Law that grants tax exemption to Chancellor, CJ unconstitutional – High Court rules

…income of all Judges now subject to same tax treatment

…awards $2.5M compensation to fmr Judge

“It is apposite to note that in other Caricom countries all Judges are treated equally in relation to taxes. In Trinidad and Tobago and the Eastern Caribbean, all Judges are exempted from taxes. There is no subset of Judges that enjoys the exemption and others excluded.  In Jamaica, all Judges are subject to taxes” – Justice Corbin-Lincoln

High Court Judge Fidela
Corbin-Lincoln

The State breached retired Puisne High Court Judge William Ramlall’s fundamental right of equality of the law as guaranteed under Article 149D of the Constitution when he was made to pay judicial income tax from 2004 up until his retirement in 2014, Justice Fidela Corbin-Lincoln ruled on Friday.

Justice Ramlall was a sitting Judge when he applied in 2015 for constitutional redress against the Attorney General arguing that Section 13 of the Income Tax Amendment Act, Act No 7 of 2004 is unconstitutional, void, and of no effect on the basis that it infringes upon Article 149D (1) by only granting tax exemptions to the Chancellor of the Judiciary and the Chief Justice.

His case is that in 2003 the Judges of the Supreme Court of Judicature engaged in a meeting with the President regarding the provision of better terms and conditions of service for all Judges. A case was made out for the grant of an exemption from income tax on the earnings of all Judges. In 2004, the relevant portion of the Act was introduced and passed in the National Assembly.

Retired Judge William Ramlall

By virtue of Section 2 of the Act, therefore, all annuities (excluding those paid out of a superannuation fund) salaries, leave pay, sick bonus, stipend, or other payment of any kind for services, director’s fees, retiring allowances, and compensation for the termination of any contract of employment or service which are chargeable with tax under the Act and received by the Chancellor and Chief Justice are exempt from tax.

Salary or profits from a trade or business carried on in person or in partnership is also excluded.  These tax exemptions were not extended to Justice Ramlall or other Judges of the Supreme Court. Prior to the enactment, the income of all Judges of the Supreme Court, including the Chancellor and Chief Justice was subject to the same tax treatment.

In light of the foregoing, Justice Ramlall sought a declaration that Section 13 (a) of the Act is unconstitutional and a declaration that the deduction of income tax from his judicial income is an unlawful alteration of the terms and conditions of the service as a Judge of the Supreme Court.

He asked the High Court to declare that the State is not entitled to take or receive income tax derived from his emoluments, a declaration that upon retirement he is entitled to a monthly pension and retirement benefits of not less than seven-eighths of his salary at the time of his retirement.

He also asked the court to grant an order for constitutional compensation and/or damages and/or a refund of income tax together with interest thereon because of the contravention of Article 149D of the Constitution. The retired Judge submitted that since the passage of the Act, he was subjected to taxes on his emoluments amounting to in excess of $34,000,000.

The retired Judge further requested orders, writs, directions that are necessary or appropriate to enforce the fundamental rights guaranteed by Article 149D.

Unconstitutional

In determining if Justice Ramlall’s fundamental right was breached, Justice Corbin-Lincoln examined the provisions of Article 149D and whether the roles of the Chancellor and Chief Justice are similarly situated/circumstanced, comparable, analogous, or broadly similar to that of the retired Judge and other Judges of the Supreme Court.

According to her, the Supreme Court was established by Article 123 (1) of the Constitution and consists of the Court of Appeal and the High Court, both of which have been designated as superior courts of record. She said Article 126 of the Constitution states that a “Judge” includes the Chancellor, the Chief Justice, a Justice of Appeal, a Puisne Judge, and a part-time Judge.

She further said the period for which a person is required to have been qualified for admission as an advocate for the qualification for the appointment of a Judge of the Court of Appeal and of the High Court is 10 and seven years, respectively.

While the Chancellor and Chief Justice are appointed by the President after obtaining agreement from the Opposition Leaders, Justice Corbin-Lincoln said the other Judges are appointed by the President who shall act in accordance with the advice of the Judicial Service Commission (JSC).

The High Court Judge noted that the Chancellor and the Chief Justice, who are appointed by a different process, are at the apex of the hierarchy of the Supreme Court and are tasked with the same judicial responsibilities as the other Judges. But apart from judicial responsibilities, they also have administrative responsibilities and are remunerated at a higher rate than other Judges.

Justice Corbin-Lincoln, however, held that like other Judges of the Supreme Court, the Chancellor and Chief Justice belong to the class of Judges of the Supreme Court as defined by the Constitution.

She said the Chancellor and Chief Justice must meet the same pre-qualification requirement and have the same retirement age as other Judges of the Court of Appeal, must subscribe to the same oath, have the same judicial responsibilities, and are bound by the same judicial code of conduct.

“A ruling or decision of the Chancellor carries no more judicial weight than those of other Judges of the Court of Appeal and, equally, a ruling or decision of the Chief Justice carries no more judicial weight than that of other Judges of the High Court. While the roles of Chancellor and Chief Justice are not identical to other Judges of the Supreme Court, I find that they are analogous and broadly similar,” Justice Corbin-Lincoln reasoned.

Since the remuneration of the Chancellor and Chief Justice already takes into account their hierarchy and additional administrative responsibilities, the Judge said the Attorney General failed to establish that the differential tax treatment has a legitimate aim.

Justice Corbin-Lincoln, therefore, found that Section 13 (a) of the Act contravenes Article 149D of the Constitution in so far as it confers tax exemptions on the Chancellor and Chief Justice only and excludes other Judges.

She described the Act as having a “discriminatory effect” and therefore declared that Section 13 (a) of the Act insofar as amended by Act No 7 is unconstitutional, void, and of no effect. In the circumstances, the Judge ordered the State to pay Justice Ramlall $2,500,000 as compensation.

Treated equally

“It is apposite to note that in other Caribbean Community (Caricom) countries all Judges are treated equally in relation to taxes. In Trinidad and Tobago and the Eastern Caribbean, all Judges are exempted from taxes. There is no subset of Judges that enjoys the exemption and others excluded.  In Jamaica, all Judges are subject to taxes,” the Justice noted.

It was further deposed by Justice Ramlall that based on the statutory regime in place, he would receive a pension of 2/3 of his salary upon retirement which is the same level of pension received by other public servants. As such, he contended that this level of pension is not enough to maintain the standard of living enjoyed as a Judge and keep him from practicing at the Bar on retirement.

He went on to argue that the actions of the State are contrary to the spirit and intent of Article 197 (10) of the Constitution which dictates that it is “in the interest of the State” to provide such terms and conditions to Judges to avoid them having to practice at the Bar upon retirement.

Although there is a multitude of reasons why this would be in the interest of the State including ensuring the independence, impartiality, and dignity of the judicial office, the Judge said that there is an existing statutory regime for the calculation of pension for Judges – Regulation 7 (2) of the Pension Act Cap 27.02.

According to her, the Act prescribed that pension for Judges is calculated on the same basis used to calculate pension for the Director of Public Prosecutions, the Solicitor General, and the Chief Parliamentary Counsel. She added that Justice Ramlall appears to be contending the current statutory pension regime for Judges enacted by Parliament is unconstitutional as it does not adequately provide for Judges and avoid them having to return to private practice.

“Pension rights are inextricably linked to the quantum of remuneration. Article 197 (10) in my view is nebulous, perhaps deliberately so. By what objective standard is it to be determined whether the pension benefits are adequate enough to avoid a Judge having to return to practice at the Bar? How is it to be determined that the current statutory pension regime puts the State in “breach” of this Article?”, the High Court Judge asked.

The Justice said that Article 197 (10) expresses the notion that Judges ought not to be placed in a position of lack and inadequate means both while serving and in retirement.  But she noted that the terms of the constitutional provision are too unclear, ambiguous, and imprecise to give rise to a legitimate expectation of better pension rights that currently exist by statute.

To this end, Justice Corbin-Lincoln ruled that Justice Ramlall failed to establish a right to a declaration that he is entitled upon retirement to a monthly pension and retirement benefits of not less than seven-eighths of his salary at the time of his retirement.

She was keen to point out that there has been no comprehensive review of the terms of conditions of Judges for decades taking into consideration changing social, technological, and economic circumstances.  This, she added, is not in keeping with the “spirit and intent” of Article 197 (10).

“While Article 197 (10) states that it would be in the interest of the State to provide adequate terms and conditions to Judges, in my view it would also be in the public interest for steps to be taken to give full effect to the spirit and intent of this constitutional provision.”

Her ruling essentially paves the way for all Judges, including the Chancellor and Chief Justice, to pay income tax. (G1)