CITATION: Jennings v. Minister of Social Services of Ontario, 2015 ONSC 6689
DIVISIONAL COURT FILE NO.: 266/14
DATE: 20151028
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, SACHS and D.L. CORBETT JJ.
B E T W E E N:
DARRELL JENNINGS
Mr Jennings, self-represented
Appellant
- and -
MINISTER OF SOCIAL SERVICES
Mimi Singh, for the Respondents
and DIRECTOR of ONTARIO
DISABILITY SUPPORT
Respondents
HEARD at Toronto: February 24, 2015
DECISION
D.L. Corbett J.:
[1] Darrell Jennings appeals the decision of the Social Benefits Tribunal upholding the decision of the Director, Ontario Disability Support Program, cancelling his income support and assessing him with an overpayment of $25,712.30 on the basis that Mr Jennings:
(a) failed to declare his income and assets as required, and
(b) did not meet financial eligibility criteria because of his income and assets.
[2] The Tribunal’s decision is based upon fundamental misapprehensions of the evidence, including that:
the Tribunal found that Mr Jennings did not disclose his real estate partnership when he applied for benefits through Ontario Works in December 2009, even though Mr Jennings did make this disclosure;
the Tribunal found that Mr Jennings did not disclose the sale of his partnership interest in July 2011. There is evidence that Mr Jennings did make this disclosure. This evidence was given no weight by the Tribunal as a result of its unfair adverse finding of credibility against Mr Jennings;
the Tribunal found that Mr Jennings received $22,115 in rental income in 2010 when Mr Jennings, in fact, had $5,085 in taxable rental income and actually received none of it in 2010. These facts were consistent with Mr Jennings’ disclosure from the outset; and
the Tribunal found that Mr Jennings received net cash proceeds of $90,000 when he sold his partnership interest in July 2011, and did not disclose this receipt. Mr Jennings received net cash proceeds of about $84,010, had further debts of about $82,000 to offset those proceeds, and, on the evidence, did disclose these matters.
[3] The Tribunal based its findings largely upon its reading of documents such as Mr Jennings’ 2010 income tax return, and Ontario Works’ documents from Mr Jennings’ intake meeting. The Tribunal found that these documents were inconsistent with Mr Jennings’ oral evidence. This finding seems explicable only if the Tribunal does not understand that partnership property and income is, for tax purposes, property and income of the partners. This misunderstanding seems the only rational basis for the Tribunal’s finding that Mr Jennings’ evidence was inconsistent with the documentary evidence. Mr Jennings’ evidence was consistent with the written record and there does not appear to be any basis for disbelieving him on these points.
[4] The Tribunal’s findings seem even less explicable when, having rejected Mr Jennings’ evidence that he disclosed his income and assets to Ontario Works from the outset, it also placed no weight upon Ontario Works’ own determination that Mr Jennings did make this disclosure to it at the outset.[^1] I prefer to see the Tribunal’s findings reflecting a tunnel vision based on its fundamental misunderstanding of the nature of a legal partnership, a misunderstanding apparently encouraged by the Director’s representative, who argued at the hearing that Mr Jennings’ investment was “an asset not a business”, as if this was a valid distinction in this case.[^2] In any event, the Tribunal’s findings of fact and credibility are so deeply flawed that the appeal must be allowed, the entire decision set aside and the matter remitted back to the Director for fresh determinations in accordance with these reasons.
Part I – Facts and History of the Case
(a) Background
[5] Mr Jennings was born in 1964 with spina biffida. He had surgery at three months of age to remove growths and to reconstruct his lower spine. This surgery succeeded; Mr Jennings led a normal life, attended school, and entered the workforce. He supported himself and contributed to the support of his family without social assistance throughout his adult life, aside from a one year period in the late 1990’s when he received benefits due to a work-related accident. When he recovered and re-entered the workforce, he repaid the benefits he had received.[^3]
[6] Mr Jennings carried on business as a sole proprietor in the construction and renovation business. In around 2006, on the advice of his accountant, he incorporated this business under the name The Work Works Inc.
[7] Mr Jennings also entered into a venture with Peter Vrzovski, who was also Mr Jennings’ landlord. This was a partnership registered under the name Petrell Investments. Petrell’s business was to purchase, renovate, and rent out residential property.
[8] Petrell purchased a house at 124 Carlaw Avenue in Toronto. Mr Jennings did, and paid for, renovations to convert the property to a duplex and to upgrade it. Mr Jennings received credit for these costs as between himself and Mr Vrzovski.
[9] Petrell received rental income. This income was used to pay expenses associated with the property (including mortgage payments). Net income, after expenses, was retained in Petrell’s bank account and not distributed to Messrs Jennings and Vrzovski.
(b) Mr Jennings Becomes Disabled
[10] In late October, 2009, Mr Jennings was hospitalized with sudden and severe onset of neurological disorders related to his spina biffida and tethered cord syndrome. He was unable to work. At about the same time, Mr Jennings’ spouse was laid off from her job at Weston’s Bakery. By December, the Jennings’ liquid resources had been depleted.
[11] Mr Jennings applied for income support under the Ontario Disability Support Program Act, 1997.[^4] Ontario Works’ records show the process followed by Mr Jennings and the information provided by him in support of his application for benefits.
(c) Mr Jennings Applies for Benefits
[12] Mr Jennings initiated his application with a call to Ontario’s Social Services Intake Triage Call Centre on December 14, 2009. Notes from the Call Centre show that Mr Jennings described his financial situation in some detail, including:
“has 50% ownership of a registered business” and
“is supposed to be receiving rental income each month from his business clients/tenants but hasn’t received anything in over a year”.[^5]
Mr Jennings was told that he appeared to be eligible for Ontario Works benefits. An Initial Service Interview was scheduled for him with a specialist intake worker experienced in ODSP applications, and he was told to bring various documents with him to support his claim.
[13] This initial meeting took place on December 22, 2009. Mr Jennings brought his documents with him and provided them to his intake worker, including:
(i) Master Business License for Petrell Investments, a business described as a general partnership in the business of real estate rentals. Mr Jennings was described as a 50% partner.[^6]
(ii) Petrell Investments Partnership Agreement.[^7]
(iii) Mr Jennings’ 2008 tax return.[^8]
(iv) business income tax filings, articles of incorporation for The Work Works Inc., business bank accounts, credit card statements, and other financial documents, and a direction to Petrell’s accountant to release information.[^9]
[14] On the basis of his situation and this disclosure, Mr Jennings needed benefits immediately to meet his day-to-day living expenses, but he also had assets and deferred income (his interest in Petrell and deferred rental income retained in Petrell).
[15] The intake worker was not sure how to address this property and deferred income. She consulted with a supervisor. She returned and advised Mr Jennings that he would have to dispose of his business property (Petrell), but that in the meantime he was eligible for Ontario Works benefits. A one-time exemption of property would apply pending disposition of the business assets.[^10] The intake worker’s notes describe this disclosure:
Client declares to own 50% of Petrell Investments Ltd. with Peter Vrzovski. The purpose of the partnership is to purchase and rent investment properties. The principal place of business is 532 Eastern Ave. [Mr Jennings’ residential address, the terms of his rental of which are described earlier in the intake worker’s notes]. Each partner has contributed to the capital of the partnership, in cash or property. Please see Partnership Agreement – in file. Client is self-employed – he is owner of The Work Works Inc. which is a renovation property….[^11]
[16] Mr Jennings was granted Ontario Works benefits[^12] and his application for ODSP benefits was commenced. He was told, correctly, that there was one intake process for both Ontario Works and ODSP.[^13]
(d) Mr Jennings Sells His Partnership Assets
[17] Mr Jennings was told by Ontario Works that he would have to dispose of his interest in Petrell Investments.[^14] His partnership agreement with Mr Vrzovski provided for dissolution of the partnership upon disability of one of the partners.[^15] Mr Jennings spoke with Mr Vrzovski and persuaded him to cooperate in a sale of the partnership property and winding up of the partnership.
[18] Petrell entered into an agreement to sell its property to Black Marlin Investments Corporation with a scheduled closing date of September 17, 2010, for a gross purchase price of $450,000.[^16] Although the agreement was dated in May, it was agreed on June 21, 2010. Closing of the transaction was extended several times at the request of the purchaser. The transaction did not close, and when the purchaser requested a further eighteen month extension, the transaction was aborted in February 2011.
[19] Following termination of the transaction with Black Marlin, Mr Vrzovski agreed in principle to buy out Mr Jennings’ interest in the partnership. This was not entirely amicable: the partnership agreement provided for sale in these circumstances, and Mr Jennings hired a lawyer, Peter Carlisi, to threaten legal action if Mr Vrzovski did not move ahead with purchase of Mr Jennings’ interest in the property.[^17] Draft agreements of purchase and sale were generated in April 2011, with an anticipated closing date on May 18, 2011.[^18] This closing was delayed at the instance of Mr Vrzovski. The transaction finally closed on July 7, 2011.[^19]
(e) The Sale Transaction
[20] At the time of the sale, Mr Jennings had debts of about $82,000.[^20] The sale price of his interest was $137,755.[^21] This was payable on the basis of gross proceeds of $90,000, plus a vendor take-back mortgage of $47,755, payable at $1,000 per month over 48 months, interest-free.[^22]
[21] From gross cash proceeds of $90,000 were deducted transaction costs of $1,239.72[^23] and $4,750 paid to the Family Responsibility Office to retire support arrears owed to Mr Jennings’ former spouse.[^24] This left Mr Jennings with net cash proceeds of $84,010.28 from the sale.[^25] These proceeds were paid into a separate bank account, according to Mr Jennings on the advice of an ODSP worker, and disbursed to settle debts in the following six months in consultation with the same ODSP worker, Ms Rona McColman.[^26] The Tribunal made no findings in respect to this evidence, and gave no reasons for making no findings in respect to this evidence.
Part II - Decisions Respecting Mr Jennings’ Claims for Benefits
(a) Mr Jennings Eligible for OW Benefits from December 2009
[22] As noted above, Mr Jennings was found eligible and received Ontario Works benefits from December 2009.
(b) Mr Jennings Eligible for ODSP Benefits from June 2010 to July 2011
[23] On December 22, 2009, Mr Jennings applied for income support as a person with a disability under the ODSPA. Mr Jennings was initially found medically ineligible for ODSP benefits. He appealed this decision to the Social Benefits Tribunal. His appeal succeeded. By decision dated May 31, 2011, Mr Jennings was found to be eligible medically to receive income support. He was found to be eligible financially for this income support in July 2011, retroactive to June 2010.[^27] His financial ineligibility for ODSP benefits prior to June 2010 was not contested by Mr Jennings and is not an issue in this proceeding.[^28]
[24] On July 21, 2011, Mr Jennings was provided with a retroactive payment for ODSP arrears of $10,700.94, the difference between what he had received from Ontario Works and what he was entitled to receive from ODSP for June 2010 to July 2011.[^29]
(c) Mr Jennings Retroactively Ineligible for ODSP Benefits Back to June 2010
[25] In January 2012, Mr Jennings’ ODSP caseworker requested information regarding his finances for the previous three years. On February 1, 2012, affirmed on March 19, 2012, the Director suspended Mr Jennings’ income support pending review of Mr Jennings’ financial information.[^30]
[26] In February 2012, the Director received a report from Canada Revenue Agency showing gross rental income of $22,115 in 2010. The respondents characterize the next events in the following way in their factum:
In March 2012, [Mr Jennings] disclosed to the ODSP caseworker that he had co-owned an investment property with Petrell Investments that had been sold in July 2011 for $137,750.00. [Mr Jennings] further indicated that he had received $90,000.00 in cash, and took back a mortgage of $47,750.00, which generated payments of $1,000.00 a month.[^31]
[27] On March 9, 2012, the Appellant was assessed with an overpayment in the amount of $25,712.30 for the period June 2010 to January 2012.[^32] On March 20, 2012, Mr Jennings’ income support was cancelled effective February 29, 2012.[^33]
[28] The reasons given for assessing an overpayment were stated generally:
(i) Change in asset amount that is available to you
(ii) Income exceeds maximum allowable amount;
(iii) Change in your shelter costs;
(iv) Change in assistance due to change in circumstances;
(v) Change in the status of the benefit unit;
(vi) Change in income amount that you receive;
(vii) ODSPA, ss. 5, 14(1) and 16(4), O. Reg. 222/98, ss. 27, 31, 32, 33, 37, 38.[^34]
[29] Two reasons were given for terminating Mr Jennings’ income support:
(i) his income was too high to receive ODSP income because the income Mr Jennings receives from the take-back mortgage is more than the amount he could receive from ODSP, and
(ii) he and his wife had more assets than they were allowed to have as a couple. The most they could have and still qualify is $7,500, and the Director calculated his assets at $9,394.92.[^35]
[30] Both decisions were upheld on internal review.[^36]
(d) The Tribunal Upholds Mr Jennings’ Ineligibility for ODSP Benefits Going Back to June 2010
[31] Mr Jennings appealed these decisions to the Social Benefits Tribunal, which upheld the decisions in a ruling dated February 6, 2014.[^37] The Tribunal’s decision was upheld on reconsideration. The reconsideration decision is conclusory and adds nothing to the reasons of the Tribunal.[^38] It is the decision from the Social Benefits Tribunal which is the subject-matter of this appeal.
Part III – Mr Jennings’ Dealings With OW and ODSP
[32] The history of decisions provides context for understanding the course of dealings between Mr Jennings and OW and ODSP. As stated above, the initial intake process was through OW. When OW found Mr Jennings eligible for benefits, it assigned a case worker to his file. Mr Jennings dealt with this case worker pending ODSP’s eligibility decision. Initially, ODSP found Mr Jennings ineligible medically and so ODSP did not assign a case worker to Mr Jennings. Mr Jennings appealed successfully but not until May 2011. It then remained for ODSP to determine whether Mr Jennings was eligible financially for ODSP benefits. This decision was not rendered until July 2011. And so to July 2011, there was no ODSP case worker assigned to Mr Jennings’ file for him to deal with on a day-to-day basis.
[33] From December 2009 to July 2011, Mr Jennings’ day-to-day dealings were with OW and not ODSP. The file transitioned to ODSP after its favourable eligibility decision in July 2011. Mr Jennings described the transition as follows:
[Mr Jennings] attended at the local Ontario Works Office on June 13, 2011 with a copy of the Tribunal Decision [allowing his appeal and finding he was medically eligible for ODSP benefits]. At that time Ms. Carryl [the OW case worker] told [Mr Jennings] that she would begin the transfer arrangements including the copy and transfer of the complete Ontario Works file to ODSP. It was explained that from that point on [Mr Jennings] was under ODSP and would be contacted by an ODSP worker from the 385 Yonge St. office. All future contact was to be with that office. [Mr Jennings] was effectively in administrative limbo waiting for the change over (sic) at this time.[^39]
[34] In July 2011, Mr Jennings dealt with an ODSP case worker, Ms Rona McColman to pick up his ODSP cheque. Mr Jennings says that he told Ms McColman about the sale of his partnership interest and that she told him to deposit the proceeds into a separate account and keep detailed records of his disbursal of these funds, directions that would not make sense if she did not know about the sale.[^40] Mr Jennings also says that he dealt regularly with Ms Ridgely of OW and gave her “hundreds of pages of documents… from August 2011 to March 2012.”[^41] Mr Jennings acknowledges that there is no case note of these dealings, but also notes that there is a “black hole of nothing” in the ODSP case record for about six months after his transition from OW to ODSP which, he says, establishes not that he failed to make disclosure but that the Director failed to keep appropriate records. Mr Jennings points to his conduct in establishing a dedicated bank account to receive the net sale proceeds, and his meticulous documentation of the debts paid from those proceeds as circumstantial evidence that he was directed to take these steps by Ms McColman.[^42] Mr Jennings made his position on these issues clear well in advance of the Tribunal hearing, and the only evidence to the contrary at the hearing was the absence of internal ODSP records verifying Mr Jennings’ claims.
[35] Finally, it seems clear that Mr Jennings considered the take-back mortgage an “exempt asset” and apparently believed that mortgage payments solely on account of capital were similarly exempt. Mr Jennings was correct that the mortgage, itself, was an “exempt asset”. The revenue he received from the mortgage, however, was not exempt, and was properly considered “income” in Mr Jennings’ hands when it was received.
[36] An ODSP case worker, Twyla McDougall, was assigned to the file in the late December, 2011, and it was Ms McDougall who requested financial information going back three years.[^43] Mr Jennings provided the requested information, even though much of it duplicated materials provided previously. Ms McDougall concluded that Mr Jennings had been hiding rental income in 2010, and had not made disclosure of his partnership interest prior to its “discovery” as a result of her investigations. On the basis of this “discovery” it seems clear that the case worker believed that she had discovered a fundamental deception by Mr Jennings, going to the very heart of his entitlement to benefits. She formed a conclusion that he had substantial partnership assets and undisclosed income from those assets dating back to the commencement of his ODSP benefits in June 2010.
[37] On the record, Mr Jennings had OW case workers up until June 2011. Then his file was to be transitioned to ODSP. He dealt with Ms McColman, but Ms McColman was not his assigned ODSP case worker. He dealt with Ms Ridgely, who was an OW employee conducting a review of Mr Jennings eligibility for OW benefits. Mr Jennings did not have a regular ODSP case worker until Ms McDougall was assigned to his file in December 2011. The Record of Proceedings does not disclose ODSP or OW electronic records of interactions between Mr Jennings and either Ms McColman or Ms Ridgely. In all of the circumstances it seems almost certain that there were some such dealings. The absence of ODSP electronic records in the Record of Proceedings is more persuasive of gaps in the records than an absence of such dealings. Mr Jennings has given evidence of these dealings.
Part IV – Issues on Appeal
[38] Mr Jennings raises numerous issues on appeal. But really there is only one set of issues: did the Tribunal misapprehend the evidence respecting (a) Mr Jennings’ disclosure of his interest in Petrell; (b) the income received by Mr Jennings from Petrell prior to his sale of that asset in July 2011; (c) Mr Jennings’ disclosure of the sale transaction in July 2011; and (c) the effect of the sale transaction on Mr Jennings’ financial eligibility for ODSP benefits after the sale transaction.
Part V - Analysis
(a) Jurisdiction of this Court and Standard of Review
[39] This is an appeal under the ODSPA from the Social Benefits Tribunal. An appeal lies from that decision to this court on a question of law.[^44]
[40] Counsel for the respondents argues in her factum that the standard of review of the Tribunal’s decision is correctness on questions of law.[^45] I agree for the reasons given by this court at paragraphs 42-45 in Fournier v. Ontario.[^46]
[41] An error of law arises if the Tribunal interprets a statutory provision incorrectly, applies a wrong legal test or principle, fails to apply an applicable legal principle or applies it incorrectly, ignores relevant factors or relies upon irrelevant ones, disregards, misapprehends or fails to appreciate relevant evidence, or makes a finding of fact on no evidence.[^47]
However, where a tribunal completely misapprehends the evidence or completely fails to take relevant and important evidence into account, this constitutes an error of law….[^48]
(b) The Legal Framework for Mr Jennings’ Benefits Claims
[42] Social assistance is delivered in Ontario through the ODSPA and the Ontario Works Act (“OWA”).[^49] The ODSPA provides for monthly income support to eligible persons with disabilities. The OWA provides temporary financial assistance to eligible non-disabled applicants attempting to obtain employment. ODSP is administered by the Ministry of Community and Social Services; OW is administered by municipalities.
[43] Both ODSP and OW are means-tested programs. The amount a recipient is entitled to receive under ODSP in any month is based on his or her income, together with an amount for shelter, up to prescribed maximums. Paragraph 5(1)(c) of the ODSPA provides:
No person is eligible for income support unless,
(c) the budgetary requirements of the person and any dependants exceed their income and their assets do not exceed the prescribed limits, as provided for in the regulations….
[44] Section 27(1) of the General Regulation under the ODSPA prescribes asset limits:
The prescribed limit for assets for a benefit unit, for the purposes of clause 5(1)(c) of the Act is equal to the sum of,
(a) $5,000
(b) $2,500 if there is a spouse included in the benefit unit; and
(c) $500.00 for each dependant other than a spouse.
[45] Section 28(1) 17. of the Regulation provides that:
[f]or the purposes of s.27, the following assets are not included assets: an interest in real property of an applicant… if the person with an interest in the real property is making reasonable efforts to sell his or her interest.
[46] Section 37 of the Regulation provides:
(1) Subject to sections 38 to 43, income shall be determined for a month by adding the total amount of all payments of any nature paid to or on behalf of or for the benefit of every member of the benefit unit during the period determined by the Director.
(2) For the purpose of subsection (1), income shall include the monetary value of items and services provided to the members of the benefit unit as well as amounts of income deemed to be available to members of the benefit unit.
(3) A payment made to a person made with respect to a number of months shall be applied to those months.
[47] A recipient is required to disclose his financial information to be eligible for benefits, and has a duty to advise the Director of changes in his financial status. Subsection 9(1) of the ODSPA provides:
If an applicant or recipient fails to comply with or meet a condition of eligibility, the Director shall, as prescribed, do one of the following:
reduce or cancel the income support… for the benefit of the person who has failed to comply
suspend the income support or suspend that part of it for the benefit of the person who has failed to comply.
[48] Section 12(1) of the Regulation provides:
The Director shall determine that a person is not eligible for income support if the person fails to provide the information the Director requires to determine initial or ongoing eligibility for income support including information with respect to
(a) new or changed circumstances.
(c) Findings of the Tribunal
[49] The Tribunal characterized the issues before it as follows:
… the appeals… arise out of this property [124 Carlaw Avenue], specifically about when the Appellant informed the Director about his property ownership, its sale in July 2011, and his income related to the property.[^50]
[50] The Tribunal found that “[t]he Appellant agreed that his tax return for 2010 shows a gross rental income of $22,115.00 in that year”.[^51] The Appellant agreed that the gross rents for the partnership were in this amount. He did not agree that he received gross rents in this amount.
[51] The Tribunal stated that Mr Jennings “also agreed that in July 2011, he sold his half of the property for $137,755.00, receiving $90,000.00 in cash and taking back a mortgage receivable of $47,755.00, payable at $1,000.00 per month since July 2011.”[^52] This is not entirely correct. The $137,755.00 represented the sale proceeds net of the mortgage on the property. The $90,000.00 was subject to transaction costs and the charge in favour of the Family Responsibility Office; the “cash” received by Mr Jennings was $84,010.28.
[52] The Tribunal made no findings about Mr Jennings’ alleged debts of about $82,000 as of July 2011. The Tribunal gave no reasons for failing to consider and decide this issue. The Director advised the Tribunal at the hearing that he had no issue with Mr Jennings’ claimed debts or the use of net proceeds of sale of the partnership interest to discharge those debts.[^53]
[53] The Tribunal found as follows:
Because [Mr Jennings] testified that he had informed Ontario Works about his rental property, the Tribunal has carefully reviewed his six page intake application for Ontario Works dated December 30, 2010. Within that form [Mr Jennings] reported he had a 50% interest in a partnership whose purpose was to purchase and rent investment properties (page six). However, he also indicated no monthly rental income (page 4) and no ‘real property other than Principal Residence’ (page 5). In addition he promised to inform Ontario Works ‘of any change of circumstances relevant to the assistance provided’ (page 6). What has emerged since then is that [Mr Jennings] received rental income in 2010 of $22,115.00 as indicated by his 2010 tax return, and he owned a half interest in a property which was not his principal residence. It may be that [Mr Jennings] eventually informed Ontario Works of these facts, but clearly he did not report his income and assets to Ontario Works at the time of his application. Therefore, the Tribunal gives little weight to [Mr Jennings’] testimony that he informed Ontario Works about his income and assets because he clearly did not do that when he applied.[^54]
These findings are simply wrong – both in their particulars and in their general tenor. Mr Jennings disclosed to OW a 50% interest in a partnership that owned real property. He told OW about 124 Carlaw Avenue. He told OW that the property generated rent, but that none of the rent was received by him. Mr Jennings did not receive rental income of $22,115 in 2010. The partnership received gross rents, before expenses, of $22,115 in 2010. It had expenses of $11,944.68. It had net rental income of $10,170.32. Mr Jennings’ share of that income was $5,085.16. This was the amount of net rental income showed on Mr Jennings’ 2010 tax return. This income was retained in the partnership and netted against prior partnership losses. This information is plain on the face of the very document the Tribunal relied upon to come to the conclusion that Mr Jennings received $22,115 in rent in 2010.[^55] The Director argued before the Tribunal that Mr Jennings was trying to claim partnership expenses against net income after-the-fact.[^56] There is no basis in the record for such an argument: the expenses were claimed against income on the face of the very tax return upon which the Director relied to establish gross income.
[54] The Tribunal then found:
[Mr Jennings] may have eventually informed Ontario Works [about the property] at some future date, but the Tribunal gives no weight to eventually informing Ontario Works whenever that occurred because informing Ontario Works is not the same as directly informing the Ontario Disability Support Program.[^57]
Mr Jennings did not “eventually” inform Ontario Works. He informed Ontario Works from the outset. And Ontario Works has, itself, made this express finding:
It has been determined that you did declare 50% ownership of Carlaw Avenue at the time of the application.[^58]
The Tribunal, in finding that disclosure to Ontario Works at the outset is not disclosure to ODSP, is again simply wrong. The intake is a unified process; documents filed at the outset do not have to be refiled and are available to ODSP personnel. Mr Jennings was told this when he applied, the ODSP manuals and literature for clients say so, and the Tribunal provided no authority for its unequivocal statement to the contrary. Section 18 of the ODSPA Regulation provides:
… if, within one year before applying for income support, an applicant had previously applied for income support or for basic financial assistance under the Ontario Works Act, 1997, the Director may accept the previous application and supporting documentation as an application for income support and may require additional information and supporting documentation to make the application complete and up to date.
That is what happened here. There is simply no basis for the Tribunal’s finding that initial disclosure of information and documents to OW was not disclosure to ODSP.
[55] The Tribunal notes, correctly, that accurate and timely reporting of assets and income “is the backbone of Ontario’s social assistance programs” and states that this fundamental point “clearly guides the Tribunal to support the Director’s position.”[^59] The Tribunal then goes on to conclude that Mr Jennings is “a very capable person” who “demonstrated a clear knowledge of process and legislation” who “clearly… understood the need to report income and assets along with any changes.”[^60] The Tribunal found that Mr Jennings’ position that “there was no need for him to inform the Director separately when he had already informed Ontario Works borders on the ridiculous.”[^61] It was not ridiculous. It was correct, at least until the time at which there was a change of circumstances, upon sale of the property in July 2011. I conclude that the Tribunal misapprehended the evidence in coming to its conclusion that Mr Jennings failed willfully to discharge his disclosure obligations and had effectively set out to deceive the Director. The Tribunal’s finding clearly “guided” it “to support the Director’s position”, and cuts to the very heart of the Tribunal’s decision.
[56] Net partnership earnings are taxable in the hands of the partners in the year in which they are earned, whether they are distributed to the partners or not. Here, the undisputed evidence is that rents received by Petrell were not distributed to the partners, but instead were retained in the partnership pending final reconciliation of partnership accounts. Thus they were part of the assets in the partnership that were reconciled and paid out to Mr Jennings after sale of his interest in July 2011. Mr Jennings’ tax return is not evidence inconsistent with his testimony that the rents were retained in the partnership and not distributed in the year in which they were earned and in respect to which they were taxed. Further, the amounts noted by the Tribunal were stated to be “gross rents” and not net rental income. The Tribunal misapprehended the evidence in concluding otherwise on the basis of the tax return.
[57] The Tribunal clearly confused the concept of “income” for the purposes of the Income Tax Act and “income” for the purpose of the ODSPA. They are not the same. As noted above, “income” in s.37 of the ODSPA Regulation refers to all payments made to or to the benefit of an applicant. The concept is based on receipt of money. It does not, for example, distinguish between capital and income in the manner in which this distinction is drawn in the Income Tax Act. Undistributed partnership income could be considered money paid “to the benefit” of an applicant, but not necessarily. Where, as here, Mr Jennings did not control the decision about distribution of partnership net income, and did not actually receive the money, or any benefit from the money, prior to July 2011, the only reasonable conclusion is that this was not income for ODSP purposes until it was received following the sale in July 2011. In any event, the Tribunal did not consider the true nature of these events and place a particular characterization on them; it misconstrued the facts and concluded that Mr Jennings was actually in receipt of money when he was not.
[58] It is a factual question whether Mr Jennings was making “reasonable efforts” to sell his interest in Petrell. The Tribunal did not make findings on this point. The record discloses that Mr Jennings acted reasonably in his efforts to sell his partnership interest:
(a) Mr Jennings was told in December 2009 that he would have to sell his interest in Petrell;
(b) Mr Jennings followed this instruction and proactively sought a sale culminating in a sale agreement in June 2010. That sale did not close through no fault of Mr Jennings’ and the transaction was aborted in February 2011;
(c) Mr Jennings then compelled a sale of his interest to his business partner and this transaction closed in July 2011;
(d) The delays in selling the property were not caused by Mr Jennings and he derived no benefit from them;
(e) Mr Jennings received no money from the partnership between the time he applied for ODSP benefits in December 2009 and closing of the sale in July 2011.
[59] The Tribunal’s finding that Mr Jennings did not report the sale transaction when it happened in July 2011 is premised primarily on its negative findings of credibility against Mr Jennings, findings based on a fundamental misapprehension of the evidence. For this reason alone it cannot stand.
[60] We do not have factual findings from the Tribunal on central aspects of Mr Jennings’ argument to have reported the sale transaction. It makes no findings on the “black hole” of any electronic records during the period, the effect of the transition from OW to ODSP on Mr Jennings’ reporting relationships with OW and ODSP, the absence of any evidence adduced by the Director’s representative in respect to the dealings between Mr Jennings and Ms McColman and Ms Ridgely during this period (even though the Director was on notice of Mr Jennings’ evidence on these points well in advance of the hearing). The Tribunal does not consider the circumstantial evidence that Mr Jennings did set up a segregated bank account and tracked his debt payments meticulously, steps that would not seem to have been necessary except for the purpose of accounting for them to the Director. And, of course, the Tribunal did not consider the circumstantial evidence that Mr Jennings did disclose his partnership assets at the outset, and as a matter of common sense, must have known that he would be called upon to account for them at some point.
(d) The Way Forward
[61] Mr Jennings’ entitlement to benefits after the sale transaction must be calculated on the basis of that transaction, as and when it took place. Its business terms are not in dispute. The Director takes no issue with Mr Jennings’ capital proceeds from the transaction or with his disbursal of those proceeds. There is no issue as to what mortgage proceeds have been received by Mr Jennings since the sale, or when he received them. This calculation will determine the amount of any overpayment since that time, and that should be an end to the matters at issue in this application. It is time to move on.
[62] On the record, there seems no doubt that Mr Jennings suffers from a serious and permanent disability. This puts him in a long-term relationship with the ODSP Director and his personnel. For many years Mr Jennings was a hard-working, contributing person, who now finds himself in need of benefits. He has had a difficult time obtaining those benefits. First he was denied eligibility on medical grounds. This was not rectified until roughly eighteen months after he applied for ODSP. Then his benefits were clawed back from the outset of his entitlement as a result of the impugned decisions from the Tribunal, a result that is only now being rectified, nearly six years after he applied for benefits.
[63] On the other hand, the Director and his staff have a difficult and important task to administer an important aspect of Ontario’s social welfare regime. They are required to take a hard look at cases to ensure that benefits are paid where appropriate, but not otherwise. Serious mistakes were made in this case, but that is not a basis for the very serious personal attacks Mr Jennings levels against ODSP personnel in his materials before us.
[64] The Director and his staff need to move forward on the basis that Mr Jennings is a person with a serious disability whose claim should be assessed on its merits, and not on the basis that he is a liar and a cheat. Mr Jennings needs to move forward on the basis that the Director and his staff have an important job to ensure that benefits are calculated accurately, on the basis of the evidence, and he should to avoid inferring bad faith when a decision goes against him.
[65] Both sides should move forward on the basis that the task is now not to lay blame and make accusations, but to calculate entitlement on the basis of past events that are not in material dispute.
Summary and Conclusions
[66] Mr Jennings owned a 50% interest in a partnership that owned a piece of real property. That property generated gross rents for the partnership. These rents were retained in the partnership and not distributed to the partners pending adjustment of accounts between the partners.
[67] Mr Jennings disclosed these facts to Ontario Works at the time of his application for benefits from Ontario Works and ODSP in December 2009.
[68] Mr Jennings was given a one-time exemption in respect of the partnership property by Ontario Works and told to dispose of the partnership property.
[69] Mr Jennings understood that this exemption also applied for the purposes of ODSPA. This understanding was correct, on the basis of s.28(1)17. of the ODSPA Regulation. Mr Jennings understood that he had to take reasonable steps to liquidate his interest in the partnership property. He discharged this obligation in the attempts to sell the property to Black Marlin, and the steps he took to compel his business partner to purchase his interest in the properties in July 2011.
[70] The proceeds of sale of the partnership property ceased to be exempt property when they were received, in July 2011. The cash proceeds received in July 2011 were capital and were to be netted against Mr Jennings’ liabilities for the purpose of determining his net assets.
[71] In the result, the Tribunal erred in upholding the Director’s decision to assess an overpayment of $25,712.30 for the period June 2010 to January 2012. There was no overpayment for the period June 2010 to July 2011. On the record, the overpayment assessed for this period was $15,894.30.[^62]
[72] There is no way to confirm whether Mr Jennings’ entitlement was calculated accurately for August 2011 to February 2012. On the Director’s calculation, the overpayment amount is $9,818.00. On Mr Jennings’ calculation, the overpayment amount is $145.94.[^63] It appears that the Director’s calculation is based upon a presumption that Mr Jennings was entitled to no benefits because of non-disclosure rather than a calculation of his entitlement on the basis of the usual criteria for financial eligibility, although it is not clear that this is the case. It appears that Mr Jennings’ calculations are based, at least in part, on characterizing accelerated mortgage payments as something other than monthly income. So it may well be that neither side’s calculations are correct.
[73] As noted above, the Tribunal made adverse findings of credibility against Mr Jennings, based on its conclusion that he had failed to disclose his assets and income from the outset. This finding of credibility strikes to the heart of the Tribunal’s finding that Mr Jennings did not disclose the transaction in July 2011. And it strikes to the heart of the Tribunal’s decision to affirm the Director’s calculations in the post-2011 period. It may be that the Director’s calculations are correct; it may be that Mr Jennings’ calculations are correct. It may be that the answer lies somewhere in between. It is not possible for this court to decide these issues on the record before us, and the Tribunal’s findings on these points cannot stand when they rest on a fundamentally flawed determination that Mr Jennings is unworthy of belief.
[74] I do not comment on specific findings made by the Tribunal respecting accounting from August 2011, aside from its correct decisions to treat the monthly mortgage payments of $1,000 as income for ODSP purposes and to allocate the $3,000 lump sum mortgage payment as it did. The Tribunal’s adverse credibility findings against Mr Jennings, and, indeed, its belittling of his position on the major issues in the appeal, leaves the Tribunal’s findings on other points related to proper calculations unsafe. These issues will have to be decided anew, by a fresh case worker not previously assigned as a case worker to Mr Jennings’ case. If the case returns to the Social Benefits Tribunal in future, it should not be before the Member who decided this matter below.
Decision and Order
[75] The decision of the Tribunal is set aside. The overpayment assessed by the Director is set aside. It is ordered that there was no overpayment for the period June 2010 to July 2011. The questions of (a) the amount of any overpayment after July 2011, and (b) Mr Jennings’ eligibility for ODSP benefits and the amount of benefits to which he was entitled from July 2011, are remitted to the Director for decision.[^64]
[76] Mr Jennings has prevailed and shall have his disbursement costs, fixed at $700 inclusive, payable by the respondents within thirty days.
D.L. Corbett J.
Swinton J.
Sachs J.
Released: 20151028
CITATION: Jennings v. Ontario (Min. of Social Services), 2015 ONSC 6689
DIVISIONAL COURT FILE NO.: 266/14
DATE: 20151028
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, SACHS and
D.L. CORBETT JJ.
B E T W E E N:
DARRELL JENNINGS
Appellant
- and –
THE MINISTER OF SOCIAL SERVICES
and DIRECTOR OF ODSP
Respondents
JUDGMENT
D.L. Corbett J.
Released: 20151028
[^1]: Ontario Works Internal Review Decision, Record of Proceedings, p.552. [^2]: Record of Proceedings, p.458. [^3]: Note Detail, May 26, 2006, Record of Proceedings, vol. 1, p. 194. [^4]: Ontario Disability Support Program Act, 1997, SO 1997, c.25, Schedule B (the “ODSPA”). [^5]: Record of Proceedings, p.196. See also Record of Proceedings, pp.103 and 347, where Mr Jennings’ interest in Petrell is recorded in OW’s intake database as “Financial Interest in Business”. [^6]: Record of Proceedings, p.245. [^7]: Record of Proceedings, pp. 249-255. [^8]: Record of Proceedings, pp. 301-342. [^9]: The case notes from the intake meeting disclose that these documents were provided at the initial intake interview: Record of Proceedings, p.196. [^10]: See the note following direction from the supervisor: “Capital contributions to Petrell Investments Ltd. to be addressed. Client may be required to liquidate the business partnership.” Record of Proceedings, p.343. [^11]: Record of Proceedings, p.196. [^12]: Ontario Works Act, 1997, SO 1997, c.25, Schedule A. Record of Proceedings, p.343: “OWA granted as of 14/12/2009.” [^13]: See, for example, Mr Jennings’ extensive references to reports from Ontario’s Auditor General, assessing the common data system for OW and ODSP: Appellant’s Application for Reconsideration, pp. 3-5, Record of Proceedings, vol. 1, pp. 17-19. This characterization was not challenged by the Respondents in their materials. [^14]: Record of Proceedings, p.343. [^15]: Partnership Agreement, para. 28, Record of Proceedings, p. 252. [^16]: Record of Proceedings, p.397. [^17]: Mr Jennings’ Submissions to the Tribunal, para. 51, Record of Proceedings, p.153. [^18]: Mr Jennings’ Submissions to the Tribunal, para. 51, Record of Proceedings, p.153. Mr Jennings included copies of initial drafts of the agreement of purchase and sale with Mr Vrzovski in his application record, but these do not appear to have been included in the record before the Tribunal. The appeal to this court is on the basis of the record before the Tribunal: ODSPA, s.31(2); ODSPA Regulation, s.71(1). [^19]: Reporting letter from Korman & Company dated July 7, 2011, Record of Proceedings, p.263. [^20]: Record of Proceedings, pp. 256-7. These debts do not appear to include the obligations to the Family Responsibility Office paid from gross proceeds of sale, described in paragraph 21 of this decision. Mr Jennings calculates his family net assets in July 2011 at $1,952.40 after receipt of the net proceeds of sale of his partnership interest: Record of Proceedings, p.257. [^21]: Agreement of Purchase and Sale, Record of Proceedings, pp. 265-272. [^22]: Vendor take-back mortgage, Record of Proceedings, pp. 290-292. [^23]: Legal fees and disbursements of $1,168.42 and a registration charge of $71.30: Trust Ledger Statement, Record of Proceedings, p.298. [^24]: The payment is recorded on the statement of adjustments. The quantum of the debt to the Family Responsibility Office is documented in a Director`s Statement of Arrears. See Record of Proceedings, pp. 283-289. [^25]: Trust Ledger Statement, Record of Proceedings, p.298. Mr Jennings explained this point clearly in his testimony before the Tribunal: Record of Proceedings, p.458. [^26]: Mr Jennings’ Submission to the Tribunal, paras. 77-85, Record of Proceedings, pp. 162- 164. [^27]: Decision of the Social Benefits Tribunal, February 6, 2014, Record of Proceedings, pp. 569-583 (the “Decision”), paras. 21-22. [^28]: This ineligibility arose largely from receipt of employment insurance benefits by Mr Jennings’ spouse, and not Mr Jennings’ own earnings or assets during this period. [^29]: Decision, para.23. [^30]: Record of Proceedings, pp. 64-65, 73-74, 127-130. [^31]: Respondent’s Factum, para. 9. [^32]: Record of Proceedings, p.56. [^33]: Record of Proceedings, pp. 84-85, 131-132. [^34]: Record of Proceedings, p.56. [^35]: Record of Proceedings, p.84. [^36]: Record of Proceedings, pp. 98, 137. [^37]: Record of Proceedings, pp. 569-583. [^38]: Decision on Application for Reconsideration, May 6, 2014, Record of Proceedings, pp.45, 615. [^39]: Mr Jennings’ Submissions to the Tribunal, para.54, Record of Proceedings, p.154. [^40]: Mr Jennings’ Submissions to the Tribunal, paras. 77-78, 82-84, Record of Proceedings, pp. 163-164. [^41]: Record of Proceedings, p.426. [^42]: Application for Reconsideration, February 24, 2014, para. 51, Record of Proceedings, p.34. [^43]: Mr Jennings’ Submissions to the Tribunal, para. 85 and following, Record of Proceedings, pp. 164-167. [^44]: ODSPA, s.31(1). [^45]: Respondent’s Factum, para. 25. [^46]: Fournier v. Ontario (Ministry of Community and Social Services, 2013 ONSC 2891, paras. 42-45. [^47]: Nova Scotia (H.R.C.) v. Play It Again Sports Ltd. (2004), 227 N.S.R. (2d) 292, 2004 NSCA 132. [^48]: Shooters Sports Bar v. Alcohol and Gaming Commission (2008), 238 O.A.C. 9, 2008 25052 (Div.Ct.), para. 38. See also (Director of Investigation and Research, Competition Act) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, para. 41, and Cepeda-Gutierrez v. Canada (Minister of Citizenship and Immigration) (1998), 1998 8667 (FC), 157 F.T.R. 35 (F.C.), cited for this point in Shooters Sports Bar, para. 38. [^49]: Ontario Works Act, S.O. 1997, c.25, Sch. A. [^50]: Decision, para. 5. [^51]: Decision, para. 6. [^52]: Decision, para. 7. [^53]: Record of Proceedings, pp. 256-257; the Director’s concession on this point is shown in the Tribunal’s handwritten summary of the evidence: Record of Proceedings, p.458. [^54]: Decision, para. 48. [^55]: Record of Proceedings, vol. 2, p.359, line 126, p.375, pp. 381-2. [^56]: Record of Proceedings, p.459. [^57]: Decision, para. 48. [^58]: Ontario Works Internal Review Decision, Record of Proceedings, p.552. [^59]: Decision, para. 50, after citing Rae v. Administrator (Simcoe Social Services Dept.), 2005 47596 (ON CA), 79 O.R. (3d) 583 (C.A.). [^60]: Decision, para. 52. [^61]: Decision, para. 53. [^62]: Record of Proceedings, pp. 116-121. The overpayment for June to December 2010 was calculated to be $9,217.55. The overpayment for 2011 was calculated to be $14,825.75. Of this, $6,676.75 was on account of January to July, 2011. On these calculations the assessed overpayment to July 2011 was $15,894.30. [^63]: Record of Proceedings, p.451. [^64]: ODSPA, s.31(5)(d).