Ontario Pension Board v. Ratansi et al.

[Indexed as: Ontario Pension Board v. Ratansi]

Ontario Reports

Ontario Superior Court of Justice, Divisional Court, Kiteley, Swinton and Ducharme JJ.

March 1, 2013

114 O.R. (3d) 540 | 2013 ONSC 1092

Case Summary

Pensions — Eligibility — Employees transferred from Ontario Ministry of Revenue to Canada Revenue Agency and ceasing to be Ontario public servants — Transfer constituting transaction within meaning of s. 80(1) of Pension Benefits Act — Financial Services Tribunal erring in finding that employees were eligible to receive immediate unreduced pension under Public Service Pension Plan — Tribunal incorrectly interpreting s. 80(3) of Act as only deeming employment with predecessor employer to continue and not as deeming plan membership to continue — Section 80(3) clearly meaning that transferred employees' rights and benefits under predecessor pension plan are to be determined as if their employment and pension plan membership are not interrupted — Pension Benefits Act, R.S.O. 1990, c. P.8, s. 80(1), (3).

The individual respondents were transferred from the Ontario Ministry of Revenue to the Canada Revenue Agency and ceased to be Ontario public servants. The transfer constituted a transaction within the meaning of s. 80(1) of the Pension Benefits Act ("PBA"). Section 80(3) of the Act states: "Where a transaction described in subsection (1) takes place, the employment of the employee shall be deemed, for the purposes of this Act, not to be terminated by reason of the transaction." The Financial Services Tribunal held that the individual respondents were eligible to receive immediate unreduced pensions under the Public Service Pension Plan. The Ontario Pension Board appealed.

Held, the appeal should be allowed.

The tribunal interpreted s. 80(3) of the Act as only deeming employment with the predecessor employment to continue, and not as deeming plan membership to continue. That interpretation is incorrect. The tribunal erred in finding that the words "for the purposes of this Act" in s. 80(3) do not also include "for the purposes of the pension plan". Rather, those words make it clear that an employee's deemed continuation of employment is effective for purposes of pension benefits and not for the purposes of another statute. Where the Act intends to distinguish between employment and plan membership, it is explicit in doing so. The reference to the purposes of the PBA clarifies that the deemed continuation of employment is extended to all parts of the PBA, and not just to the successor employer rule in s. 80. Any doubt about the applicability of s. 80(3) to the plan and its effect thereon is eliminated by ss. 3 and 19 of the PBA. Section 3 provides: "This Act applies to every pension plan that is provided for persons employed in Ontario", and s. 19 expressly states that the Act overrides any pension plan provisions that are inconsistent with the statute. The tribunal did not consider either s. 3 or s. 19 in [page541] determining the scope of s. 80(3). The plain meaning of s. 80(3) indicates that a member's rights and benefits under a predecessor pension plan are to be determined as if their employment and pension plan membership are not interrupted, even though they have formally changed employers. The plan does not permit members to work and receive a pension simultaneously prior to age 65.

Cases referred to

Horgan and Anand v. Superintendent of Financial Services (August 1, 2001), Decision No. P0120-2000 and P0147-2001-1; Ontario Pension Board v. Superintendent of Financial Services and Burns (February 28, 2002), Decision No. P0116-2000-1, consd

Imperial Oil Ltd. v. Superintendent of Financial Services (October 21, 2002), Decision No. P0169-2001-1, distd

Other cases referred to

Domtar Inc. v. Québec (Commission d'appel en matière de lésions professionnelles), 1993 106 (SCC), [1993] 2 S.C.R. 756, [1993] S.C.J. No. 75, 105 D.L.R. (4th) 385, 154 N.R. 104, J.E. 93-1309, 55 Q.A.C. 241, 15 Admin. L.R. (2d) 1, [1993] C.A.L.P. 613, 49 C.C.E.L. 1, 41 A.C.W.S. (3d) 463; Hydro One Inc. v. Ontario (Superintendent of Financial Services) (2010), 98 O.R. (3d) 401, [2010] O.J. No. 52, 2010 ONCA 6, 78 C.C.P.B. 1, 314 D.L.R. (4th) 709, 257 O.A.C. 227; Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, [2004] S.C.J. No. 51, 2004 SCC 54, 242 D.L.R. (4th) 193, 324 N.R. 259, J.E. 2004-1546, 189 O.A.C. 201, 17 Admin. L.R. (4th) 1, 45 B.L.R. (3d) 161, 41 C.C.P.B. 106, 132 A.C.W.S. (3d) 579; Nolan v. Kerry (Canada) Inc., [2009] 2 S.C.R. 678, [2009] S.C.J. No. 39, 2009 SCC 39, 309 D.L.R. (4th) 513, EYB 2009-162383, J.E. 2009-1510, 391 N.R. 234, 49 E.T.R. (3d) 159, 76 C.C.P.B. 1, 76 C.C.E.L. (3d) 55, 92 Admin. L.R. (4th) 203, 253 O.A.C. 256, 179 A.C.W.S. (3d) 1202

Statutes referred to

Employment Standards Act, 2000, S.O. 2000, c. 41 [as am.]

Financial Services Commission of Ontario Act, 1997, S.O. 1997, c. 28 [as am.]

Human Rights Code, R.S.O. 1990, c. H.19

Ministry of Revenue Act, R.S.O. 1990, c. M.33, s. 6.1(3.1) [as am.]

Pension Benefits Act, R.S.O. 1990, c. P.8, ss. 3, 19, 38(4), 80 [as am.], (1), (3), 87

Public Service of Ontario Act, 2006, S.O. 2006, c. 35, Sch. A.

Retail Sales Tax Act, R.S.O. 1990, c. R.31 [as am.]

APPEAL from the decision of the Financial Services Tribunal.

M. Gold and A. Kaplan, for appellant in appeal.

Respondents in appeal unrepresented.

M. Bailey, for Superintendent of Financial Services, respondent in appeal.

The judgment of the court was delivered by

[1] DUCHARME J.: — This is an appeal of a decision of the Financial Services Tribunal (the "tribunal") dated May 7, 2012. That decision held that some of the individual respondents were eligible to receive immediate unreduced pensions under the Public Service Pension Plan (the "Plan"). The Ontario Pension Board [page542] (the "board") appeals this decision on the basis that the tribunal erred in its interpretation and application of s. 80 of the Pension Benefits Act, R.S.O. 1990, c. P.8 ("PBA"). The board seeks an order setting aside the decision of the tribunal and directing the Superintendent of Financial Services to carry out his notice of intended decision dated August 8, 2011, in which he refused to make an order under s. 87 of the PBA. The respondent, the Superintendent of Financial Services, supports the position of the appellant.

[2] For the reasons that follow, I would allow the appeal and set aside the decision of the tribunal.

Background

[3] The material facts in this case are not in dispute. This case involves exclusively questions of statutory interpretation and interpretation of the Plan. The individual respondents were employed by the Ministry of Revenue in the administration of the Ontario Retail Sales Tax Act, R.S.O. 1990, c. R.31. With the introduction of the Harmonized Sales Tax, their work was transferred to the Canada Revenue Agency ("CRA") and they were offered employment with the CRA. All but Mr. Mehdi Ratansi accepted a position. With this move, the individual respondents were no longer Ontario public servants.

[4] Five of the respondents had sufficient years of service to qualify for immediate unreduced pensions under the Plan, Sugrim John, Harry Singh, Pat Jeyanathan, Yogesh Suri and William Lau (the "eligible members"), and they sought confirmation from the board that they would be able to begin receiving their pensions immediately upon leaving the Ontario public service. The board, the administrator of the Public Service Pension Fund and the Plan, denied this request, maintaining that the respondents would not be eligible for pensions until they ceased employment with the CRA.

[5] The superintendent similarly denied the request of the eligible members, and on August 8, 2011, issued a notice of intended decision stating his intention to refuse to make any order to the effect that the eligible members could begin receiving their pensions upon commencement of their employment with the CRA.

[6] The individual respondents filed a request for hearing before the tribunal, and asked the tribunal for an order that those applicants who are eligible for an immediate unreduced pension from the Plan as of March 1, 2012 are entitled to receive that pension, notwithstanding that they may continue to be employed by CRA. The tribunal ultimately found in favour of the [page543] five eligible members who are actually affected by the decision of the tribunal.

[7] While all of the individual respondents were properly served, none of them submitted written submissions. Another individual, Mr. Ratansi, has filed written submissions to the court and appeared before the tribunal on behalf of all the applicants. Mr. Ratansi indicated that he wished to address the court on behalf of all of the individual respondents. However, as Mr. Ratansi is not a lawyer and was not affected by the decision of the tribunal[^1] he has no right to appear before this court. While we declined to hear oral submissions from Mr. Ratansi, we have considered his written submissions. Mr. Lau, one of the other respondents, did make oral submissions to the court.

[8] The tribunal expressly declined to deal with the other employees who transferred to the CRA but who were not eligible for unreduced pension. They did not appear before the court and our decision does not directly address their situation.

The Statutory Framework

[9] The eligible members' employment was transferred to the CRA pursuant to a federal-provincial agreement. This restructuring was deemed to be a transaction within the meaning of s. 80(1) of the PBA, which provides:

80(1) Where an employer who contributes to a pension plan sells, assigns or otherwise disposes of all or part of the employer's business or all or part of the assets of the employer's business, a member of the pension plan who, in conjunction with the sale, assignment or disposition becomes an employee of the successor employer and becomes a member of a pension plan provided by the successor employer,

(a) continues to be entitled to the benefits provided under the employer's pension plan in respect of employment in Ontario or a designated jurisdiction to the effective date of the sale, assignment or disposition without further accrual;

(b) is entitled to credit in the pension plan of the successor employer for the period of membership in the employer's pension plan, for the purpose of determining eligibility for membership in or entitlement to benefits under the pension plan of the successor employer; and

(c) is entitled to credit in the employer's pension plan for the period of employment with the successor employer for the purpose of determining entitlement to benefits under the employer's pension plan. [page544]

[10] Central to the present appeal is s. 80(3), which states:

80(3) Where a transaction described in subsection (1) takes place, the employment of the employee shall be deemed, for the purposes of this Act, not to be terminated by reason of the transaction.

Relevant terms of the Plan

[11] Membership in the Plan is either mandatory or optional. Pursuant to s. 2(1)1, persons who are appointed as public servants pursuant to the Public Service of Ontario Act, 2006, S.O. 2006, c. 35, Sch. A other than for a fixed term, and who have not attained the age of 65, are among the persons who are mandatory members. The tribunal found as a fact that the eligible members were mandatory members of the Plan under s. 2(1).

[12] To trigger an entitlement to an unreduced pension under s. 15 of the Plan, a member must cease membership in the Plan pursuant to s. 3 and meet certain conditions respecting age and years of service. Section 3 deals with termination of membership and includes the following circumstances: (a) death, (b) termination of the employment that required membership in the Plan and (c) the filing of a written election that the member no longer wishes to be a member "where that member is not required to be a member of the Plan". As a result of ss. 2(1) and 3(c) of the Plan, upon attaining the age of 65, members may cease their Plan membership by filing a written election and can commence receipt of a pension while continuing in employment.

Legal Issue

[13] As mentioned above, the central issue in this appeal is the tribunal's interpretation of s. 80 of the PBA and, in particular, s. 80(3) vis-à-vis the eligible members.

Standard of Review

[14] The standard of review that an appellate court should apply to a tribunal decision has been considered on a number of occasions by higher courts. In Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), the Supreme Court of Canada determined that the tribunal is not entitled to deference on a pure question of statutory interpretation of the PBA and that correctness is the appropriate standard of review for such issues.[^2] [page545]

[15] In Nolan v. Kerry (Canada) Inc.,[^3] the Supreme Court of Canada reiterated that correctness is the standard of review for issues of the interpretation of the PBA but determined that the standard of reasonableness is applicable to the tribunal's interpretation of pension plans and related texts and the interpretation of the tribunal's constating statute, the Financial Services Commission of Ontario Act, 1997, S.O. 1997, c. 28.

[16] Finally, the Ontario Court of Appeal, in Hydro One Inc. v. Ontario (Superintendent of Financial Services),[^4] applied the correctness standard in its review of the PBA statutory interpretation issue which arose in the case. However, the less strict standard of reasonableness was applied in its review of the tribunal's application of the statute to the facts in the case.

[17] Accordingly, the tribunal's finding on the interpretation of s. 80(3) of the PBA, as a pure question of statutory interpretation, attracts the correctness standard. The tribunal is entitled to deference, however, in respect of its interpretation of the terms of the Plan and the application of the statute to those Plan terms and the facts at hand. On those issues, the standard of reasonableness is the appropriate standard of review.

The Decision of the Tribunal

[18] The tribunal issued its decision on May 7, 2012. The tribunal concluded that the eligible members may start receiving their pensions from the Plan while continuing to work for CRA, subject to their filing an election to withdraw from Plan membership under s. 3(c) of the Plan. The essence of the tribunal's reasoning is that s. 80(3) of the PBA only deems employment with the predecessor employer to continue, but does not deem Plan membership to continue. While acknowledging that it is "obvious that s. 80(3) will have some impact on how any pension plan will be interpreted in situations to which it applies", there is nothing in s. 80 that "stand[s] as an impermeable barrier to an application by a plan member for immediate pension under the plan", where the Plan terms permit. The tribunal reasoned that the words "for the purposes of the Act" in s. 80(3) do not also include "for the purposes of the pension plan". In other words, where a pension plan allows employees to terminate plan membership while continuing in employment, a s. 80 transaction does not operate to override those Plan terms. According to this [page546] tribunal panel, s. 80(3) of the PBA only operates to prevent an "automatic expulsion" from the Plan.

[19] The tribunal then interpreted the Plan terms and concluded that the eligible members' de facto change in employment results in them no longer being classified under the Plan as "mandatory" members. Where a member is not mandated to participate in the Plan, he or she may voluntarily withdraw from Plan membership under s. 3(c) of the Plan and, if eligible, may commence the pension.

[20] The tribunal did not purport to distinguish the facts of this case from Horgan and Anand v. Superintendent of Financial Services[^5] and Ontario Pension Board v. Superintendent of Financial Services and Burns,[^6] two prior cases of the tribunal that deal with the same question and came to the opposite conclusion. Rather, the tribunal suggested the prior decisions did not encompass all the relevant issues:

As the issues were framed in argument by the parties before the Tribunal in those two cases, it appears that the Tribunal did not consider the possibility that a deemed continuance of employment for purposes of the Act might not govern the rights of the employees under their respective plans.

Analysis

[21] Section 6.1(3.1) of the Ministry of Revenue Act, R.S.O. 1990, c. M.33 expressly provides that a divestment by the Ministry of Revenue to the CRA of the kind in question is a transaction to which s. 80(1) of the PBA applies. Accordingly, it was not in dispute that s. 80 applies to the situation.

[22] Section 80(1), the successor employer rule, entitles an employee who participated in his previous employer's pension plan and who commences participation in the successor employer's pension plan to (1) the benefits in the previous plan to the effective date of the transaction; (2) credit in the successor plan for the period of employment in the predecessor plan for the purpose of determining entitlement to benefits under the predecessor plan; and (3) credit in the predecessor plan for the period of employment with the successor employer for the purpose of determining entitlement to benefits under the successor plan. In the present case, eligible members may count both their service in the Plan and in the federal plan covering them at CRA in determining their eligibility for Plan benefits. To give effect to [page547] s. 80(1), s. 80(3) deems the employment of a member of the predecessor pension plan not to be terminated by reason of the transaction giving rise to the change in employer.

[23] The central question in this appeal is whether the legislature intended a divested employee to be able to take advantage of a change in employer to access pension benefits which he or she would not otherwise have had access to without ceasing employment. More specifically, was the tribunal correct in interpreting s. 80(3) narrowly as deeming the continuation of employment only for the purposes of the Act but not for purposes of the Plan?

[24] The narrow interpretation of s. 80(3) of the PBA adopted by the tribunal is untenable for several reasons.

[25] First, the language "for the purposes of the Act" in s. 80(3) of the PBA makes it clear that an employee's deemed continuation of employment is effective for purposes of pension benefits and not, for example, vis-à-vis the Human Rights Code, R.S.O. 1990, c. H.19, the Employment Standards Act, 2000, S.O. 2000, c. 41 or some other statute. That is, this phrase is meant to clarify the scope of the deeming provision, not to restrict it.

[26] Second, where the PBA intends to distinguish between employment and plan membership it is explicit in doing so. For example, s. 38(4) of the PBA stipulates as follows:

38(4) For the purpose of determining entitlement to a deferred pension, a member of a multi-employer pension plan who terminates employment with a participating employer . . . shall be deemed not to have terminated employment until the member terminates membership in the pension plan.

(Emphasis added)

[27] What is important here is that s. 38(4) of the PBA continues the plan membership of a member of a multi-employer pension plan ("MEP") when their employment terminates, just as s. 80(3) continues the plan membership of a member affected by a divestment. However, s. 38(4) expressly preserves the MEP members' rights to terminate their pension plan membership. Section 80(3) does not preserve a member's right to terminate pension plan membership in the predecessor pension plan while maintaining employment with the successor employer. This is because s. 80(3) intends no such result.

[28] Third, and more importantly, this reference to the purposes of the PBA clarifies that the deemed continuation of employment is extended to all parts of the PBA, and not just to the successor employer rule in s. 80. As a general proposition, the "purposes" of the PBA are to provide a regulatory regime for the provision of pensions in Ontario and delineate minimum standards. This makes it clear that s. 80(3) must also apply to the Plan. [page548]

[29] Fourth, any doubt about the applicability of s. 80(3) to the Plan and its effect thereon is eliminated by ss. 3 and 19 of the PBA. Section 3 of the PBA provides: "This Act applies to every pension plan that is provided for persons employed in Ontario." Section 19 of the PBA expressly states that the Act overrides any pension plan provisions that are inconsistent with the statute.[^7] The tribunal did not consider either s. 3 or s. 19 of the PBA in determining the scope of s. 80(3) and this led it into error.

[30] In sum, the plain meaning of s. 80(3) indicates that a member's rights and benefits under a predecessor pension plan are to be determined as if their employment and pension plan membership are not interrupted, even though they have formally changed employers.

[31] Moreover, the analysis of the tribunal was internally inconsistent insofar as the tribunal interpreted s. 80(3) of the PBA as applying to the Plan in some circumstances but not in others. The tribunal found that s. 80(3) operates to prevent the board from expelling the eligible members from the Plan and terminating their Plan membership on the termination of their employment under s. 3(b). But the tribunal also held that s. 80(3) does not prevent the members from voluntarily terminating Plan membership under s. 3(c). In other words, s. 80(3) operates for the purposes of s. 3(b) of the Plan, but not for the purposes of s. 3(c). This selective application of what s. 80(3) applies "for the purposes of" is not supportable. Section 80(3) [page549] applies for the purposes of the eligible members' pensions, under both the Plan and the PBA.

[32] As well, it is our view that the tribunal erred in departing from the tribunal's previous decisions in Horgan and Burns. These cases raised the identical issue and dealt with the very same pension plan. They were decided over ten years ago and settled the issue of whether divested members of this Plan who meet the conditions for early unreduced pensions, but continued to work for a successor employer, may trigger payment from the Plan: they cannot.

[33] The tribunal decision to reject the accepted meaning of s. 80(3) stemmed in part from a reliance on Imperial Oil Limited v. Superintendent of Financial Services for the proposition that there is a "distinction between 'the purposes of the Act' and the 'purposes of the plan'".[^8] As mentioned above, this distinction as enunciated by the tribunal in this case is untenable given the clear provisions of ss. 3 and 19 of the PBA. Moreover, Imperial Oil has no application to this case and certainly does not justify the tribunal's conclusion that it was "faced with two different and apparently conflicting approaches" to the interpretation of s. 80(3). Imperial Oil was about whether the actions of a successor employer may be attributed to the predecessor employer such that employees may access an enhanced benefit under their predecessor pension plan. The statement in the majority reasons that "s. 80(3) operates for the purposes of the Act and not for the purposes of a pension plan subject to the Act" was made in response to, and rejecting, the superintendent's argument that a termination by a successor employer means that the predecessor employer has also terminated the member's employment such as to trigger enhanced benefits under the predecessor plan only available due to the predecessor's employer's discretionary and involuntary termination of an employee.

[34] The tribunal's decision not to follow the established jurisprudence of the tribunal also ignores the fact that Plan members, the board, the superintendent and other pension plan administrators and members throughout Ontario have relied on and conducted their affairs based on this accepted interpretation of s. 80(3). The question before the tribunal concerns pension rights and plan administrator obligations, and calls for certainty and consistency, not the uncertain approach crafted by the tribunal. In [page550] Domtar Inc. v. Quebec, Justice L'Heureux-Dubé for a unanimous Supreme Court of Canada stated [at para. 59]:

Consistency is a desirable feature in administrative decision-making. It enables regulated parties to plan their affairs in an atmosphere of stability and predictability. It impresses upon officials the importance of objectivity and acts to prevent arbitrary or irrational decisions. It fosters public confidence in the integrity of the regulatory process. It exemplifies "common sense and good administration".[^9]

[35] In conclusion, the tribunal's interpretation of the Plan was not a reasonable one, largely because of its error in interpreting s. 80(3) too narrowly. The Plan does not permit members to work and receive a pension simultaneously prior to age 65. Plan membership is mandatory for most classes of employees under the age of 65, including the eligible members. To trigger a pension under s. 15 of the Plan, a member must cease Plan membership. When an employee reaches age 65, Plan membership becomes optional, in accordance with s. 2(2). If the employee, at age 65, chose to cease Plan membership under s. 3(c) and commence receipt of a pension, he or she would be subject to clawback provisions if he or she continued employment with a participating employer.

[36] The deemed continuation of employment in s. 80(3) of the PBA deems employment with the Ontario government and the CRA to be continuous, such that the eligible members are in the same position they would have been had divestment not occurred and their employment continued with the Ministry of Revenue.

Conclusion

[37] For the foregoing reasons, the appeal is allowed, as the tribunal's interpretation of s. 80(3) of the PBA is incorrect and its interpretation of its impact on the Plan is unreasonable. The final order and decision of the tribunal is set aside and the superintendent is directed to carry out the notice of intended decision dated August 8, 2011. There shall be no order with respect to costs.

Appeal allowed.

Notes

[^1]: Mr. Ratansi, who had worked for the Ontario Ministry of Revenue did not commence employment with the Canada Revenue Agency ("CRA"); rather, he elected to retire on a pension.

[^2]: 2004 SCC 54, [2004] 3 S.C.R. 152, [2004] S.C.J. No. 51, at para.16.

[^3]: 2009 SCC 39, [2009] 2 S.C.R. 678, [2009] S.C.J. No. 39.

[^4]: (2010), 2010 ONCA 6, 98 O.R. (3d) 401, [2010] O.J. No. 52 (C.A.), at paras. 28-45.

[^5]: (August 1, 2001), Decision No. P0120-2000 and P0147-2001-1 ("Horgan and Anand").

[^6]: (February 28, 2002), Decision No. P0116-2000-1 ("Burns").

[^7]: 19(1) The administrator of a pension plan shall ensure that the pension plan and the pension fund are administered in accordance with this Act and the regulations. (2) Subsection (1) applies whether or not the pension plan is amended to comply with this Act and the regulations. (3) The administrator of a pension plan shall ensure that the pension plan and the pension fund are administered in accordance with, (a) the filed documents in respect of which the Superintendent has issued an acknowledgment of application for registration or a certificate of registration, whichever is issued later; and (b) the filed documents in respect of an application for registration of an amendment to the pension plan, if the application complies with this Act and the regulations and the amendment is not void under this Act. (4) Subsection (3) does not apply to enable the administrator to administer the pension plan contrary to this Act and the regulations.

[^8]: Imperial Oil Limited v. Superintendent of Financial Services (October 21, 2002), Decision No. P0169-2001-1 ("Imperial Oil").

[^9]: Domtar Inc. v. Québec (Commission d'appel en matière de lésions professionnelles), 1993 106 (SCC), [1993] 2 S.C.R. 756, [1993] S.C.J. No. 75.