On January 7, 2009, the Financial Services Tribunal of Ontario (the "FST") released its decision in the case involving Montreal Trust Company of Canada ("Montreal Trust"), Montreal Trust Member Surplus Committee (the "Committee") and the Superintendent of Financial Services (the "Superintendent").
While the Montreal Trust case is prima facie a case which is concerned with the ownership of pension plan surplus (and for that reason alone perhaps not terribly germane in the current economic conditions), it is an important case in light of comments made by the FST concerning issues relating to concurrent jurisdiction between the regulator and the Court.
Montreal Trust sponsored a defined benefit pension plan (the "Plan") which, as at November 2006, had approximately $29 million in surplus. Montreal Trust entered into a surplus sharing agreement (the "Agreement") with the Committee which, subject to certain adjustments, provided for the surplus to be split between Montreal Trust and plan members. The Plan was registered in Quebec but had Ontario members. Those entitled to share in the surplus numbered 3,615 and 1,219 of those people were subject to the jurisdiction of the Ontario pension regulator ("FSCO"). As of June 2008, 83% of the Ontario members had retained counsel to the Committee and voted in favour of the Agreement.
In March 2008, Montreal Trust commenced a court application for a declaration that it was entitled to receive surplus from the Plan on the terms set out in the Agreement. Montreal Trust and the Committee went to Court together to certify a class proceeding in respect of the issue of whether Montreal Trust was entitled to surplus in the Plan. The Court certified the class proceeding. The parties subsequently brought a motion for approval of settlement of the class proceeding based on the terms of the Agreement. The Court approved the settlement and an amendment to the Plan (the "Amendment") to provide for the payment of surplus in accordance with the Agreement (the "Settlement Order").
When the parties applied to the Ontario Superintendent of Financial Services (the "Superintendent") for the necessary regulatory approval under the Pension Benefits Act, the Superintendent issued a notice of proposal indicating his intention to refuse approval on the grounds that the Plan did not provide for payment of surplus to Montreal Trust as required by subsection 79(3)(b) of the Pension Benefits Act. The Superintendent took the position that the Settlement Order did not vary the trust which governs the Plan as the Settlement Order was based on the Agreement, not an historical analysis of the terms of the trust. The Superintendent was of the view that an historical analysis of the Plan and trust provisions would lead to the conclusion that Montreal Trust was not entitled to the payment of surplus from the Plan. Montreal Trust and the Committee took the position that an historical analysis was not necessary since the Amendment was valid and binding by virtue of the Settlement Order.
The FST, while making no finding on the issue, acknowledged that if an historical review of the Plan and trust provisions were undertaken, it is possible that the conclusion might be reached that the Amendment was invalid. The FST held, however, that the Court has jurisdiction on behalf of all interest parties to sanction a compromise where the rights of beneficiaries under a trust are subject to doubt or "real or serious" dispute. The FST determined, based on evidence before it, that this was the case here, and that given that all affected beneficiaries were bound by the Court order and in light of a number of other factors, it would not be appropriate to look behind the Settlement Order.
The FST was clear that its conclusions were based on the specific facts and the terms of the Settlement Order. While the FST indicated that it would be hesitant to disregard a court-ordered plan or trust amendment, it did not need to decide the issue as to whether the Superintendent or the FST is bound to accept such amendments in all circumstances. As such, the specific facts of this case should be carefully considered before relying upon it with respect to another set of facts. The decision does not stand for the proposition that historical analysis of trust provisions can be ignored or avoided in all cases.