DIVISIONAL COURT FILE NO.: 416/02
DATE: 20041201
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CUNNINGHAM A.C.J., KOZAK and PITT JJ.
B E T W E E N:
T. STEWART BAXTER, GARY HOTRUM, GEORGE WILBUR and JUNE WILLIAMS, Representatives of Certain Members and Former Members of the Amended Pension Plan for Salaried Employees of National Steel Car Limited
Warren S. Rapoport and Ari Kaplan for the Appellants
Appellants (Applicants)
- and -
SUPERINTENDENT OF FINANCIAL SERVICES
Deborah McPhail and Mark Bailey for the Respondent, Superintendent of Financial Services
Respondent in Appeal (Respondent)
- and -
NATIONAL STEEL CAR LIMITED
Andrew K. Lokan and Craig Collins-Williams for the Respondent, National Steel Car Limited
Respondent in Appeal (Respondent)
- and -
MAURICE ROZON, CHRIS WINTERBURN and AL REICHERT of the UNITED STEEL WORKERS OF AMERICA, LOCAL 7135 (THE “USWA”) on their own behalf and on behalf of the USWA Members of the Amended Pension Plan for Hourly-Paid Employees of National Steel Car Limited
Dona Campbell for the Respondents, United Steelworkers of America, Local 7135 and USWA Members of the Hourly Paid Plan
Respondents in Appeal (Respondents)
Heard: September 13, 14, 2004
Cunningham A.C.J., Kozak and Pitt JJ.
REASONS FOR JUDGMENT
[1] National Steel Car Corporation Limited (“NSCC”), the predecessor name for the respondent, National Steel Car Limited (“NSC”), established the National Steel Car Corporation Limited Pension Plan (the original plan) effective June 30, 1952. This original plan covered both salaried and hourly employees. The original plan was not funded through a trust but through a group annuity policy between NSCC and the Mutual Life Assurance Company of Canada and annuity contracts with the Canadian government Annuities Branch. After June 30, 1964, NSCC funded benefits accrued in the original plan through a deposit administration annuity policy provided by the Mutual Life Assurance Company of Canada.
[2] The original plan expressly permitted the merger of the original plan with other pension plans. Specifically, s. 17.1 of the original plan states:
The Company intends to maintain the plan indefinitely but necessarily reserves the sole right to amend, suspend, segregate, merge or terminate the plan and to change the method of medium of funding the plan benefits, all as the company may in its absolute discretion, determine. (Emphasis added.)
[3] Effective July 1, 1965, the original plan was split into the amended pension plan for salaried hourly-paid employees of NSCC (the Salaried Plan) and the amended pension plan for hourly-paid employees of NSCC (the Hourly Plan). Both the 1965 and 1966 versions of the Salaried Plan expressly granted the employer the right to merge the Salaried Plan with another plan.
[4] Effective January 1, 1972, the Salaried Plan was further amended to permit the reversion of surplus to the employer NSC. This amendment in part states that s. 18.4 of the previous plan text is amended to state:
18.4 Should the Plan be terminated, the Company shall not be obligated to make any further contributions to the Plan and the assets thereunder shall be allocated for the provision of the accrued benefits to which members of the Plan, Pensioners, their estates, designated beneficiaries and joint annuitants are entitled in such equitable manner as may be determined by the Company in consultation with the actuary. Such benefits shall be provided in the form elected by Members under the terms of the Plan. Should a surplus remain under the Plan after the provision of all accrued benefits to Members of the Plan, Pensioners, their estates, designated beneficiaries and joint annuitants, such excess funds shall revert to the company.
[5] On July 18, 1994, the funding arrangements for the Salaried Plan and the Hourly Plan were changed to a pension trust agreement between NSC and the Canada Trust Company (the Trust Agreement). On January 20, 2000, NSC advised the members, former members, and retirees of the Salaried Plan and the Hourly Plan that it had decided to merge the two Plans retroactively to March 1, 1999. The notice stated that the merger would not affect the pension benefits earned to date in any way, nor would it affect the way in which benefits would be earned in the future.
[6] An application to transfer the Salaried Plan assets to the Hourly Plan was filed with the Superintendent of Financial Services on February 2, 2000. In the application, the employer certified that the funding excess resulting in the merged plan immediately after the transfer was such that the funding requirements for the merged plan could be met using these surplus assets.
[7] On November 20, 2000, the Superintendent invited the employer, the appellants, and the United Steelworkers of America (USWA) to make submissions to the Superintendent on the asset transfer, including the effect of the Divisional Court’s decision in Huus v. Ontario (Superintendent of Pensions), [2000] O.J. No. 2066. Detailed submissions were provided by all parties.
[8] In a letter dated March 2, 2001, the Superintendent consented to the transfer of the Salaried Plan to the Hourly Plan of $45,188,000.00 plus interest at the fund rate of return for the period March 1, 1999, to the date of transfer, plus net cash flow adjustment.
[9] The appellants herein requested a hearing under s. 89 of the Pension Benefits Act, R.S.O. 1990, c. P.8 (PBA) with respect to the decision of the Superintendent granting the transfer of assets. Following a three-day hearing, a majority of the Financial Services Tribunal (the “Tribunal”) determined that it did not have jurisdiction under the PBA or the Financial Services Commission Act, 1997, S.O. 1997, c. 28 (FSCO Act) to conduct a hearing in respect of the applicants’ request. The full Tribunal, however, did say the following,
Although we have concluded, for a number of reasons, that we do not have jurisdiction to entertain the Applicants’ request for a hearing in the matter, we proceed, nonetheless, to consider the merits of the Applicants’ case in the event we were wrong in our conclusion as to jurisdiction.
[10] On the merits, the Tribunal unanimously rejected the appellants’ argument that the asset transfer did not protect “other benefits” of the members of the Salaried Plan. The Tribunal analyzed the issue as follows:
The Applicants maintained that the 1966 version of the Salaried Plan had the effect of establishing a trust in respect of the Plan assets, or pension fund, for the benefit of the members of the Plan. We will assume for the purposes of our analysis, but without deciding, that there was such a trust and that the 1973 amendment to the Plan did not effectively revoke it. Assuming the continued existence of a trust, the members of the Plan might be said to have enjoyed benefits in the form of beneficial interests in the trust to which the Plan assets were subject.
The “other benefits” of the members of the Salaried Plan that the Applicants say were unprotected in the transfer of assets, and the accompanying plan merger, are really interests in the excess of,
(i) the contributions to the Plan, taken together with,
(ii) the income generated by those contributions, over and above,
(iii) what would be required to satisfy pension benefits under the Plan?
- in other words, interests in the nature of claims to surplus. However, no member of the Salaried Plan can be said to have anything more than a contingent claim to surplus since an actual claim to surplus pre-supposes a wind up or termination of the Plan; see Schmidt v. Air Products of Canada (1994), 1994 104 (SCC), 115 D.L.R. (4th) 631 (S.C.C.). The PBA says specifically that on a merger of pension plans under section 81, the merging plan is deemed not to be wound up and the merged plan is deemed to be a continuation of the merging plan (see subsection (1)).
The Supreme Court of Canada in Schmidt refers to the potential claim of plan members to the surplus remaining upon termination of a pension plan – by virtue of the terms of the plan or any trust in respect of the pension fund – as a “benefit” to which members may be entitled. However, the court also makes it clear that the amount of that benefit is never certain during the continuation of the plan and that the right to any surplus is crystallized only when the surplus becomes ascertainable on termination of the plan [at o, 665]. In our view, a members’ interest in surplus, which is contingent upon termination of the plan and the existence of an actual surplus at that time, does not fall within the expression “other benefits of members” in subsection (5) of section 81 of the PBA. While the plan continues, the plan sponsor has the benefit of the surplus in the sense that it can use it to justify contribution holidays (see Schmidt). That benefit pertains even if the pension fund is subject to a trust in favour of the members. Thus, it would be inaccurate to say that the interest of the members in the surplus of an on-going plan is a benefit of the members, in the sense of subsection (5) of section 81 of the PBA, given that the plan sponsor has the current benefit of that surplus, albeit for the limited purpose of taking contribution holidays.
There is nothing inherently objectionable about a merger of a pension plan that is in a surplus position with one that is not, even if the assets of the former plan are subject to a trust for the benefit of the members; see Re Heilig and Dominion Securities Pitfield Ltd. (1989), 1989 4284 (ON CA), 67 O.R. (2d) 577, at p. 582 (Ont. C.A.). We were referred to the decision of the Divisional Court in Retirement Income Plan for Salaried Employees of Weavvex Corp. v. Ontario (Superintendent of Pensions), (2000), 133 O.A.C. 375, as authority for the proposition that on a transfer of assets the Superintendent is required, under subsection (5) of section 81 of the PBA, to protect a notional claim to surplus. However, the court’s decision to set aside a consent of the Superintendent given under that subsection was based entirely on deficiencies in the process through which the Superintendent dealt with the application for consent to the transfer of assets and with objections to it. That is how the Court of Appeal, in an unreported decision dated February 14, 2002 (docket C35896 & C35919), characterized the decision in affirming it on appeal (with a modification to the form of remedy afforded by the Divisional Court). In the present case, the Applicants did not allege that there were any deficiencies in the procedure the Superintendent followed in dealing with NSC’s application for consent.
[11] The issues for us, therefore, are as follows:
(a) Did the Tribunal have jurisdiction to review the decision of the Superintendent?
(b) What is the proper standard of review of the Tribunal’s decision?
(c) Did the Superintendent/Tribunal err in concluding that the transfer complied with s. 81(5) of the PBA?
A. JURISDICTION
[12] While we recognize that parties cannot consent to grant jurisdiction where such jurisdiction does not exist, it was helpful to the court that counsel for the Superintendent agreed with counsel for the appellant employees and counsel for the respondent union that the Tribunal did have the appropriate jurisdiction. Only counsel for the Company argued to the contrary.
[13] At the end of oral arguments on jurisdiction, we decided that the Tribunal did have jurisdiction, and promised that written reasons would follow. Herewith are the reasons:
[14] The resolution of the issue turns primarily on the interpretation of ss. 89 and 81, and to a lesser extent, s. 87 of the PBA.
[15] As we understand the view of the majority of the Tribunal and counsel for the Company, s. 89(4) was, after amendments in 1997, in the language of the majority of the Tribunal, “left to extend only to decisions of the Superintendent going one way, namely against the person making the request to the Superintendent …”
[16] In contrast, the minority of the Tribunal reasoned that, “[t]he Superintendent’s consent to one party’s request can reasonably be interpreted as a refusal to consent to an opposing party’s request …”
[17] The position of the majority of the Tribunal and the Company is that only the company has the right to a hearing to contest the Superintendent’s decision, since the Company is the only applicant for approval or consent.
Analysis
[18] Nothing, however, in the legislation would have stood in the way of the employees (having ascertained the Company’s intention to seek approval) making a request to the Superintendent, in the form of an application that he refuse to give approval to the forthcoming request for approval from the Company, or to file a counter-application seeking rejection of the Company’s request for approval. In such a circumstance, the employees would certainly be an applicant (if not necessarily, the applicant), who would be entitled to notice and a hearing before the Tribunal.
That interpretation, if correct, bolsters the argument that the legislature intended equal protection for employer and employee on reviews of decisions by the Superintendent.
[19] The Superintendent served the employees with the notice of the proposed consent, and advised them of their right to a Tribunal Hearing. While the giving of such advice cannot be seen as establishing jurisdiction, it is indicative of the broad consensus in administrative, legal and judicial circles, of the requirement for procedural fairness on such a fundamental issue.
[20] Before dealing with some of the legal precedents that offer some guidance, it is instructive to examine the rather narrow basis for the Tribunal’s finding and the Company’s submission that the Tribunal lacks jurisdiction. They parsed the language of s. 89 (4) to find that rights of review exist only where the decision goes against the applicant; and used the maxim unius est exclusio alterius as the basis for an argument that the legislature made a policy choice to expand the right to a Tribunal Hearing in some circumstances and not in others as illustrated by ss. 89(3.1) and 89 (3.2).
[21] With respect, the denial of a right of one party to be heard, while protecting the right of the other party, when both parties have substantial interests at stake, would require considerably clearer and less ambiguous legislative language. As shown earlier, who the applicant is can often be determined on the basis of the priority in time of the request or indeed whether the “respondent” files something in the nature of a counter-application.
[22] In that sense, we agree with the analysis of the minority.
[23] The recent decision of the Supreme Court of Canada in Monsanto Canada Inc. v. Superintendent of Financial Services et al., [2004] S.C.C. 54 has provided considerable assistance on the question of the statutory interpretation of the PBA.
[24] In Monsanto, supra, Deschamps J., speaking for the court, said at para. 19:
The established approach to statutory interpretation was recently reiterated by Iacobucci J. in Bell Express Vu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42 at para. 26, citing E.A. Dreidger, Construction of Statutes (2nd ed. 1983), at p. 87:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
[25] We will examine each of those factors briefly in the same order as the court did in Monsanto, supra.
A. Entire Context
In the language of the Court in Monsanto at para. 24:
The historical context, though not determinative, may provide some insight into the legislature’s intention regarding the effect of [s. 81 and 89]. Through its statutory interventions, the legislature has sought to clarify some aspects of the relationship between employers and employees in pension matters. Steps have been taken to improve many employee rights but the importance of maintaining a fair and delicate balance between employer and employee interests, in a way which promotes private pensions, has also been a consistent theme. It is in light of this background that the legal meaning of the provision must be interpreted in accordance with the accepted approach to statutory interpretation. [Our emphasis.]
We need say no more on this factor.
B. Grammatical and Ordinary Sense.
Subsection 4 does not specify the party from whom the request that “the Superintendent proposes to refuse to give an approval or consent” comes.
Accordingly, it is our view that the legislation contemplates a request coming from either the employer or the employee.
Subsection 6 states that “the person on whom the notice is served is entitled to a hearing.” The word “person” must include employees.
C. Scheme of the Act.
The scheme of the Act supports the appellants, the Superintendent, the union and the minority viewpoint.
Section 87 of the Act provides as follows:
See Appendix.
Gillese J.A. in her capacity as Chair of the Pension Commission in the Imperial Oil Limited Plan and the Entitlement 55 Group, PN 0347054 and PN 0344002, April 28, 1995, PCO Index No. XDEC-28 found that the Commission (now the Tribunal) had a general supervisory jurisdiction under s. 87 of the Act.
Apart from the awkward language of s. 89(4) and the admittedly general nature of the Tribunal’s expertise, there is nothing about the Act that could lead to a conclusion that the Legislature intended to limit the employees’ rights in such circumstances to Judicial review only, with its high threshold of patent unreasonability [see Imperial Oil, supra].
D. Object of the Act
In Monsanto, supra, the court said the following with regard to the object of the Act at para. 38:
The Act is public policy legislation that recognizes the vital importance of long-term income security. As a legislative intervention in the administration of voluntary pension plans, its purpose is to establish minimum standards and regulatory supervision in order to protect and safeguard the pension benefits and rights of members, former members and others entitled to receive benefits under private pension plans (see GenCorp, supra [GenCorp Canada Inc. v. Ontario (Superintendent, Pensions) (1998), 1998 2947 (ON CA), 158 D.L.R. (4th) 497 (Ont. C.A.)]; Firestone Canada Inc. v. Ontario (Pension Commission) (1990), 1990 6833 (ON CA), 1 O.R. (3d) 122 (C.A.), at p. 127). This is especially important when, as recognized by this Court in Schmidt v. Air Products Canada Ltd., 1994 104 (SCC), [1994] 2 S.C.R. 611, at p. 646, it is recommended that pensions are now generally given for consideration rather than being merely gratuitous rewards. At the same time, the voluntary nature of the private pension system requires the interventions in this area to be carefully calibrated. This is necessary to avoid discouraging employers from making plan decisions advantageous to their employees. The Act thus seeks, in some measure, to ensure a balance between employee and employer interests that will be beneficial for both groups and for the greater public interest in established pension standards. [Our emphasis.]
We see no need to say any more on this factor.
The Jurisprudence
[26] Finally, the case law, to the extent that it has canvassed the issue, supports the position of the Superintendent, the minority, the appellants, and the union.
[27] We agree with paragraph 39 of the appellant’s factum on jurisdiction where they argue:
The Ontario Court of Appeal has determined “the Superintendent owes a high duty to employees with Ontario pension plans” in matters of process when considering merger applications under Section 81. This duty is not lower “than the high standard of fiduciary obligation imposed on trustees.” Hinds v. Ontario (Superintendent of Pensions) (2002), 2002 23592 (ON CA), 58 O.R. (3d) 367 (Ont. C.A.) at 375, 378; Huus v. Ontario (Superintendent of Pensions) (2002), 2002 23593 (ON CA), 58 O.R. (3d) 380 (Ont. C.A.) at 387 and Monsanto Canada Inc., supra, at 409-410.
[28] The language of the Pension Commission in Hospitals of Ontario Pension Plan, C-001500, November 22, 1990, PCO, XDEC-05, PCO Bulletin 1/4 (December 1990), affirmed in Re Canadian Union of Public Employees et al. and Ontario Hospital Association; Superintendent of Pensions, Intervenant (1992), 1992 8548 (ON SCDC), 91 D.L.R. (4th) 436 (Div. Ct.) (“HOOPP”) is instructive, even though the section involved was a different one, s. 89 (2). The Pension Commission said as follows:
a.) the legislature must have intended fair play for both sides in a pension dispute, and it would be inequitable for one side to have a full right to a hearing by the pension tribunal when the other side, having received the opposite proposal or order from the Superintendent, could only apply for judicial review;
In affirming the decision, the Divisional Court said, inter alia:
It is not reasonable, in our opinion, to think that a decision to refuse to issue an order requested under s. 88 [now s. 87] should be treated any differently, for the purposes of s. 90(6) (now s. 89(6)], than one to make such an order. In the first case, those interested and in disagreement with the decision would have to live with it, while in the second, they would have access to the Commission by way of an appeal and the power it possesses under s. 90(9) [now s. 89(9)]. See HOOPP (Div. Ct.) at p. 441. [Our emphasis.]
[29] In the Imperial Oil Limited Plan, supra, at 52 – 53, the Pension Commission said:
As in [HOOPP], had the Superintendent decided to act in a manner adverse to Imperial Oil, Imperial Oil would have had an automatic right to contest the Superintendent’s decision pursuant to subsection 89(8). And, as in [HOOPP], if the Commission has no jurisdiction to hear the plan members, their only legal recourse would be to the courts by way of judicial review with its high threshold test of patent unreasonability.
[30] In Pension Plan for Salaried Employees of McDonnell Douglas Canada Ltd., No. 520593, May 25, 1998, PCO, XDEC-38, affirmed in Maynard v. Ontario (Superintendent of Pensions) (2002), 23 C.C.P.B. 145 (Div. Ct.), at p. 146 – 147. the Divisional Court said:
In our view, it would be contrary to the purpose of the legislation to say that where the superintendent proposes to make an order under 89(5) requiring, for example, the wind up of a pension plan, and in which circumstances, the statute specifically states notices to be served on the administrator of the plan and the employer, who are then entitled to a hearing, that there is no corresponding right to a group of employees who have asked that such an order be made and the superintendent refuses to make such an order. In our view, the reasoning in [HOOPP] is apposite to the case at bar. [Emphasis added.]
[31] Notably, at that time, notwithstanding amendments, s. 89(5) expressly provided a hearing only where the Superintendent had proposed to order a wind up or a partial wind up.
[32] In Pension Plan for Hospital Employees of the Sisters of St. Joseph for the Diocese of Toronto in Upper Canada (PN 302851) May 28, 1998, XDEC-39, a case dealing with mergers, the Pension Commission held that there was an implied right to a hearing for employees. The Commission relied heavily on HOOPP. It accepted the reasoning in HOOPP that the phrase “proposes to make an order” includes a proposal to refuse to make an order.
[33] The company, understandably, has not been able to find any support for its position in the case law dealing with s. 89. Although the cases cited by the appellants are not on all fours with the case at bar, the sentiments expressed by the Tribunals and the courts on the need for a fair process, that is, a right of review for both parties, run through all of the cases
B. THE STANDARD OF REVIEW FROM THE MAJORITY DECISION OF THE FINANCIAL SERVICES TRIBUNAL
[34] The standard of review on appeals from the decisions of statutory tribunals requires a consideration of the principles as set down by the Supreme Court of Canada.
[35] The determination of the appropriate standard of review of the decision of an administrative tribunal now requires the application of the pragmatic and functional approach as described in Pushpanathan v. Canada (Minister of Citizenship and Immigration), 1998 778 (SCC), [1998] 1 S.C.R. 982. As stated by the Ontario Court of Appeal in Monsanto Canada Inc. v. Superintendent of Financial Services et al. (2002), 2002 17842 (ON CA), 62 O.R. (3d) 305:
That approach focuses on the fundamental question of whether the issue before the Tribunal was one that was intended by the legislation to be left to the exclusive decision of that Tribunal. (See Pasiechnyk v. Saskatchewan (Workers Compensation Board), 1997 316 (SCC), [1997] 2 S.C.R. 890 at para. 18)
[36] In dealing with the four factors as directed in Pushpanathan, supra, the Ontario Court of Appeal was dealing with the Financial Services Commission of Ontario and the Financial Services Tribunal.
[37] The first of the four factors is the presence or absence of a privitive clause. Section 20(b) of the FSCO Act gives the Tribunal exclusive jurisdiction to determine all questions of fact or law that arise in any proceeding before it. At para. [28] of Monsanto, supra, Goudge J.A. stated:
However the preclusive effect of this provision is essentially neutralized by s. 21(4) which provides that an order of the Tribunal is final and conclusive for all purposes, unless the Act under which the Tribunal made it, provides for an appeal. As we have seen, s. 91(1) of the Pension Benefits Act provides for a full appeal from the Tribunal to the Divisional Court. Thus this factor suggests a less deferential standard of review.
[38] The second and most important factor is the relative expertise of the Tribunal. In the Court of Appeal, Goudge J.A. in Monsanto, supra, describes the function of the Tribunal as follows at para. [29]:
The Act gives the Tribunal the central adjudicative role in the specialized administrative structure set up to regulate pensions in Ontario. While the Tribunal deals with other regulated sectors, in addition to pensions, the Financial Services Commission of Ontario Act requires that to the extent practicable, members are appointed with experience and expertise in the regulated sectors, and that they are assigned to cases which draw on that experience and expertise. Hence the Tribunal must be seen as having a relative expertise in adjudicating questions relating to pensions. This points to a more deferential standard of review.
[39] The appellants take the position that the Tribunal has no guaranteed expertise in pension matters in that it is a part-time multidisciplinary tribunal that has no pension policy making function. In particular they describe the Tribunal as an amalgamation of the adjudicative functions of three distinct regulatory regimes, namely the Pension Commission, the Ontario Insurance Commission and the Deposit Institutions Division of the Ministry of Finance. As such the Tribunal adjudicates disputes under the Pension Benefits Act, the Insurance Act and the Mortgage Brokers Act.
[40] From both an institutional and practical perspective, the appellants state that the Tribunal is not exclusively an expert pensions body as compared to the Tribunal’s predecessor, the Pension Commission, which was an expert tribunal, in that it only adjudicated pension matters. As such, the appellants contend that although the Pension Commission of Ontario decisions warranted considerable deference on a reasonableness simpliciter standard of review, the standard of review of the Tribunal’s majority decision is correctness.
[41] The Ontario Court of Appeal decision in Monsanto, supra, was appealed to the Supreme Court of Canada, where Deschamps J. stated that the expertise of the Tribunal relative to that of the Courts must be evaluated in reference to the particular provisions being invoked and interpreted. The issue on appeal was a pure question of law as to whether the Tribunal properly interpreted s. 70(6) of the Act as not requiring distribution of the actuarial surplus on a partial wind up.
[42] The issue was described as neither factually-laden nor highly technical and that statutory interpretation is a purely legal question, ultimately within the province of the judiciary.
[43] At paragraph 11, Deschamps J. states:
On the other hand the Tribunal does not have specific expertise in this area. The Tribunal is a general body that was created under the Financial Services Commission of Ontario Act 1997 S.O. 1997 C. 28, S. 20 (FSCOA) to replace the specialized Pension Services Commission. It is responsible for adjudication in a variety of regulated sectors (FSCOA, s. 1) including cooperatives, credit unions, insurance, mortgage brokers, loans and trusts and pensions (FSCOA, s. 1). In addition the nature of the Tribunal’s expertise is primarily adjudicative. Unlike the former Pension Services Commission or the current Financial Services Commission, the Tribunal has no policy functions as part of its pensions mandate. (see FSCOA, s. 22) As noted in Mattel Canada, supra, and in National Corn Growers Assn. v. Canada (Import Tribunal), 1990 49 (SCC), [1990] 2 S.C.R. 1324 involvement in policy development will be an important consideration in evaluating a tribunal’s expertise. Lastly in appointing members to the Tribunal and assigning funds for hearings, the statute advises that to the extent practicable, expertise and experience in the regulated sectors should be taken into account (FSCOA ss. 6(4), 7(2).) However there is no requirement that members necessarily have special expertise in the subject matter of pensions. The Tribunal is a small entity of six to 12-members which further reduces the likelihood that any particular panel would have expertise in the matter being adjudicated (FSCOA, s. 6(3)).
[44] At paragraph 12, Deschamps J. states:
Overall there is little to indicate that the legislature intended to create a body with particular expertise over the statutory interpretation of the Act. The Tribunal would not have any greater expertise than the courts in construing s. 70(6). Thus this factor suggests a lower amount of deference is required to be given to the Tribunal’s decisions on the issue of statutory interpretation.
[45] Accordingly, on a pure question of law it was found that all four factors pointed to a lower degree of deference and a standard of review of correctness was adopted.
[46] The third factor is the purpose of the Act as a whole and in particular the provision under consideration. Here s. 81(5) of the PBA provides that the Superintendent shall refuse to consent to a transfer 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.
[47] The purpose of the Act was stated in Gen Corp. Canada Inc. v. Ontario (Superintendent Pensions) 1998, 1998 2947 (ON CA), 158 D.L.R. (4th) 497 (Ont. C.A.) at p. 503:
The Pension Benefits 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 and evince a special solicitude for employees affected by plant closures.
[48] Deschamps J. goes on to state at paragraph 14 of Monsanto, supra:
On the one hand the protection of the rights of vulnerable groups is a central and long standing function of the courts … On the other hand pension standards legislation is a complex administrative scheme which seeks to strike a delicate balance between the interests of employers and employees while advancing the public interest in a thriving private pension system. In this task the regulatory body usually has a certain advantage in being closer to the dispute and the industry. In part, this led the Ontario Court of Appeal in Gen Corp. to conclude that the decisions of the Pension Services Commission should be reviewed on a standard of reasonableness.
[49] Unlike s. 70(6), which is not polycentric in nature, s. 81(5) does grant the Tribunal broad discretionary powers that involve the balancing of multiple sets of interests of competing constituencies. (See Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817 at para. 56; Pushpanathan, supra, at para. 36 and Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R. 226, 2003 S.C.C. 19 at paras. 30-31.) This points to a higher or more deferential standard of review. The question of whether the asset transfer complied with s. 81(5) is a question that lies at the heart or core of the Tribunal’s regulatory mandate and expertise and the interpretation of that provision is squarely within the Tribunal’s jurisdiction.
[50] Counsel for the respondent Superintendent took the position that the appropriate standard of review applicable to the Tribunal’s decision on the merits was reasonableness simpliciter. Had the appellants appealed the Tribunal’s jurisdictional decision, the Superintendent would have submitted that the standard of review applicable to that decision is the standard of correctness.
[51] Counsel for the respondent NSC submitted that on the merits, the standard of review from both the Superintendent and the Tribunal is reasonableness simpliciter.
[52] The fourth and final factor is the nature of the problem under review, which in this case falls within the specialized administrative expertise of the Tribunal. The restructuring of the legislation in 1997 which consolidated three distinct regulatory regimes onto the Tribunal, does not, in the view of this Court, detract to any appreciable extent the expertise of the Tribunal to deal with pension matters. The Tribunal members who are selected to sit on the panels hearing pension matters are not chosen at random from a larger pool, but rather are selected from a select smaller pool of specialized members based upon their experience and expertise in pension matters where practicable. One need only read the decisions of the Tribunal to confirm the qualified expertise of the panels.
[53] The standard of review with respect to decisions of statutory tribunals range from patently unreasonable at one end of the spectrum to correctness at the other. In between the two ends, there are decisions which are entitled to some curial deference, but not the full deference to be accorded where the standard is patently unreasonable. (See Pezim v. British Columbia (Supt. Of Brokers), 1994 103 (SCC), [1994] 114 D.L.R. (4th) 385, S.C.C.)
[54] Taking into consideration all four factors, the Tribunal’s decision on the merits must be accorded some deference and the appropriate standard of review is reasonableness simpliciter. To subject the Tribunal’s decision to the strict scrutiny of the correctness standard would represent a failure to recognize the expertise and mandate of the Tribunal.
C. DID THE SUPERINTENDENT/TRIBUNAL ERR IN CONCLUDING THAT THE TRANSFER COMPLIED WITH s. 81(5) OF THE PBA?
[55] The statutory test for approval of asset transfers is set out in s. 81(5) of the PBA which provides as follows:
Consent of Superintendent
(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.
Appellants’ Position
[56] The appellants say that the Salaried Plan assets and “other benefits” are protected by s. 81(5) of the PBA. The appellants submit the Tribunal erred in finding that: “A member’s interest in surplus, which is contingent upon termination of the plan and the existence of an actual surplus at that time, does not fall within the expression of “other benefits” of the members in s. 81(5) of the PBA.” They argue that pursuant to s. 81(5), the contributions to the Salaried Plan are, in addition to the requirement to provide defined benefits and “other benefits” of the members and as such the assets of the Salaried Plan cannot be used in the merged Plan for the benefit of the Hourly Plan because the Salaried Plan members would lose the protection those assets provided for the long-term solvency of the Salaried Plan. It is their position that “other benefits” referred to in s. 81(5) of the Act, when applied to the Salaried Plan, are the exclusive rights to all the benefits of the contributions to the Salaried Plan to be enjoyed only by the Salaried members. Surplus or deficit is not the primary element of the “other benefits”. It is the funding protection built into the Salaried Plan that is the “other benefit” under s. 81(5) of the Act. They point out that nothing in the PBA excludes the assets in a pension plan from being a benefit to members to be considered under the PBA. While s. 41(1) of the PBA specifically defines what may constitute “ancillary benefits” under the PBA without reference to surplus or assets of the pension plan, it does not define the wider term “other benefits”. It is the appellants’ position that if the Legislature intended a narrow reading of “other benefits” it would have used the narrow term “ancillary” in s. 81(5). Instead, it is submitted the Legislature used the word “other” indicating that benefits under this category might be different and wider than those enumerated in s. 40 of the Act. Surplus, they say, is a benefit specifically defined as an asset in need of protection under s. 78 of the Act, yet it is not an enumerated ancillary benefit in the statute. Accordingly, it is submitted that plan assets, like surplus, are intended to be considered an “other benefit” in need of protection under the PBA.
[57] The appellants have directed us to Huus, supra, which upheld on other grounds that a notional claim to surplus in a pension fund was considered a pension benefit within the meaning of s. 81(5) of the Act in dealing with procedural fairness issues on merger applications. There the court found that the Superintendent had a duty to consider the detriment to the surplus which could be diluted or removed as a result of merger. It is the appellants’ position that in the present case the transfer of the assets in the Salaried Plan would significantly dilute the Salaried Plan assets as a result of co-mingling the surplus of the Salaried Plan with the deficit in the other plan.
[58] The appellants suggest the pivotal question for this court in considering this merger application should be whether the contributions which form the asset base of the Salaried Plan can be used for purposes other than for the exclusive benefit of its members. They submit the Salaried Plan clearly states they cannot, as the contributions are for “the exclusive benefit of the members” and are to be vested in the members of the Salaried Plan.
[59] The effect, they say, of permitting the merger would allow NSC, as stated in its notice to the Salaried Plan members dated January 20, 2000, “to utilize the pension assets by investing the surplus that currently exists in the Salaried Plan into the new combined Plan”. The combined Plan clearly is intended to fund the Hourly plan deficit. While the appellants’ position does not preclude NSC from taking contribution holidays within the Salaried Plan, it simply precludes using the assets of the Salaried Plan to fund another plan.
Respondents’ Position
[60] In response, the respondents argue that the merger adequately protects the “pension benefits” of the members as defined under the PBA. In a defined benefit plan, the “pension promise” made to members is the promise that “they will receive the benefits as defined under the Plan, regardless of the investment performance of the fund held by the Plan and other factors.” (emphasis added) In the present case, they argue the Superintendent determined that this “pension promise” was adequately protected. The Superintendent considered and applied FSCO policy A700-251 which inter alia expressly requires that the merged plan have a “transfer ratio” of at least 1:1, which is to say that the merged plan have sufficient assets to pay all benefits set out in the plan as at the date of merger. This, they argue, contrasts with ordinary course funding of defined benefit plans. Outside of the merger context, defined benefit plans are permitted to be less than fully funded at any given time, within limits, and subject to the employer’s obligation to make special payments over time to return the plan to fully funded status. As the Tribunal noted, the respondents say, the appellants’ claim to an interest in the plan’s assets, over and above the assets required to fully fund the pension promise, is by definition a claim to the actuarial surplus. However, the respondents argue, any such claim, in the context of an on-going plan, can only be a contingent claim to a notional amount. In Schmidt, supra, the respondents say the Supreme Court of Canada clearly held that even when a pension plan takes the form of a trust, employees can claim no entitlement to surplus in an on-going plan. At p. 655, the Court stated,
Once funds are contributed to the pension fund they are “accrued benefits” of the employees. However, the benefits are of two distinct types. Employees are first entitled to the defined benefits provided under the plan. This is an amount fixed according to a formula. The other benefit to which the employees may be entitled is the surplus remaining upon termination. This amount is never fixed during the continuation of the plan. Rather, the surplus exists only on paper. It results from actuarial calculations and is a function of the assumptions used by the actuary. Employees can claim no entitlement to surplus in an ongoing plan because it is not definite. The right to any surplus is crystallized only when the surplus becomes ascertainable upon termination of the plan…
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.
[61] The respondents argue that s. 81(1) of the PBA expressly states that on a merger, the predecessor plan is deemed not to be wound up, and the successor (merged) plan is deemed to be a continuation of the predecessor(s). Accordingly, on the authority of Schmidt, they say the appellants have no specific interest in the actuarial surplus and furthermore, the Ontario Court of Appeal in Re Heilig and Dominion Securities Pitfield Ltd. (1989), 1989 4284 (ON CA), 67 O.R. (2d) 577 (C.A.) expressly held that planned mergers between trustee plans are permissible regardless of the funded status of the plan. The respondents say that if the appellants’ argument were to be accepted, it would mean employers could never take any step that would dilute an actuarial surplus. For example, employers could not add additional plan members, nor could they take contribution holidays, and they say that that is not the law of Ontario.
[62] As to the appellants’ reliance upon Huus, supra, the respondents argue that the present case is readily distinguishable for three reasons. One, the ratio of Huus is the lack of procedural fairness, as is evident from the Court of Appeal’s decision. No allegation of lack of procedural fairness is made, or could reasonably be made, in the present case. The Superintendent received extensive submissions before consenting to the transfer. Two, in Huss, the applicants asserted their right to have the plan partially wound up, which would crystallize to surplus. Partial wind-up is not an issue in the present case. Three, in Huus the applicants established that the plan was a trust. In the present case, the appellants have never established this and moreover NSC disputes the existence of a trust.
Analysis
[63] In a defined benefit pension plan, the employer undertakes to pay certain pension benefits expressly set out in the plan. Usually, these benefits are calculated on the basis of a formula set out in the plan that is dependent on the member’s age and service. In contrast, it is the amount of contributions rather than the amount of benefits that is guaranteed or defined in a defined contribution pension plan. The pension benefits payable in a defined contribution plan are not guaranteed or defined, but are whatever pension benefits can be purchased with the contributions plus interest at the time of transfer, termination or retirement. This distinction was well described in Schmidt, supra.
[64] The distinction between a defined benefit and defined contribution pension plan is also apparent from the following definitions in the PBA:
“defined benefit” means a pension benefit other than a defined contribution benefit;
“defined contribution benefit” means a pension benefit determined with reference to and provided by contributions, and the interest on the contributions, paid by or for the credit of a member or determined on an individual account basis;
“pension benefits” means the aggregate monthly, annual or other periodic amounts payable to a member or former member during the lifetime of the member or former member, to which the member or former member will become entitled under the pension plan or to which any other person is entitled under the pension plan or to which any other person is entitled upon the death of a member or former member.
[65] The appellants’ argument that contributions made to the salary plan are an “other benefit” under s. 81(5) of the PBA imports a defined contribution concept into a defined benefit plan. It implies that the Salaried Plan members have some guarantee respecting the contributions, in addition to the guaranteed defined benefit. In our view, and we agree with the Superintendent, this concept is inconsistent with the very definition of a defined benefit pension plan. In reality, the appellants’ claim as to “other benefits” is really a claim to the actuarial surplus. Surplus is neither a pension benefit, nor an “other benefit” under the PBA. Until the right to surplus crystallizes - and the right to surplus does not crystallize upon a transfer of assets – the surplus is simply as expressed in Schmidt, supra, “the excess of the value of the assets of a pension fund related to a pension plan over the value of the liabilities under the pension plan.”
[66] The term “pension benefit” is defined in the PBA as meaning the aggregate monthly, annual or other periodic amounts payable to a member or former member, to which the member or former member will become entitled under the pension plan. The term “any other benefits” is not defined in the PBA. The only types of benefits that are defined are “bridging benefits” in s. 1 and “ancillary benefits” in s. 40. Neither of these benefits include pension fund surplus assets. Accordingly the term “other benefits” in s. 81(5) of the PBA can only mean benefits that are provided by a pension plan that are not pension benefits or ancillary benefits as these are defined in the PBA. For example, a pension plan might provide disability benefits or income replacement benefits. The intent of s. 81(5) is to ensure that such benefits are also protected on any plan merger. In other words, if the original pension plan provided disability benefits, then the successor merged plan should also so provide. If the appellants are correct that “other benefits” includes surplus, then an employer would be required to fund a pension fund to maintain the current level of actuarial surplus in the pension plan, a result which in our view is contrary to the specific funding regime set out in the PBA and regulations (see s. 55(1)).
[67] Section 81 of the PBA does not provide any right to a distribution of surplus to the members of the pension plan when their plan is merged with a successor plan. In fact, there is an express statement in s. 81(1) that the original pension plan is deemed not to be wound up and that the new plan is deemed to be a continuation of the original plan. Hence, any surplus that is transferred on a merger is not withdrawn, but remains in the plan. This, in our view, is consistent with the reasoning of the Supreme Court of Canada in Schmidt, supra, and indeed is consistent with the regime under the PBA. Surplus is not payable upon retirement or termination of employment or membership in a pension plan. While the plan is continuing, surplus may only be withdrawn from the plan upon the employer’s application and with the consent of all the members.
[68] Following the filing of the original material, the decision of the Ontario Court of Appeal in Aegon Canada Inc. v. ING Canada Inc. 2003 22441 (ON CA), [2003] O.J. No. 4755 (C.A.) was released, wherein Sharpe J.A. affirmed the trial judge’s decision denying an employer entitlement to cross-subsidize one pension plan using the assets of a plan in a surplus position for the benefit of a plan in a deficit position, where the corpus of plan and surplus was held for the exclusive use of its beneficiaries. The appellants argue that the decision in Aegon distinguishes Schmidt, supra, given that in Aegon, as opposed to Schmidt, only one of the two plans in issue was in a surplus position. Accordingly, they argue that because, as in Aegon, in the present case only one of the two plans in issue was in surplus, the decision in Schmidt is not binding on the case at bar.
[69] We agree with the Superintendent and indeed with the respondents’ position concerning the relevance of Aegon. Aegon turned on specific findings that a particular plan was subject to a trust and that the terms of the trust precluded a plan merger. Neither condition applies in the present case. In Aegon, the former Pension Commission of Ontario approved an asset transfer, but imposed a condition that the trust fund be kept segregated. In the present case, the Superintendent approved the asset transfer unconditionally, and this was unanimously confirmed by the Tribunal.
[70] In the case before us, we are not persuaded the appellants have established either that the salary plan was subject to a trust, or that the specific terms of any such trust (if indeed there was one) precludes the merger. To the contrary, at all material times, both merging plans expressly permitted a merger and the merger simply restored the unified plan that was originally established in 1952. Given that the facts in Aegon are significantly different from the facts in the present case, we are of the view that the reasoning of the Supreme Court of Canada in Schmidt ought to prevail over the reasoning of the Court of Appeal in Aegon.
[71] As we have stated, the appellants have failed to establish that the Salaried Plan assets were subject to a trust because none of the classic conditions of a trust were present at the material time, that is to say, prior to the 1972 Salaried Plan amendment. There is absolutely no reference to a trust, trust fund or a trustee in any plan documents created in 1966. The appellants’ attempt to draw significance from the alleged change in the wording of the annuity contract in 1964. In fact, the only change made in 1964 was that funding for the original plan was consolidated under a mutual life group annuity policy, which funded the original plan, in part, since the plan’s inception in 1952. The change in 1964 had nothing to do with any intention to create a trust. Any reliance upon pension plan booklets, including a booklet for the Salaried Plan dated January 1966, is without basis. The 1966 booklet contained a clear disclaimer that it was not a contract and that the terms of the plan text and the annuity contract would govern in the event of a conflict. Moreover, the appellants did not establish in evidence that they relied upon any booklet or were aware of its terms. As pointed out by the Superintendent, a fundamental problem with the appellants’ argument is that they attempt to rely upon isolated clauses from various documents created on various dates over a lengthy period of time in order to advance the trust argument. There is no such thing as an evolving intention to create a trust and, in our view, the plan documents fall well short of establishing the required certainty of intention to create the trust at any time prior to 1972.
[72] Even if the assets in question were subject to a trust, the term did not preclude the present merger. The appellants have relied extensively on the decision of Buschau v. Rogers Cable Systems Inc., 2001 BCCA 16, [2001] B.C.J. No. 50 (C.A.). It is important to examine the rationale of Buschau carefully. In that case, the British Columbia Court of Appeal did not hold that the specific terms of the trust preclude a merger, rather, in the specific circumstances of that case, where the fund subject to the trust was closed and the beneficiaries sought to obtain distribution of the trust funds under the rule of Saunders v. Vautier, the beneficiaries were entitled to segregation and an accounting of the assets to which they had established their beneficial entitlement. In other words, the merger proceeded, subject to this segregation and accounting. Buschau was the subject of recent comment by the British Columbia Court of Appeal in Bower v. Cominco Limited, [2003] B.C.J. No. 2293 (C.A.), which affirmed that where the terms of a pension plan in trust permit a merger, there is nothing in the general law of trust that prevents a merger of trust funds. This appears to be in line with the Ontario Court of Appeal in Heilig ,supra.
[73] In the present case, the Salaried Plan was not subject to a trust until 1994, and by then it had been validly amended in 1972 to provide that the employer was entitled to surplus. There is wholly insufficient language in the plan prior to 1994 to indicate that the plan was a trust or that there was any intention to create a trust. Prior to 1988, the words “trust” “trust fund” or “trustee” do not appear in any of the documents related to the Salaried Plan. In addition, the Court of Appeal recently held that plan language providing exclusive benefits to members and non-diversion of benefits from members, such as that in the Salaried Plan, is not in itself sufficient to create a trust. In the circumstances of that case, very similar to the Salaried Plan, the court held that this language does not constitute evidence of intention to create a trust, especially given that the pension plan in that case was funded through a deposit contract which provided that any excess funds belong to the employer (see Howitt v. Howden Group Canada Ltd., 1999 3703 (ON CA), [1999] O.J. No. 706 (C.A.).
DISPOSITION
[74] For all of the foregoing reasons, the appeal is dismissed.
COSTS
[75] Subject to any agreement between the parties, brief written submissions on costs are to be made within 20 days of the release of these reasons.
Cunningham A.C.J.
Kozak J.
Pitt J.
Released:
DIVISIONAL COURT FILE NO.: 416/02
DATE: 20041201
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CUNNINGHAM A.C.J., KOZAK and PITT JJ.
B E T W E E N:
T. STEWART BAXTER et al.
Appellants
(Applicants)
- and -
SUPERINTENDENT OF FINANCIAL SERVICES
Respondent in Appeal
(Respondent)
- and -
NATIONAL STEEL CAR
Respondent in Appeal
(Respondent)
- and -
MAURICE RIZON et al.
Respondents in Appeal
(Respondents)
REASONS FOR JUDGMENT
Cunningham A.C.J., Kozak and Pitt JJ.
Released: December 1, 2004