On Thursday, June 22, 2006, the Supreme Court of Canada released its much-anticipated decision in Rogers Communications Incorporated v. Buschau (Buschau). The plaintiffs in the action were members of a pension plan which, subsequent to the development of a large surplus, was merged with several other pension plans. The plan members initiated an action alleging that the merger was invalid and seeking to terminate the trust based on the rule in Saunders v. Vautier. The rule in Saunders v. Vautier is a common law rule developed in respect of traditional trusts which permits a trust to be brought to an end when all of the beneficiaries consent.
The British Columbia Court of Appeal had held the challenged pension plan merger did not affect the members’ surplus rights and had ruled that the plan members were entitled to invoke the rule in Saunders v. Vautier to terminate the trust and access the surplus.
In its decision, all seven members of the Supreme Court of Canada who heard the matter held that the context and purpose of pension plans do not generally lend themselves to the common law rule in Saunders v. Vautier. The court recognized that a pension trust is not a stand-alone instrument and cannot be terminated without taking into account the plan for which it was created and the specific legislation governing the plan. Although identifying a number of reasons why the rule in Saunders v. Vautier would not generally apply to pension trusts (and did not apply in this particular case), four members of the court left open the possibility that the common law rule might apply to very small pension plans.
The pension plan at issue in Buschau was registered under the federal Pension Benefits Standards Act (PBSA). All seven of the justices who heard the matter recognized that the PBSA provided a regime governing the termination of pension plans. The court divided on whether the federal Superintendent would have the discretion under the PBSA to order a wind-up of the plan in the circumstances of this case. While the minority held the preconditions to a mandatory termination by the Superintendent were not present, the majority was prepared to leave to the Superintendent a number of issues for determination including the issue of whether the plan sponsor could amend the plan to add new members and the issue of whether or not the plan should be terminated in circumstances which included the cessation of employer contributions due to the existence of a surplus.
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