Ault v. Canada (Attorney general), 2003 FC 1155

                                                                                                                               Date: 20031006

                                                                                                                          Docket: T-1757-02

                                                                                                                  Citation: 2003 FC 1155

OTTAWA, ONTARIO, MONDAY, THIS 6^TH DAY OF OCTOBER, 2003

PRESENT: THE HONOURABLE MADAM JUSTICE SNIDER

BETWEEN:

                                                           MARGARET AULT                                                                                                                                                                                                         

                                                                                                                                          Applicant

                                                                        - and -

ATTORNEY GENERAL OF CANADA

                                                                                                                                      Respondent

                                       REASONS FOR ORDER AND ORDER

SNIDER J.

[1]                 Effective October 12, 2000, Ms. Margaret Ault, the Applicant, resigned from the federal public service. At the time she left the public service, Ms. Ault was fifty-seven years old with eighteen years of pensionable service under the Public Service Superannuation Act, R.S.C. 1985, c. P-36 ("PSSA").

[2]         Ms. Ault joined 119 other public servants who left the federal public service between March and October 2000 to take advantage of a Reciprocal Pension Transfer Agreement ("RTA") that was to expire on October 15, 2000. The RTA in this case was dated August 8, 1996 and was made between the Crown, as represented by the President of the Treasury Board of Canada (the "Minister") and Loba Limited ("Loba"), a consulting firm. Pursuant to this RTA, the Minister agreed to pay into Loba's pension plan an amount determined in the RTA, in respect of a contributor to the federal superannuation pension fund who ceased to be employed by the federal public service, on the condition that the contributor became a bona fide employee of Loba. There was significant financial advantage to Ms. Ault of leaving her government post under the RTA rules.

[3]         On October 13, 2000, Ms. Ault requested in writing that the Minister transfer pension funds from the Public Service Superannuation Fund into Loba's pension fund pursuant to the RTA. Pursuant to Ms. Ault's arrangement with Loba, Loba was to receive 7.5% of the transferred funds as a fee. However, Ms. Ault's pension funds, as well as those funds related to the other similarly situated 119 federal public servants have never been transferred. The Crown has taken the position that there was never a genuine employment relationship between Loba and these public servants as required by the RTA and the provisions of the PSSA.

[4]         On December 20, 2001, Sylvain Parent (President of Loba) and Loba, among others, were charged with four fraud-related offences under the Criminal Code, R.S.C. 1985, c. C-46. On that same day, Loba commenced an action against the Attorney General of Canada in this Court for breach of contract, based on the Minister's failure to transfer the pension funds (court file #T-2246-01).    In that action, Loba seeks to compel the Crown to execute the requests for transfer and also seeks damages, payable to the pension plan, in an unspecified amount. While this dispute is ongoing, the Crown will not transfer the funds from the federal public service pension plan to Loba's pension plan. There is no expectation of an early resolution.

[5]         On September 10, 2002, Ms. Ault requested that her earlier request to transfer her superannuation pension funds to the Loba pension plan be revoked. She was advised by Heather Macpherson, by letter dated September 19, 2002, that, due the to legal proceeding brought by Loba, the Crown would only accept a revocation if Ms. Ault executes a Release and an Indemnification Agreement. Ms. Ault is not prepared to sign the release and indemnity. The effect is a logjam. Ms. Ault does not have access to the pension monies pursuant to her employment with Loba since the Minister has refused to send the funds to Loba. And, she cannot begin to receive pension benefits under the PSSA until and unless she signs the release and waiver.

[6]         In an attempt to break up the logjam, Ms. Ault is challenging the September 19, 2002 decision of Ms. Macpherson in this application for judicial review.

Issues

[7]         This application raises one overarching issue. Specifically, does the Minister have the discretion to require Ms. Ault to execute a release and indemnity as a condition of permitting her to revoke her request for a transfer payment and commence receiving a pension?

[8]         This issue can further be subdivided into three parts:

1.          Once a request to transfer pension funds has been made, does the Applicant have the ability to revoke that request?

2.          Does the Minister have the authority to place terms and conditions on a revocation?

3.          If the answer to the first two questions is "yes", was the requirement of the Minister that the Applicant execute a release and indemnity a proper exercise of his discretion?

[9]        The first two issues are integrally linked and I will discuss them together.

Relevant Statutory Provisions

[10]       Subsections 40(3) and 40(4) of the PSSA provide the Minister with the discretion to transfer funds out of the Superannuation Account or the Public Service Pension Fund to an approved employer:

[11]      Subsection 40(5) of the PSSA provides that the Minister is only authorized to pay moneys to an employer from the Superannuation Account or the Public Service Plan with the written consent of the contributor:

Ms. Ault's request of October 13, 2000 in a standard form referred to as Appendix "B" constituted her consent to the transfer.

Analysis

Preliminary Issue: Standard of Review

[12]       Ms. Ault submits that the interpretation of the PSSA is a question of law and should be reviewed on a standard of correctness. In contrast, the Respondent submits that the proper standard of review is one of patent unreasonableness and this Court may only review the decision on limited grounds, namely bad faith, the exercise of discretion for an improper purpose and the use of irrelevant considerations (Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817; Suresh v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 3).

[13]       In my view, the appropriate standard of review to be applied depends on the issue being addressed. The issues of the legal ability of the Applicant to revoke her request and the authority of the Minister to attach conditions to a revocation are purely questions of law. In such instances, courts should be less deferential. However, how the Minister exercised his authority, if he is legally able to do so, is a different type of decision.

[14]       Although there is no privative clause in the PSSA, the particular provisions in Section 40 contain language that gives the Minister great discretion. For example, it is clear from the PSSA that the decision whether to transfer the pension funds ultimately rests with the Minister. Subsections 40(3) and 40(4) of the PSSA provide that the Minister "may" transfer the pension funds. In order for the Minister to exercise this discretion, certain conditions must be met. In particular:

·            the new employer must be an approved employer,

·            there must be a RTA between the new employer and the Minister;

·            there must be a bona fide employment relationship; and

·            the contributor must consent to the transfer.

Even if all of these conditions are met, it appears from the wording of subsections 40(3) and 40(4) that the Minister can still refuse to transfer the pension funds. All of these factors suggest a more deferential standard of review.

[15]       Further, although the overall purpose of the PSSA is to benefit public servants through the payment of their pensions, it cannot be ignored that the Minister is the steward of the PSSA and its operations. Discretionary decisions made in respect of one employee must be balanced against the responsibility that the Minister has for the prudent management of the funds established by the PSSA. Finally, it is clear that the Minister and his delegates must have an expert knowledge of the complicated investment framework and the impact of decisions on the continuing viability of the funds. This Court is certainly in no better position than the Minister in determining this matter.

[16]       Based on all of these factors and assuming an affirmative answer to the first two sub-issues, I am of the view that the decision of Ms. Macpherson should only be overturned if it is patently unreasonable. As stated in Pushpanathan, supra, the reviewing court should adopt a deferential approach to this question and should set aside the Minister's discretionary decision only if it is patently unreasonable in the sense that it was made arbitrarily or in bad faith, it cannot be supported on the evidence, or the Minister failed to consider the appropriate factors. The court should not reweigh the factors or interfere merely because it would have come to a different conclusion.

Issue #1: Once a request to transfer pension funds has been made, does the Applicant have the ability to revoke that request?

Issue #2: Does the Minister have the authority to place terms and conditions on a revocation?

Applicant's Submissions

[17]       In Ms. Ault's submission, there is no bar in the PSSA to a contributor revoking her consent prior to a transfer payment being made from the Superannuation Account. Where contributors are required to make elections or choose options on an irrevocable basis, the PSSA expressly provides that such elections are irrevocable. The absence of any express reference in section 40 of the PSSA to a contributor's request for a transfer payment being irrevocable is a compelling indicator that Parliament did not intend such requests to be irrevocable (see e.g. PSSA, ss. 25(5), 25(6), 8).

[18]       Ms. Ault submits that the Minister has an unqualified legal duty to pay earned pensions to contributors and is not entitled to require a contributor to sign a release as a condition of performance of the duty or to make payment of a pension conditional on obtaining an indemnity for the Crown's potential liability to a third party. The Minister's position that it is entitled to withhold pensions from retirees unless they agree to concessions in favour of the Crown offends the purpose of the PSSA and is grossly inconsistent with the Minister's fiduciary role.

[19]       Where Parliament intended that the Minister would be entitled to impose terms and conditions for the revocation of an election, it expressly provided the Minister with the authority to establish terms and conditions by regulation (PSSA, s. 8(4), 10(6)). The absence of similar statutory language in section 40 of the PSSA indicates that Parliament did not intend the Minister to have the power to impose conditions either by way of regulation or on an ad hoc basis.

[20]       In Ms. Ault's submission, the Minister has no discretion to refuse to permit a contributor in the Applicant's position to revoke a request for a transfer payment. To hold otherwise would mean that a non-consenting contributor could be forced to accept a transfer payment, which is plainly inconsistent with subsection 40(5) of the PSSA.

Respondent's Submissions

[21]      In the Respondent's submission, a bilateral relationship between the Applicant and the Minister was established by the fact that the Applicant gave the Minister her written consent to transfer the pension funds in the form of Appendix "B". That consent led to a consensus between the parties that the funds would be transferred. As a result of that consent, the Minister became authorized to exercise his discretion under subsections 40(3) and 40(4) of the PSSA to make payment into Loba's pension plan in respect of the Applicant. To the extent that the bilateral relationship derives from consent, it follows that the relationship cannot simply be terminated by the unilateral act of one of the parties. As a result, the Applicant's written consent to transfer the funds can only be withdrawn bilaterally, with the Minister's approval.

[22]       The Respondent draws my attention to the Implied Exclusion Rule and the "failure to follow an established pattern" as described in Ruth Sullivan, ed., Driedger on the Construction of Statutes, 3d ed. (Toronto: Butterworths, 1994) to argue that the "when the legislature wishes to deprive adjudicators of discretion . . . it does so by giving them an express and mandatory direction". In the absence of such express direction of how to deal with a request to withdraw consent from a contributor, the power of the Minister, in this case, to accept or refuse the revocation, must fall within his residual discretion.

Analysis

[23]       When Ms. Ault terminated her employment as a federal public servant, she requested, by letter dated October 13, 2000, that a transfer payment be made to Loba pursuant to s. 40(3) and 40(4) of the PSSA. Her consent was a prerequisite to the transfer of the pension funds (PSSA, s. 40(5)). Once Ms. Ault gave her consent, the Minister had the discretionary authority to transfer the Applicant's pension contributions, provided certain other conditions were met.

[24]       In other words, under the statute, the Minister has no authority whatsoever to transfer the funds if a contributor does not consent to that transfer. However, there is nothing in the PSSA or its regulations regarding what happens when a contributor decides to revoke that consent. Does the absence of a specific provision mean that revocation is not possible? Does it mean that the Minister must accept, without question or conditions, a withdrawal of consent from a contributor?

[25]       These issues raised by the parties are matters of statutory interpretation. In the decision R. v. 2002 SCC 73">Jarvis, 2002 SCC 73 at par. 77, Justices Major and Iacobucci wrote:

The approach to statutory interpretation can be easily stated: one is to seek the intent of Parliament by reading the words of the provision in context and according to their grammatical and ordinary sense, harmoniously with the scheme and the object of the statute.

[26]       Thus, I am not inclined to apply a narrow rule of statutory interpretation as suggested by both parties, unless the application of such a rule will lead to a result that is harmonious with the scheme of the legislation. The absence of specific words does not, in my view, necessarily lead to a result that Ms. Ault cannot rescind her consent or to a result that the Minister cannot impose terms and conditions on a revocation of consent.

[27]       In effect, both parties are urging me to take the same approach that would have me take a microscope to other sections of the relevant legislation and infer from the absence or presence of words what was intended by Parliament. The inutility of undertaking this mechanistic task is obvious from the fact that the results argued by the parties using the same approach were diametrically opposed.    Accordingly, in this case, while such an analysis may be helpful, it will not provide a full answer to the questions that are before me.

(b)         What is the context of the provisions?

[28]       Unlike most other provisions in the PSSA, section 40 deals with a situation involving a third party. The relationship addressed by these provisions is one that arises, not just from the statute but, from the RTA between the Minister and, in this case, Loba. Section 40 does not dictate the contents of an RTA, which is a commercial arrangement between contracting parties. Each contract is individually negotiated between the Minister and a third party. While each RTA meets the objectives of section 40 and must have the consent of the Governor in Council, it is reasonable to conclude that each contract will be unique. As a result, the provisions is in the PSSA do not wholly define the relationship among the Minister, Loba and an employee who wishes to transfer pension funds to Loba. In my view, it is imperative to keep this in mind when attempting to analyze the statute.

(c)        Given the context, what was the intent of Parliament?

[29]       Given the nature of these arrangements, it is a reasonable conclusion that Parliament intended that the Minister would retain significant discretion with respect to how the transfer of funds is to operate. Since Parliament chose not to legislate a form of agreement, it would be impossible for Parliament to foresee every possible situation that could arise under these individually negotiated contracts. Accordingly, Parliament also chose not to provide significant legislated guidance on how to operate under these contracts. In the absence of explicit direction, the intention must have been to leave the Minister with sufficient discretion to make these arrangements work.

[30]       The question then is whether this discretion of the Minister extends to dealing with something that is not explicitly referenced in the section. Surely, in allowing the Minister the latitude to deal with negotiating the contract, Parliament must have intended that he also have the ability to address unforeseen circumstances that might arise. In my view, the situation that has arisen in this case is exactly the type of situation that Parliament was contemplating; it was unforeseen and complex and demands an exercise of the Minister's discretion.

[31]      Would Parliament have wanted to prohibit the Minister from allowing a revocation? The answer is likely "no", regardless of what other provisions in the PSSA might explicitly provide. However, at the same time, is it a reasonable interpretation of the Minister's discretion to say that the Minister must, without question, accept the unilateral withdrawal of a contributor's consent? Once again, the answer is likely "no". Neither Parliament nor this Court can possibly imagine all of the circumstances that could arise in the context of these complicated contractual arrangements. The problem with giving this provision of the statute the interpretation urged on me by Ms. Ault is that the "one size fits all" result may lead to unintended results in the case of another RTA or another contributor. The Minister, with his knowledge of each RTA and of the scheme of the PSSA, is in the best position to identify and assess the risks associated with a revocation of consent in each case that may arise. To tie his hands through a narrow interpretation of his discretion could not have been what Parliament intended. Providing a residual discretion in the Minister to deal with situations that might arise is a way to achieve that balance.

[32]      I believe that Parliament's goal in enacting section 40 was to provide for portability of pensions, while allowing the Minister the discretion to arrange and oversee the entire relationship among companies, the Crown and the contributors. Inherent in that discretion must be a way for the Minister to permit contributors who wish to change their minds after asking for a transfer of pension funds to receive their well-earned pensions while, at the same time, protecting the public interest.

[33]       Thus, it is reasonable to conclude that, pursuant to and consistent with the Minister's discretion under section 40, Ms. Ault may revoke her request only with the consent of and subject to such conditions as the Minister considers appropriate.

[34]      That is not to say that the Minister's discretion is unfettered. As discussed above, decisions of the Minister must be made in a way that is not patently unreasonable.

(d)        Is this harmonious with the statute as a whole?

[35]       Interpreting the provisions of section 40 in this manner is harmonious with the statute as a whole. Contributors are not prohibited from accessing their pensions. Contrary to Ms. Ault's position that the position of the Minister is grossly inconsistent with the Minister's fiduciary role, I find the ability of the Minister to impose conditions where the circumstances warrant to be entirely harmonious with the obligations of the Minister under the PSSA. The Minister's fiduciary duty, as defined by the PSSA as a whole, extends beyond the narrow confines of Ms. Ault's pension to the efficient and effective administration of a complex pension scheme. He is accountable to many thousands of federal public servants and, indeed, to all Canadians for prudent management of the funds under his direction.

[36]       By voluntarily resigning from her position with the federal public service and seeking to take advantage of the RTA, Ms. Ault set herself apart from those many public servants who made no such choice and continue to be governed by other provisions of the PSSA. Those public servants deserve and can expect an automatic, unconditional access to their pensions. Ms. Ault, having made her choices, must expect to be treated differently. This different treatment is also consistent with the thrust of the PSSA.

Conclusion

[37]       In taking a broad and liberal approach to the interpretation of this statute, I would conclude that, in certain circumstances and subject to a reciprocal right of the Minister to protect the superannuation fund through terms and conditions on the revocation (discussed under Issue #2), Ms. Ault has the ability to revoke her request.

Issue #3: Was the requirement of the Minister that the Applicant execute a release and indemnity a proper exercise of his discretion?

Applicant's Submissions

[38]       The Applicant submits that, even if the Minister has discretion to allow a contributor to revoke an unexecuted request for a transfer payment, the conditions which it seeks to impose on the Applicant are improper and irrelevant ([1959] S.C.R. 121">Roncarelli v. Duplessis, [1959] S.C.R. 121). The exercise of discretion for an improper purpose or on the basis of an irrelevant consideration is ultra vires ([1982] 2 S.C.R. 2">Maple Lodge Farms Ltd. v. Canada, [1982] 2 S.C.R. 2; Shell Canada Products Ltd. v. Vancouver, [1994] 1 S.C.R. 231).

[39]      It would be entirely inconsistent with the purposes of the PSSA to allow the Minister to use his power as custodian of the Superannuation Account and administrator of the Superannuation Plan as a lever to extract collateral advantage from pensioners. Ms. Ault is an innocent victim in a dispute between the Crown and Loba. To require that, in order to obtain her pension, she must indemnify the Crown for damages for which the Crown might ultimately be liable to pay to Loba is punitive and inconsistent with the statutory purpose of the PSSA.

Respondent's Submissions

[40]       In the Respondent's submission, the Minister's reason for requiring a Release and Indemnity is to protect the public service pension fund and the federal Crown from future potential claims that could arise as a result of Ms. Ault's revocation of her direction to transfer. In particular, if Loba is successful in its breach of contract action, Ms. Ault could sue the Crown for damages, which could lead to double recovery since she would have been in receipt of a public service pension since 2002. In addition, Loba could sue the Crown for the 7.5% of the transferred pension funds that it would have received had Ms. Ault not revoked her request to transfer the funds.

[41]       The Respondent disagrees with Ms. Ault's portrayal of herself as the victim in the litigation between the Crown and Loba. Ms. Ault made a decision of her own free will to leave the federal public service and requested a transfer of her pension funds without legal advice and without investigating the ramifications. Moreover, she was aware that she had to be employed by Loba and that the Crown had issues with the validity of that employment relationship.

Analysis

[42]       A discretionary decision such as this, as discussed above, is subject to considerable deference. However, that does not mean that every decision is unassailable by the Court. In particular, the imposition of a requirement for a release and indemnification is very harsh indeed. Its effect is to deprive Ms. Ault of the ability to claim damages for the actions of the Crown and to leave her open for claims by the Crown. Given the draconian nature of these requirements and the potential (even if not likely) ramifications to Ms. Ault, I would expect to see both a careful consideration of all of the consequences of the condition and a clear expectation that the conditions were needed to protect the fiduciary duty of the Minister to the beneficiaries of the Superannuation Fund and the Canadian public interest. In this case, I saw neither.

[43]       In analyzing whether the decision was patently unreasonable, the following factors are very relevant:

·            There was a delay of over a year by the Minister (from October 13, 2000 when the request to transfer was made and December 20, 2001 when criminal charges and Loba's Statement of Claim were filed) during which Ms. Ault was not apprised of the seriousness of the problems with the Loba RTA. Had she known prior to the laying of criminal charges against Loba, she may have been able to revoke her consent with the agreement of Loba. Evidence before me indicates that as late as September 2000, the Minister would consent to a revocation provided that Loba was in agreement.

·            Although Ms. Ault freely chose to resign, and is not entirely an innocent victim, she certainly is not a party to the delay in transferring the funds or the claim by Loba against the Crown.

·            There is a serious inequality of bargaining positions. Ms. Ault, who is now 60 years of age and otherwise eligible to receive a pension, is unable to access those funds without agreeing to the conditions imposed by the Minister.

[44]       The Respondent argues that it is entirely reasonable to request that Ms. Ault indemnify the Crown and thereby protect it should Loba be successful in its current actions or should the Crown be successfully sued by Loba. I find that such assertions by the Respondent were unsupported by any evidence other than the originating Statement of Claim by Loba and the responding Statement of Defence. At this date, it is pure and unsubstantiated speculation as to whether Loba will be successful or whether Loba will sue the Crown for recovery of the 7.5% fee. The matter is left clouded even further by the existence of criminal charges against Loba. Should Ms. Ault be required to execute an indemnity based on this reasoning? I think not.

[45]       With respect to the release requested, the situation is too complex at this stage to contemplate whether Ms. Ault has any possible claims against the Crown. If Ms. Ault has a claim against the Crown in respect of how this matter was handled, it could well be a legitimate claim that results in damages that are separate and apart from her pension benefits. If the claim - which is highly speculative - has merit, I would call the result "fair" not "double dipping". Further, I would expect that any such claim would be vigorously fought and success would not be certain. Should she be prohibited in all possible claims at this stage of uncertainty? I think not.

[46]      The Respondent points to the fact that Ms. Ault signed a similar release when she requested the transfer of her pension funds on October 13, 2000. Therefore, it is submitted that requiring the Applicant to sign a release before she can revoke her consent to the transfer and exercise her options under section 13 of the PSSA is reasonable. However, I note that Ms. Ault received no legal advice at the time she executed that standard form document and may not have appreciated its importance. Therefore, I do not accept this argument as helpful to the Respondent.

[47]      The unusual circumstances associated with this decision lead me to the conclusion that it was patently unreasonable to require Ms. Ault to execute a release and indemnity as a condition to accepting the revocation of her consent to the transfer of funds. While the Minister must protect the interests of Canadians and current and future pension recipients, he must do so with measures that are not arbitrary and that are based on more than speculation.

Conclusion

[48]      For these reasons, I would allow this application for judicial review. The matter will be referred back to the Minister for reconsideration and any consent to revocation will be made without the conditions put before me in this proceeding.

[49]       While I hope that the Minister will accept the revocation without delay and free of any conditions, I am not prepared to go so far as to order the Minister to do so. Such an order would not be in accordance with my view that the Minister must be allowed to exercise his discretion in deciding whether and how to allow a reversal of a contributor's initial request. Although, on the basis of the facts before me, I see no need for any conditions, there may be circumstances of which I am not aware that would warrant different conditions. If so, I would expect the Minister to carefully analyze the reasonableness of any proposed conditions and to provide clear, supportable rationale for them to Ms. Ault.

Costs

[50]       Ms. Ault requests costs on a solicitor-client basis. An award of costs on a solicitor and client basis is extraordinary. In my view, there is nothing in this application that would warrant costs on any basis other than in accordance with column III of the table to Tariff B.

                                                                      ORDER

THIS COURT ORDERS THAT:

1.         The decision of the Minister, as set out in the letter dated September 19, 2002 from Heather Macpherson to the Applicant, is set aside and the matter remitted to the Minister for reconsideration.

2.         In exercising his discretion in deciding whether to accept the revocation by the Applicant, the Minister shall not make it a condition of any consent given that the Applicant execute a release and indemnity in the form submitted in this hearing.

3.         Costs shall be awarded to the Applicant, assessed in accordance with column III of the table to Tariff B.

"Judith A. Snider"

                                                                                                                                                  Judge             

                                                           FEDERAL COURT

                       NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                       T-1757-02

STYLE OF CAUSE:                      MARGARET AULT

                                                                                                                                     APPLICANT

v.

ATTORNEY GENERAL OF CANADA

                                                                                                                                RESPONDENT

PLACE OF HEARING:               OTTAWA, ONTARIO

DATE OF HEARING:                 WEDNESDAY, SEPTEMBER 17, 2003

REASONS FOR ORDER:          THE HONOURABLE MADAM JUSTICE SNIDER

DATED:                                           MONDAY, OCTOBER 6, 2003   

APPEARANCES:

MR. DOUGALD E. BROWN                                                                         FOR APPLICANT

MS. ANNE TURLEY                                                                                  FOR RESPONDENT

SOLICITORS OF RECORD:

NELLIGAN O'BRIEN PAYNE LLP                                                FOR APPLICANT

OTTAWA, ONTARIO

MORRIS ROSENBERG                                                                FOR RESPONDENT

DEPUTY ATTORNEY GENERAL OF CANADA