The August 7, 2009 decision of the Supreme Court of Canada in
the Kerry decision relating to pension plans essentially
findings of the Ontario Court of Appeal from 2007. The
highlights are as follows:
Provided that (i) there is a single, ongoing pension plan with
both a defined benefit (DB) and a defined contribution (DC)
feature, (ii) the members of both parts are beneficiaries of the
pension trust fund, and (iii) the employer may lawfully take
contributions holidays in respect of the DB feature, then it is not
unlawful under the Pension Benefits Act (Ontario) or the
common law to also apply the surplus in the trust fund to take
employer contribution holidays in respect of the DC members of the
Vis-à-vis payment of pension plan expenses, unless an
employer has clearly committed to paying a plan expense, it is not
obliged to pay plan expenses and it is not unlawful to charge
reasonable and bona fide plan expenses to the pension
trust fund (in this case Kerry (Canada) Inc. had committed to
paying trust expenses and had continued to do so, but the expenses
in dispute related to plan expenses such as actuarial, legal,
accounting etc. in the administration of the plan). The court also
ruled that, unlike the Ontario Court of Appeal, it saw no
differences between expenses paid to third-party service providers
and payment for in-house administration provided by the employer,
provided that in each case the expense was reasonable and bona
The amendment of a pension plan to allow the employer to charge
pension plan expenses to the trust fund is not prohibited merely
because the trust agreement or pension plan (or both) contains an
"exclusive benefit" clause. However, expenses incurred to
review the plan terms in support of a decision to add a DC
provision was for the sole benefit of the employer and should not
be charged to the pension plan.
With respect to cost awards in litigation of this type, the
court upheld the ruling that the Financial Services Tribunal has no
jurisdiction to order litigation costs payable from a pension fund
where the fund is not a party to the proceeding (as it was not
here) and that while a court has authority to order litigation
costs be paid from a pension trust fund in some cases, where the
litigation is not for the advantage of all of the beneficiaries of
the pension plan, then the matter is "adversarial" and
such costs should not be awarded from the pension trust fund.
The foregoing is necessarily an abbreviated highlight of the
decision and it must be remembered that all cases turn on their
individual facts. Also, seven Justices of the Supreme Court of
Canada heard this matter and while five of them supported the
Ontario Court of Appeal decision in concluding that the DC
contribution holidays were not unlawful, two of the justices
disagreed with that conclusion. Employers should take this decision
as a welcome "good news" story after a difficult several
months on the pension front.
This article was previously published as an
e-Alert. For a more detailed discussion of the Kerry
decision, please see our August
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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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
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