Huus et al. v. Superintendent of Pensions et al.

[Indexed as: Huus v. Ontario (Superintendent of Pensions)]

58 O.R. (3d) 380

[2002] O.J. No. 524

Docket Nos. C35896 and C35919

Court of Appeal for Ontario

Abella, Feldman and MacPherson JJ.A.

February 14, 2002

Pensions -- Transfer of pension assets -- Winding up of pension plan -- Standard of review of decision of Superintendent of Pensions -- Employer applying to Superintendent of Pensions for consent to transfer assets to consolidated pension plan -- Employees simultaneously applying to Superintendent for winding up of pension plan and distribution of accumulated surplus -- Superintendent's failure to consider partial wind-up request before or in conjunction with deciding transfer application making consent to transfer unreasonable -- Consent set aside -- Assets to be returned to employees' pension plan -- Pension Benefits Act, R.S.O. 1990, c. P.8, s. 81.

W Corp., a manufacturer of pulp and paper products in Ontario, Nova Scotia and Quebec, was a corporation within the BTR group. In 1995, the respondents, who were members of the Pension Advisory Committee for retired salaried members, learned of BTR's plans to consolidate the pension plans of all its affiliated corporations in Canada and the United States, and they wrote to the Superintendent of Pensions asking that their pension plan be wound up. Their letter noted that the company had not contributed to the pension plan for about 20 years, and they submitted that the plan surplus should benefit those who primarily contributed to it. In 1996, the respondents wrote the Superintendent informing him that W Corp. had announced that it would close its plant in Ontario, and they asked for a partial winding up of the W Corp. pension plan under s. 69 of the Pension Benefits Act ("PBA"). Meanwhile, on December 30, 1996, W Corp. applied to the Superintendent to obtain consent to the transfer of the pension assets into a consolidated BTR plan.

Under s. 81(5) of the PBA, the Superintendent must withhold consent to a transfer that does not protect the pension benefits of the members and former members of the pension plan. On August 15, 1997, the Superintendent approved the transfer of assets of $14,661,282, which included a surplus of $4,216,300. In June 1998, the respondents applied for judicial review of the Superintendent's decision approving the transfer.

In a decision dated May 30, 2000, the Divisional Court set aside the Superintendent's consent and ordered the return of the assets of the W Corp. plan. Furthermore, the court ordered that any new decision about the winding up of the W Corp. plan be referred to the Financial Services Tribunal. The court also awarded costs on a solicitor and client basis against the Superintendent and BTR fixed at $54,294.06. The Superintendent, W Corp. and BTR appealed.

Held, the mandatory referral to the Financial Services Tribunal should be set aside; in all other respects, the appeal should be dismissed with costs.

The Superintendent's decision approving the transfer of assets was made pursuant to s. 81 of the PBA, and the standard of review of this decision was reasonableness simpliciter. Pension plans are for the benefit of the employees, not the companies that create the plans, and the Superintendent owed a high duty to the employees. The record established that the Superintendent focused almost exclusively on W Corp.'s transfer application and ignored almost entirely the retirees' request pursuant to s. 69 of the PBA for a wind-up or partial wind-up of the pension plan with a view to the distribution of the accumulated surplus. The Superintendent appears never to have made a formal decision about the wind-up request and it was unclear whether he ever seriously considered it. The Superintendent's failure to consider the wind-up request before or in conjunction with deciding the transfer application made his consent to the transfer unreasonable. On the remedial issue, the analysis of the Divisional Court was correct. The Divisional Court, however, erred in making any future decision of the Superintendent subject to a referral to the Financial Services Tribunal, regardless of whether any party requested a hearing. Finally, there was no basis for interfering with the costs order. Although solicitor and client costs should be awarded only in exceptional cases, this was such a case. Accordingly, the mandatory referral to the Financial Services Tribunal should be set aside and, in all other respects, the appeal should be dismissed with costs.

APPEAL from an order of the Divisional Court on an application for judicial review of a decision of the Superintendent of Pensions under the Pension Benefits Act, R.S.O. 1990, c. P.8.

Cases referred to Collins and Pension Commission of Ontario, Re (1986), 1986 3913 (ON SCDC), 56 O.R. (2d) 274, 16 O.A.C. 24, 31 D.L.R. (4th) 86, 21 Admin. L.R. 186, 33 B.L.R. 265 (Div. Ct.); Firestone Canada Inc. v. Ontario (Pension Commission) (1990), 1990 6833 (ON CA), 1 O.R. (3d) 122, 42 O.A.C. 176, 78 D.L.R. (4th) 52, 33 C.C.E.L. 225 (C.A.); Gencorp Canada Inc. v. Ontario (Superintendent of Pensions) (1998), 1998 2947 (ON CA), 39 O.R. (3d) 38, 158 D.L.R. (4th) 497, 37 C.C.E.L. (2d) 69 (C.A.); Hinds v. Superintendent of Pensions, unreported, February 14, 2002 (Ont. C.A.); Schmidt v. Air Products of Canada Ltd., 1994 104 (SCC), [1994] 2 S.C.R. 611, 20 Alta. L.R. (3d) 225, 115 D.L.R. (4th) 631, 168 N.R. 81, [1994] 8 W.W.R. 305, 4 C.C.E.L. (2d) 1, 3 E.T.R. (2d) 1 (sub nom. Stearns Catalytic Pension Plans, Re) Statutes referred to Pension Benefits Act, R.S.O. 1990, c. P.8, ss. 24, 68, 69, 80, 81, 89

Steve Waller, for respondents. Deborah McPhail, for appellant Superintendent of Pensions. Bruce Pollock and Gary Nachshen, for appellants Weavexx Corporation, BTR Inc. and BTR Canada Holdings Inc.

The judgment of the court was delivered by

MACPHERSON J.A.: --

A. Introduction

[1] When a company wants to transfer pension assets from an existing pension plan to a different pension plan, it must obtain the consent of the Superintendent of Pensions (the "Superintendent") [See Note 1 at end of document] to the transfer. The Superintendent must withhold consent to a transfer "that does not protect the pension benefits . . . of the members and former members of the original pension plan": see s. 81(5) of the Pension Benefits Act, R.S.O. 1990, c. P.8 (the "PBA").

[2] In the present case, a company proposed a transfer of pension assets into a consolidated plan with a view to harmonizing several pension plans operated by its affiliates in Canada and the United States. The company applied for consent to the transfer by the Superintendent.

[3] At about the same time, a Pension Advisory Committee (the "PAC") representing the retired salaried members of the existing pension plan took a different view of the transfer. Concerned that the transfer might remove their potential right to a distribution of the substantial surplus that had accumulated in the plan, the PAC applied to the Superintendent for a partial wind-up of the pension plan pursuant to s. 69 of the PBA.

[4] This appeal concerns how the Superintendent dealt with these two requests.

B. Facts

(1) The parties and the events

[5] The appellant, Weavexx Corporation ("Weavexx"), a Canadian corporation, is engaged in the manufacture and distribution of products used in the pulp and paper production process. At all times relevant to this litigation, Weavexx was a majority-owned subsidiary of the appellant BTR Canada Holdings Inc., which in turn was a Canadian affiliate of the appellant BTR Inc., a Delaware corporation (together"BTR").

[6] Weavexx was formed by the amalgamation on October 1, 1992 of two companies in the BTR group, Hucyk Canada Inc. ("Hucyk") and Niagara Lockport Industries Ltd. ("Niagara Lockport"). At the material time, Weavexx had operations in Arnprior, Ontario and Kentville, Nova Scotia, formerly operated by Hucyk and in Warwick and Trois-Rivières, Quebec, formerly operated by Niagara Lockport.

[7] The respondents, the members of the PAC [See Note 2 at end of document] for retired salaried employees which was established in 1990, wrote to the Pension Commission of Ontario [See Note 3 at end of document] in 1993 advising it that there had been substantial downsizing in the ranks of salaried employees at Weavexx.

[8] On October 26, 1995, the PAC, which had got wind of BTR's plan to consolidate the pension plans of all of its affiliates in Canada and the United States, wrote a letter to the Superintendent requesting that the Weavexx Pension Plan be wound up. The letter, signed by the respondent Eystein Huus, stated, inter alia:

We in the committee strongly believe that this plan now should be wound up. The main reason for this is the severe downsizing which has taken place during the last four years, including two "early retirement windows" -- one in early 1992, and one in 1994. The ratio of "Actual Members" to "Retirees" has dropped from 93/46 at the end of 1991 -- to 49/72 at the end of 1994. There has also been further downsizing in 1995.

The plan has a very healthy surplus as shown in the enclosed "Report of Operations -- for Plan Year ended December 31, 1994". This in spite of the fact that the Company has not contributed to the plan for about 20 years. The surplus therefore comes from employee contributions, wise investments, and a nearly total lack of improvements to the plan. The latter can best be exemplified by the fact that there have been no improvements for the retirees in the last 20 years -- in spite of hefty inflation rates in several of those years!

Our committee believes that this surplus should primarily benefit those who have contributed to it, and who in many cases now live in dire circumstances -- rather than end up as an asset for a company which hasn't contributed to it for such a very long time! And for that reason we recommend the plan be wound up.

[9] Almost a year later, on October 7, 1996, Mr. Huus again wrote to the Superintendent, informing him that Weavexx had announced that it would close its plant in Arnprior in 1996. He continued: "All production has now ended, and the dismantling of the plant is well under way." On behalf of the PAC, he concluded by urging the Pension Commission to order a partial wind-up of the Weavexx pension plan.

[10] In the same 1995-1996 time frame, the appellants had been moving on an entirely different track. In September 1995, Weavexx notified its employees and retirees of BTR's intention to consolidate the pension plans of all its affiliates, including Weavexx. More than a year later, on December 30, 1996, Weavexx made a formal application to the Superintendent to transfer its pension assets into the consolidated BTR plan. The proposed effective date of the transfer was January 1, 1996 (almost a year earlier). The surplus in the Weavexx plan on January 1, 1996 was $4,216,300.

[11] In considering the appellants' application for a transfer, the Superintendent was required to consider s. 81(5) of the PBA, which provides:

81(5) The Superintendent shall refuse to consent to a transfer of assets that does not protect the pension benefits and any other benefits of the members and former members of the original pension plan or that does not meet the prescribed requirements and qualifications.

(Emphasis added)

[12] On August 15, 1997, the Superintendent approved the transfer of pension funds from the Weavexx plan to the BTR plan. The amount of the approved transfer was $14,661,282. The Superintendent communicated his consent to the transfer to the appellants but not to the respondents.

[13] The Superintendent appears never to have made a formal decision concerning the respondents' request for a partial wind-up of the Weavexx pension plan.

(2) The litigation

[14] On June 30, 1998, the respondents brought an application for judicial review of the Superintendent's decision dated August 15, 1997 approving the transfer of the assets of the Weavexx pension plan to the consolidated BTR pension plan. In a decision dated May 30, 2000, the Divisional Court (Flinn, Jennings and Ferguson JJ.) set aside the Superintendent's consent and ordered the return of the assets to the Weavexx plan.

[15] In an addendum to the reasons for judgment dated November 16, 2000, dealing with the question of remedy, the court said that any new decision of the Superintendent dealing with the wind-up or partial wind-up of the Weavexx plan was to be referred to the Financial Services Tribunal (the "Tribunal"), the successor since 1997 of the Pension Commission.

[16] In the same addendum, the court awarded the applicants their costs on a solicitor and client basis against the Superintendent and BTR fixed at $54,294.06.

[17] The appellants appeal against all aspects of the decision of the Divisional Court -- i.e. the merits, the remedy and costs.

C. Issues

[18] The issues on the appeal are:

(1) Did the Divisional Court err by setting aside the decision of the Superintendent dated August 15, 1997?

(2) Did the Divisional Court err by ordering that the issue of wind-up or partial wind-up be determined by the Superintendent and reviewed by the Tribunal?

(3) Did the Divisional Court err by awarding costs to the respondents on a solicitor and client basis payable by the Superintendent and BTR?

D. Analysis

(1) The consent to transfer issue

(a) General

[19] The appellants contend that the Divisional Court made several errors when it set aside the Superintendent's decision dated August 17, 1997 approving the transfer of pension assets from the Weavexx plan to the consolidated BTR plan. They submit that the Divisional Court erred by holding that the Superintendent exceeded his jurisdiction by failing to give adequate consideration to the trust provisions of the Weavexx plan and to the accrued surplus in the prior plan. The appellants also submit that the Divisional Court erred by holding that the Superintendent exceeded his jurisdiction by approving the transfer without taking account of a post- transfer development, namely, the closure some months later of the Arnprior plant. The appellants also contend that the Divisional Court erred by concluding that the Superintendent did not accord the respondents their rights of procedural fairness. Finally, the appellants contend that the Divisional Court erred by concluding that BTR owed, and breached, a duty of procedural fairness to the appellants. In summary, the appellants contend that the Divisional Court erred in its interpretation of substantive pension law and erred in its analysis of the process issue.

[20] I do not think that the appellants have accurately characterized the decision of the Divisional Court. My reading of the decision is that the Divisional Court disposed of the application entirely on the process issue. It is true that the court referred to the substantive pension law issues, including the trust provisions of the Weavexx plan and the legal nature of a surplus. However, these references were made in the context of explaining the arguments the appellants wanted to make to the Superintendent. In my view, this is clear from the final two paragraphs of the court's reasons on the validity of the Superintendent's decision. The court stated its conclusion in this fashion:

Accordingly, the court concludes that the Superintendent exceeded his jurisdiction when he did not give adequate consideration to the question of wind-up and the trust provisions of the Weavexx plan with its surplus and further failed to observe their fiduciary duties to the applicants.

Without deciding how far the Superintendent had to go with respect to procedural fairness in dealing with the request of the applicants and a number of members of the pension plan of Weavexx, procedural fairness was not accorded to these members of the plan by either the Superintendent or BTR.

[21] I do not read this passage as representing a decision by the Divisional Court on the substantive pension law issues arising from the fiduciary duties of pension administrators, the interpretation of the trust provisions of the Weavexx pension plan or the legal nature of, and entitlement to, a pension plan surplus. Rather, the court is saying that because the PAC was not accorded procedural fairness, it was not able to argue, and the Superintendent did not therefore "give adequate consideration to", those substantive issues. It goes without saying that if the PAC had been given the opportunity to advance these arguments, the Superintendent might well have decided them against the PAC.

(b) Standard of review

[22] Although the Divisional Court employed "excess of jurisdiction" language on occasion in its reasons for judgment, which might raise the spectre of a correctness standard of review, the court's reasons read as a whole make it clear that it was applying a reasonableness standard to its review of the merits of the Superintendent's decision. Indeed, the court stated this explicitly: "The court takes the view that the standard to be applied to the Superintendent should be that of reasonableness." The appellants agree that this is the appropriate standard, although they contend that the court actually applied the higher correctness standard. The respondents do not challenge the reasonableness standard.

[23] In Hinds v. Superintendent of Pensions [See Note 4 at end of document] ("Hinds"), this court held that the standard of review of a decision of the Superintendent made pursuant to s. 80 of the PBA is reasonableness simpliciter. Since s. 81(5) is identical to s. 80(5), the same standard should apply.

(c) Merits

[24] The Superintendent's decision approving the transfer of assets from the Weavexx pension plan to the consolidated BTR pension plan was made pursuant to s. 81 of the PBA. Section 81(5) of the PBA requires the Superintendent to refuse consent if the proposed transfer of assets "does not protect the pension benefits . . . of the members and former members of the original pension plan".

[25] I start with this observation: pension plans are for the benefit of the employees, not the companies which create them. They are a particularly important component of the compensation employees receive in return for their labour. They are not a gift from the employer; they are earned by the employees. Indeed, in addition to their labour, employees usually agree to other trade-offs in order to obtain a pension. As explained by Cory J. in Schmidt v. Air Products Canada Ltd., 1994 104 (SCC), [1994] 2 S.C.R. 611 at p. 646, 115 D.L.R. (4th) 631:

In the case of pension plans, employees not only contribute to the fund, in addition they almost invariably agree to accept lower wages and fewer employment benefits in exchange for the employer's agreeing to set up the pension trust in their favour.

[26] Similar statements have been expressed by this court in several cases. In Gencorp Canada Inc. v. Ontario (Superintendent of Pensions) (1998), 1998 2947 (ON CA), 39 O.R. (3d) 38, 158 D.L.R. (4th) 497 (C.A.), at p. 43 O.R., Robins J.A. said:

[T]he Pension Benefit Act is clearly public policy legislation establishing a carefully calibrated legislative and regulatory scheme prescribing minimum standards for all pension plans in Ontario. It is intended to benefit and protect the interests of members and former members of pension plans. . . .

[27] In Firestone Canada Inc. v. Ontario (Pension Commission) (1990), 1991 8352 (ON CA), 1 O.R. (3d) 122, 78 D.L.R. (4th) 52 (C.A.), at p. 127 O.R. ("Firestone"), Blair J.A. stated that the PBA "is clearly intended to benefit employees" and "[i]n particular . . . evinces a special solicitude for employees affected by plant closures". In the present case, it was the downsizing and then closure of the Arnprior plant which clearly played a role in the retirees' concern and in the employer's transfer application.

[28] The implication of these authorities is that the Superintendent owes a high duty to employees with Ontario pension plans. As for the nature and consequences of this duty, I would adopt, as I did in Hinds, the eloquent language used by Reid J. in Re Collins and Pension Commission of Ontario (1986), 1986 3913 (ON SCDC), 56 O.R. (2d) 274, 31 D.L.R. (4th) 86 (Div. Ct.) ("Collins"), at p. 285 O.R.:

[I]t appears that the commission was established to ensure that certain interests were protected. While there is no doubt that those interests included the employer's, there appears to be equally no doubt that the commission was established to safeguard the plan members' interests as well . . . While the commission may not, strictly speaking, be a trustee for the members, for it holds no money belonging to the plan, it would be artificial to conclude that the commission's obligation to members is lower than the high standard of fiduciary obligation imposed on trustees.

[29] The chronology and contents of the record establish that the Superintendent focused almost exclusively on the employers' transfer application made pursuant to s. 81 of the PBA, but ignored almost entirely the retirees' request for a wind-up or partial wind-up of the pension plan with a view to a distribution to them of the surplus that had accumulated in the plan.

[30] Sections 80 and 81 of the PBA are the principal provisions dealing with transfers. Section 69 of the PBA relates to the winding-up of pension plans. It provides, inter alia:

69(1) The Superintendent by order may require the wind up of a pension plan in whole or in part if,

(a) there is a cessation or suspension of employer contributions to the pension fund;

(d) a significant number of members of the pension plan cease to be employed by the employer as a result of the discontinuance of all or part of the business of the employer . . .;

(e) all or a significant portion of the business carried on by the employer at a specific location is discontinued. . . .

[31] All of these subsections were in play in the 1995-1997 period. The corporate appellants admitted that the employer made no contributions to the pension plan after 1983: see the affidavit of Emily Van Vleet, Director of Employee Benefits at BTR, para. 13. Thus s. 69(1)(a) of the PBA was a potential source for a wind-up order by the Superintendent. As well, throughout the early 1990s there was significant downsizing at Weavexx's Arnprior plant and it was closed in late 1996. Accordingly, s. 69(1)(d) and (e) were also potential bases for a wind-up order. [See Note 5 at end of document]

[32] Against the backdrop of the availability of both transfer and wind-up of the Weavexx pension plan, I turn to the chronology of events and the Superintendent's role and responses.

[33] The PAC moved first. It wrote to the Superintendent in 1993, alerting him to the substantial downsizing at the Arnprior plant. It wrote again on October 26, 1995 informing the Superintendent that it had been notified by BTR of its proposal to consolidate various pension plans, including the Weavexx plan. The PAC informed the Superintendent that they "strongly believe that this plan now should be wound up". The Superintendent acknowledged their letter on November 28, 1995 and said: "I would like to assure you that your representation on behalf of the Pension Advisory Committee will be taken into consideration when we review any application that is filed in respect of the proposed consolidation." On October 7, 1996, the PAC again wrote to the Pension Commission and requested that the Commission order a partial wind-up.

[34] The corporate appellants did not make their transfer application until December 30, 1996, more than a year after the first request by the PAC for a wind-up. The appropriate documents were sent to the Superintendent. However, the corporate appellants did not send them to the PAC until May 7, 1997, even though the subject matter of the application was employee and retiree pensions, there was a $4,216,300 surplus in the plan, there was a PAC which had been established pursuant to s. 24 of the PBA, and the PAC had corresponded extensively with Weavexx and BTR about the proposed transfer and consolidation.

[35] Because the PAC was having difficulty communicating with the Pension Commission, it contacted the area M.P.P., W. Leo Jordan, and asked for his assistance. The result was a letter from the Superintendent to Mr. Jordan dated June 11, 1997, stating, inter alia:

We have reviewed the reported annual membership for the above named pension plan and other related documents filed with the Pension Commission of Ontario for the periods between January 1, 1991 to December 31, 1995 and cannot establish any reason why the plan should have been wound up or even partially wound up at any time during the above described period.

We have also reviewed the documents filed for the plan consolidation (merger) effective January 1, 1996 and conclude that the consolidation meets the requirement of the Pension Benefits Act. . . .

A letter has been sent to the plan administrator [Ms. Van Vleet at BTR] requesting confirmation of the closure of the Arnprior Plant of Weavexx Corporation since a partial wind up may be warranted under subsection 69(1) of the Act. This would not have any effect on the consolidation . . . as the partial wind up of the plan would be subsequent to the consolidation of the plans. To date we have not received confirmation that a partial wind up is warranted.

[36] The timing and the contents of this letter are a cause of concern. On June 11, 1997, the Superintendent is informing an M.P.P. that a wind-up or partial wind-up based on downsizing is not warranted. This decision was not, however, formally communicated to the PAC which made the formal request for a wind-up. In the same letter, the Superintendent is informing an M.P.P. that the proposed consolidation complies with the PBA. This was not, however, communicated to the corporations which made the application until the Superintendent made his formal decision on August 15, 1997. Moreover, the decision made on that date was never communicated formally to the PAC, even though it was its members' pensions which lay at the heart of the application and even though the PAC had corresponded extensively with the Superintendent about the proposed transfer and consolidation.

[37] The third paragraph of the Superintendent's letter (set out above) is also interesting. It refers to a letter that Steve Young, the Pension Officer with carriage of the file, had sent to Ms. Van Vleet on May 30, 1997 requesting information about the closure of the Arnprior plant. In the letter Mr. Young said:

If certain conditions are met, the Superintendent of Pensions may order the wind up of a pension plan, in whole or in part, pursuant to authority under section 69 of the Pension Benefits Act. . . .

Please provide us with the name and registration number of any pension plan in which employees affected by the above event [the plant closure] participated. Also advise us as to your company's intentions with respect to these pension plans and the affected members. If it is not your company's intention to voluntarily declare a wind up of the plan, either in whole or in part, we would ask that you provide us with details of the events affecting the members. The information is being requested to determine if any of the conditions under section 69 of the Act for the Superintendent to exercise his authority to order a wind up have been satisfied.

[38] Ms. Van Vleet responded to this letter on June 19, 1997. She indicated that Weavexx had initiated a full wind-up with respect to hourly employees. She said: "the Arnprior Hourly Plan is significantly overfunded with a surplus of $2.9 million. We have approached the Union and are currently negotiating with them regarding a proposed distribution of that surplus." In other words, for the hourly workers, BTR was contemplating a wind-up, acknowledged a surplus, and was negotiating a distribution of the surplus with the members of that plan.

[39] With respect to the salaried employees, Ms. Van Vleet communicated the following:

The closure also affected seven salaried employees who are participating in the BTR Pension Plan for Canadian Employees registration number 0559716. We do not intend to declare a formal partial windup of this plan in respect of the seven individuals involved, but we will grant these members full vesting and growth rights.

[40] It will be recalled that the surplus in the Weavexx pension plan for salaried employees was approximately $4.2 million. There is nothing in Ms. Van Vleet's letter to explain why a surplus of $2.9 million in the pension plan for hourly workers suggests a full wind-up, whereas a surplus of $4.2 million in the pension plan for salaried workers does not suggest any kind of wind-up.

[41] The Superintendent made his formal decision approving the transfer application on August 15, 1997. There is nothing in that decision about the PAC's request for a wind-up or partial wind-up of the pension plan. The Superintendent's decision was not sent to the respondents.

[42] Based on this review, mostly chronological, of the major events, I share the Divisional Court's discomfort with the process adopted by the Superintendent in this case.

[43] On the transfer side of the equation, the Superintendent engaged in a review of the application and made a formal decision. However, I question whether this decision was anything more than a formality given that the Superintendent presaged his final decision in a letter to an M.P.P. two months before the formal decision.

[44] On the wind-up side of the equation, the Superintendent's performance was genuinely troubling. There was little and poor communication with the PAC, even though the PAC was established pursuant to s. 24 of the PBA and requested the Superintendent to consider a wind-up more than a year before the corporate appellants made their transfer application. The only substantive communication the Superintendent ever made about the merits of the PAC's request was in a letter to the M.P.P. from the PAC's constituency. The Superintendent appears never to have made a formal decision about the wind-up request. Indeed, it is unclear whether the Superintendent was seriously considering the wind-up issue. Pension Officer Young's letter to Ms. Van Vleet at BTR on May 30, 1997 seems to suggest that he was:

The information is being requested to determine if any of the conditions under section 69 of the Act for the Superintendent to exercise his authority to order a wind-up have been satisfied.

However, in his letter to the M.P.P. just 11 days later, on June 11, 1997, the Superintendent stated that a partial wind-up would be subsequent to the consolidation and that "[t]o date, we have not received confirmation that a partial wind up is warranted", which seems to suggest that the Superintendent regarded his role on the wind-up issue as reactive -- and, indeed, reactive to the employer, not the requesting PAC.

[45] There was a good deal at stake in this merger/ consolidation/wind-up matter. There was a surplus of more than $4.2 million in a plan to which, on its own evidence, the employer had not contributed for 13 years previous to its consolidation application. I do not say that this is unlawful. Rather, I do say that the Superintendent ignored the PAC's request for a wind-up decision as he considered that application. Moreover, on the record, it is unclear how the Superintendent viewed the relationship between the employers' s. 81 transfer and consolidation application and the employees' s. 69 wind-up request. Finally, it appears that the Superintendent never made a decision on the employees' request. All of this was, in my view, starkly contrary to the observation of Blair J.A. in Firestone, supra, that the PBA "is clearly intended to benefit employees" and "[i]n particular . . . evinces a special solicitude for employees affected by plant closures". Accordingly, I think that the Divisional Court was correct to conclude that the Superintendent's decision of August 15, 1997 was unreasonable. The Superintendent's failure to consider the partial wind-up request prior to, or in conjunction with, deciding the transfer application rendered unreasonable his consent to the transfer.

[46] Turning to a different issue, the Divisional Court also concluded that BTR had not accorded procedural fairness to the respondents. In my view, this conclusion is in error. The decision that is the subject matter of the application for judicial review and this appeal is the Superintendent's decision. BTR was the applicant, not the decision-maker. Hence it did not owe the respondents any duty of procedural fairness related to that decision.

(2) The remedy issue

[47] On the subject of remedy, the Divisional Court ordered that the consent of the Superintendent to the transfer of assets be set aside. The court also ordered that the pension assets be returned to the Weavexx plan. Finally, the court ordered the Superintendent to consider the wind-up issue. Any decision by the Superintendent (or failure to make a decision) would then be referred to the Tribunal. The appellants challenge the second and third components of this decision -- i.e. the return of the assets to the Weavexx plan and the compulsory role of the Tribunal in the resolution of the wind- up issue.

[48] On the return of the assets issue, the appellants contend that the Divisional Court only had jurisdiction to quash the Superintendent's consent to the transfer; it did not have the authority to take the additional step of returning the assets to the Weavexx plan. Specifically, the appellants contend that the Divisional Court's order breached s. 81(6) of the PBA:

81(6) The Superintendent by order may require the transferee to return to the pension fund assets . . . transferred without the prior consent of the Superintendent . . .

According to the appellants, this provision requires that the Superintendent, not the Divisional Court, decide whether the pension assets should be returned to the Weavexx plan.

[49] I disagree. On the specific point, I agree with the analysis of the Divisional Court:

Insofar as the transfer of assets is concerned the argument that s. 81(6) and (7) apply, is, in our view, in error. These sections refer to the situation where assets are transferred "without the prior consent of the Superintendent . . .". That is not the case here, the assets were transferred with the consent of the Superintendent.

[50] On the general point, I see no principled basis for interfering with the Divisional Court's decision to order the return of the pension assets to Weavexx. Once the Superintendent's decision was set aside, an order which had the effect of returning the parties to their original positions can hardly be viewed as frustrating the purposes of the PBA.

[51] On the component of the decision according a compulsory role to the Tribunal on any future decision on the wind-up issue, the respondents in effect concede in their factum that the Divisional Court erred:

65. The Superintendent has pointed out that interpreted liberally, the reasons of the Divisional Court would require that any future decision by the Superintendent on the request for a partial wind up must be referred to a Tribunal hearing, regardless of whether any party requests a hearing. This could not reasonably have been intended by the Divisional Court. All parties agree that the decision of the Superintendent with respect to the wind up request should be referred to the Tribunal only at the request of one of the affected parties.

[52] This is a fair concession. Section 89 of the PBA permits a party affected by a potential wind-up order by the Superintendent to request a hearing by the Tribunal. The Divisional Court erred by making such a hearing mandatory.

(3) The costs issue

[53] The Divisional Court awarded costs on a solicitor and client scale "for a number of reasons":

(a) The matter was indeed a complex one made more complex by the lack of support given by both the office of the superintendent and BTR.

(b) This attitude was demonstrated by the manner in which the assets were finally merged, notwithstanding the original representation that they would be kept separate and apart and the lack of information given to the applicants by the Superintendent and, indeed, to their counsel when it appeared that litigation was being contemplated.

(c) The fact that it is not clear whether or not the Superintendent had taken any position with respect to the wind-up of the Weavexx plan.

(d) Finally, by the fact that BTR would not support these retirees by providing them with funds in order to retain counsel to make submissions on their behalf.

[54] In my view, the record supports these four reasons. The Superintendent appears never to have made a decision on the wind-up request made by the respondents. The appellant corporations also did not treat the respondents properly. They did not send a copy of the valuation report to the PAC until almost five months after the transfer application was filed, even though they knew that the PAC was deeply concerned about the matter. They did not assist the PAC with legal representation, even though the pension plan had a surplus of $4.2 million and Weavexx had not contributed a penny to it for 13 years.

[55] In summary, although solicitor and client costs should be awarded only in exceptional cases, I can see no basis for interfering with the Divisional Court's conclusion that this was such a case.

E. Disposition

[56] I would allow the appeal in part. I would set aside those components of the Divisional Court's decision in which the court concluded that the corporate appellant BTR had not accorded procedural fairness to the respondents and ordered that any future decision made by the Superintendent on the wind-up issue be automatically referred to the Financial Services Tribunal.

[57] In all other respects, I would dismiss the appeal.

[58] The respondents have been substantially successful on the appeal. I would award them costs of the appeal payable by all of the respondents.

Order accordingly.

Notes

Note 1: Now the Superintendent of Financial Services.

Note 2: The respondent Tom Wood passed away in 1998.

Note 3: Now the Financial Services Commission of Ontario.

Note 4: Released today [see p. 367 O.R., supra].

Note 5: I note in passing that none of the appellants takes the position that a winding-up order can flow only from an application by the employer. Although s. 68 of the PBA envisions a wind-up process initiated by the employer, s. 69 is not limited in this fashion. Indeed, the steps the Superintendent took in this case, to be discussed below, indicate that the Superintendent regarded it as his duty to deal with a wind-up request from the respondent retirees.