Pensions Newsletter – October 2019
October 23, 2019
Welcome to the 25th 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.
For additional information or to discuss how any aspect of these developments may affect you, please contact a member of the Blakes Pensions, Benefits & Executive Compensation group.
IN THIS ISSUE
- Norfolk General Hospital v. Service Employees International Union, Local 1, 2019 CanLII 81794 (ON LA)
- Commercial Print – Craft Limited v, Unifor, Local 51G, 2019 CanLII 79288 (ON LA)
- Revolution Environmental Solutions LP (Terrapure Environmental) v. United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, Local 2009, 2019 CanLII 88163 (BC LRB)
Mr. Hronowsky and Ms. Van Delst applied for divorce. Both were members of the Public Service Superannuation Act (PSSA). At issue was the inclusion of certain pension amounts in each party’s net family property (NFP).
Ms. Van Delst took several leaves without pay during the marriage, some of which constituted non-pensionable leave. Under the PSSA, a plan member is required to contribute to his or her pension for the first three months of leave, but may opt out of further contributions thereafter. If the plan member does not specifically opt out or elects to continue making contributions, then pension benefits accrue to that member while on leave, and the plan member is required to pay the deficiencies in contribution, either by way of a lump sum payment or by equal contributions over time. Ms. Van Delst opted for equal contributions, and at the date of separation, she still owed several payments.
The Ontario Superior Court of Justice (Court) held that as Ms. Van Delst is compelled by the PSSA and its regulations, by virtue of making the election, to receive all her pension benefit entitlements, these entitlements are “vested” within the meaning of property under section 4(1) the Family Law Act. As a result, the valuation that assumed that Ms. Van Delst continued to accrue pensionable service while on leave without pay and incorporated a deduction equal to the amount of contribution deficiencies was the appropriate valuation to be included in Ms. Van Delst’s NFP.
Ms. Van Delst was also entitled to a survivor benefit from Mr. Hronowsky’s pension. However, as it was not vested at the date of separation and would be lost upon the granting of the divorce, the Court held that it was not required to be included in Ms. Van Delst’s NFP.
With respect to Mr. Hronowsky’s pension, the Court concluded that the appropriate retirement age to be used in the valuation was age 60, as Mr. Hronowsky provided evidence that the retirement date contemplated by him was as soon as he was entitled to do so with an unreduced pension. Mr. Hronowsky’s pension also included a contingency survivor benefit, which relates to a future potential spouse. With respect to the contingency survivor benefit, the court accepted evidence that Mr. Hronowsky would likely not acquire a future spouse for whom the survivor pension will ever be an asset as he retired within three months of separation, and the plan requires that a person be the contributor for at least one year in order to qualify as an eligible spouse. As a result, the value of the contingency survivor benefit was to be included in the value of Mr. Hronowsky’s pension for the purposes of calculating his NFP.
Frank and Elizabeth Stalzer (Parties) separated in 2006, but they did not resolve the property issues arising from their separation before Mr. Stalzer’s death in 2016. The Parties were both in the Canadian military and entitled to Canadian Armed Forces (CAF) pensions. Ms. Stalzer retired from the military around 2000, while Mr. Stalzer retired prior to the Parties’ separation. Mr. Stalzer was thereafter a member of the Local Authorities Pension Plan (LAPP). Ms. Stalzer was receiving survivor benefits from the CAF pension as she was still married to Mr. Stalzer on the date of his death.
At issue was the division of Mr. and Ms. Stalzer’s CAF pensions and Mr. Stalzer’s LAPP pension and death benefits. The trial judge held that the legislation permits the division of Mr. Stalzer and Ms. Stalzer’s CAF pensions notwithstanding Mr. Stalzer’s death. While Ms. Stalzer argued that her CAF pension was no longer divisible because the CAF will not give a piece of a pension to a deceased person, section 8(5) of the Pension Benefits Division Act (PBDA) provides that an amount which cannot be transferred by reason only of the death of the former spouse shall be paid to their estate or succession. Further, the PBDA does not preclude an application being made for a division of Mr. Stalzer’s pension benefits under section 4(1) because he died. Section 6 of the corresponding regulations specifically contemplates that a former spouse of a deceased member may make an application for a division of pension benefits.
Given that Ms. Stalzer was receiving survivor benefits from Mr. Stalzer’s CAF pension and will be entitled to receive survivor benefits until she dies or otherwise ceases to be entitled to receive the benefits, the trial judge noted that the survivor benefits received by Ms. Stalzer would need to be considered by the court in equally dividing Mr. Stalzer’s CAF pension at source. However, more evidence was needed from Ms. Stalzer to make a decision on the amount, including the gross monthly amount of her survivor benefits, how much she had received in survivor benefits to date, as well as an estimate of how much she could receive in survivor benefits during her lifetime.
Further, the trial judge noted that the distribution of LAPP death benefits was subject to mandatory statutory definitions. Though Ms. Stalzer contended that the death benefits should be considered matrimonial property because Mr. Stalzer commenced his LAPP pension during the parties’ marriage, Ms. Stalzer was living separate and apart from Mr. Stalzer for three or more consecutive years at the time of his death. Thus, she did not meet the definition of surviving “pension partner(s)” as defined in section 1(3) of the Employment Pension Plans Act and the terms of the LAPP in effect at the time of Mr. Stalzer’s death. Consequently, the trial judge held that Ms. Stalzer was not entitled to pension partner death benefits nor could the commuted value of Mr. Stalzer’s LAPP pension be paid out to her as a pension. While C$127,055.22 was paid out to Mr. Stalzer’s estate from LAPP, the only portion of Mr. Stalzer’s LAPP pension held as divisible was the amount accrued between the date of marriage and the date of separation (Joint Accrual Period).
The trial judge ordered that Mr. Stalzer’s estate ask LAPP to calculate the commuted value of Mr. Stalzer’s LAPP pension during the Joint Accrual Period and Ms. Stalzer’s entitlement to same. The trial judge further ordered that Mr. Stalzer’s estate pay to Ms. Stalzer her share of the net death benefits, taking into consideration that Ms. Stalzer will need to share in the tax consequences as the death benefits have already been paid out to the estate.
In the agreed facts, a part-time employee (Employee) of Norfolk General Hospital (Hospital), who was a member of the Service Employees International Union, Local 1 (Union), voluntarily enrolled in the Healthcare of Ontario Pension Plan (HOOPP), in which the Hospital is a participating employer. The Employee retired from the Hospital and began receiving pension benefits from HOOPP. She then returned to the Hospital as a part-time employee while in receipt of HOOPP benefits. Upon return to the Hospital, the Employee neither enrolled in HOOPP, nor did the Hospital make any contributions to HOOPP on the Employee’s behalf.
The issue in this case was the interpretation of the collective agreement between the Hospital and the Union. The collective agreement provided that part-time employees shall receive 14 per cent of straight time hourly rate in lieu of all health and welfare benefits, income protection plans, and paid holidays. Notwithstanding the foregoing, all part-time employees who voluntarily enroll in HOOPP and are members of HOOPP receive 10 per cent in lieu of benefits. The Employee was only receiving 10 per cent in lieu of benefits from the Hospital.
The Union argued that context supports its position that the Employee should receive 14 per cent in lieu of benefits because the collective agreement was intended to reflect the fact that an employee enrolling in HOOPP received the advantage of the Hospital contributing to HOOPP on the employee’s behalf. The Union further argued that the difference in percentage is to prevent a part-time employee from “double dipping”. In this case, the Union submitted that the rationale no longer applies to an employee who does not, upon being employed for a second time, enroll in HOOPP and for whom the Hospital is not making pension contributions. The Hospital argued that there is no express reference to such contributions in the collective agreement. Instead, in this case, where the Employee is collecting a pension, he or she is clearly a member of HOOPP as per the collective agreement.
The arbitrator noted that, if the Hospital is correct in its interpretation, the Employee is receiving nothing from the Hospital in substitution of the four per cent that is attributable to the pension portion of the 14 per cent payment in lieu of benefits. The Employee obtains no alternative entitlement or benefit from the Hospital under the rubric of “pension” in exchange for the lost four per cent, which is not what the parties could have intended. The arbitrator held that the drafting of the collective agreement was to capture notionally the Hospital’s contribution to a pension plan member’s pension. Those part-time employees who forego membership in HOOPP receive four per cent in lieu of the Hospital’s contribution. Those who enroll in HOOPP obtain the benefit of the Hospital’s matching contribution and forego the four per cent in lieu.
As such, part-time employees who do not enroll in HOOPP at the Hospital when they are hired or re-hired are entitled to 14 per cent in lieu of the straight time hourly rate even if already in receipt of HOOPP benefits.
This case involved the layoff of almost an entire bargaining unit and the apparent insolvency of the employer. Unifor, Local 51G (Union) alleged that Commercial Print-Craft Limited (Employer) failed to pay required health and welfare contributions and pension contributions in respect of, or to, the employees involved. The Union also alleged that the Employer failed to pay outstanding amounts of termination pay and/or pay in lieu of notice of layoff and vacation pay.
The Union and Employer entered into Minutes of Settlement respecting the amounts owing for health and welfare contributions, pension contributions, termination pay, and vacation pay, whereby the Employer would make all required payments. However, the Union argued that section 4 of the Employment Standards Act, 2000 (ESA) applied, such that if the employer is unable to make the payments required of it, a related numbered company and the Employer should be treated as one employer for the purposes of the statute. The Union accordingly claimed that the employer and the numbered company were jointly and severally liable for the sums which the Union alleged were owed.
While the arbitrator directed the Employer to make all payments referred to in the Minutes of Settlement, he held that he did not have jurisdiction to declare that the Employer and the related numbered company should be treated as one employer for the purposes of section 4 of the ESA, and referred this question to the Ontario Labour Relations Board.
The Respondent, Ms. Nelson, was referred to financial planners (Appellants), to create a financial plan allowing her to retire early from employment with Hydro One. She was to set up an individual pension plan (IPP) and transfer the commuted value of her pension benefit accrued while employed with Hydro One to the IPP. The Appellants advised Ms. Nelson that she would need to incorporate a company, start a business and work for that business for a minimum of two years before retiring. If she did so, her benefits would exceed the benefits she would have otherwise been expected to receive from Hydro One’s pension plan.
Ms. Nelson started a business and asked the Canada Revenue Agency (CRA) to register her IPP and on October 16, 2008, she received confirmation from the CRA that the IPP had been accepted for registration effective September 1, 2008. On August 31, 2008, she left her employment at Hydro One and on November 24, 2008, she transferred the commuted value of her Hydro One pension to the IPP.
By February 2009, Ms. Nelson realized that the payments from her IPP were lower than what she had anticipated. In May 2009, the accountant she had retained for her newly incorporated company advised her that the IPP may not be in compliance with regulatory requirements, but the Appellants assured her that this was not the case. Regardless, Ms. Nelson retained a lawyer and an accountant who both submitted opinions stating that her IPP did not meet the requirements for registration under the Income Tax Act and that it was likely that the CRA would revoke its registration. Ms. Nelson’s counsel was assured by the Appellants that this was not true. Counsel subsequently contacted the CRA on October 10, 2010 to ask for a review of the IPP’s compliance. The CRA responded on September 28, 2011 confirming that the IPP did not comply with the requirements of the Income Tax Act. Ms. Nelson subsequently sued the Appellants.
At trial, the Appellants argued that Ms. Nelson was statute-barred from bringing a claim, as the limitation period ought to run from the date Ms. Nelson received an opinion from counsel regarding the likely non-compliance of the IPP. Ms. Nelson, however, argued that her limitation period did not begin until she had received confirmation from the CRA about the IPP’s compliance on September 28, 2011. There was no way for Ms. Nelson to know that the Appellants were providing negligent advice without her knowing for certain that the IPP was not in compliance.
The motion judge found, and the appeal judge confirmed, that it was legally appropriate for Ms. Nelson to have waited for the CRA to advise her before she brought a claim and that September 2011 was the date at which she would have discovered her claim. Consequently, her limitation period had not expired by the time she brought her action in June 2012.
The Plaintiffs were all former employees of the Defendant, Canadian National Railway (CNR), and were members of the pension plan administered by CNR (Plan). All Plaintiffs voluntarily resigned from their employment with CNR on various dates between February 12, 2007 and September 23, 2010, prior to reaching age 55. The Plan allowed for early retirement where an individual’s age and service totalled 85. The Plan further provided that such individuals are entitled to an unreduced early retirement pension payout, or a deferred pension, subject to the consent of CNR. On June 8, 2006, CNR advised its employees in writing that consent would no longer be given for those employees who resigned from employment with CNR prior to age 55.
The Plaintiffs alleged that, but for this change in practice by CNR, they would be entitled to an unreduced early retirement pension or the present value thereof. On October 19, 2011, the Plaintiffs brought an action seeking declaratory relief or, in the alternative, damages against CNR. The original statement of claim was grounded on breach of fiduciary duties which the Plaintiffs said were owed to them by CNR as beneficiaries of the Plan and that CNR had been unjustly enriched by its actions. The Plaintiffs later filed a motion to amend the statement of claim to include various claims under the Pension Benefits Standards Act, 1985 and a claim for breach of contractual duties of good faith and honesty.
The motions judge held that the proposed amendments to the statement of claim were an attempt to add new causes of action to the statement of claim, so it was necessary to determine whether the applicable limitation periods had expired. The limitation period for breach of contract is six years after the cause of action, in this case being various dates between February 12, 2013 and September 3, 2016, six years after the date each Plaintiff retired. As such, the motions judge dismissed the Plaintiffs’ motion to amend the statement of claim as proposed for all Plaintiffs, apart from one who filed the motion to amend within six years of retirement.
The Alberta Court of Appeal has upheld the decision of the Alberta Court of Queen’s Bench on the correct interpretation of section 2.1(b) of Schedule 6 of the Public Sector Pension Plans Act (PSPPA) and the assessment of damages resulting from the negligent misrepresentation of a pension plan member’s pension entitlement.
The Alberta public service pension regime for managers consisted of only one pension plan prior to 1992. Two separate pension plans were created in 1994. The Public Service Management Closed Membership Pension Plan (Closed Plan) was for members who had ceased employment as managers prior to August 1, 1992. The Management Employees Pension Plan (MEP Plan) was for employees who continued employment as managers.
The plaintiff, Dr. Calder, fell into a third category. He was a former manager from 1978 to 1986 and a deemed member of the Closed Plan, but he returned to work as a manager in 1995. The PSPPA provided that returning managers would be members of both the Closed Plan and MEP Plan, and be subject to Schedule 6 of the PSPPA. Section 2.1 of Schedule 6 provided that the calculation of benefits should be based on pensionable service before inception, set in the PSPPA as August 1, 1992, but the exception in section 2.1(b) provided that pensionable service after inception may be considered in calculating benefits. Alberta Pensions Services Corporation developed two interpretations of this provision. The 2009 interpretation was permissive and favourable to returning managers such as Dr. Calder, allowing the benefits calculation to include any salary after August 1, 1992. The 2012 interpretation calculated benefits using only salary earned after August 1, 1992, but before January 1, 1994 (which was when the single, original plan was divided into the Closed Plan and MEP Plan). Both interpretations included a cost of living adjustment.
In Dr. Calder’s case, the difference between the two interpretations was significant. In 2010, the Alberta Pensions Services Corporation assured Dr. Calder that his pension would be determined according to the 2009 interpretation, which would be a monthly entitlement of approximately C$8,000. Dr. Calder decided to retire in 2011 based on this information and began receiving his monthly entitlement. In 2014, the Alberta Pensions Services Corporation revised the calculation of Dr. Calder’s monthly pension entitlement and reduced it to approximately C$2,000, based on the 2012 interpretation. Dr. Calder and his wife brought an action against the province and the Alberta Pensions Services Corporation.
The trial judge considered the purpose of the PSPPA and determined that the correct interpretation was the 2012 interpretation, which was upheld on appeal. The PSPPA was intended to transition from the government-backed single pension plan to the more financially sustainable Closed Plan and MEP Plan. To aid in this transition, the PSPPA needed to address entitlements for the period between the end of the old plan and the creation of the new plans: August 1, 1992 to January 1, 1994. It would be logical for section 2.1(b) to limit pensionable salary to salary earned in that period. Further, the 2009 interpretation presented an aspect of double dipping, as the pensioner would get the benefit of both a recent higher salary and still receive cost of living adjustment upward based on the presumption that the salary was earned prior to 1992. Finally, the 2009 interpretation would lead to absurd results. Returning managers such as Dr. Calder would receive higher pensions than those who worked continuously for the province, as they could not benefit from the cost of living adjustment.
The trial judge did, however, find for the plaintiff on the issue of negligent misrepresentation, a finding which was upheld on appeal. The trial judge reviewed the test for negligent misrepresentation and found that it had been met in this case. That is, the trial judge found that Dr. Calder and his wife relied reasonably on the Alberta Pensions Services Corporation’s estimates of his pension entitlement to their detriment and that damages resulted from this reliance. Due to the incorrect estimate and their reliance on it, Dr. Calder and his wife lost the options that would have been available had they received a correct estimate. The correct estimate may have changed Dr. Calder’s decisions on when to retire and how he managed his investments and spending after retirement.
The trial judge awarded Dr. Calder C$267,017 in damages, and this award was upheld on appeal. The quantum was based on an expert actuarial report which assumed that Dr. Calder would continue working full-time until the age of 68, with a gross-up for taxes.
The Financial Services Tribunal (Tribunal) has decided that in the context of pension plans receiving insolvency distributions after an interim Pension Benefits Guarantee Fund (PBGF) allocation has been made, the actual PBGF allocation should be calculated according to section 34 of Regulation 909 (General) (Regulation) under the Ontario Pension Benefits Act (PBA).
In this case, the former employees of Nortel Networks Corporation (Nortel) requested a hearing regarding a Notice of Intended Decision (NOID) to approve the indexation addenda prepared by the pension plan administrator, Morneau Shepell Ltd. The main issue was the interpretation of section 86(4) of the PBA and section 34 of the Regulation.
To reduce hardship for Nortel pensioners during the wind up of Nortel, Morneau Shepell applied for, and received, an interim PBGF allocation before the assets and liabilities of the Nortel Networks Negotiated Pension Plan and the Nortel Networks Limited Managerial and Non-Negotiated Pension Plan (Nortel Plans) were determined. As the interim PBGF allocation was based on estimates, Morneau Shepell and the Ontario Superintendent of Financial Services (Superintendent) agreed on the condition that excess amounts calculated according to section 34 of the Regulation would be returned. When the Companies’ Creditors Arrangement Act distribution (CCAA Dividend) was issued, the Nortel Plans received more than Morneau Shepell anticipated. Morneau Shepell calculated the actual PBGF allocation and completed the final reconciliation.
Morneau Shepell included the CCAA Dividends received by the Nortel Plans in the pool of available assets in the calculation of the PBGF allocation, according to section 34 of the Regulation. The calculation showed an estimated total refund to the PBGF of C$221,220,000. The Superintendent approved of the calculation in the NOID. The applicants disagreed with this approach. They argued that a portion of the CCAA Dividends should not have been included in the pool of assets available to satisfy the liabilities of the Nortel Plans because this portion should pay for indexing of benefits that are not covered by the PBGF. According to the applicants’ calculation, the estimated refunds should total C$121,618,000, a difference of nearly C$100-million. Further, the applicants submitted that section 34 of the Regulation no longer applied because section 34 applies to assets existing on the date that the Superintendent authorizes a PBGF payment, and not to any assets that might be recovered by a plan administrator after such an order. Rather, the Superintendent had statutory rights to a refund only through section 86(4) of the PBA, which limits the Superintendent’s recovery to amounts guaranteed by the PBGF.
The Tribunal rejected the applicants’ arguments. The Tribunal commented that the objective of the PBA and the Regulation is to protect the entitlements of pension plan members. The PBGF, consistent with the purpose of PBA and the Regulation, provides partial compensation to pension plan members for losses arising from corporate insolvencies. Allocations are limited as prescribed in the PBA and Regulation. The PBA and Regulation should be read harmoniously to ensure that all members of various pension plans receive PBGF protection as specified, not to favour members of a particular plan.
The Tribunal agreed that Morneau Shepell was required to use section 34 of the Regulation to calculate the PBGF allocation and refund. It sets out the method for determining PBGF allocations. In response to the arguments of the applicants, the Tribunal noted that the CCAA Dividends were not “new assets” acquired after the interim PBGF allocation. They represented assets of the Nortel Plans that were initially unquantified claims and later valued and realized.
In addition, reliance on section 86(4) of the PBA was not necessary in this situation. The Superintendent was entitled to the PBGF refund based on section 34 of the Regulation and the agreed upon conditions attached to the interim PBGF allocation. The Tribunal cautioned against applying general principles of subrogation, which were developed in the context of private contracts of indemnity, to section 86(4). For example, unlike the common law full indemnity principle, the Superintendent’s right of subrogation is triggered once PBGF payment is authorized by the Superintendent, and it does not require that the insured first be fully indemnified.
Further, the Superintendent and Morneau Shepell were not in breach of any fiduciary duty they might owe to the applicants as they were discharging their statutory obligations and the positions they took were consistent with the law. The Tribunal concluded by ordering that the Superintendent (now Chief Executive Officer of the Financial Services Regulatory Authority) carry out the NOID, which approves Morneau Shepell’s indexation addenda and would result in a refund to the PBGF.
The plaintiffs, trustees of the IWA – Forestry Industry Pension Plan (Pension Plan) and IWA – Forestry Industry LTD Plan (LTD Plan), sought judgment against the defendant, Mr. Wade, for knowingly assisting R W Log Transport corporation in breaches of trust. The Pension and LTD Plans provide benefits for union workers in the forestry industry. Both the Pension Plan and the LTD Plan are funded jointly by employers and employees. Contribution amounts are based on the number of eligible hours worked by plan members, and participating employers are required to submit contribution reports for the purpose of calculating contributions.
In March 2012, R W Log Transport entered into a collective agreement with USW Union Local 1-1937, and in May 2012, R W Log Transport entered into participation agreements for the Pension Plan and the LTD Plan. Mr. Wade signed on behalf of R W Log Transport in these agreements. Mr. Wade, on behalf of R W Log Transport, also signed an undertaking to the Pension Plan board of trustees to make contributions to the Pension Plan. The Pension Plan was governed by the British Columbia Pension Benefits Standards Act, which provided that contributions required to be made to a pension plan are subject to a deemed trust and that employers must keep contributions to a pension plan separate from the employer’s own assets. The LTD Plan specifically provided that all contributions are deemed to be held in trust by the participating employer.
R W Log Transport began to experience financial difficulties and ceased operations in November 2014, at which point the company owed significant debts, including to the plaintiff trustees. Mr. Wade was the company’s directing mind from 2007 to November 2014. He experienced health issues in 2014 and reduced his participation in R W Log Transport dramatically, but he remained responsible for the management and control of R W Log Transport. In October 2014, the Pension and LTD Plan trustees notified Mr. Wade that he had outstanding contribution reports and contributions from January to September 2014, and they advised that they might initiate legal action if contributions were not received by November 4, 2014. The trustees used a deemed hours calculation for the outstanding period of contributions and initiated an action to recover these amounts.
In the course of the action, the trustees also asked Mr. Wade for records for the purposes of conducting an audit of hours, but in a statutory declaration, Mr. Wade stated that he had no records in his possession. Mr. Wade testified that his office had been destroyed in November 19, 2014 and that no records could be salvaged. R W Log Transport did not defend the action and the plaintiffs obtained a judgment for C$17,519,64 in July 2015.
In its analysis on the breach of trust issues, the Supreme Court of British Columbia (Court) reviewed the leading case on assistance in breach of trust: Air Canada v. M & L Travel Ltd.,  3 SCR 787. There are two ways in which a stranger to the trust can be held personally liable to the beneficiaries for a breach of trust:
- Knowingly receiving and dealing with trust property, or knowingly assisting the trustee in a dishonest and fraudulent breach of trust.
- Under the second category, the trustee’s actions will be scrutinized to determine whether the breach of trust was fraudulent or dishonest. Further, for the stranger to be personally liable, they must have had “both actual knowledge of the trust’s existence and actual knowledge that what is being done is improperly in breach of that trust.”
The Court held that R W Log Transport breached its duty as trustee over the contributions to the Pension and LTD Plans. R W Log Transport failed to keep the contributions to the Plans in a separate account, and instead kept the contribution funds in the company’s sole bank account, a general operating account. There were insufficient funds in the account, and when R W Log Transport experienced financial difficulties, the money that should have been set aside for contributions was used to pay operating expenses. The Court also found that the breach of trust was dishonest and fraudulent because R W Log Transport failed to set up a separate bank account for the contribution funds. This resulted in prejudice to the Pension Plan and the LTD Plan due to the risk of failure to remit contributions and to the union employees due to the risk of failure to provide them with benefits conferred by the Plans.
Further, there was evidence that Mr. Wade had knowledge of R W Log Transport’s obligations to remit contributions and the breach of trust by R W Log Transport. In any case, he was found to have at least been willfully blind to the breach of trust. As such, the Court concluded that Mr. Wade knowingly and directly assisted in the breach of trust, that he knew that it was fraudulent and dishonest and that he was personally liable for the breach of trust. The Court accepted the plaintiffs’ calculations of deemed contributions, given that Mr. Wade failed to present any records to the contrary and failed to defend the initial action that resulted in the default judgment for the deemed amounts.
The Court held that Mr. Wade was personally liable for knowingly assisting R W Log Transport in its breaches of trust. He was held to be liable for the sum of C$16,529.95 as sought.
The plaintiff was a pensioner who worked for Bell Canada. He brought a double motion, seeking certification of a proposed class action on behalf of similarly situated Bell retirees and summary judgment of the claim that in 2017, Bell Canada miscalculated the cost of living increase for all pensioners. The Ontario Superior Court of Justice (Court) certified the class action. It found that the causes of action (breach of contract, breach of trust and breach of fiduciary duty) were properly pleaded, that there was an identifiable class of two or more persons, that there were common questions for each of the causes of action, that judicial economy would be enhanced by proceeding as a class action, and that the plaintiff was an appropriate representative plaintiff.
The Court then dismissed the certified class action in summary judgment. The dispute between the parties concerned the interpretation of clauses in the pension plan that determined the amount of pension indexation for 2017 and subsequent years. According to the plaintiff’s interpretation of the clauses, the indexing increase would be two per cent for 2017, whereas the defendants interpreted such clauses to provide an indexing increase of one per cent.
The Court found that the dispute stemmed from a punctuation issue. The placement of the comma in the controversial clause created two possible interpretations. The defendant’s interpretation was that, as plan manager, it should independently determine the annual percentage increase according to the plan. The plaintiff’s interpretation was that the defendant should use the annual percentage increase as determined by Statistics Canada. However, when the Court considered the plan as a whole, it became clear that only the defendant’s interpretation gave meaning to other related calculation provisions in the plan. Approving of the doctrine of contract interpretation to avoid rendering terms ineffective and meaningless, the Court favoured the defendant’s interpretation. As a result, the Court granted summary judgment to the defendants and dismissed the action.
Revolution Environmental Solutions LP (Terrapure Environmental) v. United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, Local 2009, 2019 CanLII 88163 (BC LRB)
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, Local 2009 (Union), filed an unfair labour practice complaint against Revolution Environmental Solutions LP (Terrapure Environmental) (Employer) alleging a violation of section 45 of the Labour Relations Code (Code) in respect of changes to the benefit plan provided by the Employer. Section 45 of the Code contains freeze provisions that prohibit an employer from changing the rate of pay of an employee or altering another term or condition of employment until 12 months after the Labour Relations Board (Board) certifies a trade union or a collective agreement is executed, whichever occurs first.
The Employer advised employees at its Delta, British Columbia office in December 2018 that there would be changes to the benefit plan for non-unionized employees to harmonize benefit plans across Canada. The Employer held information sessions and emailed employees to explain the changes throughout January and February 2019. While the changes included a reduction in the Employer’s RRSP contributions from eight to five per cent, the new benefit plan enhanced certain health and welfare benefits (including the addition of a health care spending account, critical illness coverage and a flex plan for employees with alternate coverage). In February 2019, the Union was certified. The changes to the benefit plan were implemented shortly after on March 1, 2019.
The Union argued that the Employer violated section 45 of the Code by carrying out changes to the benefit plan during the statutory freeze period. The Union argued that the changes should not have applied to newly unionized employees, that there was no urgency to change benefits, and that the changes upset the status quo entering bargaining. The Employer argued that the changes fell within the “business as usual” exception because the benefits were in motion and announced to employees well prior to the Union’s certification application. Further, the changes to the benefit plan did not constitute a change to the terms of employment because the new plan was reasonably comparable to the existing plan.
The Board found for the Employer and outlined that section 45 of the Code is not intended to prevent an employer from giving effect to firm decisions that are crystallized before certification but are not implemented until afterwards. The Employer finalized the decision to implement the new benefit plan and explained the changes to its employees months before the Union applied for certification. The Board further noted that the Employer clearly intended for the plan to apply to all employees except those who were already unionized at the time the changes were announced, that Delta employees were told that the new benefit plan would apply to all locations except to those which were already unionized, and that the Employer is not required to show a pressing or urgent need to implement a change to meet the “business as usual” test.
The Board concluded that the changes to the benefit plan were “business as usual” and not intended to penalize employees for joining the Union. As such, the Employer did not violate the section 45 statutory freeze.
The Applicant, Mr. Fuller, and his personal company, JPF Komon Kaisha Inc. (JPF), sought damages from the Respondent, Aphria Inc. (Aphria), for Aphria’s refusal to permit JPF’s exercise of 200,000 stock options in accordance with the stock option agreement between the parties.
Mr. Fuller decided to pursue a medical marijuana business venture along with Mr. Cacciavillani and Mr. Carvini. Mr. Fuller was appointed Chief Executive Officer (CEO) of Aphria’s predecessor, Pure Natures Wellness Inc. (PNW). PNW was working toward completing a private placement and implementing a reverse takeover to become a public company on the TSX Venture Exchange (RTO). At that time, Mr. Cacciavillani and Mr. Carvini advised Mr. Fuller that they no longer wanted him employed as the CEO of the company.
Mr. Fuller entered into a Consulting Agreement and a Stock Option Agreement dated June 2, 2014 with the company. The Consulting Agreement provided that, for a term of two years (i.e., until June 2, 2016), Mr. Fuller would provide consulting services to PNW through JPF, which included assisting PNW in obtaining its final licence to distribute and sell medical marijuana (Final Licence) and assisting in various tasks related to the RTO. In return, JPF would receive compensation of approximately C$590,000 and 200,000 options to purchase common shares of PNW/Aphria.
The options were to be issued immediately upon receipt of the Final Licence and were to expire five years from the completion of the RTO. Further, the options were made subject to the terms and conditions of any option plan implemented by the Resulting Issuer (defined as the publicly listed entity resulting from the RTO). The Stock Option Agreement outlined that Mr. Fuller had been granted options to acquire common shares of Aphria under the Aphria Stock Option Plan and that the options were subject to the terms and conditions of such plan.
On December 1, 2014, the shareholders approved the RTO as well as the Aphria Incentive Stock Option Plan (Plan). The Plan provided that each vested option by a participant would cease to be exercisable on the earlier of the original expiry date of the option and six months after the participant’s termination date.
On December 2, 2014, Aphria received its Final Licence and, in accordance with the terms of the Consulting Agreement, the Options vested on that date. The Consulting Agreement expired on June 2, 2016, at the end of its two-year term. On December 6, 2017, Mr. Fuller delivered to Aphria an executed election to exercise stock options. Aphria advised Mr. Fuller that it did not accept his exercise of the options as his right had previously expired on December 2, 2016, pursuant to the terms of the Plan.
Mr. Fuller claimed breach of contract and argued that it was clear from reading the Consulting Agreement, the Stock Option Agreement and the Plan that the intent of the parties was that the options would be granted over a five-year term. As such, Mr. Fuller argued that the options vested on December 2, 2014 and could be exercised until December 2, 2019. Aphria submitted that the proper interpretation when the three documents were read together was that the options were subject to the terms of the Plan and the Plan clearly provided that the options were to expire six months after the termination of the Consulting Agreement, being December 2, 2016.
The application judge dismissed Mr. Fuller and JPF’s claim, noting that regard must have been had to each of the Consulting Agreement, Stock Option Agreement and the Plan. The documents were connected, inter-related instruments which must be interpreted in light of each other. The application judge further noted that a plain reading of the Consulting Agreement makes clear that the parties’ intention was to make the terms of the options subject to Aphria’s future option plan. While the expiry date of the options was June 2, 2019 (as indicated in the Stock Option Agreement), the exercise date was the earlier of the expiry date and six months after the termination date of the Consulting Agreement, as provided by the Plan. Accordingly, the options expired six months after the termination of the Consulting Agreement and Mr. Fuller did not exercise the options within that six-month period.
Posted in: Pensions, Benefits & Executive Compensation
Blakes and Blakes Business Class communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue.
We would be pleased to provide additional details or advice about specific situations if desired.
For permission to reprint articles, please contact the Blakes Client Relations & Marketing Department at firstname.lastname@example.org. © 2019 Blake, Cassels & Graydon LLP