Date: 19981120
Docket: 98-593-IT-I
BETWEEN:
PATRICIA CORBETT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Agent for the Appellant: Barry Fleming
Counsel for the Respondent: John Bodurtha
Reasons for Judgment
(delivered orally on August 18, 1998 at St. John's, Newfoundland)
ARCHAMBAULT, J.T.C.C.
[1] Ms. Patricia Corbett is appealing an income tax assessment issued by the Minister of National Revenue (Minister) with respect to the 1994 and 1995 taxation years. The Minister disallowed the deduction of « additional voluntary contributions » made by Ms. Corbett to her pension plan in 1994 and 1995.
[2] The Minister claims that those contributions were not made in accordance with the current legislation governing her pension plan.
The facts
[3] In 1989, Ms. Corbett was a member of a pension plan which was governed by The Public Service (Pensions) Act of the province of Newfoundland (1970 Act). Pursuant to s. 32 of the 1970 Act, it was possible for such member to buy non-existent years of service. More specifically, this section gave to the minister responsible for the application of the 1970 Act the power to make regulations establishing conditions under which an employee could purchase service to be counted as pensionable service.
[4] Such regulations were indeed in force in 1989 when Ms. Corbett availed herself of the right to purchase seven additional years of service. She had the option of paying a lump sum of $20,690.04 or of proceeding by way of payroll deductions of $140.74 for 181 pay periods, plus a final deduction of $141.41 for a total cost of $25,615.35. Ms. Corbett chose the latter option.
[5] In 1991, the 1970 Act was replaced by the Public Service Pensions Act, 1991 (1991 Act). In this new Act, there are no provisions which would allow a member of a pension plan to buy non-existent years of service. However, s. 4 of the 1991 Act provides that the Public Service Pension Plan provided for under the 1970 Act is continued as the pension plan subject to the 1991 Act and the regulations thereunder. Furthermore, s. 39 of the 1991 Act provides that all benefits acquired under the 1970 Act before the commencement of the 1991 Act are protected under the 1991 Act.
[6] After the coming into force of the 1991 Act, Ms. Corbett continued to make contributions by way of payroll deductions in respect of her non-existent service and the Minister of Finance, who I understand to be the minister responsible for the administration of her pension plan, did not return to Ms. Corbett the amounts so withheld by her employer.
Analysis
[7] The issue before me is whether the contributions made for non-existent service meet the conditions set out in paragraph 147.2(4)(a) of the Income Tax Act (Act). This paragraph provides that:
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.
(My emphasis.)
It was agreed by the parties during the course of the hearing that the only issue before this Court was whether the contributions in question were "made in accordance with the plan". There are no issues raised with respect to any other restrictions imposed by the Act.
[8] Were the contributions made by Ms. Corbett for non-existent service made in accordance with the plan? The Minister's position is that there were no provisions in the 1991 Act which would permit such contributions. In my view, this is not the proper way to deal with the issue. The relevant section of the Act only requires that the contributions be made in accordance with a pension plan, not in accordance with an Act such as the 1991 Act.
[9] The pension plan to which Ms. Corbett contributed had been in existence for many years prior to 1989. Pursuant to an agreement (1989 Amendment) entered into in 1989 her pension plan was in effect amended so as to oblige Ms. Corbett to make additional contributions ($25,615 in total) and give her an entitlement to additional benefits. It is true that the 1991 Act does not grant Ms. Corbett the right to purchase non-existent years of service. However, the 1989 Amendment was agreed to in 1989 when such purchase was possible and it was not suggested before me that this was not in accordance with her pension plan, the 1970 Act and the regulations thereunder as they existed at that time.
[10] 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 1970 Act are protected under the 1991 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.1
[11] I believe that this result is in harmony with the principles of statutory interpretation. Among the authorities cited by counsel for Mrs. Corbett, I shall refer to the decision of the Supreme Court of Canada in Morguard Properties Ltd. v. City of Winnipeg (1983), 3 D.L.R. (4th) 1, at page 13. In order to adversely affect a citizen's right to a benefit, the courts require that Parliament or the provincial legislatures must legislate expressly to that effect. I also refer to a statement found in Maxwell on the Interpretation of Statutes, 12th ed. (1969), at pages 251-2, which was referred to by Rutherford J. of the Ontario High Court of Justice in Re Ontario Medical Association and Workers' Compensation Board (1985), 22 D.L.R. (4th) 321, at page 327:
Statutes which encroach on the rights of the subject, whether as regards person or property, are subject to a strict construction in the same way as penal Acts. It is a recognised rule that they should be interpreted, if possible, so as to respect such rights, and if there is any ambiguity the construction which is in favour of the freedom of the individual should be adopted. One aspect of this approach to legislation is the presumption that a statute does not retrospectively abrogate vested rights.
[12] I also believe that s. 39 of the 1991 Act shows a clear intention not to abrogate vested rights. I accordingly conclude that the contributions made in 1994 and 1995 by Ms. Corbett were so made in accordance with her pension plan as amended by the 1989 Amendment. There is nothing in the 1991 Act which would prohibit contributions for non-existent service from being made under such plan.
[13] For these reasons, the appeals are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the contributions made in respect of non-existent service are deductible in computing the Appellant's income.
Signed at Ottawa, Canada, this 20th day of November 1998.
Pierre Archambault
J.T.C.C.