Hembruff et al. v. Ontario Municipal Employees Retirement Board Lyon et al. v. Ontario Municipal Employees Retirement Board [Indexed as: Hembruff v. Ontario Municipal Employees Retirement Board]
78 O.R. (3d) 561
[2005] O.J. No. 4667
Dockets: C41729 and C41752
Court of Appeal for Ontario,
Cronk, Gillese and Armstrong JJ.A.
November 1, 2005
*Application for leave to appeal to the Supreme Court of Canada was dismissed with costs April 20, 2006 (Bastarache, LeBel and Deschamps).
Fiduciaries -- Duties -- Pension plan administrator not having fiduciary obligation to disclose pension plan changes that are under consideration -- Such information not material.
Torts -- Negligent misrepresentation -- Pension plan administrator having duty to disclose highly relevant information to members of plan -- Information on potential future benefit improvements not constituting highly relevant information -- Administrator not having duty to disclose such information -- Trial judge erring in finding pension plan administrator liable for negligent misrepresentation in failing to inform members taking early retirement that it was contemplating making benefit improvements to plan.
The eight plaintiffs were employees who resigned from their positions with the Toronto Police Services Board in 1998 and withdrew the commuted values of their pensions from their pension plan. They were not given benefit enhancements that came into effect the following year and which were made from surplus funds in the pension plan. Four other employees who resigned in 1998 were given the 1999 benefit enhancement, however. The plaintiffs brought an action against the plan administrator alleging that they had been wrongly deprived of the benefit enhancement. They claimed damages for breach of fiduciary duty, alleging that the defendant failed to treat all members fairly and to administer the plan equitably and in good faith. Alternatively, they sought damages for negligent misrepresentation, claiming that the defendant had a duty to inform members, in advance, of possible changes to the benefits scheme and that it breached that duty to the detriment of some of the members. The trial judge found that the defendant was liable for negligent misrepresentation to six of the eight plaintiffs and that it breached its fiduciary duty to those six plaintiffs. The claims of the remaining two defendants were dismissed. The defendant appealed. One of the unsuccessful plaintiffs, L, also appealed.
Held, the defendant's appeal should be allowed; L's appeal should be dismissed.
The defendant, as administrator of the pension plan, owed a duty of care to members of the plan. However, the trial judge erred in law in finding that the defendant's failure to inform members of the anticipated future event of a plan change leading to a benefit enhancement represented an untrue, inaccurate or misleading representation. A pension plan administrator has an obligation to disclose highly relevant information. Failing to disclose accurate and complete information regarding a pension plan's existing terms and options can amount to an untrue, inaccurate or misleading representation. However, information on what a pension plan's terms potentially might be is not highly relevant. Because such information is a forecast as to the future, it is speculative in nature and, therefore, not information on which it would be reasonable to rely. A representation [page562] must be a matter of ascertainable fact, as distinguished from an opinion or expectation. Until the defendant finally decided upon the package of recommendations it intended to submit to the provincial government, the possibility of benefit enhancements was nothing more than an expectation. The claim for negligent misrepresentation failed.
The defendant did not breach its fiduciary obligation to the plaintiffs by failing to disclose that potential plan enhancements were under consideration. Section 26 of the Pension Benefits Act, R.S.O. 1990, c. P.8, which requires advance notice in certain circumstances of an amendment that would result in a reduction of pension benefits or otherwise adversely affect a member's rights or obligations, did not apply to require the defendant to give advance notice of the potential benefit enhancement, as an enhancement does not reduce or negatively impact upon rights or obligations. While the plaintiffs were members of the pension plan, the defendant owed them fiduciary duties that included the duty to disclose material information. However, for the same reason that information about potential plan changes is not highly relevant for the purpose of determining whether it constitutes negligent misrepresentation, it is not material and therefore does not give rise to a disclosure obligation. There are significant reasons why a disclosure obligation should not be imposed in respect of pension plan changes that are under consideration. Imposition of such an obligation would result in an unmanageable burden being placed on the defendant. The defendant's consideration of possible surplus management options at various meetings and consultations was a dynamic process. If potential plan changes were announced but subsequently modified or discarded as the result of further input, administrators could be faced with unhappy members who had relied to their detriment on the earlier announcement. To guard against this possibility, the announcement of a plan change under consideration would have to be in such general terms as to be hopelessly vague or so circumscribed as to be meaningless. Until the defendant finalized its recommendations, the information was not material because it was speculative and subject to change. It would not have been reasonable for a member to rely on information that was clearly subject to the consultation process and, therefore, subject to change. Accordingly, the trial judge erred in concluding that the defendant was in breach of its duty to disclose information on potential plan changes under consideration.
The trial judge also erred in finding that the defendant's recommendation of January 1, 1999 as the effective date for the plan amendments constituted a breach of its fiduciary duty to treat all plan members fairly and equitably.
APPEAL by the defendant from the judgment of Kiteley J. of the Superior Court of Justice, [2004] O.J. No. 1355, [2004] O.T.C. 289 (S.C.J.) finding the defendant liable for negligent misrepresentation and breach of fiduciary duty.
Hercules Managements Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165, [1997] S.C.J. No. 51, 115 Man. R. (2d) 241, 146 D.L.R. (4th) 577, 211 N.R. 352, 139 W.A.C. 241, [1997] 8 W.W.R. 80, 31 B.L.R. (2d) 147, 35 C.C.L.T. (2d) 115; Nuxoll v. Inco Ltd., [1997] O.J. No. 4680, 47 O.T.C. 40, 33 C.C.E.L. (2d) 97, 45 C.C.P.B. 243, 98 C.L.L.C. para. 210-002, 75 A.C.W.S. (3d) 665 (Gen. Div.), consd Other cases referred to Bratkowski v. Ontario Teachers' Pension Plan Board, [1997] O.J. No. 2775, 36 O.T.C. 296, 16 C.C.P.B. 182, 72 A.C.W.S. (3d) 784 (Gen. Div.); Canada Trustco Mortgage Co. v. Bartlet & Richardes (1996), 1996 526 (ON CA), 28 O.R. (3d) 768, [1996] O.J. No. 1551 (C.A.); CF Kingsway Inc. v. Goetz, [2002] O.J. No. 2381, 32 C.C.P.B. 226, 112 A.C.W.S. (3d) 829 (S.C.J.); Datile Financial Corp. v. Royal Trust Corp. of Canada (1992), 1992 7661 (ON CA), 11 O.R. (3d) 224, [1992] O.J. No. 3680 (C.A.), affg (1991), 1991 7310 (ON SC), 5 O.R. (3d) 358, [1991] O.J. No. 1859 (Gen. Div.); Deraps v. Labourer's Pension Fund of Central and Eastern Canada, 1999 3790 (ON CA), [1999] O.J. No. 3281, 179 D.L.R. (4th) 168, 124 O.A.C. 73, 21 C.C.P.B. 304, 91 A.C.W.S. (3d) 160 (C.A.); [page563] Foster Advertising Ltd. v. Keenberg, 1987 5267 (MB CA), [1987] M.J. No. 41, 45 Man. R. (2d) 1, 35 D.L.R. (4th) 521, [1987] 3 W.W.R. 127, 38 C.C.L.T. 309 (C.A.) [Leave to appeal to S.C.C. refused (1987), 80 N.R. 314n]; Gauthier v. Canada (Attorney General), 2000 20261 (NB CA), [2000] N.B.J. No. 143, 185 D.L.R. (4th) 660, 225 N.B.R. (2d) 211, 23 C.C.P.B. 275, 96 A.C.W.S. (3d) 152 (C.A.); Hinchey v. Gonda, [1955] O.W.N. 125 (H.C.J.); Lee v. 1071397 Ontario Inc., [2000] O.J. No. 4389, 101 A.C.W.S. (3d) 175 (C.A.), affg [1999] O.J. No. 8, 84 A.C.W.S. (3d) 1214 (Gen. Div.); Mair v. Stelco Inc., [1995] O.J. No. 2535, 9 C.C.P.B. 140, 57 A.C.W.S. (3d) 360 (Gen. Div.); McIntosh Estates Ltd. v. Surrey (City), [2000] B.C.J. No. 216, 2000 BCSC 128, 9 M.P.L.R. (3d) 84, 94 A.C.W.S. (3d) 771 (S.C.); McMaster University v. Robb, [2001] O.J. No. 5480, 37 C.C.P.B. 252, 41 C.P.C. (5th) 403 (S.C.J.); PWA Corp. v. Gemini Group Automated Distribution Systems Inc. (1993), 1993 8475 (ON CA), 15 O.R. (3d) 730, [1993] O.J. No. 1793, 103 D.L.R. (4th) 609, 10 B.L.R. (2d) 109, 49 C.P.R. (3d) 456 (C.A.); Queen v. Cognos Inc., 1993 146 (SCC), [1993] 1 S.C.R. 87, [1993] S.C.J. No. 3, 99 D.L.R. (4th) 626, 147 N.R. 169, 45 C.C.E.L. 153, 14 C.C.L.T. (2d) 113, 93 C.L.L.C. 14,019; Spinks v. Canada, 1996 4041 (FCA), [1996] F.C.J. No. 352, [1996] 2 F.C. 563, 134 D.L.R. (4th) 223, 19 C.C.E.L. (2d) 1, 12 C.C.P.B. 81, 62 A.C.W.S. (3d) 298 (C.A.); Yates v. Air Canada, [2004] B.C.J. No. 43, 2004 BCSC 3, 40 C.C.P.B. 121, 5 E.T.R. (3d) 281, 128 A.C.W.S. (3d) 590 (S.C.) Statutes referred to Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) Ontario Municipal Employees Retirement System Act, R.S.O. 1990, c. O.29 Pension Benefits Act, R.S.O. 1990, c. P.8, s. 26 Regulations referred to R.R.O. 1990, Reg. 890 ("Ontario Municipal Employees Retirement System Act"), s. 4(1)
J. Brett Ledger and David A. Stamp, for Ontario Municipal Employees Retirement Board. Bryan B. Skolnik, for R. Lyon. Michael N. Freeman, for D. Hembruff, B. Hill, J. Lee, R. McKinnnon, F. Van Den Bijllaardt and P. Wilson.
The judgment of the court was delivered by
[1] GILLESE J.A.:-- Does a pension plan administrator have a duty to advise plan members that it is contemplating making benefit improvements to the plan? If so, when does that duty arise? These questions lie at the heart of this appeal.
Overview
[2] Employees of municipalities and local boards in Ontario are part of the Ontario Municipal Employees Retirement System (the "OMERS pension plan"). The appellant, the Ontario Municipal [page564] Employees Retirement Board (the "Board"), administers the OMERS pension plan.
[3] In 1998, eight employees resigned from their positions with the Toronto Police Services Board (the "TPSB") and withdrew the commuted values of their pensions ("CVPs") from the OMERS pension plan. Once they withdrew their CVPs, they were no longer members of the OMERS pension plan. They were not given benefit enhancements that came into effect on January 1, 1999, and which were made from surplus funds in the OMERS pension plan (the "1999 benefit enhancement"). Four other TPSB employees who resigned in 1998 were given the 1999 benefit enhancement, however. In addition to the commuted values of their pensions, these four non-plaintiffs received approximately $33,000, $46,000, $158,000 and $219,000, respectively.
[4] The eight employees brought an action against the Board in which they alleged that they had been wrongly deprived of the 1999 benefit enhancement. They claimed damages for breach of fiduciary duty, alleging that the Board failed to treat all members fairly and to administer the pension plan equitably and in good faith. Alternatively, they sought compensation for negligent misrepresentation, claiming that the Board had a duty to inform members, in advance, of possible changes to the benefits scheme and that it breached that duty to the detriment of some of the members.
[5] By judgment dated March 31, 2004, Kiteley J. held the Board liable in damages to six of the eight plaintiffs in amounts that ranged between $97,423 and $178,988. The trial judge found the Board liable for negligent misrepresentation by virtue of failing to keep the six plaintiffs reasonably informed and that the Board breached its fiduciary duty to the six plaintiffs as it failed to treat all members of the OMERS pension plan fairly and equitably. The damages represented the value of the 1999 benefit enhancement to each of the six successful plaintiffs. The trial judge dismissed the claims of the remaining two plaintiffs, R. Lyon and R. Wilson.
[6] The Board appeals, asking that the judgment below be set aside and the action dismissed. The six successful plaintiffs -- D. Hembruff, B. Hill, J. Lee, R. McKinnon, F. Van Den Bijllaardt and P. Wilson -- are the respondents in the Board appeal and are referred to as the "respondents" throughout. The eight original plaintiffs are referred to as the "plaintiffs".
[7] Lyon appeals, asking that judgment be granted in his favour.
[8] For the reasons that follow, I would allow the Board appeal and dismiss the Lyon appeal. [page565]
Background
[9] The OMERS pension plan is a statutory pension plan scheme established under, and governed by, the Ontario Municipal Employees Retirement System Act, R.S.O. 1990, c. O.29, as amended (the "OMERS Act") and its Regulation, R.R.O. 1990, Reg. 890, as amended (the "OMERS Regulation"). The Pension Benefits Act, R.S.O. 1990, c. P.8, as amended, also governs the OMERS pension plan. The Lieutenant Governor in Council effects changes to the terms of the OMERS pension plan by amending the OMERS Regulation.
[10] The OMERS pension plan is administered by the Board, which is composed of six employee representatives, six employer representatives, and one government representative. The Board has the practice of recommending, to the Ontario government, changes to the OMERS Regulation.
[11] The OMERS pension plan is a defined benefit plan. Employers and employees make equal contributions. At the time of trial, there were about 900 participating employers and 300,000 participating employees in the OMERS pension plan.
[12] All TPSB employees have been required to be members of the OMERS pension plan since 1972.
[13] Each of the plaintiffs resigned from the TPSB between mid-January and mid-September 1998. At the time of their resignations, each plaintiff was in his mid- to late-40s. All resigned in order to pursue other employment opportunities. Because the plaintiffs left their employment before retirement age, they were not entitled to an immediate pension from the OMERS pension plan. However, each was entitled to a deferred pension. Consequently, each plaintiff had a choice to make. He could leave his accumulated pension credit in the OMERS pension plan until he became eligible to receive a pension, at which time the OMERS pension plan would begin paying him his pension. Under this option, even though the plaintiff would no longer be a TPSB employee, he would remain a member of the OMERS pension plan throughout the deferral period. Alternatively, each plaintiff could elect to take his CVP and transfer it to another pension plan or to an RRSP. An individual who takes his or her CVP ceases to be a member of the OMERS pension plan.
[14] A member's CVP is determined by an actuarial calculation performed in accordance with the Pension Benefits Act. A member who elects to take a CVP may change his or mind with respect to the election, up to the point when he or she receives the CVP cheque.
[15] All the plaintiffs filled out a termination election form ("TEF") in which they chose the CVP option. A statement on the TEF advised that if the member elected the transfer of the CVP, [page566] that member forfeited all rights to a pension or other pension benefits from the OMERS pension plan. The form also specified that the commuted value amounts provided for in the form would remain in effect for a limited time and that if the member did not return the TEF within that time, the re-calculated commuted value might be lower than that provided for in the original TEF.
[16] Each plaintiff sent his TEF to the Board and received a cheque, in 1998, for the CVP.
[17] Four non-plaintiffs in similar employment situations to those of the plaintiffs were given the 1999 benefit enhancement. All of them resigned in 1998 and were entitled to deferred pensions at the time of resignation. Between December 22, 1998 and January 27, 1999, each of the four non-plaintiffs sent in a TEF in which they elected to take the CVP rather than a deferred pension. In addition to receiving cheques for the CVPs, they received cheques in the approximate amounts of $33,000, $46,000, $158,000 and $219,000, respectively, for the 1999 benefit enhancement. The Board explains that it gave the non-plaintiffs the benefit enhancement for this reason. While the 1999 Plan Amendment (as defined later in these reasons) had the effect of removing the CVP option for members in the position of the four non-plaintiffs, the non-plaintiffs had exercised the option to take their CVPs at a time when they were entitled to so do. The Board concluded that, in the circumstances, it could not remove the non-plaintiff's rights to take their CVPs. And, as the four non-plaintiffs had not received their CVPs prior to January 1, 1999, they were members of the OMERS pension plan as at that date. Consequently, they were entitled to the 1999 benefit enhancement despite having elected to take their CVPs.
[18] The following chart summarizes the key dates for the plaintiffs and four non-plaintiffs.
| Plaintiff | Date of Resignation | Date of TEF submitted with CVP election | Date on which plaintiff received CVP cheque |
|---|---|---|---|
| Hembruff | June 19, 1998 | July 28, 1998 | August 7, 1998 |
| Hill | July 5, 1998 | August 5, 1998 | August 14, 1998 |
| Lee | Jan. 12, 1998 | March 13, 1998 | June 5, 1998 |
| Lyon | March 8, 1998 | April 14, 1998 | April 24, 1998 |
| McKinnon | Sept. 6, 1998 | Oct. 24, 1998 | Nov. 6, 1998 |
| Van Den Bijllaardt | May 3, 1998 | June 5, 1998 | June 26, 1998 |
| P. Wilson | July 6, 1998 | August 7, 1998 | August 14, 1998 |
| R. Wilson | Jan. 19, 1998 | March 31, 1998 | April 17, 1998 |
| Non-Plaintiff | Date of Resignation | Date TEF submitted with CVP election | Date on which non-plaintiff received CVP cheque |
|---|---|---|---|
| Bergstrom | Sept. 30, 1998 | Dec. 22, 1998 | Jan. 15, 1999 |
| Downs | Sept. 30, 1998 | Jan. 27, 1999 | Feb. 19, 1999 |
| Henderson | Nov. 13, 1998 | Jan. 19, 1999 | Feb. 26, 1999 |
| McCormick | Sept. 30, 1998 | Dec. 24, 1998 | Feb. 26, 1999 |
[19] The trial judge allowed the respondents' claims on the basis that the Board failed to inform them, in advance, of potential changes to the OMERS pension plan and that such a failure constituted both negligent misrepresentation and breach of fiduciary duty. She rejected the claims of Lyon and R. Wilson based on her finding that the Board's duty to inform members of potential changes to the plan did not arise until after Lyon and R. Wilson had received their CVP cheques.
[20] On appeal, Lyon contends that he is similarly situated to the respondents whom the trial judge found were entitled to receive the 1999 benefit enhancement and that it was an error for the trial judge to fail to so find.
[21] In particular, Lyon compares his situation with that of J. Lee, whose claim was accepted by the trial judge. Lyon's date of retirement was two months later than was Lee's. Lyon submitted his TEF to OMERS one month after Lee submitted his TEF. However, Lyon received his CVP cheque on April 24, 1998, whereas Lee received his cheque on June 5, 1998.
[22] The essence of the Board's appeal is that the trial judge erred, as matter of law, in finding liability on either tort or fiduciary law principles.
A summary of the surplus management process
[23] An overview of the surplus management process follows. More detailed descriptions of the events and the process are included where relevant.
[24] When the assets in the OMERS pension plan exceed approximately 110 per cent of plan liabilities, the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended, effectively requires employers to cease making contributions. In the OMERS pension plan, when employer contributions cease, employee contributions must cease also. [page568]
[25] A significant asset surplus in the OMERS pension plan was identified in 1997. In May 1997, the Board decided upon a five-year strategy for surplus management that included contribution rate reductions. However, by the end of 1997, it was apparent that the contribution rate reductions were not going to be sufficient to bring the surplus below the Income Tax Act limit. Consequently, based on Board recommendations, the Ontario government implemented certain additional surplus management measures, including a contribution rate reduction and certain benefit enhancements. The measures were announced in December 1997, and implemented effective November 30, 1997 and January 1, 1998.
[26] At its March 27, 1998 meeting, the Board received a preliminary actuarial valuation report in respect of the OMERS pension plan for the year ended December 31, 1996. The preliminary report indicated that the surplus was continuing to grow at a faster than expected rate. Michael Beswick, the Senior Vice-President of Pensions for OMERS, testified that the Board recognized that it was likely that further action in respect of surplus management would be required, including a full contribution holiday. He also testified that the Board could possibly look at benefit improvements once it examined a final valuation report at its meeting scheduled for April 24, 1998.
[27] At the Board meeting on April 24, 1998, the Board received and approved the final valuation report. The report confirmed an unexpected and substantial rate of growth in the surplus.
[28] At its meeting on May 22, 1998, the Board began the second round in the surplus management process, a process that was designed to determine surplus management options and culminate with Board recommendations to the provincial government. At that meeting, the Board established a timetable for consultation with stakeholders on the matter of surplus management.
[29] In June 1998, the Board issued a Member Update in which it gave members notice of what had taken place at the May 22 meeting. The Update informed members that there would be a temporary contribution holiday commencing on August 1, 1998, and running through to July 31, 1999. The Update also stated that the Board was discussing options regarding surplus management, such as a five-year, two per cent contribution rate reduction. The Update set out a timetable for the surplus management process, including the fact that the Board expected to make recommendations to the government in November 1998.
[30] On November 9, 1998, the OMERS President and the Chairman of the Board met with the Deputy Minister of Finance to discuss surplus management recommendations. [page569]
[31] On November 19, 1998, the Board met with representatives from employer and member organizations to talk about the recommendations.
[32] On November 23, 1998, the Board made recommendations to the provincial government, through the Minister of Municipal Affairs and Housing, on how to manage the surplus. These recommendations included introducing benefit improvements, such as an early retirement formula and enhanced survivor benefits.
[33] During November, another Member Update was issued to the membership, in which the surplus management recommendations were outlined.
[34] On November 26, 1998, the Board met again with the Deputy Minister to review the recommendations.
[35] The government ultimately accepted the Board's recommendations and, on May 5, 1999, O. Reg. 317/99 was passed (the "1999 Plan Amendment"). The amendments were made effective January 1, 1999. The 1999 Plan Amendment provided certain limited increased pension benefits to members of the OMERS pension plan; it also provided that members of the OMERS pension plan could qualify to receive a pension sooner under certain circumstances. Further, it removed the possibility for members in the position of the respondents to withdraw their CVPs.
The Trial Decision
[36] The trial judge found the Board liable to the respondents for negligent misrepresentation by virtue of its failure to inform members, in advance, of potential changes to the plan. The trial judge also held that the Board had breached its fiduciary duty to the respondents. Her reasoning on both heads of liability is summarized below.
Negligent misrepresentation -- The trial decision
[37] The trial judge set out the five requirements for liability for negligent misrepresentation. She then noted [at para. 26] Beswick's acknowledgment that "OMERS had a fiduciary duty to members". Based on that, the trial judge found that the first requirement of a duty of care based on a special relationship had been met.
[38] The trial judge went on to find [at para. 33] that the Board "had a duty to inform members in advance of potential changes to the plan in order that members have the ability to make informed financial decisions" and that the duty arose earlier than November 1998 when the Board finalized its recommendations. She also found [at para. 40] that the Board had a duty to assess [page570] information, as it became known, and to determine what information ought to be communicated to members because each plaintiff was "entitled to information that would enable him to make wise decisions".
[39] To determine whether the Board breached its duty in respect of each plaintiff, the trial judge evaluated the information that had been made available to the plaintiff at the date on which each plaintiff received his CVP cheque. That date was chosen because it was the date at which the member could no longer change his election and choose to remain in the OMERS pension plan.
[40] The trial judge found that at the conclusion of the Board meeting on April 24, 1998, the Board had an obligation to communicate information to the members because it was then apparent that the Board would consider a variety of options for surplus management, including those that were ultimately recommended.
[41] Because R. Wilson received his CVP cheque on April 17, 1998 (i.e., before the Board meeting on April 24, 1998), the Board did not breach its duty to inform him of the possible changes. Nor did the Board breach its duty to Lyon, as he received his cheque on April 24, 1998, and "it would not be reasonable to expect instantaneous communication quickly enough to allow Lyon an opportunity to reconsider his options."
[42] However, by June 5, 1998, the date at which Lee received a cheque for his CVP, the trial judge found [at para. 79] that"it was inevitable that the Board would recommend benefit enhancements", and therefore, the Board was in breach of its duty as it had failed to tell members of the "inevitability" of benefit enhancements. This finding was based largely on the fact that at the May 22, 1998 Board meeting, the Board had passed a motion to adopt a two-tier approach to surplus management that included, pending consultation, a full 12-month contribution holiday commencing August 1, 1998, and further consultation with stakeholders on a complete package of recommendations.
[43] In June 1998, the Board distributed the June Member Update to OMERS pension plan members. The Update announced: the temporary contribution holiday, that due to unexpected surplus growth the Board was considering other options in addition to the contribution holiday, and the timetable for creating a package of recommendations to be submitted to the provincial government, including the dates for consultations with stakeholders.
[44] The trial judge found the Board's obligation to inform on June 26, 1998, the date at which Van Den Bijllaardt received his CVP cheque, was the same as it was on June 5, 1998. The trial [page571] judge found that the June Member Update was too vague to satisfy the Board's duty to inform.
[45] In July 1998, the Board sent out a Member Information pamphlet that explained termination benefits, transfers of commuted values, and pension deferrals; it did not refer to the surplus management issues.
[46] By August 7 and 14, 1998, the dates at which Hembruff, Hill, and P. Wilson received their CVP cheques, the trial judge found that the benefit enhancements were "almost certain" and "highly likely". The trial judge found that the Board had failed to fulfil its duty to inform at this stage, as well.
[47] Finally, the trial judge considered the Board's duty as of November 6, 1998, when McKinnon received his CVP cheque. She found that at a Board meeting on August 21, 1998, Beswick and others had made a presentation regarding surplus management which included recommending to the government a contribution holiday and further benefit enhancements. She found that it was apparent by August 21, 1998, that the possibility of enhancements was "very likely" or "quite certain".
[48] The Board met again in September and decided on a tentative package of recommendations. As a result of further consultations held on October 22, the package of recommendations was changed at the Board meeting on October 23. At the Board meeting, staff members were instructed to prepare a communications strategy in respect of the recommendations. While the trial judge accepted that the package of recommendations was not a "done deal" at that time, including because Ministry representatives had not yet seen it, she found that the Board had concluded its analysis. She found that the Board should have told members, after the October Board meeting, that benefit enhancements were a "certainty" and because it had not done so, it was in breach of its duty to members.
[49] On May 13, 1998, at the request of the Toronto Police Association, representatives from the Board met with OMERS members from the TPSB. At trial, five witnesses gave evidence as to what occurred at this meeting. One witness testified that although Board representatives informed members that the plan was in surplus, they were told "nothing was planned for the surplus at that time". Both Hembruff and Van Den Bijllaardt attended the meeting.
[50] The trial judge found that the Board representatives had represented to the membership that although there was a surplus, no changes were anticipated to the plan. She found that the representations made by the Board at the May 13, 1998 meeting were inaccurate and misleading. She also found that the June [page572] Member Update was misleading, as it failed to identify the potential for benefit enhancements.
[51] The trial judge further found that the Board had acted negligently in failing to establish a communication policy to fulfil its duty to keep the membership reasonably informed, and in the manner in which it made representations at the May 13 meeting.
[52] The trial judge found that members had a reasonable expectation that the Board would provide them with the information they needed regarding their pensions, and that the Board failed to provide the information that was necessary to allow them to make informed decisions regarding how they would receive their pensions.
[53] As a result of the Board's failure to inform the membership of the proposed changes to the OMERS pension plan, the trial judge found that the respondents had lost the opportunity to receive the benefit enhancements received by the non-plaintiffs. She found that, had they known that a delay in requesting their CVPs would have resulted in these additional benefits, they would have chosen to delay submitting their TEFs. Thus, she concluded that the respondents relied in a reasonable manner on the negligent misrepresentations made by the Board and that their reliance was detrimental.
Breach of fiduciary duty -- the trial decision
[54] The trial judge referred [at para. 134] again to Beswick's concession that the Board owed a fiduciary duty to the membership and stated that, as a fiduciary, OMERS was responsible for "complete disclosure of any material information". Based on her finding that the information about potential benefit enhancements became material by April 24, 1998 (the date on which the Board received the final actuarial valuation report for the year ending December 31, 1996), she held that the Board breached its fiduciary duty when it failed to communicate that information to the membership.
[55] In addition, in light of the "fundamental importance of the duty on a fiduciary to inform", she found [at para. 136] that the Board breached that duty "by failing to establish, implement and monitor a communications policy that would serve to ensure the fulfillment of its duty".
[56] The trial judge accepted that the Board had the discretion to determine which group or groups of beneficiaries would benefit from the use of surplus in an ongoing pension plan and that it was entitled to make recommendations that would result in the exclusion of certain beneficiaries, provided that in so doing it [page573] acted reasonably. However, the trial judge found that, in exercising its discretion and choosing to recommend an effective date of January 1, 1999 for the plan amendments, the Board breached its fiduciary duty to treat all plan members fairly and equitably in three ways. She reasoned as follows [at paras. 154-56]:
First, before the Board recommended an effective date unrelated to the date of the amendment to the Regulation, it had a duty to consider the effect on all members and employers. Instead, the Board picked an arbitrary date which was the beginning of the fiscal year. Unlike the situation in Edge, supra, there is no evidence that the Board considered various options as to effective date ... The selection of January 1, 1999 cannot be said to be either logical or rational in this context ...
Second, once it made the unusual recommendation that the regulatory amendment would have retroactive application, the Board had to consider the effect on members. Specifically, the Board failed in its duty under s. 4(1) of the OMERS Regulation to establish transition measures that would (a) treat all members fairly and equitably; and (b) recognize that members would be in various stages of making decisions ...
Third, not only did the Board fail to determine to whom a benefit is payable by establishing a transition policy, it acquiesced in allowing administrative staff to make transition decisions. Furthermore, it failed to ensure that the transition protocol dealt with all members fairly and equitably and on a principled basis.
[57] The trial judge held that the Board also breached its fiduciary duty by failing to act in good faith towards the respondents. This finding was based on statements that Beswick made at a meeting with the plaintiffs on November 25, 1999, after the plaintiffs had learned that the 1999 benefit enhancement had been given to the four non-plaintiffs. At the meeting, the plaintiffs, their counsel and a financial advisor met with Beswick to discuss the plaintiffs' concerns about having not received the 1999 benefit enhancement.
[58] The trial judge reviewed the events that took place at the meeting on November 25, 1999 and stated [at para. 165]:
All of the plaintiffs and Beswick gave evidence about this meeting. The evidence is consistent in these respects: the plaintiffs asked for the meeting to obtain an explanation for their lack of entitlement to the additional termination benefits and to seek redress; Beswick said that a line had to be drawn somewhere, that he had drawn it as of January 1, 1999, and that in any large high-volume operation there is always a range of outcomes in any given transaction; that when pressed by the plaintiffs about the perceived unfairness, he said "well, that's your tough luck" and "that's the way the cookie crumbles"; that those responses were partly a sign of his frustration by the criticisms of his staff; and that there was no mention at the meeting of the advice Beswick said that he had given that OMERS could not take away a benefit that people had who had begun the process prior to January 1, 1999. [page574]
[59] She concluded that Beswick's responses constituted a breach of the Board's duty of good faith, saying [at para. 166]:
I find that OMERS breached its fiduciary duty by failing to deal with six of the plaintiffs in good faith and this was manifested in the cavalier and condescending treatment of the plaintiffs during the November 25th meeting.
The Board Appeal
[60] The Board identified eight issues in this appeal:
(a) Did it owe a duty to inform OMERS members in advance about plan changes it was considering recommending to the Ontario government?
(b) If such a duty was owed, did the trial judge err by not applying a consistent and coherent test for determining when such a duty arose and how it should have been fulfilled?
(c) If such a duty was owed, did the trial judge err by finding that the respondents detrimentally relied upon the omission to advise about the potential recommendations?
(d) Did statements made to two of the respondents at the May 13, 1998 meeting constitute negligent misrepresentation or breach of fiduciary duty?
(e) Did the Board's communication strategy breach its fiduciary duty?
(f) Did the Board breach its fiduciary duty by recommending a January 1, 1999 effective date for the 1999 Plan Amendment?
(g) Did the trial judge exceed the court's jurisdiction by overriding the 1999 Plan Amendment as enacted by the government?
(h) Did the Board fail to act in good faith towards the respondents?
[61] The matters raised by the Board will be addressed in the course of determining whether the Board's failure to notify plan members of potential plan changes constitutes (1) negligent misrepresentation or (2) a breach of fiduciary duty.
Negligent Misrepresentation
[62] As the trial judge correctly stated, relying on Queen v. Cognos Inc., 1993 146 (SCC), [1993] 1 S.C.R. 87, [1993] S.C.J. No. 3, at p. 110 S.C.R., five requirements must be met to succeed in a claim for negligent misrepresentation. These are: [page575]
(1) the representor must owe the representee a duty of care;
(2) the representor must have made a representation that was untrue, inaccurate or misleading;
(3) the representor must have acted negligently in making the representation;
(4) the representee must have relied, in a reasonable manner, on the negligent misrepresentation; and
(5) reliance must have been detrimental to the representee in the sense that damages resulted.
The first requirement -- the duty of care
[63] In the context of a negligent misrepresentation claim, the existence of a duty of care depends on whether a prima facie duty of care is owed and, if so, whether the existence of the duty is negated by policy considerations. See Hercules Managements Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165, [1997] S.C.J. No. 51, 146 D.L.R. (4th) 577. In Hercules Managements at p. 188 S.C.R., p. 589 D.L.R., La Forest J., speaking for the court, said that a prima facie duty of care will exist where there is a relationship of proximity:
To my mind, proximity can be seen to inhere between a defendant-representor and a plaintiff-representee when two criteria relating to reliance may be said to exist on the facts: (a) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation; and (b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable. To use the term employed by my colleague, Iacobucci J., in Cognos, supra, at p. 110, the plaintiff and the defendant can be said to be in a "special relationship" whenever these two factors inhere.
[64] The Board concedes that a special relationship exists between it and the members of the OMERS pension plan but argues that, nonetheless, the trial judge erred in two ways in finding that it owed the respondents a duty of care. First, the trial judge is said to have erred by failing to determine whether there was a relationship of proximity with respect to the particular information in question. The Board contends that, in order for a prima facie duty of care to be found to exist, the trial judge had to find that the Board ought to have foreseen that the respondents would rely on its representations and that such reliance was reasonable in light of "the nature and quality of the information that was the subject of the representation". Second, the Board argues that even if a prima facie duty of care is found to exist, that duty is negated by policy considerations. I disagree with both submissions. [page576]
[65] There is ample authority for the proposition that a pension plan administrator owes a duty of care to members of the pension plan. See, for example, Spinks v. Canada, 1996 4041 (FCA), [1996] F.C.J. No. 352, 134 D.L.R. (4th) 223 (C.A.); Bratkowski v. Ontario Teachers' Pension Plan Board, [1997] O.J. No. 2775, 16 C.C.P.B. 182 (Gen. Div.); Deraps v. Labourer's Pension Fund of Central and Eastern Canada, 1999 3790 (ON CA), [1999] O.J. No. 3281, 21 C.C.P.B. 304 (C.A.); and Gauthier v. Canada (Attorney General), 2000 20261 (NB CA), [2000] N.B.J. No. 143, 185 D.L.R. (4th) 660 (C.A.).
[66] I accept that the OMERS pension plan, with over 900 participating employers, is different from the usual type of pension plan where there is but a single employer. Nonetheless, in my view, an application of the principles in Hercules Managements makes it clear that the Board's special relationship with the members of the OMERS pension plan gives rise to a prima facie duty of care.
[67] In Hercules Managements at p. 190 S.C.R., p. 591 D.L.R., La Forest J. said that "determining whether a 'proximity' exists on a given set of facts consists of an attempt to discern whether, as a matter of simple justice, the defendant may be said to have had an obligation to be mindful of the plaintiff's interests in going about his or her business". It seems beyond dispute that the Board has an obligation to be mindful of the members' interests when going about its business of administering the pension plan. It also seems beyond dispute that the Board would reasonably foresee that plan members would rely upon the pension information that it gives to them and that, in the circumstances, such reliance is reasonable.
[68] The type of inquiry that the appellant suggests ought to negate the finding of a prima facie duty of care is based not on a consideration of the type of information conveyed (i.e., pension information) within the context of the relationship between the parties but, rather, on an isolated consideration of the specific content of the information. In my view, a consideration of the specific content of the information occurs not in the first stage, when determining whether a prima facie duty of care is owed, but, rather, when determining whether the second and third requirements for negligent misrepresentation have been met.
[69] Hercules Managements also answers the contention that policy considerations negate such a duty. As explained in Hercules Managements at p. 192 S.C.R., p. 592 D.L.R., the fundamental policy consideration that must be addressed at the second stage of analysis centres on the spectre that "the defendant might be exposed to liability in an indeterminate amount [page577] for an indeterminate time to an indeterminate class". That consideration does not arise in the circumstances of this case. In finding that the Board owes the members of the OMERS pension plan a duty of care, there is no such indeterminacy. The class is limited to a readily identifiable group known to the Board, namely, the members of the OMERS pension plan. The information was used for the purpose for which it was given, that is, to make decisions relating to members' pensions. No issue of indeterminate liability arises as the sums claimed are based on plan benefits. Nor is the time frame indeterminate; it is related to the time in which individuals are members of the OMERS pension plan.
The second requirement -- An untrue, inaccurate or misleading representation
[70] In respect of the second requirement, the trial judge found [at para. 33] that the Board had a "duty to inform members in advance of potential changes to the Plan". She found that by the conclusion of the Board meeting on April 24, 1998, the Board was required to inform members that it would consider a variety of options in dealing with surplus, including benefit enhancement. In effect, she found that the Board's failure to inform members of the anticipated future event of a plan change leading to a benefit enhancement constituted an untrue, inaccurate or misleading representation. In my view, she erred in law in so finding.
[71] The question of whether the failure of a pension plan administrator to inform a plan member of a potential plan change amounts to negligent misrepresentation was addressed in Nuxoll v. Inco Ltd., [1997] O.J. No. 4680, 45 C.C.P.B. 243 (Gen. Div.). In Nuxoll, one month after the plaintiff retired, the defendant employer announced a retirement incentive program for which the plaintiff would have qualified. The plaintiff claimed he was induced to elect early retirement, prior to introduction of the incentive package, because of the defendant's negligent misrepresentation that no package would be offered. Justice Cavarzan dismissed the claim. The trial judge found that the defendant had not told the plaintiff that there never would be an early retirement package. He then held that failing to tell the plaintiff that an early retirement package was under consideration did not constitute negligent misrepresentation. He viewed the plaintiff's claim as tantamount to a demand for full disclosure, a position rejected by the Supreme Court of Canada in Cognos as imposing too high a standard on employers. [page578]
[72] In Nuxoll, the trial judge also found that failing to inform the plaintiff of anticipated plan changes was prudent. He explained this conclusion at p. 257 C.C.P.B.:
Both Ashcroft and Davies testified, however, that they refrained from predicting the future for two reasons. If they were to tell employees that they should expect that retirement incentives will be announced and this fails to occur, eligible employees who delayed taking their retirement on a full pension might well have cause to complain. If they were to tell employees not to expect retirement incentives, as it was alleged was done in this case, then those who elected to retire prior to the announcement would have cause to complain.
The course chosen by the company representatives in this case was the prudent course.
[73] The case at bar illustrates the problem with disclosure of possible benefit enhancements as described in Nuxoll. There were two principal aspects of the 1999 Plan Amendment that would have been material to the respondents. The first was the benefit enhancement that increased members' commuted values; the second was the removal of the availability of receiving a CVP as an option for members with a normal retirement age of 60 and who, like the respondents, were over 45 years of age (the "CVP withdrawal measure"). The CVP withdrawal measure was material to the respondents, given their evidence that they wanted the CVP option.
[74] The CVP withdrawal measure was initially considered and rejected by the Board during the surplus management process. However, following the October 22, 1998 consultation session, the Board added it again to the list of possible recommendations and it ultimately formed part of the package of recommendations that the Board made to the government.
[75] If the respondents had been told of the possibility of benefit enhancements and wished to receive those enhancements, there is only one way in which they could have been assured of the same and that is to have delayed their resignations until the 1999 Plan Amendments had been enacted. However, had they delayed their resignations in that fashion, they would have lost the right to take their CVPs because the 1999 Plan Amendment introduced the CVP withdrawal measure as well as the benefit enhancement. Consequently, the respondents would have had cause to complain that they had relied on the information relating to the potential plan amendments to their detriment.
[76] As Cognos makes clear, a pension plan administrator has an obligation to disclose "highly relevant" information. Failure to disclose accurate and complete information regarding a pension plan's existing terms and options can amount to an untrue, [page579] inaccurate or misleading representation. See Spinks at pp. 236-37 D.L.R. However, information on what a pension plan's terms potentially might be is not highly relevant. Because such information is a forecast as to the future, it is speculative in nature and, therefore, not information on which it would be reasonable to rely. That a representation must be a matter of ascertainable fact, as distinguished from an opinion or expectation, was explained in Hinchey v. Gonda, [1955] O.W.N. 125 (H.C.J.), at p. 128:
It is, of course, well settled that a representation, to be of effect in law, should be in respect of an ascertainable fact as distinguished from a mere matter of opinion. A representation which amounts merely to a statement of opinion, judgment, probability or expectation, or is vague and indefinite in its nature and terms, or is merely a loose, conjectural or exaggerated statement, goes for nothing, though it may not be true, for a man is not justified in placing reliance on it. [See Note 1 at the end of the document]
[77] It follows that if the making of statements of forecasts about the future cannot sustain an action in negligent misrepresentation, the omission to make the same kind of statement cannot sustain such an action. Until the Board meeting in November 1998 when the Board decided upon the package of recommendations, the possibility of benefit enhancements was nothing more than an expectation. As such, it was not highly relevant information and the Board did not have an obligation to disclose it. Consequently, the second requirement for negligent misrepresentation has not been established.
The third requirement -- Negligence in making the representation
[78] In light of my conclusion that the Board did not make a misrepresentation, strictly speaking there is no need to consider the third requirement. That said, the trial judge's findings of negligence warrant comment.
[79] The trial judge found three acts of negligence on the part of the Board. At para. 113 of the reasons, she found that the Board was negligent "in failing to establish, implement and monitor a communications policy that took into account all members", [page580] including those who would likely be affected by the potential changes to the OMERS pension plan; "in the representations that were made on May 13, [1998]"; and"in failing to communicate the information to which its members were entitled".
[80] The first finding -- failure to establish a legally adequate communications policy -- is dealt with below in the context of the duty to disclose.
[81] The second finding of negligence is based on statements made by OMERS representatives at a meeting with members on May 13, 1998, to the effect that "there were no changes planned" to the OMERS pension plan. The OMERS representatives did not say that there would be no changes to the plan in the future. The impugned statements were accurate at the time they were made. On May 13, 1998, there were no changes planned for the OMERS pension plan. All that the Board knew was that, according to the latest actuarial report, surplus growth had been more rapid than anticipated and consequently it had become necessary to consider what further steps should be taken to manage the surplus. The second round of the surplus management process, including the initial discussion of various options over and above a contribution holiday, began some nine days later at the Board meeting on May 22, 1998.
[82] As explained above, the Board's duty did not extend to providing information of potential plan changes; therefore, the third finding of negligence cannot stand.
The fourth and fifth requirements
[83] In light of my conclusion that no misrepresentation was made, it is unnecessary to inquire into the fourth and fifth requirements; the absence of a representation renders inconsequential the question of actual reliance.
Breach of Fiduciary Obligation
[84] The trial judge found that the Board breached its duty to inform, to act fairly and to act in good faith. In my view, for the reasons that follow, she erred in all three matters.
(1) The Duty to Disclose [See note 2 at the end of the document]
[85] The trial judge had two separate, but closely related, questions before her. The first question, addressed above in the context [page581] of the second requirement for negligent misrepresentation, is: by failing to disclose that potential plan enhancements were under consideration, did the Board make an untrue, inaccurate or misleading representation? The second question, which must be addressed now, is: did the Board breach its fiduciary obligation to the respondents by failing to disclose that potential plan enhancements were under consideration?
[86] The Board's only statutory disclosure obligation in Ontario is found in s. 26 of the Pension Benefits Act. Pursuant to s. 26, in certain circumstances, a plan administrator that applies for registration of an amendment that would result in a reduction of pension benefits or otherwise adversely affect a member's right or obligations, can be required to give 45 days' advance notice of the amendment. It will be apparent that s. 26 could not have applied to require the Board to give advance notice of the potential benefit enhancement, as an enhancement does not reduce or negatively impact upon rights or obligations.
[87] The Board acknowledges that, while the respondents were members of the OMERS pension plan, it owed them fiduciary duties that included the duty to disclose material information. However, it argues that in the same way that information about potential plan changes is not highly relevant for the purpose of determining whether it constitutes negligent misrepresentation, it is not "material" and therefore does not give rise to a disclosure obligation. The Board relies on Canada Trustco Mortgage Co. v. Bartlet and Richardes (1996), 1996 526 (ON CA), 28 O.R. (3d) 768, [1996] O.J. No. 1551 (C.A.), at p. 773 O.R., where this court stated:
A negligent misrepresentation or omission to convey information by a solicitor may give rise to an action for damages for breach of contract, negligence, or for breach of fiduciary duty: McKitterick v. Duco, Geist & Chodos (1994), 1994 558 (ON CA), 76 O.A.C. 310 (C.A.) at p. 314. In order for a plaintiff to succeed it is, however, necessary to prove that the misrepresentation or omission was a material one in the sense that it would be likely to influence the conduct of the plaintiff or would be likely to operate upon his judgment: Ocean City Realty Ltd. v. A & M Holdings Ltd. (1987), 1987 2872 (BC CA), 36 D.L.R. (4th) 94 at p. 98, 44 R.P.R. 312 (B.C.C.A.), per Wallace J.A., quoted with approval by Dubin C.J.O. in Raso v. Dionigi (1993), 1993 8664 (ON CA), 12 O.R. (3d) 580 at p. 587, 100 D.L.R. (4th) 459 (C.A.).
[88] The Board also urges this court to follow the approach taken in respect of a fiduciary's disclosure obligation in PWA Corp. v. Gemini Group Automated Distribution Systems Inc. (1993), 1993 8475 (ON CA), 15 O.R. (3d) 730, [1993] O.J. No. 1793, 103 D.L.R. (4th) 609 (C.A.). In that case, a majority of this court upheld the trial judge's finding that PWA had breached its fiduciary duty to its partners by failing to disclose its intention to escape its contractual obligations with the partnership. On the facts, it [page582] appears that the disclosure obligation arose when PWA decided to pursue a strategy to exit from the partnership, not when PWA was merely considering whether to pursue such strategy.
[89] I accept the Board's arguments on this issue. In my view, there is no legal authority for the imposition of a disclosure obligation in respect of pension plan changes that are under consideration. Moreover, there are significant reasons why such an obligation should not be imposed.
[90] Imposition of a positive obligation to disclose plan changes under consideration would, in my view, result in an unmanageable burden being placed on the Board. Throughout the surplus management process in 1998, the Board discussed possible surplus management options at every meeting and consultation. It was a dynamic process, with options being considered and rejected and then considered again. The magnitude of the process can only be understood in context. OMERS has multiple constituencies: 300,000 members (active, deferred and retired) and 900 employers, all of whom had different interests and to whom different things might be material at different times, depending on their individual situations.
[91] In those circumstances, it is hard to conceive of how the Board could have met an obligation to disclose potential plan changes under consideration. How seriously must a change be under consideration in order to trigger the disclosure obligation? What information would be sufficient to meet the obligation, given the breadth of the constituencies, member's particular circumstances, the volume of options being considered and the dynamic nature of the surplus management process? When and how would the information have to be disseminated in order to satisfy such an obligation? These difficulties are not illusory as the facts themselves show. Had the Board disclosed the potential benefit enhancement in the summer of 1998, when it appeared likely that it would be recommended, but not disclosed the CVP withdrawal option, which was far less likely to be recommended, the information would have been incomplete and misleading as far as the respondents were concerned.
[92] This example also illustrates the invidious position in which a plan administrator would be placed were it subject to such a broad disclosure obligation. If potential plan changes were announced but subsequently modified or discarded as the result of further input, administrators could be faced with unhappy members who had relied to their detriment on the earlier announcement. To guard against this possibility, the announcement of a plan change under consideration would have to be in [page583] such general terms as to be hopelessly vague or so circumscribed as to be meaningless.
[93] In my view, until the Board finalized its recommendations at its November 1998 meeting, the information was not material because it was speculative and subject to change. It would not have been reasonable for a member to rely on information that was clearly subject to the consultation process and, therefore, to change. Accordingly, the trial judge erred in concluding that the Board was in breach of its duty to disclose information on potential pension plan changes under consideration following the April 24, 1998 Board meeting.
[94] I also conclude that the trial judge erred in finding [at para. 113] that the Board was negligent in "failing to establish, implement and monitor a communications policy that took into account all members". This finding is based on her view that the Board had an obligation to disclose potential pension plan changes that were under serious consideration. In light of my conclusion that there was no obligation to disclose until the Board made its decision at its November 1998 meeting, this finding cannot stand. The June 1998 Member Update provided sufficient and appropriate disclosure, prior to the November Board meeting, by announcing the unexpected growth in surplus, the institution of a temporary contribution holiday, the need to develop other options, and the Board's timetable for the second round of the surplus management process, including consultations and the making of recommendations. As the sufficiency of the Board's communication after the November 1998 meeting is not in issue, that matter need not be addressed. In any event, the record is insufficient to make such a determination.
(2) The duty to act fairly
[95] Three findings underlie the trial judge's conclusion that the Board's recommendation of January 1, 1999, as the effective date for the plan amendments (the "recommended date"), constituted a breach of its fiduciary duty to treat all plan members fairly and equitably. These are that the Board:
(1) failed to consider the effect upon the membership of the recommended date;
(2) failed in its duty under s. 4(1) of the OMERS Regulation to establish transition measures that would treat all members fairly and equitably and that recognized that members would be in various stages of decision-making; and [page584]
(3) failed to ensure that the transition protocol dealt with all of the members fairly and equitably.
The first reason
[96] The trial judge found that the Board had failed to consider the effects of the recommended date on the membership because the recommended date was: arbitrary; unrelated to the date of the amendment to the Regulation; neither logical nor rational; and, retroactive. In my view, none of these findings is supportable on the record.
[97] I begin by stating the obvious: any effective date will affect members "on the eve of making decisions", whether fixed in advance or not. An effective date necessarily creates a dividing line, with some members benefiting and others not.
[98] Beswick testified that the recommended date was chosen because it would provide employers and employees with a degree of certainty as to when the recommendations would become effective, if accepted by the government, and that it benefited both employers and employees as it permitted better planning in the face of anticipated down-sizing and avoided "hanging members up".
[99] Had the Board recommended that the government enact the 1999 Plan Amendment without a fixed effective date and had the government acted on that recommendation, the effective date necessarily would have been the date of enactment, which turned out to be May 5, 1999. Recommending a fixed date removed the irrationality of an effective date determined solely by the government's timing for enacting the changes. If the effective date had been the date of enactment, it clearly would not have resulted in the respondents being entitled to the benefit of the amendment.
[100] Given that the recommended date was the beginning of the fiscal year for the OMERS pension plan and in light of Beswick's uncontradicted testimony on this point, it cannot be said that the recommended date was arbitrary, unrelated to the date of the plan amendment, illogical or irrational.
[101] Moreover, the trial judge erred in viewing the recommended date as retroactive. In November 1998, the Board recommended a fixed effective date of January 1, 1999. As it turned out, the government did not pass O. Reg. 317/99 until after the fixed date that had been recommended, with the result that retroactivity issues arose. The fact that the recommended date ended up being retroactive is not the same thing as recommending a retroactive date. [page585]
The second reason
[102] The second reason given by the trial judge is that the Board failed to establish transition measures that treated all members fairly and equitably in accordance with the dictates of s. 4(1)(e) of the OMERS Regulation. This view is based on the erroneous assumption that s. 4(1)(e) empowers the President of the OMERS pension plan to determine the effective date of a regulatory amendment. It does not.
[103] Section 4(1)(e) reads as follows:
4(1) The president,
(e) shall determine whether or not a benefit is payable, the amount of a benefit that is payable, and to whom a benefit is payable under this Regulation;
[104] On a plain reading, s. 4(1)(e) obligates the President to interpret and apply the legislation after the Regulation (and any amendment thereto) is in force in order to determine whether a benefit is payable. Section 4(1)(e) does not govern, or relate to, the Board's practice of including suggested dates for plan changes when making recommendations for enactment by the government. Therefore, establishing the recommended date could not have been a breach of duty under s. 4(1).
The third reason
[105] The third reason given by the trial judge for finding the Board's recommended effective date to be a breach of its duty to act fairly is based on a concern with what has been termed the "B. gap". [See note 3 at the end of the document] The Board's treatment of those persons within the "B. gap" created a perception of unfairness because it resulted in other police officers, who resigned from the TPSB only a few months after the last respondent, receiving the 1999 benefit enhancement.
[106] The "B. gap" arose as a consequence of the government enacting the 1999 Plan Amendment after January 1, 1999, but with retroactive effect to January 1, 1999, and with language that did not limit the changes to members actively employed on [page586] the effective date. The 1999 Plan Amendment applied to members who had elected to receive their CVP prior to January 1, 1999, but who remained members of the OMERS pension plan on January 1, 1999, as they had not then received their CVP cheques. The Board had to determine how to treat these "in process" members of a certain age who had been rendered technically ineligible to receive their CVPs by virtue of the 1999 Plan Amendment but who had elected that option before January 1, 1999.
[107] The Board concluded, in light of the rights of members under the Pension Benefits Act, that the entitlement of these members to receive their CVPs should not be taken away after they had elected that option. Nonetheless, as these "in-process" members were members of the OMERS pension plan on January 1, 1999, they were entitled to the 1999 benefit enhancement, as well. This combination of events created the "B. gap".
[108] The "B. gap" would not have arisen had the government enacted the 1999 Plan Amendment prior to January 1, 1999, made it apply only to actively employed members, or excluded the "in process" members from its application in some other way. None of these scenarios would have benefited the respondents.
[109] The only way in which the 1999 Plan Amendment could have benefited the respondents would have been if the plan changes had been made with a significantly earlier effective date. The "B. gap" would then have extended to all the respondents and others like them.
[110] In my view, it was reasonable for the Board to not recommend an earlier effective date. As already explained, valid reasons have been given for recommending January 1, 1999 as the effective date. No reason, however, has been offered to support an earlier date other than that it would have led to the plaintiffs being treated the same as the four non-plaintiffs. But, as has also already been noted, an effective date will always result in some people being denied benefits. Thus, in my view, that is not a cogent reason for recommending an effective date earlier than January 1, 1999.
[111] Moreover, had the Board recommended an earlier date and had the government adopted the recommendation, I do not see how the Board could reasonably have not extended the benefit enhancement to all other individuals similarly situated to the plaintiffs. Thus, an earlier effective date would have resulted in many people who were no longer members of the OMERS pension plan at the time that the Board finalized its recommendations being included in the group that benefited from the changes. This would have been at a significant cost to the [page587] OMERS pension plan and, therefore, to the members who remained in the plan. While it is not necessary to decide the matter, it appears to me that in the circumstances of this case, a good case could be made that the Board would not have been acting reasonably or prudently, and therefore would have been in breach of its fiduciary duty, had it made such a recommendation.
[112] The apparent unfairness of the decision in respect of those in the "B. gap" is only that -- apparent. In light of the peculiar circumstances of those in the "B. gap", as explained above, it cannot be said that the Board improperly favoured the group who were in the "B. gap" or unfairly or unreasonably excluded the respondents from receiving the 1999 benefit enhancement.
[113] Furthermore, even if the Board erred in extending the 1999 benefit enhancement to those persons in the "B. gap", in my view, that does not create a legal obligation on the Board to extend the benefit of the "B. gap" to the respondents and the trial judge erred in so doing. This issue was addressed in Mair v. Stelco Inc., [1995] O.J. No. 2535, 9 C.C.P.B. 140 (Gen. Div.). In that case, Mair argued that Stelco's refusal to give him the same benefit as it had given another plan member amounted to a failure to treat him fairly and equitably. Justice Fedak found that Stelco may have erred in including certain benefits in the non-plaintiff employee's pension but he nonetheless denied Mair those benefits. At para. 23 of the reasons, he explained:
To rely on this error by Stelco, as Mair does, to require Stelco to provide section 41 Benefits to all employees who retired early would be absurd and create total chaos in the pension plan scheme. For Mair to take such a position is unreasonable under all the circumstances of this case. A mere error by Stelco, which otherwise applied its policy consistently, cannot, in itself, extend the application of section 41 Benefits to all employees who had 30 years' service at Stelco.
[114] That reasoning applies to the instant case. If the Board were required to extend the benefits to the respondents on the basis that it erred in giving the benefits to those in the "B. gap", the duty to act fairly would compel the Board to extend the benefit enhancement to all similarly situated individuals. Such a result is unreasonable in light of the Board's duty to manage the funds in the OMERS pension plan prudently and on behalf of the members of the plan.
(3) The duty to act in good faith
[115] The trial judge concluded that the Board failed to act in good faith toward the respondents based on statements made at a meeting held on November 25, 1999, slightly over a year after [page588] the Board made its recommendations to the government, and many months after the 1999 Plan Amendment was enacted and implemented. The evidence is that, after an emotional and offensive outburst from Hembruff, Beswick said such things as "well, that's your tough luck" and "that's the way the cookie crumbles".
[116] Although the duty of good faith has not been defined, in my view, a finding of a breach of the duty of good faith would require evidence that some sort of bad motive -- such as self-interest, ill will or a dishonest purpose -- underlay a decision. While a breach of the duty of good faith is not necessarily the same thing as acting in bad faith, this view is consistent with the approach taken in Yates v. Air Canada, 2004 BCSC 3, [2004] B.C.J. No. 43, 40 C.C.P.B. 121 (S.C.), relying upon McIntosh Estates Ltd. v. Surrey (City), 2000 BCSC 128, [2000] B.C.J. No. 216, 9 M.P.L.R. (3d) 84 (S.C.), to a determination of bad faith. To paraphrase the court in Yates at para. 150, a finding of bad faith would require a determination that the impugned decision was: actuated by an intent to mislead or deceive; due to a neglect of, or refusal to, fulfil some duty or obligation; or, made for an improper purpose.
[117] There is no evidence on this record to support any such finding. The statements in question were uttered long after the relevant decisions had been made and implemented. They do not reflect upon, or call into question, the Board's intent, motive or purpose in making the recommendations or its subsequent decisions in respect of those in the "B. gap".
[118] While it is hoped that representatives speaking on behalf of a plan administrator will treat members with invariable courtesy and respect, the simple failure to do so does not equate to a breach of the duty of good faith. The statements in question, quite simply, were an intemperate response to a challenging situation that arose significantly after the special relationship between the Board and the respondents had ended.
The Lyon Appeal
[119] The essence of the Lyon appeal is that he is entitled to damages as he is similarly situated to the respondents. In light of my conclusions in respect of the Board appeal, the Lyon appeal must fail.
[120] Mr. Lyon also appears to take issue with the trial judge's finding that the Board had no liability based on the wording of the TEF. At para. 54 of his factum, he contends that the trial judge erred in failing to find that the TEF which he completed and returned to OMERS electing the CVP option was untrue, inaccurate or misleading because it did not warn him that his [page589] commuted value could increase if the TEF was not sent in within six months. He also complains that the TEF never warned that by taking the CVP, he would be giving up all eligibility for future benefits.
[121] I see no basis for interfering with the trial judge's determination in respect of the TEF. The commuted value calculation can change for a number of reasons, including a change in market performance or in the benefits to which a member is entitled. The record shows that Mr. Lyon was aware that his CVP could increase if benefits were enhanced. Before electing to take his CVP, Mr. Lyon had received two estimates of the value of his CVP. The second was substantially increased over the first and he understood that the reason for the increase was the benefit enhancements made with effect on January 1, 1998.
[122] Moreover, it is incorrect to say that the TEF never warned that if Mr. Lyon took the CVP, he would give up all eligibility for future benefits. In a statement directly underneath the box in which Mr. Lyon checked to select a CVP, he was advised: "If you elect this option you forfeit all rights to a pension or other benefits from OMERS." That language makes it clear that withdrawal of the CVP ends entitlement to all further benefits from the OMERS pension plan.
[123] Mr. Lyon admitted that he read and understood that statement, and understood that he would no longer be a member of OMERS if he withdrew his CVP. In my view, it is self-evident that if an individual ceases membership in the OMERS pension plan, he or she gives up eligibility for any benefit enhancements that might be implemented thereafter. Having chosen to withdraw their funds from the plan and invest those funds elsewhere, such individuals cannot later be heard to complain that they are not receiving additional benefits from the plan they chose to leave. As Cumming J. stated in McMaster University v. Robb, [2001] O.J. No. 5480, 37 C.C.P.B. 252 (S.C.J.), at para. 11:
Anyone choosing to remove the commuted value of his/her benefits would be well aware that s/he is giving up any continuing claim to any benefits under the Plan. A choice is made on a basis of what is assumed will be financially best for the individual for the future and expert advice can be obtained to assist in making that choice. Individuals are responsible for the choices they make.
[124] See also CF Kingsway v. Goetz, [2002] O.J. No. 2381, 32 C.C.P.B. 226 (S.C.J.), at pp. 228-29 C.C.P.B. to the same effect.
Disposition
[125] Accordingly, I would allow the Board appeal, set aside the judgment below and dismiss the action. In all the circumstances, [page590] while the Board is entitled to costs below and on appeal, should it wish to pursue them, in my view costs should be modest. Thus, I would order costs of the appeal to the Board, payable by the respondents, fixed at $20,000, inclusive of disbursements and GST. If the parties are unable to agree on costs below, such costs shall be assessed.
[126] I would dismiss the Lyon appeal with costs to the Board fixed at $4,000, inclusive of disbursements and GST.
Appeal allowed.
Notes
Note 1: See also Foster Advertising Ltd. v. Keenberg, 1987 5267 (MB CA), [1987] M.J. No. 41, 35 D.L.R. (4th) 521 (C.A.), at pp. 525-26 D.L.R. (leave to appeal to S.C.C. refused (1987), 80 N.R. 314n); Datile Financial Corp. v. Royal Trust Corp. of Canada (1991), 1991 7310 (ON SC), 5 O.R. (3d) 358, [1991] O.J. No. 1859 (Gen. Div.), at p. 379 O.R., aff'd (1992), 1992 7661 (ON CA), 11 O.R. (3d) 224, [1992] O.J. No. 3680 (C.A.); Lee v. 1071397 Ontario Inc., [1999] O.J. No. 8, 84 A.C.W.S. (3d) 1214 (Gen. Div.), at para. 13, aff'd [2000] O.J. No. 4389 (C.A.).
Note 2: The trial judge described the Board's obligation as a duty "to inform". It appears that she was addressing the Board's duty to disclose. Except when referring to the trial judge's reasons, the obligation is described as the duty to dislose throughout these reasons.
Note 3: The trial judge mentioned, as part of the third reason, that the Board acquiesced in allowing administrative staff to make transition decisions. As the parties did not pursue this aspect of the third reason, and as the primary concern is the apparent inequity of treatment between the respondents and those in the "B. gap", nothing need be said in respect of the Board's actions in permitting administrative staff to make transition decisions.