Canada: December 2016 Pensions Newsletter

INVESTMENT OF RETIREMENT ACCOUNTS

Webb v. TD, 2016 ONSC 7153

In 2005, a former branch manager of TD Bank (Plaintiff), after being terminated, elected to invest the commuted value of his pension in a retirement investment account with TD Waterhouse Canada Inc., TD Waterhouse Financial Planning and Kim Myers, a financial advisor and employee of TD Waterhouse Financial Planning (Defendants). By 2009 and 2010, the Plaintiff noticed that the investment did not perform as well as initially represented in 2005, and filed a statement of claim in January 2014 alleging misrepresentation, undue influence, negligence, and failure to provide or require the Plaintiff to obtain independent legal advice in the context of presumed conflict of interest and/or undue influence. The Defendants moved for summary judgment based on a limitation defence.

In granting the Defendants' motion, the Ontario Superior Court of Justice (Court) relied on various facts which indicated that the Plaintiff knew or ought to have known of the claim as early as 2009.

The Court further held that, even if the claim was not statute-barred, there were no facts that raise a presumption of undue influence requiring a trial. The Defendants and the Plaintiff's relationship did not have the degree of influence and dependency that can be subject to abuse and pressure. The Court found that the Plaintiff had the capacity for independent action, made independent inquiries and made independent choices, at times against the advice of Ms. Myers. His education, training, work history and knowledge of markets and investments indicated that he was not a vulnerable party. The Plaintiff was well aware of the affiliation between the Defendants and his former employer, and sought Ms. Myers out based on his personal knowledge, rather than at her solicitation of business. He was not incapable of obtaining independent legal advice, and nothing interfered with his ability to obtain legal advice. Finally, he knew or ought to have known that there was no guarantee in the representation of returns made in 2005, based on the representation documents and his knowledge of markets.

Ontario Superior Court of Justice Decision

PENSION PLAN WIND-UPS

Tibbett & Britten Group Canada Inc. v. Sobeys Inc., 2016 ONCA 861

In January 1995, Oshawa Foods (Oshawa) and Surelink entered into parallel asset sale and warehouse and transportation services transactions, wherein Oshawa sold two warehouses to Surelink, and Surelink provided warehousing and transportation services to Oshawa in connection with Oshawa's food distribution business. Under the warehousing and transportation agreement (WTA), Surelink assumed responsibility for the former employees of Oshawa who were working in the warehouses, including responsibility for the benefits under an existing pension plan (Plan). Following its acquisition of Oshawa in 1999, Sobeys Inc. (Sobeys) terminated the agreements, which terminated all of the positions of the Surelink employees at the two warehouses and triggered a wind-up of the Plan effective March 5, 2000.

In determining the extent to which the obligations for the pension benefits reverted to Sobeys on termination of the agreement, the application judge held that (1) the termination provisions of the WTA required Sobeys to reimburse Tibbett & Britten Group Canada Inc. (Tibbett), Surelink's successor, for the amount required to fund the deficit that arose on the wind-up of the Plan, and (2) Sobeys and Tibbett reached a new agreement in or around August 2001 pursuant to which Sobeys agreed to be responsible for directly funding the Plan deficit and ongoing administration of the Plan.

Sobeys appealed the decision, arguing that (1) it was only obliged to reimburse Tibbett for the reasonable costs incurred in funding the Plan deficit, and (2) it did not agree to assume responsibility for directly funding the Plan deficit. Alternatively, Sobeys argued that Tibbett's claim, either under the WTA or pursuant to any new agreement, was statute-barred under the Limitations Act, 2002.

Finding no palpable and overriding error in the application judge's finding of fact or of mixed fact and law, the Ontario Court of Appeal (Court) dismissed Sobeys' appeal. The Court found that the application judge made a factual finding that Tibbett had acted with due diligence, and saw no basis for interfering with it. Similarly, the Court agreed with the application judge's finding of a new agreement based on the factual record, the parties' conduct and the business context. Lastly, the Court held that the limitation period for Tibbett did not begin to run until April 17, 2013, as Tibbett was entitled to assume that Sobeys undertook to fulfill its obligations with respect to the Plan under the WTA and the subsequent agreement between the parties in the absence of indication to the contrary.

Ontario Court of Appeal Decision

TAX TREATMENT OF FOREIGN PLANS

Jacques v. The Queen, 2016 TCC 245

The taxpayer, Julie Jacques, had a sister resident in the United States who passed away. Ms. Jacques was named as the death beneficiary for her sister's retirement plan, a 401(k) plan. The Minister of National Revenue reassessed Ms. Jacques to include the proceeds of this plan in her income for 2009. The issue to be decided was whether the proceeds received from the 401(k) plan met the definition of "superannuation or pension benefits" under s. 248(1) of the Income Tax Act (Canada), which is defined as "any amount received out of or under a superannuation or pension fund or plan."

Justice Graham was tasked with determining whether the 401(k) plan is a superannuation or pension fund or plan. This was a question of fact. In analyzing the 401(k) plan, Justice Graham looked for factors that set the plan apart from an ordinary savings plan. The factors he found that leant themselves to the 401(k) plan being a superannuation or pension fund or plan are (1) the employer was expected to make contributions and (2) the vesting schedule of employer contributions. Certain factors were neutral: the purpose of the plan; the ability of an employee to opt out of the plan; and an employee's ability to direct investments. Many factors suggested the plan is more like a savings plan: the ability to significantly vary employee contributions (up to 50 per cent); the ability to withdraw amounts early; and the distribution methods available out of the plan.

Justice Graham stated that the distribution methods were the most significant feature. According to Canadian jurisprudence, a superannuation or pension fund or plan provides payment of "regular post-retirement income." The 401(k) plan in question paid out lump sums by default, and employees aged 59.5 or older were permitted to withdraw some or all of their balance and continue to work. Any employees retiring before age 70.5 were required to take a lump sum. In fact, Justice Graham identified that the only way to receive regular payments post-retirement was to work past age 70.5 and then choose to not receive a lump-sum payment, thereby triggering minimum annual distributions. In that situation, the employee would still be entitled to withdraw lump sums at will.

Justice Graham concluded that, upon a total review of the plan in question, it was not a superannuation or pension fund or plan, and allowed Ms. Jacques's appeal of her income tax reassessment by referring the matter back to the Minister of National Revenue for reconsideration and reassessment.

Tax Court of Canada Decision

ERISA WITHDRAWAL LIABILITY

Walter Energy Canada Holdings, Inc. (Re), 2016 BCSC 107; 2016 BCSC 1746

The Walter Group, a U.S.-based metallurgical coal-exporting group of companies, purchased Canadian coal mines in 2011. Due to the decline in global demand for its product, the Canadian coal mines, as well as other Walter Group coal mines across the world, were idled and the Walter Group experienced major financial difficulties. The Walter Group filed for Chapter 11 bankruptcy protection in the United States, and its Canadian operations filed for creditor protection under the Companies' Creditors Arrangement Act (CCAA). The initial order in the CCAA proceedings was granted in December 2015. In early 2016, the parties sought various forms of relief to assist in the restructuring plan, including the court approval of a sale and solicitation process and the appointment of further professionals to manage that process; the approval of an employment retention plan; and an extension of the stay against creditors' collection efforts. In her decision on January 26, 2016, Justice Fitzpatrick granted the requested relief and noted the novel objections made by the United Mine Workers of America 1974 Pension Plan and Trust (1974 Pension Plan), discussed below.

One of the American entities within the Walter Group is Jim Walter Resources Inc. (JWR). This company is party to a collective agreement with the United Mine Workers of America. In December 2015, the bankruptcy court in the United States ruled that JWR was permitted to reject the collective agreement and further ruled that the sale of the U.S. assets of the Walter Group would be free and clear of any liabilities under the collective agreement. In response, the trustees of the 1974 Pension Plan filed a proof of claim in the U.S. bankruptcy proceedings for a contingent claim against JWR for a potential "withdrawal liability" under the Employee Retirement Income Security Act of 1974 (USA) (ERISA) of approximately US$900-million. In this CCAA proceeding, the 1974 Pension Plan argued that, under ERISA, all companies under common control with JWR are jointly and severally liable for this withdrawal liability. The 1974 Pension Plan alleges that certain Canadian companies within the Walter Group fall within this joint and several liability provision. The claim, if valid, would have the potential to overwhelm most other claims against the estate of the Canadian operations.

In August 2016, the company sought approval of the sale of one of the Canadian mining operations. At the same hearing, the petitioners sought an order governing the distribution of the proceeds of the sale. In her September 23, 2016 decision, Justice Fitzpatrick addressed the ERISA claim directly. Her ruling indicates that due to the procedural and legal complexity of the claim, the parties had agreed to not file a proof of claim under the CCAA proceedings (which is the ordinary procedure for a claim against a CCAA protected company), and instead the petitioner would file an independent civil claim. Therefore, the merits of the ERISA claim were not decided, but will be litigated in the near future in parallel proceedings, to which the parties on the service list for the CCAA proceedings would be entitled to participate.

January 2016 B.C. Supreme Court Decision

September 2016 B.C. Supreme Court Decision

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 Mondaq.com.

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

Authors
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.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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