The Board of Trustees of the City of Saint John Employee Pension Plan (the Trustees) commenced an action against John Ferguson, a member of the Common Council of the City of Saint John, for defamation based upon certain comments Mr. Ferguson made at both council meetings and in a newspaper article. At issue in two motions relating to the case was whether the Trustees: (a) had the legal capacity to commence and maintain legal proceedings; and (b) had legal capacity to specifically bring an action for defamation.

The first motion before the New Brunswick Court of Queen’s Bench addressed the Trustees’ legal capacity to commence and maintain legal proceedings more generally. In this motion, the Court determined that since certain powers of the Trustees in their enabling statute were commercial in nature, the Trustees are required to have the general capacity to commence and maintain legal proceedings as these powers would be “necessarily incidental to their exercise in the administration of the pension plan”.

A second motion before the Court addressed whether the Trustees had legal capacity to maintain a defamation action in particular. This issue was characterized as being dependent upon whether or not the Trustees were “capable of holding a reputation.”

The Court distinguished the Trustees from voluntary associations or entities with an indeterminate number of persons in concluding that the Trustees have “sufficient personality in the form of an important reputation which it is entitled to protect.” Central to this determination was the fact that the Trustees are subject to fiduciary duties which requires “a personality characterized by a high standard of care and diligence in carrying out their responsibilities to the best of their abilities and a reputation for honesty, integrity and fairness.” As a result, the Court concluded that the Trustees did have standing to bring the defamation action.

Implications for other Trustees?

The conclusions in the first motion (regarding the Trustees’ capacity to commence and maintain legal proceedings) were made, in part, based upon the powers of the Trustees under their specific enabling statute (the City of Saint John Pension Act). However, as the powers of most boards of trustees are commercial in nature, an argument might be made that the conclusions in this motion would extend to trustees more generally.

Similarly, the second motion concluded that the Trustees had sufficient personality which it is entitled to protect (i.e., not necessarily that all boards of trustees can be defamed). However, as most trustees’ reputation is central to their ability to function as a fiduciary, this opens the possibility that the conclusions made in this motion can also be applied more generally.

It will be interesting to see whether criticism of boards of trustees’ decisions will lead to future defamation cases, particularly in light of the increased scrutiny of pension plan administrators’ decisions as a result of the current economic environment.