The Supreme Court of Canada (the SCC) has issued its decision in the appeal of the Ontario Court of Appeal (the OCA) decision in the Indalex case. Written reasons were issued by three groups of the seven justices who decided the appeal. The three groups concurred on some issues and disagreed on others. The end result was that the SCC overturned the OCA decision that subjected pension plan wind up deficiencies to deemed and constructive trusts with priority over debtor-in-possession financing. The SCC decision is summarized in a special edition of Fully Secured@Gowlings.
From a purely pension-focused perspective, the SCC decision is important because it:
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Affirms that the statutory deemed trust set out in s. 57(4) of the Pension Benefits Act (Ontario) applies to the wind up deficiencies in respect of a pension plan that is being wound up;
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Affirms that a s. 57(4) deemed trust is subject to the application of the federal paramountcy doctrine and can be superseded by a court-ordered priority granted under the Companies' Creditors Arrangement Act (Canada) which will have the same effect as a federal statutory priority; and
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Contains analysis with respect to the scope of a pension plan administrator's fiduciary duties, the "two hats" worn by an employer when acting as pension plan administrator and the potential for conflict when wearing the "two hats."
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.
