Date: 200608010
Docket: T-957-05
Citation: 2006
FC 964
Toronto, Ontario, August 10, 2006
PRESENT: Madam Prothonotary Milczynski
BETWEEN:
ISAC SCHENKMAN
Plaintiff
and
HER MAJESTY THE QUEEN IN RIGHT
OF CANADA
Defendant
REASONS FOR ORDER AND ORDER
[1]
This is a
motion to dismiss the action, pursuant to Rule 221 (1) of the Federal Courts
Rules. For the reasons below, the motion is granted and the claim struck,
on the grounds that the proceeding to challenge and set aside the decision
finding that the Plaintiff received a pension overpayment and recovery of that
overpayment, ought to have been commenced by way of application for judicial
review, and not by way of action.
Background
[2]
The
Plaintiff in this action, Mr. Isac Schenkman, is a former employee of the
Federal Public Service. Mr. Schenkman was a Project Manager for Public Works
and Government Services Canada, and commenced his employment with Public Works
in June of 1982.
[3]
Mr.
Schenkman was terminated from his employment on January 6, 1999. Public Works
and Government Services alleged just cause for Mr. Schenkman’s termination.
Mr. Schenkman, however, filed a grievance and was ultimately successful in
being awarded reinstatement by the Public Service Staff Relations Board, with
full compensation and benefits. The period of time for which he received this
full compensation was from the date of his termination in January, 1999 to
August 28, 2002.
[4]
Following
his termination, but prior to the resolution of his grievance, Mr. Schenkman
applied for and received, among other things, his pension benefit from the
Public Service Superannuation Plan.
[5]
Upon or
around the time of Mr. Schenkman’s reinstatement, Public Works generated a
number of statements setting out the reconciliation of amounts owed to or owing
by Mr. Schenkman. This prompted a further grievance, filed in September of
2002 and a further award from the PSSRB to clarify the retroactive entitlements
and Mr. Schenkman’s claim for interest (which was denied).
[6]
There were
further meetings and discussions regarding Mr. Schenkman’s entitlements, his
reinstatement and duties – during which time, according to the evidence of
Public Works, it was raised with Mr. Schenkman that he would be required to
repay the amount of the pension benefits he received prior to his reinstatement
in light of the fact that he was made whole for his lost salary and benefits.
Mr. Schenkman denies that these discussions took place. 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.
[7]
In fact,
nothing was done about the repayment of pension benefits for quite some time -
even though there were opportunities, unfortunately many not under the best of
circumstances. On May 8, 2003, Mr. Schenkman commenced an action in the
Ontario Superior court seeking damages for a number of employment related
matters. He also filed complaints to the Canadian Human Rights Commission. Throughout
this time, neither the employer nor the pension plan administrator took any
steps to give Mr. Schenkman written notification of the amounts that were
asserted to be owed. The Defendant’s position is that the onus was somehow on
Mr. Schenkman to raise the matter of the pension overpayment either prior to or
in the course of these proceedings, to ask for clarification, or ask for
specific information on the amounts owing, and how they were to be repaid.
[8]
The
Ontario Court action and the Canadian Human Rights complaints were all settled
through a global mediation conducted by George Adams. As part of the
settlement, Mr. Schenkman resigned from Public Works and Government Services
Canada effective September 10, 2004 and he applied to receive his pension
benefit from the Public Service Superannuation Plan.
[9]
Shortly
thereafter, in correspondence dated September 13, 2004, Mr. Schenkman received
what the Defendant describes as “the standard information package for
prospective retirees”. Part of the package addressed insurance matters, but,
subject to the usual disclaimer, it also clearly set out the amount of Mr.
Schenkman’s immediate annuity entitlement, expressed in annual and monthly
amounts, ($41,354.04 and $3,446.17 respectively). Nothing was stated regarding
any overpayment.
[10]
In that
respect, Mr. Schenkman received two letters, each dated November 1, 2004, and
each from Ms. Barbara Sowerby of the Superannuation, Pension Transition and
Client Services Sector in Shediac, New Brunswick. One letter enclosed his pension statement
with information regarding the amount of his monthly pension benefit. The
second letter made reference to his re-employment in the Public Service in
August 2002 with full reinstatement retroactive to January 7, 1999. It stated
that because Mr. Schenkman had been compensated for all lost salary and
benefits, the amount of pension benefit he received in that timeframe was an
overpayment and had to be repaid.
[11]
The total
lump sum amount of the overpayment was stated at $73,515.01, which Mr. Schenkman
was advised he could pay in a single lump sum or in monthly deductions from his
pension benefit in the amount of $585.96 (an amount that included a charge for
a life insurance policy taken out by Public Works for the amount of the
overpayment). Mr. Schenkman was required to respond within thirty days, or
else it would be assumed that he had chosen the latter option.
[12]
Mr.
Schenkman’s counsel wrote to Ms. Sowerby on November 10, 2004 inquiring as to
the legal basis in any legislation which authorized the demand and the
unilateral deduction of any amount from Mr. Schenkman’s monthly benefit.
Counsel also made reference to the settlement before George Adams that he
thought had resolved all matters between the parties and involved the
resignation of his client and the release of all claims. No response was
received, and Mr. Schenkman himself wrote on February 8, 2005.
[13]
On March
10, 2005, a response was received from Ms. Melissa Soucoup, Policy &
Legislation Advisor at Public Works and Government Services Canada –
Superannuation, Pension Transition and Client Services Sector. The letter
states as follows:
…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.
Mr. Schenkman commenced this action on June 2, 2005. The
claim seeks an interim and permanent injunction restraining Public Works from
making monthly deductions from Mr. Schenkman’s pension; reimbursement of all
monies Mr. Schenkman states were wrongfully deducted, and damages for bad
faith and breach of fiduciary duty in the amount of $250,000.00.
Discussion
[14]
Whether or
not there was a pension overpayment that Mr. Schenkman is obliged to repay is
not the issue on this motion. That Public Works, however, waited until after
Mr. Schenkman retired to make the claim is unfortunate. It creates the most
hardship. The claim for repayment could arguably have been made at the time of
Mr. Schenkman’s reinstatement and simply deducted from amounts owing to him for
lost wages. The demand could also have been made while Mr. Schenkman was
re-employed, and earning a higher income. The claim for pension overpayment
could also have been addressed in the mediation before George Adams. If the
claim had been made at any of these junctures, Mr. Schenkman could, if he
disputed the claim, have had access to the grievance procedure. As a former
employee and retiree, his rights to the union’s representation and grievance
procedure is not clearcut, but rather doubtful.
[15]
Instead,
Public Works waited until after Mr. Schenkman’s resignation, and even then did
not mention any claim for overpayment in the initial communication with him in
September of 2004 regarding his retirement benefits. The first written
notification of the exact amount said to be owing and demand for repayment was
made in November of 2004, some two and a half years after Mr. Schenkman’s
reinstatement.
[16]
As noted
above, the evidence submitted by the Defendant, through the affidavit of Ms.
Linda Bellissimo who is a Supervisor, Compensation Services, Ontario Region,
Public Works and Government Services Canada, puts the burden on Mr. Schenkman
to make the inquiries and ask the right questions, yet for all the
communications Public Works had with Mr. Schenkman regarding his salary,
benefits and terms of reinstatement that detailed retroactive salary payments,
superannuation deficiencies (contributions), reimbursement of Mr. Schenkman for
dental care premiums and the like, Ms. Bellissimo states at paragraph 25 of her
affidavit, that she “did not mention the superannuation repayment requirement
as [she] was unaware of the amount thereof, which was being dealt with by
Superannuation”.
[17]
There does
not appear to be an appreciation of the obligations an employer and pension plan
administrator have to give plan members full, accurate and timely disclosure of
their benefits, entitlements and obligations. For his part, Mr. Schenkman appears
to be under the impression that he is entitled to receive a pension for the
same period of time for which he has been awarded full pay and for which he has
made pension contributions and accrued pensionable service.
[18]
In any
event, however Mr. Schenkman’s file may have been administered, the proper
proceeding to seek an order essentially setting aside the decision to deem an
overpayment and stop the steps to recover the overpayment, is an application
for judicial review. 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.
[19]
As stated
by the Federal Court of Appeal in The Queen v. Grenier, 2005 F.C.A. 348,
a plaintiff must challenge an administrative decision by way of an application
for judicial review in an attempt to have the administrative decision
invalidated, as opposed to an action. To permit otherwise would be to permit
indirect or collateral attacks on decisions made under statutory authority. In
that respect, the manner of proceeding is not simply a matter of form - there
is a public interest in precluding the use of tort claims to engage in
collateral attacks on decisions that are or should be final and that may be
reviewed against the proper and applicable standard of review. To permit a
collateral attack on a decision by way of action could encourage conduct
contrary to a statute’s objects and would tend to undermine the statute’s
effectiveness.
[20]
As in Michaud
v. Canada (Attorney General), [2000] F.C.J. No.1999 (T.D.), having selected
the wrong procedure, the only recourse at this juncture is for Mr. Schenkman to
move for an extension of time to commence an application, with valid reasons to
explain the delay.
ORDER
THIS COURT ORDERS that
1.
The
statement of claim is struck, and the action is dismissed.
2.
If the
parties cannot agree on costs they may, within thirty days of the date of this
Order, file written submissions, no longer than three pages in length, to
address the matter of costs.
“Martha
Milczynski”
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