The Queen v. Kurisko, 88 DTC 6434, [1988] 2 CTC 254 (FCTD), aff'd 90 DTC 6376 (FCA)

Walsh, D.J.: —This action came on for hearing by way of trial de novo on appeal by plaintiff from a decision of the Tax Court of Canada, dated August 17, 1984, maintaining defendant's appeal from an assessment of his income for h is 1982 taxation year, dated September 16, 1983, which disallowed as a deduction amounts totalling $1,617.04 which had been claimed by defendant.

No witnesses were called, the trial proceeding on the basis of an agreed partial statement of facts, and a book of documents which were produced as Exhibits.

The facts agreed to were as follows:

1. The Defendant was, at all times relevant to this appeal, a federally appointed Judge, pursuant to s. 96 of the Constitution Act, 1867.

2. During his 1982 taxation year, the Defendant received from his office, a salary or other renumerations totalling $73,385.55

3. From the said amount of $73,385.55, there was deducted pursuant to the Judges Act, R.S.C. 1974-75 c. 81, amounts totally (sic) $5,117.04 which represented the Defendant's contributions to or under a registered pension fund or plan.

4. In computing his income in respect of his 1982 taxation year, the Defendant sought to deduct the said sum of $5,117.04 as contributions to a registered plan.

5. By Notice of Assessment dated September 16, 1983, the Minister of National Revenue, pursuant to s. 8(1)(m) of the Income Tax Act, 1952 R.S.C. 148 as amended by section 1, S.C. 63, S.C. 1970-71-72 and as further amended (hereinafter referred to as "the Act”), disallowed the deduction of $1,617.04, being that part of the deduction claimed by the Appellant for contributions to or under a registered pension fund or plan which exceeded $3,500.00.

6. The Defendant filed a Notice of Objection on December 9, 1983 concerning the assessment referred to above and the Minister of National Revenue confirmed the said assessment on February 17, 1984.

7. In assessing the Defendant for the 1982 taxation year, the Minister of National Reenue proceeded on the basis that the provisions of paragraph 8(1)(m) of the Act limited the Defendant's possible deduction to a registered fund or plan to an amount of $3,500.

In the book of documents, those to which attention was drawn to complete the proof were Tab 4, defendant's income tax return for 1982, Tab 5 the notice of assessment and Tab 8, an administrative circular dated May 16,1979 issued by the Commissioner for Federal Judicial Affairs dealing with contributions towards annuities and registered retirement savings plans. This circular quotes a letter received from the Taxation Division of the Department of National Revenue reading as follows:

In order to clear up any misunderstanding on the question of what a judge may claim in respect of contributions to his pension plan and registered retirement savings plan, I would like to make it clear that he may claim:

(a) amounts contributed by him to the pension plan set up under the Judges Act, subject to the limitations in paragraph 3(1)(m), since these amounts are deemed by that Act to be contributions to a registered pension fund or plan, and

(b) contributions made to his registered retirement savings plan up to a maximum of $5,500, with no reduction for amounts contributed to his pension plan (paragraph 146(5)(b),

While this gives judges an advantage that is not available to any other class of taxpayer, it automatically follows from the opinion that judges may claim under paragraph 146(5)(b) since the Government neither contributes to the judge's pension plan nor credits anything thereto. This may have been unintended, but that is a matter for the Department of Finance who determine tax policy.

This is the position taken by plaintiff in the present proceedings which concern contributions to the judges' pension plan and the limitation impar- ted on the deductibility of them by subsection 8(1) of the Income Tax Act. Defendant, not having made any contributions to a registered retirement savings plan in the year in question that is not an issue in the present proceedings.

Although, necessarily, it is only the defendant's income tax assessment for the 1982 taxation year which can be dealt with in the formal pronouncement of judgment herein, it is common ground, and the action was argued on the basis that the same finding would also apply to assessments for the subsequent 1983, 1984 and 1985 taxation years and also to all other federally appointed judges in Canada similarly affected. The proceedings do not seek a declaratory judgment, so no formal pronouncement dealing with these issues can be made.

It will be convenient at this stage to quote some of the relevant sections of the statutes involved.

Income Tax Act:

Sec. 8. Deductions allowed.

(1) In computing a taxpayer's income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:

(m) contribution to registered pension plan amounts contributed by the taxpayer in the year to or under a registered pension fund or plan,

(i) not exceeding in the aggregate his contribution limit for the year under this subparagraph in respect of the fund or plan, if retained by his employer from his remuneration for or under the fund or plan in respect of services rendered in the year or paid into or under the fund or plan by the taxpayer as part of his dues for the year as a member of a trade union . . .

(iii) not exceeding in the aggregate $3,500 minus any amount deducted under subparagraph (i) or (ii) in computing his income for the year, paid by him in the year whether into or under the fund or plan or into or under any other such fund or plan in respect of services rendered by him previous to the year while he was a contributor, to the extent not deductible in the immediately preceding year under paragraph 60(j); and . . .

8(2) General Limitation. Except as permitted by this section, no deductions shall be made in computing a taxpayer's income for a taxation year from an office or employment.

8(6) "Contribution limit” defined. For the purposes of paragraph (1)(m), a taxpayer's “contribution limit” for a taxation year under subparagraph (1)(m)(i) or (ii) in respect of a registered pension fund or plan means such amount as is designated by the taxpayer in his return of income for the year to be his contribution limit for the year under subparagraph (1)(m)(i) or (ii), as the case may be, in respect of that fund or plan, not exceeding however the amount, if any, by which $3,500 exceeds the aggregate of amounts each of which is this contribution limit for the year under subparagraph (1)(m)(i) or (ii), as the case may be, in respect of any other such fund or plan.

5. Income from office or employment.

(1) Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by him in the year.

Judges Act, R.S.C. 1970, c. J-1, as amended by S.C. 1974-75, c. 1:

29.1.

(2) Every judge appointed after the 16th day of February, 1975 to hold office as a judge of a superior or county court or of the Tax Court of Canada, to whom subsection (1) does not apply, shall, by reservation from his salary under this Act,

(a) contribute to the Consolidated Revenue Fund an amount equal to six per cent of his salary; and

(b) contribute to the Supplementary Retirement Benefits Account established in the accounts of Canada pursuant to the Supplementary Retirement Benefits Act

(i) prior to 1977, an amount equal to one-half of one per cent of his salary,

and

(ii) commencing with the month of January 1977, an amount equal to one per cent of his salary.

(3) For the purposes of the Income Tax Act the amounts contributed by a judge pursuant to subsection (1) or (2) shall be deemed to be contributed to or under a registered pension fund or plan.

(4) Where any amount is paid into the Supplementary Retirement Benefits Account pursuant to paragraph (2)(b), an amount equal to the amount so paid shall be credited to that Account. 1974, 75-76, c. 82, s. 100; 1980-81-82-83, c. 158, s. 43.

While during the lengthy and comprehensive arguments of counsel for both parties various other sections of the Income Tax Act, Judges Act, Constitution Act 1867, Bill of Rights and Charter of Rights and Freedoms were referred to, these sections need not be quoted in extensive detail. It will be more convenient to refer to them in dealing with the various issues. Some issues have been dealt with already by the Supreme Court judgment in the case of The Queen v. Beauregard, [1986] 2 S.C.R. 56; 30 D.L.R. (4th) 481.

It is common ground that for taxation years prior to 1982 judges' pension contributions made pursuant to subsection 29.1(2) of the Judges Act did not exceed the $3,500.00 limit referred to in subparagraph 8(1)(m)(iii) of the Income Tax Act; so that there was no issue as to deductibility of contributions in excess of that amount. In the 1986 and subsequent taxation years the Income Tax Act was amended by insertion of paragraph 8(1)(m.1) reading as follows:

8(1)(m.1) Idem. the portion, in excess of $3,500, of the aggregate of the amounts (other than voluntary contributions) that the taxpayer contributes in the year to or under a registered pension fund or plan in respect of services rendered by him in the year where his pension entitlement under the fund or plan is determined without reference to the amount accumulated or contributed thereunder;

so that the excess amounts were thereafter deductible.

The only years for which the problem arises therefore are the 1982 to 1985 taxation years, inclusive. While the 1986 amendment removed the inequity of not allowing full deduction of the amounts contributed, whereas the pension payments when received are fully taxable, thereby resulting in double taxation, this amendment did not have retroactive effect, and whatever the motive for making it, it is the law as it stood in 1982 and the subsequent years up to 1985 which must be interpreted.

It is common ground that there is no issue arising out of section 29.1(1) of the Act dealing with pension contributions of one and one half per cent by judges subject to the Act appointed before February 17, 1975 for the purpose of increasing dependant's pensions.

Income of Defendant for Year

The first issue raised and strongly argued by defendant was that the sum of $5,117.04 deducted was not a part of his income since he never received it. Although some jurisprudence which might seem to support this contention, such as the cases of Cliffe v. M.N.R., (1957), 17 Tax A.B.C. 207; 57 D.T.C. 305 (Tax Appeal Board), M.N.R. v. Rousseau, [1960] C.T.C. 336; 60 D.T.C. 1236 (Exchequer Court), The Queen v. Chrapko, [1984] C.T.C. 594; 84 D.T.C. 6544 (F.C.T.D.) and Fairey v. M.N.R., [1987] 2 C.T.C. 2204; 87 D.T.C. 534 (Tax Court), which I am informed is now under appeal, was referred to, an examination of the facts in these cases indicates that they can be distinguished.

Against these cases are that of Paul Morin v. The Queen, [1975] C.T.C. 106; 75 D.T.C. 5061 (Federal Court) in which reference is made inter alia to a decision of the Privy Council [1926] A.C. 289, in Hartland v. Diggines where the employer paid his employees' taxes directly. The employees claimed they had not received the money. Viscount Cave speaking for the Court said:

It is true that the appellant did not receive cash in his hands, but he received money's worth year after year. This being so, I cannot resist the conclusion that the payment was in fact a part of his profits and emoluments as an officer of the company for which he has been properly assessed to tax.

The Morin judgment goes on to state:

This same principle was confirmed recently (March 26, 1973) in a very clear and very well-written decision by Roland St. Onge, Q.C., a member of the Tax Review Board, in Lucien Gingras v. Minister of National Revenue (unreported). At pages 4 and 5 of his judgment, he states the following:

[Trans]

The expression "touché" (received) does not necessarily mean that the full amount of the salary must be physically received by the payee or be deposited in full in his bank account.

According to the interpretation of s. 5 it is sufficient to say that the amount of the salary was paid by the employer either to the employee himself or to his benefit, or that it was handed over to a third party under a federal or provincial Statute.

Defendant distinguishes this judgment pointing out that, unlike tax deductions which are made each year on behalf of the taxpayer who thereby benefits by them in the year when they are deducted, defendant will not benefit from the amounts deducted until he commences receiving pension, at which time the pension payments will themselves be taxable. (The fact that the inequity complained of will be delayed, however, would not appear to destroy the conclusion that the amounts deducted are in the year of deduction for the eventual benefit of the taxpayer).

In the case of The Queen v. Henry E. Hoffman, [1985] 2 C.T.C. 347; 85 D.T.C. 5508 (F.C.T.D.) Justice Rouleau distinguishes the Cliffe, Rousseau and Chrapko cases (supra) and states at page 349 (D.T.C. 5510):

If the proposition that income must be in the actual possession of the employee before it can be taxed is correct, then I would have to conclude that an employee's contributions to Canadian or provincial pension plans, deducted at source by the employer, are not income in the hands of the employee. Jurisprudence does not support this proposition.

He refers to the Gingras case (supra) and other jurisprudence, including Hartland v. Diggines (supra) citing the latter as authority for the proposition that there need be no concurrence or agreement between employer and employee to make the amount deducted constitute income received by the employee.

Certainly it cannot be said that the pension contributions imposed on judges by subsection 29.1(2) of the Judges Act constitute voluntary contributions by them. They were imposed by the statute but the financial consequences were alleviated by the substantial pay raise given at the same time. Dealing with the validity of section 29.1 of the Judges Act, Chief Justice Dickson stated in The Queen v. Beauregard, [1986] 2 S.C.R. 57 at 76; 30 D.L.R. (4th) 481 at 496:

As a general observation, Canadian judges are Canadian citizens and must bear their fair share of the financial burden of administering the country. Thus, for example, judges must pay the general taxes of the land. See Judges v. Attorney- General of Saskatchewan, [1937] 2 D.L.R. 209 (P.C.). Judges also have an amount deducted from their salaries as a contribution to the Canada Pension Plan. These two liabilities are, of course, general in the sense that all citizens are subject to them whereas the contributions demanded by s. 29.1 of the Judges Act are directed at judges only. (Other legislation, federal and provincial, establishes similar pension schemes for a substantial number of other Canadians.) Conceding the factual difference that s. 29.1 of the Judges Act is directed only to judges, I fail to see that this difference translates into any legal consequence. As I have earlier indicated, the essential condition of judicial independence at the individual level is the necessity of having judges who feel totally free to render decisions in the cases that come before them. On the institutional plane, judicial independence means the preservation of the separateness and integrity of the judicial branch and a guarantee of its freedom from unwarranted intrusions by, or even intertwining with, the legislative and executive branches. It is very difficult for me to see any connection between these essential conditions of judicial independence and Parliament’s decision to establish a pension scheme for judges and to expect judges to make contributions toward the benefits established by the scheme. At the end of the day, all s. 29.1 of the Judges Act does, pursuant to the constitutional obligation imposed by s. 100 of the Constitution Act, 1867, is treat judges in accordance with standard, widely used and generally accepted pension schemes in Canada. From that factual reality it is far too long a stretch, in my opinion, to the conclusion that s. 29.1 of the Judges Act violates judicial independence.

It is no longer disputable that Parliament can oblige judges subject to its jurisdiction to contribute to a pension plan (unless of course the federal law were enacted for an improper or colourable purpose, or if there was discriminatory treatment of judges vis-à-vis other citizens which might raise issues of judicial independence as Chief Justice Dickson points out at page 77 (D.L.R. 497) of the Beauregard judgment). This was not suggested in the action before the Court in that case.

Defendant argues strongly that the fact that the contributions deducted are by virtue of section 29.1(2) contributed to the extent of six per cent to the Consolidated Revenue Fund and one-half per cent prior to 1977 and one per cent commencing Jnauary 1,1977 to the Supplementary Retirement Benefits Account, with the contributions being commingled with other government funds rather than being held in a specific pension account for judges, is significant. They cannot be drawn out in whole or in part by a judge on his own volition. The same may be said, however, of many employer-employee pension plans. Section 29.2 of the Act provides for various circumstances in which no annuity becomes payable, or ceases to become payable to him or other persons to whom it could be granted, however, so the contributions, although held in the Consolidated Revenue Fund or the Supplementary Retirement Benefits Account are not lost to him or his estate in the event no pension becomes payable.

I do not conclude therefore that these contributions should be treated differently from contributions to a normal employer-employee pension plan and not considered as part of his income since he never received them. They are analogous to other deductions at the source for income tax, Canada Pension Plan and any other deductions normally made from other taxpayers and not, therefore, directly received by them.

The decision in the Tax Court in this case [1984] C.T.C. 2737; 84 D.T.C. 1663, is of no help to the defendant, since in concluding that the $5,117.04 formed no part of Judge Kurisko's income for 1982, Chief Judge Christie relied on the majority judgments in the Beauregard case (supra) in the Federal Court of Appeal which found that subsection 29.1(2) of the Judges Act was ultra vires in the face of section 100 of the Constitution Act 1867, Chief Judge Christie states at page 2740 (D.T.C. 1165):

In my opinion the $5,117.04 formed no part of the appellant's income for 1982. This amount was reserved and retained without the existence of lawful authority. No benefit accrued to the appellant either directly or indirectly in respect of it.

The Beauregard judgment has now been reversed in the Supreme Court, subsequent to the judgment of the Tax Court in the present case, which must therefore now be considered to have been based on erroneous considerations.

Interpretation of Subsections 29.1(3) of Judges Act and 8(2) of Income Tax Act.

Plaintiff contends that the purpose of subsection 29.1(3) of the Judges Act (supra) is merely to ensure that the contributions required from the judge by subsection 29.1(2) are deductible at all, and not to limit or alter the provisions of the Income Tax Act as to the amounts it permits to be deducted pursuant to subparagraph 8(1)(m)(iii). In order to permit the deduction it had to be a contribution to a registered pension fund or plan to comply with paragraph 8(1)(m) and this was accomplished by the "deeming" provision of subsection 29.1(3) of the Judges Act.

Defendant's contentions on this issue are set forth succinctly in his written argument as follows:

The Defendant submits that the function of Section 29.1(3) is simply to deem conclusively the status, namely, deductibility, of the amount reserved, and no further. This is supported by the words "the amounts contributed by a judge pursuant to subsection (1) or (2)". More specifically, the limitation of $3,500 established by the Income Tax Act is not the "amount" being deemed by Section 29.1(3) as being contributed to or under a registered pension fund or plan.

Defendant states in his written argument:

The Defendant submits that no absurdity or injustice arises if the ordinary and natural meaning is given to the word "deemed" and its scope made to extend only to the deductibility of the amount reserved. On the contrary, absurdity or injustice arises if the limitation in Section 8(1)(m) of the Income Tax Act is made to qualify the amount deductible. First, the limitation in Section 8(1)(m) is intended to preclude voluntary contributions to a registered pension fund or plan, to prevent different amounts being made deductible by employees and to preclude abuse. In this case, the reservation is not voluntary but statutory, and the amount reserved is the same for all judges who are essentially similarly situated. Second, the employee whose deduction is limited to $3,500 has a matching employer contributor whose contribution is deductible. In this case, the Crown makes no contribution, and the pension of the judges is totally funded by them. Third, an employee has the opportunity of contributing beyond the $3,500 limitation to any amount he, at his discretion, determines (although he is denied deductibility above the $3,500). In this case, on the other hand, the Defendant and other judges do not have the same opportunity.

In interpreting statutes, full effect must be given to the words used and this is all the more true of a taxing statute such as the Income Tax Act which must be strictly interpreted. Section 8 of that Act was in effect long before section 29.1 of the Judges Act and if it had been intended that subsection 29.1(3) was to have the effect of a derogation from subparagraph 8(1)(m)(iii) so that the $3,500 limit therein would not apply to judges, a clear statement to this effect would be required.

A further argument was made by defendant resulting from the use of the term "contributed" in section 29 as opposed to the use of the term “paid” in the Income Tax Act, which choice of words was said to be deliberate. While it is true that the “contribution” by judges is not voluntary, but enforced by the Act, and also that there is no matching contribution by the Crown as employer [1] , I do not conclude that this makes a significant difference with respect to the application of the $3,500 limitation to them.

Paragraph 8(1)(m) refers to contributions by the taxpayer and 8(1)(m)(i) includes them in the plan whether retained by the employer or paid into the plan by the taxpayer and subparagraph (iii) establishing the $3,500 limit refers back to subparagraphs (i) and (ii). I find no significant difference therefore between contributions made on behalf of a judge and payments made by other taxpayers.

I interpret subsection 29.1(3) as merely indicating that all amounts reserved from judicial salaries pursuant to subsections 29.1(1) and (2) shall be held in the Consolidated Revenue Fund or Supplementary Retirement Benefits Account and deemed to form part of a registered pension fund or plan. Subparagraph 8(1)(m)(iii) of the Income Tax Act limits the amount of such contributions which can be claimed as a tax deduction to $3,500 for all taxpayers and no special provision is made for judges.

Subsection 8(2) categorically states that no deductions shall be made "except as permitted by this section”. A strict interpretation of this requires that the limitation of subparagraph 8(1)(m)(iii) be applied to all taxpayers, and the wording of subsection 29.1(3) of the Judges Act does not change this. This argument therefore fails.

Independence of Judges

Defendant contends that the independence of the judiciary is undermined by being limited to $3,500 in pension contributions resulting in double taxation since the pension when paid will be fully taxed. However, subsection 146(5) of the Income Tax Act was also referred to. It permits deductions of the lesser of $3,500 or 20 per cent of earned income as a contribution to a registered retirement savings plan in the case of a taxpayer whose employer ("a person other than the taxpayer") contributes to a pension fund or plan, but permits deduction of the lesser of $5,500 or 20 per cent of earned income for all other cases (i.e. self-employed persons).

A distinction must be drawn, however, between a registered pension fund or plan and a registered retirement savings plan. In addition to the $3,500 permitted deduction for the amounts withheld to establish a deemed registered pension fund or plan over which the judge has no control, he may, in common with other taxpayers whose employers do not contribute to a pension fund, deduct $5,500 (or 20 per cent of earned income) for a registered retirement savings plan established by him. The fact that Judge Kurisko did not choose to do so in 1982 is irrelevant.

This gives judges an advantageous treatment rather than discriminating against them if paragraph 146(5)(b) is considered in conjunction with subparagraph 8(1)(m)(iii). This consideration may well be irrelevant, as defendant contends and I would hesitate to comment on it but for the fact that the Supreme Court itself in the Beauregard case (supra) in considering the constitutional validity of section 29.1 of the Judges Act referred to it as being part of a remuneration package accompanied by a salary increase so that requiring pension contributions did not diminish, reduce or impair the financial position of federally appointed judges (see quotation from judgment of Chief Justice Dickson at page 76 (supra)).

The Court therefore looked at the whole picture in considering whether section 29.1 of the Judges Act requiring pension contributions from judges for the first time was constitutional or not. Judges benefit from the larger $5,500 contribution deduction for registered retirement savings plans accorded to self-employed persons rather than being limited to the $3,500 allowed to those participating in a pension plan to which the employer contributes.

In Valente v. The Queen, [1985] 2 S.C.R. 673; 24 D.L.R. (4th) 161, the Supreme Court analyzed the essential conditions for the independence of the judiciary as: security of tenure; financial security; the institutional independence of the tribunal.

In the Beauregard case (supra) Chief Justice Dickson stated at page 77 (D.L.R. 497):

It is very difficult for me to see any connection between these essential conditions of judicial independence and Parliament's decision to establish a pension scheme to judges and to expect judges to make contributions toward the benefits established by the scheme.

and again at page 77 (D.L.R. 497):

The essential condition of judicial independence at the individual level is the necessity of having judges who feel totally free to render decisions in the cases that come before them.

This action was of course dealing with the validity of section 29.1 of the Judges Act which is no longer disputed by defendant and hence was a different issue from that under consideration here which is the consequence of not being able to make full deduction of the amounts withheld for pension contributions.

It is difficult, however, to see how the financial security of federally appointed judges will be so seriously affected by their being unable to deduct pension contributions in excess of $3,500 per annum as to interfere with their independence or ability to render decisions in the cases that come before them. This contention is therefore rejected.

Double Taxation and Bill of Rights and/or Charter of Rights

It will be convenient to examine these issues together, as most of the argument was devoted to them. Double taxation results when the deduction is limited to $3,500 whereas for the 1982 taxation year of defendant $5,117.04 was withheld from his salary, and when he comes to receive pension the amounts received will be fully taxable, whether in recognition of this or for some other reason, the amendment in paragraph 8(1)(m.1) permits full deduction commencing with the 1986 taxation year. As previously indicated, however, while this removes the problem, it cannot be given retroactive effect so as to apply to the 1982 to 1985 taxation years.

Subparagraph 8(1)(m)(iii) of the Income Tax Act which imposes the limit does not, of course, single out federally appointed judges for discriminatory treatment. It applies to all taxpayers. In the case of federally appointed judges no direct employer contribution results from the application of subsection 29.1(2), (although there is no doubt that they will receive the full amount of pension provided whether or not the amount of their obligatory contributions to the Consolidated Revenue Fund and Supplementary Retirement Benefits Account are sufficient to fund it).

Even assuming that there will be double taxation if the full amount of pension contributions is not deductible and that this is not compensated for by the more generous treatment of judges with respect to registered retirement savings plans (discussed supra), there is some jurisprudence to the effect that double taxation has been sustained on occasion.

In the case of Robert Dudley Stewart, [1973] C.T.C. 2265; 73 D.T.C. 213, the taxpayer had been required to contribute six per cent of his earnings ($1,500) to a registered pension plan of his company. During the year 1971 he went to work for another company and had to pay $300 to its pension plan. At the time the Act only allowed a $1,500 deduction. He tried to claim the total or $1,800. The judgment held that he was limited to a deduction of $1,500 to which section 11 (1)(i) of the Act at that time limited him and that no other interpretation was possible.

In the case of George James Carroll v. M.N.R., [1984] C.T.C. 2612; 84 D.T.C. 1614, it was held that all amounts withdrawn from a superannuation or pension plan, including RRSPs are taxable whether or not premiums paid into the plan or fund had been deducted previously. Reference was made to the case of The Queen v. Lloyd Herman, [1978] C.T.C. 442; 78 D.T.C. 6311 in which contributions had been made by the taxpayer and his wife to a United Nations Joint Staff Pension Fund which were not deductible in Canada. Amounts they received from the fund were taxed, however. With regret the Court found that all pension benefits had to be taxed even if no deductions had been allowed for contributors to the fund.

In neither of these cases was the Bill of Rights referred to, and they are cited merely to show that double taxation, although inequitable, is not unknown and that the Income Tax Act must be interpreted strictly.

Retroactivity of Section 15 of Charter

Defendant invokes paragraph 1(b) of the Canadian Bill of Rights which reads:

(1) It is hereby recognized and declared that in Canada there have existed and shall continue to exist without discrimination by reason of race, national origin, colour, religion or sex, the following human rights and fundamental freedoms, namely,

(b) the right of the individual to equality before the law and protection of the law.

Section 15 of the Canadian Charter of Rights and Freedoms is also invoked, which reads:

15.(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination, and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

The Charter was proclaimed in force on April 17, 1982. Subsection 32(2) of the Charter provides:

(2) Notwithstanding subsection (1) section 15 shall not have effect until three years after this section somes into force.

The assessment of defendant was dated September 16, 1983 with respect to the 1982 taxtion year and plaintiff contends that it must be dependent on the law as it stood for that year, the rights in section 15 of the Charter being applicable only from April 17, 1985, and hence only affects one of the years under examination herein.

The retroactivity of section 15 of the Charter is discussed by Justice Le Dain in the case of Tom (Asmunt) Cornell v. The Queen, [1988] 1 S.C.R. 461.

At page 478 Justice Le Dain refers to "the clear expression of legislative intention that the constitutional protection of the right to equality before the law was not to take effect until April 17, 1985.”

The retrospective application of section 15 of the Charter was discussed in the judgment in the British Columbia Court of Appeal case of Davidson et al. v. Davidson, 33 D.L.R. (4th) 162. Macfarlane, J., after reviewing the authorities in question, states at page 170:

An examination of s. 32(2) of the Canadian Charter of Rights and Freedoms indicates that Parliament did not intend that s. 15 be applied retrospectively. Section 32(2) provides “notwithstanding subsection (1), section 15 shall not have effect until three years after this section comes into force”. That is a clear expression of parliamentary intention that the equality rights guaranteed by s. 15 would not have effect until after April 17, 1985. The three-year period was required as a period of grace to allow governments to reorganize their affairs and to amend legislation to satisfy the constitutional guarantees provided by s. 15. To give the section retrospective effect would completely ignore the purpose of the three-year delay.

In my opinion, it was not intended that any law which violated s. 15 would be invalid before April 17, 1985.

This view was also adopted in a tax case by the Tax Court of Canada in Dr. William A. Fleming and Stella Fleming v. M.N.R., [1986] 2 C.T.C. 2192 at 2199; 86 D.T.C. 1628 at 1632 where it is stated:

Therefore, it is my view that to give the appellants the relief they seek with respect to the 1978-1982 taxation years as to subsection 15(1) of the Charter, and with respect to the 1978-1981 taxation years as to section 7 of the Charter, even if either section was applicable, would amount to its application retroactively which is not sustainable.

Of some assistance to defendant on the issue of the retroactivity of section 15 of the Charter is the case of George Addy v. The Queen in Right of Canada, [1985] 2 F.C. 452 where at page 468 Deputy Justice Grant states:

The Constitution Act, 1982 and the Charter of Rights came into force and effect when proclaimed on the 17th day of April, 1982, by virtue of section 58 of the Constitution Act, 1982, with the exception of section 15 of the Charter in respect of which subsection 32(2) provides:

32 . . .

(2) Notwithstanding subsection (1), section 15 shall not have effect until three years after this section comes into force.

Counsel submits that if the distinction could be removed through section 15, effect could not be given thereto until 3 years after the coming into force of the Constitution Act, 1982, and that the reasonable conclusion to be drawn therefrom is that it was not meant to cover such a situation. The answer to that appears to be that the Constitution of Canada is the supreme law of Canada and that any law that is inconsistent therewith is, to the extent of such inconsistency, of no force and effect. It follows that subsection 8(2) of the Federal Court Act to the extent that it is inconsistent with subsection 99(2) of the Constitution is invalid by virtue of section

52. Such subsection 8(2) is equally invalid by virtue of its inconsistency with section 52.

With respect I conclude, nevertheless, that the weight of jurisprudence is to the effect that section 15 cannot be applied retrospectively or given effect before it comes into force.

Application of Paragraph 1(b) of Bill of Rights and Section 15 of Charter

The interpretation to be given to paragraph 1(b) of the Canadian Bill of Rights is discussed at some length by Justice Le Dain rendering the judgment of the Court in the Cornell case (supra). He refers at page 471 to the “valid federal objective" test set forth by Chief Justice Dickson speaking for the majority in The Queen v. Beauregard, [1986] 2 S.C.R. 56. Justice Le Dain points out that after reviewing the jurisprudence with respect to paragraph (1)(b) of the Canadian Bill of Rights, the Chief Justice, with whom Estey and Lamer, JJ. concurred, said at page 90(D.L.R. 506):

This short history of “equality before the law” under s. 1(b) of the Canadian Bill of Rights demonstrates that a majority of the Court was never prepared to review impugned legislation according to an exacting standard which would demand of Parliament the most carefully tailored, finely crafted legislation. On the contrary, a majority of the Court was consistently prepared to look in a general way to whether the legislation was in pursuit of a valid federal legislative objective. This approach was followed in cases involving legislative distinctions on the basis of race, sex and age, and in cases involving profoundly important interests of the person asserting the equality right. The passages which I have quoted from the cases indicate that the Court was concerned with the merely statutory status of the Canadian Bill of Rights and the declaratory nature of the rights it conferred. I believe the day has passed when it might have been appropriate to re-evaluate those concerns and to reassess the direction this Court has taken in interpreting that document.

After referring to the dissenting judgment of Beetz, J and McIntyre, J, Justice Le Dain continues at page 472 of the Cornell judgment:

The conclusion that must be drawn from Beauregard, with great respect, is that the test formulated by McIntyre J. in McKay — at least that part of it which requires that the departure from the principle of equality be necessary to the attainment of the legislative purpose — has not been adopted by a majority in this Court as the test for the application of s. 1(b) of the Canadian Bill of Rights, and that, as held by the majority in Beauregard, it is too late to do so now.

In the case of Mackay v. The Queen, [1980] 2 S.C.R. 370; 114 D.L.R. (3d) 393, referred to by defendant, there was an alleged discrimination contrary to paragraph 1(b) of the Canadian Bill of Rights in the National Defence Act in providing different procedures for trial by military tribunals from those in the regular criminal courts. At page 391 (D.L.R. 418), Justice Ritchie in rendering the majority judgment, refers to the judgment of Justice Martland in Prata v. The Minister of Manpower and Immigration, [1976] 1 S.C.R. 376; 52 D.L.R. (3d) 383 in which at page 382 (D.L.R. 387) he said:

The Court has held that section 1(b) of the Canadian Bill of Rights does not require that all federal statutes must apply to all individuals in the same manner. Legisla- tion dealing with a particular class of people is valid if it is enacted for the purpose of achieving a valid federal objective.

I have already concluded that section 15 of the Charter can only affect the 1985 taxation year and will now examine its applicability.

A recent discussion of section 15 of the Charter in Re: Blainey v. Ontario Hockey Association et al., 54 O.R. (2d) 513; 26 D.L.R. (4th) 728 in the Ontario Court of Appeal was referred to by defendant. Dubin, J.A., rendering the judgment of the Court refers, at page 524 (D.L.R. 738), inter alia, to the judgment of Morden, J.A. in Re McDonald and The Queen, [1985] 51 O.R.

(2d) 745 at 765; 21 D.L.R. (4th) 397 at 417 in which he stated:

The same point can be made in a different way. It can reasonably be said, in broad terms, that the purpose of s. 15 is to require “that those who are similarly situated be treated similarly”: Tussman and tenBroek, "The Equal Protection of the Laws”, 37 Cal. L. Rev. 341 (1948), at p. 344.

At page 524 Justice Dubin's judgment goes on to refer to the judgment of Chief Justice Howland and Robins, J.A. in Reference re an Act to Amend the Education Act, 53 O.R. (2d) 513; 25 D.L.R. (4th), where, at pages 554-5 (D.L.R. 42-3), it is stated :

In our view, s. 15(1) read as a whole constitutes a compendious expression of a positive right to equality in both the substance and the administration of the law. It is an all-encompassing right governing all legislative action. Like the ideals of “equal justice" and “equal access to the law”, the right to equal protection and equal benefit of the law now enshrined in the Charter rests on the moral and ethical princple fundamental to a truly free and democratic society that all persons should be treated by the law on a footing of equality with equal concern and equal respect.

This is not to suggest that s. 15(1) requires that every person in every instance be treated in precisely the same manner. There is no infringement of the section unless the unequal treatment is discriminatory. Most laws provide for distinctions and prescribe different results based on those distinctions. Indeed, a State could not function without classifying its citizens for various purposes and treating some differently from others. As Mr. Justice Stewart pointed out in his discussion of the equal protection clause of the U.S. Fourteenth Amendment in San Antonio School District v. Rodriguez (1973), 411 U.S. 1 at p. 60: "There is hardly a law on the books that does not affect some people differently from others." Similarly, although spoken in a different context, Chief Justice Dickson said at p. 347 S.C.R., p. 362 D.L.R. of Big M Drug Mart Ltd., [infra] ”. . . the interests of true equality may well require differentiation in treatment". This Court in Re McDonald and The Queen (1985), 51 O.R. (2d) 745 at 765, 21 D.L.R. (4th) 397 at p. 417, 21 C.C.C. (3d) 330, speaking through Morden J.A., accepted that "[i]t can reasonably be said, in broad terms, that the purpose of s. 15 is to require 'that those who are similarly situated be treated similarly'."

The Prata and Mackay cases were reviewed together with others by Chief Justice Dickson in the Beauregard case and his conclusions appear in the quote from page 90 (D.L.R. 506) (supra).

Reference was also made by defendant to the recent judgment of Justice McNair in the Federal Court in the case of Suche v. The Queen, 37 D.L.R.

(4th) 474 in which he concluded that the exception with respect to notice to be given for injuries caused by snow and ice from notice required for other causes of injury in subsection 4(5) of the Crown Liability Act was contrary to paragraph 1(b) of the Canadian Bill of Rights. He found the discrimination to be arbitrary and capricious and not to attain a valid federal objective. That case can be distinguished, however, in that there was a clear cut distinction in the Act made between claims for injuries caused by snow and ice and injuries resulting from other causes and it was this that was found to be lacking a valid federal objective, whereas in the present case there is no such distinction in paragraph 8(1)(m) of the Income Tax Act.

It may be pointed out that with respect to the defendant Kurisko the right to "equality before the law” in the Bill of Rights which he alleges is infringed does not come within any of the specific headings of “race, national origin, colour, regligion or sex". With respect to section 15 of the Charter, which I have already concluded would only be applicable for the 1985 taxation year in any event, judges do not come within any of the specific types of discrimination enumerated therein, but the use of the words "and in particular" preceding them justifies a less restrictive interpretation. The words “equal protection and equal benefit of the law without discrimination” in the Charter are also broader than the words "equality before the law” in the Bill of Rights. It is not necessary to go into the jurisprudence giving a broader interpretation here, but it is sufficient to conclude that if there were discrimination in the treatment, and to the extent that section 15 of the Charter applied, this issue could validly be raised.

Defendant argues that the principles set out in section 15 of the Charter are fundamental principles applicable even before the Bill of Rights or Charter and should be applied to avoid the inequity of double taxation.

In order to even establish that unequal treatment has been applied to the federally appointed judges, he must first establish that such judges are not themselves a distinct class but form part of a much larger class composed of taxpayers generally, some of whom such as these who are self-employed or have a plan to which their employer contributes may be more advantaged taxwise with respect to the deductions allowed them.

I have already indicated doubt as to whether this is so, but even assuming that it were, the broader classification of defendant (and the other federally appointed judges under consideration) as taxpayers would have to be established by defendant so as to compare any alleged discrimination suffered by them with the situation of certain other taxpayers. Certainly there is no suggestion that all such judges are not treated equally as a class, nor is there any suggestion that judges are singled out as such by paragraph 8(1)(m) of the Income Tax Act for treatment in any way different from other taxpayers.

The issue is put succinctly and accurately in the judgment of Deputy Justice Grant in the Addy case (supra) where he states at page 467:

In deciding whether equality rights guaranteed by the section have been breached against a person, one must compare the treatment complained of by the aggrieved person with that of a group of persons who substantially belong to the same class and are similarly circumstanced.

In Andrews and Law Society of British Columbia et al., 27 D.L.R. (4th) 600; [1986] 4 W.W.R. 242, Justice McLachlin, in rendering the judgment of the British Columbia Court of Appeal, after examining the Supreme Court jurisprudence any many authorities, said at page 606 (W.W.R. 249):

It cannot have been the intention of Parliament to guarantee a general right against unequal treatment. Almost all statutes draw distinctions between individuals. It cannot be supposed that in all such cases, the individual’s constitutional rights are infringed. To call every legislative distinction between people an infringement of s. 15 is to trivialize the fundamental rights guaranteed by the Charter.

Reference should also be made to the judgment of Justice Hugessen in Smith, Kline & French Laboratories Ltd. v. Attorney-General of Canada, [1987] 2 F.C. 362; 34 D.L.R. (4th) 584 in the Federal Court of Appeal, where he said at page 365 (D.L.R. 589):

. . . when the alleged "discrimination" results directly from a voluntarily assumed package of rights and obligations, section 15 simply does not come into play [2]

and again at page 369 (D.L.R. 592):

. . . it would seem to me that, since the Charter's primary focus is upon personal rights, liberties and freedoms, categories whose main impact is elsewhere, such as on property and economic rights, will be less subject to scrutiny.

and again at page 371 (D.L.R. 594):

To succeed, plaintiffs have to urge, as they do, that section 15 guarantees absolute equality to every individual in every conceivable circumstance and that every possible distinction that can result in one receiving a benefit or incurring a disadvantage which is not enjoyed or suffered by all can only be justified, if at all, under section 1 . . .

Finally, in the case of Ontario Public Service Employees Union et al. v. National Citizens Coalition Inc. et al., [1987] 2 C.T.C. 59 at 61; 87 D.T.C. 5270 at 5272, Justice Galligan, dealing summarily with a motion to strike stated:

. . . it is clear that some taxpayers are entitled to certain deductions from their income while others are not. The Income Tax Act is full of examples where one taxpayer for certain reasons has certain deductions which another taxpayer does not have. Also, certain taxpayers are called upon to pay more taxes than others. Some taxpayers are called upon to pay taxes at a higher rate than others.

The Charter, as it has been said in many, many cases, too numerous to mention, is an important piece of legislation which constitutionally protects important rights and freedoms of people who live in this country. It seems to me that it comes very close to trivializing that very important constitutional law, if it is used to get into the weighing and balancing of the nuts and bolts of taxing statutes.

and again

I am prepared to hold and do hold that the fact that a taxpayer who earns his living by operating a business is entitled to a deduction which is not available to a taxpayer whose income is earned by way of wages of salary does not amount to that denial of equal benefit under the law which is contemplated by s. 15 of the Charter.

To conclude that paragraph 8(1)(m) is inoperative with respect to federally appointed judges by virtue of the Charter would result in a reverse discrimination against other taxpayers who would remain limited to the $3,500 deduction. The section would have to be found contrary to the Charter for all, but this would require a conclusion that it was not adopted for a valid federal objective.

Paragraph 8(1)(m) of the Income Tax Act is a law of general application and not specifically directed to judges. By itself it deprives them of nothing. It was only when subsections 29.1(2) and (3) of the Judges Act was adopted that paragraph 8(1)(m) affected federally appointed judges. It appears to me that paragraph 8(1)(m) when read in conjunction with sections 5(1), 8(6) and 56(1)(a) of the Income Tax Act was adopted for a valid federal objective. In particular the limitation of deductions to a registered pension plan to $3,500 appears to have the valid objective of not allowing unlimited deductions. The amount of $3,500 has been altered from time to time as conditions change, so the actual figure has no particular significance but the principle of limiting deductions is valid.

I cannot conclude that although it had a valid federal objective when adopted it should now be found to be inoperative or void and of no effect with respect to federally appointed judges because of duplication of taxation. That is not to say that in no circumstances can such a finding be made respecting a statute which has never been attacked before (see the case of Suche, supra), but on the facts of the present case and in the absence of any specific discrimination against federally appointed judges in the Income Tax Act and particularly paragraph 8(1)(m) thereof, and looking at the Act as a whole, and in the light of the jurisprudence referred to, I cannot conclude that section 15 of the Charter has been infringed, even for the year 1985 in which it was applicable.

In view of this conclusion it is unnecessary to consider the application of section 1 of the Charter.

The appeal is therefore maintained and the assessment of defendant's income tax for 1982 is sustained. Neither the plaintiff nor defendant asked for costs in the pleadings.

Appeal dismissed.