Tanner v. Tanner, 2017 ONSC 7182
In an application for divorce, certain issues were determined in a temporary order granted by Justice Lalonde (the Lalonde Order) in connection with the parties’ earlier separation in 2008. One of the issues determined by the Lalonde Order was the value of David Tanner (husband)’s pension, 50 per cent of which was to be transferred to Peggy Tanner (wife). The pension was valued on the consent of the parties at C$163,758 based on retirement at age 60. Following the Lalonde Order, the application lay dormant for more than six years. The husband retired in 2015 at age 58 and began receiving a pension. The wife’s 50 per cent interest in the husband’s pension was never transferred, as the parties had not provided ultimate direction to the plan administrator (which was not a party to the litigation).
At trial in May 2016, one of the issues that had to be determined was how to divide the pension in compliance with the 2008 Lalonde Order. It was determined that the wife bore ultimate responsibility for the fact that the 50 per cent pension interest was not transferred. However, the wife argued persuasively that it would be unfair to use the Lalonde Order valuation to divide the pension, as her share ought to have appreciated in value since 2008, resulting in a potential windfall to the husband. She provided an alternative valuation from an actuary, but Justice Sheard rejected this on the basis that the original valuation was made on consent, and that the actuary’s report was based on unreliable figures. Justice Sheard declined to apply the five per cent post-judgment interest rate set in the Lalonde Order, on the basis that it did not apply as the delay in transferring the funds did not result from any default on the part of the husband in respect of his obligations under the Lalonde Order. Justice Sheard instead used the discretion reserved to her under the Courts of Justice Act (Ontario) to set an interest rate of two per cent per year since the date of the Lalonde Order, in keeping with interest rates of recent years, to adjust the share of the pension payable to the wife.
MISTAKEN CALCULATION OF PENSION BENEFITS
Calder v. Alberta, 2017 ABQB 162
Former members of the Alberta Public Service Management Pension Plan sued the Government of Alberta (Province) over the interpretation of the value of their pensions. The plaintiffs, represented by Dr. William Calder as a “test case,” were those who ceased participation in the Alberta Public Service Management Pension Plan prior to its closure to members in 1994 (Closed Plan) and who returned to pensionable employment with the Province after 1994. Upon their return to pensionable service with the Province, they participated in the Management Employees Pension Plan (MEP Plan), which was established in 1992 and began accepting transferred members from the Closed Plan in 1994.
In 2009, the Closed Plan administrator, Alberta Pensions Services Corporation (APSC), began communicating to the plaintiffs the method their Closed Plan pensions would be calculated, based on their interpretation of the terms of the Closed Plan. This interpretation used post-closure service (i.e., pensionable service under the MEP Plan) in determining final average salary under the Closed Plan, but included cost-of-living adjustments and an actuarial upgrade that treated the post-1994 salary as if it were earned prior to 1994 (2009 Interpretation). The 2009 Interpretation contained an obvious “double-counting” problem in the calculation of the benefits and grossly inflated the pension payments from the Closed Plan.
In 2012, APSC realized its mistake in interpreting the Closed Plan. It concluded that the intent of the Closed Plan was to limit the determination of final average salary to pre-1994 salary, and should be interpreted as such (2012 Interpretation). Members seeking pension calculations were provided estimates based on the 2012 Interpretation, but pensioners receiving benefits calculated using the 2009 Interpretation continued to have their benefits paid in such fashion while APSC conducted an internal risk assessment. In 2014, these pensioners were notified that their benefits were calculated incorrectly and were to be recalculated using the 2012 Interpretation, which resulted in — some cases significant — reductions to the plaintiffs’ pension benefits. For example, Dr. Calder’s monthly Closed Plan benefits were reduced from C$8,417.09 to C$2,232.16. The plaintiffs sued as a result.
The plaintiffs argued that the Closed Plan language indicating that “salary earned after inception” of the MEP Plan may be used to determine that final average salary supported APSC’s 2009 Interpretation. However, Justice Neufeld ruled that this provision was meant to cover the time from the inception of the MEP Plan (August 1, 1992) and the closure of the Closed Plan and transfer of its members to the MEP Plan (effective January 1, 1994). It did not mean that any pensionable service with the Province after 1992 could be used to calculate benefits under the Closed Plan. Such an interpretation would be unreasonable and produce absurd results, and APSC was not precluded from correcting its earlier error.
The plaintiffs made several arguments as to why they should be entitled to the payments based on the 2009 Interpretation. They argued that the Province should be prevented, by the concept of estoppel, from using any interpretation other than the 2009 Interpretation. This argument failed because estoppel is a defence against an enforceable right, it is not an independent cause of action (in other words, it is a shield but not a sword). Additionally, estoppel cannot prevent the application of express legislative provisions.
The plaintiffs also argued that the application of the 2012 Interpretation resulted in a breach by the Province and its delegate APSC of fiduciary obligations owed to the plaintiffs. Justice Neufeld ruled that no fiduciary duty was owed by the Province or the APSC in this case because the plan in question is a statutory public pension plan. Furthermore, any fiduciary duty that might exist could not be used to force the Province to adopt a legislative interpretation that is incorrect in law and leads to an absurd result.
The plaintiffs also argued that once the 2009 Interpretation had been communicated to the plaintiffs, the pension benefits based on that interpretation was a “vested right” that cannot be taken away. This argument failed as it misconstrues the concept of a “vested right.” The law of trust or contract cannot be stretched such as to compel the Province to continue to misapply a legislative provision.
Finally, the plaintiffs argued that the communication of the 2009 Interpretation was a negligent misrepresentation that caused them harm. On this argument, the plaintiffs succeeded. Dr. Calder was entitled to rely on the pension calculations provided, and relied on those representations to his detriment in planning his retirement (specifically, he retired earlier and spent more in early retirement than he would have had his pension benefits been originally calculated in accordance with the 2012 Interpretation).
In determining the quantum of damages for Dr. Calder, Justice Neufeld found that had the plaintiff been properly advised, he would have delayed retirement by several years. A lump sum payment to compensate for these lost years of income, after gross-up for taxes, was C$265,017, based on scenarios prepared by actuarial advisers engaged by the Province.
The Province argued unsuccessfully that the plaintiffs’ lawsuits were an impermissible collateral attack on the jurisdiction of the Management Employees Pension Board, which is the body responsible for reconsideration of the interpretation of the Closed Plan. First, Justice Neufeld found that this argument was moot because the 2012 Interpretation was correct, and therefore would have withstood any review. Second, jurisprudence permits claims for damages based on a government decision, provided that the plaintiffs are prepared to accept the legal correctness of the impugned government decision. While the plaintiffs did not accept the correctness of the Province’s decision, the ultimate result (based on negligent misrepresentation) was based on the conclusion that the Province’s decision to reduce benefits was legally correct. For this reason, it was unnecessary to consider whether the claim was an impermissible collateral attack.
While the matter was brought forward as a test case, the success of Dr. Calder on the negligent misrepresentation claim alone will require the remaining plaintiffs to successfully demonstrate detrimental reliance on the negligent misrepresentation, including applicable damages, on an individual basis.
EMPLOYER OVER-CONTRIBUTIONS TO PENSION PLANS
Coco Paving Inc. v. International Union of Operating Engineers, 2017 CanLII 8326
In this labour grievance, the employer, Coco Paving Inc. (Coco), made pension contributions to the International Union of Operating Engineers (Union)’s pension plan. Due to a misunderstanding of the wage rates for employees in Simcoe County, Coco made pension contributions to the Union’s plan that Coco alleged were higher than required. Over a period of four years, the alleged cumulative over-contribution was C$354,044.48. Coco, rather than seek the return of this money, sought credit from the Union to apply against future pension contributions. The Union objected and Coco brought a grievance against the Union.
The Union argued that this grievance ought to be stayed and referred to the Superintendent of Financial Services (Superintendent), as the Superintendent has the authority over the regime, set out in the Pension Benefits Act (Ontario) dealing with the repayment of over-contributions to a pension plan. Vice-Chair McKee was not convinced that Coco’s application for “credit” rather than refund of the money brought the matter outside the jurisdiction of the Superintendent as “credits are simply money in another guise.” Furthermore, the granting of future credits to a pension plan may create complications for the plan’s solvency, calculations and individual members’ registered retirement savings plan room. As the Superintendent has the authority and expertise to deal with all of these issues, Vice-Chair McKee deferred the hearing of the grievance until after the Superintendent has made a determination on Coco’s allegation that it made an overpayment to the plan.
ALIENATION OF PENSION BENEFITS
Alberta Motor Association v. Gladden, 2017 ABQB 174
The Alberta Motor Association (AMA) was previously granted a consent judgment against James Gladden in the amount of C$10,236,945.26 for fraudulently misappropriating funds from the AMA while employed in a fiduciary capacity as a senior executive. In connection with the previously granted consent judgment, Mr. Gladden agreed to transfer the commuted value of his pension benefit under his pension plan (Plan) to the AMA.
The Plan is governed by the Alberta Employment Pension Plans Act (EPPA), which prohibits the alienation of pension benefits. However, despite prior case law confirming that attachment of a benefit governed by the EPPA is not permitted, Justice Veit held that section 93 of the Alberta Civil Enforcement Act (CEA) permitted transfer of the commuted value of Mr. Gladden’s pension benefit under the Plan. Section 93 of the CEA provides enforcement against assets that would otherwise be exempt in certain circumstances, including assets held in a registered retirement savings plan (RRSP). Justice Veit held that the permitted enforcement against RRSPs under section 93 of the CEA would similarly apply to pension plans as “there is no material difference between RRSPs and pension benefits,” both being retirement savings vehicles. Allowing creditor attachment of RRSPs in the wake of criminal activity but not against pension benefits in similar circumstances would be an arbitrary distinction that, under principles of statutory interpretation, must be avoided.
Justice Veit held that a further arbitrary distinction results from the fact that a judgment creditor could not enforce the judgment against the pension benefit itself, but could enforce it on an ongoing basis against proceeds or other assets arising from the pension. Further, subsection 93(e) of the CEA provides for enforcement on a money judgment arising out of an act for which the enforcement debtor has been convicted of an offence under the Criminal Code. Mr. Gladden consented to the judgment based on fraud. Although Mr. Gladden had not been convicted of fraud under the Criminal Code, Justice Veit held that there would be no principled reason to require an actual conviction in order to permit the victim of the fraud to pursue recovery.
Finally, subsection 93(d) of the CEA provides for enforcement with respect to property that the enforcement debtor had abandoned. Justice Veit held that the consent judgment along with the consent order constitutes an abandonment by Mr. Gladden of his pension entitlements.
As such, Justice Veit issued a consent order permitting the transfer of Mr. Gladden’s pension benefit to the AMA. No details were provided in the judgment regarding how the transfer is to be made, nor was any consideration provided to the income tax implications of the transfer. The Alberta Superintendent of Pensions was not a party to the application.
Service Employees International Union, Local 1 Canada v. Shannex RLC Limited, 2016 CanLII 89322 (ON LA)
This is a labour arbitration award for the renewal of a collective agreement between Service Employees International Union, Local 1 Canada (Union) and Shannex RLC Limited (Employer). The arbitration award ordered introduction of a multi-employer pension plan, the Nursing Homes and Related Industries Pension Plan (NHRIPP) at a contribution rate of two per cent.
The arbitration was before a three-panel board of arbitrators. The Employer-nominated arbitrator, Robert Kelly, dissented from the award on the introduction of the NHRIPP. Mr. Kelly noted that the original collective agreement did not contain pension language.
Mr. Kelly also stated that, in this case, the Employer has a corporate retirement plan that it proposed, during arbitration, that the bargaining unit join as members. The Employer also offered to consider contribution rates in this plan at higher than two per cent if the bargaining unit joined this plan rather than the NHRIPP.
Mr. Kelly noted that according to the replication principle, the arbitrators are to decide what the parties may have agreed to in a conciliation/strike environment. Mr. Kelly believed that the employees would have chosen the Employer’s plan over the NHRIPP if given the choice.
Ontario Nurses’ Association v. Victorian Order of Nurses for Canada-Ontario Branch, 2017 CanLII 5514 (ON LA)
Deborah Hatt was employed as a nurse by the Victorian Order of Nurses for Canada-Ontario Branch, North Bay Site (VON). VON and the Ontario Nurses’ Association (ONA) are parties to a collective agreement, under which Ms. Hatt was covered. A grievance was launched following the denial of long-term disability (LTD) benefits to Ms. Hatt by the insurance provider, Desjardins Insurance, on the basis that she had not satisfied the requisite conditions.
The relevant provisions of the collective agreement stated:
The Employer shall contribute towards the premium coverage of participating eligible nurses in the active employ of the Employer under the insurance plans set out below . . .
Full-time nurses have access to the National Long-Term Disability Plan, subject to its terms and conditions. . .
The issue before the arbitrator was whether the denial of LTD benefits was a dispute that arose from the collective agreement and could be adjudicated through the grievance process. VON argued that the collective agreement provided that it was only obligated to remit insurance premiums and provide a plan for LTD benefits, which it did. Accordingly, VON submitted that the denial of the LTD benefits did not relate to the collective agreement and could not be adjudicated through the grievance process. ONA countered that, by providing for “access” to the LTD plan, the collective agreement was effectively incorporating the LTD plan into the collective agreement by reference. Therefore, the grievance related to the collective agreement and was arbitrable.
The arbitrator ultimately held in favour of VON and dismissed the grievance. Based on the wording of the collective agreement, the arbitrator reasoned that VON was obligated only to ensure that a plan providing LTD benefits was in place and contribute to the insurance carrier the premiums remitted by employees. Therefore, the arbitrator decided that the subject of the dispute did not arise out of the collective agreement and was inarbitrable.