BUSSINESS MAURITIUS & ORS v MAURITIUS REVENUE AUTHORITY

2020 SCJ 315

Record No. 120842

IN THE SUPREME COURT OF MAURITIUS

In the matter of:

1. Business Mauritius
2. V. D’Unienville & Associates Co. Ltd
3. Louis Henri Andre Jean Claude Louison
4. Derick Andre Steinhobel
Applicants

v/s

The Director General, The Mauritius Revenue Authority

Respondent

In the presence of:

1. The Republic of Mauritius

2. The Minister of Finance, Economic Planning and
Development
3. The Minister of Social Integration Social Security and
National Solidarity
4. The National Pensions Fund
5. The Sugar Industry Pension Fund Board

Interested Parties

JUDGMENT
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The applicants have brought 2 main actions before the Supreme Court, by way of
Judicial Review and Plaint with Summons for constitutional redress, in order to challenge the
validity of:

1. The amendments to the National Pensions Act by the Finance (Miscellaneous

Provisions) Act 2020 (Act No. 7 of 2020) which:
(a) abolish the contributions to the National Pensions Fund (“the NPF”); and
(b) provide for the Contribution Sociale Genéralisée (“CSG”) pursuant to a new
Part VA of the National Pensions Act.
2. The Contribution Sociale Genéralisée Regulations 2020.
(“The amending legislation”)

Application for Stay

The applicants are now moving for an order to stay the application of section 30B(4) of
the National Pensions Act (“the Act”) pending the determination of the 2 main actions. Section
30B(1) of the Act provides for the payment of the CSG by employers and employees to the
Director-General of the Mauritius Revenue Authority (the respondent). Section 30B(4) goes on
to provide that the CSG collected by the Mauritius Revenue Authority (“the MRA”) shall be
credited to the Consolidated Fund.

The applicants’ motion for stay targets only section 30B(4). The applicants are not
asking for the stay of any of the provisions relating to the payment of the CSG by employees or
employers. They are only asking that the provisions to section 30B(4), enjoining the MRA to
credit the CSG collected from employers and participants to the Consolidated Fund, be stayed.
The applicants are thus asking that the MRA be directed by the Court to remit the CSG and/or
pension contributions to the National Pension Fund as provided for under the repealed
legislation, and not to the Consolidated Fund as enacted by the new section 30B(4) of the Act.

Applicants’ case

The applicants’ case in support of their motion for stay may be summed up as follows:

1. Prior to the amending legislation, employers and employees of the private sector
were effecting their contributions towards the NPF directly, for the benefit of the
employees in respect of whom such contributions were made. Upon retirement,
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these employees were paid pension benefits reflecting the contributions made by
them and on their behalf by their employers.
2. The value of the assets of the NPF has increased from nil in 1978 to some Rs 134
billion in December 2019. The NPF has become a major institutional investor with
large economies of scale and a diversified portfolio.
3. As a result of the amending legislation -
(a) Contributions are no longer paid into the NPF, which nonetheless has liabilities to
pay pension entitlements for at least 3 years according to statements made by
the Finance Minister.
(b) The NPF has ceased to be funded by contributions but has outstanding liabilities.
Since the NPF is already underfunded, it has limited means to be able to fulfill its
pension payment obligations.
(c) As a result of the abolition of NPF contributions, the time horizon for investments
has been shortened. The NPF will consequently not be in a position to make
longer term and/or riskier investments which usually yield higher returns.
Consequently the investment return of the NPF is likely to be lower, leading to a
reduction in the accrued benefits.
(d) The effect of the closure of the NPF to future contributions and future accrual will
have the result that, with the forced liquidation of its assets and investments,
which represent the property of the members of the NPF, the funds are being
depleted, with no guarantee that the NPF will be able to fulfill all its existing
payment obligations.
(e) Whilst under the NPF scheme, all contributions were being credited to the
individual account of employees, the contributions to the CSG now collected by
the MRA are paid into the Consolidated Fund wherein all contributions are
comingled.
(f) Consequently, employees of the private sector no longer have the benefit of
pension entitlements proportionate to their contributions.

It was therefore submitted on behalf of the applicants that there is a serious question to
be tried concerning the validity of the amending legislation inasmuch as the implementation of
the CSG, in replacement of the NPF, amounts to a deprivation of property in breach of the
constitutional rights of the applicants.
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It is submitted that the applicants are not asking for the amending legislation to be
stayed in toto. They are only asking that the contributions now payable under the CSG scheme
be paid into the NPF instead of the Consolidated Fund. The contributions thus collected by the
MRA will be fed into the NPF for investment pending the determination of the main actions
entered by the applicants. Should the applicants be unsuccessful in their main actions, the NPF
ought to be in a position to refund these contributions for them to be credited to the
Consolidated Fund.

On the other hand, should the stay not be granted, the CSG contribution will be credited
to the Consolidated Fund, which under section 103 of the Constitution, amounts to revenues of
the Government which may be used to meet the expenditures of the Government. As such, the
contributions so made, whilst the main actions are being determined, may be used up and may
not be available for transfer to the NPF if the applicants are successful in their main actions. In
addition, by the time the case is determined, the NPF will have taken investment decisions
based on its precarious financial position, which may further put at risk the entitlement of
employees to cash in on their acquired pension rights under the NPF.

There is therefore a risk of irreparable harm being caused to contributors like the
applicants in the event that the stay is not granted.

It is accordingly submitted that it is urgent and necessary to preserve the segregation of

funds and the assets of the NPF by maintaining that contributions be paid into the NPF instead
of payment into the Consolidated Fund, pending the determination of the main actions.

The Sugar Industry Pension Fund Board, which is the 5th interested party, is supporting
the motion for stay and has joined in the submissions made on behalf of the applicants.

Respondent’s case

The case for the respondent and the first four interested parties is based essentially on
the following premise:

By virtue of the amending legislation, a new Contribution Sociale Genéralisée (CSG)

régime has been created with effect from 1 September 2020. The NPF has not ceased to exist
and continues to be operational in so far as payments of accrued benefits to insured persons
are concerned. Its assets, investments, return on investments and liabilities have remained
untouched.
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As at 30 September 2020, the assets of the NPF are to the tune of 139 billion rupees.
For the period 1 October 2020 to 30 September 2021, the liabilities of the NPF are to the tune of
some 3.5 billion rupees. These liabilities will not be met out of the 139 billion rupees but from
income on investment on the basis of the current trend. The NPF will be able to meet its
liabilities as they become due without deliberately engaging into any major disinvestment of the
assets of 139 billion rupees for at least the next ten years.

It is also contended that the accrued benefits and their method of calculation for insured
persons, remain unchanged with effect from 1 September 2020. This means that accrued
pension rights under the Act have remained unaffected.

As at 19 November 2020, the sum of Rs 215,258,667 in respect of 11,431 employees

has been collected by the MRA and credited to the Consolidated Fund. All such contributions
are being recorded under a specific item, namely “item 12110001: Employee Contribution under
Pension Scheme”.

It is therefore submitted on behalf of the respondent and the 4 interested parties that the
amending legislation does not adversely affect accrued rights in respect of contributory
pensions under the Act. It is also the contention of the respondent and the 4 interested parties
that monies which would now be credited to the Consolidated Fund, would be better secured in
view of the fact that (1) the Consolidated Fund is a Fund created by the Constitution (section
103) into which generally all revenues or other money raised or received for the purposes of
Government shall be paid; and (2) from which no money may be withdrawn except as
authorised by the Constitution, by a law in force in Mauritius or by an Appropriation law
approved by resolution of the National Assembly [section 104 of the Constitution].

Analysis

Both the factual averments and submissions of respondent and the 4 interested parties
have been strongly challenged by the applicants who have maintained that the NPF and the
accrued rights of the insured pensions under the Act are bound to be adversely affected since
the NPF is now being deprived of monthly contributions which were previously made to the
Fund. This is going to lead to lower investment returns to the detriment of the insured persons.
Insured persons retiring between 1 September 2020 and 30 June 2023 will receive lower
contributory pensions due to the abolition of the NPF contributions as from 1 September 2020.
It is also averred by the applicants that, as opposed to the NPF contributions, the CSG is in the
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nature of a tax paid into the Consolidated Fund, from which no monies are invested since the
Fund is only used to meet the government expenditure for the year.

The guiding principles for deciding upon the granting of a stay order pending the judicial
determination of the constitutionality of an impugned legislation, have been succinctly
expressed by the Supreme Court of Canada in Attorney General of Manitoba v Metropolitan
Stores (MTS) Ltd [1987] 1 S.C.R 110, which case has been referred to us by Counsel on both
sides.

The following extracts from the judgment provide useful guidance as to the approach,
namely the three tests, which should be adopted in such a situation in order to determine
whether a stay should be granted or not pending a constitutional challenge of the applicable
legislation:

“A stay of proceedings and an interlocutory injunction are remedies of the same

nature and should be governed by the same rules. In order to better delineate
the situations in which it is just and equitable to grant an interlocutory injunction,
the courts currently apply three main tests.

The first test is a preliminary and tentative assessment of the merits of the case.
The traditional way consists in asking whether the litigant who seeks the
interlocutory injunction can make out a prima facie case. A more recent
formulation holds that all that is necessary is to satisfy the court that there is a
serious question to be tried as opposed to a frivolous or vexatious claim. The
“serious question” test is sufficient in a case involving the constitutional challenge
of a law where the public interest must be taken into consideration in the balance
of convenience. The second test addresses the question of irreparable harm.
The third test, called the balance of convenience, is a determination of which of
the two parties will suffer the greater harm from the grant or refusal of an
interlocutory injunction, pending a decision on the merits.

When one contrasts the uncertainty in which a court finds itself with respect to
the merits of the constitutional challenge of a law at the interlocutory stage, with
the sometimes far-reaching albeit temporary practical consequences of an
interlocutory injunction, not only for the parties to the litigation but also for the
public at large, it becomes evident that the courts ought not to be restricted to the
traditional application of the balance of convenience.

It is thus necessary to weigh in the balance of convenience the public interest as

well as the interest of the parties. … …”

The applicants have been able to demonstrate ex facie their 2 main court actions that
there is a serious question to be tried which involves the determination of the constitutionality of
the impugned amending Legislation and Regulations and which requires a complex factual and
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legal analysis. Their actions are indeed based on the premise that the abolition of the NPF
contributions and the setting up of the new CSG régime by the legislator constitute an
interference with their accrued rights, which is neither proportionate, nor justifiable in a
democratic society and which amounts to a deprivation of property in violation of section 8 of the
Constitution. Their actions also invoke a disparity in treatment of employees of the private and
public sectors which, in the absence of any objective and reasonable justification, would offend
the principle of equality of treatment and protection from discrimination as laid down under the
Constitution. The applicants have also come up with factual averments in support of the
contention that the impugned legislation cannot be deemed to have been adopted for the good
government of Mauritius and would thus be in breach of section 45 of the Constitution.

Before turning to the question of irreparable harm and the test for balance of
convenience, it is necessary to address the legal argument raised by the respondent and the 4
interested parties with regard to the presumption of constitutionality.

As pointed out earlier, the applicants are praying for a stay in respect of only one matter.
The MRA should not credit the collected CSG contributions to the Consolidated Fund in
conformity with section 30B(4) of the Act but should instead credit the contributions to the NPF
as was done prior to 1 September 2020, by virtue of a repealed legislation.

It is not in dispute that what the applicants are asking would be against the existing
provisions of the amending legislation as enacted by Parliament. It has indeed been correctly
submitted that “it is a well-established principle that a law is presumed to be constitutional
unless the contrary is shown” (Police v Moorba [1971 MR 199]). What this means is that
unless and until the impugned legislation, or any part of it, is struck down by the Court as being
unconstitutional, the legislation must be presumed to be valid and would therefore continue to
be enforceable.

However, the continued enforcement of a legislation which is presumed to be valid but

which is being constitutionally challenged does not operate as an automatic or absolute bar in
all situations. The Court may intervene where its continued enforcement would lead to
irreparable harm being caused as a result of a blatant violation of some constitutionally-
entrenched right. The Court had this to say in that respect in RJR – Mac Donald v The
Attorney-General of Canada [1994] 1 S.C.R 311, at p 333:
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“For the Courts to insist rigidly that all legislation be enforced to the letter until the
moment that it is struck down as unconstitutional might in some instances be to
condone the most blatant violation of Charter rights”

It is most helpful and appropriate to refer in extenso to a more recent Canadian decision
Hak c. Procureure générale du Québec 2019 QCCA 2145 which, following an in-depth
analysis of the issues involved, explains the approach to be adopted where the Court is
confronted with an application for stay pending the determination of the constitutionality of a
legislation:

“[104] In this regard, the third test – assessing where the balance of
convenience lies is particularly relevant, because it is here that the public
interest, which is presumed to be reflected in the impugned legislation, must be
considered and given the weight it should carry: RJR-MacDonald Inc. v. Canada
(Attorney General), supra, pp. 342-347. As Sopinka and Cory, JJ., noted in RJR
– MacDonald, p. 346, “[a] court should not, as a general rule, attempt to ascertain
whether actual harm would result from the restraint sought”, because doing so
“would in effect require judicial inquiry into whether the government is governing
well”, which is not the role of the courts. On the contrary, the court should in
most cases assume that irreparable harm to the public interest would result from
a suspension of the statute.

[105] Courts are very familiar with these rules, including the rule pertaining to
what is often referred to as the presumption of the validity of laws. In this regard,
it is appropriate to cite the following passage from the decision of the Supreme
Court of Canada in Harper v. Canada (Attorney general), 2000 SCC 57, [2000] 2
S.C.R. 764, para. 9:
[9] Another principle set out in the cases is that in considering the grant
of an interlocutory injunction suspending the operation of a validly
enacted but challenged law, it is wrong to insist on proof that the law will
produce a public good. Rather, at this stage of the proceeding, this is
presumed. As Sopinka and Cory JJ. stated in RJR – Macdonald Inc. v.
Canada (Attorney General), [1994] 1 S.C.R 311, at pp. 348-49
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When the nature and declared purpose of legislation is to promote

the public interest, a motions court should not be concerned
whether the legislation actually has such an effect. It must be
assumed to do so.” … …

‘It follows that in assessing the balance of convenience, the motions

judge must proceed on the assumption that the law … … is directed to
the public good and serves a valid public purpose. … … The assumption
of the public interest in enforcing the law weighs heavily in the balance.
Courts will not lightly order that laws that Parliament or a legislature has
duly enacted for the public good are inoperable in advance of complete
constitutional review, which is always a complex and difficult matter. It
follows that only in clear cases will interlocutory injunctions against the
enforcement of a law on grounds of alleged unconstitutionality succeed.”
[Emphasis added]

The applicants contend that they would suffer irreparable harm if the contributions
collected by the MRA are credited to the Consolidated Fund instead of being credited to the
NPF. The contention of irreparable harm is not correct simply because any potential prejudice
as alleged by them, whether it relates to their accrued pension rights, a reduction in the return
on investments or in respect of any matter relating to the payment of any benefit to which they
are entitled, would be essentially of a financial nature and has not been shown to be
irremediable. Any such financial prejudice may be amply compensated in the eventuality that
they are successful in any of their main actions. In fact, any of the prejudice which is
complained of as being likely to occur pending the determination of the main actions may be
amply compensated by the payment of such financial compensation to which they may be
legally entitled in order to repair the prejudice. There is accordingly at this juncture, no risk of
any serious harm, stemming from the violation of any of their constitutional rights, which
requires the immediate suspension of section 30B(4) of the Act pending the determination of the
constitutionality of the impugned legislation.

Any of the risks apprehended by the applicants, which may result from a refusal to grant
the stay, may be averted in the present circumstances without any interference with the
continued enforcement of section 30B(4) of the Act. As explained earlier the operation and
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management of the Consolidated Fund is secured by the Constitution [sections 103-106]. It has
further been highlighted on behalf of the respondent and the 4 interested parties that:

(i) all contributions collected by the MRA are being credited to the Consolidated
Fund under a specific item, namely “Item 12110001 Employee Contribution
under Pension Scheme”.
(ii) The Consolidated Fund
(a) operates on a cash basis and must always have sufficient cash inflows to
meet its cash outflows; and
(b) can never fail to meet its cash payments as any shortfall is met through other
sources.

The NPF, on the other hand can only meet its liabilities from its revenue or by sale of its
assets which means that its ability to meet its liabilities is finite in terms of time.

In view of all that we have stated above, we decline to grant the stay but make the
following interim order to ensure that the applicants are not prejudiced in the eventuality that
they are successful in any one of their 2 main actions.

We order that pending the determination of any one of the 2 main actions entered by the
applicants, the respondent and the first interested party including their préposés, shall ensure
that (i) the contributions collected by the MRA pursuant to section 30B of the Act shall be
credited under item 12110001: Employee Contribution under Pension Scheme or under any
alternative item specifically created for that purpose; and (ii) sufficient funds be maintained to
the extent that may be required to compensate the applicants in conformity with a judgment of
the Court, if any, in favour of any of the applicants in any one of the 2 main actions.

We shall in the circumstances make no order as to costs.

A. Caunhye
Chief Justice

D. Chan Kan Cheong

Judge
07 December 2020
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Judgment delivered by Hon. A. Caunhye, Chief Justice

For Applicants : Mr T. Koenig, SA,

Mr M. Sauzier, SC, together with Mr H. Duval, SC.
Mr D. Dodin, of Counsel, Mrs L. Churriter- Kistnareddy, of Counsel,
Mr K. Arian, of Counsel, Miss D. Bismohun, of Counsel and
Mr N. Henry, of Counsel

For Respondent : Miss V. Nirsimloo, Chief State Attorney

Mr Y.C. Jean Louis, Ag. Assistant Parliamentary Counsel

Interested parties Nos. 1 and 2 Miss V. Nirsimloo, Chief State Attorney

Mr R. Ramloll, Deputy Solicitor General, together with
Mrs N. Dauharry-Jeewa, Ag. Principal State Counsel

Interested parties Nos. 3 and 4 Miss V. Nirsimloo, Chief State Attorney

Mr K. Naghee-Reddy, Ag. Assistant Parliamentary
Counsel

Interested parties No. 5 Mr Attorney U.K. Ragobur

Mr S. Dabee, of Counsel, together with
Ms N. Behary-Paray, of Counsel