V. Minister of National Revenue, [1984] CTC 2737

Christie, CJTC:—The issue is whether the sum of $5,117.04 was part of the appellant’s income in his 1982 taxation year. There is no dispute about the facts. It is a test case which arose in this way. The appellant is a judge of the District Court of Thunder Bay, Ontario, having been appointed to that office by the Governor General on September 20, 1979 pursuant to section 96 of the Constitution Act, 1867. Section 100 of this Act provides:

100. The Salaries, Allowances, and Pensions of the Judges of the Superior, District, and County Courts (except the Courts of Probate in Nova Scotia and New Brunswick), and of the Admiralty Courts in Cases where the Judges thereof are for the Time being paid by Salary, shall be fixed and provided by the Parliament of Canada.

Pursuant to this mandate Parliament has enacted subsection 19(1) of the Judges Act, RSC 1970, c J-l, which states: “The salaries of the judges of the county and district courts are as follows:”. Special amounts are then listed. They are the same for all County and District Court judges across Canada except that the salaries of Chief and Associate Chief Judges of those courts are modestly higher than the salary for the other judges. These specified amounts are, pursuant to subsection 19.2(1) of the Judges Act, subject to annual adjustments related to the Industrial Composite which “for an adjustment year is the average weekly wages and salaries of the Industrial Composite in Canada for that year as published by Statistics Canada under the authority of the Statistics Act" (paragraph 19.2(2)(b)). A combination of the specific amount stated in paragraph 19(1) applicable to the appellant and adjustments made pursuant to subsection 19.2(1) was the appellant’s salary in 1982 fixed and provided as required by section 100 of the Constitution Act, 1867. Allowances and pensions for judges are dealt with in other provisions of the Judges Act. Section 29.1 thereof provides:

29.1 (1) Every judge appointed before the 17th day of February, 1975 to hold office as a judge of a superior or county court shall, by reservation from his salary under this Act, contribute to the Consolidated Revenue Fund one and one-half per cent of his salary.

(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 Retirements Benefits Account pursuant to paragraph (2)(b), an amount equal to the amount so paid shall be credited to that Account.

In accordance with subsection 29.1(2), seven per cent or $5,117.04 of the appellant’s salary fixed under the Judges Act was reserved. Six per cent was contributed to the Consolidated Revenue Fund and the other one per cent to the Supplementary Retirement Benefits Account. In his return of income for 1982 the appellant sought to deduct the entire $5,117.04 as registered pension plan contributions. By notice of assessment dated September 16, 1983, the respondent relying on subparagraph 8(l)(m)(i) and subsection 8(6) of the Income Tax Act, took the position that the appellant was restricted to deducting $3,500 for the purpose stated. In his notices of objection and appeal, the appellant contended that he had “never received as income’’ the $5,117.04 which had been reserved.

On June 29, 1983, the Federal Court of Appeal delivered judgment in Beauregard v The Queen in Right of Canada (1983), 148 DLR (3d) 205. The essential facts of this case are that the respondent, Mr Justice Beauregard, was appointed to the Superior Court for the District of Montreal on July 24, 1975. Section 29.1 of the Judges Act received royal assent on December 20, 1975, and the respondent thereupon came within the wording of subsection 29.1(2). Three judges of the Court of Appeal heard the Beauregard appeal. Chief Justice Thurlow held that section 29.1 is ultra vires in its entirety. He said at 217:

I turn now to s 29.1 of the Judges Act and the question of its pith and substance. It was, as it seems to me, a part of the appellant’s case and is, I think, beyond dispute that this legislation was part of an overall scheme to put all federally funded pension plans on a contributory basis. The method by which this was to be accomplished was to include and enact these provisions as part of an enactment relating to retirement pensions for public servants, public officials, members of Parliament and others and requiring contributions from all of them. In relation to such persons, the statute is enacted in the exercise of legislative powers entirely separate and different from any to be found in s 100. In so far as judges are concerned, the legislation enacting s 29.1 is thus, in my opinion, in pith and substance, the imposition of a contributory pension scheme requiring judges to make contributions to a fund and giving them no option as to whether they will contribute or participate or not. Such an enactment, in my opinion, is not authorized by anything in s 100 and is accordingly ultra vires in so far as the judges referred to in that section, of whom the appellant is one, are concerned.

Mr Justice Heald concluded that subsection 29.1(1) is valid because the one and one-half per cent deduction provided for therein relates solely to the cost of improving annuities for widowed spouses and other dependants of judges. Subsection 29.1(1), however, has no application to the appeal to this Court by His Honour Judge Kurisko. Mr Justice Heald held that subsection 29.1(2) is ultra vires in the face of section 100 of the Constitution Act, 1867 because contributions thereunder are in respect of both judges’ pensions and what may be paid to their dependants. If subsection 29.1(2) is ultra vires it takes down with it subsection 29.1(3) to the extent that it refers to subsection 29.1(2) as well as subsection 29.1(4). The basis for Mr Justice Heald’s conclusion regarding subsection 29.1(2) is capsulized in these words at 231:

In my view, the obligation imposed by s 100 to provide pensions imposes a duty on Parliament to provide the total amount of those pensions.

The conclusion arrived at by the majority did not turn in any way on the fact that Mr Justic Beauregard was appointed to the bench prior to the enactment of section 29.1 on December 20, 1975. Mr Justic Pratte dissented.

I am bound by the law as declared by the Federal Court of Appeal unless, of course, it is overruled by higher authority. Whether I agree with it is irrelevant. Legislation enacted by Her Majesty, by and with the advice and consent of the Senate and House of Commons, or by and with the advice and consent of provincial legislatures which is ultra vires by reason of the provisions of the Constitution Act, 1867 is a nullity and devoid of legal force ab initio. It is as if it had never been enacted: Lenoir v Ritchie (1880), 3 SCR 575 per Taschereau, J at 624-5; Bawtinheimer v Niagara Falls Bridge Commission et al, [1949] OR 788 per McRuer, CJHC at 799; and Lefroy, Legislative Power in Canada at 300-4. That is the condition of subsection 29.1(2) of the Judges Act regarding those judges identified in section 100 of the Constitution Act, 1867 in respect of whom salaries, allowances and pensions shall be fixed and provided by Parliament.

As I conceive it, my duty in disposing of this appeal is to apply the law as laid down by the majority in Beauregard in relation to the $5,117.04 regardless of the fact that the return of income, the assessment, the objection, the notification of confirmation of assessment, the notice of appeal and the reply to the notice of appeal occurred under the circumstance that both the appellant and respondent treated subsection 29.1(2) of the Judges Act as having legal force. The documents indicate that the dispute between them had no relationship to constitutional considerations, but was confined to the proper construction to be placed on certain provisions in the Judges Act and the Income Tax Act. The constitutional argument was raised at the time of hearing of this appeal. Additional arguments unrelated to the Constitution were made by Mr Henderson on behalf of the appellant, but in the light of my conclusion arising out of Beauregard it is unnecessary for me to deal with them.

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. Prior to the enactment of the vacuous section 29.1 those benefits which are listed by Heald, J at 228 were provided by the Judges Act to County and District Court judges, namely:

1. Salaries;

2. Non-contributory retirement annuities;

3. Non-contributory annuities for the judges’ widows and children; and

4. Non-contributory supplementary retirement benefits pursuant to the provisions of the Supplementary Retirement Benefits Act, RSC 1970, c 43 (1st Supp).

The appeal is allowed and the matter referred back to the respondent for reconsideration and reassessment on the basis that the $5,117.04 which was reserved and retained under the purported authority of subsection 29.1(2) of the Judges Act was not part of the appellant’s income in his 1982 taxation year.

Appeal allowed.