A. RESTRUCTURING & FIDUCIARY DUTIES

SUN INDALEX FINANCE, LLC V. UNITED STEELWORKERS, 2013 SCC 6

The Supreme Court of Canada (“SCC”) released its long-awaited decision in Indalex on February 1, 2013. The decision overturned the Ontario Court of Appeal in a number of respects and found that a debtor-in-possession charge has priority over the statutory deemed trust of a wound-up pension plan under the Ontario Pension Benefits Act (“PBA”). By way of a four-to-three majority, the SCC also held that the deemed trust created by section 57(4) of the PBA extends to the entire wind-up deficiency of a pension plan. The decision also provides guidance to plan administrators (particularly in the case of single employer pension plans) on the scope of their fiduciary duties and speaks to the use of constructive trusts as remedies for breaches thereof. Please see our Blakes Bulletins for further information:

SLATER STAINLESS CORP.

In the early 2000s, Slater Stainless Corp. (“Slater”) sponsored and administered a number of registered pension plans. In 2003 and 2004, Slater was granted protection under the Companies Creditors’ Arrangement Act (“CCAA”) and Morneau Sobeco (“Morneau”) was appointed by the Superintendent as a replacement administrator for the plans. Morneau subsequently brought an action against AON Consulting Inc. and an individual actuary, Mel Norton, for breach of fiduciary duties relating to the preparation of certain actuarial reports in respect of Slater pension plans. AON and Norton, in turn, brought third party claims against the former directors and officers of Slater. Slater responded by arguing that no actions could be brought against the directors and officers because under the CCAA stay order, all actions against the directors and officers had been stayed. In 2008, the Ontario Court of Appeal ruled that, notwithstanding the stay order, third party claims could be brought against the directors and officers in their capacity as agents and employees of the plan administrator. The matter settled in September 2012. As a result, we will not have a decision on the merits.

B. CCAA STAY OF PROCEEDINGS

G.E. CANADA V. NORTHERN SAWMILLS, 2012 ONSC 6664

In Northern Sawmills, the Ontario Superior Court considered some of the same issues previously considered by the Ontario Court of Appeal in Indalex. Northern Sawmills was released before the SCC’s decision in Indalex and, as a result, we will not review those portions of the Northern Sawmills decision which have now been dealt with conclusively in Indalex.

One aspect of Northern Sawmills which remains of interest, however, is the portion of the decision which deals with the request by the plan administrator to have the stay of proceedings in the Receivership Order lifted so that the Superintendent of Financial Services (the “Superintendent”) could revise the wind-up date of one of the pension plans (the Hourly Plan).

The court found that the process whereby the Superintendent was being asked to change the wind-up date for the Hourly Plan was stayed by paragraphs 8 and 9 of the Receivership Order, which were in the following terms:

“NO PROCEEDINGS AGAINST THE DEBTOR OR THE PROPERTY

8. THIS COURT ORDERS that no Proceeding against or in respect of the Debtor or the Property shall be commenced or continued except with the written consent of the Receiver or with leave of this Court and any and all Proceedings currently under way against or in respect of the Debtor or the Property are hereby stayed and suspended pending further Order of this Court.

NO EXERCISE OF RIGHTS OR REMEDIES

9. THIS COURT ORDERS that all rights and remedies against the Debtor, the Receiver, or affecting the Property, are hereby stayed and suspended except with the written consent of the Receiver or leave of this Court, … “

The court commented that in considering whether the stay should be lifted, it was necessary “to consider the totality of the circumstances and the relative prejudice to both sides.”

The court refused to lift the stay on the grounds that to do so would prejudice the secured lender. In any event, the court also found that, as conceded by counsel for the Superintendent, there is no authority in the PBA permitting the Superintendent to reconsider the wind-up date of the Hourly Plan.

C. SURPLUS ENTITLEMENT

PROFESSIONAL INSTITUTE OF THE PUBLIC SERVICE OF CANADA V. CANADA (ATTORNEY GENERAL), 2012 SCC 71

In a December 19, 2012 decision, the SCC dismissed the claims of members of three federal public sector pension plans to an actuarial surplus in excess of $28 billion.

The case involved members of the Public Service Superannuation Plan, the Canadian Forces Superannuation Plan and the RCMP Superannuation Plan, the terms and conditions of which are set out in legislation. For each plan, employee and employer contributions were placed in “Superannuation Accounts” within the federal government’s Consolidated Revenue Fund. In the 1990s, the Superannuation Accounts were in a surplus position. In order to reduce its overall deficit, the federal government applied an accounting treatment to the accounts to “amortize” the surplus. In 2000, the government passed Bill C-78 which allowed the government to debit from the Superannuation Accounts certain amounts in excess of specified actuarial surplus ceilings. Under this legislation, the government debited over $28 billion directly from the Superannuation Accounts, thereby effectively reducing the actuarial surplus.

The plan members objected and argued that they had an equitable interest in the balance recorded in the Superannuation Accounts.

All three levels of court dismissed the members’ claims. At the SCC, the court found that the Superannuation Accounts did not contain assets. The SCC held that the accounts were “just accounting records” designed to track the operation of the plans and to estimate the government’s future pension liabilities, which were not funded pools of assets and were not “trust-like”. As the accounts did not hold assets, there was no property in which the members could have a legal or equitable interest. Even if the accounts did hold assets, nothing in the legislated terms of the plans suggested that members had a proprietary interest in their contributions or in the government’s credits under the applicable pension legislation.

The SCC did not decide whether the government qua pension plan administrator owed a fiduciary duty to the members. The SCC spoke only to the obligations owed with respect to the actuarial surplus and found that there were none. It found that there was no evidence that the government had “undertaken to forsake the interests of all others (including taxpayers) in favour of the plan members, with respect to the actuarial surplus”.

D. DEFINITION OF “SPOUSE” UNDER THE PBA

CARRIGAN V. CARRIGAN ESTATE, 2012 ONCA 736

As discussed at our November 2012 client seminar, the October 31, 2012 decision of the Ontario Court of Appeal in Carrigan v. Carrigan Estate has generated significant confusion in the area of pre-retirement death benefits. Briefly, the Court of Appeal held that a common-law spouse was not entitled to a spousal death benefit because the plan member (Mr. Carrigan) had a legally married spouse at the time of his death. As the legally married spouse was also disentitled to the benefit as a “spouse” under the PBA because she and the member were living separate and apart at the time of his death, the Court of Appeal ruled that the benefit was payable to Mr. Carrigan’s designated beneficiaries (Mr. Carrigan’s legally married spouse and his daughters).

On February 4, 2012, the Financial Services Commission of Ontario (“FSCO”) published a brief comment on the decision and stated, in part, that “[i]n denying the benefit to a common law spouse (a person who is not legally married to a plan member but qualifies as a spouse under the definition in section 1 of the PBA) who was living with the member at the date of death, the Court gave an interpretation which was unexpected and inconsistent with how section 48 had been previously administered. If the decision stands it may also create uncertainty about the interpretation of other spousal rights provisions in the PBA.”

An application for leave to appeal to the SCC was filed by Mr. Carrigan’s common-law spouse. Leave to appeal was denied by the SCC on March 28, 2013.  In December 2012, the Ontario Court of Appeal granted the motion of the common-law spouse for a stay of its decision pending the result of the leave application. The stay acted to halt the effect of the decision only as it applied to the parties in the Carrigan case. ” In view of the SCC’s decision to deny leave, the stay has expired and the Court of Appeal decision is fully operative.

In view of the Carrigan decision and the ongoing uncertainty which it is creating, plan administrators and issuers of locked-in plans are advised to seek legal advice before making pre-retirement and post-retirement death benefit payments in a Carrigan-type family situation.

E. RECTIFICATION

RE AMCOR PACKAGING CANADA, INC., 2012 ONSC 6168

Amcor is an important decision which provides guidance to plan administrators as to the circumstances in which the equitable doctrine of “rectification” can be used to correct inadvertent or unintentional errors in plan drafting.

As part of a January 1, 2005 restatement, Amcor sought to close the defined benefit component of its non-contributory defined benefit plan for its hourly non-unionized employees to new members. Although Amcor did not intend to increase benefits in the defined benefit component of the plan, the amendments, as they were written, acted to increase benefits when employment was terminated before the age of 55.

Amcor sought to rectify the plan document. According to the Ontario Superior Court, the remedy of rectification is available at the court’s discretion only where the parties can demonstrate with clear and convincing proof that, by mistake, a written document does not reflect the agreement or arrangements intended by the parties. The court adopted reasoning from earlier decisions which was to the effect that rectification cannot be used to vary the intentions of the parties or to correct erroneous assumptions as to what was intended. Rather, the purpose of the remedy is “to correct a mistake in carrying out the settled intentions of the parties as established by the evidence.”

The court held that there was “convincing proof” on an objective basis that the amendment to increase benefits was an “unintended mistake.” The contemporaneous documents (such as plan booklets, pension statements, valuation reports and education materials), the affidavit evidence before the court and the way in which the plan had been administered led the court to this conclusion. The court also held that there was no issue with employees relying on the mistaken language in the restatement because none of the employee documentation contained the mistake. Rather, all materials provided to employees following the 2005 restatement reflected the intentions of Amcor and did not reference the erroneous amendment. As a result, the court found that Amcor was allowed to rectify the 2005 restatement.

F. SUCCESSOR PENSION PLANS & SECTION 80 OF THE PBA

ONTARIO PENSION BOARD V. RATANSI, 2013 ONSC 1092

As discussed at our 2012 client seminars, in Ratansi, the Financial Services Tribunal (“FST”) issued an unexpected ruling. In Ratansi, the Applicants were former Ontario public servants whose jobs with the Ministry of Revenue were transferred to the Canada Revenue Agency due to the implementation of the Harmonized Sales Tax. As a result, the Applicants would no longer be Ontario public servants, and would no longer be considered “mandatory members” under the terms of the Public Service Pension Plan. The Applicants sought confirmation from the administrator (the Ontario Pension Board) and the Superintendent that they could commence receiving their pensions upon leaving the Ontario public service. When their requests were rejected, the Applicants filed a request for hearing with the FST.

The FST found that section 80 of the PBA is a protective provision designed to enhance employees’ pension rights in a sale of business situation. Since pension plans are often drafted such that termination of employment results in automatic termination of active plan membership, section 80(3) prevents administrators from expelling employees from pension plans when they lose their employment as the result of a sale. However, the FST found that nothing in section 80(3) prevents employees from withdrawing from the former employer’s plan on their own volition and in accordance with the plan terms after their employment has been de facto terminated. The FST held that since the Applicants were no longer Ontario public servants, they were no longer mandatory Plan members and were entitled to elect to cease membership even if their employment status was deemed to continue by virtue of section 80(3).

The Ontario Pension Board appealed the decision of the FST to the Ontario Divisional Court. In a strongly worded decision released on March 1, 2013, the Divisional Court allowed the appeal and set aside the decision of the FST.

The Divisional Court noted that the narrow interpretation employed by the FST was “untenable” for several reasons: (i) the phrase “for the purposes of the Act” in section 80(3) of the PBA is not meant to restrict the deeming provision; (ii) where the PBA intends to distinguish between employment and plan membership, it does so explicitly, which is not the case in section 80(3); (iii) the phrase “for the purposes of the PBA” also means that the deemed continuation of employment applies to all parts of the PBA; and (iv) sections 3 and 19 of the PBA, which the FST did not consider, provide that the PBA applies to every pension plan in Ontario and overrides any inconsistent plan provisions.

The Court held that the “plain meaning” of section 80(3) is that a “member’s rights and benefits under a predecessor pension plan are to be determined as if their employment and pension plan membership are not interrupted.”

The Court was critical of the FST for departing from its earlier decisions in reaching the conclusion it did in Ratansi. According to the court, the “question before the Tribunal concerns pension rights and plan administrator obligations, and calls for certainty and consistency, not the uncertain approach crafted by the Tribunal.”

G.WITHDRAWAL LIABILITY

NORTHERN EMPLOYEE BENEFITS SERVICES V. RAE-EDZO COMMUNITY SERVICES AUTHORITY, 2012 NWTSC 61

Northern Employee Benefits Services (“NEBS”) administers several pension and benefit plans for employers in the NorthWest Territories and Nunavut, including a defined benefit plan that was the subject of this case. Rae-Edzo Community Services Authority (“RECSA”) was a participating employer in the defined benefit plan. The defined benefit plan is exempt from the Pension Benefits Standards Act, 1985 and, as such, is not subject to pension standards legislation.

In August 2005, RECSA informed NEBS that a number of its employees would be terminating their membership in the defined benefit plan. After RECSA stopped making contributions to the defined benefit plan, NEBS terminated its membership and claimed a payment representing RECSA’s share of the solvency deficiency in the plan, pursuant to the Policy on Joining or Terminating Membership in NEBS (the “Policy”).

The NorthWest Territories Supreme Court reviewed NEBS’s by-laws as well as the Policy in order to determine if NEBS had the authority to impose a solvency deficiency payment on RECSA. The court found that the provision in the by-laws that required “any outstanding balance to be refunded or paid by the member and its participating employees” on termination did not include solvency payments.

With respect to the Policy, the court noted that it had been amended in March 2002 to require an employer to make solvency deficiency payments for the employer’s liability for active, deferred and retired members. However, the amendment was never distributed nor explained to participating employers. The court found that the change in the Policy was a change to the material terms of the plan and merely announcing the change without notice or explanation was inadequate, particularly in light of the significant financial impact the change could have on a participating employer. As a result, the court found that RECSA was not responsible for its share of the solvency deficiency.

H. COLLECTIVE AGREEMENTS & BENEFIT REDUCTIONS

FRANK SUTHERLAND V. SUPERINTENDENT OF FINANCIAL SERVICES AND CAW-CANADA AND ITS LOCAL 1090, LEAR CANADA CORPORATION AND RON BAKER (FST) (FEBRUARY 5, 2013)

The applicant was a member of the Basic Retirement Plan for Employees of Lear Canada, Ajax Plant (the “Plan”) and subject to a collective agreement between the CAW and Lear (the “Collective Agreement”).

Under Article 28.08(f) of the 2007 Collective Agreement, entitled “Severance Pay Plan”, employees who accepted severance pay benefits were to be granted an additional 1.9 years of credited service under the Plan. As a result of the economic downturn and a threat of plant closure, the CAW and Lear entered into a Memorandum of Understanding in 2009 which, among other things, removed the right to the additional 1.9 years of credited service. Mr. Sutherland was subsequently terminated and, pursuant to the Collective Agreement, requested that an additional 1.9 years of credited service be granted to him on the grounds that the benefit in question was a pension benefit or ancillary benefit under the Plan which could not be retroactively reduced pursuant to the provisions of section 14 of the PBA.

The FST found that the benefit was not a pension benefit or ancillary benefit but a severance benefit which the parties were free to amend, subject to applicable labour laws. Although it accepted that a collective agreement can contain pension benefits, it found that at no point was the benefit incorporated in the Plan nor was its value included in any actuarial valuation reports. The FST also found that the benefit had always been administered as a severance benefit which was consistent with the intentions of both Lear and the union.

TRW CANADA LTD. V. THOMPSON PRODUCTS EMPLOYEES’ ASSN., [2012] O.J. NO. 6211

The Thompson Products Employees’ Association filed two grievances on behalf of a former retiree and all other retirees of TRW Canada Ltd. in respect of changes to retiree benefits. Under a new collective agreement, retirees were given the option of either receiving a taxable cash settlement for opting out of retiree benefits or remaining in the existing benefit plan with reduced entitlements and a new co-pay obligation.

In allowing the grievances, Arbitrator William Kaplan relied on the 1993 SCC decision in Dayco (Canada) Ltd. v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (CAW-Canada) in which the SCC held that a retired worker withdraws from the collective bargaining relationship, and any accrued rights during the course of employment “crystallize” into a vested right. However, as Arbitrator Kaplan noted, if the parties to a collective agreement wish to reduce or eliminate retiree benefits, they may do so “provided they use clear and unequivocal language.” In the case before him, the arbitrator concluded that the collective agreement required the employer to pay for all of the retiree benefits and did not provide that the listed retiree benefits were subject to change. Accordingly, the introduction of a co-pay obligation and the elimination of some of the retiree benefits was prohibited.

The Ontario Divisional Court dismissed the application of TRW Canada Ltd. for judicial review on the grounds that Arbitrator Kaplan’s decision was reasonable.

I. PROVINCIAL PRIVACY LEGISLATION

FINANCIAL INSTITUTIONS COMMISSION (RE), [2013] B.C.I.P.C.D. NO. 2 (INFORMATION AND PRIVACY COMMISSIONER FOR BC, ORDER F13-02) (JANUARY 28, 2013)

The Independent Contractors and Business Association (“ICBA”) requested copies of the pension plan filings for 16 trade union-sponsored pension plans. The British Columbia Financial Institutions Commission (“FICOM”) relied on section 21 of the British Columbia Freedom of Information and Protection of Privacy Act (“FIPPA”), which requires that the head of a public body refuse to disclose information to an applicant if that disclosure would harm the business interests of a third party, and initially refused to disclose the requested information. After the ICBA requested a review of FICOM’s decision, FICOM reversed its decision. Thirteen of the trustees objected to the disclosure and requested a review of FICOM’s decision.

The information requested in respect of each pension plan by ICBA was as follows: the average accrued monthly pension, the average annual pension paid, the surplus or unfunded liability in the previous actuarial valuation report, and the surplus or unfunded liability in the current actuarial valuation report.

Section 21 of FIPPA sets out a three-part test that must be met to prevent the disclosure of the information. First, the information must reveal trade secrets of a third party or commercial, financial, labour relations, scientific or technical information of, or about the party. Second, it must be supplied in confidence. And finally, the disclosure must reasonably be expected to significantly harm the competitive position of the third party or result in one of the other types of enumerated harm under paragraph 21(1)(c).

The Assistant Commissioner found that the first two prongs of the test were met. The threshold to be met under the third part of the test is whether there is a reasonable expectation of probable harm. The Assistant Commissioner found that the trustees had not met this test. He rejected the argument that disclosure could reasonably be expected to cause the plans to lose members and found that there was no evidence to show that the publication of specific information about the plan would make them a less attractive option for employees or that it would affect their position in collective bargaining. The Assistant Commissioner noted that FICOM had previously disclosed similar information about other union-sponsored pension plans without negative consequences. He ordered FICOM to give the ICBA access to the information within 30 days of the date of the order but noted that there may be some circumstances in which plan information should be withheld under section 21. As such, a different result could be reached on a different set of facts.

J. INFLATION INDEXING & FIDUCIARY DUTIES

MAY V. GOVERNMENT OF SASKATCHEWAN, 2013 SKCA 11

The appellants were the representative plaintiffs in a class action against the Government of Saskatchewan. The government established the Public Service Superannuation Plan (PSSP), a defined benefit plan, by legislation in 1927. The legislative scheme did not index pension benefits against inflation, but as inflation rates increased, the government responded with ad hoc increases in benefits under the plan. The PSSP was closed to new members in 1977, and replaced with a defined contribution plan. The appellants brought a class action on behalf of all of the individuals entitled to benefits under the PSSP.

At trial, the members argued that there was an express or implied agreement between the government and the members that the government would provide them with enhanced benefits. They also argued that the government owed them a fiduciary duty which had been breached. The trial judge dismissed all of the members’ arguments and the members appealed.

The Court of Appeal upheld the lower court’s decision that there was no implied contractual term that obliged the government to protect the plan members from the effects of inflation.

On the issue of fiduciary duties, the court rejected the appellants’ argument that the government had an “additional or free-standing obligation” to prevent their pension benefits from being eroded by inflation. Relying on a recent SCC decision on the scope of governments’ fiduciary duties, the court found that the nature and responsibilities of governments mean that they will owe fiduciary duties only in limited and special circumstances. The court also found that a fiduciary relationship could not exist unless the appellants could show that the government had undertaken to act in their best interests. As the government had frequently resisted inflation-based increases, the appellants could not meet this standard. As a result, the appeal was dismissed.

K. DPSP WITHDRAWALS

FORBES V. CANADIAN TIRE CORPORATION LIMITED, 2013 ONSC 132

Mr. Forbes was a participant in the Canadian Tire Corporation Limited, Deferred Profit Sharing Plan (the “Plan”). He brought an application seeking an order that would direct the Plan trustee to pay him $150,000 net of income taxes from his Plan account. The applicant claimed that he was experiencing financial difficulties, and needed the funds to pay for living necessities and to pay off his debt. The Plan only permitted a pre-retirement withdrawal when a participant’s holdings in the Plan had a market value greater than what would be required to provide salary payments for a period of 20 years after the age of 65. The Plan, in Article 7.12, also provided that the trustee was entitled, but not required, to distribute plan property under a valid court order.

The Ontario Superior Court dismissed the application. It held that only the trustee could make a payment out of the Plan but the trustee was not a party to the action nor had it received notice. It also found that even if the employer was the appropriate party, Mr. Forbes was not entitled to payment under the pre-retirement withdrawal provisions. With respect to Article 7.12, the court held that it did not give the trustee general discretion to pay funds out of the Plan and that Ontario courts have “steadfastly refused” to interfere with a trustee’s exercise of discretion unless certain limited circumstances exist. The court dismissed the application.

L. GROW-IN BENEFITS & PAST CONDUCT

EMERSON ÉLECTRIQUE DU CANADA LTEE V. CHATIGNY, 2013 QCCA 163

This was an appeal of the decision of the Quebec Superior Court requiring Emerson Electric of Canada Limited (“Emerson”) to pay grow-in benefits, as set out in the PBA, to former non-unionized plan members employed in Quebec (the “Respondents”).

The Respondents were employees of Nortel who became employees of Emerson when it acquired the division in which the Respondents worked (the “Transaction”). The trial judge found that at the time of the Transaction, Nortel and Emerson had represented to the Respondents that their conditions of employment would be unchanged from those at Nortel.

In the years following the Transaction, the Respondents’ employment was terminated as a result of restructuring. In their claim for grow-in benefits, the Respondents relied on a provision in both the Emerson and Nortel pension plans which provided that “the Company may” decide that terminated members are entitled to the same benefits as under the PBA. In response, Emerson argued that such provision granted it a discretionary power to provide grow-in benefits to members employed outside of Ontario but that it was not required to do so.

The Court of Appeal rejected Emerson’s appeal and held that grow-in benefits should be provided to the Respondents. It found that prior to the Transaction, Nortel had systematically provided grow-in benefits to Quebec members who were terminated due to a restructuring and that Emerson was now obligated to do the same. In addition, the court found that the documentation pertaining to the Transaction indicated that the amount Nortel transferred to the Emerson pension plan was calculated on the basis of grow-in benefits being provided to the Respondents.

M. LIMITATION PERIODS

WELDON V. TECK METALS, 2013 BCSC 345

In actions commenced in British Columbia in 2009 and 2011, the plaintiffs, former members of a defined benefit plan, allege that they were provided with inadequate information when they agreed to transfer into a new defined contribution plan. A decision was recently rendered on a procedural matter respecting the operation of limitation periods.

The parties previously consented to certification of the action as a class proceeding and agreed upon twenty-three common issues. The issues considered by the court in this case were as follows: (i) When did the right to bring the action arise under the Limitation Act (BC)(“BCLA”)? and (2) If the limitation period had expired, to what extent can the plaintiffs rely on the postponement provisions of the BCLA?

In August 1992, Teck advised its defined benefit plan members of the intended effective date of a new defined contribution plan and of the members’ option to transfer to such plan. Based on the information provided to them by Teck and Towers Perrin, the plan actuary, the plaintiffs elected to transfer to the defined contribution plan. The plan was effective January 1, 1993.

Under the BCLA, the normal limitation period is 6 years from the date on which the right to bring a claim arose. Teck argued that the limitation period started running on January 1, 1993, the date on which they became members of the defined contribution plan whereas the plaintiffs claimed that the limitation period could not begin to run until the plaintiffs suffered a loss, i.e. until retirement or until they were otherwise eligible for payment under the plan. After reviewing Canadian and international case law, the court found that the limitation period started to run on January 1, 1993 on the grounds that the alleged loss occurred when the plaintiffs joined the defined contribution plan in 1993. Accordingly, the limitation period had expired.

The court then considered whether the plaintiffs could rely on the postponement provisions in the BCLA. Section 6 of the BCLA identifies certain categories of actions for which the limitation period does not begin to run until the plaintiff knows or ought to know of the facts giving rise to the action. The Court found that, in this case, the common issues arguably fell into the category of “for damage to property” under subsection 6(3)(b) and/or “for professional negligence” under subsection 6(3)(c) of the BCLA and, therefore, it was open to the plaintiffs to argue that the postponement provisions should apply. The Court made clear that the plaintiffs must still prove the facts that they claim entitle them to postponement.

N. DIVISION OF PENSIONS ON MARRIAGE BREAKDOWN

GRASSIE V. GRASSIE, 2013 ONSC 1198

This case involves issues arising from the separation and divorce of Mr. and Mrs. Grassie. At the date of separation, Mr. Grassie had an OMERS pension, which had accrued only during the marriage. The former couple entered into two separation agreements in March 2011 but neither agreement addressed the division of Mr. Grassie’s pension. Accordingly, the division was subject to the new rules on division of pensions on marriage breakdown under the PBA which came into effect January 1, 2012.

Mr. Grassie argued that the value of his pension, $86,606,301, less a tax deduction of 20.8%, should be included as an asset on his side of the Net Family Property Statement, and should not be split at source with Mrs. Grassie as is permitted under the PBA. The court found that this was not an appropriate means of dealing with the pension asset because Mr. Grassie did not have sufficient assets on his side of the Net Family Property Statement to buy out his former spouse’s interest in the pension. The court instead ordered that the pension be split at source but agreed that if the pension were to be included as an asset on the Net Family Property Statement, the tax deduction would be appropriate. Conversely, the court found that it was not appropriate, as Mr. Grassie had also argued, to subtract a notional tax from the value of the pension prior to the transfer to Mrs. Grassie, as she will be required to pay tax on those funds when she withdraws them from her LIRA.