519-646-2222CERB and CEBA overpayments
This is a follow up on several blogs we have written, over the past two years, regarding the treatment of CERB and CEBA overpayments in insolvency proceedings. As we had previously blogged, the Trudeau Regime tried to pass an omnibus bill that would have effectively criminalized the receipt of funds the recipient was not entitled too. Fortunately, the Regime was caught in the act and the opposition was able to reject the Bill.
It would appear that the treatment of these funds has caused concern among some Licensed Insolvency Trustees leading to the Office of the Superintendent of Bankruptcy issuing recent guidance and clarification:
March 25, 2022
The Government of Canada is beginning to recover Canada Emergency Response Benefit (CERB) where it has been determined that it was paid erroneously or was an overpayment. The Office of the Superintendent of Bankruptcy (OSB) is confirming to Licensed Insolvency Trustees (LIT) that erroneous or overpayment of CERB are provable claims in bankruptcy.
Erroneous or overpayment of CERB is a releasable debt in the event of an insolvency given that it is to be treated as a debt owed to the Crown pursuant to subsection 13(2) of the Canada Emergency Response Benefit Act (CERBA). An erroneous or overpayment of CERB does not automatically constitute a debt that survives discharge under section 178 of the Bankruptcy and Insolvency Act (BIA) because any allegation made regarding section 178 of the BIA must be proven in accordance with the BIA. (See Re: Coyle.) Lastly, the claim provable date would be the date that the CERB payment was made to the insolvent person.
A collector fro the CRA, the agency responsible for collecting these accounts, had previously advised my office that they were not even collecting outstanding amounts. Presumably they were waiting to see if the Regime would be able to push legislation through.
In order for these amounts to survive a bankruptcy or proposal the Regime would have to prosecute the debtor and prove a fraud. Although some financial dealings may appear to be fraudulent because the recipient received something they ought not have, there is more to proving fraud than errors or omissions, there must also be intent.
Fraud must be proved by showing that the defendant’s actions involved five separate elements: (1) a false statement of a material fact(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.
These elements contain nuances that are not all easily proved. First, not all false statements are fraudulent. To be fraudulent, a false statement must relate to a material fact. It should also substantially affect a person’s decision to enter into a contract or pursue a certain course of action. A false statement of fact that does not bear on the disputed transaction will not be considered fraudulent.
For more information about dealing with CERB or CEBA overpayments call us at 519-646-2222