Canada: Quebec Court Issues New Decision Regarding Supplemental Pension Plans Act

On January 24, 2014, the Québec Superior Court (Quebec Court) issued a decision in the Companies' Creditors Arrangement Act (Canada) (CCAA) proceedings of Timminco Limited (Timminco) and Bécancour Silicon Inc. (BSI). In this decision, the Quebec Court concluded that the Supplemental Pension Plans Act (Quebec) (SPPA) created a deemed trust that secured an employer's obligation to fund normal course payments and amortization payments (i.e. special payments), but the statutory deemed trust did not extend to the entire solvency deficiency of a defined benefit pension plan. The Quebec Court also held that the deemed trust ranked in priority to pre-filing contractual security.

The Quebec Court's decision in Timminco comes almost a year after the Supreme Court of Canada's (SCC) landmark pension priority decision in Re Indalex Ltd. In that case, the SCC concluded that Ontario's Pension Benefits Act (PBA) created a deemed trust that secured an employer's obligation to fund not only normal cost contributions and special payments to be made into a pension plan, but on the wind-up of a defined benefit pension plan, the entire wind-up deficiency. In Ontario, section 30(7) of the Personal Property Security Act (PPSA Ontario) expressly provides that a deemed trust created by the PBA enjoys priority over secured creditors with respect to working capital assets (i.e. inventory and receivables). An earlier SCC case, Royal Bank of Canada v. Sparrow Electric Corp. (Sparrow Electric) held that unless there was an express statutory provision granting priority to a deemed trust, the deemed trust did not enjoy priority over prior registered secured creditors. In Timminco, the Quebec Court held that although Quebec does not have an equivalent provision to section 30(7) of the PPSA Ontario, the reasoning in Sparrow was not applicable.


On January 3, 2012, Timminco and its wholly owned subsidiary BSI filed for protection from their creditors before the Ontario Superior Court of Justice (Ontario Court) pursuant to the provisions of the CCAA. Pursuant to an order of the Ontario Court issued on January 16, 2012, the amortization payments to be made by BSI with respect to two defined benefit pension plans were suspended. Both pension plans had an aggregate actuarial deficiency of approximately C$14 million. During the course of the CCAA proceedings, substantially all of BSI's assets and all of which were located in Quebec, were sold and the super priority debtor-in-possession (DIP) financing obtained by Timminco and BSI was repaid in full. Excess sales proceeds were available for distribution.

Following repayment of the DIP, BSI's pre-filing secured creditor, Investissement Québec (IQ), which held a universal hypothec (the equivalent of a general security interest) on all of BSI's movable property (i.e. personal property) asserted priority to the sale proceeds. The Quebec pension plan committees representing each Quebec pension plan disputed IQ's priority and asserted that BSI's obligation to fund the actuarial deficit of the pension plan and BSI's obligation to make the suspended amortization payments rank in priority to BSI's obligation to repay its secured indebtedness to IQ. Given the priority dispute involved, the priority of the claims of Quebec pensioners under the SPPA, relative to the priority of claims of a pre-filing creditor holding hypothecary security, the Ontario Court transferred the priority dispute to the Quebec Court for adjudication.


Section 49 of the SPPA reads as follows:

"Until contributions and accrued interest are paid into the pension fund or to the insurer, they are deemed to be held in trust by the employer, whether or not the latter has kept them separate from his property."

From the outset, the Quebec Court acknowledged that it had previously rendered a decision in the White Birch case that held that section 49 of the SPPA did not create a deemed trust. This decision was the subject of a previous Blakes Bulletin: Quebec Court Won't Apply Indalex. In that decision, the Quebec Court went on to say that even if it was incorrect in its interpretation of section 49, the deemed trust would not enjoy priority over the super priority DIP charge that was granted in that case.   

After carefully considering the arguments of the parties and various decisions dealing with the concept of a statutory deemed trust, the Quebec Court concluded that section 49 of the SPPA does in fact create a deemed trust. On this point, the Quebec Court reversed its earlier ruling in White Birch. The Quebec Court, however, found that the scope of this trust covers only unpaid contributions to the plan and not the entire actuarial deficit.


After emphasizing that there is no equivalent legislation in Quebec to section 30(7) of the PPSA in Ontario granting express priority to the statutory deemed trust created by the SPPA, the Quebec Court concluded that section 264 of the SPPA nonetheless ensures that the property that is subject to the deemed trust of section 49 of the SPPA is not affected by the universal hypothecary creditor.

Section 264 of the SPPA reads as follows:

"Unless otherwise provided by law, the following amounts or contributions are unassignable and unseizable:

(1) all contributions paid or payable into the pension fund or to the insurer, with accrued interest;" [...]

The Quebec Court held "[t]he notion of unassignability and unseizability of due and unpaid contributions prevents the employer and his creditors from using these funds for purposes other than those specified in the SPPA. These amounts therefore, cannot be the subject of a universal movable hypothec with or without delivery." The Quebec Court therefore concluded that the reasoning adopted earlier in Sparrow Electric cannot be applied in these circumstances. In the view of the Quebec Court, it is not necessary, given the wording of the provision in question, to physically separate the amortization payments for them to benefit from being unassignable and unseizable.

In conclusion, the Quebec Court stated that the amortization payments that have not been paid to a pension plan are subject to a deemed trust created by law, and that these contributions are unassignable and unseizable and cannot therefore be affected by a hypothec even if the amortization became due after the establishment of the said hypothec.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
23 Nov 2018, Other, Toronto, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

28 Nov 2018, Speaking Engagement, Toronto, Canada

Arbitration has a number of advantages and some disadvantages for the resolution of domestic and international commercial disputes.

Similar Articles
Relevancy Powered by MondaqAI
Stikeman Elliott LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Stikeman Elliott LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions