Wells v. Newfoundland, [1999] 3 S.C.R. 199
Her Majesty The Queen in Right of Newfoundland and
Board of Commissioners of Public Utilities Appellants
v.
Andrew Wells Respondent
Indexed as: Wells v. Newfoundland
File No.: 26362.
1999: May 17; 1999: September 15.
Present: Lamer C.J. and L’Heureux‑Dubé, Gonthier, Cory, McLachlin, Iacobucci, Major, Bastarache and Binnie JJ.
on appeal from the court of appeal for newfoundland
Employment law -- Public service -- Senior civil servants -- Elimination of position by statute -- Whether senior civil servants who hold tenure appointments subject to good behaviour owed compensation in event that their positions were eliminated by legislation in absence of clear statutory language denying compensation -- Whether legislatures can escape financial consequences of restructuring public service by eliminating or altering positions without explicitly extinguishing rights they have abrogated -- Whether government can rely on doctrine of separation of powers to avoid consequences of its own actions -- Public Utilities Act, R.S.N. 1970, c. 322, s. 5(4), (5).
The respondent was appointed as a member of the Public Utilities Board (“Board”) with the designation commissioner (Consumer Representative) under the provisions of the Public Utilities Act. He was entitled to hold office during good behaviour until the age of 70. Due to changes in the jurisdiction of the Board and its workload, the Executive Council of the Government of Newfoundland ordered an assessment of the continuing need for the Board. The assessment recommended a differently constituted board with fewer commissioners and that the respondent’s position be replaced by an office of Consumer Advocate in the Department of Consumer Affairs and Communications or the Department of Justice. A new Public Utilities Act was passed which restructured the Board, reduced the number of commissioners and abolished the respondent position. The respondent ceased to hold office on that date. Having served for four and a half years, the respondent was six months short of having his pension vest. He was not reappointed to the new Board and did not receive any compensation. The respondent was not interested in filling the office of Consumer Advocate. He decided to seek damages. His action was dismissed by the Newfoundland Supreme Court, Trial Division. He successfully appealed to the Court of Appeal which found the Crown to be in breach of statutory and contractual obligations. The Court of Appeal awarded damages equivalent to two and one-half years of salary plus pension benefits.
Held: The appeal should be dismissed.
The respondent’s position was not a form of monarchial patronage. He was employed to carry out an important function on behalf of the citizens of Newfoundland. The government offered him the position, terms were negotiated, and an agreement reached. It was a contract. While the terms and conditions of the contract may be dictated, in whole or in part, by statute, the employment relationship remains a contract in substance and the general law of contract will apply unless specifically superceded by explicit terms in the statute or the agreement. The terms of such a contract are to be found in the written and verbal manifestations of the agreement, applicable statutes and regulations, and the common law.
The respondent held a senior public position of quasi-judicial responsibility. No misbehaviour was alleged against him, but his position was eliminated. In the private sector, this would clearly constitute a breach of the respondent’s contract of employment, and he would be entitled to damages. His status as an employee of the Crown, in the circumstances, should not be different. The law regarding senior civil servants accords with contemporary understanding of the state’s role and obligations in its dealings with employees. The most plausible interpretation of the respondent’s terms of employment is that while his position, and the authority flowing from it, could be eliminated, he could not be deprived of the benefits of the job except by virtue of age or bad behaviour.
The Crown breached its ongoing obligations to the respondent when it cut off his remuneration. As his right to seek damages for that breach was not taken from him by legislation, he is entitled to compensation. The Government of Newfoundland had the authority to restructure or eliminate the Board. There is a crucial distinction, however, between the Crown legislatively avoiding a contract, and altogether escaping the legal consequences of doing so. While the legislature may have extraordinary power of passing a law to specifically deny compensation to an aggrieved individual with whom it has broken an agreement, clear and explicit statutory language would be required to extinguish existing rights previously conferred on that party. In a nation governed by the rule of law, it is assumed that the government will honour its obligations unless it explicitly exercises its power not to. In the absence of a clear express intent to abrogate rights and obligations -- rights of the highest importance to the individual -- those rights remain in force. To argue the opposite is to say that the government is bound only by its whim, not its word. In Canada this is unacceptable, and does not accord with the nation’s understanding of the relationship between the state and its citizens. While the legislature is free to remove the power and responsibility of the office, in doing so it does not strip the respondent of the compensation flowing from the contract unless it specifically so enacts. It is reasonable to infer that the respondent’s financial security was intended to survive elimination of his position.
The government cannot rely on the doctrine of separation of powers to avoid the consequences of its own actions. While the legislature retains the power to expressly terminate a contract without compensation, it is disingenuous for the executive to assert that the legislative enactment of its own agenda constitutes a frustrating act beyond its control. The damages assessed by the Court of Appeal are reasonable and fairly compensate the respondent’s loss.
Cases Cited
Not followed: Reilly v. The King, [1934] A.C. 176; Peddle v. Newfoundland (1994), 116 D.L.R. (4th) 161; Petryshyn v. Canada, [1993] 3 F.C. 640; referred to: Alberta Government Telephones v. Canada (Canadian Radio‑television and Telecommunications Commission), [1989] 2 S.C.R. 225; Attorney General of Quebec v. Labrecque, [1980] 2 S.C.R. 1057; Nova Scotia Government Employees Association v. Civil Service Commission of Nova Scotia, [1981] 1 S.C.R. 211; Knight v. Indian Head School Division No. 19, [1990] 1 S.C.R. 653; Nicholson v. Haldimand-Norfolk Regional Board of Commissioners of Police, [1979] 1 S.C.R. 311; Lucas v. Lucas, [1943] P. 68; Washer v. British Columbia Toll Highways and Bridges Authority (1965), 53 D.L.R. (2d) 620; Cooper v. Canada (Human Rights Commission), [1996] 3 S.C.R. 854; Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island, [1997] 3 S.C.R. 3; R. v. Campbell, [1999] 1 S.C.R. 565; Ridge v. Baldwin, [1964] A.C. 40; The King v. Dominion of Canada Postage Stamp Vending Co., [1930] S.C.R. 500; Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525; West Lakes Ltd. v. State of South Australia (1980), 25 S.A.S.R. 389; Welch v. New Brunswick (1991), 116 N.B.R. (2d) 262; Manitoba Fisheries Ltd. v. The Queen, [1979] 1 S.C.R. 101; National Trust Co. v. Wong Aviation Ltd., [1969] S.C.R. 481; Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441; Fraser v. Public Service Staff Relations Board, [1985] 2 S.C.R. 455; Attorney General of Quebec v. Blaikie, [1981] 1 S.C.R. 312; Roncarelli v. Duplessis, [1959] S.C.R. 121; Martineau v. Matsqui Institution Disciplinary Board, [1980] 1 S.C.R. 602; Reference re Amendment of Constitution of Canada, [1981] 1 S.C.R. 753; Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735; Neilson v. Vancouver Hockey Club (1988), 51 D.L.R. (4th) 40; Gunton v. London Borough of Richmond Upon Thames, [1980] 3 All E.R. 577; Bellechasse Hospital v. Pilotte, [1975] 2 S.C.R. 454; Reaney v. Co-operative Wholesale Society, Ltd., [1932] W.N. 78.
Statutes and Regulations Cited
Interpretation Act, R.S.N. 1990, c. I-19, ss. 28(1), 29(1)(c).
Public Utilities Act, R.S.N. 1970, c. 322, s. 5(4), (5).
Public Utilities Act, 1989, S.N. 1989, c. 37.
Supreme Court Act, R.S.C., 1985, c. S-26, s. 46.1 [ad. 1994, c. 44, s. 99].
Authors Cited
Blair, Leo. “Civil Servant -- A Status Relationship” (1958), 21 Mod. L. Rev. 265.
Chitty, Joseph. A Treatise on the Law of the Prerogatives of the Crown. London: Butterworths, 1820.
Chitty on Contracts, vol. 1, 27th ed. General Editor: A. G. Guest. London: Sweet & Maxwell, 1994.
Emden, Cecil S. The Civil Servant in the Law and the Constitution. London: Stevens, 1923.
Fridman, Gerald H. L. The Law of Contract in Canada, 3rd ed. Scarborough: Carswell, 1994.
Hogg, Peter W. Liability of the Crown, 2nd ed. Toronto: Carswell, 1989.
Newfoundland. House of Assembly. Proceedings of the Resource Legislation Review Committee, Issue No. 8, December 14, 1989.
APPEAL from a judgment of the Newfoundland Court of Appeal (1997), 156 Nfld. & P.E.I.R. 271, 483 A.P.R. 271, 5 Admin. L.R. (3d) 113, [1997] N.J. No. 250 (QL), setting aside a decision of Riche J. (1994), 126 Nfld. & P.E.I.R. 295, 393 A.P.R. 295, [1994] N.J. No. 396 (QL), dismissing the respondent’s claim for compensation. Appeal dismissed.
John B. Laskin, Reg Locke and Andrew E. Bernstein, for the appellants.
Gillian D. Butler, Q.C., Stacy L. Feltham and Kenneth S. Purchase, for the respondent.
The judgment of the Court was delivered by
//Major J.//
1 Major J. -- This appeal deals with the position of the Crown and its senior civil servants who hold tenured appointments subject to good behaviour. Are such office-holders owed compensation in the event that their positions are eliminated by legislation? There is no dispute that Parliament and the provincial legislatures have the authority to structure the public service as they see fit, and to eliminate or alter positions in the process. But can it escape the financial consequences for doing so without explicitly extinguishing the rights they have abrogated? I conclude that they cannot.
I. Facts
2 In August 1985, the respondent Andrew Wells, was appointed as a member of the Public Utilities Board (“Board”) with the designation Commissioner (Consumer Representative) under the provisions of the Public Utilities Act, R.S.N. 1970, c. 322 (“1970 Act”). Pursuant to the 1970 Act’s provisions, he was entitled to hold office during good behaviour.
3 The terms of the respondent’s appointment were discussed in a meeting with the Clerk of the Executive Council of Newfoundland, on August 28, 1985, at which time he was given the choice of serving for a fixed term of 10 years, or until age 70. The respondent chose the latter option. These terms, as well as the rates of remuneration, were confirmed by the Honourable William W. Marshall, President of the Executive Council, in a letter dated September 18, 1985. The following day the respondent was sworn in as Commissioner.
4 The respondent’s tenure proved to be a short and turbulent one. On April 6, 1988, the Executive Council of the Government of Newfoundland ordered the Departments of Justice and Transportation and the Treasury Board Secretariat to assess the continuing need for the Board.
5 This review stemmed from the deregulation of the trucking industry in Newfoundland, and this Court’s decision on regulatory authority over telephone utilities in Alberta Government Telephones v. Canada (Canadian Radio‑television and Telecommunications Commission), [1989] 2 S.C.R. 225.
6 All the foregoing factors resulted in a substantially decreased workload for the Board given its loss of jurisdiction over two areas of authority that had previously accounted for a substantial amount of its work. The assessment recommended a differently constituted Board with fewer Commissioners, and that the respondent’s position be replaced by an office of Consumer Advocate in the Department of Consumer Affairs and Communications or the Department of Justice.
7 In the wake of this review, a new Public Utilities Act was tabled. The respondent was informed by the Minister of Justice that the government intended to act on the recommendations of the review and that on “the balance of probabilities” his position would be abolished. On December 18, 1989, the Newfoundland House of Assembly passed Bill 44, which comprehensively restructured the Board, reduced the number of Commissioners from six to three, and abolished the Consumer Representative position. Under its provisions, all existing commissioners were to cease holding office, but remained eligible for re-appointment to limited positions on the new Board.
8 This Bill was proclaimed into force on February 16, 1990, as the Public Utilities Act, 1989, S.N. 1989, c. 37, and the respondent ceased to hold office on that date. The respondent’s salary on the date of his termination was $70,058 per year. Having served for four and a half years, he was six months short of having his pension vest.
9 The respondent was not re-appointed to the new Board. Furthermore, Cabinet Directive MC 0359-’90 directed that the respondent receive no compensation. The respondent was asked by the Minister of Justice whether he was interested in filling the office of Consumer Advocate. He was not, and subsequently commenced this action seeking damages.
II. Judicial History
A. Newfoundland Supreme Court, Trial Division (1994), 126 Nfld. & P.E.I.R. 295
10 Riche J. dismissed the respondent’s action, holding that Reilly v. The King, [1934] A.C. 176 (P.C.), and Peddle v. Newfoundland (1994), 116 D.L.R. (4th) 161 (Nfld. C.A.), barred any right of compensation for government appointees whose positions are abolished by statute unless compensation is provided for in the abolishing legislation. He concluded (at p. 301) that the respondent had not held a “true good behaviour appointment” as his position was only secure until altered by cabinet order, which he found could be done under the 1970 Act.
11 Riche J. also held that the Crown in right of the Province of Newfoundland had not acted in bad faith nor with improper motives. He stated that the change in legislation had occurred because the Board had lost jurisdiction. He saw no fault in the Crown’s reasons for changing the respondent’s office from consumer representative to advocate. He also noted that the respondent had been the junior member of the Board at the time the 1970 Act was repealed, and that more senior members could have claimed priority entitlement to re-appointment. In all, Riche J. concluded that there was no basis for judicial review of the government’s decision to restructure the Board.
B. Newfoundland Court of Appeal (1997), 156 Nfld. & P.E.I.R. 271
12 Gushue C.J.N. (Steele J.A. concurring) in a majority judgment rejected the trial judge’s interpretation of the 1970 Act. The relevant provisions were read to mean that while the government had the right to abolish the position by repealing the 1970 Act, it did not have the right to curtail the respondent’s rights by eliminating his position and not re‑appointing him to the new Board. The majority stated (at p. 283): “If tenure in a statutory office that can be held during good behaviour is to mean anything, it must include the right to be compensated for the loss of the emoluments of that office if the office holder is deprived of it.”
13 The majority declined to follow Reilly and its application in Petryshyn v. Canada, [1993] 3 F.C. 640 (T.D.), saying (at p. 284) that “[m]uch has happened in the law since the decision in Reilly”. According to Gushue C.J.N., parliamentary supremacy over the rights of individuals had been curtailed and Reilly was anachronistic and inapplicable. Insofar as the respondent’s rights rested on contract, the Chief Justice held that the appellant could not abolish the respondent’s position by changing legislation and then rely on the doctrine of frustration because the frustrating event was caused by its own acts. Furthermore, unlike the aggrieved employees in Reilly, supra, and Peddle, supra, the respondent could have been reappointed.
14 Gushue C.J.N. reasoned that the damage award in this case should exceed what would have been awarded to an “at pleasure” employee. He reasoned that the respondent was not entitled to what he would have received at age 70 because factors such as the contingencies of life and mitigation had to be considered. Gushue C.J.N. allowed the appeal, set aside the trial judgment, and declared Her Majesty the Queen in Right of Newfoundland to be in breach of its statutory and contractual obligations. He awarded damages equal to two and one‑half years of the salary the respondent was receiving as Commissioner at the time of termination, pension benefits to which he would have been entitled for these additional services, and costs throughout.
15 O’Neill J.A., dissented. He not only agreed with the principles of law applied in Reilly and Peddle, but held that they were binding. He would have found that the respondent’s office had been abolished by legislation, that nothing in the new legislation provided for compensation, and that there was no obligation to appoint the respondent to the new Board.
III. Analysis
16 The respondent, as a member of the Board, held a senior public position of quasi-judicial responsibility. Both the terms of the statute governing his appointment, and his specific negotiations with the government’s representatives established that the fundamental terms of his appointment were that he would serve until the age of 70, subject to good behaviour.
17 This agreement plainly meant that the Crown could not terminate the respondent’s employment unless he did something which rendered him unfit to continue serving as a Public Utilities Commissioner. No misbehaviour was alleged against the respondent, but his position was eliminated. In the private sector, this would clearly constitute a breach of the respondent’s contract of employment, and he would be entitled to damages. His status as an employee of the Crown, in the circumstances, should not be different.
A. The Status of Civil Servants
18 The respondent’s entitlement to compensation hinges on the nature of his relationship with the Crown. If he had a contract of employment with the Crown, then his termination will constitute a breach compensable in damages. If, on the other hand, his relationship was purely statutory, then he is limited to administrative remedies.
19 This appeal was principally argued on the basis that the respondent’s employment was the product of statutory and executive decision-making and that any grievances or disputes relating to his employment are to be resolved by references to the principles of administrative law. For the reasons that follow, the appeal is more satisfactorily assessed on the basis of contract, and whether the respondent’s termination constituted a remediable breach.
20 The status of junior non-unionized government employees was examined in Attorney General of Quebec v. Labrecque, [1980] 2 S.C.R. 1057. That case concerned a casual employee who sued the provincial government in small claims court for an employment-related debt. Allowing his claim to proceed, Beetz J. said at pp. 1082-83:
. . . faced with the necessity of qualifying and regulating a given legal relationship in public law, the jurist of the Anglo‑Canadian tradition must necessarily carry out this function with the concepts and rules of the ordinary law, unless statute or prerogative require otherwise. Confronted by a legal relationship having all the characteristics of a contract, as in the case at bar, the Anglo‑Canadian jurist must consider it and deal with it as contract, subject to legislation and prerogative.
This characteristic is one of the aspects of the rule of law, as conceived in English public law.
. . .
I cannot see in this Regulation anything preventing application of the ordinary law of contract. The Attorney General placed great emphasis on the fact that a casual employee is “appointed” to his position. Something more than this expression would be required to dispense with the general principles of public law. Furthermore, in the private sector an employee is often “appointed” to a managerial position. It is also true that a casual employee is not dealing on an equal basis with the Government and cannot, in practice, negotiate the terms of his employment. However, the same thing can be said of the small employee contracting with large business. As to the argument that the Government may unilaterally modify the terms of employment, which also appears to derive from French administrative law, it seems to me to be at the least doubtful in our law, apart from express provisions of the enactment, which I do not find in the Regulation in question.
Accordingly I conclude, like the Provincial Court and the Superior Court, that respondent was a contract employee and that he was correct in following the procedure prescribed for the recovery of small claims. [Emphasis added.]
21 While the Court stopped short of saying that all Crown employees are governed by ordinary contract law, it held that jobs with the government are in substance contractual relationships. The status of most civil servants is that of public employees, not personal servants of the Crown.
22 A common-sense view of what it means to work for the government suggests that these relationships have all the hallmarks of contract. There are negotiations leading to agreement and employment. This gives rise to enforceable obligations on both sides. The Crown is acting much as an ordinary citizen would, engaging in mutually beneficial commercial relations with individual and corporate actors. Although the Crown may have statutory guidelines, the result is still a contract of employment.
23 The majority of civil servants today are unionized and employed under collective agreements which define the terms of their work as well as the Crown’s obligations towards them. In Nova Scotia Government Employees Association v. Civil Service Commission of Nova Scotia, [1981] 1 S.C.R. 211, at pp. 222-23, this Court considered the question of whether a collective agreement between the Crown and its unionized clerical employees could oust or overcome the “prerogative” of dismissal at pleasure. In holding that the terms of the collective agreement prevailed and bound the Crown, Laskin C.J. said:
I wish to dwell briefly on the nature of the common law power of the Crown to dismiss at pleasure. Section 57 [of the relevant Nova Scotia act] uses the word “power” and not the word “prerogative”, which has sometimes been used in this as in other connections where Crown authority is involved. In Shenton v. Smith, [[1895] A.C. 229,] the Privy Council rejected the designation of “prerogative” to characterize the Crown’s right to dismiss civil servants. The law in Canada, in Canadian provinces, as well as in other common law jurisdictions has gone far down the road to establishing a relative equality of legal position as between the Crown and those with whom it deals, too far in my opinion to warrant a reversion to an anachronism.
. . .
At best, in my view, the power to dismiss at pleasure could be regarded as an implied term of an engagement which contained no contrary provision. That is not this case. [Emphasis added.]
24 As the Crown is bound to act according to the rule of law, it must normally respect the principles of natural justice in exercising its legal rights in relation to contracts of employment. In cases such as Nicholson v. Haldimand-Norfolk Regional Board of Commissioners of Police, [1979] 1 S.C.R. 311, and Knight v. Indian Head School Division No. 19, [1990] 1 S.C.R. 653, when a civil servant’s terms of employment permitted the employee to be dismissed without cause, the Crown was still required to act fairly in deciding to do so. In the absence of contractual rights, a civil servant may still be able to resort to administrative remedies. However, that is irrelevant in this appeal as the respondent’s contract provides the remedy.
25 As opposed to rank-and-file employees covered by collective agreements, the status of senior civil servants remains an open question. They are sometimes in limbo, caught between the feudal condition of servants serving at the pleasure of the Crown, and a modern environment of mutual contractual obligation. The original feudal concept of the civil service, stemmed from the 14th century. It held that a “civil servant” was precisely that, a servant of the King and a member of the Royal household, and the position held was proprietary. As C. S. Emden wrote in The Civil Servant in the Law and the Constitution (1923), at p. 18:
The tendency was for offices to be hereditary; they were estates, intimately connected with land-holding. Sometimes they were granted for life. The relation of the “civil servant” to the King was, therefore, feudal rather than contractual. A holder could not be dismissed from his office; but he could not insist on exercising its functions if the King did not so desire.
26 Traditionally, the Crown’s relationship with its servants was not characterized as contractual: Lucas v. Lucas, [1943] P. 68; Washer v. British Columbia Toll Highways and Bridges Authority (1965), 53 D.L.R. (2d) 620 (B.C.C.A.); L. Blair, “The Civil Servant -- A Status Relationship” (1958), 21 Mod. L. Rev. 265. The Crown appointed individuals to positions which they fulfilled until the Crown directed that they be dismissed. As a result, appointments were unilateral and subject to arbitrary dismissal: cf. Reilly, supra; J. Chitty, A Treatise on the Law of the Prerogatives of the Crown (1820).
27 In Reilly, the Privy Council considered the claim of a member of the Federal Appeal Board, who lost his position when Parliament repealed the applicable enabling legislation. The Privy Council resolved the case by holding that it was irrelevant whether or not a contract existed, since performance of the contract was rendered impossible by the statutory abolition of the office. If the relationship was statutory, then all rights and obligations were created by statute. Conversely, by abolishing the statute, the Crown was relieved of all obligations under it. It concluded (at p. 180) that:
So far as the rights and obligations of the Crown and the holder of the office rested on statute, the office was abolished and there was no statutory provision made for holders of the office so abolished. So far as the rights and obligations rested on contract, further performance of the contract had been made by statute impossible, and the contract was discharged. It is perhaps unnecessary to add that discharged means put an end to and does not mean broken.
28 Despite entertaining the possibility that a contract of sorts existed between Reilly and the Crown, the Privy Council held that the relationship remained in essence one defined by statute, and thus not subject to the duties arising under the ordinary law of employment. This allowed the Crown to dismiss its servants at will, irrespective of the terms of their appointment, without any requirement to provide compensation: see Petryshyn, supra. The Crown in this appeal places almost complete reliance on the principles in Reilly to deny the respondent’s claim.
29 In my opinion, it is time to remove uncertainty and confirm that the law regarding senior civil servants accords with the contemporary understanding of the state’s role and obligations in its dealings with employees. Employment in the civil service is not feudal servitude. The respondent’s position was not a form of monarchical patronage. He was employed to carry out an important function on behalf of the citizens of Newfoundland. The government offered him the position, terms were negotiated, and an agreement reached. It was a contract.
30 As Beetz J. clearly observed in Labrecque, supra, the common law views mutually agreed employment relationships through the lens of contract. This undeniably is the way virtually everyone dealing with the Crown sees it. While the terms and conditions of the contract may be dictated, in whole or in part, by statute, the employment relationship remains a contract in substance and the general law of contract will apply unless specifically superceded by explicit terms in the statute or the agreement.
31 This is the case for most senior public officers. Exceptions are necessary for judges, ministers of the Crown and others who fulfill constitutionally defined state roles. The terms of their relationship with the state are dictated by the terms and conventions of the Constitution. The offices held by these are an integral part of “the web of institutional relationships between the legislature, the executive and the judiciary which continue to form the backbone of our constitutional system”: Cooper v. Canada (Human Rights Commission), [1996] 3 S.C.R. 854, at para. 3.
32 The fundamental terms and conditions of these relationships cannot be modified by either party, even by agreement. For instance, a judge cannot negotiate his or her salary or other terms of employment; see Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island, [1997] 3 S.C.R. 3 (“Judges’ Reference”), at para. 134. These individuals still serve under specified terms. Their mechanism for enforcement of those terms is not in contract, but through a declaration of the constitutional guarantees underlying their positions: see Judges’ Reference, supra. There are also certain offices that survive because their historical roots are still nourished by functional consideration, e.g., the independent “office” of a police officer: R. v. Campbell, [1999] 1 S.C.R. 565, Ridge v. Baldwin, [1964] A.C. 40 (H.L.).
B. Terms of the Respondent’s Employment
33 In cases such as this, the Court’s inquiry should focus on the terms of the civil servant’s contract. These are to be found in the written and verbal manifestations of the agreement, applicable statutes and regulations, and the common law. A good starting point in determining the terms of the respondent’s employment contract is s. 5(4) and (5) of the 1970 Act, under which he was appointed. These provisions state that:
5. . . .
(4) Subject to subsection (5) each commissioner shall hold office during good behaviour.
(5) Unless otherwise directed by the Lieutenant-Governor in Council, a commissioner shall cease to hold office when he attains the age of seventy years.
34 The substance of the communications between the respondent and the Crown regarding the position are encapsulated in the Agreed Statement of Facts. Paragraph 5 states that the respondent, “was entitled to hold office during good behaviour until he attained the age of 70 years”. Similarly, para. 9 states that “the Plaintiff [Wells] was given the option of the terms of his appointment and elected ‘good behaviour’ to age 70” (emphasis added). Section 5 of the Act, when read in concert with these facts, creates a tenured position.
35 While both the Crown and the respondent knew that the Board could be altered or eliminated by legislative action, there is no indication that this was understood to jeopardize the respondent’s financial security. The concept of security of the position must apply to the respondent’s personal situation under the contract, not the position itself.
36 The only contemplated termination was by bad behaviour or age. It was explicitly a tenured job. That tenure has to mean something. The most plausible interpretation of the respondent’s terms of employment is that while his position, and the authority flowing from it, could be eliminated, he could not be deprived of the benefits of the job except by virtue of age or bad behaviour. The Crown breached its ongoing obligations to the respondent when it cut off his remuneration.
C. The Crown’s Entitlement to Abrogate the Contract
37 The appellant Crown asserts that even if it breached the respondent’s contract of employment by eliminating his position, it was entitled to do so as an exercise of its unfettered sovereign power. It is axiomatic, they submit, that the government cannot contract away its legislative authority: The King v. Dominion of Canada Postage Stamp Vending Co., [1930] S.C.R. 500. In Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, at p. 560, Sopinka J. adopted the principle articulated by King C.J. of the Supreme Court of South Australia, in banco, in West Lakes Ltd. v. State of South Australia (1980), 25 S.A.S.R. 389, at p. 390:
Ministers of State cannot, however, by means of contractual obligations entered into on behalf of the State fetter their own freedom, or the freedom of their successors or the freedom of other members of parliament, to propose, consider and, if they think fit, vote for laws, even laws which are inconsistent with the contractual obligations.
38 The Crown’s argument is that no matter what the terms of the respondent’s engagement may have been, the legislature retained the power to eliminate his position. This prerogative, it was submitted, could have existed either as an implied term of the contract, or as a matter of right in the hands of the Crown. Lord Atkin wrote in Reilly, supra, at p. 181: “[i]t would be strange that the Dominion should have power to create an office but no power to abolish it except on the terms of awarding compensation apparently for the full term of the original office.”
39 In essence, the appellant Crown’s submission is that the Court of Appeal confused the respondent’s right to hold his office, with a right to have that office continue to exist. In other words, the respondent had the right to hold his office on good behaviour, until the age of 70, so long as it existed. Since the position legitimately ceased to exist, the argument continues, the respondent’s rights which flowed from it ceased at the same time.
40 The Crown attempted to buttress this position by reference to s. 28(1) of the Interpretation Act, R.S.N. 1990, c. I-19, which it construed as inferring that the elimination of the respondent’s position was to also terminate any rights or entitlements flowing from it. This section states that:
28. (1) An Act shall be construed as reserving to the Legislature the power of repealing or amending it and revoking, restricting, or modifying a power, privilege, or advantage vested in or granted to a person by that Act.
41 At the cost of repetition, there is no question that the Government of Newfoundland had the authority to restructure or eliminate the Board. There is a crucial distinction, however, between the Crown legislatively avoiding a contract, and altogether escaping the legal consequences of doing so. While the legislature may have the extraordinary power of passing a law to specifically deny compensation to an aggrieved individual with whom it has broken an agreement, clear and explicit statutory language would be required to extinguish existing rights previously conferred on that party. This view is strengthened by s. 29(1)(c) of the Interpretation Act which states that:
29. (1) Where an Act or enactment is repealed in whole or in part or a regulation is revoked in whole or in part the repeal or revocation shall not
. . .
(c) affect a right, privilege, obligation, or liability acquired, accrued, accruing or incurred under the Act, enactment, or regulation repealed or revoked;
42 The respondent’s contractual rights relating to his employment as a Commissioner were acquired under the Public Utilities Act, and its repeal did not, of itself, strip him of those rights. It is eye-catching that the Vice-Chairman of the Resource Legislation Review Committee of the Newfoundland House of Assembly suggested that the new Act be entitled “The Get Rid of Andy Wells Bill”: Newfoundland: Proceedings of the Resource Legislation Review Committee, Issue No. 8, December 14, 1989, at p. L7. The government was free to pass such a bill and they were equally free to pass a bill which would have explicitly denied the respondent compensation (see Welch v. New Brunswick (1991), 116 N.B.R. (2d) 262 (Q.B.), for an explicit bar to compensation). However, since no such Act was passed, the respondent’s basic contractual rights to severance pay remain.
43 The apparent anomaly of a tenured position in a realm where the government has an unfettered right to change an administrative structure is resolved by observing the distinction between the respondent’s right to hold office as a Commissioner, and his right to the financial benefits of having agreed to serve in that capacity. While the legislature is free to remove the power and responsibility of the office, in doing so it does not strip the respondent of the compensation flowing from the contract unless it specifically so enacts.
44 As was observed in Judges’ Reference, supra, individual financial security is a core characteristic of judicial independence. Since the protection of independence in public decision making was the raison d’être of a tenured Public Utilities Board, a purposive approach forces the conclusion that the government intended to insulate him, where reasonably possible, from undue financial coercion. A threat to deprive him of substantial financial benefits and security, such as the abolition of his nearly vested pension, would be a prime example of such pressure.
45 It is reasonable to infer that the respondent’s financial security was intended to survive elimination of his position. Since the Crown relied on the fact that its elimination of the original Board was a good faith decision made without any intention to pressure or intimidate its members or compromise their independence, it is untenable for the Crown to now advance any other interpretation of the respondent’s terms of employment.
46 In a nation governed by the rule of law, we assume that the government will honour its obligations unless it explicitly exercises its power not to. In the absence of a clear express intent to abrogate rights and obligations – rights of the highest importance to the individual – those rights remain in force. To argue the opposite is to say that the government is bound only by its whim, not its word. In Canada this is unacceptable, and does not accord with the nation’s understanding of the relationship between the state and its citizens.
47 Reilly should be taken as turning on the interpretation given to the specific statute of abolition. To the extent it is relied upon for the proposition that the Crown can implicitly avoid its contractual obligations by indirectly legislating a breach, it is no longer the law in Canada. A contract of employment with the Crown remains binding unless and until it is explicitly displaced by statute. This follows Manitoba Fisheries Ltd. v. The Queen, [1979] 1 S.C.R. 101, which held that a statute is not to be construed so as to take away a person’s property without compensation unless its wording clearly demand it.
48 The principled restriction on the Crown’s ability to breach contractual obligations without consequence was endorsed by Professor P. W. Hogg, in Liability of the Crown (2nd ed. 1989), at pp. 171-72, where he wrote:
I acknowledge the possibility that, on rare occasions, the Crown may feel compelled by considerations of public policy to break a contractual undertaking. If there were no doctrines of executive necessity, the ordinary law of contract would apply, and would require the Crown to negotiate with the other party for a variation or release, or to pay damages for its breach of contract. That is surely the right result. It provides compensation for the injured contractor. It requires the public purse to bear the cost of the change of public policy.
It is conceivable that a case might arise where the government cannot accept the decision of a court holding the Crown liable for breach of contract. For example, a court might award damages that were so high as to place an intolerable cost on a desired public policy. The solution to this case is legislation. The Parliament or Legislature has the power to cancel a contract, and this power is not limited by any obligation to pay compensation. Similarly, judicial decisions can be retroactively reversed or modified. The Canadian Charter of Rights does not provide any general protection for private property or any general prohibition on retroactive laws. Through legislation, therefore, the will of the community can be made to prevail over private contract rights. That is the ultimate safeguard of public policy.
49 There were no Charter submissions in this appeal, and these reasons do not address potential Charter arguments. In any event, the use of legislation to strip a specific individual of a legal right to compensation for breach of an employment relationship is a harsh and extraordinary use of governmental authority which, because it should not be done lightly, requires specific and unambiguous language.
D. Frustration
50 The appellant Crown argues that the respondent’s contract was frustrated by the passage of the new Act, which made further employment of Wells in his previous position impossible. The Crown again relied upon Reilly, as well as recent decisions applying it; Welch, supra; Peddle, supra, and Petryshyn, supra. In Reilly, at p. 180, Lord Atkin had stated that:
. . . the present case appears to their Lordships to be determined by the elementary proposition that if further performance of a contract becomes impossible by legislation having that effect the contract is discharged. In the present case the office held by the appellant was abolished by statute: thenceforward it was illegal for the executive to continue him in that office or pay him any salary. . . . So far as the rights and obligations rested on contract, further performance of the contract had been made by statute impossible, and the contract was discharged.
51 The obvious objection to this submission is that self-induced frustration does not excuse non-performance: National Trust Co. v. Wong Aviation Ltd., [1969] S.C.R. 481; G. H. L. Fridman, The Law of Contract in Canada (3rd ed. 1994), at pp. 642-43; Chitty on Contracts (27th ed. 1994), vol. 1, at para. 23-047. The Crown responds that the separation of powers between the legislative and executive branches means that a legislative act which bars the executive from performing pending contractual obligations does not constitute self-induced frustration, as these branches are independent entities.
52 The doctrine of separation of powers is an essential feature of our constitution. It maintains a separation of powers between the judiciary and the other two branches, legislature and the executive, and to some extent between the legislature and the executive: see Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441, at p. 491; Fraser v. Public Service Staff Relations Board, [1985] 2 S.C.R. 455, at p. 469. The government cannot, however, rely on this formal separation to avoid the consequences of its own actions. While the legislature retains the power to expressly terminate a contract without compensation, it is disingenuous for the executive to assert that the legislative enactment of its own agenda constitutes a frustrating act beyond its control.
53 On a practical level, it is recognized that the same individuals control both the executive and the legislative branches of government. As this Court observed in Attorney General of Quebec v. Blaikie, [1981] 1 S.C.R. 312, at p. 320, “There is thus a considerable degree of integration between the Legislature and the Government. . . . [I]t is the Government which, through its majority, does in practice control the operations of the elected branch of the Legislature on a day to day basis”. Similarly, in Reference re Canada Assistance Plan, supra, at p. 547, Sopinka J. said:
. . . the true executive power lies in the Cabinet. And since the Cabinet controls the government, there is in practice a degree of overlap among the terms “government”, “Cabinet” and “executive”. . . . In practice, the bulk of the new legislation is initiated by the government.
54 The separation of powers is not a rigid and absolute structure. The Court should not be blind to the reality of Canadian governance that, except in certain rare cases, the executive frequently and de facto controls the legislature. The new Public Utilities Act in Newfoundland was a government bill, introduced by a member, as directed by Cabinet Directive C 328-’89. Therefore, the same “directing minds”, namely the executive, were responsible for both the respondent’s appointment and his termination. Moreover, since a number of positions equivalent to that previously held by the respondent were created under the new Act, the executive could have re-appointed him and remedied its breach of contract. This continues to demonstrate the futility of the frustration argument in the circumstances of this case.
55 The Crown had a contractual obligation to the respondent, which it breached by eliminating his position. As his right to seek damages for that breach was not taken from him by legislation, he is entitled to compensation.
E. Administrative Law Issue
56 As these reasons provide that the respondent is entitled to damages in contract, it is unnecessary to consider whether the Crown breached any duty of fairness in the decision-making process which resulted in the respondent’s termination. However, since the case was argued primarily on this basis, and it was the subject of extensive and conflicting commentary by the courts below, the issue should be briefly addressed.
57 The thrust of the respondent’s submission was that since he lost his job as a result of governmental action, he had a right to fairness in the making of that decision. Procedurally unfair or arbitrary decisions by government lack the force of law and are reviewable by the courts: Nicholson, supra, at p. 328; Knight, supra, at p. 675. Crown employees, even those who have no specific statutory or negotiated terms protecting them from dismissal, have the right not to be dismissed except in accordance with the principles of natural justice.
58 In this case, the respondent’s termination had nothing to do with him personally, and is distinct from those instances where an employee’s competence or capabilities are at issue. The respondent’s termination was the consequence of external events which had overtaken the Board on which he served, and the public policy choices taken by the Government of Newfoundland in response to changing public needs. This was not a situation where personal animus led those in government to use their authority unlawfully against an individual over whom they had power, as was the case in Roncarelli v. Duplessis, [1959] S.C.R. 121, at p. 140.
59 Both the decision to restructure the Board, and the subsequent decision not to re-appoint the respondent, were bona fide decisions. The decision to restructure the Board was deliberated and enacted by the elected legislature of the Province of Newfoundland. This is fatal to the respondent’s argument on bad faith, as legislative decision making is not subject to any known duty of fairness. Legislatures are subject to constitutional requirements for valid law-making, but within their constitutional boundaries, they can do as they see fit. The wisdom and value of legislative decisions are subject only to review by the electorate. The judgment in Reference re Canada Assistance Plan, supra, at p. 558, was conclusive on this point in stating that: “the rules governing procedural fairness do not apply to a body exercising purely legislative functions”. See also Martineau v. Matsqui Institution Disciplinary Board, [1980] 1 S.C.R. 602, per Dickson J., at p. 628.
60 In Reference re Amendment of Constitution of Canada, [1981] 1 S.C.R. 753, it was stated at p. 785:
How Houses of Parliament proceed, how a provincial legislative assembly proceeds is in either case a matter of self-definition, subject to any overriding constitutional or self-imposed statutory or indoor prescription. It is unnecessary here to embark on any historical review of the “court” aspect of Parliament and the immunity of its procedures from judicial review. Courts come into the picture when legislation is enacted and not before (unless references are made to them for their opinion on a bill or a proposed enactment). [Emphasis added.]
61 The respondent’s loss resulted from a legitimately enacted “legislative and general” decision, not an “administrative and specific” one: see Knight, at p. 670. While the impact on him may be singularly severe, it did not constitute a direct and intentional attack upon his interests. His position is no different in kind than that of an unhappy tax-payer who is out-of-pocket as a result of a newly enacted budget, or an impoverished welfare recipient whose benefits are reduced as a result of a legislative changes in eligibility criteria. This was not a personal matter, it was a legislative policy choice. The procedural rights arising in Nicholson, supra, and Knight, supra, do not apply. There is no general right to judicial review of the fairness of such decisions or their implications for individuals: Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735. The respondent has no claim to participation in the decisions leading to the elimination of his position through comprehensive reforms.
62 The respondent also has no basis to challenge the decision not to re-appoint him. The question of the respondent’s re-appointment is reached once it has been decided that his termination upon the dissolution of the previous Board was lawful and effective. At that point the respondent would be in no different position than any other member of the public vying for an appointment. It is difficult to comprehend how a candidate for public office can claim a right to participate in the appointment process. There is no vested interest at stake causing a duty of fairness to arise (Knight, supra). The respondent did not show any basis on which he could have formed a reasonable expectation to be consulted in the process.
F. Calculating the Respondent’s Damages
63 The respondent’s contract could be terminated in one of three ways: by his resignation or death, by his attaining the age of 70 or for bad behaviour. The respondent could choose to leave at any time, but could not be terminated with notice. It was neither a contract for indefinite employment, nor for a fixed term. The respondent’s damages must be calculated based on his loss of the chance to serve his full term and earn the accompanying salary and benefits.
64 In this case, the respondent’s remuneration over the remaining years of his appointment was known, and the only issue is whether he would have served out his full term. The record shows that the respondent took his position seriously and pursued further education to better his understanding and performance of his duties. There was no evidence to suggest his imminent departure.
65 As a contractual claim, the usual rules relating to mitigation of damages apply: Neilson v. Vancouver Hockey Club (1988), 51 D.L.R. (4th) 40 (B.C.C.A.); Gunton v. London Borough of Richmond Upon Thames, [1980] 3 All E.R. 577 (C.A.). The respondent is a man of considerable political acumen and public profile, and did not languish in unemployment following his termination from the Board. Indeed, he presently serves as the elected mayor of St. John’s Newfoundland. Therefore, it is clear that he was able to mitigate his loss of long-term steady employment. He was, however, under no obligation to accept the lesser position of “Consumer Advocate”, which was abolished soon after in any event. There is no suggestion that the respondent could have reasonably mitigated his loss of pension benefits.
66 On its review of the Record and the evidence regarding the respondent performance and intention regarding the position, the Court of Appeal awarded the respondent damages of two and one-half years salary, along with any pension benefits to which he would have been entitled for such additional service (i.e., seven years). The Court of Appeal noted its hesitancy to assess damages in the first instance, absent any comment on the subject by the trial judge. However, it held at p. 288 that, “[i]n the interests of expedition and, hopefully, to avoid further litigation and passage of time, we have decided to deal with damages here”.
67 We agree that ordinarily the assessment of damages would have been referred back to the trial judge, but share the Court of Appeal’s concerns regarding timeliness. While the appellant Crown objected to the Court of Appeal’s awarding damages, no compelling reasons were given as to why the award was too high or otherwise not appropriate in these circumstances. It is not without precedent for this Court to affirm a damage award made in the first instance by a Court of Appeal: see Bellechasse Hospital v. Pilotte, [1975] 2 S.C.R. 454.
68 Similarly, in Reaney v. Co-operative Wholesale Society, Ltd., [1932] W.N. 78, the English Court of Appeal assessed damages in the first instance upon the appeal of a wrongful death case, again for the sake of avoiding an unproductive delay which would have wrought more injustice than benefit. Section 46.1 of the Supreme Court Act, R.S.C., 1985, c. S-26, provides that:
46.1 The Court may, in its discretion, remand any appeal or any part of an appeal to the court appealed from or the court of original jurisdiction and order any further proceedings that would be just in the circumstances.
The respondent was terminated more than nine years ago, any further delays are not in the interests of justice and the case ought to be concluded. In all the circumstances, the damages assessed by the Court of Appeal are reasonable, and fairly compensate the respondent’s loss. The record does not support the awarding of any other damages, accordingly, the order of the Newfoundland Court of Appeal is affirmed.
IV. Disposition
69 Accordingly, the appeal is dismissed. The respondent shall have his costs in this Court and throughout.
Appeal dismissed with costs.
Solicitor for the appellants: The Department of Justice, St. John’s.
Solicitors for the respondent: White, Ottenheimer & Baker, St. John’s.