The recent Federal Court decision in Canada (Attorney General) v. Aéroport
de Québec inc. will serve as a reminder to
employers that there may only be a relatively short window of time
to challenge decisions rendered by pension regulators. Failure to
act within that period can prevent an employer from successfully
challenging the decision at a later time regardless of the merits
of the claim.
This case involves a small federally regulated pension plan
sponsored by Aéroport de Québec inc. (the Employer)
that was terminated effective October 15, 2008. While examining the
wind-up documentation, the Office of the Superintendent of
Financial Institutions (OSFI) came to the conclusion that the
Employer had failed to exercise an appropriate level of diligence
and care in connection with the investment of the plan assets as
required by subsections 8(3), 8(4) and 8(4.1) of the Pension Benefits Standards Act, 1985
On February 2010, the Superintendent issued a direction
requiring the Employer to pay $263,000 plus interest in the fund as
a result of the breach. The Employer did not file an application
for a judicial review of the direction and it then failed to pay
the amount as directed. On May 13, 2010, the Attorney General filed
an application with the Federal Court for the enforcement of the
direction in accordance with section 33.1 of the PBSA.
The Employer opposed the application, mainly on the basis that
it had properly administered the pension fund and that the
direction was therefore unreasonable. It argued that the Court has
a broad discretion under section 33.1 that allows it to refuse to
enforce an unreasonable direction.
The Court first found that the defence raised by the Employer
was essentially a collateral attack on the validity of the
direction. The Court then concluded that the Parliament did not
intend an application for the enforcement of a direction to be an
opportunity to challenge the validity of such direction. As part of
its analysis, the Court noted that the adoption of the
Employer's interpretation of section 33.1 would indirectly
create a right of appeal of the Superintendent's direction
whereas the legislative scheme clearly contemplates that directions
should be challenged by judicial review. The Court thus ordered the
Employer to comply with the direction.
At first glance, the result may seem somewhat harsh for the plan
sponsor as it was basically prevented from defending its investment
strategy for what may seem to be a fairly procedural point.
However, the result is not necessarily surprising given the
applicable provisions of the PBSA.
This case should alert employers, whether under federal or
provincial jurisdiction, that they must act promptly to challenge
regulatory orders or directions issued by pension regulators or
they may not be able to do so later on. Legal advice should
therefore be sought as soon as possible upon receipt of a direction
or other type of regulatory order.
Julien Ranger-Musiol advises employers, pension
fund administrators and service providers on issues such as plan
mergers, use of surplus assets, contribution holidays,
administration expenses and plan administration and
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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