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© Copyright 2000 Rogers Media. The following article first appeared in the December 2000 edition of
BENEFITS CANADA magazine.
Veterans' victory
Disabled war pensioners have won a billion-dollar class action suit against Ottawa. The case is an
important confirmation of the Crown's fiduciary duty.
By Murray Gold
In a stunning decision Canada's disabled veterans have won a class action against the government of Canada
that is likely worth over $1 billion. Thousands of vets, whose disability pensions were administered by the
Department of Veterans' Affairs (DVA), will get cheques for interest on their administered accounts.
Since the First World War, the government of Canada has given pensions to veterans with permanent physical
or mental disabilities. The accounts of veterans who were unable to handle their affairs were administered
by the DVA, which deposited pension cheques into a government bank account, treating the account as part of
the government's consolidated revenue fund. The DVA neither paid nor credited the veterans with any
interest on the amounts deposited.
In the mid-1980s, the auditor general reported that the government "as a trustee, . . . has a
responsibility to invest funds in approved instruments and to account to the beneficiary regularly." It
found that the DVA had not even "met the minimum obligations of the situation" as the veterans "had been
deprived of the investment value of their funds."
In 1990, the finance minister proudly declared that with the passage of Bill C-87, the DVA would pay
interest on administered accounts effective Jan. 1, 1990. What the minister did not say was that the very
same legislation purported to bar any claims for interest prior to Jan. 1, 1990.
In a class action, Authorson vs. Canada, veterans sued for interest on the accounts administered by
the DVA. The government tried to thwart the claim using the bar against such claims introduced in 1990 as
well as a second bar found in the Crown Liability Act. It also argued that a general provision of the
Financial Administration Act made the veterans' pension accounts "public money."
In the recent victory for veteran pensioners, the court rejected all of the government's defences. It found
that the DVA was a trustee with respect to these accounts that had an obligation--as would any trustee--to
invest the accounts prudently. Judge John Brockenshire described the government's attempt to legislatively
bar a claim for interest before 1990 as "pernicious."
FIDUCIARY CLAIMS
The ruling is of great interest to those who have fiduciary claims against the Crown. It has long been
established that the Crown may be a trustee or a fiduciary, and that in this role it has the same
obligation as any other trustee or fiduciary.
The court found that the ministry of finance did have the authority to pay interest dating back to 1951,
and had done so in certain cases. The failure of the DVA to request interest, and the failure of the
ministry to actually pay it, breached the Crown's fiduciary obligations.
The judgment goes further than this though. It states that the Crown had an obligation to use its
legislative power to ensure that interest was paid. "The Crown is a defendant here, and could have, and
under the rules of equity should have, made whatever statutory or regulatory provisions might have been
necessary to invest and to pay interest."
The court also dispensed the government's 1990 legislation that attempts to bar all claims for pre-1990
interest. Here, it relies upon Canada's Bill of Rights that has been largely overshadowed since the Charter
of Rights and Freedoms was introduced in 1982.
The Bill of Rights has been elevated to quasi- constitutional status in recent years. In this regard it
contains protections that the Charter does not for property rights. It also states that individuals cannot
be deprived of the right to enjoyment of property, except by due process of law.
The court found that the veterans' entitlement to interest was a form of property and that there had not
been any process put forward for the protection of their interests. The absence of any process--much less
due process--was fatal to the government's attempt to bar the veterans' claims.
Murray Gold is a partner in the pension law section of Koskie Minsky inToronto. mgold@koskieminsky.com.
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