Ontario Judges' Assn. v. Ontario, 2003 CanLII 50088 (ON CA)

The Ontario Judges' Association et al. v. Her Majesty the Queen in Right of Ontario, as represented by the Chair of the Management Board [Indexed as: Ontario Judges' Assn. v. Ontario]

67 O.R. (3d) 641

[2003] O.J. No. 4155

Docket No. C39422

Court of Appeal for Ontario

O'Connor A.C.J.O., Borins and MacPherson JJ.A.

October 29, 2003

*Application for leave to appeal filed January 22, 2004, and submitted to court April 26, 2004.

Charter of Rights and Freedoms -- Independent and impartial tribunal -- Constitutional requirement that government adhere to standard of simple rationality in justifying rejecting Fourth Triennial Provincial Judges' Remuneration Commission's recommendations not meaning that government can reject commission's recommendations only in exceptional circumstances -- Purpose of "simple rationality" test being to screen out government decisions that are based on purely political or discriminatory reasons and to review reasonableness of factual foundation underlying government's decision -- Reasons of Ontario Government for rejecting recommendations of commission relating to judicial pensions meeting simple rationality test -- Canadian Charter of Rights and Freedoms, s. 11(d).

The Fourth Triennial Provincial Judges' Remuneration Commission (the "Commission") was convened to make recommendations relating to judicial compensation for the 1998-2000 period. Its recommendations relating to judicial salaries, benefits and allowances were binding on the government. Its recommendations relating to judicial pensions were not. The Government decided not to implement any of the Commission's recommendations concerning pensions. The appellants were the three judges' assocations which represented the justices of the Ontario Court of Justice before the Commission. They brought an application for judicial review of the decision not to implement the Commmission's pension recommendations. The application was dismissed. The appellants appealed, arguing that the manner in which the Government considered and dealt with the Commission's report and recommendations contravened both the constitutional process set out in the P.E.I. Reference and the Framework Agreement which governed the Commission's jurisdiction and terms of reference.

Held, the appeal should be dismissed.

The Divisional Court did not err by concluding that the Government's engagement of an accounting firm to review the Commission's pension recommendations and, in particular, to determine the cost of the recommended pension options in light of the salary increases implemented by the Government was constitutional and complied with the Framework Agreement. The Government's retention of the accounting firm to provide advice about the cost implications of the Commission's pension recommendations did not undermine the effectiveness of the Commission process. Indeed, the decision promoted this important component of the constitutional commission process. It showed that the Government intended to conduct a serious analysis with respect to those recommendations.

In the P.E.I. Reference, the Supreme Court of Canada held that the constitutional principle of judicial independence required that judicial salaries, benefits and pensions be established through the vehicle of a commission. The commission does not make a final decision with respect to salaries, benefits and pensions; it makes recommendations. The government has a duty to consider, and respond to, a commission's recommendations. If it rejects them, judges are entitled [page642] to challenge the government's decision in court. The government will be required to defend its decision and the court will be required to affirm it or set it aside. The standard of justification is not the same as that required under s. 1 of the Canadian Charter of Rights and Freedoms. Rather, it is one of simple rationality. It requires that the government articulate a legitimate reason for why it has chosen to depart from the commission's recommendations. The P.E.I. Reference does not stand for the proposition that the government can reject a commission's recommendations only in exceptional circumstances. Any judicial review of the government's final decision with respect to judicial compensation should be a cautious and modest one. The purpose of the "simple rationality" test is to screen out government decisions that are based on purely political or discriminatory reasons and to review the reasonableness of the factual foundation underlying the government's decision. In this case, the Government's reasons were clear, logical, relevant and consistent with the Government's position taken before the Commission. It was not irrational for the Government to respond to the Commission, in effect, that a 28 per cent increase in judges' salaries and pensions was enough at that time in light of economic conditions in Ontario and the Government's treatment of other people who received their salaries and wages from the public purse.

APPEAL from a judgment of the Divisional Court (O'Driscoll, Then and Dunnet JJ.) (2002), 2002 62446 (ON SCDC), 58 O.R. (3d) 186 dismissing an application for the judicial review of a decision of the Ontario Government to reject recommendations relating to judges' pensions.

Provincial Court Judges' Assn. of New Brunswick v. New Brunswick (Minister of Justice) (2003), 260 N.B.R. (2d) 201, 231 D.L.R. (4th) 38, 684 A.P.R. 201, 2003 NBCA 54, [2003] N.B.J. No. 321 (QL) (C.A.), affg (2002), 249 N.B.R. (2d) 275, 213 D.L.R. (4th) 329, 648 A.P.R. 275, 2002 NBQB 156 (Q.B.); R. v. Beauregard, 1986 24 (SCC), [1986] 2 S.C.R. 56, 30 D.L.R. (4th) 481, 70 N.R. 1, 26 C.R.R. 59 (sub nom. Beauregard v. Canada); Remuneration of Judges of the Provincial Court of Prince Edward Island (Reference re), 1997 317 (SCC), [1997] 3 S.C.R. 3, 121 Man. R. (2d) 1, 156 Nfld. & P.E.I.R. 1, 150 D.L.R. (4th) 577, 217 N.R. 1, 483 A.P.R. 1, 158 W.A.C. 1, [1997] 10 W.W.R. 417, 46 C.R.R. (2d) 1, 118 C.C.C. (3d) 193, apld Alberta Provincial Judges' Assn. v. Alberta (1999), 1999 ABCA 229, 71 Alta. L.R. (3d) 269, 177 D.L.R. (4th) 418, [1999] 12 W.W.R. 66, 35 C.P.C. (4th) 213 (C.A.), supp. reasons (1999), 1999 ABCA 349, 75 Alta. L.R. (3d) 184, [2000] 3 W.W.R. 44 (C.A.), affg (1999), 1999 ABQB 57, 70 Alta. L.R. (3d) 177, [1999] 10 W.W.R. 356, 32 C.P.C. (4th) 95 (Q.B.); Bodner v. Alberta (2002), 222 D.L.R. (4th) 284, [2003] 9 W.W.R. 637, 36 C.P.C. (5th) 1, 2002 ABCA 274, 16 Alta. L.R. (4th) 244, [2002] A.J. No. 1428 (QL) (C.A.), affg (2001), 93 Alta. L.R. (3d) 358, [2001] 10 W.W.R. 444, 10 C.P.C. (5th) 157, 2001 ABQB 650, [2001] A.J. No. 1033 (QL) (Q.B.), supp. reasons (2001), [2002] 8 W.W.R. 152, 19 C.P.C. (5th) 242, 2001 ABQB 960, 3 Alta. L.R. (4th) 59, [2001] A.J. No. 1565 (QL) (Q.B.); British Columbia Legislative Assembly Resolution on Judicial Compensation (Re) (1998), 1998 6193 (BC CA), 51 B.C.L.R. (3d) 139, 160 D.L.R. (4th) 477 (C.A.), revg (1996), 1996 2208 (BC SC), 139 D.L.R. (4th) 325 (B.C.S.C.); Conférence des Juges du Québec v. Québec (Procureure Générale) (2000), 2000 6948 (QC CA), 196 D.L.R. (4th) 533 (Que. C.A.); Newfoundland Assn. of Provincial Court Judges v. Newfoundland (2000), 2000 NFCA 46, 192 Nfld. & P.E.I.R. 183, 191 D.L.R. (4th) 225, 580 A.P.R. 183, 79 C.R.R. (2d) D-1, 50 C.P.C. (4th) 1 (C.A.), revg in part (1998), 1998 14092 (NL SC), 163 Nfld. & P.E.I.R. 319, 160 D.L.R. (4th) 337, 503 A.P.R. 319, 32 C.P.C. (4th) 324 (T.D.); R. v. Oakes, 1986 46 (SCC), [1986] 1 S.C.R. 103, 53 O.R. (2d) 719n, 14 O.A.C. 335, 26 D.L.R. (4th) 200, 65 N.R. 87, 19 C.R.R. 308, 24 C.C.C. (3d) 321, 50 C.R. (3d) 1, consd Other cases referred to Danson v. Ontario (Attorney General), 1990 93 (SCC), [1990] 2 S.C.R. 1086, 74 O.R. (2d) 763n, 41 O.A.C. 250, 73 D.L.R. (4th) 686, 112 N.R. 362, 50 C.R.R. 59, 43 C.P.C. (2d) 165 (sub nom. R. v. Danson); Reference re Anti-Inflation Act (Canada), 1976 16 (SCC), [1976] 2 S.C.R. 373, 68 D.L.R. (3d) 452, 9 N.R. 541 [page643] Statutes referred to Canadian Charter of Rights and Freedoms, ss. 1,11(d) Courts of Justice Act, R.S.O. 1990, c. C.43, s. 51.13, Sched., s. 25

C. Michael Mitchell and Steven Barrett, for appellants. Lori Sterling and Arif Virani, for respondent.

The judgment of the court was delivered by

MACPHERSON J.A.: --

A. INTRODUCTION

[1]

Introduction

In two landmark decisions, the Supreme Court of Canada addressed the relationship between judicial compensation and the constitutional principle of judicial independence.

2In Beauregard v. Canada, 1986 24 (SCC), [1986] 2 S.C.R. 56, 30 D.L.R. (4th) 481 ("Beauregard"), the court defined judicial independence in individual and institutional terms and applied the definition in the context of judicial pensions.

3In the P.E.I. Reference [See Note 1 at end of document] 1997 317 (SCC), [1997] 3 S.C.R. 3, 150 D.L.R. (4th) 577, the court dealt comprehensively with the process by which judicial compensation is set. In order to ensure actual and perceived judicial independence, the court held that the compensation of judges cannot be the subject of unilateral decision-making by governments, nor can it be the subject of direct negotiations between the judiciary and governments. Rather, judicial compensation must be determined through an independent commission process. Once a commission has conducted hearings and made its report, the government must consider that report. The government is not bound to accept the commission's recommendations; however, the recommendations "should not be set aside lightly" (p. 88 S.C.R.). Moreover, if a government chooses not to accept a commission's recommendations, it must be prepared to justify its decision, [page644] "if need be, in a court of law" (p. 88 S.C.R.). The standard of justification is "simple rationality [which] requires that the government articulate a legitimate reason for why it has chosen to depart from the recommendation of the commission" (p. 110 S.C.R.).

4The present appeal requires careful consideration and application of the principles of Beauregard and the P.E.I. Reference in the context of the decision of Her Majesty the Queen in Right of the Province of Ontario, as represented by the Chair of the Management Board (the "Government") in 2000 not to accept the recommendations of an independent commission relating to pensions for judges of the Ontario provincial courts [See Note 2 at end of document]. The Government provided reasonably detailed reasons for rejecting the commission's recommendations. The principal issue on appeal is whether those reasons met the "simple rationality" standard set out in the P.E.I. Reference.

B. FACTS

(1) The Parties and the Events

[5]

Facts

The appellants, the Ontario Judges' Association, the Ontario Family Law Judges' Association and the Provincial Court (Civil Division) Judges' Association, are the three judges' associations which represented the justices of the Ontario Court of Justice before the Fourth Triennial Provincial Judges' Remuneration Commission (the "Commission").

6The Commission was constituted pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 51.13, and the Framework Agreement, attached as a schedule to that statute. The Framework Agreement governs the jurisdiction and terms of reference of each triennial commission. The Commission's recommendations relating to judicial salaries, benefits and allowances are binding on the Government. In contrast, the Commission's recommendations relating to judicial pensions are not binding.

7The Fourth Triennial Commission was convened to make recommendations relating to judicial compensation for the 1998-2000 period. The terms of reference of the Commission were set out in s. 25 of the Framework Agreement: [page645]

25. The parties agree that the Commission in making its recommendations on provincial judges' compensation shall give every consideration to, but not limited to, the following criteria . . .

(a) the laws of Ontario,

(b) the need to provide fair and reasonable compensation for judges in light of prevailing economic conditions in the province and the overall state of the provincial economy,

(c) the growth or decline in real per capita income,

(d) the parameters set by any joint working committees established by the parties,

(e) that the Government may not reduce the salaries, pensions or benefits of Judges, individually or collectively, without infringing the principle of judicial independence,

(f) any other factor which it considers relevant to the matters in issue.

8The Commission was chaired by Stanley M. Beck, Q.C. The judges' nominee on the Commission was John C. Murray; the Government's nominee was Valerie A. Gibbons. The Commission conducted hearings and received several written submissions from the judges' associations and the Government in late 1998 and early 1999.

9On May 20, 1999, the Commission released its report. On the question of salary, the majority (Beck and Murray) recommended a staged increase from the then base salary of $130,810 to $150,000 in 1998, $160,000 in 1999, and $170,000 in 2000. This represented a 28 per cent salary increase and, according to the Commission, would have cost the Government approximately $10 million over the three-year period. By virtue of the Framework Agreement, this recommendation was binding on the Government and was implemented.

10The majority of the Commission also recommended significant improvements to the judges' pension scheme. At the time, the judges were entitled to a base pension of 45 per cent of salary at 65 years of age and after 15 years of service. A judge would also receive an additional 1 per cent for each year of service above 15 before age 65 and a further 1 per cent for each year of service after age 65. Thus, for example, a judge who was appointed to the provincial court at age 45 and retired at age 70 would be entitled to a pension of 55 per cent of his final salary (45 base plus 5 pre-65 service plus 5 post-65 service).

11The pension for federally appointed judges in 1998 was 66 2/3 per cent of salary at age 65 and after 15 years of service. The majority of the Commission was of the view that the pension scheme for provincial court judges should be equal, or at least closer, to the federal scheme. The Commission said: [page646]

The goal of doing away with a hierarchy of courts in Ontario, and attracting the same high quality of practitioner to the bench, regardless of the court, will not be attainable without a substantial revision to the pension plan. The mandatory implementation of our salary recommendations, without implementation of our pension recommendations, would not be sensible social policy.

12The Commission recommended that the Government improve the pension scheme for provincial judges in one of three ways: (1) duplicate the federal scheme; (2) adopt a 20-year accrual rate of 3.3 per cent, which would provide a judge with a pension of 66 2/3 per cent of salary at age 65 after 20 years of service; or (3) provide an across-the-board increase of 10 per cent, making the base pension 55 per cent (the Commission stressed that this third option was "not nearly as desirable as options 1 or 2").

13The majority of the Commission also recommended a retirement Rule of 80 for provincial judges, similar to the plan for federally appointed judges. The Rule of 80 permits retirement before age 65 without penalty if a judge's age and years of service, added together, equal 80.

14Finally, the majority of the Commission commented on the penalties applicable to provincial judges who retired early. The penalties were a reduction in pension of 5 per cent for every year between ages 60 and 64 that a judge took early retirement and an additional reduction of 2 per cent for every year between ages 55 and 59. The Commission recommended that these penalties be eliminated or, in the alternative, reversed.

15The minority of the Commission (Gibbons) stated that the majority's award was not supportable. After acknowledging more buoyant economic conditions generally, the minority observed that an environment of economic restraint continued to exist, resulting in public sector wage settlements that averaged 0.3 per cent in 1997 and 1.5 per cent by the end of the third quarter in 1998. As well, the minority found that there was no evidence that the existing salary levels had resulted in a diminution of the quality of provincial judges in the province. The minority did not support enhancements to the judges' pension plan. Ms. Gibbons was of the view that any concerns about the adequacy of the pension should be reviewed in a manner similar to the approach taken by the Second Triennial Commission (i.e., the appointment of an actuarial team to study the matter).

16Following receipt of the Commission's report, the Government began to consider it. Pursuant to the Framework Agreement, the Commission's recommendations relating to salary, benefits and allowances were binding and the Government implemented them. [page647]

17The Commission's recommendations relating to pensions and related matters (the Rule of 80 and penalties for early retirement) were not binding. The P.E.I. Reference required the Government to respond to them.

18The Government decided to engage PricewaterhouseCoopers LLP ("PwC") to review the Commission's pension recommendations. The contract between the Government and PwC provided:

Background and scope

-- The Provincial Judges Remuneration Commission ("the Commission") is established under the Framework Agreement between the government and the Judges. The agreement is incorporated into the Courts of Justice Act as a schedule. The Commission's mandate is to review and make recommendations to the government concerning judicial compensation, on a triennial basis. The Commission reports to the Chair of Management Board of Cabinet.

-- The Commission's salary and benefit recommendations are binding on the government, while pension recommendations must be given the "greatest consideration".

Purpose of Project

-- The 1998 Commission recommended a number of different pension options. The objective is to examine the Commission's pension recommendations. Management Board Secretariat is required to present the Commission's pension recommendations to MBC. It is the intention to do so before the end of the year.

Required Services

1. Examine the Commission's pension recommendations.

2. Endorse or reject those recommendations, in part or in whole.

3. Propose other options that would meet the Commission's objectives.

4. Cost the Commission's pension options and the sensitivity of these costs to the assumptions employed in developing them.

5. Advise as to any implications associated with the Framework Agreement (between the government and the judges) with respect to:

-- the principle of judicial independence.

-- the competitiveness of the current Ontario pension compensation package as compared to that in other jurisdictions, and its adequacy in attracting qualified candidates to the Ontario bench. [The report will test the Commission's assertion that the Ontario compensation package is competitively inferior compared to other jurisdictions, particularly the federal arrangements.]

PwC provided advice to the Government pursuant to this contract.

19In a letter to the Chair of the Commission dated February 1, 2000, the Government, speaking through the Honourable [page648] Chris Hodgson, Chair of the Management Board of Cabinet, indicated that it "has decided not to implement any of the recommendations of the Commission concerning pensions for the following reasons":

1. The current pension entitlements are appropriate and their value has already increased as a result of salary increases awarded by the Commission. The salary increase awarded by the Commission increased the value of a judge's pension benefit by approximately 28 [per cent].

2. Ontario judges' pensions will not erode over time, because they are automatically protected by the fact that the benefit formula is based on the final salary at retirement and indexed thereafter. Ontario's retired judges' pensions increase at the actual rate of increases in active judges' salaries. Retired judges' pensions have increased as a result of the Commission's salary increase award.

3. Increases to Ontario judges' salaries have significantly narrowed the gap with federal judges. Although there is not parity, the Commission did not endorse parity.

4. In 1991, actuaries, representing the Judges, the Government and the Second Triennial Commission, reviewed the judges' pension plan. The actuaries noted a demographic shift toward a younger age of appointment, which was apparent then. Based on the design options presented by the actuaries, the Commission recommended and the Government accepted some significant changes. Since 1991, no other significant demographic changes have occurred.

5. A 75 [per cent] replacement ratio (of retirement income to final salary) is achievable under the current pension arrangement when one considers the likely pre- appointment savings of judges.

6. For a typical judge, the value of the pension provided by the Ontario judges' pension plan is not only comparable, but is superior to the pension provided to provincial judges in all other provinces and territories. For a typical judge, the value of the Ontario judges' pension is approximately 4.75 [per cent] higher than the next closest province or territory.

7. The Commission's recommendations concerning pensions are not appropriate under the Government's continued fiscal restraint. Management Board cannot look at an issue in isolation, but must view it within the framework of balancing competing interests for the Government's limited resources. In balancing competing interests, it attempts to maximize social utility, considering that the taxpayers of Ontario will bear the costs. Government must continue to ensure that taxpayer dollars are spent more effectively and efficiently as it moves toward a balanced budget. The Government's announcement of $300 million in expenditure reductions on November 18, 1999 is evidence of the Government's continued commitment to fiscal restraint to strengthen the Ontario economy.

(2) The Litigation

[20]

The Litigation

On August 10, 2000, the three judges' associations commenced an application for judicial review in the Divisional Court. [page649] They sought an order quashing and setting aside the Government's decision and an order directing the Government to implement the Commission's recommendations relating to judges' pensions.

21In support of their application, the judges' associations filed an affidavit by Vanessa Payne, a lawyer at Sack Goldblatt Mitchell, the firm representing them, attaching excerpts from the parties' submissions before the Commission, the Commission's report and the Government's response.

22The Government filed an affidavit by Owen M. O'Neil, the current senior team leader at PwC on the judges' pension file, detailing PwC's work for the Government. One of the components of the affidavit was a description of PwC's inability to confirm the costing calculations relating to judges' pensions performed by Watson Wyatt, a firm retained by the judges' associations whose report had been submitted to the Commission. O'Neil's affidavit also set out conversations and correspondence with Watson Wyatt which did not produce satisfactory responses from PwC's perspective.

23The judges' associations then filed two affidavits by Justice R. Lloyd Budgell dealing with the Watson Wyatt report and communications between Watson Wyatt and PwC.

24The Government countered with a final brief affidavit from O'Neil on the same topics.

25Before the Divisional Court (O'Driscoll, Then and Dunnet JJ.), the judges' associations advanced three arguments: (1) the Government's retainer of PwC to provide advice after the Commission delivered its report was a violation of the process set out in the P.E.I. Reference and the Framework Agreement; (2) the two O'Neil affidavits were inadmissible in the judicial review proceedings; and (3) the Government's rejection of the Commission's recommendations relating to pensions was unconstitutional because it was not a rational response within the parameters of the Supreme Court of Canada's analysis in the P.E.I. Reference.

26The Divisional Court rejected the judges' associations' submissions and dismissed the application for judicial review.

27On the PwC retainer issue, the Divisional Court said [at p. 199 O.R.]:

We do not accept the submission of . . . the Association, that it was "outrageous conduct" for the Government of Ontario to retain PWC, independent actuaries, in order to find out "what would this cost". Indeed, we see it as an essential, prudent decision that enabled the Government of Ontario to make an informed response to the Commission's pension proposals.

28With respect to the admissibility of the O'Neil affidavits, the court said [at p. 198 O.R.]: [page650]

[T]he Government of Ontario is entitled to put before the Court the advice given when called upon to "justify its decision in a court of law". Because the advice regarding pensions would only be sought and provided after the Government of Ontario had been advised of the Commission's recommendations, excluding extraordinary circumstances, the only avenue open to the Government of Ontario to justify its decision was to file affidavit evidence in order to place before the Court what advice was sought and what advice was received. The preparation and filing by the Government of Ontario of the disputed affidavits were actions that arose out of necessity.

29On the principal issue in the judicial review application, namely, whether the Government's reasons for not accepting the Commission's recommendations relating to judges' pensions complied with the "simple rationality" test set out in the P.E.I. Reference, the court concluded [at p. 204 O.R.]:

Applying the "simple rationality" test to the Government of Ontario's seven-part response, dated February 1, 2000 (supra), in our view, the Government of Ontario has met the test set out under each heading. There is no evidence that the decision was purely political, discriminatory or lacked a rational basis. The process (the Commission) used to determine the pension benefits exceeded judicial independence requirements.

The actions of the Government of Ontario in retaining PWC actuaries to cost out the Commission's recommendations demonstrate that the Government of Ontario gave serious concern to the Commission's recommendations.

We agree with the submissions of its counsel that the Government of Ontario's written decision meets the standard of simple rationality. The reasons are clear, logical, relevant and consistent with the Government's position taken before the Commission.

There is no evidence that the judges of the Ontario Court of Justice are anything but qualified. There is no evidence that the Government of Ontario has been unable to attract the ablest of candidates because of the amount, structure or features of the Association's pension plan.

30The judges' associations appeal from the judgment of the Divisional Court.

C. ISSUES

[31]

Issues

The issues on the appeal are:

(1) Did the Divisional Court err by concluding that the Government's engagement of PwC after the Commission delivered its report was constitutional and complied with the Framework Agreement?

(2) Did the Divisional Court err by admitting the two O'Neil affidavits tendered by the Government in the judicial review proceedings? [page651]

(3) Did the Divisional Court err by concluding that the Government's reasons for not accepting the Commission's recommendations relating to judges' pensions met the "simple rationality" test from the P.E.I. Reference?

(4) If the answer to any of (1) - (3) is "Yes", what is the appropriate remedy?

D. ANALYSIS

(1) The Government's Engagement of PwC

[32]

Analysis

The appellants contend that the manner in which the Government considered and dealt with the Commission's report and recommendations contravened both the constitutional process set out in the P.E.I. Reference and the provisions of the Framework Agreement. The focal point of this submission is the Government's decision to retain PwC to provide actuarial services and advice with respect to the Commission's pension recommendations. The appellants label this component of the Government's decision-making process "secretive, ex post facto and unauthorized". They contend that it was entirely inconsistent with the constitutional requirement that the commission process established in the P.E.I. Reference be an effective process. They also submit that it contravened the special process the parties established in the Framework Agreement.

(a) The constitutional process argument

[33]

The Constitutional Process Argument

The appellants contend that the constitutional imperative that the commission process be effective requires the Government to put all of the information and arguments which support its position before the Commission. The Government should not be permitted 'to lie in the weeds' at the commission stage of the process only to bring forward the bases on which it rejects commission recommendations for the first time as part of its response to the Commission's report. To do so would prevent the judges or the Commission from answering the Government's final position, thereby rendering the commission process ineffective and unconstitutional.

34What would render a commission process ineffective will, of course, depend on the circumstances of each case. I do not think that this is an area in which there can be absolute rules. However, I agree with the appellants that, as a general rule, the Government as a party to the commission process should put its best foot forward; it should be open and forthcoming about the positions that it takes and the information upon which it relies. [page652] The Government should not hold back for tactical reasons. The Commission should have the benefit of (1) all of the relevant information that is available and (2) all of the arguments that the parties wish to make. In that way, the Commission has the opportunity to consider the competing positions of the parties in a comprehensive manner. Such consideration of the parties' positions will produce well-founded commission recommendations.

35That said, I do not agree with the appellants that in this case the fact that the Government commissioned the PwC Report after the release of the Commission's report, and to some extent relied on its contents in rejecting the Commission's recommendations, rendered the commission process ineffective. It is important to consider how the process in this case actually unfolded and why it was necessary for the Government to retain PwC in order to respond to the Commission's report in an informed and intelligent manner.

36The judges' associations provided a brief on the subject of 'pension costings' to the Commission. The brief was based on the calculations of an actuarial firm, Watson Wyatt. These calculations related to three models of pension reform proposed by the judges -- the 66 2/3 per cent scheme for federal judges, the 20-year 3.3 per cent accrual rate scheme, and the 10 per cent across-the-board increase scheme. Importantly, the Watson Wyatt calculations for these models used as a base the current salary for the judges, $130,810. None of the calculations done by Watson Wyatt used as a base the new salary sought by the judges, $175,305 (the current salary for federally approved judges), or indeed any other number above their current salary.

37The Government's position before the Commission was that the existing pension plan had been established in 1992 and that there was no need to revise it for the 1998-2000 period:

The design and level of benefits in the Judges' pension plan were considered in detail by the 1991 Commission. A joint actuarial group was formed consisting of actuaries from each of the two parties, the Judges and the Government, plus the Commission. The mandate of the group was to review the plan and requirements, and present reasonable alternatives which it did in the form of two reports which became part of the Commission's 1992 Report.

The result of this joint process was the development of a jointly-agreed upon rationale and basis for the re-design of the pension plan. The enhancements took into consideration the trend towards younger appointments and provided for a recognition of benefits based on service. The two joint actuarial reports became the basis for the Commission's recommendation to significantly enhance the existing plan. As stated directly in the previous Commission's report"Given that actuaries for the two parties as well as the Commission participated in the development of the rationale for the present recommendation, we are satisfied that it is a sound one that should be implemented". [page653]

The Government accepted the Commission's recommendation and implemented the new redesigned plan.

Since 1992, there have been no significant changes in the demographics of Judges which would necessitate a further enhancement in the pension plan at this time.

Overall, therefore, the Government believes that a change to the pension plan is not warranted at this time.

38The Commission recommended that the Government implement one of the three pension reforms proposed by the judges. It provided cost calculations for all three models. However, unlike its analysis with respect to salaries, where the Commission stated the costs of the proposed three-stage increase ("somewhat over $10,000,000"), the Commission's cost calculations with respect to pensions were limited to the current salary of the judges.

39The implication of the above description is obvious: no one -- not the judges, the Government nor the Commission -- analyzed how much money was involved in any of the three pension models proposed by the Commission when linked with the judges' new salaries.

40I do not blame anyone for this omission. The judges' associations provided some cost calculations, but linked only to their current salary, not to the new salary they were seeking. The Government performed no calculation, presumably because it opposed further enhancement of the pension scheme. Finally, the Commission did not conduct a cost analysis of its pension recommendations, presumably because it was recommending three possible reform models and assumed the Government would perform the calculation as part of its assessment of those models. Each of the parties and the Commission could be criticized for this omission. I prefer to say that while all three made their best efforts on this topic, those efforts left an obvious question: what would the implementation of the Commission's pension models cost? In this context, it was entirely proper for the Government to engage PwC to provide advice about the pension reform models proposed by the Commission.

41In Beauregard, at p. 76 S.C.R., Dickson C.J.C. observed that "[t]he starting point . . . is recognition that someone must provide for judicial salaries and benefits and . . . that someone is, explicitly, Parliament"

(emphasis in original). In the P.E.I. Reference, at p. 102 S.C.R., Lamer C.J.C. stated that "the requirements laid down in Beauregard and developed in these reasons [page654] with respect to s. 100 [of the Constitution Act, 1867] and superior court judges, are equally applicable to the guarantee of financial security provided by s. 11(d) [of the Charter] to provincial court judges."

42To these jurisprudential underpinnings, I would add the common sense observation, that, at bottom, one of the crucial matters at issue here is the expenditure of public funds. In the context of huge government deficits, scarce resources, and difficult public policy choices, it is self-evident, in my view, that a government would want to know the cost implications of any decision it makes. That includes a decision relating to judicial pensions, especially in the context of a substantial, and linked, increase in judicial salaries. Accordingly, I explicitly agree with the observation of the Divisional Court that "[w]ithout an accurate 'price tag', any Government of Ontario response would have been, at best, ill informed and perhaps uninformed."

43It follows that the Government's decision to retain PwC to provide advice about the 'price tag' of the Commission's three options for pension reform was appropriate. In Re British Columbia Legislative Assembly Resolution on Judicial Compensation (1998), 1998 6193 (BC CA), 160 D.L.R. (4th) 477, 51 B.C.L.R. (3d) 139 (C.A.), at p. 493 D.L.R., Hall J.A. explained that a government's consideration of the recommendations of a judicial compensation commission involves "due reflection and [the receipt of] advice from whatever quarter it thinks fit". This is a rather sweeping statement which might require refinement if a government engaged in a truly unusual post-commission review. Nevertheless, the terseness and breadth of Hall J.A.'s statement underline the obvious common sense of the following propositions: (1) a government must determine the costs of commission recommendations (if the commission has not done this) and (2) there is nothing wrong with a government seeking external advice from experts to enable it to determine the costs of commission recommendations.

44In summary, the Government's retention of PwC to provide advice about the cost implications of the Commission's pension recommendations did not undermine the effectiveness of the commission process. Indeed, in my view, the Government's decision promoted this important component of the constitutional commission process; it showed that the Government intended to conduct a serious analysis with respect to those recommendations.

(b) The Framework Agreement argument

[45]

The Framework Agreement Argument

The appellants submit that the Government's decision to retain PwC after it had received the Commission's recommendations [page655] was also contrary to the statutory Framework Agreement which governs the process by which judges' pensions are determined in Ontario. In support of this position, the appellants advance two arguments.

46Their first argument is that the Government's retention of PwC was inconsistent with the effective operation of the commission created by the Framework Agreement. This argument covers the same ground as the appellants' argument relating to the constitutional commission process. Accordingly, it fails.

47The appellants' second argument is that once the Government determined that it needed more information -- especially financial data -- before making a decision relating to the Commission's pension recommendations, the Government was obligated to return to the commission process so that the Commission could revisit the issue. The appellants rely on s. 28 of the Framework Agreement:

28. The parties agree that the Commission may, within thirty days, upon application by the Crown or the judges' associations . . . amend, alter or vary its recommendations and report where it is shown to the satisfaction of the Commission that it has failed to deal with any matter properly arising from the inquiry . . . or that an error relating to a matter . . . is apparent on the report.

(Emphasis added)

48The Divisional Court observed that s. 28 is permissive, not mandatory, and expressed doubt that either of the two substantive bases for returning a matter to the Commission was present in this case.

49I agree. The appellants do not assert that the Commission made any error in the pension section of its report. Nor would it be fair to conclude that the Commission failed to deal with a matter. The Commission dealt at some length with judicial pensions. It made several recommendations. It costed those recommendations using the judges' current salary as a base. It did not take the extra step and provide cost calculations related to its recommendations. However, neither did the judges' associations, whose submissions formed the basis of the Commission's recommendations. In these circumstances, although s. 28 of the Framework Agreement permitted the Government to return to the Commission, it did not require the Government to do so.

50I make a final comment before leaving this issue. Before the Divisional Court, the parties devoted a great deal of time and effort, principally through duelling affidavits, to the question of whether Watson Wyatt's original cost calculations were accurate or flawed. This dispute was also raised during the appeal hearing. [page656]

51Nothing turns on this dispute. The crucial question for the Government after it received the Commission's recommendation was how much the various pension recommendations would cost when linked to the new, binding judicial salary. This calculation had not been done by the judges' associations, the Government or the Commission. Accordingly, the Government needed to perform this analysis as part of its decision-making process. An accurate or flawed Watson Wyatt calculation was only a potential step in that analysis; moreover, it was a matter open to both parties to address in their own way, which they did.

(2) The Admissibility of the O'Neil Affidavits

[52]

The Admissibility of the O'Neil Affidavits

In support of its application for judicial review of the Government's decision not to adopt the Commission's recommendations relating to judges' pensions, the judges' associations filed an affidavit from one of their lawyers to which it attached excerpts from the parties' submissions before the Commission, the Commission's report and the Government's response.

53The Government filed an affidavit from Owen M. O'Neil of PwC detailing PwC's work for the Government after the Government received the Commission's recommendations.

54The judges' associations then filed two affidavits by Justice Budgell dealing with the Watson Wyatt report and post- commission communications between Watson Wyatt and PwC. The Government then filed a second O'Neil affidavit on the same topics.

55The appellants submit that the Divisional Court erred by admitting the two O'Neil affidavits on the judicial review application. I disagree for three reasons.

56First, the appellants explicitly link their argument on this issue to their argument on the first issue. As expressed in para. 46 of their factum: "It is the position of the Judges that if, as submitted above, the process engaged in by the Government was unconstitutional and contrary to the Framework Agreement, the Divisional Court erred in admitting the contested affidavit evidence." Since I have concluded that the Government's retention of PwC after it received the Commission's recommendations was both constitutional and in compliance with the Framework Agreement, it follows, on the logic of the appellants' own submission, that affidavit evidence setting out PwC's role and advice was admissible.

57Second, the judges' associations filed two affidavits dealing with some of the same topics as the first O'Neil affidavit. There is nothing in the two affidavits from Justice Budgell to indicate that the associations objected to the first O'Neil affidavit; indeed, on [page657] the contrary, in the first affidavit from Justice Budgell, there is a reference, without criticism, to "the affidavit of Owen M. O'Neil".

58Third, and most importantly, the P.E.I. Reference requires a government to justify its decision to reject a commission's recommendations"if need be, in a court of law" (p. 88 S.C.R.). This decision is not an adjudicative decision or even a quasi-adjudicative decision. It is, whether made by the legislature (as it is in several provinces) or the executive (as it is in Ontario), very much a political, or 'legislative', decision.

59In Danson v. Ontario (Attorney General), 1990 93 (SCC), [1990] 2 S.C.R. 1086, 73 D.L.R. (4th) 686, at p. 1099 S.C.R., Sopinka J. stated:

Legislative facts are those that establish the purpose and background of legislation, including its social, economic and cultural context. Such facts are of a more general nature, and are subject to less stringent admissibility requirements: see e.g., Re Anti-Inflation Act, 1976 16 (SCC), [1976] 2 S.C.R. 373, per Laskin C.J., at p. 391; Re Residential Tenancies Act, 1979, 1981 24 (SCC), [1981] 1 S.C.R. 714, per Dickson J. (as he then was), at p. 723; and Reference re Upper Churchill Water Rights Reversion Act, 1984 17 (SCC), [1984] 1 S.C.R. 297, per McIntyre J., at p. 318.

60The Government's decision in the present case, through the Management Board of Cabinet, was more akin to a legislative decision than an adjudicative decision. It involved historical, social and economic factors and, following the decisions of the Supreme Court of Canada in Beauregard and the P.E.I. Reference, the need to address in a careful way a fundamental principle of the Canadian Constitution, judicial independence. In that context, once the Government's decision was challenged in a court of law, it was entirely appropriate for the Government to place before the reviewing court both the fact of its engagement of PwC and the role PwC's advice played in its decision-making process. Indeed, in my view, if the Government had chosen to remain silent before the court on these crucial matters, it would have been potentially subject to censure for non-disclosure of vital information.

(3) The Constitutionality of the Government's Reasons for Rejection

[61]

The Constitutionality of the Government's Reasons for Rejection

This is the central issue on the appeal.

(a) The P.E.I. Reference

[62]

The P.E.I. Reference

The "simple rationality" test was set out in the P.E.I. Reference. The Supreme Court of Canada held that the constitutional principle of judicial independence required that judicial salaries, benefits and pensions be established through the vehicle of a commission. The essential attributes of the commission process are independence, objectivity and effectiveness. However, the commission does not make a final decision with respect to [page658] salaries, benefits and pensions; it makes recommendations. A government has a duty to consider, and respond to, a commission's recommendations. It can accept and implement the recommendations. However, it can also reject and refuse to implement them.

63If a government rejects a commission's recommendations, judges are entitled to challenge the government's decision in the courts. The government will be required to defend its decision and the court will be required to affirm it or set it aside.

64The crucial question at this juncture is: what is the standard of review that a court should apply when reviewing a government's decision not to accept a commission's recommendations relating to some aspect of judicial compensation? Fortunately, in the P.E.I. Reference, the court answered this question with, in my view, genuine clarity and simplicity. Lamer C.J.C. stated, at pp. 110-11 S.C.R.:

[T]he standard of justification . . . is not the same as that required under s. 1 of the Charter. Section 1 imposes a very rigorous standard of justification. Not only does it require an important government objective, but it requires a proportionality between this objective and the means employed to pursue it. The party seeking to uphold the impugned state action must demonstrate a rational connection between the objective and the means chosen, that the means chosen are the least restrictive means or violate the right as little as reasonably possible, and that there is a proportionality between the effect of the measure and its objective so that the attainment of the legislative goal is not outweighed by the abridgment of the right.

The standard of justification, here, by contrast, is one of simple rationality. It requires that the government articulate a legitimate reason for why it has chosen to depart from the recommendation of the commission, and if applicable, why it has chosen to treat judges differently from other persons paid from the public purse. A reviewing court does not engage in a searching analysis of the relationship between ends and means, which is the hallmark of a s. 1 analysis. However, the absence of this analysis does not mean that the standard of justification is ineffectual. On the contrary, it has two aspects. First, it screens out decisions with respect to judicial remuneration which are based on purely political considerations, or which are enacted for discriminatory reasons. Changes to or freezes in remuneration can only be justified for reasons which relate to the public interest, broadly understood. Second, if judicial review is sought, a reviewing court must inquire into the reasonableness of the factual foundation of the claim made by the government, similar to the way that we have evaluated whether there was an economic emergency in Canada in our jurisprudence under the division of powers (Reference re Anti-Inflation Act, 1976 16 (SCC), [1976] 2 S.C.R. 373).

(Emphasis in original)

65In my view, it is clear from this passage that the Supreme Court of Canada intended that any judicial review of a government's final decision with respect to judicial compensation be a cautious and modest review. The juxtaposition in this brief passage of [page659] what the review is not to be (a rigorous Canadian Charter of Rights and Freedoms, s. 1 analysis) and what it is to be (a review that screens out purely political or discriminatory decisions and a review of the factual foundation of a government's decision on a basis similar to the review of a government's declaration of an economic emergency) could not be more striking. It is not an exaggeration to say that the juxtaposition chosen by Lamer C.J.C. is one between the strictest (s. 1 of the Charter, especially as represented by its original formulation in R. v. Oakes, 1986 46 (SCC), [1986] 1 S.C.R. 103, 26 D.L.R. (4th) 200) and the most deferential (declaration of economic emergency in a distribution of powers context) standards of review in the history of Canadian constitutional law. The former is truly rigorous, as it should be given that the context is a government's attempt to justify a continuation of its infringement of a constitutional right protected by the Charter. The latter is truly deferential, as it should be given that the context is a government's attempt to deal with a matter concerning "social and economic policy and hence governmental and legislative judgment" (Reference re Anti- Inflation Act (Canada), 1976 16 (SCC), [1976] 2 S.C.R. 373, 68 D.L.R. (3d) 452, at pp. 422-24 S.C.R., pp. 495-96 D.L.R.).

(b) Appellate court decisions post-P.E.I. Reference

[66]

Appellate Court Decisions Post-P.E.I. Reference

Since the P.E.I. Reference, five provincial appellate courts have released six decisions in which they have reviewed government decisions not to accept some or all of the recommendations of judges' compensation commissions: Re British Columbia Legislative Assembly Resolution on Judicial Compensation, supra ("British Columbia Judges"); Alberta Provincial Judges' Assn. v. Alberta (1999), 1999 ABCA 229, 177 D.L.R. (4th) 418, 35 C.P.C. (4th) 213 (Alta. C.A.) ("Alberta Judges"); Bodner v. Alberta (2002), 2002 ABCA 274, 222 D.L.R. (4th) 284, 36 C.P.C. (5th) 1 (Alta. C.A.); Conférence des Juges du Québec v. Québec (Procureure Générale) (2000), 2000 6948 (QC CA), 196 D.L.R. (4th) 533 (Que. C.A.) ("Quebec Judges"); Provincial Court Judges' Assn. of New Brunswick v. New Brunswick (Minister of Justice), 2003 NBCA 54, [2003] N.B.J. No. 321 (QL), 231 D.L.R. (4th) 38 (C.A.) ("New Brunswick Judges"); and Newfoundland Assn. of Provincial Court Judges v. Newfoundland (2000), 2000 NFCA 46, 191 D.L.R. (4th) 225, 50 C.P.C. (4th) 1 (Nfld. C.A.) ("Newfoundland Judges").

67In four of these decisions, the courts explicitly recognized the foundation of deference enunciated in the P.E.I. Reference. In British Columbia Judges, at p. 496 D.L.R., Hall J.A. described the jurisdiction of a court reviewing a government's rejection decision as a jurisdiction "that no doubt should be most cautiously exercised and one that will, hopefully, rarely be needed to be invoked". [page660] In Alberta Judges, at p. 434 D.L.R., Côté J.A. stated that "in many senses this is a fairly lax test, and it certainly does not let a superior court substitute its own opinion for that of the government." In Newfoundland Judges, at p. 285 D.L.R., Green J.A. referred to "the low threshold of a 'simple rationality' justification".

68Finally, in the recent New Brunswick Judges (20 August 2003), after an admirable discussion of the P.E.I. Reference, Robertson J.A., at para. 113, summarized his understanding of the test:

In conclusion, the simple rationality test requires deference to the government's factual justification for its rejection decision. In other respects, a government decision to reject a salary recommendation does not require a searching examination. A government need only articulate a "legitimate" reason for rejection.

69In the present appeal, the appellants rely heavily on the other two appellate decisions, Quebec Judges and, especially, the second Alberta case, which I will call Bodner.

70The passage in Quebec Judges on which the appellants rely is set out in the court's judgment at pp. 545-46 D.L.R.:

As we also said above, after the commission's report, the Government can refuse the determination for a legitimate reason.

A legitimate ground may involve the intrinsic value of the commission's decision (a fundamental error of law, a palpable error of fact, or an abuse of its power of assessment). A legitimate reason may also result from the occurrence of a significant fact since the commission's report was tabled.

In the absence of an overriding error of law, a palpable error of fact, or the occurrence of a new fact, a government can only refuse a commission's determination by demonstrating that the commission greatly exceeded its power of assessment. In the determination of remuneration and the taking into account of the various factors mentioned above, there is a broad scope of power of assessment. This power belongs to the commission. It does not suffice that a government disagrees with the determination of a commission; the commission is not a body which makes recommendations which this government can accept or refuse merely because it wants to apply the relevant criteria differently and weight them in another manner before making its own decision.

71With respect, I do not agree with this formulation of the test. It reverses the focus of the judicial review from the government's decision to the commission's decision. I do not accept that a government can reject a commission's recommendation only if the commission makes an overriding error of law or a palpable error of fact, the commission greatly exceeds its power of assessment, or a new fact arises.

72The focus for a court reviewing a government's decision must be the government's decision, not the commission's decision. [page661] Moreover, within that focus, it is entirely permissible -- and rational -- for a government to reject a commission's recommendation without attributing errors of fact, law or jurisdiction to the commission. As expressed by Green J.A., at p. 262 D.L.R., in Newfoundland Judges:

[I]t is important to recognize that the "simple rationality" test does not require that the executive or the legislature demonstrate that the commission recommendation is wrong, irrational or unreasonable. . . .It must only demonstrate the rationality of its own decision to depart from the commission recommendations. These are not the same thing. The reasons given for two differing positions may both be rational.

(Emphasis in original)

73The principal case relied on by the appellants is Bodner, the second Alberta judges' compensation case. In their factum under the heading "Divisional Court Failed to Apply An Appropriate Standard of Review", the appellants summarize their argument in this fashion:

52. The Appellants submit that the Divisional Court erred in concluding that the Government's justification met the constitutional requirements of rationality, including consistency, responsiveness, logic, relevance and accuracy. Rather than conducting a "thorough and searching examination of the reasons proffered", the Divisional Court adopted an extremely deferential approach involving minimal scrutiny, and did not even advert to the more rigorous and far less deferential approach taken in decisions of appellate courts in other provinces.

Bodner v. Alberta, supra, at paras. 108-14.

74In Bodner, an independent commission recommended an increase in salary for full-time Justices of the Peace from approximately $55,000 to $95,000 per annum and an increase in the per diem rate for part-time Justices of the Peace from $220 to $600. The government of Alberta rejected, with reasons, these recommendations and imposed increases significantly lower than the recommended amounts. The Justices of the Peace challenged the government's decision. The chambers judge held in their favour (Bodner v. Alberta, 2001 ABQB 650, [2001] 10 W.W.R. 444, 10 C.P.C. (5th) 157 (Alta. Q.B.)) and ordered the government to implement the commission's recommendations. The Court of Appeal dismissed the government's appeal (Paperny and Picard JJ.A.; Côté J.A. dissenting in part).

75In the crucial section of her reasons, titled "Constitutional Standard of Justification", Paperny J.A. said, at pp. 314 and 315 D.L.R.:

To ensure that the reasons for justification are constitutionally sound, a court must conduct a thorough and searching examination of the reasons proffered. [page662]

The Supreme Court has mandated that the commission process be independent, objective and effective. This demands that the constitutional standard of justification be high.

76With respect, I do not agree with these propositions; in my view, they run directly contrary to the P.E.I. Reference.

77The requirement that "a court must conduct a thorough and searching examination of the reasons proffered" is inconsistent with Lamer C.J.C.'s admonition, at p. 110 S.C.R., that a reviewing court "does not engage in a searching analysis of the relationship between ends or means": see also New Brunswick Judges, at para. 113.

78The description of the standard of justification as "high" is, in my view, unique in the judges' compensation case law ("a fairly lax test": Alberta Judges; "the low threshold": Newfoundland Judges). It is also contrary to the whole thrust of the language chosen by Lamer C.J.C. in P.E.I. Reference; in particular, it misconceives his analogy with the standard of justification for a declaration of economic emergency enunciated in Reference re Anti-Inflation Act.

79Paperny J.A. considered the economic emergency analogy in her reasons, at p. 315 D.L.R.:

[A] court must review the factual underpinnings of the government's claimed justification for rejecting commission recommendations on a standard of reasonableness. In so doing, the court is to follow the approach taken by the Supreme Court in Reference re Anti-Inflation Act . . . . This necessarily involves a two part process. The first question to be answered is whether government has established the "exceptional circumstances" required to invoke its reliance on what should be a rarely used legislative power. This can be seen in Reference re Anti-Inflation where the federal government had to demonstrate "exceptional circumstances" to justify resorting to the peace, order and good government power during an economic crisis.

Assuming the government meets this threshold requirement, the next question is whether government's failure to implement the commission recommendations is rationally connected to the exceptional circumstances it has purported to address.

80Paperny J.A. then applied this two-stage analysis to the decision of the government of Alberta to reject the recommendations of the Commission. She concluded, at p. 320 D.L.R.:

In this case, all the reasons for rejection fail the constitutional standard of justification. First, the government has not adduced any evidence or made any submissions before this Court or the Court of Queen's Bench that circumstances exist to justify the government's resort to its power of rejection. There is nothing in this record suggesting any political or economic exigencies that demand resort to the power of rejection or modification. On this basis alone, the standard of justification has not been met. [page663]

81With respect, I do not agree with this analysis; in my view, it represents a misreading of Lamer C.J.C.'s analogy in the P.E.I. Reference to the standard of justification from Reference re Anti-Inflation Act.

82I do not think that the P.E.I. Reference stands for the proposition that a government can reject a commission's recommendations only in 'exceptional circumstances'. The point of Lamer C.J.C.'s reference to Reference re Anti-Inflation Act was to describe the nature of the justification (simple rationality) that a government would need to provide in support of its decision not to accept a commission's recommendations. I do not think he intended to import the factual context (exceptional circumstances) into a government's decision- making process regarding judicial compensation. Accordingly, I do not agree with the Alberta Court of Appeal's description of a two-part process. In my view, the first part of this process does not exist in the context of the test enunciated in the P.E.I. Reference.

83I note that New Brunswick Judges makes a similar critique of this component of the Bodner decision. After a careful and extended analysis, Robertson J.A. reached a conclusion, at para. 119, with which I agree:

In summary, the understanding that a government cannot depart from a salary recommendation without first satisfying an "exceptional circumstances" test has, in my respectful view, no foundation in law. If the law were otherwise it would be difficult to appreciate why the Supreme Court framed the constitutional role of remuneration commissions in terms of a recommendatory mandate. If the Supreme Court intended that deference belongs to the commissions, it is difficult to appreciate why the Supreme Court imposed a less demanding review standard on a government decision, at least when compared to the more exacting standard available under s. 1 of the Charter. In my respectful view, to grant deference to the commission rather than the government comes perilously close to adopting a constitutional process that resembles binding arbitration.

(c) Application

[84]

Application

I turn, then, to the question of whether the Government's decision not to accept the pension recommendations of the Commission met the 'simple rationality' test from the P.E.I. Reference. The appellants contend that the Government's reasons were defective in three respects: (1) they were inconsistent with the Government's position before the Commission; (2) they were not responsive to the Commission's recommendations; and (3) they did not meet the standard of logic and rationality.

85I do not agree with these submissions. The Divisional Court described the Government's reasons for not accepting the Commission's recommendations as "clear, logical, relevant and [page664] consistent with the Government's position taken before the Commission". I agree with this description. I would supplement the Divisional Court's analysis and conclusions with a few additional observations about the Government's seven reasons (set out in the "FACTS" section of these reasons), with a particular emphasis on the first and seventh reasons, which I will leave to the end.

86The second reason, relating to the fact that judges' pensions will not erode over time, is an important factor for a government to consider. In both Beauregard and the P.E.I. Reference, the Supreme Court of Canada cautioned against measures taken by a government that would impair or erode the financial security of judges. The indexing of the pensions of retired judges to the salary of active judges in Ontario is a strong bulwark against erosion. It is, therefore, reasonable for the Government to consider this factor.

87The third reason, relating to the compensation gap between federal and provincial judges, is directly responsive to one of the overarching themes of the Commission's recommendations. There is nothing irrational in a government noting that the gap between these judges has "significantly narrowed" as a result of implementation of a salary recommendation, but then deciding not to narrow the gap even more by revising the pension scheme for judges. This is especially so given that the Commission itself did not recommend complete parity.

88The fourth reason, relating to the genesis of the judges' current pension plan and recent demographic information about judges, was a central feature of the Government's submissions to the Commission and was referred to in the Commission's report. I cannot see how the Government's decision in 2000 not to change a pension scheme that had been developed through a joint effort by judges and the Government in 1992 could be labelled irrational.

89The fifth reason, relating to whether a 75 per cent replacement ratio (of retirement income to final salary) was achievable under the current pension arrangement, was, again, both raised by the parties in their submissions to the Commission and addressed by the Commission. The Commission did not express a view about whether the current pension, coupled with pre-appointment savings, would enable most judges to achieve this ratio. Accordingly, the Government's reliance on this reason was not even a rejection of a conclusion by the Commission.

90The sixth reason, relating to a comparison of pensions for Ontario judges with those for judges in other provinces, strikes me as a natural factor for a government to consider. The Government provided extensive analysis of comparative salaries in its [page665] submissions to the Commission and contended that its arguments relating to salaries also applied to pensions. Accordingly, this reason was both consistent with its position before the Commission and responsive to the Commission's recommendations.

91I turn to the Government's first and seventh reasons which, taken together, I would label the fiscal restraint reason. The Government's first and seventh reasons were:

1. The current pension entitlements are appropriate and their value has already increased as a result of salary increases awarded by the Commission. The salary increase awarded by the Commission increased the value of a judge's pension benefit by approximately 28 per cent.

2. The Commission's recommendations concerning pensions are not appropriate under the Government's continued fiscal restraint. Management Board cannot look at an issue in isolation, but must view it within the framework of balancing competing interests for the Government's limited resources. In balancing competing interests, it attempts to maximize social utility, considering that the taxpayers of Ontario will bear the costs. Government must continue to ensure that taxpayer dollars are spent more effectively and efficiently as it moves toward a balanced budget. The Government's announcement of $300 million in expenditure reductions on November 18, 1999 is evidence of the Government's continued commitment to fiscal restraint to strengthen the Ontario economy.

92The appellants rely on the Commission's description of the Ontario economy: "It is perhaps not too strong a statement to say that the Ontario economy, in terms of growth, job creation and deficit reduction, has never been stronger." In light of this finding, the appellants assert that it was incumbent that the Government "do more than merely assert that it was balancing competing interests and flag its commitment to restraint to support its position" (Factum, para. 67).

93I do not regard this as a fair description of the Government's response.

94In its submissions to the Commission, the Government discussed the provincial economy in great detail, with a comprehensive description of the provincial deficit and debt, recent spending cuts, settlements for other groups paid by public funds and downsizing in the public sector. There is no question that fiscal restraint was the centrepiece of the Government's policy in the entire 1998-2000 period.

95The Commission considered the Government's economic arguments. The majority, as the passage set out above indicates, was not persuaded by them. The minority attached greater significance to them: [page666]

There is no doubt that the condition of the economy has improved since the last Triennial Commission, and continues to show signs of robustness. What has not improved is the debt load. The general response to the most recent Budget indicates there continues to be widespread concern from many sectors about both the size of the debt ($105 billion) and the annual fiscal deficit ($3.2 billion).

96With respect to the first reason, the starting point is recognition that the judges' pensions increased by 28 per cent because of the 28 per cent salary increase. The annual cost of the pension plan as a percentage of salary for 1998-1999 increased from 27.1 per cent to 34.5 per cent. In real dollar terms, the annual costs of the plan in the first year alone rose from $9.4 million to $14 million, an almost 50 per cent increase in the overall cost of the plan. These annual costs would continue to increase as the salary increased from $150,000 in 1998 to $160,000 in 1999 and $170,000 in 2000. There is no question that as a result of the salary increase, the existing pension plan became more lucrative for the judges and more expensive for the Government.

97With respect to the seventh reason, when the Government made its decision in 2000, deficit and debt reduction was still a crucial component of the Government's policy and program, the Government had just announced a further cut in spending of $300 million, and salary and wage increases throughout the public sector were non-existent or very low.

98This, then, was the factual background underpinning the Government's first and seventh reasons. Do those reasons survive the 'simple rationality' standard? In order to answer this question, I return to Beauregard and the P.E.I. Reference.

99A central theme of both cases is that, as a general proposition, a government which treats judges, in terms of compensation, as well as or better than other people paid from the public purse does not run afoul of the constitutional principle of judicial independence.

100In Beauregard, after an extended discussion of judicial independence and a careful analysis of the new federal law requiring judges to contribute to their pension plan, Dickson C.J.C. addressed, at p. 77 S.C.R., their intersection:

It is very difficult for me to see any connection between these essential conditions of judicial independence and Parliament's decision to establish a pension scheme for judges and to expect judges to make contributions toward the benefits established by the scheme. At the end of the day, all s. 29.1 of the Judges Act does, pursuant to the constitutional obligation imposed by s. 100 of the Constitution Act, 1867, is treat judges in accordance with standard, widely used and generally accepted pension schemes in Canada. From that factual reality it is far too long a stretch, in my opinion, to the conclusion that s. 29.1 of the Judges Act violates judicial independence. [page667]

101Lamer C.J.C. sounded a similar note in the P.E.I. Reference, at pp. 111 and 117 S.C.R.:

Although the test of justification -- one of simple rationality -- must be met by all measures which affect judicial remuneration and which depart from the recommendation of the salary commission, some will satisfy that test more easily than others, because they pose less of a danger of being used as a means of economic manipulation, and hence of political interference. Across-the-board measures which affect substantially every person who is paid from the public purse, in my opinion, are prima facie rational. For example, an across-the-board reduction in salaries that includes judges will typically be designed to effectuate the government's overall fiscal priorities, and hence will usually be aimed at furthering some sort of larger public interest. By contrast, a measure directed at judges alone may require a somewhat fuller explanation, precisely because it is directed at judges alone.

Finally, I want to emphasize that the guarantee of a minimum acceptable level of judicial remuneration is not a device to shield the courts from the effects of deficit reduction. Nothing would be more damaging to the reputation of the judiciary and the administration of justice than a perception that judges were not shouldering their share of the burden in difficult economic times.

102It seems to me that Beauregard and the P.E.I. Reference illuminate quite clearly what is and what is not constitutionally permissible when a government chooses to reject a judges' compensation commission's recommendations.

103The impermissible rejection is one in which a government makes its decision "for an improper or colourable purpose" or engages in "discriminatory treatment of judges vis- à-vis other citizens" (Beauregard, p. 77 S.C.R.). The impermissible rejection is also one in which a government "single[s] out judges as a class for a pay reduction" or reduces judicial compensation "below a basic minimum level of remuneration which is required for the office of a judge", or deals with compensation in a manner that "raises the spectre of political interference through economic manipulation" (P.E.I. Reference, pp. 89 and 93 S.C.R.).

104There is not a hint that the Government's rejection of the Commission's recommendations falls into any of these prohibited realms.

105The permissible rejection is one which treats judges "in accordance with standard, widely used and generally accepted" practices (Beauregard, p. 77 S.C.R.) or as part of "[a]cross-the-board measures which affect substantially every person who is paid from the public purse" (P.E.I. Reference, p. 111 S.C.R.).

106The appellants were treated substantially better than these standards. They received a 28 per cent increase in salary and pension at a time when no one in the public sector received anything close to such an increase. [page668]

107For these reasons, I conclude that the Government's rejection of the Commission's recommendations to improve the judges' pension plan complies with the 'simple rationality' standard established in the P.E.I. Reference. It was not irrational for the Government to respond to the Commission, in effect, that a 28 per cent increase in judges' salary and pension is enough at this time in light of economic conditions in Ontario and the Government's treatment of other people who receive their salaries and wages from the public purse.

E. CONCLUSION AND DISPOSITION

[108]

Conclusion and Disposition

In the end, this appeal is close, in a factual context, to Beauregard. In Beauregard, the federal government amended the Judges Act to provide federal judges with a much higher salary and pension. At the same time, the government introduced a measure requiring the judges to contribute a percentage of their salaries towards their pensions. This measure reduced the judges' salaries.

109Dickson C.J.C. regarded it as appropriate to look at the entire compensation package established by the law. After noting that governments could not deal with judges' compensation for an improper or colourable purpose or treat judges in a discriminatory fashion, he continued, at p. 78 S.C.R.:

There is no suggestion, however, of any of these considerations in the present appeal. First, the motive underlying s. 29.1 of the Judges Act, especially when viewed in the context of the substantial increase in salaries received by superior court judges at virtually the same time, was, without question, to try to deal fairly with judges and with judicial salaries and pensions. Secondly, although superior court judges were required to contribute to their pension benefits commencing December 20, 1975, the contributory scheme was effectively introduced as part of a remuneration package which included a 39 per cent salary increase and a 50 per cent increase in pensions to dependants. The salary and pension changes were intended to be complementary and, as a comprehensive package, did not diminish, reduce or impair the financial position of federally-appointed judges.

110In this appeal, Ontario judges received a 28 per cent increase in their salary and pension. The Government did not, as in Beauregard, set off some of the increased pension by introducing a change in the pension plan. Rather, the Government chose not to accept a commission recommendation that would have increased judges' pensions even more than 28 per cent. In this context, the appellants' assertion that the Government's decision violates judicial independence is, in the words of Dickson C.J.C., at p. 77 S.C.R."far too long a stretch". [page669]

111I conclude with a final observation. In Bodner, Côté J.A. recognized the awkward position which governments are in after the P.E.I. Reference. They make submissions to an independent commission. Later, they must consider and, ultimately, accept or reject the commission's recommendations. Côté J.A. said, at p. 292 D.L.R.:

There should be a principled way to handle the interaction of the two stages: when the government puts its case to the Commission, and then later when the government accepts or rejects the Commission's recommendations, with reasons.

112I agree with this thoughtful observation. It would be quite wrong for governments to attempt to use their role as final decision-maker to circumvent the commission process. There is an essential integrity in that process which governments must respect.

113However, it seems to me that Côté J.A.'s observation also applies to the judiciary. The judiciary also plays a role at two stages. In the first stage, members of the judiciary make submissions to a commission. Here, the judiciary plays the role of supplicant. In the second stage, which is triggered if those members of the judiciary challenge a government's decision to reject the commission's recommendations, the judiciary plays the role of decision-maker when it reviews the government's decision.

114In my view, it is crucial that the judiciary also respect the integrity of the commission process. When reviewing government decisions under the 'simple rationality' test, courts should focus on the permissible and impermissible factors set out clearly in Beauregard and the P.E.I. Reference.

115Courts should be vigilant to identify and reject government decisions that are made for an improper or colourable purpose, reduce the compensation of judges below a basic minimum, or single out judges for negative treatment.

116Courts should be careful not to go beyond these factors. In particular, courts should not misuse the introduction of a constitutional process for determining judicial compensation as a vehicle to shield the judiciary from government decisions that treat them as well as, or even better than, others paid from the public purse. To do this would trivialize the great principle of judicial independence.

117I would dismiss the appeal, without costs.

Appeal dismissed. [page670]

Notes

Note 1: I will use this well-known title for the court's decision in a quartet of cases that were heard and decided together: Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island; Reference re Independence and Impartiality of Judges of the Provincial Court of Prince Edward Island; R. v. Campbell, R. v. Ekmecic and R. v. Wickman; and Manitoba Provincial Judges Assn. v. Manitoba (Minister of Justice).

Note 2: This appeal involves a provincial judges' compensation commission, provincial court judges and a provincial government. I would apply the same principles and approach to a challenge by federally appointed judges to a rejection by the federal government of recommendations by a federal judges' compensation commission. There is nothing in Beauregard or the P.E.I. Reference that would support a distinction between provincial and federal appointed judges in this domain.