May 31, 2004                     

 

 

 

 

 

The Honourable Irwin Cotler

Minister of Justice and Attorney General of Canada

Department of Justice

East Memorial Building

284 Wellington Street

Ottawa, Ontario   K1A 0H8

 

 

Dear Minister:

 

Pursuant to the provisions of Section 26(2) of the Judges Act, I am pleased to submit the report of the second Judicial Compensation and Benefits Commission.

 

Yours truly,

 

 

 

Roderick A. McLennan, Q.C.

Chair

 

 

 

 

 

 

 

 

Encl.

ACKnOWLEDGEMENTS

In the work we undertook, we were ably assisted by the following:

·        Ms. Deborah LaPierre, the Executive Director of the Drouin Commission, who on completing her duties had the foresight to prepare a record of the activities carried out and the methodology used by her and her staff in the work of the first Quadrennial Commission and made herself available to guide us from the outset of this Commission.

·        Mr. David Gourdeau, the Commissioner of the Federal Judicial Affairs, and his assistant, Ms. Marie Burgher, and their staff who helped us get organized and recruit an Executive Director for our work and who subsequently provided continuous administrative services, support and counsel.

·        Ms. Jeanne Ruest, who joined us as our Executive Director and who has diligently and faithfully organized the information flow and communications with persons making submissions and with other government departments from which we needed information.  Her experience with government, organizational skills and pleasant personality were of invaluable assistance to the work of the Commission.

·        Ms. Elizabeth Morin, our Research Assistant, who provided us with the necessary research and technical expertise to gather and organize the information we required and greatly assisted us in putting this report together.

·        Mr. André Sauvé, an associate with the actuarial firm of Morneau Sobeco, whose past experience and insights into compensation matters generally and judicial compensation matters specifically, were invaluable to us.

·        Ms. Chantal Lefebvre from the LexUM Centre at the University of Montreal who efficiently organized and updated our website.

·        Mr. Phil Epstein, Q.C., who helped us to understand the complexities of the issues surrounding conjugal breakdown.

We are indebted to all these individuals for their unstinting commitment to the work of the Commission.

TABLE OF CONTENTS

Chapter 1 – INTRODUCTION.. 1

Commission. 2

Factors to be Considered. 2

Quadrennial Inquiry. 2

Response to Report 2

1.1       Overall Considerations. 3

1.2       Process. 6

1.3       Our Jurisdiction. 9

1.4       Conclusions. 12

Chapter 2 – JUDICIAL SALARIES.. 15

2.1       Financial Security and the Need to Attract Outstanding Candidates. 15

2.2       Positions of the Principal Parties. 22

2.3       Comparators. 24

2.3.1       DM-3 Comparator 25

2.3.2       Income of Private Practitioners. 31

2.3.3       Current Information on Lawyers’ Income in Private Practice. 32

2.3.4       SGM’s Work in Comparing the Year 2000 Data. 33

2.3.5       The Government’s Submission. 36

2.3.6       Responses by the Principal Parties. 38

2.4       The Commission’s View of the Available Evidence. 41

2.5       Annual Increases. 49

2.6       Recommendations Concerning Salaries for Puisne Judges. 50

2.7       Salary Levels of Other Judges. 51

2.8       Compensation for Senior Northern Judges. 52

2.9       Differential Compensation for Court of Appeal Judges. 53

Chapter 3 – ANNUITY BENEFITS.. 57

3.1       The Judicial Annuity. 57

3.2       Comparison of the Judicial Annuity With the Deputy Ministers’ Pension. 58

3.3       Division of Annuity After Conjugal Breakdown. 61

3.4       Survivor Benefits for Single Judges. 66

3.5       Annuities for Judges Who Retired During the Salary Freeze 1992–97. 68

 

Chapter 4 – Special ALLOWANCES.. 73

4.1       Incidental Allowance. 73

4.2       Representational Allowance for Regional Senior Judges in Ontario. 76

4.3       Isolation Allowance – Resident Labrador Judge. 80

4.4       Removal Allowances. 81

4.4.1       Relocation Expenses Extension. 81

4.4.2       Relocation Expenses Within Two Years of Retirement 82

4.4.3       Relocation Costs Program For Partners of Judges of the Supreme Court of Canada, the Federal Court of Appeal, the Federal Court
                and the Tax Court of Canada. 83

4.4.4       Relocation Expenses for All Superior Court Judges. 84

 

Chapter 5 – Other Issues.. 85

5.1       Retirement Age for Justices of The Supreme Court of Canada. 85

5.2       Representational Costs For Judges to Participate in the Quadrennial Commission Review Process  87

 

Chapter 6 – RECOMMENDATIONS FOR IMPROVEMENTS.. 89

 

List of Recommendations.. 94

 

List of Appendices

Appendix 1 –   Orders in Council

Appendix 2 –   Legislation Tying the Compensation of Other Individuals to Judicial    Salaries

Appendix 3 –   Case Law

Appendix 4 –   Public Notice and List of Newspapers

Appendix 5 –   List of Submissions Received by the Commission

Appendix 6 –   Public Hearings, List of Presentations, February 3 and 4, 2004

Appendix 7 –   List of Individuals Whose Salaries Are Tied to Judicial Salaries

Appendix 8 –   Letter from Morneau Sobeco

Appendix 9 –   Letters from Individuals Who Commented on the Submission on a      Salary Differential for Puisne Judges of the Appeal Courts of            Canada

 

Chapter 1

INTRODUCTION

This is the report of the second Quadrennial Judicial Compensation and Benefits Commission, which was established pursuant to the provisions of the Judges Act by amendments to that statute contained in Bill C-37 in 1999.  The first such report, hereafter identified as the “Drouin Commission”, outlined carefully and fully the history of earlier Commission activity, which had been designed to maintain proper compensation levels for federally-appointed judges (hereafter referred to as “puisne judges”) over the years.  It is, accordingly, unnecessary for us to reiterate that history here. 

 

The recommendations presented in compensation reports that preceded the Drouin Commission were generally not acted upon by the federal government. The consequences of successive governments’ failure to act, as well as the attempted reduction in the compensation paid to provincial court judges by some provinces, culminated in a decision by the Supreme Court of Canada known as the PEI Reference Case.[1]  In that decision, Chief Justice Antonio Lamer concluded, for the majority of the court, that there was a constitutional obligation on government to establish a judicial compensation commission.  He stated that the object of a commission ought to be to present “an objective and fair set of recommendations dictated by the public interest”, and went on to say that “financial security is a means to the end of judicial independence, and is therefore of benefit to the public”.[2]

 

The relevant consequence of the Supreme Court of Canada judgment in the PEI Reference Case was the amendment to the Judges Act (Bill C-37), which provided for the creation of this Commission, set out its powers and duties, and defined the framework within which we are obliged to act.

 

The significant portions of the Judges Act provide as follows:

 

Commission

 

s. 26 (1) The Judicial Compensation and Benefits Commission is hereby established to inquire into the adequacy of the salaries and other amounts payable under this Act and into the adequacy of judges' benefits generally.

 

Factors to be Considered

 

(1.1)    In conducting its inquiry, the Commission shall consider

(a)   the prevailing economic conditions in Canada, including the cost of living, and the overall economic and current financial position of the federal government;

(b)     the role of financial security of the judiciary in ensuring judicial independence;

(c)      the need to attract outstanding candidates to the judiciary; and

 

(d)     any other objective criteria that the Commission considers relevant.

 

Quadrennial Inquiry

 

(2) The Commission shall commence an inquiry on September 1, 1999, and on September 1 of every fourth year after 1999, and shall submit a report containing its recommendations to the Minister of Justice of Canada within nine months after the date of commencement.

 

Response to Report

 

(7) The Minister of Justice shall respond to a report of the Commission within six months after receiving it. R.S. 1985, c. J-1, s. 26; 1996, c.  2, s. 1; 1998, c. 30, s. 5; 2001, c. 7, s. 17 (F).

 

The Act also provides for the membership of the Commission.[3]  Pursuant to those provisions, the judiciary nominated Earl A. Cherniak, Q.C. as Commissioner of the 2003 Quadrennial Commission and the Minister of Justice of Canada nominated Gretta Chambers, C.C., O.Q.  Those nominees together selected Roderick A. McLennan, Q.C. as the Chair of the Commission.  All nominations were confirmed by Order in Council (see Appendix 1).

 

 

1.1    Overall Considerations

The members of the Commission owe no allegiance to those who appointed them and the Commission has acted completely independently throughout the process.  In all our deliberations, we have been able to arrive at our recommendations amicably and unanimously.

 

We did not consider ourselves in any sense an arbitration panel deciding and resolving differences between the two principal protagonists – the federal government and the judiciary – rather, we approached our duties on the basis that we were to be guided by our perception of the public interest.  For example, as will be seen, there is one feature of the proposed compensation package that we do not recommend, notwithstanding the fact that the federal government and the judiciary are in accord on that issue.

 

The legal principles and constitutional imperatives underlying a judge’s compensation was described in detail in the Drouin Report[4] and have not changed in the intervening four years.  They are set out in that report and can be conveniently summarized as follows:

 

·        The sui generis nature of the role and responsibilities of judges in Canada requires that they be provided with salary and benefits, before and after retirement, to ensure a reasonable standard of living, in order that they may function fearlessly and impartially in the advancement of the administration of justice and that they be independent of both government and all litigants appearing before them.

·        There is a constitutional prohibition against judges negotiating any part of their compensation arrangement with the executive or representatives of the legislature, a prohibition that applies to no other class of persons in Canada, within or outside of the public service.[5]

·        Federally appointed judges are the only persons in Canadian society whose compensation is set by Parliament, pursuant to s. 100 of The Constitution Act, 1867.[6]  (Recent legislation, however, has tied the compensation of others to that which is authorized by the federal government for puisne judges.[7])

·        There is, as a result, a constitutional guarantee of an independent commission process, which serves as a substitute for negotiations because it “provides a forum in which members of the judiciary can raise concerns about the level of their remuneration that might otherwise have been advanced at the bargaining table.”[8]

·        Judges’ salaries are subject to mandatory indexing according to the Industrial Aggregate Index (IAI), pursuant to s. 25 of the Judges Act.[9]

• Judges are precluded from engaging in any form of occupation or business other than their judicial duties, and must be lawyers of at least 10 years’ standing at the bar.[10]

 

A variety of additional considerations are relevant to the setting of judicial compensation.  They include the ever-shifting demands on the judiciary, the increasing complexity of litigation, the growth in importance of Charter litigation and the intensified scrutiny of judicial decisions.[11]  If anything, those factors are even more relevant in 2004, given the involvement of the courts in such diverse and controversial matters as same-sex marriage, First Nation land claims and constitutional challenges to legislation. One vivid example serves to signify the issue – the child pornography decision in R. v. Sharp, where the trial judge was widely (but totally improperly) vilified in some quarters for concluding that the relevant sections of the Criminal Code violated the provisions of the Canadian Charter of Rights and Freedoms.[12]

 

The considerations that go into the setting of judicial compensation and benefits are unique, in that so much of the usual process of determining compensation does not apply.  Judges cannot speak out and bargain in the usual way.  Compensation incentives usual in the private sector, such as bonuses, profit sharing, stock options, at-risk pay, recruitment and performance bonuses, together with the prospect of promotion, do not apply in the judicial context, although many of these financial incentives are increasingly common in the public sector.

 

On the other side of the ledger, judges have an annuity that, as will be seen, has a substantial value and is unique in many respects.  Its existence is essential to the concept of judicial independence, ensuring, as it does, a reasonable and commensurate standard of living in retirement after judicial service is done.  Judges also have the opportunity of achieving supernumerary status for a maximum of 10 years, during which time a judge continues to receive full pay and benefits for a partial workload.  Retention factors play little part in the consideration of appropriate compensation for judges; historically few judges resign their position before they were eligible to retire, save for health or unusual personal reasons.

 

 

1.2    Process

As stated, we were the beneficiaries of the Drouin Commission report, which comprehensively identified a number of significant issues and an appropriate method of dealing with them.  However, to obtain an appreciation of what other precedents might guide and inform us, we gathered for our review all of the previous triennial commission reports (five such commissions preceded the Drouin report) as well as the reports of the provincial commissions that were created in each province to address the compensation payable to provincial court judges following the PEI Reference Case.  In addition, we reviewed the decisions issued by a number of courts when some provinces failed to implement certain recommendations made by provincial commissions.[13]

 

We published our mandate in newspapers across the country and solicited submissions from the public as well as the more acutely interested parties.  A copy of that advertisement and a list of the newspapers in which it was published are attached in Appendix 4.

 

We also solicited by letter, submissions from either the Attorneys General or Ministers of Justice of each province, from the bar associations or law societies of each province, and the Canadian Bar Association.  Notwithstanding these steps, it is fair to say that only very modest public interest was shown in the work of the Commission.  We updated the Commission’s website, www.quadcom.gc.ca, where we published all of the submissions and communications received by the Commission.  Those who made submissions to the Commission are identified in Appendix 5.

We retained our own compensation consultants/actuaries from the firm of Morneau Sobeco to advise the Commission on matters that arose as a result of the information submitted to us and/or obtained at the public hearings we conducted, and to opine on such other matters as the Commission referred to them.

 

We met with counsel for the federal government (hereafter, the “Government”) and for the judiciary early in the process to determine what they respectively saw as the major issues so that we could prepare to assess the eventual submissions they and others might make.  Their candour and advice was of benefit to us.  The judiciary made submissions to us through the Association of Canadian Superior Court Judges and the Canadian Judicial Council (hereafter referred to as the “Association and Council”).  The Association and Council, we were advised, represent over 90% of the federal judiciary.

 

We found when our Commission was first created that it had no staff or infrastructure. The Office of the Commissioner for Federal Judicial Affairs assisted us in getting organized and in recruiting an Executive Director.  Our Executive Director, Jeanne Ruest, in turn, recruited a Research Assistant, Elizabeth Morin, and organized our website.  (We will speak further to this situation in our recommendations for the future.)  We believe, notwithstanding our late start, that the Commission has been able to effectively assemble the information we required to make our recommendations.

 

We have had the benefit of reviewing a series of reports initially entitled: The Advisory Commission on Senior Level Retention and Compensation; the first such report (the Strong Report) was issued in January 1998 and the latest report in the series was issued in May 2003.  These reports were commissioned by the Treasury Board of Canada and represent the views and conclusions of a sophisticated and experienced group of business people and academics.  The last three such reports were chaired by Professor Carol Stephenson, Dean of the Ivey School of Business, University of Western Ontario.

 

These reports were of assistance to us because they addressed, inter alia, the need for the federal government to attract and retain executive level personnel with the requisite skills for the efficient operation of the nation's civil service.  They do not refer to the compensation paid to judges, but because of the importance of the comparator of the most senior civil servants to judges, the rationale for establishing those salaries was seen by us to be important, and is addressed later in this report.

 

The Commission held hearings in Ottawa on February 3 and 4, 2004, and the presenters are listed in Appendix 6.  We granted a hearing to all those who expressed an interest in making an oral presentation.  Those hearings were beneficial and resulted in frank and useful discussions and presentations by all those participating.  In particular, the presentation by the Government led by Paul Vickery, along with Judith Bellis and Linda Wall, and the presentation for the Association and Council, which was led by Yves Fortier, Q.C. and Pierre Bienvenu, were very helpful to the Commission.  Certain matters were identified at those hearings that needed to be further addressed, and, as a result, at the end of March further written submissions were made. In April, we received submissions from the principal parties on the subject of the consequences of conjugal breakdown on the judges’ annuity.

 

We have adverted to the precedential value of the previous commissions.  It is proper that we state that we did not consider ourselves to be “bound” by any previous decisions, including those of the Drouin Commission.  We were, and are, of the view that it would be counter-productive to fix judicial salaries as having a pre-determined relationship to other salaries, whether those of senior civil servants or senior legal practitioners.  Those considerations represent dynamics at work in our society and they change constantly.  We believe the proper approach was to consider these and other factors in light of the most current information and to make recommendations accordingly.  Were it otherwise, there would be no need to address this subject every four years, as contemplated by the Judges Act.

 

1.3    Our Jurisdiction

As stated, s. 26 of the Judges Act frames our role.  We have interpreted this legislation as dictating that our recommendations be prospective in nature for the next four years.  Our mandate is to consider the issues and make recommendations that will have the future desired effect on the financial security of judges and the availability of excellent candidates for appointment to judicial office.  As will become apparent from this report and our comments below, we concluded that we are not some form of judicial ombudsman cloaked with authority to correct perceived past wrongs or anomalies, nor to re-arrange the historical structure of our courts, which have served the country so well.

 

Section 26 calls on us to make recommendations as to what compensation would be "adequate" to fulfill the goals established by the legislation.  We interpret that mandate as meaning compensation that is appropriate or sufficient.  If it is appropriate or sufficient to achieve the desired goals, it will be adequate, whereas if it were not appropriate compensation, in hindsight it might be determined not to have been adequate.

 

We are obliged by s. 26 to consider the prevailing economic conditions in Canada, including the cost of living and the overall economic and current financial position of the federal government.

 

We interpret this direction as obliging us to consider whether the state of economic affairs in Canada would or should inhibit or restrain us from making the recommendations we otherwise would consider appropriate.  An economy providing large surpluses, lower taxes, etc. should not influence a commission to make recommendations that would be overly generous or spendthrift.  The consideration to be applied is whether economic conditions dictate restraint from expenditures out of the public purse.

 

While this consideration may well impose difficulties for future commissions, we conclude that the current economic condition in Canada does not restrain this Commission from arriving at the compensation recommendations we believe are appropriate.

 

To wit:

 

·        The 2004 budget handed down in March by the federal government clearly signals that the economy in Canada is very healthy indeed.  It identifies low projected inflation rates and a growing economy.

 

·        The recent report of the Conference Board of Canada similarly rates Canada's economy as healthy and growing and forecasts significant surpluses in the next two years and growing surpluses over the longer term.[14]

 

·        A recent report from the Royal Bank of Canada states:

"The Canadian economy bounced back in the fourth quarter of 2003 from the year's shocks with the strongest growth rate in six quarters.  Growth comes in at 3.8% and was 1.7% for the year as a whole.  We expect the economy to nearly double last year's performance of a target of 3.2% this year and 3.6% next year." [15]

 

·        The recent federal budget referred to above highlights Canada's enviable economic condition relative to other G-7 countries as follows:

 

Ø      Canada was the only G-7 country to record a surplus in 2002 and 2003.

 

Ø      According to the Organization for Economic Co-operation and Development (OECD), Canada is projected to be the only G-7 country to record a surplus in both 2004 and 2005.

Ø      Canada has made the largest improvement in its budgetary situation among the G-7 countries since 1992, including the sharpest decline in the debt burden.

Ø      Canada's total government sector debt burden declined to an estimated 35% of Gross Domestic Product (GDP) in 2003 and, according to the OECD, it is expected to be the lowest in the G-7 in 2004.

Ø      The Canadian federal government posted a surplus of $7 billion, or 0.6% of GDP, in 2002–03, while the U.S. federal balance fell further into deficit in 2002–03 to U.S. $375 billion, or 3.5% of its GDP.

Ø      For 2003-04, a surplus of $1.9 billion is estimated for Canada, while a deficit of U.S. $521 billion is projected for the United States.

Ø      As a result of continued surpluses at the federal level in Canada and the recent deterioration in U.S. federal finances, the federal market debt-to-GDP ratio in Canada is expected to fall below the U.S. figure in 2003–04 for the first time since 1977–78.

 

In light of all this information, we conclude there is no economic basis for us to restrain our recommendations from what we otherwise believe is appropriate.

 

We have been apprised of the surprising number of people who, by virtue of amendments to legislation passed since the report of the Drouin Commission, have had their compensation tied to that which is accorded by Parliament to the federal judiciary.  The persons so affected and the legislation creating this effect is summarized in Appendix 7.  The wisdom of directly linking those compensation arrangements to the compensation paid to puisne judges is not for us to comment on.  We have concluded that our terms of reference in s. 26 of the Judges Act neither require nor permit our consideration of any extraneous implications that will flow from our recommendations pursuant to the legislation referred to in Appendix 2; and accordingly, we have concluded that we are obliged to ignore any ramifications for the compensation of others which will ensue as a result of that legislation.  In other words, it is our duty to make recommendations with respect to the appropriate compensation for judges as contemplated in s. 26 of the Judges Act, and that is what we have done.

 

1.4    Conclusions

Our conclusions have been arrived at from a consideration of the information we received from the submissions made to us and from the efforts made and research conducted by our own staff and consultants.  Our recommendations are consistent with our description of the approach we took in the interpretation of s. 26 and the philosophy that guided our approach and informed our conclusions.

 

Reports of the Strong Committee and its successors, mentioned above, have the advantage of being able to consider an active marketplace in arriving at recommendations as to the proposed appropriate level of compensation for the most senior of the government's executives.  This Commission does not have that ability, inasmuch as judges' compensation is arrived at in a monopsony or a situation where there is no marketplace for puisne judges; all judges are paid from the public purse and appointed by the federal government.  The only direct comparison would be to judges similarly remunerated by governments in other jurisdictions.  We received no information to make the appropriate comparison with respect to working conditions, cost of living, judicial tradition, annuities, security of tenure, and all the other factors that might permit us to consider the role and compensation of judges in other jurisdictions, which could assist us to make meaningful comparisons.  We comment further on this situation in our recommendations.

 

Accordingly, our role is to consider, as we have, those available comparators that are best able to provide us with an informed opinion and to reach a judgment on what compensation would be appropriate for federally appointed judges for the next four years.

 

The government appoints judges from pools of candidates who have applied for such an appointment.  Our purpose is to recommend a level of compensation that ensures that those pools from which appointments are made are composed of persons who are highly qualified for judicial office, whereby the country ensures that its judiciary – the third arm of our democracy – is secure in its position and can confidently, efficiently, and with the wisdom and experience of excellent judges, fulfill its important role in the maintenance of that democracy.  In a prosperous and progressive country like Canada, subject as it is to the rule of law, nothing less should be tolerated.

 

Our recommendations are for a level of compensation that will not deter the best and the brightest from seeking judicial office and that should ensure that the level of compensation provided to puisne judges is not so great that the office will be sought after for its monetary rewards alone.  Rather, it should appeal to those highly qualified persons of maturity and judgment who seek to provide a valuable public service to their country.  In other words, we are of the view that “too much” would not be in the public interest just as “too little” is obviously not in the public interest.

 

The importance and prestige of the judiciary must continue to be gauged by the manner in which judges carry out their important duties rather than the compensation they are accorded by this or any other commission.  This concept has been foremost in the posture that has been adopted by our puisne judges in the past and, as a result, we are privileged to live in a society where our judiciary is nearly universally regarded as a group of dispassionate officers of the law who manifestly serve no other interests.  We must ensure that that continues to be so.

 

There are two parts to the quest of securing a judiciary of high quality and this Commission can influence only one part.  We expect that our recommendations, if implemented, will result in a salary level that will attract the best and the brightest to make themselves available for judicial appointment, or at least not discourage them from doing so.  The goal will be attained when the second part of the quest is properly fulfilled, which is the selection, from the pool of candidates available, of the most qualified of those prepared to accept judicial office.  That will continue to be the challenge of the government.

Chapter 2

JUDICIAL SALARIES

This chapter deals with the considerations underlying our approach to the evaluation of the appropriate level of judicial salaries for the ensuing four-year period, the position of the principal parties, the comparators put forward and our view of their relevance and importance, our assessment of the issues raised before us, and those other matters that we considered relevant and useful.

 

2.1    Financial Security and the Need to Attract Outstanding Candidates

While financial security and the need to attract outstanding candidates are interrelated, they have different purposes.  Judicial salaries and benefits must be set at a level such that those most qualified for judicial office, those who can be characterized as outstanding candidates, will be not be deterred from seeking judicial office.  That level of salary and benefits must also be such that those who hold judicial office can never be tempted, or be seen to be tempted, to compromise their independence and integrity by reward or hope of reward, either during or after their judicial tenure.  This latter consideration is why the judicial annuity is such an important part of the judicial compensation package.  But its value, on an annual basis, must also be considered as part of the financial package for those contemplating judicial appointment, given that the large majority of those applying, especially those in private practice, are unlikely to have any such benefit available to them.

 

We have to take into account that there is no universally applicable definition or measure of “outstanding”, as it applies to candidates for judicial office, given the geographical and pre-appointment occupational diversity of applicants.  Certainly, pre-appointment income levels can be no firm guide to quality, for a number of reasons.  A large income is no sure indication, although financial success can be an indicator of ability.  Incomes of self-employed lawyers, including the most successful, vary substantially across the country.  Incomes of lawyers in larger firms may be thought to be generally higher than those in smaller firms, but our common experience tells us that this is far from universally the case, since many small firm lawyers, depending upon the kind of law they practice, may earn large sums of money, while many who work in large firms, again depending on the type of law they practice, do not. 

 

Outstanding candidates for the judiciary can be found in all types of legal practice, such as academe, government service, including the provincial or territorial courts, as counsel in corporations, as well as in private practice.  In private practice, incomes vary significantly, not only by geography, but by area of practice, given that many outstanding potential candidates work in what are generally considered the less well paid segments of the profession, such as family law, criminal law, or legal aid clinics.  Even in some of those areas, there are exceptions.  For lawyers in private practice, many of the most successful and high-income potential candidates will have made a significant capital contribution to their firm, which would be returned to them upon appointment.

 

We have to take into account all of these factors, and the reality that while for some, judicial appointment involves a significant reduction from the income that they enjoyed in practice, for others the current level of salary and benefits may result in an enhanced economic package.

 

Tables 1 through 5 show the statistics on age at date of appointment, area of practice, and geographical distribution of federal appointees from 1997 to 2004.

Table 1 Age at Date of Appointment January 1, 1997 to March 30, 2004
Age Groups	# of Appointees	% of Appointees
40 to 43	14	3.8%
44 to 56	310	84.2%
57 to 66	44	11.0%
Total	368*	100%
Source: Office of the Commissioner for Federal Judicial Affairs – Judicial Appointments Secretariat.

 

 

1  Includes Natural Resources Law, International Law, Native Law, Telecommunications Law and Class Actions.

2  Does not include appointees from academe, legal aid clinics or corporate lawyers.

Table 5 shows that geographical diversity of appointees was, of course, very wide.  The number of judges appointed from the major centres, where incomes might be considered to be highest, included 12 from Halifax, 45 from Montreal, 42 from Toronto, 17 from Winnipeg, 11 from Calgary, 15 from Edmonton, and 26 from Vancouver.  We note as well that, while many judicial appointees do not come from the large cities, those who work in large urban centres are subject to a higher cost of living than those who do not.  Judicial compensation and benefits, with only minor exceptions, is the same throughout Canada, though the reality is that the judicial dollar goes further in some areas of the country than it does, say, in Toronto or Vancouver.

 

We must also be mindful that, as shown in Table 6, the number of applicants who are recommended or highly recommended by the provincial and territorial Judicial Appointment Committees and the Federal Judicial Appointments Secretariat that inform the Minister of Justice, relative to the number of judicial vacancies, demonstrates that current levels of salary and benefits do attract qualified candidates.[16]  This consideration must be tempered by the fact that, while many potential candidates may be qualified or even highly qualified, what is important for the well-being of our judicial system and democracy, and what is mandated for us, is to ensure that salary and benefit levels are adequate to attract, or at least, not discourage, outstanding candidates, in other words, the best and the brightest, which must be only a subset of even those who may be highly recommended.[17]

 

 

Table 6 Judicial Appointments Process From 1988 to March 30, 2004
Province	Applications Received	Candidates Proposed (not assessed)	Recommended	Highly Recommended	Total Recommended and Highly Recommended	Provincial Judges	Unable to Recommend	Candidates Appointed
Newfoundland and Labrador	158	7	41	38	79	17	48	21
Prince Edward Island	66	2	23	14	37	0	23	9
Nova Scotia	386	7	117	29	146	23	186	43
New Brunswick	262	10	82	52	134	11	100	25
Quebec	1,651	43	488	64	552	44	947	168
Ontario	2,491	77	807	236	1,043	77	1,179	266
Manitoba	306	14	86	44	130	16	137	37
Saskatchewan	267	2	97	27	124	10	120	38
Alberta	597	16	170	56	226	20	302	77
British Columbia	677	12	161	17	178	31	428	101
Northwest Territories	24	0	4	3	7	0	6	2
Yukon	30	0	3	3	6	3	16	3
Nunavut	49	9	5	2	7	3	28	3
Total	6,964	199	2,084	585	2,669	255	3,520	793
Source: Office of Federal Judicial Affairs  – Judicial Appointments Secretariat.

 

2.2    Positions of the Principal Parties

The current salary levels of puisne judges (2003–04), including the $2,000 annual increase recommended by the Drouin Commission and the statutory increases for inflation, is $216,600, up from the $198,000 level recommended in May 2000 by the Drouin Commission and accepted by the federal government.  The chief justices and associate chief justices of the Superior, Federal and Tax Courts receive a salary of $237,400, judges of the Supreme Court of Canada, a salary of $257,800, and the Chief Justice of Canada $278,400.  The increases set out above for puisne judges between the years 2000 and 2003 amount to 9.39% and the increases over that period for associate chief justices and chief justices, and the Chief Justice of Canada are of the same order of magnitude.

 

The Association and Council submit that the salary level of a puisne judge should be set at $253,800 for April 1, 2004, which is the equivalent of the mid-point of the current remuneration of what is now the second highest level of deputy minister (DM-3), and the salaries of chief justices, associate chief justices, Supreme Court of Canada judges, and the Chief Justice of Canada, be set at the same percentage differential as at present.

 

The submission of the Association and Council would result in a 17.2% increase over the current salary level for puisne judges.

 

As well, the Association and Council propose that, in order to maintain an appropriate level of compensation throughout the four-year period until the next Quadrennial Commission, the concept of annual increases continue, except that the annual increase should be $3,000 rather than the current $2,000.  This, of course, would be in addition to the annual statutory indexation for inflation.

 

These increases were justified by the Association and Council, in large part, by the increasing erosion of what may be termed “rough equivalence” between judicial salaries and the salaries of DM-3s.  At the time of the report of the Drouin Commission award of $198,000, the DM-3 mid-point salary level, including at-risk pay, of which more will be said later, was approximately $203,000.  However, in the period 2000–01, the actual level of DM-3 income at the mid-point, including at-risk pay, had risen to $239,081 and had risen by 2003–04 to a mid point of $253,880, while judicial salaries rose to $216,600, as shown in the following table.

 

 

 

 

The position of the Government was starkly different.  Taking into account its view of the consideration of fiscal restraint, the availability of a surplus of qualified applicants for the available judicial posts, the demographics of these applicants, trends in the public sector, the argument that the DM-3 salary levels have become a poor comparator and that at-risk pay awarded to DM-3s should not be taken into account, the Government proposes an increase of 4.48%, including statutory indexing as of April 1, 2004, which would bring the salary level of puisne judges to $226,300, plus annual increases of $2,000 in each of the years 2005, 2006 and 2007 in addition to statutory indexing in those years.  Taking into account these increases, the Government proposal amounts to an increase of 7.25% over those years, in addition to the statutory indexing in 2005, 2006 and 2007.  

2.3    Comparators

For reasons that will become apparent in the analysis that follows, we were disappointed, and our task made more difficult, by both the lack of available and reliable data on comparators other than the remuneration of public servants at the deputy minister level, and the lack on consensus between the principal parties on the comparative information that was available. 

 

Current information on the income levels of lawyers in private practice in Canada seems to be significantly less reliable than it was at the time of the Drouin Commission in 1999–2000, for reasons that appear to be related to the way in which the Canada Revenue Agency (CRA) gathers and reports the statistics relating to lawyers in private practice who are not employees.  We discuss later in this chapter our view of the information that is available, but it is an understatement to say that it is less than satisfactory.  We will make some observations and recommendations as to how this absence of important information on a key comparator might be addressed for the benefit of future commissions.

 

The problem with the use of the DM-3 comparator relates to the fact that there are presently only nine[18] persons in the federal public service who have that designation, along with two more who have the recent designation of DM-4 (the Clerk of the Privy Council and the Deputy Minister of Finance).  In the years since the 1998 Strong Report and the successor reports to it, the level of compensation of the DM level has, for a variety of reasons detailed in those reports, contained a significant and increasingly large element of at-risk pay, contingent upon achievement by the DM of specific defined annual goals.[19]  At-risk pay, and the achievement of defined annual goals, are concepts that have no relationship whatever to the judicial function.

The problem is compounded by the starkly different positions of the principal parties as to how the DM-3 comparator should be approached.  The position of the Association and Council was that, because of the historic relationship between the DM-3 salary and those of judges, and because at-risk pay should be considered as simply a part of DM-3 compensation, the mid-point of such compensation remained the most appropriate comparator, and should form the basis of the salary recommendation.  The position of the Government, as outlined earlier, was that the DM-3 comparator has outlived its usefulness, or at least its importance, and at-risk pay should not be considered at all. 

 

Given these differences, the problems with the information available concerning the current income of practicing lawyers, the lack of reliance by either party on judicial salaries elsewhere, and the lack of reference by the principal parties to any other comparator, the difficulty faced by this Commission is apparent.

 

We turn to a consideration of the comparators, based on the information that we have from the principal parties and our own research.

 

2.3.1   DM-3 Comparator

The relationship between judicial salaries and DM-3 salaries goes back more than 20 years, and has been considered by every commission investigating federal and judicial salaries.[20]  The theory upon which this relationship is said to be based is not that the jobs of a judge and a DM-3 are similar, but rather that the relationship is a reflection of “what the marketplace expects to pay individuals of outstanding character and ability, which are qualities shared by deputy ministers and judges”.[21] That is a proposition that we can accept, but as will be shown later in this chapter, we do not apply it in the way proposed by the Association and Council or by the Government.  The Association and Council concede that there can be no direct comparison between senior public servants and judges because judges are sui generis and independent of government.  Nevertheless, the Association and Council’s salary proposal virtually equates the judicial salary of puisne judges with the current salary, including mid-point at-risk pay, of DM-3s. 

 

The Government’s submission is that the DM-3 range is a relatively poor comparator for two principal reasons: there is a difference in the security of tenure and the concept of at-risk pay is inapplicable to judges.  Rather, the Government suggests we be guided by general compensation trends in the federal public service, especially in the executive and deputy minister ranks, and notes that annual salary increases, excluding at-risk pay, in the last three years have ranged from 2.5% to 3.1% and the negotiated annual increases in the same period were 2.5% to 2.7%.  It argues that increases in judicial salaries should continue to be consistent with overall compensation trends in the federal public service, including DM-3s, but without any consideration given to at-risk pay. That relationship is shown in Table 8.

 

 

 

The Association and Council take exception to this position, which was argued before the Drouin Commission and expressly rejected.[22]  The Association and Council strongly urged us not to accede to the Government submission that the DM-3 comparator and “rough equivalence” have become inappropriate, and to accept the proposition that at-risk pay is properly included in the comparison.  While the Association and Council did not argue that we were bound to follow the reasoning and the result of the Drouin Commission, they urged that we should not fail to do so unless there were changes in the circumstances that led to that conclusion or good reasons demonstrated not to do so, and they argue that none have been shown.  They point to the widening of the “gap” between DM-3 remuneration and judges salaries that has occurred since 2000.  The Association and Council went so far as to say that, while they were not at this time arguing for rough equivalence with the newly created DM-4 level, they were reserving the right to do so in the future.  The Association and Council acknowledged that no comparator, including the DM-3 comparator, should be determinative, and that comparators could only serve to inform the ultimate recommendation.

 

We have difficulty with the positions put forward by both parties.  While we agree with the proposition that at-risk pay is simply a form of remuneration and cannot be ignored, to the extent that the DM class is considered a proper comparator, it is also true that since the publication of the Strong Report in 1998 and its successor reports, the concept of at-risk pay has proved a more important and increasing part of the remuneration of federal public servants at the DM level (see Table 9).  It is apparent from a review of those reports that this is so in part because of the executive market pressures that exist to attract and retain talented people in the public service, as compared to the income levels available to such people in the private sector, and in part as an incentive to reward the attaining of preset and measurable annual goals of achievement.  Those considerations are not relevant to the judicial context.

 

 

 

 

We also question the wisdom of confining the examination to the DM-3 level, rather than considering the entire group of deputy ministers from DM-1 to DM-4.  The passage quoted earlier from the Courtois and Scott Commissions, and accepted by the Drouin Commission, referred to deputy ministers, not DM-3s.[23]  It is apparent that the large majority of those who reach the DM-3 level have come up from the DM-1 and DM-2 levels, and that, on average, those who reach the DM-1 and DM-2 levels are public servants of long experience and demonstrable ability.[24]

The level of experience of DM-1s and DM-2s is not very much different from that of judges on their appointment, the significant majority of whom (84.2%) are between the ages of 44 and 56 years.

 

Since many, if not most, of those who reach the DM-1 and DM-2 levels have the qualities of character and ability that qualify them for promotion to DM-3, were openings available, there seems to us to be no good reason to exclude them from consideration.  This is especially so given the importance that is accorded to the DM-3 comparison and the fact that, at present, there are only nine people who hold that rank, a very small sample upon which to base the remuneration of more than 1,100 federally appointed judges.  Another consideration that influences our thinking was the difference in the pension available to those at the DM levels compared with the judicial annuity, which we will discuss in the next chapter.  We are also cognizant of the fact that deputy ministers do not have the security of tenure accorded puisne judges.

 

If the salary and at-risk pay of all DM levels are taken into account, there are a variety of ways of looking at their remuneration.

 

 

 

 

 

*  Includes at-risk pay and adjusted to reflect the changes in the number of DM–1s, DM–2s and DM–3s.

 

 

We do not accept the submission of the Association and Council that to look beyond the DM-3 comparator in any way politicizes the process, or makes it arbitrary. Rather, we are of the view that it is incumbent upon us to look at a broader range of the most senior public servants whose qualities, character and abilities might be said to be similar to those of judges. 

 

We therefore looked at other classes of Governor in Council appointees.  We thought that was appropriate, since the quality of a person who becomes a president or a chair of such institutions as the Canadian Institutes of Health Research (CIHR), the National Research Council (NRC), or one of the quasi-judicial commissions, which include the Canadian Radio-Television and Telecommunications Commission (CRTC), the Office of the Superintendent of Financial Institutions (OSFI), the National Energy Board (NEB), the Canadian Transportation Agency (CTA) and the Competition Bureau are likely to be as highly qualified as those who rise to the level of DM-3.  Those who were appointed to these positions are recognized leaders and experts in their field. Some are lawyers.  The remuneration of the chairs of the quasi-judicial commissions is more comparable in some respects to the judicial context, since there is no at-risk pay associated with these posts (see Table 12).  In addition to their quasi-judicial duties, they administer large agencies.  Unlike judges, they do not have security of tenure, since the length of appointment ranges from five to ten years, with the possibility of reappointment and, while pension benefits are roughly equivalent to those at the DM-3 level, many, if not most, of such appointees come from outside the public sector, and therefore do not qualify for a full pension because of the limited number of years of service.

 

 

 

 

The GCQ-9 level includes the chairperson’s position in the largest administrative tribunals, the CRTC, NEB, CTA, CB and OSFI. There are only 2 GC-10s, the presidents of the NRC and the CIHR.  There are no GCQ-10s at this time.

 

2.3.2   Incomes of Private Practitioners

Tables 2 and 3 show that it is necessary, to the extent possible, in order to address the requirement of attracting outstanding candidates to the bench, to have regard to the income of private practitioners, since that remains the pool from which most of the appointees, and presumably most of the recommended applicants, come.  Unfortunately, the information available to us was problematic, to say the least, and not as helpful and complete as the information that appears to have been available to the Drouin Commission.[25]

 

The triennial commissions dealt with the relationship between the incomes of lawyers in private practice and the salaries of judges.  The Scott Commission, in particular, was of the view that the commission process in the Judges Act was “a statutory mechanism for ensuring that there will be, to the extent possible, a constant relationship, in terms of degree, between judges’ salaries and the incomes of those members of the Bar most suited in experience and ability for appointment to the Bench.”[26]

 

The rationale, of course, is that it is in the public interest that senior members of the Bar should be attracted to the bench, and senior members of the Bar are, as a general rule, among the highest earners in private practice.  While not all the “outstanding” candidates contemplated by s. 26(1.1)(c) of the Judges Act will be senior lawyers in the higher earning brackets, many will, and they should not be discouraged from applying to the bench because of inadequate compensation.

 

2.3.3   Current Information on Lawyers’ Income in Private Practice

We expected to be given information on the income of lawyers in private practice that would be sufficiently reliable for the purpose of our deliberations, and the principal parties hoped to be able to make a joint submission as to what those statistics demonstrated.  They asked for, and were given, to the end of January 2004 to submit the material, so that they could use the most recent information available from CRA, which was not available in time for the initial round of submissions by the principal parties on December 15, 2003.

 

The information put before us for the years 2000 and 2001 was characterized by the Government as “unreliable” and “of little use” to the Commission for the purposes of establishing comparison with judicial salaries.  The 2000 data suggested a significant decline in the number of self-employed lawyers since 1997, a suggestion that does not reflect reality.  The 2001 data was said to be no better, since it showed a decline of 10% in the number of self-employed lawyers who filed income tax returns and a decline of 36% in average net income, both figures manifestly highly suspect.  These problems apparently stem from the changes made by CRA in the way it now collects and analyzes lawyers’ income and the difficulties that arise from the way lawyers self-identify and report income, combined with changes in the CRA’s occupational coding system.  Of course, CRA does not track this information for the purposes of this Commission and the principal parties were obliged to use only what CRA was able to give them.

 

We obtained the view of our consultant and we forwarded this to the principal parties (see the letter dated March 25, 2004, from Morneau Sobeco in Appendix 8).

 

The Government requested and obtained an independent analysis on the 2001 data from a compensation specialist at Western Compensation and Benefits Consultants (WCBC).  The Government recommends that the Commission utilize the methodology from that firm’s report in reviewing the data for the tax years provided.

 

The Association and Council also provided us with two reports from an independent consultant, Sack Goldblatt Mitchell (SGM).  The first such report is dated January 30, 2004, and comments on the data as to the income of lawyers in private practice for the years 2000 and 2001 (the first SGM report).  SGM provided a second report (the second SGM report) on February 27, 2004, responding to the Government’s reply submission on the usefulness of these numbers and a reply to the WCBC report filed by the Government at the end of January. 

 

2.3.4   SGM’s Work in Comparing the Year 2000 Data

The first SGM report was based on the data supplied to it through CRA for the year 2000.  SGM found that there were many differences in the way that the 2000 information was presented as compared with that from 1997, particularly in the geographical designations, especially the definitions of the major metropolitan areas. 

SGM continued to use in its analysis a $50,000 earnings threshold, as it did in the report that it prepared for submission to the Drouin Commission, but observed that this was very conservative, and was of the view that it was reasonable to increase that threshold to account for inflation between 1997 and 2000.  Because of the way that the information came to SGM from CRA, they found it impossible to present the data from 1997 in a manner that the Drouin Commission had found appropriate.

 

In spite of some difficulties with the 2000 data, SGM was able to verify much of it, because of work that it had done and information that it had received in connection with a report it prepared for the Ontario Conference of Judges, in the proceedings before the Fifth Triennial Provincial Judges’ Remuneration Commission in Ontario in 2003.

 

Although it was not possible to calculate exactly to the 75th percentile of income, SGM believed that it was possible to approximate it with a reasonable degree of accuracy.

SGM prepared a number of tables that compared the 1997 and 2000 data for both the country and selected metropolitan areas, using the 75th percentile of income, the 44 to 56 age group, a $50,000 exclusion, and an inflation-adjusted exclusion of $53,122.  Further adjustments took into account inflation to 2003 and the results are shown in the following table.  SGM notes that the 2000 data confirmed the importance of the seven largest Census Metropolitan Areas (CMAs) where more than 60% of Canada’s lawyers live.

Table 13 Income at 75th Percentile by Province and CMA1 for Lawyers, Aged 44 to 56, after $50,000 Exclusion for 2000 Tax Year March 2003, Adjusted for Increased Thresholds and Inflation
	CRA Tax Year2
	Column A	Column B	Column C	Column D
	Income Calculated at the 75th Percentile	Column A Plus 3.1% to Account for Increased Threshold	Column A Adjusted for Inflation to April 2004 (6.8%) without Adjustment to Threshold	Column B Plus 6.8%
Canada	$238,816	$246,219	$250,055	$262,962
Newfoundland and Labrador	$229,205	$236,310	$244,791	$252,379
Prince Edward Island	n/a	n/a	n/a	n/a
Nova Scotia	$158,243	$163,149	$169,004	$174,243
New Brunswick	$178,838	$184,382	$190,999	$196,920
Quebec	$202,972	$209,264	$216,774	$223,494
Ontario	$276,152	$284,713	$294,930	$304,973
Manitoba	$188,481	$194,324	$201,298	$207,538
Saskatchewan	$159,994	$164,954	$170,874	$176,171
Alberta	$255,118	$263,027	$272,466	$280,913
British Columbia	$201,543	$207,791	$215,248	$221,921
Toronto	$369,536	$380,992	$394,664	$406,899
Montréal	$252,571	$260,401	$269,746	$278,108
Vancouver	$230,482	$237,627	$246,155	$253,786
Ottawa–Gatineau	$225,949	$232,953	$241,314	$248,794
Edmonton	$164,522	$169,622	$175,709	$181,156
Calgary	$361,284	$372,484	$385,851	$397,813
Québec	$201,658	$207,909	$215,371	$222,047
Sources: Canada Revenue Agency, March 2003; Sack Goldblatt Mitchell Report, January 30, 2004, page 27.

 

¹  CMAs are Census Metropolitan Areas.

²  CRA Tax Year indicates the data produced by the Canada Revenue Agency in March 2003.

 

 

However, SGM also noted, as do we, significant issues that cast doubt on the accuracy of the 2000 data supplied by CRA.  There is a large discrepancy in the number of filers of returns in many areas, notably British Columbia and Ontario.  There are unexplained anomalies that call into question the validity of the material presented. Differences between the 2000 data supplied in March 2003 and that supplied in January 2004 remain unexplained, and in the opinion of SGM cast doubt upon the lower income levels for Canada, especially Ontario, in comparison to the March 2003 data they used for the Ontario Provincial Triennial Commission.  As a result, SGM did not give much credence to the January 2004 data supplied by CRA.

 

With respect to the 2001 data, SGM rejected it because of inexplicable differences from both the 1997 data and the 2000 data, which differences could not be clarified or explained either by CRA or the Department of Justice.  SGM concluded that the 2001 data was unreliable.

 

2.3.5   The Government’s Submission

Notwithstanding its submission that the data obtained from CRA as to the income of self-employed lawyers was of limited use to the Commission, the Government provided us with the WCBC report dated January 2004 (the first WCBC report), which was an analysis of the 2001 net income of self-employed lawyers who filed income tax returns. 

 

WCBC concluded that a valid comparison could not be made with the 1997 data without major modifications to them, which was not possible to carry into effect.[27]  The WCBC analysis concluded that the average net income for the practice of law by self-employed lawyers in 2001 across Canada was $94,000.

The WCBC analysis took issue with the exclusion of self-employed lawyers’ earnings below $50,000, and the decision to focus on lawyers between the ages of 44 to 56 years of age.  Rather, WCBC based its opinion on the entire range of available data with “more emphasis” (p. 4) on the group from which the majority of judges was appointed.  Looking at the entire group, and taking the 66th and 75th percentile for net income in 2001, and applying an age weighting to the data, WCBC found a 66 percentile average income of $105,993 and a 75th percentile, age-weighted, average income of $128,016.  Their report noted the average incomes for the major metropolitan areas as well as the all Canada average.  The first WCBC report went on to analyze the judicial annuity scheme, about which we will say more in the next chapter.  If the value of the annuity is taken to be 24% of the current salary of $216,600,  the current annual value of the judicial annuity to each judge, on average, is $51,984.

 

 

Table 14 66th and 75th Percentile Age-Weighted Income for Major Metropolitan Centres 2001
Metropolitan Area	66th Percentile Income	% Difference from Canada	75th Percentile Income	% Difference from Canada
Toronto	$125,305	18%	$156,070	22%
Montréal	$91,941	–13%	$114,084	–11%
Vancouver	$103,663	–2%	$128,223	0%
Edmonton	$112,250	6%	$129,560	1%
Calgary	$115,958	9%	$146,555	15%
Québec	$85,095	–20%	$105,820	–17%
Ottawa–Gatineau	$122,008	15%	$145,926	14%
Hamilton	$136,257	29%	$155,482	22%
Canada	$105,993		$128,016
Sources: Canada Revenue Agency; Western Compensation and Benefits Consultants Report, January 2004, page 9.

The first WCBC report went on to calculate the percentile ranking of current judicial income with and without the annuity in the major metropolitan centres with the following result.

 

 

 

*  CMAs are Census Metropolitan Areas.

 

 

2.3.6   Responses by the Principal Parties

The principal parties responded to each other’s initial submissions and their experts’ reports with respect to the 2000 and 2001 income data on self-employed lawyers. 

 

The Association and Council noted the inconsistency between the Government’s stated position that the 2001 data was unreliable and of limited importance, and the WCBC finding that it was reliable.  The Association and Council criticized the methodology used by WCBC and its report, where it failed to accept the view that the analysis should include a $50,000 income threshold, and the failure of WCBC to accept that the 44 to 56 age bracket was the appropriate comparator group.

 

The second SGM report concluded that the first WCBC report was unreliable in two respects:

 

            a) the data upon which it was based were flawed; and

            b) the analysis of the data was flawed.

 

It is not possible to detail here the entire basis for these criticisms.  The primary criticism was the exclusion by WCBC in the 2001 data of 7,198 self-employed lawyers who earned significant professional income, which was said to be from sources other than the practice of law.  The second SGM report argues that this exclusion was unreasonable and against common sense, and contrary to other available statistical information.  In the view of SGM, exclusion of these individuals accounts for the discrepancy in the average income of self employed lawyers between the 1997 and 2001 data.

 

SGM points out that, in order for the income levels reported by WCBC to be correct, massive layoffs and significant disruption in lawyers’ offices across the country would have been required, but there is no evidence of this.  SGM describes many other reasons why the data relied upon by WCBC are flawed and unreliable.

 

SGM criticizes the failure of WCBC to use the $50,000 threshold and the failure to use the 44 to 56 year comparator group.  It describes those omissions as fatal flaws to the usefulness of the report.

 

The Government responded to the first SGM report by way of a submission, and a second WCBC report.  The Government pointed out that, given the Drouin Commission’s ultimate recommendation of a judicial salary of $198,000 for judges, it could not have accepted the 1997 data, which placed the income of lawyers in the comparator age group at the 75th percentile at $230,000 on average throughout Canada, and significantly higher in the major metropolitan areas.  The Government’s submission refers to the weaknesses it found in the methodology of the first SGM report.  Briefly summarized, these criticisms relate to the problems inherent in using an income threshold, which fails to take into account those lawyers who, for a variety of reasons, earn less, yet are fully qualified for the bench, and the failure to exclude the highest-income earners who, so the Government argues, would never consider judicial appointment.  The Government points to the lack of statistical evidence to justify a $50,000 exclusion.

 

The Government believes that the use of the 44-to-56 age group fails to take into account a sufficient sample of the self-employed lawyers who were appointed to the bench, since the actual age range of such appointees is between 41 and 66 years of age.

 

The second WCBC report comments on the first SGM report and criticizes its use of the 2000 data, rather than the more recent 2001 data.[28]  It found the SGM criticism and rejection of the 2001 data to be unconvincing.  WCBC criticizes the SGM methodology for the reasons outlined in the Government’s submission described above and for the failure to recognize the value of the judicial annuity.  WCBC was critical of the attempts made to update the 2000 data to 2004 for many reasons that need not be detailed here but relate to problems with attempts to generalize to the entire country and to assume that the income of self-employed lawyers necessarily rises with inflation or increases every year.

2.4    The Commission’s View of the Available Evidence

We have taken the reader through this lengthy survey of the principal parties’ positions on the current income data available with respect to self-employed lawyers in Canada because it is important to understand both the problems that exist with respect to the available data and the diametrically opposed positions taken by the principal parties on  the data available.  This review is also necessary because we are of the view that, given the statutory criteria that bind us, information as to self-employed lawyers’ income in Canada is important, indeed critical, to our task.  This is true as a stand-alone proposition, and particularly so, given the views we have outlined earlier in this chapter with respect to the DM-3 comparator and the principal parties’ position on that comparator.

 

While we deplore the deficiencies in the material put before us with respect to the 2000 and 2001 income data of self-employed lawyers, we remain of the view that the income of self-employed lawyers in Canada is an important, and perhaps the most important, comparator for our work, and that we must do the best we can with the data available.  Accordingly, we asked our consultants, Morneau Sobeco, to assist us in this endeavour.

 

We were of the view that, of the current information on the income of lawyers in private practice that is available, the most reliable was the 2000 data, since it was based on a total grouping of 20,670 lawyers (of whom 7,144 were between the ages of 44 and 56 and had incomes in excess of $50,000) and constitutes a sufficient sampling to provide a credible image of the net incomes of lawyers in private practice.  The problems noted with the 2001 data, because of the way they are reported by CRA, are too great for them to be relied upon to any extent.  We agree with SGM and the Association and Council that the 2000 data are useful, and our consultant concurs.  We note that, notwithstanding the use made of the 2001 data by its consultant WCBC, the Government itself questioned the usefulness of the 2001 data in its own submissions.

 

The lawyers’ net professional incomes reported for 1997 and 2000, while consistent, are not directly comparable because of the significant difference in the reported number of cases.  Possible explanations for the reduction include the increased use of personal corporations.  However, no complete and satisfactory explanation has been found for the substantial reduction in the number of reported cases.

 

Unfortunately, we were not provided with any more recent and reliable data.  We view the 2001 data as less reliable, since the removal of notaries and paralegals should have had the effect of increasing the average net income rather than reducing it.  Also, we find it difficult to accept that 7,198 lawyers could have “professional incomes”, but no professional income from the practice of law.

 

In the final analysis, the 2000 data are more or less consistent with the 1997 data and remains the most credible and relatively recent source of information that we have on the net income of self-employed lawyers in Canada.  The number of lawyers in private practice reported in 2000 (20,670), although 33.9% fewer than in 1997, still represents a very significant proportion of all lawyers in private practice in Canada and, as such, constitutes a sufficient sample to study the net income of lawyers in private practice.

 

We are mindful of the fact that the 1997 and 2000 data are samples and, as such, provide only estimates of the net income of lawyers in private practice in Canada.  We can take some comfort in the fact that these estimates are probably conservative because:

 

• They include the net income of notaries and paralegals, which will tend to reduce the averages, given the information that was provided to us by the Chambre des notaires du Québec;
  
  
• The lawyers who have established personal corporations and are no longer reporting professional incomes are probably those with the higher incomes; and
• The nature of the data provided (net income for income tax purposes associated with professional income from the practice of law) is more likely to underestimate rather than overestimate the real economic benefits of lawyers in private practice.

 

The 44-to-56 age group continues to be the population from which the large majority of judicial appointments are made.[29]  The 75th percentile of income, calculated with an income exclusion, strikes a reasonable balance between the largest self-employed income earners and those in lower brackets, given the criteria that we must apply.  To the extent that there is validity in the Government’s submission that lawyers at the highest income levels do not apply for the bench, of which there is no evidence, the use of the 75th percentile level takes that into account.  With respect to the appropriate level of exclusion mentioned above, our view is that it would be more appropriate to increase the level to $60,000.  It is unlikely that any in the pool of qualified candidates will have an income level lower than $60,000.  The salaries of articling students range from $40,000 to $66,000 in major urban centres and the salaries of first-year lawyers range from $60,000 to $90,000 in those same centres, and are often augmented by bonuses.  Earnings for more senior associates are significantly higher.

 

Accordingly, we asked Morneau Sobeco to provide us with tables comparing the 1997 and 2000 income of self-employed lawyers between the ages of 44 and 56, at the 75^th percentile, with no income exclusion and then excluding lawyers with incomes below $60,000.  The results were requested for Canada, each province and each of the largest cities with adjustments for inflation to 2004.

 

Morneau Sobeco used 2000 income data obtained from the CRA on behalf of the Canadian Association of Provincial Court Judges (CAPCJ).  The data obtained by Morneau Sobeco allowed the identification of income from the 50^th to the 95^th percentile, whereas the data obtained by the Ministry of Justice and SGM required an estimation of the 75^th percentile.  The data obtained by Morneau Sobeco and the Ministry of Justice are otherwise consistent at the national and provincial levels with only minor differences in the reported number of lawyers for a few provinces.  The results are also consistent for smaller municipalities.  However, important differences exist in the number of lawyers reported by CRA to the Ministry of Justice and Morneau Sobeco for larger municipalities, presumably because of the difference in the approaches used by CRA in distinguishing between cities and large metropolitan areas.

 

The results are presented in the following Tables 16 to 19.  The net income of Canadian lawyers for that taxation year 2000 were projected to 2004, on the basis of an estimated increase in the Industrial Aggregate Index (IAI) of 7.1% from the year 2000 to April 2004. 

 

 

 

 

 

 

 

* Data for the year 1997 was not available for the city of Winnipeg.