DIVISIONAL COURT FILE NO.: DC15-2108, DC15-2109
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Ellies, Marrocco A.C.J.S.C., Mulligan, JJ.
B E T W E E N:
NICOLE LACROIX and ROSIE LADOUCEUR
William J. Sammon, for the Respondents
Plaintiffs/Respondents
- and -
CANADA MORTGAGE AND HOUSING CORPORATION and MARC ROCHON, CLAUDE POIRIER-DEFOY, JIM MILLAR, KAREN KINSLEY, GERALD NORBRATEN, JEAN-GUY TANGUAY, DAVID METZAK, and BRIAN KNIGHT, being the Trustees of the CANADA MORTGAGE AND HOUSING CORPORATION PENSION FUND
J. Brett Ledger, Lauren Tomasich and Lia Bruschetta, for the Appellants
Defendants/Appellants
B E T W E E N:
FRANK McCANN and DAVID GUFFIE
Paul Leamen and Tara M. Sweeney, for the Respondents
Plaintiffs/Respondents
- and -
CANADA MORTGAGE AND HOUSING CORPORATION and MARC ROCHON, CLAUDE POIRIER-DEFOY, JIM MILLAR, KAREN KINSLEY, GERALD NORBRATEN, JEAN-GUY TANGUAY, DAVID METZAK, and BRIAN KNIGHT, being the Trustees of the CANADA MORTGAGE AND HOUSING CORPORATION PENSION FUND
J. Brett Ledger, for the Appellants
Defendants/Appellants
HEARD: January 27, 2016
REASONS FOR DECISION
ellies j.
OVERVIEW
1The defendants (collectively, “CMHC”) appeal the decision of the motion judge in which he certified four additional common issues in these two related class actions. In both actions, former employees of CMHC seek damages against CMHC for breach of trust, breach of fiduciary duty, negligence and breach of statutory duty. The allegations relate to CMHC’s decision to use surplus pension funds to pay enhanced pension benefits to employees on two occasions and to pay for the cost of downsizing its workforce.
2The plaintiffs in the action by Lacroix and Ladouceur (the “Lacroix action”) left CMHC’s employ before the first enhanced benefits payment. The plaintiffs in the action by McCann and Guffie (the “McCann action”) left before the second. In both actions, the plaintiffs contend that they are entitled to damages equivalent to a portion of the surplus funds that were distributed to members after the plaintiffs took the commuted value of their pension benefits and left the pension plan.
3The additional common issues certified by the motion judge all relate to s. 8(10) of the Pension Benefits Standards Act, 1985, R.S.C., 1985, c. 32 (2nd Supp.) (“PBSA”). Under that section, an employer such as CMHC who acts as the administrator of a pension plan must declare any material conflict it may have between its role as administrator and its role as an employer and must act in the best interests of the plan members when such a conflict occurs.
4The four additional common issues (the “conflict of interest common issues”) call into question whether CMHC was in a situation of conflicting interests while deciding what to do with the Plan surplus.
5In the appeal relating to the Lacroix action, CMHC argues that the motion judge erred in concluding that the conflict of interest common issues satisfy the elements of s. 5(1) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“CPA”), with the exception of s. 5(1)(b) regarding the class definition. It alleges that the motion judge erred in law in the manner in which he applied s. 8(10) of the PBSA and in a manner central to the application of s. 5 of the CPA. CMHC submits, therefore, that the motion judge’s order should be set aside as being incorrect.
6I disagree. I would dismiss the appeal in that matter. In my view, the motion judge made no legal error by finding that it was neither plain nor obvious that CMHC was not in a position of conflict when it was deciding what to do with the Plan surplus. Nor did the motion judge err when he found that the question of whether there was such a conflict was common to all of the class members and potential class members in both actions, and does not require proof of reliance. His decision to certify, therefore, is entitled to deference and there is no basis upon which this court should interfere with it.
7In the appeal relating to the McCann action, in addition to raising the issues it raises in the Lacroix matter, CMHC argues that the motion judge erred in finding that the proposed class definition meets the requirements of s. 5(1)(b) of the CPA with respect to both the conflict of interest common issues and the issues certified on consent in the Lacroix action. I agree. With respect, I conclude that the motion judge failed to properly consider whether the class definition is unnecessarily under-inclusive and whether it properly identifies those who have a potential claim against the defendants, defines the parameters of the lawsuit so as to identify those persons bound by its results, and describes who is entitled to notice of the action. For these reasons, I would allow the appeal in the McCann action and amend the class definition to align it more with the class definition certified in the Lacroix action.
BACKGROUND FACTS
8Four facts are crucial to understanding the issues in this case:
(1) the accumulation of a large surplus in the CMHC pension plan;
(2) a significant reduction of CMHC’s workforce while that surplus was building;
(3) the payment of enhanced benefits to those individuals who remained members of the pension plan after the workforce reduction; and
(4) CMHC’s decision to use surplus pension funds to pay for those enhanced benefits and the costs of the reduction in its workforce.
The CMHC pension plan
9CMHC is both the sponsor and the administrator of a defined benefit plan maintained for the benefit of its employees (the “Plan”). Beginning in about 1988, as a result of strong investment returns, the Plan began experiencing an actuarial surplus (meaning that the actuarial value of the Plan’s assets exceeded the actuarial estimation of its future liabilities: see Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), 2004 SCC 54, [2004] 3 S.C.R. 152, at paras. 21 and 22). By 1995, the actuarial surplus was over $100 million.
The CMHC workforce reduction programs
10Beginning in that year (1995), CMHC began to reduce the size of its workforce. CMHC implemented two different programs for that purpose. The first of these was called the “Workforce Adjustment Program” (“WFA”). The second was called the “Transition”. Both programs were commonly referred to simply as the WFA, despite the distinction. Under both programs, employees could volunteer for early retirement, if eligible, or could opt for a “departure allowance”. Those employees who did not choose to retire early or who were not eligible to do so were given three options, namely:
(a) take the commuted value of their pension benefits;
(b) transfer their pension contribution and service into the pension plan of a new employer; or
(c) remain in the Plan as an inactive member and receive a deferred pension at age 60.
11The plaintiffs in these two class actions all elected the first option, although at different times.
12According to the statement of claim, between 1995 and 2000, 1,400 employees – about half of CMHC’s workforce – were let go1.
Surplus reviews and benefits enhancements
13While CMHC was steadily reducing the size of its workforce, the Plan surplus was steadily increasing. As a result, CMHC undertook two “surplus reviews” in order to “identify options for dealing with the (s)urplus” (Millar affidavit, CMHC Appeal Book and Compendium, Lacroix action, tab 12, para. 31). The first review began on December 4, 1997 and resulted in what the parties call the “first benefits enhancement decision”.
14By virtue of this decision, on October 8, 1998 CMHC decided to pay enhanced benefits to those individuals who were members of the Plan as of January 1, 1999. These enhanced benefits included the return of contributions (plus interest), the introduction of spousal benefits for same sex couples, an increase in survivor benefits, and a contribution holiday.
15As the Lacroix plaintiffs had chosen to take the commuted value of their pension benefits and left the Plan prior to January 1, 1999 they received none of these enhanced benefits.
16The second surplus review began on or about May 15, 2000 and resulted in the “second benefits enhancement decision”. On October 5, 2000 CMHC decided to pay enhanced benefits to those employees who were members of the Plan as of January 1, 2001. In addition to contribution returns, these enhanced benefits included improvements in the integration of the Plan with the Canada/Québec Pension Plan, a revised formula for calculating retirement benefits, and a contribution holiday.
17The McCann plaintiffs chose to take the commuted value of their pension benefits after January 1, 1999 but before January 1, 2001. Therefore, while they received the enhanced benefits provided by virtue of the first enhanced benefits decision, they received none of the enhanced benefits that flowed from the second.
18During both surplus reviews, CMHC issued a number of communiqués and memoranda to its employees. One bears mention. On December 4, 1997, the date the first surplus review began, CMHC sent out a communiqué advising of the surplus review and setting out CMHC’s position regarding ownership of the surplus as follows:
What is not in question in the review [of how the surplus may be utilized] is the ownership of the Pension Fund surplus. The Corporation’s position is that the surplus belongs to it, just as the Corporation has responsibility for any Pension Fund deficit that might arise.
Uses to which the surplus was put
19While these decisions by CMHC to pay enhanced benefits were being made, the Plan surplus continued to build. By the time the first benefits enhancement decision was made in 1998, the Plan had an actuarial surplus of $123.7 million. By December of that year, it had grown to $153.6 million. By the time the second benefits enhancement decision was made in 2000, the actuarial surplus was $235.6 million.
20In the first benefits enhancement decision, CMHC decided that $100 million of the surplus would be shared between CMHC and its employees. In the second benefits enhancement decision, CMHC ultimately decided to share $ 124.5 million of the surplus. In each case, 60% was allocated to CMHC and 40% was allocated to the employees, based on the historical contribution ratios of each contributor. In total, according to the plaintiffs, CMHC allocated $151.92 million to itself and $98.3 million to its employees.
21The money allocated to the employees was used to pay for the cost of the benefits enhancements paid to them. With respect to its share, CMHC did not actually withdraw its first $60 million allocation from the Plan. Instead, it decided to use this amount to offset the increase in liabilities to the Plan resulting from the benefits it offered to the departing employees as part of the two workforce reduction programs, the value of which was $59.4 million as of December 31, 1998.
22According to the Lacroix plaintiffs, CMHC wanted to use the surplus funds to pay for the cost of downsizing as early as 1995. In that year, CMHC sought permission from Canada Revenue Agency to amend the terms of the Plan to permit employees aged 50 or older with 10 or more years of service to retire immediately without actuarial reduction of their pension benefits. However, CMHC was advised that such amendments would contravene the Income Tax Act. Instead, CMHC provided early retirement benefits through a program called the “Early Retirement Reduction Waiver”, the cost of which was eventually paid for using the $59.4 million referred to above.
PROCEDURAL HISTORY
23The procedural history of this case has been recounted many times. Some might say too many times: see the comments of Laskin J.A. in Lacroix v. Canada Mortgage and Housing Corporation, 2012 ONCA 243, 110 O.R. (3d) 81, at paras. 53 and 54. Of course, each time the story is told, it gets a little longer.
24The Lacroix action was commenced by a statement of claim issued in July 1999. Plaintiffs in that action included former employees who chose to take the commuted value of their pension benefits, along with a departure allowance, during the workforce reduction between January 1, 1995 and October 23, 1998. In the original statement of claim, the Lacroix plaintiffs sought damages from CMHC for breach of trust and breach of fiduciary duty.
25On May 4, 2000 the following class definition was certified on consent:
… all former employees who left the Canada Mortgage Housing Corporation (“CMHC”) from January 1, 1995 to October 23, 1998, due to CMHC’s work adjustment (downsizing) program, who did not receive their alleged share of a pension surplus (which has been paid by what the Defendants have characterized as “benefits enhancements” funded from surplus and which the Plaintiffs allege was a distribution of surplus)”.
26In addition, the following three common issues were certified on consent, namely:
Do members of the proposed class have an equitable and/or beneficial interest in the pension fund surplus which entitled them to an equitable share of what the defendants have characterized as ‘benefits enhancements’ funded out of surplus?
Did the failure of the defendants to include members of the proposed class to the extent of their equitable share in what the defendants have characterized as ‘benefits enhancements’ funded from surplus amount to a breach of trust or fiduciary duty?
If answer to (ii) above is yes, are the class members entitled to any remedy and, if so, on what basis?
27In 2002, the Lacroix Statement of Claim was amended in three respects. First, it was amended to include the McCann plaintiffs, i.e. former employees who left the employ of CMHC after October 23, 1998. Second, claims of negligence and breach of statutory duty were added. Third, the Statement of Claim was amended to advance two new theories of liability, which became known as the “partial termination” and “estoppel” theories. The partial termination theory was based on a claim that the workforce reduction programs and the pension surplus reviews which led to the benefits enhancement decisions amounted to a partial termination of the Plan under the PBSA, thereby crystalizing the plaintiffs’ interest in the Plan’s assets.
28The estoppel theory, as its name suggests, was advanced more by way of a shield than a sword. The issue was framed as follows:
(If the election by class members to take the commuted value of their pension terminated any beneficial right or interest in the surplus), are the defendants estoped by their conduct from alleging same, assuming reliance?
29In 2003, the plaintiffs in the reconstituted Lacroix action sought certification based on the amended Statement of Claim. The motion judge dismissed the motion, finding that the proposed amendments failed to satisfy the requirements of an identifiable class, commonality, and preferable procedure required by ss. 5(1)(b), (c) and (d), respectively, of the CPA: (2003), 36 C.P.C. (5th) 150. An appeal to the Divisional Court was unsuccessful: [2004] O.J. No. 4348. Leave to Appeal to both the Court of Appeal and Supreme Court of Canada was denied: [2005] O.J. No. 484 (C.A.); [2005] S.C.C.A. No. 164.
30In 2006, the McCann plaintiffs moved for an order severing their claims from those of the Lacroix plaintiffs. The motion judge granted the motion on the basis that the addition of the McCann plaintiffs was the cause of the problems that he had identified in his 2003 decision: (2007), 2007 ON SC 14335, 50 C.P.C. (6th) 95. On consent, the original three common issues that had been certified on consent in the Lacroix action were amended to include two new common issues, to which I will refer below.
31In addition to allowing the severance of the McCann plaintiffs, the motion judge granted permission to both sets of plaintiffs to bring motions for certification, including (again, in the case of the Lacroix plaintiffs) a motion for certification of the partial termination issue. These motions were heard in 20082. In addition to seeking certification of the partial termination issue, the Lacroix plaintiffs also sought certification of the estoppel issue. For their part, the McCann plaintiffs sought certification of different common issues than those that had been certified on consent in the Lacroix action. In separate reasons released on January 26, 2009 with respect to each action, the motion judge dismissed both motions: Lacroix v. CMHC, 68 C.P.C. (6th) 111; McCann v. CMHC, 75 C.P.C. (6th) 156. Although CMHC had indicated that it was willing to consent to the identical common issues being certified in the McCann action as had been certified on consent in the Lacroix action, the McCann plaintiffs refused. As a result, following the motions, the McCann action remained uncertified.
32Once again, the plaintiffs in both actions appealed the motion judge’s decision, first to the Divisional Court and then to the Court of Appeal. Once again, the appeals were dismissed by both courts: 2010 ONSC 65, 90 C.P.C. (6th) 169 (Div. Ct.); 2012 ONCA 243, 110 O.R. (3d) 81. Leave to Appeal to the Supreme Court of Canada was also, once again, refused: [2012] S.C.C.A. No. 286.
33In the course of dismissing the plaintiffs appeals, however, the Divisional Court made the following comments, at paras. 77 and 78:
77 Our decision does not preclude the Lacroix or McCann appellants from pursuing the issue of a breach of s. 8(10) and the appropriate remedy pursuant to s. 8(11) of the PBSA (apart from relief based upon partial termination), as a common issue before the certification judge.
78 This was not submitted or argued on the basis of a stand-alone common issue. Given the procedural history of this matter and the numerous attempts to deal with these issues and the reformulations of both the class members and the common issues, in our view, it is not appropriate that we attempt to fashion this as a common issue.
The motions under appeal
34Taking inspiration, if not an invitation, from the comments of the Divisional Court, in 2013, the plaintiffs in both actions then brought the motions from which the present appeals arise. As of that date, the following common issues had been certified on consent in the Lacroix action:
Do members of the proposed class have an equitable and/or beneficial interest in the pension fund surplus which entitled them to an equitable share of what the defendants have characterized as “benefits enhancements” funded out of surplus?
If the answer to 1 is yes, did the election by the members to take the commuted value of their pension terminate any beneficial right or interest they might have had in the surplus by virtue of the trust and/or fiduciary relationship?
If the answer to 2 is no, did the failure of the defendants to include members of the class to the extent of their equitable share in what the defendants have characterized as “benefits enhancements” funded from surplus amount to breach of trust or fiduciary duty?
If the answer to 3 is yes, are the class members entitled to any remedy and, if so, on what basis?
If the answer to 2 is yes, should those class members
a) whose commuted value transfer election was reduced by the amount of the maximum income tax limit, but
b) who were permitted by CMHC to leave any commuted value balance over such limit in the plan to be received as a transfer restriction annuity rather than a residual cash payment (TRA subclass), nevertheless be entitled to have any beneficial right or interest in the surplus determined as if their commuted value transfer had not occurred or only to the extent of the value of the transfer restriction annuity as was done by CMHC.
- Are class members entitled to exemplary and/or punitive damages and, if so, in what amount?3
35In their motion in the Lacroix action, the plaintiffs sought to certify the following four additional common issues (the conflict of interest common issues to which I referred earlier):
(1) Was CMHC in a conflict of interest within the meaning of s. 8(10) of the PBSA when it failed to advise the class members at the beginning of the WFA or anytime thereafter that they had or may have had a beneficial interest in the pension fund surplus prior to those class members electing to take their commuted value and leaving the plan?
(2) Was CMHC in a conflict of interest within the meaning of s. 8(10) of the PBSA when by word and/or conduct it took the position that it owned the surplus to the exclusion of plan members including the class members?
(3) Was CMHC in a conflict of interest within the meaning of s. 8(10) of the PBSA when it made and when it implemented its surplus sharing decisions on the 1 January 1999 and the 1 January 2001, without including the class members as beneficiaries of those decisions.
(4) If the answer to any of (1), (2) or (3) is yes, what is the appropriate remedy for the class members pursuant to s. 8(11) of the PBSA?
36In the McCann action, in addition to these four conflict of interest common issues and the six common issues certified on consent in the Lacroix action, the plaintiffs sought to certify the following class definition (which I will refer to as “the McCann class definition”, below):
All former employees of CMHC who were pension plan members on the 1st of January, 1995, who subsequently took their commuted value, along with a work force adjustment package, and left the plan after October 24, 1998, without receiving their alleged share of the pension surplus, which has been partially paid by what the Defendants have characterized as “benefit enhancement” funded from surplus and which the Plaintiffs allege was a distribution of surplus.
37The motions were argued in December, 2014. In reasons released on January 23, 2015, the motion judge allowed both motions, finding that the class definition in the McCann action and the proposed common issues in both actions meet the requirements of the CPA.
ISSUES
38In the Lacroix action, CMHC contends that the motion judge erred in concluding that the conflict of interest common issues satisfy the requirements of four of the five criteria for certification set out under s. 5(1) of the CPA. Specifically, it alleges that he erred in concluding that:
(1) they are premised on a viable cause of action under s. 5(1)(a);
(2) they raise common issues under s. 5(1)(c);
(3) a class proceeding is the preferable procedure for resolution of the common issues under s. 5(1)(d); and
(4) the plaintiffs are appropriate representative plaintiffs under s. 5(1)(e).
39In the McCann action, CMHC raises an additional issue, namely that:
(5) the motion judge erred in concluding that the McCann class definition is not under-inclusive and vague in respect of the Lacroix certified common issues and the conflict of interest common issues and meets the test under s. 5(1)(b) of the CPA.
40As the appellant did in its factum, I will address issues (2) and (3) together. I will address the other issues separately. Before I do, however, I will address the standard of review.
STANDARD OF REVIEW
41The deference due to a motion judge deciding the issue of certification, indeed the deference due to the particular motion judge involved in this case, was set out by this court in McCann and Guffie v. Canada Mortgage and Housing Corporation, 2010 ONSC 65, 263 O.A.C. 273, at para. 11:
Substantial deference should be paid to the certification judge's expertise and detailed knowledge of the file. The certification judge in this case has had extensive involvement in this matter over a period of years. The reviewing court should intervene only where the certification judge has made a palpable and overriding error of fact, or otherwise erred in principle. Any errors of law are reviewable on the correctness standard. See: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Pearson v. Inco, 2006 ON CA 913, [2005] O.J. No. 4918 (C.A.) at para 43; 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp., 2009 ON SCDC 23374, [2009] O.J. No. 1874 (Div. Ct.) at paras. 24 to 28.
42Although CMHC has appealed on all of the grounds set out above, in oral argument it focused on what it alleges are two fundamental legal errors that underlie all of the errors alleged with respect to the Lacroix action. On behalf of CMHC, counsel submits that:
a. there can be no conflict of interest under the PBSA because Plan members had no ownership interest in the actuarial surplus of the Plan at the time of the benefits enhancement decisions; and
b. a class proceeding is not appropriate because the first two conflict of interest common issues involve allegations of misrepresentation that are unique to each member of the class or proposed class, as the Divisional Court and the Court of Appeal have already held.
43CMHC contends that these legal errors relate to matters central to the proper application of s. 5 of the CPA and, for that reason, displace the deference usually paid to decisions on certification motions: Hickey-Button v. Loyalist College of Applied Arts & Technology (2006), 2006 ON CA 20079, 211 O.A.C. 301 (Ont. C.A.), at para. 6; Cassano v. Toronto-Dominion Bank, 2007 ONCA 781, 87 O.R. (3d) 401, at para. 23.
44With respect to the appeal of the decision of the motion judge to certify the McCann action, CMHC takes the position that the motion judge failed to engage in any supporting analysis. CMHC argues that the motion judge’s failure amounts to an error of law, which is also reviewable on the correctness standard: Brown v. Bramalea City Centre, 2014 ONSC 6166, at paras. 11-13.
ANALYSIS
Relevant statutory provisions
45Before I begin my analysis of the legal issues, I believe it would be helpful to set out the text of the relevant statutory provisions.
46The plaintiffs brought their motions for certification under s. 2(1) of the CPA. Subsection 5(1) of the CPA sets out the requirements that must be met before an action will be certified on such a motion. It reads:
- (1) The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,
(a) the pleadings or the notice of application discloses a cause of action;
(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
(c) the claims or defences of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and
(e) there is a representative plaintiff or defendant who,
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.
47The conflict of interest issues that the plaintiffs sought to certify as common issues were based on the statutory cause of action contained in s. 8 of the PBSA. Subsections (10) and (11) of that statute provide:
(10) If there is a material conflict of interest between the role of an employer who is an administrator and their role in any other capacity, the administrator
(a) shall, within thirty days after becoming aware that a material conflict of interest exists, declare that conflict of interest to the pension council or to the members of the pension plan; and
(b) shall act in the best interests of the members of the pension plan.
(11) If an administrator contravenes subsection (10), a court of competent jurisdiction may, on application by the Superintendent or any other interested person, make any order on such terms as the court considers appropriate.
48With that statutory framework in mind, I turn to the issues in these appeals.
Did the motion judge err in finding that the conflict of interest issues are premised on a viable cause of action under s. 5(1)(a) of the CPA?
49Unlike the other criteria that must be established under s. 5(1) of the CPA, the question of whether the pleadings disclose a cause of action is purely a question of law. It is governed by the rule that a pleading should not be struck for failure to disclose a cause of action unless it is “plain and obvious” that no claim exists: Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, at p. 175; Cloud v. Canada (Attorney General) (2004), 2004 ON CA 45444, 192 O.A.C. 239, 73 O.R. (3d) 401 (Ont. C.A.), at para. 41. In making that determination, the facts must be assumed as pleaded: Hunt v. Carey Canada Inc., 1990 SCC 90, [1990] 2 S.C.R 959, at 980.
50We have not been taken to any jurisprudence dealing directly with the interpretation of ss. 8(10) and (11) of the PBSA. We were advised by counsel for the McCann plaintiffs during argument that there is none. Throughout the following discussion, therefore, it must be remembered that the question is not whether the plaintiffs clearly have a viable cause of action. Rather, the question is whether they clearly do not.
51The motion judge held that the proposed common conflict of interest issues met the test for certification under s. 5(1)(a). At para. 34 of his decision in the Lacroix action (upon which he relied in his decision in the McCann action), he wrote:
If, as alleged, the defendants made decisions during the implementation of the WFA and the surplus review that they, as the employer and sponsor of the plan, intended to use part of the surplus for CMHC's own benefit and purposes, I find it is not clear and obvious that the defendants were not in a conflict of interest with the interest of dismissed employees who were being asked to choose whether to leave or stay in the pension plan. If such a conflict of interest existed they had a statutory duty to declare it and act in the best interests of all plan members.
52CMHC contends that the motion judge made three mistakes in arriving at this conclusion. It submits that he:
(a) misconstrued the common issues that the plaintiffs sought to certify;
(b) failed to identify a conflict of interest within the meaning of s. 8(10) of the PBSA; and
(c) misinterpreted and misapplied both ss. 8(10) and 8(11).
53With respect, I am unable to agree with any of these submissions, for three reasons. In my view, CMHC’s submissions:
(1) are based on the false premise that the motion judge should look only at the wording of the proposed common issue to determine the cause of action under s. 5(1)(a) of the CPA;
(2) fail to distinguish between the situation of being in a position of conflicting interests, on one hand, and acts undertaken while in that situation, on the other; and
(3) conflate the plaintiffs’ right to bring an action under s. 8(11) of the PBSA with the remedy the plaintiffs are seeking under that section.
54While the first reason set out above is specific to CMHC’s allegation that the motion judge misconstrued the conflict of interest issues, the other two are much like the fundamental legal errors CMHC alleges the motion judge committed; they underlie all of CMHC’s grounds of appeal. As a result, they could be expanded upon at any point during the following analysis. However, I will expand upon each of my reasons as I deal with each of the three specific errors CMHC alleges the motion judge made in concluding that both actions disclosed viable causes of action.
55Before explaining my views, it may be worthwhile to set out the conflict of interest issues once again, as follows:
(1) Was CMHC in a conflict of interest within the meaning of s. 8(10) of the PBSA when it failed to advise the class members at the beginning of the WFA or anytime thereafter that they had or may have had a beneficial interest in the pension fund surplus prior to those class members electing to take their commuted value and leaving the plan?
(2) Was CMHC in a conflict of interest within the meaning of s. 8(10) of the PBSA when by word and/or conduct it took the position that it owned the surplus to the exclusion of plan members including the class members?
(3) Was CMHC in a conflict of interest within the meaning of s. 8(10) of the PBSA when it made and when it implemented its surplus sharing decisions on the 1 January 1999 and the 1 January 2001, without including the class members as beneficiaries of those decisions.
(4) If the answer to any of (1), (2) or (3) is yes, what is the appropriate remedy for the class members pursuant to s. 8(11) of the PBSA?
56I turn now to the specific errors alleged by CMCH.
Did the motion judge misconstrue the common issues?
57At para. 33 in the Lacroix decision, the motion judge wrote:
I am of the opinion that the plaintiffs’ pleading discloses a cause of action. The defendants are quite correct when they say a member of an ongoing plan has no right to the actuarial surplus. The law is well settled on this issue. However, the plaintiffs are not alleging they were entitled to claim a portion of the actuarial surplus but rather that they were entitled to be told and the defendants had a duty to tell them that the defendants intended to use the surplus to pay enhanced benefits to members who decided to remain in the plan. In not doing so they were in a conflict of interest within the meaning of section 8(10).
58CMHC argues that this paragraph demonstrates that the motion judge misconstrued the proposed common issues. CMHC contends that, but for this misconstruction, the present motions ought to have failed in light of the decisions in Schmidt v. Air Products Canada Ltd., 1994 SCC 104, [1994] 2 S.C.R. 611; Hembruff v. Ontario Municipal Employees Retirement Board (2005), 2005 ON CA 39859, 78 O.R. (3d) 561 (C.A.) and Potter v. Bank of Canada, 2007 ONCA 234, 85 O.R. (3d) 9. In Schmidt, the Supreme Court of Canada held that plan members have no specific interest in the assets of an ongoing plan: para. 89. In Hembruff, the Court of Appeal held that members who leave a pension plan can have no claim for any benefit enhancements that are implemented thereafter: para. 123. In Potter, the Court of Appeal held that funds wrongfully removed from a pension plan must be returned to the plan, and not to the beneficiaries of the plan: paras. 14-23.
59CMHC submits that, contrary to the finding of the motion judge, ownership of the surplus by the plaintiffs is the cornerstone on which the conflict of interest common issues are built. It highlights a number of areas in the materials that were before the motion judge, including the pleadings, the factum, and even the costs submissions of the plaintiffs, in support of its argument. CMHC submits that, although the motion judge acknowledged that the plaintiffs could have no interest in the surplus of an ongoing plan, he nonetheless managed to “side-step” the decisions in Schmidt, Hembruff and Potter by recasting the conflict of interest common issues in the manner set out above.
60The first problem I have with CMHC’s argument is obvious from one particular paragraph in its factum. At para. 45, CMCH submits that:
…nowhere do the proposed common issues allege that CMHC was in a conflict of interest for failing to tell the Plaintiffs that CMHC intended to use [the surplus] to pay enhanced benefits to Members who decided to remain in the Plan. [Emphasis added.]
61CMHC’s argument is based on the premise that the entire cause of action should somehow be contained in the wording of the proposed common issues. As demonstrated by CMHC’s own reference to the pleadings in support of its argument that the common issues are based on ownership, the motion judge must look to the whole of the statement of claim to determine the viability of the cause of action. That is exactly what the motion judge did in this case. At para. 18 of his reasons in Lacroix, the motion judge accurately set out the theory of the plaintiffs’ claim, as follows:
The theory of the plaintiff [sic] as outlined in their allegations in the amended statement of claim is that the defendants proceeded with a large downsizing of the workforce while simultaneously looking at what could be done with the large surplus in the pension plan fund. They made decisions early in the process, to use the surplus to finance costs of the downsizing. They had various options and sought advice as to how to proceed. Eventually when they put the dismissed employees to their election whether they wished to continue or not their involvement in the plan, they did not advise the plaintiffs that there was a huge surplus which belonged to the plan members. In fact, the defendants took the position that CMHC owned the surplus. Some of the defendant trustees were the most senior officers of CMHC and were in charge of the implementation of both the workforce and the surplus review. They were instrumental in deciding which of the various options, CMHC would choose to adopt. As such they were in a conflict of interest pursuant to section 8 (10) of the PBSA and they failed to fulfill their statutory trust and fiduciary duty by not disclosing the true state of affairs concerning the surplus before each plaintiff elected to take his or her commuted value. [Emphasis added.]
62The motion judge correctly understood that the plaintiffs are not claiming ownership of a portion of the surplus under s. 8(11) of the PBSA. Instead, as the following passages from the motion judge’s reasons indicate, the plaintiffs are claiming damages under s. 8(11) based on a portion of the surplus. Those are two different things. At paras. 19 and 30 of his reasons in Lacroix, the motion judge wrote:
19 Finally, the plaintiffs submit that the court may as part of its remedial jurisdiction under section 8 (11) of the Act award damages compensating the plaintiffs for the loss they incurred by not being allowed to receive their share of the benefit enhancements received by plan members who were either plan members at the time of the payment of the benefits or who had elected to remain inactive members of the plan and receive a deferred pension payable at 60.
30 The plaintiffs allege that the defendants had a trust, fiduciary and statutory duty to notify the plaintiffs of the existence of their intentions. In deciding not to do so the plaintiffs allege the defendants were in a conflict of interest within the meaning of subsection 8 (10) of the Act. The defendants did not declare this conflict nor act in their best interests as members of the plan at the relevant time. They seek damages equal to the pro-rata share of the enhanced benefits paid to members after the plaintiffs left the plan.
63In my opinion, the motion judge accurately set out the allegations giving rise to the common issues and did not misconstrue them.
Did the motion judge fail to identify the conflict of interest?
64CMHC alleges that the trial judge failed to identify a conflict of interest. Like its argument about the motion judge misconstruing the conflict of interest issues, the flaw in CMHC’s reasoning is evident from para. 45 of CMHC’s factum. In para. 45, CMHC states:
…nowhere do the proposed common issues allege that CMHC was in a conflict of interest for failing to tell the Plaintiffs … [Emphasis added.]
65In my view, the use of this language demonstrates CMHC’s failure to distinguish the situation of being in a conflict of interest from an act that conflicts with a party’s interests.
66A conflict of interest is a set of circumstances that results in a certain situation: Lozinik v. Sutherland, 2012 ABQB 440, at para. 56. It is a state of being, not a course of action. The Supreme Court of Canada explained the circumstances which will give rise to a conflict of interest under s. 8(10) of the PBSA in Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6, [2013] 1 S.C.R. 271. At para. 201, Cromwell J. wrote:
…a situation of conflict of interest occurs when there is a substantial risk that the employer-administrator’s representation of the plan beneficiaries would be materially and adversely affected by the employer-administrator’s duties to the corporation. [Emphasis added.]
67Subsection 8(10) refers both to the situation of being in a conflict of interest and to the course of action that must be taken when that situation occurs. Paragraph (10)(a) dictates that, when a material conflict of interest arises, the employer-administrator must take a particular course of action, i.e. declare the conflict. Paragraph (10)(b), unlike paragraph (10)(a), does not specify the course of action that must be taken to satisfy the requirement that the employer-administrator act in the members best interests, which will vary in the circumstances of each case, of course.
68In my view, the motion judge correctly understood the distinction called for in s. 8(10) between: (1) the situation giving rise to a conflict of interest, (2) the acts alleged by the plaintiffs to have occurred while that situation existed that were contrary to their interests, and (3) the course of action CMHC ought to have followed to avoid acting in conflict with the plaintiffs’ interests. As I interpret the proposed conflict of interest common issues, the plaintiffs have specified within each of the first three issues the particular acts that they allege were done in conflict with their interests, i.e. failing to advise of the plaintiffs’ beneficial interest, taking the position that it owned the surplus, and excluding the plaintiffs in the benefits enhancements. By doing so, they have also pinpointed the particular times as which they allege CMHC was in a position of conflict.
69The plaintiffs have not specified in the common issues themselves what CMHC ought to have done. Instead, they have set that out in their statement of claim. As I interpret the motion judge’s reasons, his reference to CHMC failing to tell the plaintiffs that it intended to use the surplus in the way it did is a reference to what the plaintiffs allege in their statement of claim CMHC should have been done under s. 8(10)(b) to avoid acting in conflict with their interests.
70The motion judge did not misconstrue what the statement of claim says in this regard. At para. 17 of the amended statement of claim, the plaintiffs in the Lacroix action allege:
- In making these offers during this downsizing campaign, CMHC and the trustees never advised the Plaintiffs and the class members that :
a) the huge surplus that existed was part of a Pension Fund that was subject to a Trust Agreement where the Plaintiffs and other class beneficiaries of that trust along with other current of retired employees of CMHC;
b) CMHC and the trustees were planning to use this huge surplus not only to enhance benefits of current and retired employees but to pay for the cost of the downsizing. [Emphasis added.]
71In addition to what he wrote at para. 18 of his reasons, at para. 34, in the section marked “Analysis”, the motion judge set out with precision the circumstances allegedly creating the conflict. He wrote:
If, as alleged, the defendants made decisions during the implementation of the WFA and the surplus review that they, as the employer and sponsor of the plan, intended to use part of the surplus for CMHC's own benefit and purposes, I find it is not clear and obvious that the defendants were not in a conflict of interest with the interest of dismissed employees who were being asked to choose whether to leave or stay in the pension plan. If such a conflict of interest existed they had a statutory duty to declare it and act in the best interests of all plan members.
72In my view, there is no question that the motion judge identified the situation the plaintiffs allege gave rise to a material conflict of interests. CMHC’s real complaint is that the circumstances he identified are not capable of giving rise to a conflict, which complaint I will deal with now.
73CMHC advances two arguments in support of its position that there could be no conflict of interests in the circumstances identified by the plaintiffs. In one argument, the focus is on the plaintiffs. I have already referred to this argument. By virtue of this argument, which I will call the “no ownership argument”, CMHC contends that there can be no conflict because the plaintiffs do not own the surplus. This argument is based on the cases I referred to above of Schmidt, Hembruff, and Potter. In the other argument, the focus is on CMHC. In this argument, which I will call the “employer only argument”, CMHC contends that it was never acting as the Plan administrator when it made the benefits enhancements decision, but only as the employer. Therefore, it argues, there can be no conflict.
74In my view, neither argument makes it plain and obvious that the plaintiffs have no cause of action.
The no ownership argument
75In my view, CMHC’s submission that there could not possibly be a conflict of interest because the plaintiffs have no interest in the actuarial surplus of an ongoing plan is an incorrect statement of both fact and law.
76The Supreme Court in Schmidt did not hold that members of an ongoing plan have no interest in the assets of an ongoing plan. Rather, it held that members of an ongoing plan have no specific interest in the assets of an ongoing defined benefits plan. At para. 89, 1994 SCC 104, [1994] S.C.J. No. 48, Cory J. wrote on behalf of the majority:
While a plan which takes the form of a trust is in operation, the surplus is an actuarial surplus. Neither the employer nor the employees have a specific interest in this amount, since it only exists on paper, although the employee beneficiaries have an equitable interest in the total assets of the fund while it is in existence. When the plan is terminated, the actuarial surplus becomes an actual surplus and vests in the employee beneficiaries. [Emphasis added.]
77Thus, while the members of a plan have no specific interest in any surplus calculated to exist in an operating defined benefit pension plan, they do have an equitable interest in the total assets of such a plan. In Burke v. Hudson’s Bay Co., 2010 SCC 34, [2010] S.C.R. 273, the Court expanded upon the nature of the plan members’ equitable interest. Writing on behalf of the Court, Rothstein J. held that employees may have an equitable interest not only in the funds of the plan sufficient to pay for their defined benefits, but also in the surplus. At paras. 56-58, he wrote:
56 First, it is clear that in a defined benefit pension governed by trust principles, employees have an equitable interest in their defined benefits. As in the case of a classic trust, legal ownership of the defined benefits lies with the trustee. The funds needed to pay the employees’ defined benefits are held in trust on their behalf. As beneficiaries, the employees have an equitable interest in the funds needed to cover their defined benefits.
57 Second, and importantly, when Cory J. referred to the employees’ equitable interest in the total assets of the fund, he was writing on the premise that the employees were entitled to the actual surplus on termination. This is clear from the language that follows his use of “equitable interest”, which I repeat:
Neither the employer nor the employees have a specific interest in this amount, since it only exists on paper, although the employee beneficiaries have an equitable interest in the total assets of the fund while it is in existence. When the plan is terminated, the actuarial surplus becomes an actual surplus and vests in the employee beneficiaries. [Emphasis in original.]
If the employees are entitled to actual surplus on termination then they do have an equitable interest in that surplus, and, when added to their defined benefits, this constitutes the total assets of the fund. Thus, I would agree with Cory J. that, where employees are entitled to actual surplus on termination, they have an equitable interest in the total assets of the fund.
78As Rothstein J. held, whether the members of a defined benefit plan have an equitable interest in the plan’s surplus depends on whether they are entitled to the actual surplus on termination. This, in turn, depends on the terms of the trust: Schmidt, para. 48; Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), 2004 SCC 54, [2004] 3 S.C.R. 152, at para. 39; Buschau v. Rogers Communications Inc., 2006 SCC 28, [2006] 1 S.C.R. 973, at para. 17. That is a question of fact. In their statements of claim, the plaintiffs have alleged that they are entitled to the surplus under the terms of the Plan. As I have pointed out, that fact must be assumed for the purpose of the analysis under s. 5(1)(a) of the CPA. Just as importantly, the extent of the plaintiffs’ interest in the Plan’s assets is an issue that has already been certified on consent.
79I agree with the motion judge (para. 39) that Hembruff is of limited application in the case of plans subject to the PBSA, as this one is. Unlike the provincial legislation which governed the plan at issue in Hembruff, s. 8(10) of the PBSA imposes a positive obligation on the employer-administrator to declare the conflict and act in the best interests of the plan members. I would add that, in Hembruff, unlike in the cases at bar, the decision to pay enhanced benefits from plan surplus was not made until after the plaintiff had left the plan.
80The decision in Potter is also no bar to the plaintiffs’ claims. While the facts in Potter included an allegation that the employer-administrator bank had improperly caused surplus funds from a defined benefit plan to be used to cover administration costs, the similarities between the facts in Potter and the facts in these cases ends there. The plaintiffs in Potter were still members of the plan at the time they asserted their claim. They did not allege that they had been denied benefits to which they were entitled. The plaintiffs in Potter were asking for the return of funds taken by the employer, whereas the plaintiffs in these actions are asking for damages based on what was paid to employees by way of enhanced benefits. Most importantly, the plaintiffs in Potter were not advancing a claim under s. 8(11) of the PBSA. There was no issue in Potter as to whether the employer-administrator was in a conflict of interest at the time of the impugned action.
81If CMHC’s “no ownership” argument was to be accepted, former members of a defined benefits pension plan could never bring a claim under s. 8(11) of the PBSA, no matter how clear the conflicting interests might have been and no matter how egregious the act of the employer-administrator undertaken against those interests while they were still members. In my view, such an interpretation would unnecessarily and unjustly reduce the number of “interested person(s)” to whom a claim under s. 8(11) would otherwise be available.
Did the motion judge misinterpret and misapply ss. 8(10) and (11) of the PBSA?
The employer only argument
82CMHC submits that it had no role in any other capacity than that of an employer under s. 8(10) during the times in question in these actions. CMHC argues that an administrator’s duties are dictated by the terms of the plan and the applicable legislation. It argues that those duties do not include deciding who will share in enhancements to benefits within a plan, whether from surplus funds or otherwise. Therefore, it contends that there could not have been any conflict between its role as administrator and its role as employer4.
83I agree with the submission that an administrator’s duties are determined by reference to the terms of the plan and the governing legislation: Indalex, para. 187. However, that does not mean that, whenever an employer is acting outside the scope of its duties as administrator, no conflict can arise with those duties.
84In support of its submission, CMHC relies on the decision of the Ontario Pension Commission in Imperial Oil Ltd. v. Ontario (Superintendent of Pensions) (1995), 18 C.C.P.B. 198. In that case, the Commission found that the employer-administrator was not acting as an administrator when it obtained amendments to the company’s pension plan through the office of the Superintendent that had the effect of depriving certain terminated employees of retirement benefits. The Commission held that an employer may wear “two hats” in respect of pension plans without infringing the conflict of interest provisions of the Pension Benefits Act, R.S.O. 1990, c. P.8 (the “PBA”): paras. 30-33.
85With respect, I do not find the reasoning in Imperial Oil to be persuasive. In any event, the two hats theory has been undermined, if not eliminated, by the subsequent decision of the Supreme Court of Canada in Indalex. In Indalex, the employer-administrator commenced proceedings under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”) and entered into an agreement for debtor-in-possession ("DIP") financing. At issue was whether repayment of the debt took priority over the unfunded liabilities of the pension plan and whether the employer was in position where its interests as employer conflicted with its interests as plan administrator at any point during the CCAA proceedings.
86Although the court divided on the extent of the conflict of interest in which the employer-administrator found itself, at a minimum the court agreed that an employer cannot avoid its duty to act in the best interests of plan members merely because it is acting in its capacity as employer under the Pension Benefits Act, R.S.O. 1990, c. P.8 (“PBA”): see paras. 63-66, per Deschamps J.; paras. 212-215, per Cromwell J.; paras. 269-270, per LeBel J.
87At paras. 65-66, Deschamps J. wrote:
65 … where an employer’s own interests do not converge with those of the plan’s members, it must ask itself whether there is a potential conflict and, if so, what can be done to resolve the conflict. Where interests do conflict, I do not find the two hats metaphor helpful. The solution is not to determine whether a given decision can be classified as being related to either the management of the corporation or the administration of the pension plan. The employer may well take a sound management decision, and yet do something that harms the interests of the plan's members. An employer acting as a plan administrator is not permitted to disregard its fiduciary obligations to plan members and favour the competing interests of the corporation on the basis that it is wearing a “corporate hat”. What is important is to consider the consequences of the decision, not its nature.
66 When the interests the employer seeks to advance on behalf of the corporation conflict with interests the employer has a duty to preserve as plan administrator, a solution must be found to ensure that the plan members’ interests are taken care of. This may mean that the corporation puts the members on notice, or that it finds a replacement administrator, appoints representative counsel or finds some other means to resolve the conflict. The solution has to fit the problem, and the same solution may not be appropriate in every case.
88Based on Indalex, I agree with the submission of counsel for the Lacroix plaintiffs that, even if CMHC was acting as an employer when it made the decisions it did, it may nonetheless have had a duty as an administrator to obtain an opinion on behalf of the Plan members, and not just on its own behalf, with respect to the issue of ownership of the surplus. At least, it is neither plain nor obvious that it had no such duty.
Did the motion judge err in finding that the conflict of interest issues are common to the class under s. 5 (1)(c) and that a class action is the preferable procedure to resolve the conflict of interest issues under s. 5 (1)(d) of the CPA?
89CMHC submits that the motions from which these appeals are taken ought to have failed for the same reason that the estoppel theory failed in the motions brought by the plaintiffs in 2008, namely that they raise individual issues.
90At paras. 42 and 43 of his reasons, the motion judge wrote:
Common Issues and Preferred Procedure
42 I find that the proposed common issues a), b) and c) are common issues which should be certified. The adjudication of these issues is required for all class members’ claim and will greatly advance the litigation. I find commonality is clear.
43 As I have already mentioned, the allegation here is not that representations caused the plaintiffs to take their commuted value but rather that the defendants were in a conflict when they made representations during the relevant period and failed to abide by the statutory duty placed on them by section 8 (10). As such, it is incorrect for the defendants to submit that individual issues will overwhelm the trial of the action. Individual issues may only arise when proposed common issue d) [the remedy issue] comes for decision. But depending on what the trial judge will find is the legal consequence of a breach of s. 8 (10), it is not certain whether any individual issue based on reliance will remain. Only after the trial judge has answered the common issues will individual issues potentially arise, if any. The present action is therefore the best procedure to address the conflict of interest common issues.
91CMHC contends that, contrary to the motion judge’s ruling, the first two conflict of interest issues are “premised and exclusively based on a misrepresentation or failure to advise” (factum, para. 56). CMHC argues that this is exactly the same basis upon which the estoppel theory was based -- a theory that the motion judge in 2009, the Divisional Court in 2010, and the Court of Appeal in 2012 (in the McCann action) all held raised individual issues of reliance that made certification impossible.
92CMHC argues that the motion judge skipped right over the issue of causation in arriving at his conclusion in the motions under appeal and that his decision is inconsistent with his 2009 decision. It argues that causation is an essential element of the cause of action, which requires individual inquiries that preclude the conflict of interest issues from being certified.
93Again, I find myself unable to agree with CMHC’s position. In my respectful view, it is based on the same confusion I referred to earlier between the situation of being in a conflict of interest and the activity of acting in conflict with a party’s interests. Again, this is obvious from some of the submissions made by CMHC in its factum. At paras. 56 and 59, CMHC writes:
The Plaintiffs have alleged that CMHC was in a conflict of interest when it did the things that are the subject of the allegations. But whether or not these actions could conceivably constitute a conflict of interest (which is denied), they are still premised and exclusively based on a misrepresentation or failure to advise.
It cannot be that the determination of whether an act resulted in a “conflict of interest” can lead directly to the question of remedy. [Emphasis added.]
94As I have explained, a conflict of interest is not an act; it is a situation.
95As I read them, the specific acts or failures to act alleged in each of the first three conflict of interest issues refer to breaches of s. 8(10)(b), i.e. to acts which were not in the best interests of plan members. They are distinct from the question of whether CMHC was in a situation of conflict within the meaning of s. 8(10) at the time that they occurred.
96By making reference to three specific acts or failures to act in the proposed conflict of interest common issues, the plaintiffs have pinpointed the times at which they allege CMHC was in a position of conflict. I agree with the motion judge that the question of whether CMHC was in a position of conflict at these times is common to all class members.
97I also agree with the motion judge that reliance is not an essential element of the cause of action provided for in s. 8(11), which brings me to the third difficulty I have with CMHC’s reasoning regarding s. 5(1)(a) of the CPA and ss. 8(10) and (11) of the PBSA. In my opinion, CMHC’s argument fails to distinguish between the remedy the plaintiffs are pursuing under s. 8(11) of the PBSA, and the cause of action on which their claim is based.
98CMHC’s submits that a conflict of interest is not a cause of action in and of itself. In support of its position, CMHC relies, in part, on the decision in Lozinik, which I cited above in support of the proposition that a conflict of interest is a set of circumstances, and not a course of action. In Lozinik, the court held, at para. 56:
… conflict of interest may describe a situation which could cause an individual to act inappropriately in a set of circumstances but it does not describe a separate cause of action.
99I agree with this statement. A conflict of interest is not a common law cause of action: see also Comstock Canada v. Potash Corporation of Saskatchewan, 2015 NBQB 80, at paras. 93-94. However, by virtue of s. 8(11) of the PBSA, it has been made a statutory one.
100By virtue of s. 8(10), two obligations are imposed on an employer-administrator, namely: (1) to declare any material conflict of interest, and (2) to act in the best interests of the plan members when one arises. Where those obligations are not fulfilled, s. 8(11) provides a right to the Superintendent “or any other interested person” to seek relief. Section 8(11) contains no requirement, either express or implied, that a claimant must establish causation, or even harm, in order to succeed under that section. The section is purposely very broad, permitting the court to “make any order on such terms as the court considers appropriate”.
101It may well be, as the Lacroix plaintiffs themselves concede (see para. 81 of their factum), that causation will arise at the remedy stage of the inquiry under s. 8(11). I do not believe it is necessary to decide that question at this stage. For present purposes, it is sufficient to point out that it is neither plain nor obvious from the wording of s. 8(11) that causation is a necessary element of the right to bring a claim under that section.
Did the motion judge err in finding that the Lacroix plaintiffs and the McCann plaintiffs were appropriate in respect of the conflict of interest issues under s. 5(1)(e) of the CPA?
102CMHC submits that the plaintiffs in both actions are inappropriate representatives. It points to the following evidence regarding each of them:
a. neither Lacroix nor Ladouceur were aware of or received the December 4, 1997 communiqué;
b. Ladouceur left the Plan well before the communiqué;
c. Lacroix did not know the Plan was in surplus when she elected to take her commuted value and leave the Plan;
d. Lacroix was unaware of any statement by CMHC regarding ownership of the Plan, nor was she aware of evidence to suggest that CMHC had decided on a qualification date or that members would share in the surplus prior to electing to leave the Plan;
e. both McCann and Guffie were fully aware that they would not participate in future benefit enhancements or surplus return if they left the Plan; and
f. Guffie wrote to the Office of the Superintendent of Financial Institutions before he left the Plan, taking issue with CMHC’s position that it owned the surplus.
103CMHC maintains that, because of these facts, none of the plaintiffs in either action meet the requirements of s. 5(1)(e) of the CPA. In my opinion, this argument must fail for two reasons.
104First, all of the facts that CMHC lists relate to reliance. As I have pointed out, it is not plain and obvious that reliance is a necessary element of the right to bring a claim under s. 8(11) of the PBSA.
105Second, it is not necessary under s. 5(1)(e) of the CPA that the representative plaintiffs have facts in common with every member of the group they seek to represent. It is sufficient if they are in the same position relative to one common issue, the resolution of which will significantly advance the litigation: Anderson v. Wilson (1999), 1999 ON CA 3753, 44 O.R. (3d) 673 (C.A.), at p. 684; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534, at para. 41. As the motion judge held, whether CMHC was in a position of conflicting interests is common to all class members. The factual distinctions listed above are irrelevant to the resolution of that common issue.
Did the motion judge err in finding that the Lacroix certified common issues and the conflict of interest issues were rationally connected to the McCann class definition under s. 5(1)(b) of the CPA?
106CMHC submits that the McCann class definition is under-inclusive and vague in respect of the common issues certified on consent in the Lacroix action and the conflict of interest common issues certified by the motion judge. CMHC argues that the motion judge failed to engage in the analysis necessary to give his decision the deference it would ordinarily attract with respect to this issue: see Brown, referred to above. With great respect for the motion judge, I agree with this submission.
107In order to understand CMHC’s argument, I believe it is helpful to contrast the proposed class definition in the McCann action with the class definition certified on consent in the Lacroix action. The Lacroix class is defined as:
… all former employees who left the Canada Mortgage Housing Corporation (“CMHC”) from January 1, 1995 to October 23, 1998, due to CMHC’s work adjustment (downsizing) program, who did not receive their alleged share of a pension surplus (which has been paid by what the Defendants have characterized as “benefits enhancements” funded from surplus and which the Plaintiffs allege was a distribution of surplus)”.
108In the following McCann class definition, I have highlighted the words with which CMHC takes issue:
All former employees of CMHC who were pension plan members on the 1st of January, 1995, who subsequently took their commuted value, along with a work force adjustment package, and left the plan after October 24, 1998, without receiving their alleged share of the pension surplus, which has been partially paid by what the Defendants have characterized as “benefit enhancement” funded from surplus and which the Plaintiffs allege was a distribution of surplus.
109CMHC submits that, by including the words “who were pension plan members on the 1st of January, 1995”, the McCann plaintiffs are potentially excluding from the class those individuals who joined the Plan after January 1, 1995 but left the Plan after October 24, 1998 without receiving the benefit of the second enhanced benefits decision.
110CMHC’s complaint with respect to the word “partially” is that it is too vague. It points out that, until just before the argument of the motion in question, the McCann plaintiffs included CMHC’s portion of the allotted surplus in this amount, and not just the portion that was allotted to employees in each benefits enhancement decision.
111The motion judge’s reasons with respect to CMHC’s complaints were quite brief. They consist of two paragraphs, as follows:
7 I disagree with the defendants' submission that the proposed class is irrationally both over-inclusive and under-inclusive. The defendants base their submission on the fact that the class members are required to have been plan members on January 1, 1995. In the context of this action only class members who were affected by the WFA have a claim. To require that the class only include individuals who were plan members at the outset of the WFA and who were terminated as a result thereof is rational.
8 For the same reasons, I gave in the Lacroix action, I am of the view the above class definition meets with the criteria required for a proper class definition: it identifies who have a potential claim against the defendants; defines the parameters of the lawsuit so as to identify those persons bound by its results; and describes who is entitled to notice of the action.
112The brevity of the motion judge’s reasons is understandable given the complexity of the other issues he dealt with in these motions and the number of times he has been called upon to make difficult decisions over the 15-year life span of these related actions. Unfortunately, however, his reasons fail to address either of CMHC’s arguments in any meaningful way.
113It is true, as the motion judge held, that only class members who were affected by the WFA should have a claim. However, the motion judge did not address the possibility that individuals who were affected by the WFA, but who were not members of the Plan as of January 1, 1995 would be excluded from the class. The McCann plaintiffs do not dispute this possibility. Instead, the McCann plaintiffs say that there is no evidence that there are any such potential class members.
114I have concerns about the correctness of the McCann plaintiffs’ assertion that there is no evidence that there are excluded class members. In response to the motion, CMHC filed the affidavit of the defendant, James Millar. At the time of his retirement, Millar was a Vice-President of CMHC and was a trustee of the Plan. At para. 24 of his affidavit, he deposes:
Even during the downsizing, there were constant hirings as employees with different skill sets were required to perform new or changed functions.
I can find no evidence in the record that employees hired during the WFA were not dismissed later as part of it.
115The McCann plaintiffs have said that, if this court advises, they are prepared to remove the reference in the class definition requiring membership in the Plan as of January 1, 1995. I would remove those words, which will bring the McCann class definition closer to that of the Lacroix class, with the exception of the word “partial”, which I will now address.
116As the motion judge correctly pointed out, a class definition must identify those who have a potential claim against the defendants, define the parameters of the lawsuit so as to identify those persons bound by its results, and describe who is entitled to notice of the action: Sun-Rype Products Ltd. v. Archer Daniels Midland Company, [2013] 2 SCC 58, [2013] 2 S.C.R. 545, at para. 57. The motion judge did not, however, address the question of whether, by using the word “partial”, the McCann class definition achieves those goals as well as it might.
117In my view, it does not. While it might now be clear to the parties that the word “partial” refers to the departing employees’ share of the allocated surplus, it is not so clear to the rest of the world. I see no need to include the word in the class definition. I would remove it.
CONCLUSION
118The motion judge made no errors in the manner in which he interpreted the conflict of interest common issues, nor did he make any legal errors in his interpretation of ss. 8(10) and (11) of the PBSA. As a result, there is no reason to interfere with his decision on the issues under s. 5(1) of the CPA on either basis. However, in my respectful view, the motion judge failed to address the issues raised by CMHC under s. 5(1)(b) in the McCann action.
119For these reasons, I would dismiss the appeal in the Lacroix action and allow the appeal in the McCann action. In the latter, I would order that the words “who were pension plan members on the 1st of January, 1995” and “partially” be removed from the McCann class definition.
COSTS
120At the conclusion of the appeal, we asked counsel for their positions on costs. We were advised that they had agreed that, if CMHC lost the appeals, it would pay $20,000 as costs of the appeal to the responding parties, in total. Those costs would be split as the plaintiffs see fit.
121However, CMHC has not lost both appeals. It was successful with respect to the issue raised in the McCann action relating to s. 5(1)(b) of the CPA. In these circumstances, I would order that CMHC pay costs in the total amount of $15,000 to the responding parties.
122The issue of costs of the motions under appeal is remitted back to the motion judge, to be determined by him in the event the parties are unable to reach an agreement on the matter.
ELLIES J.
MARROCCO A.C.J.S.C.
MULLIGAN J.
Released: April 26, 2016
CITATION: Lacroix v. CMHC and McCann v. CMHC, 2016 ONSC 2641
DIVISIONAL COURT FILE NO.: DC15-2108, DC15-2109
DATE: 2016/04/26
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Ellies, Marrocco A.C.J.S.C., Mulligan, JJ.
NICOLE LACROIX and ROSIE LADOUCEUR
Plaintiffs/Respondents
– and –
CANADA MORTGAGE AND HOUSING CORPORATION and MARC ROCHON, CLAUDE POIRIER-DEFOY, JIM MILLAR, KAREN KINSLEY, GERALD NORBRATEN, JEAN-GUY TANGUAY, DAVID METZAK, and BRIAN KNIGHT, being the Trustees of the CANADA MORTGAGE AND HOUSING CORPORATION PENSION FUND
Defendants/Appellants
AND
FRANK McCANN and DAVID GUFFIE
Plaintiffs/Respondents
– and –
CANADA MORTGAGE AND HOUSING CORPORATION and MARC ROCHON, CLAUDE POIRIER-DEFOY, JIM MILLAR, KAREN KINSLEY, GERALD NORBRATEN, JEAN-GUY TANGUAY, DAVID METZAK, and BRIAN KNIGHT, being the Trustees of the CANADA MORTGAGE AND HOUSING CORPORATION PENSION FUND
Defendants/Appellants
REASONS FOR decision
Released: April 26, 2016
Footnotes
- According to the McCann plaintiffs’ factum, the number is higher: 1,127 in the Lacroix class and 465 in the McCann class, for a total of 1,592.
- CMHC calls these motions the “2009 Certification Motion(s)”, because of the release date of the decisions: CMHC’s McCann factum, para. 8.
- Although Charbonneau J. dismissed the motions in his January 26, 2009 decisions, he did allow this issue to be certified in the context of the benefits enhancement claim that was already certified on consent in the Lacroix action: see para. 104 of his decision in that case.
- CMHC also argues that the motion judge’s fundamental error in his interpretation of s. 8(10) is demonstrated at para. 40 of his reasons in the Lacroix action, where he wrote that some of the decisions taken by CMHC were taken “as the employer and not as sponsor of the pension plan”. Clearly, this was a slip of the pen, as the rest of the motion judge’s reasons demonstrate an obvious understanding that an employer is also a sponsor. For example, earlier in the same paragraph he wrote “[i]t appears to be far from clear and obvious that because the role of the sponsor and the administrator are distinct…”