Thursday, April 3, 2014

Forgiveness of ODSP Overpayments

A little different from my usual content, but there's a really interesting new decision out of the Ontario Court of Appeal dealing with ODSP overpayments.  Back in my days as a law student, I did a fair bit of ODSP-related work.

Background:  ODSP and Overpayments

ODSP is the "Ontario Disability Support Program".  Basically, it's social assistance for the disabled - the differences being that it gives them more money than Ontario Works (though still not a whole lot), and they aren't expected to look for work.  Whereas OW is designed as a short-term stop-gap measure for people who are out of work, ODSP is a longer-term measure for people who can't work.  (Though, strictly speaking, that isn't the test, but that's another matter.)

There are a number of ways that an overpayment can arise, but it usually deals with a retroactive reassessment of entitlements based on the government getting new information.  For example, if you're collecting ODSP benefits, then you get a full-time job but don't tell the government, they'll still pay you cheques until they find out about your employment status, and then they'll say "We need you to pay that back."

Most overpayments can be collected against future benefits - so if you're an ongoing ODSP recipient, and you've gotten an overpayment, then the government will typically just claw back your ongoing benefits to make up the difference.  However, when you're no longer eligible for benefits at all, they need to look at other options.

The Surdivall Case

The new decision, Surdivall, deals with an individual who received ODSP benefits until he turned 65 (at which point ODSP is no longer available).

For a period of time while receiving benefits, Mr. Surdivall shared an apartment with a friend.  His share of the rent was $444, and ODSP reimbursed him for that by way of a "shelter allowance".  He then received an offer of public housing at a rate of only $139 per month...but his friend asked him not to move out until he found a new roommate, because the friend couldn't handle the full rent on his own.  So Mr. Surdivall stayed with his friend for another 10 months, while paying rent for both apartments.  Presumably, the extra $139 per month came out of his own pocket - it's noble in its own way, but neglects the fact that the rent on the shared apartment was being paid by the taxpayer.

When MCSS found out, they took the position that, over those 10 months, he should only have received $139 per month for the shelter allowance instead of $444, and this generated an overpayment of $3050.

The Social Benefits Tribunal agreed.  However, the SBT also felt for Mr. Surdivall:  By this time, he was over 65, no longer receiving ODSP benefits, and instead relying on CPP, OAS, and Guaranteed Income Supplement benefits (still not a lot of money), and having to pay a three thousand dollar debt would create hardship for him.  And it was an honest mistake, thinking that he didn't have to inform MCSS of the new circumstances until he actually moved...and it was a well-intentioned mistake.

So the SBT decided to order him to repay only half of the amount.

The government appealed to the Divisional Court, which found that the SBT erred in reducing the debt, and then Surdivall appealed to the Ontario Court of Appeal.

The Court of Appeal Decision

There were two central issues:  Firstly, does the Director of ODSP have any discretion at all to forgive all or part of an overpayment?  Secondly, does the SBT have the authority to restrict the Director's recovery?

The Court looked at the overall language of the ODSPA (the statute enabling ODSP), and found that there was an intention to give broad discretion to the Director, and concluded that the SBT was implicitly given the authority to make any decision the Director could.  Accordingly, the SBT was empowered to forgive part of a debt, and the Court of Appeal restored the SBT's original decision.  Unless there's an appeal to the Supreme Court (which could happen), that's the final word.


It's hard to predict exactly how this will play out.  On the one hand, Surdivall was in the relatively unique position of relying on other minimalistic income, so if that turns out to be an essential precondition for applying this precedent, then it will be relatively rare.

On the other hand, by the very nature of the ODSP program, recovery of a significant overpayment will almost always cause hardship to a recipient.

Since the Director has discretion to forgive part of the overpayment, the question is going to arise very quickly as to exactly when and to what extent that discretion should be applied, and I suspect that we're going to start seeing a lot of these cases at the SBT, to figure out what factors need to be looked at - likely factors like the reason for the overpayment, the good faith of the recipient in failing to notify the Director of the new circumstances, the amount of the overpayment, and the hardship to result from collecting it.

It may well be that, in cases where the recipient can show good faith, partial forgiveness will become the norm, not the exception.  But that's not so unusual, either.  I've spent a bit of time in bankruptcy court at discharge hearings, and I was initially surprised by some of the conditional discharges - basically, it's not uncommon for the Master presiding to calculate the amount he could order the bankrupt to pay, and then to reduce that figure by a fairly arbitrary percentage depending on soft factors of the justice of the case.  It's a summary process, and highly discretionary.

The trouble with the Surdivall decision is this:  Who has the discretion?  If the Director has the discretion, then one would hope that - once the principles are worked out - the SBT would defer to the Director so long as the decision falls within a certain reasonable range.  However, knowing a few things about the system, I'm concerned that the Director may err on the side of denying any request to forgive part of the debt, and require SBT appeals of these decisions.

That is how the adjudication of disability entitlements works in the first place.  Unless you're dying or have obvious objective disabilities (say, amputations), then you're likely to get denied at first.  You can then appeal to the SBT to try to get that decision reversed.  Every legal aid clinic I've seen is inundated with these appeals, and gets very high success rates (the one I most worked with had success rates well into the 90% range).  Which is a problem:  These are not huge benefits, but the cost of going to a Tribunal, with advocates on both sides (both paid with taxpayer money, most of the time) is a significant drain of tax dollars.  Success rates that high suggest that there is a disconnect between the criteria for accepting or denying applicants at first instance, and the criteria applied by the Social Benefits Tribunal.  It also suggests that we could loosen the criteria and seriously reduce the need for hearings without significantly increasing the number of improper applications that make it through.

Likewise here:  There have been appeals to the SBT, the Divisional Court, and the Court of Appeal.  The cost is immense, most or all of which falls to the taxpayer, over whether or not the SBT was right to waive a relatively small debt to taxpayers.  As a taxpayer, I'm less concerned about the thought of losing a number of ODSP overpayment recoveries than I am about the public money to be expended on having to regularly fight about it.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

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