The Supreme Court issued one judgment this week in a case of interest to Canadian businesses and professions.
In its eagerly awaited decision in Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6, the Court provided some needed clarity regarding the rights of pensioners in proceedings under the Companies’ Creditors Arrangement Act (“the CCAA“). In three separate sets of reasons, the members of the Court converged and diverged on several important issues.
The Court was unanimous in reversing the Ontario Court of Appeal on the priority to be accorded to the statutory deemed trust, protecting pension claims, arising under s. 57(4) of the Ontario Pension Benefits Act (“the PBA”). As a result of the constitutional paramountcy doctrine, the priority granted to the debtor-in-possession (“DIP”) lenders by the CCAA judge took precedence over the deemed trust created by the provincial legislation.
On a related issue, however, the majority of the Court affirmed the decision of the Court of Appeal in finding that the deemed trust provisions of s. 57(4) of the PBA apply to the entirety of the plan’s wind-up deficiency.
A differently constituted majority of the Supreme Court reversed the Court of Appeal regarding the imposition a constructive trust, benefiting pension plan members, as a result of the breach of fiduciary duty committed by the employer (qua pension plan administrator). While the employer’s action in seeking the DIP orders did conflict with its duties to the plan members, it could not be said that the resulting fiduciary breach resulted in the creation of an identifiable asset to which a constructive trust could attach.
Lastly, the Court was unanimous in affirming the Court of Appeal’s refusal to grant costs, to be paid out of the pension fund, to the United Steelworkers.