OUTCOME: Allowed

Date: 20260703 Docket: T-3280-25 Citation: 2026 FC 896 Toronto, Ontario, July 3, 2026 PRESENT: Madam Justice Whyte Nowak BETWEEN: [APPELLANT] Applicant and ATTORNEY GENERAL OF CANADA Respondent

REASONS AND

JUDGMENT I. Overview [ 1 ] Between March 2020 and August 2021, the Applicant, [APPELLANT] [Applicant], applied for and received the Canada Emergency Response Benefit [CERB], Canada Recovery Benefit [CRB] and Canada Recovery Sickness Benefit [CRSB] [collectively, the Benefits]. After he received the Benefits, the Applicant became insolvent and made a [NAME] proposal under subsection 66.13(1) of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 [ BIA ], which was accepted. A year later, an officer of the Canada Revenue Agency [[NAME]] initiated a review of the Applicant’s eligibility for the Benefits and in a second-level review decision dated July 22, 2025 [Decision], a second officer [Officer] found the Applicant ineligible for the Benefits. [ 2 ] For the more detailed reasons that follow, I find that the Decision is unreasonable as the Officer failed to consider whether the Decision is “an action for the recovery of a claim provable in bankruptcy,” which therefore acted as a constraint on its issuance by virtue of the stay of proceedings that apply to [NAME] proposals under subsection 69.2(1) of the BIA . [ 3 ] This application is therefore granted and shall be remitted back to the [NAME] for redetermination.

II. Facts A. The Applicant’s [NAME] proposal [ 4 ] The Applicant says that he earned an income in late 2019 and early 2020 as an import/export consultant. According to his affidavit, his consulting earnings dwindled during the COVID-19 [COVID] Pandemic, and he failed to find other employment. [ 5 ] The Applicant applied for and received the Benefits which consisted of: (i) CERB from March 15, 2020 to September 26, 2020; (ii) CRB from September 27, 2020, to August 14, 2021; and (iii) CRSB from November 8, 2020, to November 14, 2020. The Applicant believed that he was eligible for the Benefits when he applied for them. [ 6 ] After he received the Benefits, the Applicant became insolvent and filed for a [NAME] proposal under subsection 66.13(1) of the BIA in November 2023. The Applicant’s [NAME] proposal was accepted two months later. [ 7 ] Screen captures from the [NAME]’s [NAME] case specific notes/reports [[NAME]] show that the Applicant’s case was “on hold due to bankruptcy” from March 29, 2023, through February 2, 2024. B. The [NAME]’s review of the Benefits [ 8 ] By letter dated February 27, 2024, the [NAME] issued an Initial Contact Letter [ICL] to the Applicant informing him that he would need to provide documentation to confirm his eligibility for the Benefits he received. The ICL specifically asked the Applicant to show that he earned at least $5,000 in 2019, 2020, 2021 or in the 12 months before the date he applied for the Benefits. C. The first level decision [ 9 ] On July 4, 2024, a [NAME] officer [[NAME]] conducted a review of the Applicant’s file. [NAME] noted that no additional documentation was received and determined the Applicant was ineligible for the Benefits because he had not shown that he earned the requisite $5,000 of income in 2019 or in the 12 months preceding his application for the Benefits and there were gaps in the information required to verify his eligibility. No mention was made of the Applicant’s [NAME] proposal or the bankruptcy “hold” that had been noted in the [NAME]. [ 10 ] The Decision was communicated to the Applicant by letter dated July 19, 2024 [First Level Decision. D. The Decision [ 11 ] The Decision dated July 22, 2025, found the Applicant ineligible for the Benefits as the Applicant did not meet the requisite income requirements. The T1Case notes indicate that despite the Employer’s Letter, further documents like invoices, receipts or paystubs with coordinating bank statements, were required to validate the $5,000 in foreign income. The Applicant also needed to confirm if he was residing in Canada and if he was working and stopped due to COVID.

III. Issues and Standard of Review [ 12 ] While the Applicant raised a number of issues going to the reasonableness and fairness of the Decision, I find that a single issue related to the reasonableness of the Decision is dispositive of the application. [ 13 ] The parties agree that the standard of review for the first two issues is reasonableness as that standard is articulated in Canada (Minister of Citizenship and Immigration) v [NAME] , 2019 SCC 65 at paragraphs 16-17 [ [NAME] ]. [ADDRESS] must consider whether the Decision, including both its rationale and its outcome, read in light of the history and context of the proceedings are based on an internally coherent and rational chain of analysis justified in relation to the facts and law that constrain the decision maker ( [APPELLANT] at paras 85, 94).

IV. Analysis [ 14 ] The Applicant argues that the Decision is unreasonable as the [NAME] failed to adhere to the constraints imposed by subsection 69.2(1) of the BIA which limited the [NAME]’s authority to issue the Decision (citing [NAME] at para 68) . [ 15 ] Subsection 69.2(1) of the BIA reads as follows: Stay of proceedings — [NAME] proposals Suspension des procédures en cas de dépôt d’une proposition de [NAME] 69.2 (1) Subject to subsections (2) to (4) and sections 69.4 and 69.5, on the filing of a [NAME] proposal under subsection 66.13(2) or of an amendment to a [NAME] proposal under subsection 66.37(1) in respect of a [NAME] debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy until 69.2 (1) Sous réserve des paragraphes (2) à (4) et des articles 69.4 et 69.5, entre la date de dépôt d’une proposition de [NAME] aux termes du paragraphe 66.13(2) ou d’une modification de la proposition aux termes du paragraphe 66.37(1) et son retrait, son rejet ou son annulation — effective ou présumée — ou la libération de l’administrateur, les créanciers n’ont aucun re cours contre le débiteur [NAME] ou ses biens et ne peuvent intenter ou continuer aucune action, exécution ou autre procédure en vue du recouvrement de réclamations prouvables en matière de faillite. (a) the [NAME] proposal or the amended [NAME] proposal, as the case may be, has been withdrawn, refused, annulled or deemed annulled; or En blanc (b) the administrator has been discharged. En blanc [ 16 ] Nowhere in the Decision does the Officer address the impact of the Applicant’s accepted [NAME], despite the notation in the [NAME] that the Applicant’s case had been “on hold due to bankruptcy.” Nor did the Officer consider subsection 69.2(1) of the BIA , and whether the issuance of the Decision could be considered to be “an action for the recovery of a claim provable in bankruptcy.” [ 17 ] The Respondent submits that the Applicant engaged with the review process and did not raise the stay of proceedings with the Officer or take any objection to the Decision being made. This argument has no merit. Decision makers do not get to choose whether to follow the governing legislative scheme; rather, they must adhere to the legal constraints imposed by statute, which “dictate the limits and contours of the space in which the decision maker may act and the types of solutions it may adopt.” ( [NAME] at paras 90, 106, 108, and 111). [ 18 ] I therefore find that the Decision is unreasonable as the Officer failed to consider whether subsection 69.2(1) of the BIA imposed a constraint on the issuance of the Decision. [ 19 ] Neither party was able to cite to any judicial authority which has considered whether the [NAME] is barred by subsection 69.2(1) of the BIA from making a determination of eligibility for CERB, CRB or CRSB benefits in circumstances where the taxpayer is subject to a [NAME] proposal. Given that administrative decision makers are intended to hold “the interpretative upper hand,” this will be the task of another officer of the [NAME] on redetermination and not the Court on this application ( [NAME] v Canada (Citizenship and Immigration) , 2025 SCC 21 at para 46).

V. Costs [ 20 ] While the Applicant has sought his costs, I do not consider this an appropriate case for a special cost award given that the Applicant is a self-represented litigant ( [APPELLANT] v Canada , 2003 FCA 173 at paras 5-6) and this application involved a novel question.

VI. Conclusion The Decision is not reasonable as the Officer failed to consider whether its issuance was prohibited by subsection 69.2(1) of the BIA. The application is therefore granted.

JUDGMENT in T-3280-25 THIS COURT’S

JUDGMENT is that: The application for judicial review is granted, and the decision of the Canada Revenue Agency dated July 22, 2025, is hereby set aside and remitted to another officer for redetermination; and There shall be no award of costs. Blank “Allyson Whyte Nowak” Blank Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-3280-25 STYLE OF CAUSE: [APPELLANT] v ATTORNEY GENERAL OF CANADA PLACE OF HEARING:

HELD BY WAY OF ZOOM VIDEOCONFERENCE DATE OF HEARING: MAY 19, 2026

REASONS AND

JUDGMENT: WHYTE NOWAK J. DATED: JULY 3, 2026 APPEARANCES : [APPELLANT] FOR THE APPLICANT (ON HIS OWN BEHALF) [APPELLANT] FOR THE RESPONDENT SOLICITORS OF RECORD : Attorney General of Canada Edmonton, Alberta FOR THE RESPONDENT