Corbett v. R., [1999] 4 CTC 231, 99 DTC 5624, 1999 CanLII 9367

Isaac C.J. (dissenting):

I have had the privilege of reading the reasons for judgment which Mr. Justice Rothstein proposes to deliver in this application for judicial review. I am unable to agree either with his reasons or with his conclusion. The reasons for my conclusion follow.

On this section 28 application, Her Majesty The Queen, as applicant, has asked us to review and set aside a judgment of a Tax Court Judge, delivered orally, in the Informal Procedure, on 18 August, 1998. By his judgment, the learned Tax Court Judge allowed the respondent’s appeals from assessments made under the Income Tax Act! [1] (“the Act”), with respect to the 1994 and 1995 taxation years. He referred the assessments back to the Minister of National Revenue for reconsideration and reassessment on the basis that the contributions which the respondent has made in respect of nonexistent service are deductible in computing her income.

The record before us indicates that no viva voce evidence was adduced at the hearing in the Tax Court. It indicates further that the respondent supported her appeal by reference to the documents mentioned in her letter to the Tax Court dated 13 March, 1998 and by argument.? [2]

The evidence before the Tax Court consisted of a copy of a purchase of service contract, a copy of a notice of confirmation by the Minister, and, a copy of the Minister’s letter to the respondent. [3]

At the hearing in the Court below, the respondent advanced the following argument respecting the deductibility of her contributions for the taxation years in issue:

Deductibility

In November 1989 I entered into a contract with my employer, the Government of Newfoundland, for the purchase of service for pension purposes. The contract was executed pursuant to section 32 of the Public Service (Pensions) Act. The contract imposed burdens and conferred benefits on me. It was a legally binding contract and both parties performed their obligations without flaw.

It is my primary argument that because that contract, made pursuant to the legislation establishing a registered pension, was the legal instrument by which I made my payments in 1994 and 1995, I am entitled to deduct those payments from income pursuant to paragraph 147.2(4)(a) of the Income Tax Act. [4]

The position of the applicant is stated in a letter dated 18 July, 1997 and filed at the hearing in the Tax Court as Exhibit 3:

...please be advised that in the absence of an express provision allowing the purchase of non-existent services, you do not meet the qualifications set out in paragraph 147.2(4)(a) of the Income Tax Act and thus you cannot deduct these contributions in computing your income. [5]

The appeals were heard on 18 August, 1998. On the same day, the Tax Court Judge delivered oral reasons allowing them. In his reasons, he stated [6] that the parties had agreed that the only issue before him was whether the respondent’s contributions were “made in accordance with the plan”. He stated further:

There are no other issues raised with respect to any other restrictions imposed by the Act J [7]

His dispositive reasons read:

Given that her pension plan as it existed in 1989 was continued in 1991 when the 1991 Act came into effect and that s. 39 of the 1991 Act clearly states that all benefits acquired under the 7970 Act are protected under the 7997 Act, it is my view that the additional benefits accruing from the 1989 Amendment qualify as such benefits. Ms. Corbett is entitled to these benefits provided that she makes her additional contributions until 1996. Therefore, I conclude that the contributions for non-existent service made by Ms. Corbett in 1994 and 1995 were made according to her pension plan as amended by the 1989 Amendment, and met the requirements of paragraph 147.2(4)(a) of the Act%

Issue

Whether the Tax Court Judge was wrong in concluding that the respondent is entitled to deduct contributions for non-existent service in the computation of her income for the taxation years in issue, pursuant to paragraph 147.2(4)(a) of the Act.

Analysis

Paragraph 147.2 (4)(a) of the Act reads:

(4) There may be deducted in computing the income of an individual for a taxation year ending after 1990 an amount equal to the total of

(a) Service after 1989 — the total of all amounts each of which is a contribution (other than a prescribed contribution) made by the individual in the year to a registered pension plan in respect of a period after 1989, to the extent that the contribution was made in accordance with the plan as registered.

(4) Un particulier peut déduire dans le calcul de son revenu pour une année d’imposition se terminant après 1990 le total des montants suivants:

a) Les cotisations (sauf celles visées par règlement) qu’il verse au cours de l’année à un régime de pension agréé pour une période postérieure à 1989, dans la mesure où il les verse conformément au régime tel qu’il est agréé;

The paragraph is part of the section of the Act dealing with the deductibility of pension contributions made to registered pension plans by both employees and employers. Subsections 147.2(1)(2) and (3) deal with employer contributions and subsection 147.2(4) with employee contributions.

An employee’s contributions to a plan may represent contributions made after 1990 for current service and for past service in respect of years after 1989, (paragraph 147.2(4)(a)), contributions for past service before 1990 while the employee was not a contributor to the plan (paragraph 147.2(4)(b)), and contributions for past service while the employee was a contributor to the plan (paragraph 147.2(4)(c)).

Subsection 147.2(5) is a transition provision for teachers and subsection 147.2(5) deals with deductibility of contributions in the year a taxpayer dies.

The editors of the C.C.H. Canadian Tax Reporter state:

Subsection 147.2(4) provides for the deduction of employee contributions to a registered pension plan commencing in 1991 and for subsequent taxation years. For years prior to 1991, the deduction was provided for under paragraphs 8(1)(m) and 8(1)(m.1) and subsections 8(6) and 8(8). Paragraph 8(1)(m) is amended (paragraph 8( 1 )(/n. 1 ) and subsections 8(6) and 8(8) are repealed) effective for the 1991 and subsequent taxation years such that only contributions that are deductible under subsection 147.2(4) will be allowed.? [9]

It should be noticed that the deductibility of “additional voluntary contributions” are expressly excluded by paragraphs 147.2(4)(b) and (c) and that contributions for non-existent service is neither expressly included in paragraph 147.2(4)(a) and nor expressly allowed.

In order to resolve the issue, the Tax Court Judge was required to construe paragraph 147.2(4)(a) of the Act in light of the applicable provisions of the Newfoundland Public Service Pensions Act, 199] (“1991 Act”).

Since the issue posed raises a question of law, the standard of review must be one of correctness.

In order to succeed in the Tax Court, paragraph 147.2(4)(a) required the respondent to demonstrate to the requisite degree of proof, that:

a) she made contributions

b) to a registered pension plan

c) those contributions were in respect of a period after 1989, and

d) they were made in accordance with the plan as registered.

If she failed to demonstrate any of those elements of proof, then her appeals should have been dismissed.

The phrase “the plan as registered” found in paragraph 147.2(4)(a), is defined in the Act as follows: [10]

(15) Plan as registered. — Any reference in this Act and the regulations to a pension plan as registered means the terms of the plan on the basis of which the Minister has registered the plan for the purposes of this Act and as amended by

(a) each amendment that has been accepted by the Minister, and

(b) each amendment that has been submitted to the Minister for acceptance and which the Minister has neither accepted nor refused to accept, if it is reasonable to expect the Minister to accept the amendment,

and includes all terms that are not contained in the documents constituting the plan but that are terms of the plan by reason of the Pension Benefits Standards Act, 1985 or a similar law of a province.

(15) Régime tel qu’il est agréé. — Dans la présente loi et dans son règlement, toute mention d’un régime de pension tel qu'il est agréé vaut mention des modalités du régime sur lesquelles le ministre s’est fondé afin d’agréer le régime pour l’application de la présente loi, ainsi que des modifications suivantes apportées à ces modalités:

a) celles qu'il accepte par la suite:

b) celles sur lesquelles il ne s’est pas prononcé mais qu’il aurait pu valablement accepter.

Sont comprises parmi ces modalités celles qui ne sont pas énoncées dans les documents instituant le régime, mais qui constituent des modalités de celui-ci par l’effet del Loi de 1985 sur les normes de prestation de pension ou d’une loi provinciale semblable.

The first point to notice is that, although the Act contains detailed provisions [11] about registration of pension plans, no evidence was led before the Tax Court Judge and no mention was made in his reasons on the issue whether the plan which the respondent invokes was, in fact, registered. In argument, counsel for the applicant informed us that the plan as registered is contained in the Public Service Pensions Act, 1991 [12] (“the 1991 Act). Since counsel for the respondent did not challenge that statement, I have assumed, for the purpose these reasons, that the registration requirements of the Act were met.

Similarly, no issue was taken with the respondent’s assertion that she did make contributions to a registered pension plan. It was assumed on both sides that the instalment payments which the respondent is alleged to have made pursuant to the purchase of service contract that she executed in 1989 were, for the years, 1994 and 1995, contributions to a registered pension plan.

The respondent’s principal contention before the Tax Court and before us was that she was entitled to the deductions claimed for the taxation years in dispute because she had made the contributions pursuant to the purchase of service contract made under the predecessor statute of Newfoundland, the Public Service (Pensions) Act (“the 1970 Act”). [13] She contended further that the rights flowing from the contract had been transformed, in law, into benefits and were, therefore, continued in and protected by the 1991 Act.

In doing so, the respondent invokes the following statutory provisions from the 1970 Act and the 1991 Act:

1991 Act

4. The Public Service Pension Act provided for by and under the former Act is continued, subject to this Act and the regulations, as the pension plan.

39. All benefits acquired under the former Act before the commencement of this Act are protected under this Act.^ [14]

In the 1991 Act, the phrase “the former Act” is defined in section 2 as the 1970 Act. Section 32 of the latter reads:

32. Subject to this Act and the prior approval of the Lieutenant-Governor in Council, the Minister may make regulations establishing conditions under which an employee or a person who is about to become an employee may purchase service which shall be awarded as pensionable service.

Pursuant to the authority given in that section, the Minister of Finance of Newfoundland made regulations which read:

1. These regulations may be cited as The Public Service (Pensions) (Purchase of Service) Regulations, 1969.

2. In these regulations

(a) “Act” means The Public Service (Pensions) Act, 1968;

(b) “employee” includes

(i) any person deemed to be an employee by regulations made under Section 34 of the Act;

(ii) a person who is about to become an employee.

3. The conditions under which an employee may purchase service which shall be counted as pensionable service are

(a) the employee shall pay a sum equivalent to twice the amount which he would have contributed under Section 4 of the Act if he had been an employee contributing under that section during the whole period in respect of which the service is purchased based upon the salary payable to him at the date of purchase or be payable [sic] to him on commencement of his employment;

(b) interest on any sum due under these regulations shall be payable by the employee from the date of purchase to the date of payment, said interest to be calculated annually on the balance of principal owing at the time at the rate of 6'/2 per centum per annum; and

(c) the employee may pay all sums payable under this regulation by instalments over a period not exceeding the period of service purchased and the instalments may be deducted from the salary of the employee. ID [15]

From a careful reading of the 1991 Act and the regulations made thereunder it is clear that no express provision is made either for the purchase of non-existent service or for the continuation of contributions toward the purchase of such service that had been commenced under the authority of the 1970 Act. The respondent and the Tax Court Judge accept that fact, yet they construe section 4 of the 1991 Act as continuing the plan established in the 1970 Act and section 39 of the 1991 Act as protecting rights acquired under the 1970 Act. Mr. Justice Rothstein appears to have accepted this interpretation also.

I am unable to accept the construction of the two sections of the 1991 Act upon which the respondent relies, because, it not only ignores the legal effect of the phrase “subject to this Act and the regulations”, found in section 4 but it also misconstrues the phrase “all benefits acquired” found in section 39 of the 1991 Act.

In my respectful view, the phrase “subject to this Act and the regulations”, means that the pension plan established by the 1970 Act continues to exist, but only to the extent that its terms and conditions are not changed or altered by the provisions of the 1991 Act and the regulations made thereunder.

Put another way, section 4 of the 1991 Act first requires an examination of the 1970 Act and the regulations made pursuant to it and secondly it invites comparison with the plan established by the 1991 Act and its regulations. Such an analysis is needed to determine what portions of the plan established by the 1970 Act have been preserved in the 1991 Act and what portions have been altered or revoked. It is only after such examination and comparison have been done that one can determine what constitutes “the plan as registered” for the purpose of paragraph 147.2 (4)(a) of the Act.

A brief reference to the legislative history of the 1991 Act will, in my respectful view, be of some assistance in the task of determining the meaning of the phrase “subject to this Act and the regulations”.

The 1991 Act was introduced into the House of Assembly of Newfoundland as Bill No. 6. Second reading on the Bill commenced on 10 May, 1991. In introducing the debate the Minister of Finance noted:

It is with considerable pride that I bring in this long overdue Bill to revise and amend the law respecting a pension plan for employees of the Government of the Province and others.

When we assumed office two years ago and I took the Portfolio for the Department of Finance, two things were very striking about the conditions of the fi- nances of the Province. One was the debt which we inherited, the other was the unfunded liability of the pension plans and the serious condition that the pension plans were in. We looked at that for a short time and appointed a Commission of Enquiry into pensions, and after holding public discussions and looking into the pension plans of other provinces and the Federal Government, the Commission of Enquiry which consisted of: Mr. George M. Cummins, Chairman, who was a Professor at Memorial, Department of Commerce and a lawyer; two chartered accounts, one David Earle from Corner Brook and one Michael Power from St. John’s, they constituted a Commission of Enquiry and brought in a report in March 1990, a comprehensive report. Volume one, most Members are aware of, there are also two or three other volumes consisting of the submissions that were made to the commission. That commission made a number of very serious recommendations most of which find themselves incorporated into Bill 6.

I would like to say a word or two about that, the unfunded liability of the plans were at the end of December 1989 approximately $2.1 billion. Most of the unfunded liability, more than half of that was in the Teacher Pension Plan but a substantial amount was in the Public Service Pension Plan the last time we had an actuarial assessment done, at that time it was something over $730 million. The Uniformed Services Pension Plan was in a non-funded liability situation. In fact, we had no assets in the plan at all and all the pensions were paid out of revenue and a (Inaudible) with the MHAs’ pension plan. So we did have serious questions with respect to pensions. And we decided to address those plans. And 1 would like to take Members through some of the changes that were made. ! [16]

The Commission of Enquiry considered the purchase of service option given by section 32 of the 1970 Act and Nfld regulations 387/78. In their report to the Lieutenant-Governor of Newfoundland, the Commissioners recommended that “Purchase of non-worked service provision should be eliminated from all Provincial Pension Plans”. [17]

The rationale for this recommendation is contained in the majority report as follows:

2.04 Purchase of Unworked Service and Other Purchase Options

(A) “To review and comment on:

a) the policy of permitting plan members to purchase unworked service and the contribution rates at which such unworked service may be purchased.

Conclusions:

1. The purchase of unworked service, at rates below the actuarial cost for the pension benefit related to such service, has led to increases in the unfunded liabilities of Provincial Pension Plans. In the view of the Commission, purchase of unworked service at rates less than the actuarial cost will lead to increased costs for taxpayers.

2. The Commission is of the view that certain purchase of service provisions were introduced in the Plans to attract and retain certain groups of employees in accordance with Provincial priorities at the time. These purchase of service provisions, such as purchase of university time for teachers, have purchase rates and terms considerably below their actuarial cost.

3, With the exception of war service, the right to purchase non-worked

service on favourable purchase terms does not exist in other Public Sector Plans.

4. Tax Reform may require elimination of purchase of service provisions in Provincial Pension Plans J [18]

The Chairman of the Commission of Enquiry who delivered a separate Report stated:

2.4 Purchase of Unworked Service and Other Purchase Options

Under the heading 2.04 Purchase of Unworked Service and Other Service Options, the following recommendation has been made:

Recommendation

1. Purchase of non-worked service provisions should be eliminated from all Provincial Pension Plans.

I concur with this recommendation J [19]

The respondent contends, nonetheless, that the purchase of service contract which she executed in 1989, to purchase seven additional years of service to count as pensionable service, and to pay the purchase price by instalments over 182 pay periods has been continued in the 1994 and 1995 taxation years by virtue of the conjoint effect of sections 4 and 39 of the 1991 Act.

It is my respectful view that this contention is not sustainable in law.

The respondent’s position rests on the assumption that the so called “rule” that a legislature does not intend to abolish, limit or interfere with the rights of subjects is absolute. She assumes that this “rule” must yield the same result in all cases to which it is applied, regardless of the language of the relevant legislation. However, it is well settled that the rule is not a rule of law but a rebuttable presumption that may be displaced by evidence of contrary legislative intention, [20] and, in any case that it applies “only where the legislation is in some way ambiguous and reasonably susceptible of two constructions”. [21] As I will demonstrate below, evidence of a contrary legislative intention exists in this case.

In my judgment, sections 4 and 39 of the 1991 Act are neither ambiguous nor susceptible of two reasonable constructions. The weight of judicial opinion in the Tax Court of Canada [22] contradicts the position taken by the respondent, by the Tax Court Judge in this case, and by Mr. Justice Rothstein in his reasons. However, even if the legislation were ambiguous and triggered the operation of this presumption, it is my view that it could be rebutted.

Driedger explains how the presumption is rebutted. He states:

The presumption against interfering with vested rights is rebutted by any adequate intention that the legislature intended its legislation to have immediate and general application despite its prejudicial impact. This intention is sometimes stated expressly in the form of transitional provisions. These set out rules specifying the temporal application of the legislation being repealed or enacted by a particular Act. Such rules prevail over any contrary common law or Interpretation Act rules. [23] ^

The following transitional provisions of the 1991 Act afford cogent evidence that the legislature of Newfoundland intended the 1991 Act to have general and immediate effect despite their apparent prejudicial effects:

37. (1) Where this Act conflicts with The Civil Service Act or another Act, this Act shall prevail.

(2) Notwithstanding subsection (1), where this Act conflicts with The Pension Benefits Act, that Act shall prevail and the Lieutenant-Governor in Council may make regulations to further comply with that Act.

38. Those persons who on the commencement of this Act are employed by the Newfoundland Association of Public Employees and who became members of the pension plan upon the terms and conditions set out in certain Orders-in- Council made under the authority of subsection 33(3) of the former Act shall continue to participate in the pension plan upon those same terms and conditions or those other terms and conditions that may be specified by order of the Lieu- tenant-Governor-in Council from a date not earlier than April, 1967.

41. For the purpose of the Income Tax Act (Canada)

(a) the pension adjustment factor as defined under the Income Tax Act (Canada) shall not exceed 18% for all years of service after December 31, 1990;

(b) all employer and employee contributions shall be made with reference to actuarial reports; and

42. (1) Paragraph 3(d) of The Pensions Funding Act is repealed and the following substituted:

(d) the Public Service Pension Act, 1991 and The Civil Service Act..

(2) Where in an Act or regulations there is a reference to The Public Service (Pensions) Act or a part or section of that Act, the reference shall be considered to be a reference to the equivalent part or section contained in the Public Service Pensions Act, 1991.

In section 37 the legislature states expressly the circumstances in which the 1991 Act should prevail over other Newfoundland statutes and those in which it should not. Secondly, section 38 restricts the right to contribute to the plan on the same terms and conditions as prior to the enactment of the 1991 Act to specific classes of employees. I observe here that the respondents’ class is not mentioned. Thirdly, unlike the circumstances which prevailed under the 1970 Act, all employer contributions (being made for the first time ever under the 1991 Act) and employee contributions should be rooted in actuarial reports.

These transitional provisions contrast sharply with the transitional provisions of the 1970 Act which, generally, (that is subject to the Civil Service Act and the 1970 Act) allow pensions and gratuities to continue in the same amount, at the same time and upon the same terms and conditions. In this respect, section 35 of the 1970 Act is instructive. It reads:

35. An employee who elects to be subject to the existing plan shall, subject to the Civil Service and this Act, be eligible for the award of a pension or gratuity in the same amount, at the same time and upon the same terms and conditions as if this Act, other than the provisions of it that are specifically made applicable to him, had not been enacted.

When the legislature of Newfoundland was reviewing the 1970 Act, it certainly could have chosen simply to repeat in the 1991 Act, this broad and sweeping statement in order to ensure the continuation of existing pension plans. However, it did not. I am, therefore, of the view that it would be wrong in law to interpret the 1991 Act as if it had.

A comparative reading of the manner in which the different “existing plans” were treated in the 1991 Act is also supportive of this interpretation of legislative intention.

Section 32 of the 1970 Act was the authority for the respondent’s voluntary purchase of seven additional years of non-existent service. For convenience, I repeat that section here:

32. Subject to this Act and the prior approval of the Lieutenant-Governor in Council, the Minister may make regulations establishing conditions under which an employee may purchase service which shall be counted as pensionable service.

Thus, section 32 granted the Lieutenant-Governor in Council broad regulatory powers over all its employees.

Similarly, subsection 33(3) of the 1970 Act, invests the Lieutenant-Governor’s with regulatory authority over “certain employees”. It reads:

33. The Lieutenant-Governor in Council may by order apply the Pension Plan to persons employed by the Newfoundland Government Employees Association from any date not earlier than April I, 1967, upon such terms and conditions as the Lieutenant-Governor in Council may prescribe, and when an order is made under this subsection, this Act shall, from the effective date of the order, apply to and in respect of the persons referred to in it, as if they were employees, and the Lieutenant-Governor in Council may, in the same or a later order and to such extent and upon such terms and conditions as may be prescribed in the order, credit any such person with pensionable service under this Act, in respect of any service done by that person before April 1, 1967.

The 1970 Act not only provided for the purchase of years of service by employees such as the respondent, but it also provided the Lieutenant-Governor in Council with similar regulatory powers with respect to specific categories of employees, such as those employed by the Newfoundland Government Employees Association.

The separate pension plans which existed by virtue of these distinct regulatory powers were treated differently in the 1991 Act. Subsection 33(1) of the 1991 Act explicitly provides for the continuation of the terms and con- ditions of the pension plans established under section 33 of the 1970 Act. It reads, in part:

33. (1) The Lieutenant-Governor in Council may make regulations.

(a) designating a class or classes of persons, otherwise coming within the definition of “employee” provided by paragraph 2(d) to and in respect of whom this Act shall not be applied;

(b) prescribing the number of hours for the purposes of paragraph 2(e) and other remuneration for the purposes of paragraph 2(p);

(c) excluding an employee or group of employees from participating in the pension plan, notwithstanding subsection 3(1) and may prescribe terms and conditions for the removal of an employee or group of employees including the refund of contributions and matching amounts paid under the authority of this Act;

(d) prescribing additional years of pensionable service that may be credited to an employee and may prescribe the terms and conditions upon which that pensionable service shall be credited;

(n) defining, enlarging or restricting the meaning of a word or expression used in this Act but not defined in this Act; and

(0) respecting matters necessary or advisable to carry out effectively the intent and purpose of this Act.

(2) Regulations made under this section may be made with retroactive effect.

A perusal of the regulations made under the authority given in this section does not disclose that regulation 387/78 was replicated in any form. [24]

Section 38 of the 1991 Act, reproduced earlier, protects explicitly and specifically whatever pension arrangements existed for employees of the Newfoundland Association of Public Employees. No similar provision exists in the 1991 Act preserving the terms and conditions of pension plans devised under the authority of section 32 of the 1970 Act. To my mind, this is strong evidence that the legislature of Newfoundland turned its attention to the terms and conditions of the various pension plans in existence before 1991 and intentionally chose to continue, in their totality, some of them and not others.

The express transitional provisions of the 1991 Act, when read in the context of the scheme of the 1991 Act, and its predecessor, rebut the presumption against the derogation of rights and make it reasonable to conclude that the legislature of Newfoundland intended the 1991 Act to have immediate and general application despite its prejudicial effect. These provisions overcome any rule of construction, whether statutory or common law, which would require a different construction.

As Dickson C.J. explained in Gustavson Drilling, supra:

No one has a vested right to continuance of the law as it stood in the past; in tax law it is imperative that legislation conform to changing social needs and government policy. A taxpayer may plan his financial affairs in reliance on the tax laws remaining the same; he takes the risk that the legislation may change. The mere right existing in members of the community or any of them at the date of the repeal of a statute to take advantage of the repealed statute is not a right- accrued].^ [25]

I come now to consider the second statutory defence of the judgment of the Tax Court. It rests on section 39 of the 1991 Act. I repeat that section here for ease of reference:

39. All benefits acquired under the former Act before the commencement of this Act are protected under this Act.

Basing himself on one of the definitions of “benefits” from Blacks Law Dictionary, Mr. Justice Rothstein makes the following assertions at paragraph 14 of his reasons:

The phrase “all benefits” as used in section 39 is, in my view, broad enough to encompass the contractual entitlements acquired by the respondent pursuant to the terms of her Purchase of Service Contract. Her contract was validly entered into in accordance with the 1970 Act and vested the respondent with the right to acquire certain benefits, namely, pension benefits based on seven additional years of additional pensionable service. The right to acquire these benefits by continuing to make contributions is protected under section 39 of the Act.^ [26]

The authors of Black Law Dictionary rely for their definition, exclusively on jurisprudence developed by Courts in the United States of America.

I find it baffling that reliance should be placed on jurisprudence from a foreign jurisdiction when the word “benefits”, as it relates to the pension plan has an accepted meaning in Canada, where there are authoritative definitions of the word. For example, the Dictionary of Canadian Law, relying on Canadian sources, defines the word as meaning “a pension; a monetary amount paid under a pension or other plan.” It includes the definition found in the Act respecting benefits received from registered retirement savings plans. [27]

More importantly, the Pension Benefits Act, referred to in section 37 of the 1991 Act, defines the phrase “pension benefit” as follows: 2. In this Act

(f) “pension benefit” means the aggregate annual, monthly or other periodic amounts to which an employee will become entitled upon retirement or to which any other person is entitled by virtue of his death after retirement under a pension plan; [28]

It is my respectful view, therefore, that that is the sense in which the legislature of Newfoundland used the phrase “all benefits acquired” in section 39 of the 1991 Act.

Consequently, I am of the view, that the right to continue to make contributions under the purchase of service contract in the 1994 and 1995 taxation years was not a “benefit” acquired by the respondent which section 39 of the 1991 Act protects.

It follows that the Minister of National Revenue was right in disallowing the deductions of “additional voluntary contributions” made by the respondent in the 1994 and 1995 taxation years because they were not shown to have been made in accordance with the plan as registered i.e. by the plan established by the 1991 Act.

I would therefore allow, with costs both here and below, the application for judicial review, set aside the judgment of the Tax court of Canada, and reinstate the Minister’s reassessment of the respondent’s income for the 1994 and 1995 taxation years, disallowing the respondent’s deductions of her contributions towards the purchase of additional years of “pensionable” service.

Rothstein J.A.:

This is an application for judicial review, brought by the Crown, of a decision of the Tax Court of Canada (Archambault J.T.C.C.) allowing the appeal of Patricia Corbett (the “respondent”) in respect of her 1994 and 1995 taxation years. The issue is whether contributions, made by the respondent in 1994 and 1995 in respect of purchased years of service, were made in accordance with her registered pension plan as required by paragraph 147.2(4)(a) of the Income Tax Act. Paragraph 147.2(4)(a) provides: 147.2. (4) There may be deducted in computing the income of an individual for a taxation year ending after 1990 an amount equal to the total of

(a) the total of all amounts each of which is a contribution (other than a prescribed contribution) made by the individual in the year to a registered pension plan in respect of a period after 1989, to the extent that the contribution was made in accordance with the plan as registered. [emphasis added]

147.2 (4) Un particulier peut déduire dans le calcul de son revenu pour une année d’imposition se terminant après 1990 le total des montants suivants:

(a) les cotisations (sauf celles visées par règlement) qu'il verse au cours de l’année à un régime de pension agréé pour une période postérieure à 1989, dans la mesure où il les verse conformément au régime tel qu’il est agréé.

Facts

The respondent was a member of a pension plan which, prior to 1991, was governed by the Newfoundland Public Service (Pensions) Act~^ [29] (the “1970 Act”). In November 1989, the respondent elected, pursuant to section 32 of the 1970 Act, to purchase seven additional years of service under her pension plan to count as pensionable service. Counsel explained at the hearing that the opportunity to purchase service to count as pensionable service was provided, among other reasons, to recognize that women, on account of pregnancy and child rearing, could be out of the workforce for some years. Section 32 of the 1970 Act provided:

Subject to this Act and the prior approval of the Lieutenant-Governor in Council, the Minister may make regulations establishing conditions under which an employee or a person who is about to become an employee may purchase service which shall be counted as pensionable service.

In accordance with the Regulations made under section 32, [30] the respondent entered into a purchase of service contract with her employer, the Government of Newfoundland. The respondent elected to pay for this service by way of payroll deductions of $140.74 for 181 pay periods, plus a final payment of $141.41 for a total cost of $25,615.35, i.e. for the equivalent of approximately seven years.

In 1991, the 1970 Act was repealed and replaced by the Public Service Pensions Act, 1991 (the “1991 Act”). Under this new legislation, there are no provisions which would, after the legislation came into effect, allow the respondent to purchase years of service to be counted as pensionable service.

The respondent continued to make contributions by way of payroll deduction after 1991 in respect of the seven years of service she had agreed to purchase. She deducted these contributions from her income under paragraph 147.2(4)(a) of the Income Tax Act.

On June 16, 1997, the Minister of National Revenue reassessed the respondent in respect of her 1994 and 1995 taxation years, disallowing her deductions in those years for the contributions made in respect of the years of service she had purchased on the grounds that they did not satisfy paragraph 147.2(4)(a) of the Income Tax Act. The respondent filed a Notice of Objection and the Minister confirmed the reassessments. The respondent successfully appealed these reassessments to the Tax Court of Canada. The Crown applies to this Court for judicial review of this decision of the Tax Court of Canada.

Analysis

There are conflicting decisions in the Tax Court of Canada in respect of the deductibility of contributions made after the enactment of the 1991 Act for years of service purchased prior to the enactment of the 1991 Act under the Newfoundland Public Service Pension Plan. In the present case, Archambault J.T.C.C. found the contributions deductible. In Vivian v. R.^ [31] and Pike v. /?., [32] such contributions were found to be non-deductible.

In order to deduct contributions from income for purpose of paragraph 147.2(4)(a) of the Income Tax Act, they must be “made in accordance with the plan as registered”. It is therefore necessary to determine what was the “plan as registered” during the 1994 and 1995 taxation years for which the respondent was reassessed.

Section 2 of the 1970 Act defines “Pension Plan” as “the pension plan established by this Act.” Section 2 of the 1991 Act defines “pension plan” as “the Public Service Pension Plan referred to in this Act.” No conclusive evidence was offered at the hearing as to what was the exact content of the plan, however, it is readily apparent that the content of the pension plan will be defined by the applicable legislation. Accordingly, the plan as registered in the 1994 and 1995 taxation years will be defined by the 1991 Act.

The relevant provisions of the 1991 Act read as follows:

2. In this Act

(f) “former act” means The Public Service (Pensions) Act [the 1970 Act].

4. The Public Service Pension Plan provided for, by and under the former Act is continued, subject to this Act and the regulations, as the pension plan.

39. All benefits acquired under the former Act before the commencement of the Act are protected under this Act. [emphasis added]

There is no provision in the 1991 Act equivalent to section 32 of the 1970 Act, i.e. the 1991 Act does not authorize the purchase of years of service in the broad manner previously provided by section 32 of the 1970 Act. The question is whether the absence of such a provision in the 1991 Act truncated the respondent’s right to make contributions for the purchase of years of service pursuant to her 1989 purchase of service contract in the years following the enactment of the 1991 Act.

It is clear that the absence of a provision such as section 32 of the 1970 Act precludes the purchase of years of service after the 1991 Act came into force. In his dissenting reasons, the learned Chief Justice refers to the comments of the Minister of Finance of Newfoundland in the House of Assembly and the Commission of Enquiry on Pensions, 1990, to explain the reasons why the provision for the purchase of unworked service was not carried forward in the 1991 Act. The purchase of unworked service at rates below the actuarial cost for the pension benefits related to such service had led to increases in the unfunded liabilities of provincial pension plans. This is a rational and prudent reason for not continuing the opportunity for employees to purchase unworked service at rates below actuarial cost. However, in my respectful opinion, the absence of a provision authorizing such purchase does not have the retrospective effect of abrogating contracts for the purchase of years of service made in accordance with the plan as registered before the 1991 Act came into force.

Section 4 of the 1991 Act provides that despite the repeal of the 1970 Act, the plan established thereunder is continued as the pension plan under the 1991 Act. The only limitation imposed is that the plan is continued subject to the 1991 Act and its regulations. This provision is clearly intended to continue the rights and benefits which were acquired under the plan as it existed under the 1970 Act. Only to the extent that the 1991 Act provides that what was acquired under the 1970 plan was abrogated or rescinded would rights and benefits under the 1970 plan be interfered with. Nothing in the 1991 Act purports to do so in respect of purchase of service contracts entered into pursuant to section 32 of the 1970 Act. I see no reason why rights and benefits under a purchase of service contract for the purchase of years of service, validly entered into in 1989 in accordance with the plan as registered at that time and which was statutorily continued after 1991, would not also be continued.

This conclusion is supported by section 39 of the 1991 Act which expressly protects “all benefits” acquired under the 1970 Act prior to the repeal of that Act. The word “benefit” has a broad meaning. Black’s Law Dictionary defines benefit as “Advantage; profit; fruit; privilege; gain; interest.” [33] In a contractual context, which is the context that is relevant here: “benefit” means that the promisor [in this case, the respondent] has, in return for his promise, acquired some legal right to which he would not otherwise be entitled. ^ [34]

The phrase “all benefits” as used in section 39 is, in my view, broad enough to encompass the contractual entitlements acquired by the respondent pursuant to the terms of her purchase of service contract. Her contract was validly entered into in accordance with the 1970 Act and vested the respondent with the right to acquire certain benefits, namely, pension benefits based on seven years of additional pensionable service. The right to acquire these benefits by continuing to make contributions is protected under section 39 of the 1991 Act. This further supports the view that contributions made in 1994 and 1995 were made in accordance with the plan as registered.

In his dissenting reasons, The Chief Justice refers to section 38 of the 1991 Act as a provision that explicitly and specifically protects pension arrangements for employees of the Newfoundland Association of Public Employees. He says that this is strong evidence that the Newfoundland legislation intended to continue the terms and conditions of some plans but not others. Section 38 provides:

Those persons who on the commencement of this Act are employed by the Newfoundland Association of Public Employees and who became members of the pension plan upon the terms and conditions set out in certain Orders in Council made under the authority of subsection 33(3) of the former Act shall continue to participate in the pension plan upon those same terms and conditions or those other terms and conditions that may be specified by order of the Lieutenant-Governor in Council from a date not earlier than April, 1967.

With respect, I do not read section 38 in the same way as the learned Chief Justice. Section 38 deals with a special category of member of the pension plan. In my opinion, section 38 is a special provision dealing with employees who are not employees within the definition of that term in the 1991 Act, i.e. they were employees of the Government Employees Union and not the Government itself, but who were admitted to the 1970 pension plan. Section 38 addresses this special category of members and allows them to continue to participate in the pension plan under the 1991 Act. I do not read section 38 to the effect that employees of this Union had their accrued rights protected because they are subject to change by the Lieutenant- Governor in Council. However, employees who do fit the definition of “employee” under section 2 of the Act have their rights and benefits accrued under the 1970 Act protected by section 39.

It is also significant that section 29 of the Newfoundland Interpretation Act [35] provides that:

29. (1) Where an Act or enactment is repealed in whole or in part or a regulation is revoked in whole or in part the repeal or revocation shall not

(b) affect the previous operation of an Act, enactment, or regulation so repealed or anything done or suffered under the Act, enactment or regulation;

(c) affect any right, privilege, obligation or liability acquired, accrued, accruing or incurred under the Act, enactment or regulation repealed or revoked;... [emphasis added]

When this provision is considered in conjunction with sections 4 and 39 of the 1991 Act, the repeal of the 1970 Act and the subsequent enactment of the 1991 Act could not affect the rights acquired by or accruing to the respondent through her purchase of service contract.

This interpretation is further supported by the strong and well established presumption in statutory interpretation that the legislature does not intend to “abolish, limit or otherwise interfere with the rights of subjects.” [36] In a taxation context, Estey J., speaking for the Court in Morguard Properties, stated that: [37]

In more modern terminology the courts require that, in order to adversely affect a citizen s right, whether as a taxpayer or otherwise, the Legislature must do so expressly. Truncation of such rights may be legislatively unintended or even accidental, but the courts must look for express language in the statute before concluding that these rights have been reduced. This principle of construction becomes even more important and more generally operative in modern times because the Legislature is guided and assisted by a well-staffed and ordinarily very articulate Executive. The resources at hand in the preparation and enactment of legislation are such that a court must be slow to presume oversight or inarticulate intentions when the rights of the citizen are involved. The Legislature has complete control of the process of legislation, and when it has not for any reason clearly expressed itself, it has all the resources available to correct that inadequacy of expression. This is more true today than ever before in our history of parliamentary rule. [emphasis added]

The fact that the 1991 Act does not provide, after it came into force, for the purchase of years of service for persons in the position of the respondent does not satisfy the requirement that legislation which intends to abrogate existing rights must do so expressly. The respondent has rights and corresponding benefits under the purchase of service contract she entered into with her employer in 1989 and the 1991 Act would have to be much more explicit to have the effect of taking those rights and benefits away from her.

Indeed, the Government of Newfoundland continued to take her contributions by payroll deduction after the 1991 Act came into force. Such action is only consistent with the view that contributions in respect of purchased years of service, made pursuant to a contract validly entered into prior to the 1991 Act becoming effective, were to continue in accordance with that contract.

It is also worth noting that if the respondent’s contributions were not deductible from income, she would be subject to double taxation. Her contributions would be made from after-tax dollars and her pension benefits arising from those contributions would still be subject to income tax in the years when they are received by her. Again, it would be extraordinary that the mere omission from the 1991 Act of a provision authorizing the future purchase of years of service, albeit for prudent fiscal reasons, should retrospectively invalidate purchase of service contracts validly entered into prior to the enactment of the 1991 Act, especially when there is a clause which expressly aims at protecting pension benefits acquired under the former Act.

The applicant seeks to draw an analogy between the omission of section 32 of the 1970 Act in the 1991 Act and the situation in Gustavson Drilling.^ [38] The central issue in Gustavson Drilling was whether a 1962 amendment to the Income Tax Act could act to deny Gustavson from enjoying a deduction which would have been available under prior legislation. The majority answered this question in the affirmative stating that: [39]

The section as amended by the repeal does not purport to deal with taxation years prior to the date of the amendment; it does not reach into the past and declare that the law or the rights of parties as of an earlier date shall be taken to be something other than they were as of that earlier date. The effect, so far as appellant is concerned, is to deny for the future a right to deduct enjoyed in the past but the right is not affected as of a time prior to enactment of the amending statute. [emphasis added]

And further that: [40]

No one has a vested right to continuance of the law as it stood in the past; in tax law it is imperative that legislation conform to changing social needs and governmental policy. A taxpayer may plan his financial affairs in reliance on the tax laws remaining the same; he takes the risk that the legislation may be changed.

The applicant argues that these passages describe the effect that the 1991 Act has on the respondent in the case at bar. With respect, I cannot agree.

Similar to the situation in Gustavson Drilling, it is clear that the 1991 Act does not purport to have retrospective effect. Indeed, there is no evidence that the Act intended to affect the rights of parties prior to the date that the 1991 Act came into force. However, unlike the situation in Gustavson Drilling, sections 4 and 39 of the 1991 Act expressly continue the pension plan as provided for, by and under the 1970 Act and protect the bene fits acquired thereunder. Specifically, the continuation of the prior plan under section 4 and the express protection of benefits offered by section 39 distinguishes the case at bar from the situation in Gustavson Drilling.

I conclude that contributions made in 1994 and 1995 under the respondent’s 1989 purchase of service contract were made in accordance with the plan as registered as required by paragraph 147.2(4)(a) of the Income Tax Act.

The appeal will be dismissed with costs.

Application dismissed.