Toronto, Ontario, June 6, 2007
PRESENT: The Honourable Madam Justice Heneghan
BETWEEN:
and
IN RIGHT OF CANADA
REASONS FOR ORDER AND ORDER
[1]
Mr.
Schenkman (the “Plaintiff” or the “Appellant”) appeals from the Order, dated
August 10,
2006, made by Prothonotary Milczynski, allowing a motion brought by Her Majesty
the Queen in right of Canada (the “Defendant” or the “Respondent”), to strike
out the Statement of Claim issued in this matter on June 2, 2005. The Appellant
seeks an Order reversing the decision of the Prothonotary and reinstating his
action.
I. Background
[2]
The
Appellant is a former employee of the Department of Public Works and Government
Services Canada (“Public Works”). His employment with that Department commenced
in June 1982 and was terminated on January 6, 1999. The Appellant successfully
pursued a grievance against his termination and he was awarded reinstatement,
with full compensation and benefits, by the Public Service Staff Relations
Board (the “PSSRB”). This compensation related to a period of time from his
termination in January 1999 up to August 28, 2002.
[3]
The
Appellant applied for and received his pension benefits from the Public Service
Superannuation Plan after he was terminated but prior to the resolution of his
grievance. Following his reinstatement in his employment, Public Works issued
various statements to the Appellant, setting out the amounts that he owed or
was owed. In response, the Appellant filed a further grievance in September
2002, relative to a claim for back-pay for a one and a half year period between
January 1999 and August 2002. His claim for interest was denied but the PSSRB
made an award clarifying the retroactive entitlement.
[4]
The
entitlements, reinstatement and duties of the Appellant were the subject of
subsequent meetings and discussions between representatives of the Respondent
and representatives of the Appellant. In her arguments before the Prothonotary,
the Respondent argued that the Appellant was informed that he would be required
to repay the pension benefits that he had received prior to his reinstatement
since he had been wholly compensated for his lost salary and benefits. The
Appellant, however, denied that any such discussions occurred. In the face of
these conflicting views, the Prothonotary noted that:
… Nevertheless, it is clear and not in dispute that he did not receive any formal notice or demand for repayment; there was nothing in writing provided to Mr. Schenkman around the time of his reinstatement or immediately thereafter, either by Public Works or by the Superannuation Directorate in Shediac, New Brunswick, that set out the precise amount that was said to be owing, the basis for the claim, or options for how the amount could be repaid.
[5]
On May 8,
2003, the Appellant commenced an action in the Ontario Superior Court seeking
damages related to various employment matters. He also filed complaints with
the Canadian Human Rights Commission. The employer and the pension plan
administrator did not inform the Appellant in writing during this time of any
amounts that he owed Public Works. Before the Prothonotary, the Respondent took
the position that the Appellant bore the onus of raising the issue as to his
pension entitlement.
[6]
The
parties resolved the Ontario Court action and the Canadian Human Rights Commission
complaints through a global mediation process. Pursuant to the settlement
agreement, the Appellant resigned from Public Works as of September 10, 2004
and he then applied to receive his pension benefit from the Public Service
Superannuation Plan.
[7]
The
Respondent subsequently provided the Appellant a package of information
relating to his retirement. The correspondence dated September 13, 2004
addressed insurance issues and, with standard disclaimers, set out the amount
of the Appellant’s immediate annuity entitlement, that is $41,354.04 per year,
payable monthly in the amount of $3,446.17. This information package did not
refer to any overpayment.
[8]
The
Respondent subsequently sent two letters to the Appellant, each dated November
1, 2004, each written by Ms. Barbara Sowerby of the Superannuation, Pension
Transition and Client Services Sector in Shediac, New Brunswick. One letter
included the Appellant’s pension statement and discussed his monthly pension
benefits. The second letter stated that, because he had been compensated for
all lost salary and benefits when he was reinstated in August 2002, the amount
of pension that he received between his 1999 termination and 2002 reinstatement
was an overpayment that had to be repaid.
[9]
The amount
of the overpayment was said to be $73,515.01. According to one of the November
1, 2004 letters written by Ms. Sowerby, the amount could be repaid as a single
lump sum or in monthly deductions from his pension benefits. The monthly
deduction amount of $585.96 included a charge for a life insurance policy taken
out by Public Works for the amount of the overpayment. The Appellant was
advised that if he failed to respond within 30 days, it would be assumed that he
had chosen to repay the amount by making monthly contributions.
[10]
In a
letter dated November 10, 2004, counsel for the Appellant asked the Respondent
to identify the legislative authority that authorized the demand and the
unilateral deduction of the alleged overpayment from the Appellant’s monthly
pension benefit. The Appellant’s counsel also made it clear that he had
understood the prior settlement reached through the mediation process had
resolved all matters between the parties. No response was provided to the
Appellant or his counsel. The Appellant wrote a further letter on February 8,
2005, objecting to the claim for repayment set out in the correspondence of
November 2004 and to the timing of that demand.
[11]
On March
10, 2005, Ms. Melissa Soucoup, a Policy and Legislation Advisor at the
Superannuation, Pension Transition and Client Services Sector of Public Works,
wrote to the Appellant’s lawyer. In that letter, she set out the following
position:
…According to Section 29 of the Public Service Superannuation Act (PSSA), when a person who is entitled to an annuity becomes re-employed in the Public Service and a contributor under the PSSA, whatever right or claim that he may have to the annuity shall be terminated without delay. Since the Public Service Staff Relations Board Decision of July 18, 2002, reinstated Mr. Schenkman’s employment and he, therefore, became a contributor under the PSSA, he is no longer entitled to any annuity under the PSSA, retroactive to the date of his reinstatement of employment. This resulted in an overpayment of Mr. Schenkman’s pension in the amount of $73,510.01.
According to Subsections 6(1) of the Public Service Superannuation Regulations (PSSR), where an amount has been paid in error under the Act to any person on account of any annuity or annual allowance, the Minister shall forthwith demand payment from that person of amount equal to the amount paid in error. Further, subsections 6 (2) and (3) of the PSSR state that where a person does not elect to pay the amount of the overpayment in a lump sum within 30 days from the date on which the repayment is requested, he shall be assumed to have chosen a monthly, life insured, form of recovery. Although Mr. Schenkman’s pension was not initially paid in error, it was later deemed to have been paid in error as a result of the reinstatement of his employment, as a person cannot be a contributor under the PSSA and at the same time be in receipt of a pension under the Act.
[12]
On June 2,
2005, the Appellant commenced this action seeking an interim and permanent
injunction restraining Public Works from making monthly deductions from his
pension, reimbursement of all monies he claims were wrongfully deducted, and
$250,000.00 in damages for bad faith and breach of fiduciary duty.
[13]
In her
decision, the Prothonotary made it clear that the dispute was not about whether
in fact a pension overpayment had been made or whether in fact the Appellant
was required to repay any such overpayment.
[14]
She
described as “unfortunate” the fact that Public Works had waited until after
the Appellant’s retirement to claim entitlement to the alleged pension
overpayment. This issue had not been raised when the Appellant had been reinstated,
during his re-employment or during the global mediation process. Had the issue
been raised, the Appellant could have chosen to dispute Public Works’ claim
through the grievance process. By failing to raise the issue during the
Appellant’s reinstatement, the Prothonotary said that Public Works had created
“the most hardship” because, as a former employee and now retired employee, the
Appellant’s rights to union representation and access to the grievance
procedure was “not clearcut, but rather doubtful”, according to the
Prothonotary.
[15]
Prothonotary
Milczynski found that Public Works only notified the Appellant of the alleged
overpayment in writing for the first time in November 2004. Nonetheless, the
Prothonotary determined that the Appellant could only pursue the relief he
sought through an application for judicial review. She said that this was the
proper procedure “to seek an order essentially setting aside the decision to
deem an overpayment and stop the steps to recover the overpayment”. She noted
that the decision in question was made pursuant to the Public Service
Superannuation Act, R.S.C. 1985, c. P-36 and the Public Service
Superannuation Regulations, C.R.C., c 1358 . She suggested that whether or
not the decision was validly made and whether enforced repayment is authorized,
are issues that can only be addressed in an application for judicial review.
[16]
Relying on
the decision in The Queen v. Grenier (2005), 262 D.L.R. (4th) 337 (F.C.),
the Prothonotary said that a litigant must challenge an administrative decision
by way of an application for judicial review if seeking to invalidate an
administrative action. Allowing such a challenge to proceed by way of action,
she suggested, would be to “permit indirect or collateral attacks on decisions
made under statutory authority.” Having concluded that the Appellant had
selected the wrong procedure, Prothonotary Milczynski said, relying on Michaud
v. Canada (Attorney General) (2000) 204 F.T.R. 113, that the only recourse
was for the Appellant to move for an extension of time to commence an
application for judicial review, setting out the reasons for the delay in doing
so.
II. Discussion and Disposition
[17]
Since the
effect of the Prothonotary’s Order is to dispose of the Appellant’s action, the
appropriate standard of review in this matter is the de novo standard.
In that regard, I refer to the decisions in Canada v. Aqua-gem Investments Ltd., [1993] 2 F.C. 425 (C.A.) and
Merck & Co. v. Apotex Inc., [2004] 2 F.C.R. 459 (C.A.). Accordingly, I must treat this appeal
as an original motion to strike a statement of claim.
[18]
The test
for striking a statement of claim is set out in the decision in Hunt v.
Carey Canada Inc., [1990] 2 S.C.R. 959, that is whether it is plain and
obvious that the claim discloses no reasonable cause of action. For the purpose
of a motion to strike a pleading, the allegations in that pleading are to be
accepted as true; see Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441.
[19]
In the
present case, the difficulty is not with the allegations made by the Appellant
but with his choice of forum for challenging the actions of the Respondent. The
heart of the Appellant’s claim relates to a decision that was purportedly made
pursuant to statutory authority, that is the Public Service Superannuation
Act and the Public Service Superannuation Regulations.
[20]
Subsection
8(9) of the Public Service Superannuation Act provides as follows:
|
8(9) Where any amount has been paid in error under this Part or Part III on account of any annuity, annual allowance or supplementary benefit, the Minister may retain by way of deduction from any subsequent payment of that annuity, allowance or supplementary benefit, in the manner prescribed by the regulations, an amount equal to the amount paid in error, without prejudice to any other recourse available to Her Majesty with respect to the recovery thereof. |
8(9) Lorsqu’un montant à valoir sur une pension, allocation annuelle ou prestation supplémentaire a été payé par erreur aux termes de la présente partie ou de la partie III, le ministre peut retenir, par déduction sur les versements ultérieurs de cette pension, allocation annuelle ou prestation supplémentaire, de la manière prescrite par les règlements, un montant égal à celui qui a été payé par erreur, sans préjudice de tout autre recours ouvert à Sa Majesté quant au recouvrement de ce montant. |
[21]
Section 6
of the Public Service Superannuation Regulations provides as follows:
|
6(1) Where an amount has been paid in error under the Act to any person on account of any annuity or annual allowance, the Minister shall forthwith demand payment from that person of an amount equal to the amount paid in error. (2) A person from whom payment of an amount has been demanded by the Minister pursuant to subsection (1) shall, within 30 days from the day on which the demand is made (a) pay that amount to the Minister in one lump sum, or (b) arrange to pay the amount to the Minister in monthly instalments to be deducted from his annuity or annual allowance for the lesser of (i) the life of that person, or (ii) the period required to pay the amount in monthly instalments equal to 10 per cent of the gross monthly amount of any annuity or annual allowance payable to that person under the Act, as that person may elect, calculated as of the date of his election, in accordance with Canadian Life Table No. 2 (1941), Males or Females, as the case may be. (3) Where a person referred to in subsection (2) does not elect within 30 days from the day on which the demand for payment is made, he shall be deemed to have chosen the method of payment specified in paragraph (b) of that subsection. (4) Any person in respect of whom deductions are made under this section may, at any time (a) pay the amount then owing in one lump sum; or (b) arrange to pay the amount then owing (i) by larger monthly instalments on a basis similar to that described in paragraph (2)(b), or (ii) by a lump sum payment and monthly instalments on a basis similar to that described in paragraph (2)(b) and payable within the same or a lesser period than that originally used. (5) Where, pursuant to this section, deductions are to be made from the gross monthly amount of an annuity or annual allowance, the first deduction therefrom shall be made in the month following the month in which the 30-day period prescribed in subsection (2) expires, and succeeding deductions shall be made monthly thereafter in equal amounts during the life of the person to whom the annuity or annual allowance is payable or until the amount demanded by the Minister pursuant to subsection (1) has been paid, except with respect to the last instalment which may be less in amount than the preceding instalments. (6) Notwithstanding subsection (2), where the monthly deductions referred to therein would, in the opinion of the Minister, cause financial hardship to the person to whom the annuity or annual allowance is payable, the Minister may direct that lesser monthly deductions be made but such deductions shall not in any case be less than five per cent of the gross monthly amount of annuity or annual allowance, or $1, whichever is the greater. (7) Notwithstanding subsection (5), where the Minister directs, pursuant to subsection (6), that lesser monthly deductions be made, such deductions shall be continued until the amount then owing is paid in full and if the person in respect of whom the deductions are made dies before the amount is paid in full, the balance remaining unpaid shall, if the Minister so directs, be recovered from any further benefits payable under the Act in respect of that person. (8) The provisions of subsections 5(9) and (10) apply to this section. |
6(1)Si, en vertu de la Loi, un montant a été versé par erreur à une personne en raison d’une pension ou d’une allocation annuelle, le ministre doit, immédiatement, sommer cette personne de payer un montant égal au montant qui a été payé par erreur. (2) Une personne qui a été sommée de payer un montant par le ministre conformément au paragraphe (1) doit, dans les 30 jours qui suivent la date où la sommation a été faite a) payer ledit montant au ministre en une somme forfaitaire, ou b) prendre les dispositions nécessaires en vue de payer le montant au ministre en versements mensuels à déduire de sa pension ou de son allocation annuelle, pendant la moindre des durées suivantes : (i) la vie de ladite personne, ou (ii) la période requise pour payer le montant par des versements égaux à 10 pour cent du montant mensuel brut de la pension ou de l’allocation annuelle payable à cette personne en vertu de la Loi,
selon le choix que peut faire cette personne, le montant étant calculé à la date où elle a exercé son choix, en conformité de la Table canadienne de mortalité no 2 (1941), Hommes ou Femmes, suivant le cas. (3) Lorsque la personne dont il est question au paragraphe (2) ne formule pas son choix dans les 30 jours qui suivent la date de la sommation de paiement, elle est censée avoir choisi la méthode de paiement spécifiée à l’alinéa (2)b). (4) La personne à l’égard de laquelle des déductions sont effectuées en vertu du présent article peut, en tout temps, a) payer le montant alors dû en une somme forfaitaire; ou b) prendre les dispositions nécessaires en vue de payer le montant alors dû (i) par versements plus considérables suivant un mode semblable à celui qui est prévu à l’alinéa (2)b), ou (ii) par un montant comptant et des versements mensuels suivant un mode semblable à celui qui est prévu à l’alinéa (2)b), et payables en dedans de la même période ou une période plus courte que celle qui avait d’abord été fixée. (5) Si, en vertu du présent article, des déductions doivent être faites sur le montant mensuel brut d’une pension ou d’une allocation annuelle, la première déduction doit se faire au cours du mois qui suit le mois dans lequel expire la période de 30 jours prévue au paragraphe (2), et les déductions subséquentes devront s’effectuer mensuellement par la suite en montants égaux pendant la vie de la personne à qui la pension ou l’allocation annuelle est payable ou jusqu’à ce que le montant demandé par le ministre, en conformité du paragraphe (1), ait été payé, sauf dans le cas du dernier versement dont le montant pourra être inférieur aux versements précédents. (6) Nonobstant le paragraphe (2), lorsque les déductions mensuelles dont il est question seraient, de l’avis du ministre, trop onéreuses pour la personne à qui la pension ou l’allocation annuelle est payable, le ministre peut prescrire d’effectuer des déductions mensuelles moins élevées, mais ces déductions ne doivent en aucun cas être inférieures à cinq pour cent du montant mensuel brut de la pension ou de l’allocation annuelle, ou à 1 $, selon le plus élevé des deux montants. (7) Nonobstant le paragraphe (5), lorsque le ministre ordonne, en vertu du paragraphe (6), que des déductions moins élevées soient effectuées, de telles déductions doivent se continuer tant que le montant alors dû n’aura pas été entièrement acquitté et, advenant le décès de la personne à l’égard de laquelle les déductions sont effectuées, avant le paiement complet du montant, le solde impayé sera, si le ministre l’ordonne, recouvré sur toutes autres prestations payables, en vertu de la Loi, à l’égard de ladite personne. (8) Les dispositions des paragraphes 5(9) et (10) s’appliquent au présent article. |
[22]
A key element
of the Appellant’s submissions, before both the Prothonotary and this Court, is
whether any monies had been paid “in error”. This issue was addressed by the
Prothonotary in paragraph 18 of her Reasons as follows:
… The basis for the decision deeming the overpayment and the authority to enforce repayment is found in the Public Service Superannuation Act and Regulations, as referred to in the letter to Mr. Schenkman’s counsel of March 10, 2005. Whether or not that basis is valid and whether or not the enforcement of repayment is authorized, are issues that can only be determined in this case in an application for judicial review.
[23]
In my
opinion, the Prothonotary correctly identified the Appellant’s claim as a
challenge to the exercise of statutory authority by an administrative
decision-maker. It is well established that such a challenge can only be made
upon an application for judicial review pursuant to the Federal Courts Act,
R.S.C. 1985, c. F-7 as amended and the Federal Courts Rules, SOR/98-106,
as amended. The Grenier decision cited by and relied upon by the
Prothonotary is relevant and applicable.
[24]
In the
result, the Appeal is dismissed, but without prejudice to the right of the
Appellant to seek an extension of time for the commencement of an application
for judicial review. In that regard, I share and adopt the concerns expressed
by the Prothonotary about the conduct of the Respondent in making the decision
in issue. The Court can entertain arguments concerning procedural fairness and
similar issues in an application for judicial review.
[25] In the event that the parties cannot agree on costs, they may file written submissions no longer than three (3) pages in length within twenty (20) days of this Order.
ORDER
THIS COURT ORDERS that the appeal is dismissed
without prejudice to the right of the Appellant to seek an extension of time
for the commencement of an application for judicial review.
If the parties cannot agree on costs, then brief submissions not exceeding three (3) pages in length may be made within twenty (20) days of this Order.
“E. Heneghan”
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-957-05
STYLE OF CAUSE: Isac Schenkman v. Her Majesty the Queen in Right of Canada
PLACE OF HEARING: Vancouver, B.C. by videoconference from Toronto
DATE OF HEARING: December 5, 2006
APPEARANCES:
|
Mr. Morris Cooper |
FOR THE PLAINTIFF-APPELLANT |
|
Ms. Sandra Nishikawa |
FOR THE DEFENDANT-RESPONDENT |
SOLICITORS OF RECORD:
|
Morris Cooper, Barrister Toronto, Ontario
|
FOR THE PLAINTIFF-APPELLANT |
|
John H. Sims, Q.C. Deputy Attorney General of Canada |
FOR THE DEFENDANT-RESPONDENT |