Welcome to the 15th issue of the Blakes Pensions Newsletter. This newsletter provides a summary of recent jurisprudential developments that affect pensions and benefits and is not intended to be legal advice.
For additional information or to discuss how any aspect of these developments may affect you, please contact a member of the Blakes Pensions, Benefits & Executive Compensation group.
Kalawarny Estate v. Fife, 2016 MBQB 146
The estate of Brenda Kalawarny sought a division of Ms. Kalawarny’s former partner’s pension benefit credits accumulated during their common law relationship. The deceased Ms. Kalawarny and the surviving husband, Mr. Fife, had been in a common law marriage starting on February 1, 1999, until November 7, 2010, at which point they began to live separate and apart. Ms. Kalawarny passed away on March 28, 2014. At the time of Ms. Kalawarny’s death, the family law proceedings, which Ms. Kalawarny had commenced, regarding the separation had not been resolved.
Mr. Fife’s employer, Canadian National Railway Company (CN), had taken the position that it could not divide the pension pursuant to the breakdown of a common law relationship when the common law spouse was deceased, and the parties had not entered into an agreement to divide the pension prior to the death of the common law spouse. Ms. Kalawarny’s estate obtained an interim order requiring Mr. Fife to obtain from CN a statement regarding the commuted value of the pension benefit that had accumulated during the period of cohabitation for the purpose of a division of the pension. CN took the position that it required a request letter from both parties to issue such a statement or a court order to similar effect. Mr. Fife refused to sign a request letter. As a result, the estate made this motion for a court order declaring the pension benefits a shareable family asset to be divided according to relevant pension legislation. Mr. Fife’s position was that the pension credits should not be divided. Rather, the application for division should cease and the deceased’s property, as it existed at the time of her death, should be distributed according to the deceased’s will.
Mr. Fife’s pension is governed by the federal Pension Benefits Standards Act (Canada), which states that provincial property laws govern pension divisions in the context of relationship breakdown. The relevant Manitoba statutory provision is section 28(2) of The Family Property Act (Manitoba), which provides that an application for division of family property can continue after one of the spouses or common law partners dies. For this reason, Ms. Kalawarny’s application for division of family property, which was launched prior to her death, could be continued by her estate. Furthermore, Justice Hatch ordered the pension benefits accrued during cohabitation to be a shareable family asset to be divided equally between Mr. Fife and Ms. Kalawarny’s estate.
Dudumas v. Ontario (Superintendent of Financial Services), 2016 ONFST 15
In this dispute before the Financial Services Tribunal (Tribunal), Mr. Dudumas made numerous claims regarding entitlement to additional benefits under the CROWN Metal Packaging Canada LP Pension Plan for Hourly Employees (Plan) and that the benefits provided to him were calculated incorrectly. Mr. Dudumas was permanently laid off during a plant closure at 53 years of age with 26 years of credited service. The plant closure triggered a partial wind-up of the Plan in which Mr. Dudumas was included in the wind-up group. Mr. Dudumas received a basic pension (paid under a provision for an early, unreduced pension) and a bridge benefit.
Mr. Dudumas made various claims that the pension he had received was calculated incorrectly. He did not provide evidence to support this claim nor did he propose different calculation methods. Mr. Dudumas also claimed that even though he had received an unreduced early pension with a bridge benefit, he was entitled to an additional full normal pension starting at the retirement age. The Tribunal dismissed Mr. Dudumas’s claims as being unsupported by fact and based on a very obvious misunderstanding of the Plan and the law.
The Plan sponsor, CROWN Metal Packaging Canada LP (Crown), requested costs for the proceeding. Costs can be ordered by the Tribunal pursuant to rule 41.01 of the Rules of Practice and Procedure for Proceedings before the Financial Services Tribunal (Rules), and section 24 of the Financial Services Commission of Ontario Act. Rule 41.01 states that costs can be ordered where a party’s conduct has been unreasonable, frivolous or vexatious. Rule 42.01 further states that in determining whether a party’s conduct falls within the language of rule 41.01, the Tribunal must consider all relevant circumstances, including (among other factors): failure to cooperate with other parties during the hearing or preliminary hearing, and advancing manifestly unfounded positions.
During the course of this litigation, Crown offered on numerous occasions to provide Mr. Dudumas with independent actuarial or legal advice at no cost to him. Such offers were refused. The Tribunal found that had the free advice been taken, the entire hearing would likely have been avoided. As a result, the Tribunal found that Mr. Dudumas’s pursuit of a baseless and unstated legal claim and refusal of free professional advice constituted unreasonable conduct worthy of an adverse costs award. Crown requested costs of C$10,000, stating that its actual costs at the hearing well exceeded that amount, but also indicated that it would be satisfied with a nominal costs award. The Tribunal acknowledged that cost awards can be made against individual litigants but elected to award nominal costs of C$500. This represents the first time the Tribunal has issued a cost award in a pensions matter.
ACCESS TO INFORMATION
Trustees of the Bricklayers and Stonemasons Union Local 2 v. Information and Privacy Commissioner of Ontario; Canadian Bricklayers and Allied Craft Unions Members v. Information and Privacy Commissioner of Ontario, 2016 ONSC 3821
In preparation for a union “raid” (where one union tries to displace another union), Joseph Maloney of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers (IBB) made an access-to-information request to the Ministry of Finance (MOF) and the Financial Services Commission of Ontario (FSCO) regarding certain documents related to two rival unions’ multi-employer pension plans (Plans). Some of the requested documents contained sensitive financial information about the Plans (for example, the actuarial reports). MOF provided some of the requested documents but did not include any documents containing sensitive financial information. Maloney appealed to the Information and Privacy Commissioner (Commissioner) for disclosure of the remaining documents.
The Commissioner ordered the disclosure of certain of the financial documents, including the actuarial valuation reports of the Plans. The Commissioner’s reasoning was based in large part on the conclusion that such disclosure would not cause Plan members any harm because such documents were already widely available to Plan members who could easily disseminate it among the trade union community. Furthermore, the Commissioner found that the harms that MOF argued would result from the disclosure were related to union raiding, namely that if a union were successfully raided, the raided union’s loss in membership would negatively impact the raided union’s pension plan. Since union raiding is statutorily permitted, harms stemming from it could not be the types of harms considered to constitute grounds for refusal of freedom of information requests.
The trustees of the Plans (Applicants) appealed the decision of the Commissioner to the Divisional Court of Ontario, with the support of MOF and FSCO as interested parties. Writing for the majority of the court, Justice Stewart found that, due to the statutory protection of pension documents filed with FSCO, the Commissioner’s finding regarding the widespread availability of those documents was overstated and that such documents are accessible only to certain enumerated persons. Furthermore, the harms that could result to the pension plans targeted by the request and their beneficiaries, even those connected to a bargaining unit being successfully raided by a rival union, qualify as harms under the relevant privacy legislation as “undue loss.” For these reasons, the potential harms identified by MOF were more than mere speculation when considered within the context of bitterly competitive union raids in the construction industry. The Divisional Court of Ontario referred the matter back to the Commissioner for reconsideration with these reasons in mind.
HEALTH AND WELFARE BENEFITS
Watt v. Health Sciences Association of British Columbia, 2016 BCCA 325
The Health Sciences Association of British Columbia (Union) established employee-funded trusts to fund long-term disability (LTD) benefits provided to its members. Some of the Union board members were named as personal trustees of the trust. Over time, the trusts became significantly underfunded. In March 2012, the underfunding of the trusts, as well as possible courses of action to remedy the situation, was discussed at the Union’s annual general meeting. Afterwards, members were asked to adopt a resolution approving an increase in Union dues to maintain the solvency of the trusts and the LTD benefit coverage. The Union’s board of directors opposed the resolution, and communicated this opposition to the members. The resolution failed by a large margin. Shortly after the failure of the resolution, the Union amended the LTD plans to reduce benefits.
Union members currently receiving LTD benefits (Plaintiffs) launched this proposed class action against the Union for breach of contract. The Plaintiffs also asserted that the Union, having control over the trustees, was itself a bare trustee or a trustee de son tort of the trust and that the Union had breached its duty of care and fiduciary duties as trustee. Additionally, the Plaintiffs claimed against the individual trustees of the LTD trusts for breaches of fiduciary duties and duties of care.
This class action was certified by the Supreme Court of British Columbia (B.C. Supreme Court) (2015 BCSC 1290). The Union appeals from that decision.
As a preliminary matter, the Court of Appeal for British Columbia (Appeal Court) decided to hear the issue of whether the B.C. Supreme Court had proper jurisdiction to hear the case at all. The Appeal Count found that the B.C. Supreme Court would not have jurisdiction if the claim were based on the Union’s duty of fair representation codified under section 12 of the Labour Relations Code (British Columbia) (disputes of which are properly the jurisdiction of the Labour Relations Board). The Appeal Court found that the dispute, as pled by the Plaintiffs, could not be characterized as relating to the Union’s role as bargaining agent of the employees because they do not engage the Union’s duty of fair representation. Therefore, the B.C. Supreme Court had jurisdiction to hear the case.
In a class action certification motion, the proposed causes of action need only meet the standard of “not plain and obvious that the claim will fail.” Regarding the claims against the Union based on a breach of contract, both the B.C. Supreme Court and the Appeal Court acknowledged the legal hurdles that the Plaintiffs would face in establishing that the Union contracted with its own membership to provide benefits. However, they found that it was not plain and obvious that this claim would fail.
Regarding the claims against the Union for breach of fiduciary duty, the B.C. Supreme Court found sufficient grounds to certify a claim based on the theory that the Union owed its disabled members a fiduciary duty because of its power over them, coupled with those members’ inherent vulnerability. The Appeal Court overturned this decision. The Appeal Court found that this finding is inconsistent with the Union’s duty (whether fiduciary or otherwise) to represent all of its members as their bargaining agent. The Appeal Court also overturned the B.C. Supreme Court’s certification of the claim based on the Union as a trustee de son tort of the LTD trusts, on the basis that this claim had no legal authority.
Regarding the claims against the individual trustees, the Appeal Court overturned the B.C. Supreme Court’s decision and dismissed this cause of action. The Plaintiffs claimed that the trustees breached their fiduciary duties to the disabled members by failing to ensure that the LTD trusts were fully funded. The Appeal Court ruled that the trustees did not have the power to order the Union to fund the trusts. The Appeal Court left open the alternative claim regarding the trustees’ potential conflict of duty during the 2012 general meeting. The trustees were the same individuals who, as Union board members, advocated against funding the LTD trust shortfall with a Union due increase. The Appeal Court noted that causation would be difficult for the Plaintiffs to prove but acknowledged that the claim was not bound to fail.
Rein v. Alberta (Human Rights Commission), 2016 ABQB 386
The applicant, Ms. Rein, alleged age discrimination due to the termination of her Group Health Benefits and Life Insurance Plan (Benefit Plan) coverage by reason of her reaching the age of 65. The Director of the Alberta Human Rights Commission (AHRC) (Director) dismissed her complaint. The applicant requested that the Director’s decision to dismiss be reviewed. The Chief Commissioner of the AHRC (Chief Commissioner) upheld the dismissal. The applicant appealed that decision to the Alberta Court of Queen’s Bench for judicial review.
While the Alberta Human Rights Act prohibits discrimination based on age, this prohibition does not affect “the operation of any bona fide retirement or pension plan or the terms or conditions of any bona fide group or employee insurance plan.”
The Director has a gatekeeper role whereby he can dismiss cases where there is no reasonable basis in the evidence to proceed. Similarly, the Chief Commissioner’s duty in reviewing these dismissals is to decide whether there is a reasonable basis in the evidence to proceed. In performing this duty, the Chief Commissioner can assess evidence. Both the Director’s and the Chief Commissioner’s decisions were based on the conclusion that the Benefit Plan was bona fide. The test for whether a benefit plan is bona fide is established in New Brunswick (Human Rights Commission) v. Potash Corporation of Saskatchewan Inc., 2008 SCC 45. In that case, the question of bona fides was applied to a pension plan. In this case, Justice Pentelechuk found that the same test applies to employee benefit plans as well due to the specific wording of the Alberta Human Rights Act.
The standard of review of the Chief Commissioner is that of reasonableness. The Chief Commissioner had the benefit of the relevant collective agreement and the Benefit Plan documents, which were sufficient to establish that the Benefit Plan was bona fide. Though the Chief Commissioner did not specifically state what elements of these documents she relied on to come to the conclusion that the benefit plan was bona fide, jurisprudence clearly states than gaps in an administrative decision-maker’s reasons are not fatal to the decision. As a result, Justice Pentelechuk concluded that the Chief Commissioner’s decision was reasonable and the applicant’s complaint was dismissed.