In the context of CCAA proceedings for Sears Canada Inc., the Employee Representative Counsel sought an order for directions regarding the distribution of an approximately $850,000 Deposit Fund Surplus, which resulted from the termination of employee life insurance coverage provided by Sun Life.
The counsel argued that Sears acted as an agent for its employees in remitting insurance premiums, and therefore, the portion of the surplus attributable to employee contributions should be returned to them pro rata.
The Monitor opposed, contending that Sears had a contractual entitlement to the surplus under the financial letter of agreement with Sun Life and that no agency or fiduciary relationship existed.
The court found that an agency relationship was established when employees permitted Sears to deduct and remit premiums on their behalf, preventing Sears from unjustly enriching itself by retaining the surplus.
The court ordered the Monitor to distribute the relevant percentage of the surplus to the participating employees.
