Canada: The Marine Atlantic Decision – Whether the Federal Pension Benefits Standards Act Requires Distribution Of Surplus On Partial Plan Termination

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Pension & Employee Benefits, July 2008

On June 26, 2008, the Federal Court of Appeal released a unanimous decision in Cousins et al. v. Attorney General of Canada and Marine Atlantic Inc. (Marine Atlantic) in which the court accepted the employer's arguments that the federal Pension Benefits Standards Act reflects a different legislative scheme from that in Ontario and, therefore, no surplus distribution on partial plan termination is required.


The appellants were former employees of Marine Atlantic Inc. (MAI) and former members of the Pension Plan for Employees of Marine Atlantic Inc. (the Plan). The Plan was a defined benefit plan, registered under the federal Pension Benefits Standards Act, 1985 (the PBSA) and regulated by the Office of the Superintendent of Financial Institutions (OSFI). In the years between 1997 and 2000, MAI implemented certain changes in its operations that resulted in the appellants and other employees having their employment terminated. In connection with those employment terminations, MAI implemented a number of partial terminations of the Plan. MAI prepared the related partial termination reports on the basis that there was no requirement to pay out a proportional share of surplus existing in the Plan at the time of the partial terminations to the affected members. OSFI took no steps to require such a distribution.

In July 2004, the Supreme Court of Canada released its decision in Monsanto Canada Inc. v. Ontario (Superintendent of Financial Institutions) (Monsanto) in which it determined that subsection 70(6) of the Ontario Pension Benefits Act (the PBA) requires the distribution of a proportional share of any surplus when a defined benefit pension plan is partially wound up. Following the release of Monsanto, counsel for the MAI appellants wrote to OSFI seeking to have Monsanto applied to the Plan pursuant to subsection 29(12) of the PBSA which provides as follows:

Where a plan is terminated in part, the rights of members affected shall not be less than what they would have been if the whole of the plan had been terminated on the same date as the partial termination.

The Superintendent declined to grant the relief requested by the appellants and, as a result, they commenced applications to the Federal Court for judicial review, in respect of each of three partial terminations.

2007 Decision Of The Federal Court

In a decision released on May 1, 2007, the Federal Court held that the applications in respect of two of the partial terminations were out of time but allowed the third application. The Federal Court reviewed the Superintendent's decision using a standard of correctness and concluded that the ordinary and grammatical sense of subsection 29(12) required members affected by a partial termination to be put in the same position in respect of distribution of surplus as those affected by a final termination, but as of the date of the partial termination. After considering the various rights that a plan member has in respect of a terminated plan pursuant to the PBSA, the applications judge found that the legislation's scheme was consistent with requiring that there be a proportional distribution of surplus on or shortly after partial termination.

Decision Of The Federal Court Of Appeal

MAI appealed to the Federal Court of Appeal. In its June 26 decision, the Federal Court of Appeal held that the proper standard of review to be applied to the Federal Superintendent's decision was reasonableness, a different standard than that applied by the Supreme Court of Canada in Monsanto to the similar decision by the Ontario Financial Services Tribunal. The Federal Court of Appeal went on to hold that under either a reasonableness or correctness standard, the Federal Court erred in interfering with the Superintendent's decision.

The Federal Court of Appeal held that the applications judge had erred in his interpretation of subsection 29(12) of the PBSA. According to the Court of Appeal, the distinctions between the Ontario legislation in Monsanto and the federal legislation at issue in Marine Atlantic are material and justified distinguishing Monsanto from the case at bar. Consequently, the court held that Monsanto could not be treated as binding authority for the proposition that members of a federally regulated pension plan have a right to a distribution of surplus at the time of a partial termination under the PBSA.

In noting the significant differences between the PBA and the PBSA, the court focussed on the definitions of "termination" and "wind up" in the respective legislation. In noting how these definitions affected the interpretation of subsection 29(12), the court stated the following:

[39] It is important to recognize that, for the purposes of the PBA, the termination of a pension plan coincides with the distribution of assets. The Ontario statute defines "wind-up" to mean the termination of a pension plan and the distribution of the assets of the pension fund. This strong and inextricable connection between the termination of a pension plan and the distribution of assets in the Ontario scheme underpinned the Supreme Court of Canada's reasoning in Monsanto. In contrast, such a connection is absent in the PBSA. Under the federal scheme, "termination" is defined to mean the distribution of the assets of a pension plan that has been terminated. While the PBSA contemplates that winding-up is a step that follows the termination of a pension plan, there is no provision in the PBSA that compels the distribution of assets to be done on the termination of a pension plan.


[43] The fact that, unlike the PBA, the PBSA treats "termination" and "winding-up" as separate and distinct terms that occur at two different periods of time is relevant to the interpretation of subsection 29(12) of the PBSA. Whereas subsection 70(6) of the PBA equalizes the rights of members on a partial and full wind-up, subsection 29(12) of the PBSA equalizes the rights of members on a partial and full termination. The PBSA defines a "surplus" to mean the amount by which the assets of a pension plan exceed its liabilities (i.e., the pension benefits owed to members). Assets and liabilities cannot be precisely determined until a plan is wound-up. As such, the existence of any actual or real surplus is determined at some point after the termination of a plan, and the distribution thereof would be the final step in the wind-up process. Accordingly, the federal scheme itself appears to preclude a right to a distribution of surplus from being a right on termination subject to subsection 29(12) of the PBSA. The suggestion by counsel for the applicants that while a right to a distribution of surplus crystallizes after the time of termination, such a right is somehow retroactive to the time of termination is without any merit. [emphasis added]

Marine Atlantic is a helpful decision in that it clarifies that the Monsanto decision should not be summarily imposed on other jurisdictions whose pensions legislation contains language similar to subsection 70(6) of the PBA—rather, should the issue of surplus distribution on partial wind-up reach the courts of other Canadian jurisdictions, a detailed analysis of that particular jurisdiction's pensions legislation will be required.

The case also provides insight on how deficits should be dealt with on termination of a federally registered plan. In identifying differences between the PBA and the PBSA, for purposes of reaching its decision on the surplus issue, the court also compared subsection 29(6) of the PBSA and subsection 75(1) of the PBA and stated at paragraph 44 that "subsection 29(6) of the PBSA is in fact different from subsection 75(1) of the PBA in that only the latter ensures that the employer is responsible for any deficit in the pension plan on wind-up, whereas the former limits the obligation of the employer, essentially, to the payment of accrued contribution obligations that are outstanding at the time of termination of the particular plan."

Supreme Court Of Canada

We will watch to see whether the respondents in this case seek leave to appeal the court's decision to the Supreme Court of Canada. This must be done by September 25, 2008.

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
1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

3 Nov 2016, Other, Vancouver, Canada

“Risk” is the new black. It’s on the lips of every CEO, CFO, GC and board member — as it should be. Can you spot it? How do you analyze it? Are you equipped to manage it?

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.