York (Police Services Board) v. York Regional Police Association, 2015 CanLII 62103 (ON LA)
The grievor retired from service as a police officer one day prior to his 50th birthday. He chose to accept the commuted value of his pension in lump sum transfers rather than receive periodic pension payments. The police board determined (1) that the officer had resigned, rather than retired, and so no early retirement leave benefits were owing and (2) that due to the language of the benefit plan, the grievor was not entitled to extended health and dental because he was not “in receipt of an unreduced OMERS pension.”
The arbitrator found that the police board’s attempt to distinguish “resign” from “retire” was unfounded considering the collective agreement made no such distinction. The circumstances of the grievor’s retirement were such that they met the plain and ordinary interpretation of the word “retire,” which the arbitrator interpreted to mean “voluntary termination of a career upon reaching a certain age” (the evidence demonstrated that the grievor had no intention of resuming a career in policing). Since he otherwise met the requirements to receive retirement leave (30 years of service), the arbitrator awarded him the early retirement leave.
The collective agreement provided for extended health and dental benefits to those retirees who were “in receipt of an unreduced OMERS pension.” The arbitrator found that such a provision requires retirees to be in receipt of a periodic payment from OMERS. The grievor did not meet this requirement because he had chosen to receive the commuted value of his pension in lieu of periodic payments. For this reason, he was not entitled to extended health and dental benefits.
Boys v. Shoppers, 2015 ONSC 5870
Shoppers Drug Mart Inc. (Shoppers) underwent a restructuring that involved significant employee terminations, triggering a partial wind-up of the Shoppers registered pension plan and “grow-in” benefits under section 74 of the Pension Benefits Act (Ontario). Shoppers also sponsored a supplemental pension arrangement (Supplementary Plan), which was drafted to exclude any grow-in provisions under provincial legislation. Shoppers argued that by subtracting the grow-in amounts earned under the registered plan, the Supplementary Plan benefits (according to the formula for calculating the supplementary benefit) were negative. Therefore, no supplementary benefits were payable to the applicants, who were included in the partial wind-up group but sought enhanced Supplementary Plan benefits on the basis that grow-in benefits were not to be considered in calculating their Supplementary Plan entitlements.
The Ontario Superior Court (Court) found that, when considering the entirety of the registered pension plan and Supplementary Plan, it was clear that the Supplementary Plan was intended as a top-up to the registered plan due to the limits imposed on the registered pension plan under the Income Tax Act (Canada). Furthermore, it was clear that the Supplementary Plan was not to operate on top of statutory benefits created by provincial grow-in rules. As a result, the Court concluded that Shoppers had correctly interpreted the Supplementary Plan by calculating the supplemental benefit as the registered plan benefit, without regard for the Income Tax Act (Canada) limits and excluding any grow-in benefits, less the benefit actually paid from the registered pension plan (including any grow-in benefits). The applicants’ claim was therefore dismissed.
The unsuccessful applicants requested that costs for this application be paid out of the registered pension plan. The Court, relying on factors outlined in Nolan v. Kerry (Canada) Inc., denied this request. The application arose from the particular circumstances of the two applicants, rather than from inherent shortcomings in the drafting of the plan texts. Therefore, the argument that the application dealt with interpretive questions that impacted all plan members was denied. Furthermore, the litigation was adversarial, a factor which favours a costs award against the applicants. However, the judge awarded no costs, relying on Rule 57 of the Rules of Civil Procedure, which gives total discretion as to costs.
DEEMED TRUSTS IN THE CONTEXT OF BANKRUPTCY AND INSOLVENCY
Bloom Lake, G.P.L. (Arrangement of), 2015 QCCS 3064
On initiating CCAA proceedings, Wabush Iron Co. Limited and Wabush Resources Inc., Mises-en-cause Wabush Mines, Arnaud Railway Company and Wabush Lake Railway Company Limited (collectively, the Petitioners) requested that the Québec Superior Court (Court) approve an interim financing arrangement as part of the CCAA initial order. The financing arrangement would give the interim lender (Interim Lender) a super-priority charge over all charges against the Petitioners. The Petitioners had two underfunded defined benefit plans (Plans) and had significant obligations on account of amortization payments. As part of the interim financing arrangement, the Petitioners would be required to suspend (1) special payments in relation to the Plans and (2) payments in respect of post-employment benefits (OPEBs). On May 20, 2015, the Court granted the initial order approving the interim financing but provided for a comeback hearing on June 9, 2015.
The Petitioners then sent notice letters to retirees, union representatives and the pension regulators with jurisdiction over the Petitioners’ pension plans: the federal Office of the Superintendent of Financial Institutions (OSFI) and the Newfoundland and Labrador Superintendent of Pensions (Regulators). The notice letter advised these parties of the comeback hearing and informed them that the Petitioners would request that the Interim Lender be given a priority charge over the statutory deemed trusts relating to pension payments and the suspension of special payments and OPEBs.
In response, the Regulators, United Steelworkers Locals 6254 and 6285 and non-unionized retirees (collectively, the Objecting Parties) sent in notices of objections. The Court scheduled an additional comeback hearing on June 22, 2015 to decide the issues as between the Petitioners and the Objecting Parties.
At issue was whether the Interim Lender could be granted a super-priority charge over the statutory deemed trusts created by the federal Pension Benefits Standards Act (PBSA) and Newfoundland and Labrador Pension Benefits Act, 1997 (N&L Act). Additionally, the Court had to determine whether to suspend the Petitioners’ obligations to pay the special pension payments and OPEBs, as required by the interim financing arrangement.
The Court relied on the principles of statutory interpretation in order to resolve the conflict between the two federal statutes: (1) section 8(2) of the PBSA, which provides for a deemed trust over all amounts due to a pension fund by an employer in the context of a liquidation or bankruptcy and (2) section 11.2 of the CCAA, which authorizes a court to grant a super-priority charge to an interim lender over other secured claims. The Court held that Parliament’s intent was for federal pension claims to be protected only to the limited extent set out in the CCAA and the Bankruptcy and Insolvency Act, notwithstanding the broader scope of protections in the PBSA. On this basis, the Court held that the deemed trust provisions in the PBSA did not prevent the Court from granting a super-priority charge to the Interim Lender provided that the conditions set out in section 11.2 of the CCAA for granting the charge are met.
With respect to the N&L Act, the Court held that the deemed trust provisions in the N&L Act were in conflict with section 11.2 of the CCAA and that there was no interpretive basis on which the inconsistency could be avoided. Based on Sun Indalex Finance, LLC v. United Steelworkers (Indalex) and the doctrine of federal paramountcy, the Court held the Interim Lender could be given priority over the N&L deemed trust.
With respect to the suspension of special payments, the Court relied on previous case law, which had established that courts have the jurisdiction to suspend special payment and OPEB obligations “when necessary to enhance liquidity to promote the survival of a company in financial distress.”
Finally, the Court considered whether Wabush Mines was in breach of its fiduciary duties in agreeing to the terms of the interim financing arrangement with the Interim Lender. The Court held that in giving notice to the Objecting Parties and postponing the hearing to allow for the Objecting Parties to prepare and attend, the Petitioners acted in good faith and in compliance with their duties to Plan beneficiaries. Such procedural steps were consistent with the Supreme Court of Canada’s views on this issue in Indalex.
A motion for leave to appeal the Court’s decision to the Québec Court of Appeal was denied in a decision released on August 18, 2015. The motion for leave to appeal was brought by representatives of non-union and retired employees and by the Syndicat des Métallos, sections locales 6254 and 6285.
Prystupa v. Desjardins Financial Security Life Assurance Company, 2015 ONCA 298
Katrina Prystupa (Plaintiff) applied for and received long-term disability (LTD) benefits from her insurer, Desjardins Financial Security Life Assurance Company (Desjardins), the defendant. A dispute arose between her and Desjardins regarding the calculation of the monthly benefit. That dispute was settled by way of signed minutes of settlement. The settlement set out the monthly benefit to be paid, but otherwise provided that the original LTD policy governed.
Subsequent to the settlement, the Plaintiff began to receive Canada Pension Plan (CPP) disability benefits. She informed Desjardins of her CPP benefits, at which point they instituted a deduction of her LTD benefits to offset these amounts and recover overpayments, as provided for under the policy. As a result, the Plaintiff launched this lawsuit claiming that the minutes of settlement set out the benefit to be paid and override the reduction clause of the original policy.
The motion judge dismissed the Plaintiff’s application, stating that CPP benefit deductions were clearly outside the scope of the minutes of settlement and that the parties did not intend to do away with that portion of the policy. In upholding the motion judge’s decision, the Ontario Court of Appeal (Court) relied on Sattva Capital Corp. v. Creston Moly Corp. for the proposition that contracts must be interpreted as a whole, consistent with their surrounding circumstances known to the parties at the time. In applying these interpretive principles, the Court found that the motion judge was correct in finding that the CPP deductibility issues was not in contemplation of the parties at the time of the settlement.
The Plaintiff also argued that the seeming inconsistency between the minutes of settlement and the policy contract created ambiguity in the minutes that should have been resolved in her favour according to the principle of contra proferentem. The Court found that because the settlement had been negotiated by two parties with legal representation, contra proferentem did not apply. The Plaintiff’s appeal was dismissed.
W.G.P. v. D.F.P., 2015 BCSC 1791
Prior to this proceeding, the parties separated and consented to a spousal support order whereby the claimant, a judge, would transfer half of the value of his judicial annuity in a lump sum to the respondent, his former wife. Subsequent to the division of the annuity, the claimant elected supernumerary status and worked in that capacity for five years. Upon his retirement, he initiated this proceeding requesting that his spousal support payments be reduced to zero. The respondent sought to continue the spousal support payments but agreed they should be varied considering the claimant’s income was reduced in light of his retirement.
The key issue was whether it was appropriate to divide the claimant’s annuity payments and CPP benefits considering both had been previously divided for the initial spousal support order. According to jurisprudence, dividing a pension for the purposes of an equalization payment and then ordering further spousal support based on the income of that pension amounts to double recovery and should not be permitted. Certain exceptions to this rule apply. For instance, double recovery is permitted where the spouse suffers economic hardship notwithstanding reasonable effort to reinvest the lump-sum payment or use it in “an income-producing way.”
The annuity in this case is a “judicial annuity,” provided for under section 52.16 of the Judges Act. That statute stipulates that an annuity divided for the purposes of a conjugal breakdown cannot be further divided. Parliamentary documents showed that it was the intention of the government to prevent more than a 50 per cent reduction of a judicial annuity. This policy is intended to protect judges’ financial independence, and therefore their judicial independence as well. Therefore, the Supreme Court of British Columbia in this case found that exceptions to the double-recovery rules could not apply to a judicial annuity. Both the annuity and the CPP had been divided previously, and it was concluded that neither should be reduced further and the obligation to pay spousal support terminated.
Stockton v. Simoneau, 2015 SKQB 304
The claimant voluntarily retired from his position with CP Rail after reaching the level of service necessary to achieve the maximum pension payable and commenced an immediate pension. According to him, his employment at CP Rail was at risk once he reached this level of service because he believed that CP Rail would manufacture a reason to terminate him for cause as a way of avoiding paying out his vested pension benefits.
As a result of his retirement, the claimant requested that his child support payments be reduced to reflect the decrease in his income. However, under the Federal Child Support Guidelines, the court may impute income to a parent if they believe the parent is “intentionally underemployed.” The Saskatchewan Court of Queen’s Bench (Court) found that not only were the claimant’s fears regarding his pension security based on a complete misunderstanding of pension law, but were without any evidentiary basis at all. The Court disregarded the claimant’s reasons for retiring and instead found that he was deliberately underemployed. As a result, the requested support order variation was denied.
Hickey v. Princ, 2015 ONSC 5596
Gaye Princ, a long-time sufferer of fibromyalgia and chronic fatigue syndrome, has long been unable to work. Her husband, Edward Hickey, was a police officer with the Ontario Provincial Police (OPP). Ms. Princ and Mr. Hickey divorced in 2004 after 20 years of marriage. Pursuant to the divorce settlement, Mr. Hickey’s defined benefit OPP pension was equalized based on the assumption that Mr. Hickey would retire at the earliest possible date that allowed him to receive a full unreduced pension thereby maximizing the value of the pension. Upon his retirement at 51, after becoming eligible for an unreduced early retirement pension, Mr. Hickey moved to reduce his spousal support payments to reflect his decreased income. Ms. Princ opposed this motion on the grounds that Mr. Hickey was being intentionally underemployed by retiring at age 51. The motion judge reduced the spousal support order.
On appeal, the Ontario Divisional Court (Court) overturned the motion judge’s factual finding that the pension equalization was based on a valuation that assumed a retirement age of 51. The actual age used was 55. Furthermore, the Court overturned the finding that Mr. Hickey had declared an intention to retire at 51 during the divorce proceedings. For these reasons, the Court found that Mr. Hickey voluntarily retired when he was still capable of working.
Although unnecessary for the outcome, the Court overturned the motion judge’s findings regarding the “double dipping” issue. In this case, the Court found that it would be appropriate to allow double dipping on the pension income (i.e., ordering spousal support on pension payments that were already included in determining the net family property to be equalized) because Ms. Princ was destitute, disabled and had attempted to use the original equalization payment in an income-producing way. Furthermore, the respondent was clearly able to pay.
PENSION COSTS IN REGULATORY BODY RATE SETTING
ATCO Gas and Pipelines Ltd. v. Alberta (Utilities Commission), 2015 SCC 45
Under Alberta utilities legislation, the Alberta Utilities Commission (Commission) must approve utility rates. Utility companies must be given the opportunity to recover “prudent” costs and expenses. In this case, ATCO (a utility company) requested rate increases to recover costs it incurred in the form of additional pension contributions by providing a cost of living adjustment (COLA) to its members. The COLA was 100 per cent of the annual CPI up to a maximum of three per cent. The Commission only approved recovery of a COLA of 50 per cent of annual CPI, concluding that amounts above that were not prudent. ATCO applied for judicial review of this decision and appealed all the way to the Supreme Court of Canada (Court).
The Commission’s decision was based on the finding that the COLA was not a committed cost (i.e., a necessary cost that ATCO had no control over). In fact, the COLA was set annually by the pension committee of ATCO’s parent company, Canada Utilities Limited, which had historically set the COLA at 100 per cent of CPI based on actuarial advice regarding the pension’s large unfunded liabilities. Despite the fact that the COLA was set by an independent third party and on actuarial advice, the Commission could not be persuaded that, from ATCO’s perspective, the COLA was a committed cost. The Commission found it was discretionary and overly generous when compared to industry standards.
The Commission’s decision was reviewed on a standard of reasonableness. All courts of appeal, including the Court, found that the findings of the Commission and their interpretation of the "prudence requirement” under its enabling statute were reasonable. The Court found that the Commission’s reasoning was based on their finding that it was unreasonable to permit a utility rate hike to fund a large COLA for the utility’s pension while that pension carried a large unfunded liability, where comparator companies were not granting similar increases and the increases were not necessary to ensure that ATCO could continue to attract and retain employees.
Mumby v. General Motors of Canada Limited, 2015 HRTO 1470
The applicant, Ronald Mumby, was injured on the job in 1998 and qualified for WSIB benefits. He qualified for and participated in a labour market re-entry program, but expressed no intention to look for work, preferring instead to live off of his disability payments until he reached early retirement age. Under the GM pension plan, early retirement benefits, which included special allowance benefits payable until age 65, are reduced by the amount of any WSIB payments or other disability insurance benefits to which GM had contributed. Other sources of income up to the YMPE were not deducted. The applicant launched this complaint alleging that this policy was discriminatory against the disabled.
The Human Rights Tribunal of Ontario (Tribunal) found that the deductions were not discriminatory. The differential treatment suffered by the applicant was not due to disability, but due to the fact that he was not working. Jurisprudence has long established that differential treatment of employees based on working status is permitted. Other former employees who earn income while also collecting early retirement benefits seek out and attain alternate employment. They are not working with GM. In this way, the applicant is similarly situated to other GM retirees who are not working while receiving early retirement benefits.