Schenkman v. Canada, 2007 FC 603

 

 

 

Date: 20070606

Docket: T-957-05

Citation: 2007 FC 603

Toronto, Ontario, June 6, 2007

PRESENT:     The Honourable Madam Justice Heneghan

 

BETWEEN:

ISAC SCHENKMAN

Plaintiff-Appellant

and

 

HER MAJESTY THE QUEEN

 IN RIGHT OF CANADA

Defendant-Respondent

 

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:

[21]           Section 6 of the Public Service Superannuation Regulations provides as follows:

[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”

 

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

 

REASONS FOR ORDER

AND ORDER:                                   HENEGHAN J.

 

DATED:                                             June 6, 2007

 

 

 

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