Canada: Federal Court Decision In The Application For Judiciary Review In The Buschau Matter

Copyright 2008, Blake, Cassels & Graydon LLP

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

Following the Supreme Court of Canada decision in Buschau, the legal representative of members and former members of the Pension Plan for Employees of Premier Cable Systems Limited, and legal representative of Rogers Communications Incorporated (RCI) and Rogers Cable Communications Inc. (employer and administrator of the Premier Plan) made submissions to the federal Acting Superintendent of the Office of Financial Institutions (the Superintendent) concerning the Pension Plan for Employees of Rogers Communications Inc., and, in particular, the portion of that plan previously known as the Premier Plan. In summary, the members requested that the Superintendent:

  • Consider the Premier Plan already terminated; or
  • Terminate the Premier Plan pursuant to section 29 of the Pension Benefits Standards Act (PBSA); or
  • Direct Rogers to terminate the Premier Plan, and
  • After termination of the Premier Plan, remove the current administrator of the Premier Plan; and
  • After termination, wind up the Premier Plan by allowing the fund to be used to buy annuities to cover pension benefits, with the balance of the surplus distributed to members.

RCI argued the merger of the RCI Plan and Premier Plan was not completed because of past court decisions that prevented RCI from completing the merger. Following the Supreme Court's decision, RCI advised it had decided to revoke the merger, thereby separating the Premier Plan and RCI Plan. RCI further submitted it had decided to amend the Premier Plan by reopening it to a new class of employees.

On the basis of the foregoing submissions, the Superintendent decided:

  • The decision by RCI to revoke the merger of the Premier Plan and RCI Plan and the reopening of the Premier Plan did not contravene the terms of the Premier Plan or the federal PBSA;
  • As a factual matter, the Premier Plan had not been terminated under the PBSA or by the employer;
  • The Premier Plan had not "terminated" within the meaning of the PBSA; Not to exercise the Superintendent's discretion to declare the Premier Plan terminated; and
  • Taking into account all of the evidence and submissions of the parties, the continued existence of the Plan was a worthy goal and the employer was continuing to provide the promised benefits and was complying with solvency requirements.

On the question of termination by the regulator, either directly by way of declaration or by directing the employer or administrator to terminate a plan, the decision noted that this was "an extreme measure, usually done only after other regulatory intervention measures have failed". The decision states that termination may be appropriate "where the pension benefits are jeopardized, the plan's funding level is not in accordance with the PBSA and cannot be rectified or the purpose of the plan is frustrated". On the amendments to reopen the Premier Plan, the decision notes that while the Premier Plan had been closed to new members since 1984, no submissions were made that the closure amendment was irrevocable. Further, the decision includes a review of the relevant plan terms and concludes they permitted the company's proposed actions of revoking the merger of the Premier Plan with the RCI Plan and reopening the former plan to new members. In conclusion, the decision states "in deciding to revoke the merger and to reopen the [Premier] Plan to new employees, RCI and Cable Inc. are not acting contrary to safe and sound financial or business practices, are not jeopardizing the pension benefits of the members, and are not contravening the PBSA nor the terms of the [Premier] Plan."

On September 11, 2008 the Federal Court released its reasons for judgment granting the application for judicial review of the Superintendent's decision and referring it back to the Superintendent for redetermination.

As noted above, the members and former members had requested that the Superintendent terminate the Premier Plan and the Superintendent declined to do so. The Superintendent had considered her power to order a plan termination under section 29 of the PBSA, found no power existing in these circumstances under paragraphs 29(2)(b) and (c) and therefore considered her powers under paragraph 29(2)(a).

Subsection 29(2) of the Act delegates to the Superintendent the discretion to terminate a pension plan: (2) The Superintendent may declare the whole or part of a pension plan terminated where (a) there is any suspension or cessation of employer contributions in respect of all or part of the plan members... The Superintendent found that, given the cessation of contributions was the result of contribution holidays taken in accordance with the PBSA, "the situation did not warrant the use of her discretion to terminate the Plan."

The court considered the Superintendent's decision and found as follows:

[51] In my opinion, the Superintendent failed to appreciate the extent of her discretion under paragraph 29(2)(a) and rendered a decision that was unreasonable given the evidence before her. I am of this opinion for two reasons. Firstly, the Superintendent failed to recognize that even legitimate contribution holidays that are valid under the Act can be considered illegitimate for the purposes of paragraph 29(2)(a) if they are used to hide an improper refusal to terminate on the part of the employer. The evidence before the Superintendent included that in the past, Rogers Inc. had replaced an uncooperative actuary and trustee, had improperly amended the Plan, and had improperly withdrawn funds from the Plan all with the objective of getting at the Plan's surplus. In my opinion, this evidence, coupled with the fact that Roger Inc. had closed the Plan in 1984, had stopped making contributions to the Plan, and had no intention to reopen the Plan until the applicants filed their petition for termination, makes the Superintendent's finding unreasonable.

[52] Secondly, the Superintendent failed to appreciate her duty to the employees under paragraph 29(2)(a). As mentioned by the Supreme Court of Canada, the powers delegated under the Act must be exercised in light of its remedial purpose. This duty is not to be taken lightly as it provides Plan members with a much needed remedy. In light of these failures on the part of the Superintendent, I am of the opinion that her decision not to exercise her discretion under paragraph 29(2)(a) was unreasonable. I would allow the judicial review on this ground.

It is difficult to reconcile this decision with the fact that the Supreme Court of Canada left to the Superintendent's discretion the decision as to whether to require a wind up of the pension plan.

Rogers has 30 days from September 11 to appeal this matter to the Federal Court of Appeal and we have been told that it is their intention to do so.

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.

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