Canada: Pensions Newsletter – April 2017

Welcome to the 17th issue of the Blakes Pensions Newsletter. This newsletter provides a summary of recent jurisprudential developments that affect pensions and benefits and is not intended to be legal advice.

FAMILY LAW

Tanner v. Tanner, 2017 ONSC 7182

In an application for divorce, certain issues were determined in a temporary order granted by Justice Lalonde (the Lalonde Order) in connection with the parties' earlier separation in 2008. One of the issues determined by the Lalonde Order was the value of David Tanner (husband)'s pension, 50 per cent of which was to be transferred to Peggy Tanner (wife). The pension was valued on the consent of the parties at C$163,758 based on retirement at age 60. Following the Lalonde Order, the application lay dormant for more than six years. The husband retired in 2015 at age 58 and began receiving a pension. The wife's 50 per cent interest in the husband's pension was never transferred, as the parties had not provided ultimate direction to the plan administrator (which was not a party to the litigation).

At trial in May 2016, one of the issues that had to be determined was how to divide the pension in compliance with the 2008 Lalonde Order. It was determined that the wife bore ultimate responsibility for the fact that the 50 per cent pension interest was not transferred. However, the wife argued persuasively that it would be unfair to use the Lalonde Order valuation to divide the pension, as her share ought to have appreciated in value since 2008, resulting in a potential windfall to the husband. She provided an alternative valuation from an actuary, but Justice Sheard rejected this on the basis that the original valuation was made on consent, and that the actuary's report was based on unreliable figures. Justice Sheard declined to apply the five per cent post-judgment interest rate set in the Lalonde Order, on the basis that it did not apply as the delay in transferring the funds did not result from any default on the part of the husband in respect of his obligations under the Lalonde Order. Justice Sheard instead used the discretion reserved to her under the Courts of Justice Act (Ontario) to set an interest rate of two per cent per year since the date of the Lalonde Order, in keeping with interest rates of recent years, to adjust the share of the pension payable to the wife.

Ontario Superior Court of Justice Decision

MISTAKEN CALCULATION OF PENSION BENEFITS

Calder v. Alberta, 2017 ABQB 162

Former members of the Alberta Public Service Management Pension Plan sued the Government of Alberta (Province) over the interpretation of the value of their pensions. The plaintiffs, represented by Dr. William Calder as a "test case," were those who ceased participation in the Alberta Public Service Management Pension Plan prior to its closure to members in 1994 (Closed Plan) and who returned to pensionable employment with the Province after 1994. Upon their return to pensionable service with the Province, they participated in the Management Employees Pension Plan (MEP Plan), which was established in 1992 and began accepting transferred members from the Closed Plan in 1994.

In 2009, the Closed Plan administrator, Alberta Pensions Services Corporation (APSC), began communicating to the plaintiffs the method their Closed Plan pensions would be calculated, based on their interpretation of the terms of the Closed Plan. This interpretation used post-closure service (i.e., pensionable service under the MEP Plan) in determining final average salary under the Closed Plan, but included cost-of-living adjustments and an actuarial upgrade that treated the post-1994 salary as if it were earned prior to 1994 (2009 Interpretation). The 2009 Interpretation contained an obvious "double-counting" problem in the calculation of the benefits and grossly inflated the pension payments from the Closed Plan.

In 2012, APSC realized its mistake in interpreting the Closed Plan. It concluded that the intent of the Closed Plan was to limit the determination of final average salary to pre-1994 salary, and should be interpreted as such (2012 Interpretation). Members seeking pension calculations were provided estimates based on the 2012 Interpretation, but pensioners receiving benefits calculated using the 2009 Interpretation continued to have their benefits paid in such fashion while APSC conducted an internal risk assessment. In 2014, these pensioners were notified that their benefits were calculated incorrectly and were to be recalculated using the 2012 Interpretation, which resulted in — some cases significant — reductions to the plaintiffs' pension benefits. For example, Dr. Calder's monthly Closed Plan benefits were reduced from C$8,417.09 to C$2,232.16. The plaintiffs sued as a result.

The plaintiffs argued that the Closed Plan language indicating that "salary earned after inception" of the MEP Plan may be used to determine that final average salary supported APSC's 2009 Interpretation. However, Justice Neufeld ruled that this provision was meant to cover the time from the inception of the MEP Plan (August 1, 1992) and the closure of the Closed Plan and transfer of its members to the MEP Plan (effective January 1, 1994). It did not mean that any pensionable service with the Province after 1992 could be used to calculate benefits under the Closed Plan. Such an interpretation would be unreasonable and produce absurd results, and APSC was not precluded from correcting its earlier error.

The plaintiffs made several arguments as to why they should be entitled to the payments based on the 2009 Interpretation. They argued that the Province should be prevented, by the concept of estoppel, from using any interpretation other than the 2009 Interpretation. This argument failed because estoppel is a defence against an enforceable right, it is not an independent cause of action (in other words, it is a shield but not a sword). Additionally, estoppel cannot prevent the application of express legislative provisions.

The plaintiffs also argued that the application of the 2012 Interpretation resulted in a breach by the Province and its delegate APSC of fiduciary obligations owed to the plaintiffs. Justice Neufeld ruled that no fiduciary duty was owed by the Province or the APSC in this case because the plan in question is a statutory public pension plan. Furthermore, any fiduciary duty that might exist could not be used to force the Province to adopt a legislative interpretation that is incorrect in law and leads to an absurd result.

The plaintiffs also argued that once the 2009 Interpretation had been communicated to the plaintiffs, the pension benefits based on that interpretation was a "vested right" that cannot be taken away. This argument failed as it misconstrues the concept of a "vested right." The law of trust or contract cannot be stretched such as to compel the Province to continue to misapply a legislative provision.

Finally, the plaintiffs argued that the communication of the 2009 Interpretation was a negligent misrepresentation that caused them harm. On this argument, the plaintiffs succeeded. Dr. Calder was entitled to rely on the pension calculations provided, and relied on those representations to his detriment in planning his retirement (specifically, he retired earlier and spent more in early retirement than he would have had his pension benefits been originally calculated in accordance with the 2012 Interpretation).

In determining the quantum of damages for Dr. Calder, Justice Neufeld found that had the plaintiff been properly advised, he would have delayed retirement by several years. A lump sum payment to compensate for these lost years of income, after gross-up for taxes, was C$265,017, based on scenarios prepared by actuarial advisers engaged by the Province.

The Province argued unsuccessfully that the plaintiffs' lawsuits were an impermissible collateral attack on the jurisdiction of the Management Employees Pension Board, which is the body responsible for reconsideration of the interpretation of the Closed Plan. First, Justice Neufeld found that this argument was moot because the 2012 Interpretation was correct, and therefore would have withstood any review. Second, jurisprudence permits claims for damages based on a government decision, provided that the plaintiffs are prepared to accept the legal correctness of the impugned government decision. While the plaintiffs did not accept the correctness of the Province's decision, the ultimate result (based on negligent misrepresentation) was based on the conclusion that the Province's decision to reduce benefits was legally correct. For this reason, it was unnecessary to consider whether the claim was an impermissible collateral attack.

While the matter was brought forward as a test case, the success of Dr. Calder on the negligent misrepresentation claim alone will require the remaining plaintiffs to successfully demonstrate detrimental reliance on the negligent misrepresentation, including applicable damages, on an individual basis.

Alberta Court of Queen's Bench Decision

EMPLOYER OVER-CONTRIBUTIONS TO PENSION PLANS

Coco Paving Inc. v. International Union of Operating Engineers, 2017 CanLII 8326

In this labour grievance, the employer, Coco Paving Inc. (Coco), made pension contributions to the International Union of Operating Engineers (Union)'s pension plan. Due to a misunderstanding of the wage rates for employees in Simcoe County, Coco made pension contributions to the Union's plan that Coco alleged were higher than required. Over a period of four years, the alleged cumulative over-contribution was C$354,044.48. Coco, rather than seek the return of this money, sought credit from the Union to apply against future pension contributions. The Union objected and Coco brought a grievance against the Union.

The Union argued that this grievance ought to be stayed and referred to the Superintendent of Financial Services (Superintendent), as the Superintendent has the authority over the regime, set out in the Pension Benefits Act (Ontario) dealing with the repayment of over-contributions to a pension plan. Vice-Chair McKee was not convinced that Coco's application for "credit" rather than refund of the money brought the matter outside the jurisdiction of the Superintendent as "credits are simply money in another guise." Furthermore, the granting of future credits to a pension plan may create complications for the plan's solvency, calculations and individual members' registered retirement savings plan room. As the Superintendent has the authority and expertise to deal with all of these issues, Vice-Chair McKee deferred the hearing of the grievance until after the Superintendent has made a determination on Coco's allegation that it made an overpayment to the plan.

Ontario Labour Relations Board Decision

ALIENATION OF PENSION BENEFITS

Alberta Motor Association v. Gladden, 2017 ABQB 174

The Alberta Motor Association (AMA) was previously granted a consent judgment against James Gladden in the amount of C$10,236,945.26 for fraudulently misappropriating funds from the AMA while employed in a fiduciary capacity as a senior executive. In connection with the previously granted consent judgment, Mr. Gladden agreed to transfer the commuted value of his pension benefit under his pension plan (Plan) to the AMA.

The Plan is governed by the Alberta Employment Pension Plans Act (EPPA), which prohibits the alienation of pension benefits. However, despite prior case law confirming that attachment of a benefit governed by the EPPA is not permitted, Justice Veit held that section 93 of the Alberta Civil Enforcement Act (CEA) permitted transfer of the commuted value of Mr. Gladden's pension benefit under the Plan. Section 93 of the CEA provides enforcement against assets that would otherwise be exempt in certain circumstances, including assets held in a registered retirement savings plan (RRSP). Justice Veit held that the permitted enforcement against RRSPs under section 93 of the CEA would similarly apply to pension plans as "there is no material difference between RRSPs and pension benefits," both being retirement savings vehicles. Allowing creditor attachment of RRSPs in the wake of criminal activity but not against pension benefits in similar circumstances would be an arbitrary distinction that, under principles of statutory interpretation, must be avoided.

Justice Veit held that a further arbitrary distinction results from the fact that a judgment creditor could not enforce the judgment against the pension benefit itself, but could enforce it on an ongoing basis against proceeds or other assets arising from the pension. Further, subsection 93(e) of the CEA provides for enforcement on a money judgment arising out of an act for which the enforcement debtor has been convicted of an offence under the Criminal Code. Mr. Gladden consented to the judgment based on fraud. Although Mr. Gladden had not been convicted of fraud under the Criminal Code, Justice Veit held that there would be no principled reason to require an actual conviction in order to permit the victim of the fraud to pursue recovery.

Finally, subsection 93(d) of the CEA provides for enforcement with respect to property that the enforcement debtor had abandoned. Justice Veit held that the consent judgment along with the consent order constitutes an abandonment by Mr. Gladden of his pension entitlements.

As such, Justice Veit issued a consent order permitting the transfer of Mr. Gladden's pension benefit to the AMA. No details were provided in the judgment regarding how the transfer is to be made, nor was any consideration provided to the income tax implications of the transfer. The Alberta Superintendent of Pensions was not a party to the application.

Alberta Court of Queen's Bench Decision

COLLECTIVE AGREEMENTS

Service Employees International Union, Local 1 Canada v. Shannex RLC Limited, 2016 CanLII 89322 (ON LA)

This is a labour arbitration award for the renewal of a collective agreement between Service Employees International Union, Local 1 Canada (Union) and Shannex RLC Limited (Employer). The arbitration award ordered introduction of a multi-employer pension plan, the Nursing Homes and Related Industries Pension Plan (NHRIPP) at a contribution rate of two per cent.

The arbitration was before a three-panel board of arbitrators. The Employer-nominated arbitrator, Robert Kelly, dissented from the award on the introduction of the NHRIPP. Mr. Kelly noted that the original collective agreement did not contain pension language.

Mr. Kelly also stated that, in this case, the Employer has a corporate retirement plan that it proposed, during arbitration, that the bargaining unit join as members. The Employer also offered to consider contribution rates in this plan at higher than two per cent if the bargaining unit joined this plan rather than the NHRIPP.

Mr. Kelly noted that according to the replication principle, the arbitrators are to decide what the parties may have agreed to in a conciliation/strike environment. Mr. Kelly believed that the employees would have chosen the Employer's plan over the NHRIPP if given the choice.

Ontario Labour Arbitrator Decision

Ontario Nurses' Association v. Victorian Order of Nurses for Canada-Ontario Branch, 2017 CanLII 5514 (ON LA)

Deborah Hatt was employed as a nurse by the Victorian Order of Nurses for Canada-Ontario Branch, North Bay Site (VON). VON and the Ontario Nurses' Association (ONA) are parties to a collective agreement, under which Ms. Hatt was covered. A grievance was launched following the denial of long-term disability (LTD) benefits to Ms. Hatt by the insurance provider, Desjardins Insurance, on the basis that she had not satisfied the requisite conditions.

The relevant provisions of the collective agreement stated:

The Employer shall contribute towards the premium coverage of participating eligible nurses in the active employ of the Employer under the insurance plans set out below . . .

Full-time nurses have access to the National Long-Term Disability Plan, subject to its terms and conditions. . .

The issue before the arbitrator was whether the denial of LTD benefits was a dispute that arose from the collective agreement and could be adjudicated through the grievance process. VON argued that the collective agreement provided that it was only obligated to remit insurance premiums and provide a plan for LTD benefits, which it did. Accordingly, VON submitted that the denial of the LTD benefits did not relate to the collective agreement and could not be adjudicated through the grievance process. ONA countered that, by providing for "access" to the LTD plan, the collective agreement was effectively incorporating the LTD plan into the collective agreement by reference. Therefore, the grievance related to the collective agreement and was arbitrable.

The arbitrator ultimately held in favour of VON and dismissed the grievance. Based on the wording of the collective agreement, the arbitrator reasoned that VON was obligated only to ensure that a plan providing LTD benefits was in place and contribute to the insurance carrier the premiums remitted by employees. Therefore, the arbitrator decided that the subject of the dispute did not arise out of the collective agreement and was inarbitrable.

Ontario Labour Arbitrator 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.

Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Blake, Cassels & Graydon LLP
Borden Ladner Gervais LLP
Osler, Hoskin & Harcourt LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Blake, Cassels & Graydon LLP
Borden Ladner Gervais LLP
Osler, Hoskin & Harcourt LLP
Related Articles
 
Related Video
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