COURT FILE NO.: CV-12-9804-00CL
DATE: 20121031
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF AN APPLICATION UNDER RULE 14.05(3)(h) OF THE RULES OF CIVIL PROCEDURE
AND IN THE MATTER OF AN APPLICATION BY AMCOR PACKAGING CANADA, INC. WITH RESPECT TO THE RECTIFICATION OF THE PLAN TEXT OF THE AMCOR PACKAGING CANADA, INC. PENSION PLAN FOR HOURLY PAID EMPLOYEES
W. Ross MacDougall, for the Applicant
HEARD: October 30, 2012
Newbould J.
[1] This is an application by Amcor Packaging Canada, Inc. (“Amcor”) to rectify an amendment to its pension plan for hourly employees (Hourly Plan) to correct a mistake made in the course of drafting the amendment that was to be effective January 1, 2005. The equitable jurisdiction of the court is relied on for the relief sought.
[2] For the reasons that follow, the relief is granted.
Facts
[3] Amcor’s Hourly Plan is a non-contributory defined benefit registered pension plan for non-unionized employees paid on an hourly basis. Amcor also has a plan for non-unionized salaried employees (“Salaried Plan”).
[4] In restatements of the Hourly Plan and Salaried Plan effective January 1, 2005, the existing defined benefit component of both plans were closed to new hires. A new defined contribution component was added to each Plan for new hires. This was done in order to contain the costs of the defined benefit pension arrangements in all Amcor associated companies, on a world-wide basis.
[5] In mid-July 2003, Amcor’s parent company directed Amcor divisions worldwide to discontinue participation in defined benefit pension plans in order to minimize the long term financial risks arising out of unfunded pension liabilities. The directive instructed Amcor to develop viable alternatives to the existing defined benefit pension plans available to employees. In accordance with the direction from Amcor’s parent company, Amcor directed Avalon Actuarial Consulting Inc., Amcor’s actuary for the pension plans at that time, to conduct an analysis and develop acceptable alternatives.
[6] Avalon, with Amcor personnel’s input, designed a new defined contribution module to replace the defined benefit component in the two plans. The proposal referred to maintaining employer cash costs as unaltered for Plan funding and made no reference to increasing benefits to the members of the defined benefit component of either Plan. Amcor’s senior management discussed the impact of the Plan changes with respect to cash and expenses. None of the correspondence makes reference to any increase in benefits in the defined benefit component of the Hourly Plan.
[7] The 2005 Hourly Plan restatement and the 2005 Salaried Plan restatement were filed with the Financial Services Commission of Ontario and with Canada Revenue Agency. None of these documents reflected an intention to otherwise amend in any way the benefit formula in the existing defined benefit component of the Hourly Plan for any class members of the Hourly Plan.
[8] The 2005 Hourly Plan restatement contained a revision of section 12.03(a) of the prior version of the Hourly Plan. That revision had the unintended effect of providing an increase in benefits on early retirement to members of the Hourly Plan whose employment with Amcor or another participating employer in the Hourly Plan is terminated prior to age 55.
[9] Amcor became aware of the erroneous amendment through Mr. Andrew Lang, the client relationship manager for Amcor at Mercer (Canada) Limited, which by this time had replaced Avalon as Amcor’s actuary. Mercer had become aware of the erroneous amendment when determining benefit entitlements for the members who were affected by plant closures in Alberta and British Columbia. Following a diligent investigation of Amcor’s employees involved in the Plan restatements and amendments, it appears that none of the employees had any knowledge of the erroneous amendment or believed it to be intentional. Inquiries with Avalon revealed that Avalon personnel had no readily apparent knowledge of the reason for the inclusion of the erroneous amendment in the 2005 Hourly Plan restatement.
[10] Upon discovery of the erroneous amendment, Amcor conducted a thorough review of its records, including e-mails, memoranda, meeting notes and resolutions of its board of directors. No reference could be found to conferring an increase in benefits on early retirement to members of the Hourly Plan whose employment with Amcor is terminated before they reach 55. At no time was the erroneous amendment authorized by Amcor’s management or, to the knowledge of Amcor, even discussed.
[11] Historically, members of the Hourly and Salaried Plans who retired while in active service with Amcor received more generous treatment in the Plans versus those who first left employment with Amcor and then retired at some later time. The underlying rationale was to give a reward for remaining with Amcor, and an incentive to remain with Amcor until retirement. However, the effect of the erroneous amendment is to confer the pension payable to employees who leave the employment of Amcor and decide to commence their pension before age 65 on the same terms as if they had remained with Amcor and retired while in active service; that is, to remove the incentive for remaining with Amcor until retirement.
[12] Following the amendments of the Hourly Plan, Amcor administered the Hourly Plan consistent with its intention that no benefit be conferred to terminated vested members. This was reflected in: (a) plan booklets distributed to employees; (b) pension statements sent to plan members; (c) education sessions and materials disseminated to employees following the amendments; (d) determination of entitlements for terminated employees; and (e) valuation reports prepared for Amcor by Mercer for filing with the Financial Services Commission of Ontario.
[13] Following the 2005 Hourly Plan restatement all information communicated to plant managers, controllers and plan members expressly stated there are no changes to the existing defined benefit component. Terminations of employees who are members of the Hourly Plan have been administered in accordance with the 2005 Hourly Plan restatement since January 1, 2005 without taking into consideration the erroneous amendment.
Discussion
(a) Service on persons affected
[14] Following the commencing of this application for rectification, Amcor obtained an order for substituted service to serve the large number of members potentially affected by the application. Pursuant to the order, service of the application was made on any potential respondents by mailing notice to such individuals together with a letter from Amcor discussing its substance. No individual served has appeared to oppose the relief sought.
(b) Test for equitable relief
[15] The equitable remedy of rectification is available to relieve against mistake in a document. The basis for this remedy is the protection of an applicant, so that he or she is not prejudiced by the existence of a document, reliance upon which would, without rectification, be unconscionable. See Spry, The Principles of Equitable Remedies, 6th edition, at p. 607.
[16] In Council of the Wasauksing First Nation v. Wasausink Lands Inc. (2004), 2004 CanLII 15484 (ON CA), 43 B.L.R. (3d) 244 (Ont. C.A.), Laskin J.A. summarized the principles as follows:
- As relevant to the appellants' rectification claim, the following principles concerning equitable rectification emerge from the foregoing authorities. Rectification is available in the exercise of the court's discretion. Such discretion is not to be exercised lightly but, rather, only where it is demonstrated that, by mistake, a written document or instrument does not accord with or accurately reflect the agreement or arrangements intended by the parties. Rectification is not used to vary the intentions of the parties, or to speculate on the substance of those intentions; rather, it is designed to correct a mistake in carrying out the settled intentions of the parties as established by the evidence. As well, and importantly, rectification is not available to correct erroneous assumptions or beliefs as to what was intended; the remedy seeks to effect the actual intentions of the parties which, by mistake, were not accurately recorded.
[17] More generally, a superior court has equitable jurisdiction to relieve persons from the effect of their mistakes. See TCR Holding Corp. v. Ontario (2010), 64 B.L.R. (4th) 139 at para. 22; aff’d (2010), 2010 ONCA 233, 69 B.L.R. (4th) 175 (Ont. C.A.) involving rectification of an amalgamation agreement in which Macpherson J.A. stated:
- Broadly speaking, a superior court has "all the powers that are necessary to do justice between the parties": see 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 CanLII 535 (ON CA), [1972] 2 O.R. 280 (C.A.), at p. 282. More specifically, "superior courts have equitable jurisdiction to relieve persons from the effect of their mistakes": see 771225 Ontario Inc. v. Bramco Holdings Co. (1995), 1995 CanLII 745 (ON CA), 21 O.R. (3d) 739 (C.A.), at p. 741
[18] Unlike most cases dealing with rectification, this case does not deal with a contract between two or more persons. It deals with a declaration of trust, in this case an amendment to a pension trust agreement. It is clear from the 2005 Hourly Plan restatement that it is a unilateral trust document not negotiated with any employees. I do not see the fact that it is a unilateral document as being an impediment to the making of an order in a proper case for rectification or to the exercise of the equitable jurisdiction recognized in TCR, 80 Wellesley or Bramco. Equity should not be so constrained if the conditions for granting relief are present.
[19] This is not therefore a case of a contract in which the distinction between a common mistake and a unilateral mistake and the differing tests for rectification of each, as discussed in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678 by Binnie J., is applicable.
[20] In Amp (UK) Ltd. plc v. Barker, [2000] E.W.J. No. 7155, a pension scheme was amended to provide that earlier retiring employees caused by disability would receive enhanced benefits. Unfortunately, a mistake in the document meant that all early retiring employees, whether disabled or not, received this enhanced benefit. Lawrence Collins J. reviewed English authorities and concluded that the pension amendment could be corrected. He stated:
Where a document is executed under a mistake as to its effect, it may be set aside. This jurisdiction in relation to unilateral transactions also has a long pedigree: see Lady Hood of Avalon v Mackinnon [1909] 1 Ch. 476. In that case Lady Hood made an appointment in favour of her elder daughter, in order to place her in the same position as her younger daughter to whom she had already made large appointments. But in doing so she (and her solicitor) had forgotten that she had, several years before, made a large appointment to the elder daughter on her marriage. It was held that the appointment to the elder daughter would be rescinded because Lady Hood, intending only to bring about equality between her daughters, was labouring under a mistake, since the effect of the appointment "was to bring about that which Lady Hood never intended and never contemplated" (at 484).
The most notable modern authority is the decision of Millett J. in Gibbon v. Mitchell [1990] 1 WLR 1304. In this case Mr Gibbon executed a deed surrendering his life interest in a trust fund in order to vest the property in his two children: the deed did not have that effect because of two errors (one of which was ignoring the fact that his life interest was subject to protective trusts), with the result that the fund became subject to discretionary trusts for the remainder of his life and only then would it vest in his two children, and also in further as yet unborn children. It was held that this was a case, not for rectification, but for setting aside for mistake. Millett J said (at 1309):
"... wherever there is a voluntary transaction by which one party intends to confer bounty on another, the deed will be set aside if the court is satisfied that the disponor did not intend the transaction to have the effect that it did. It will be set aside for mistake whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained by entering into it."
- There is no reason in principle why this jurisdiction should be limited to voluntary settlements in the strict sense. As Millett J emphasised (at 1307) there is a wide equitable jurisdiction to relieve from the consequences of mistake, and I would have decided that this would have been an appropriate case for setting aside NPI's consent for mistake.
[21] This and similar U.K. authorities have been recognized in Canada as giving jurisdiction to remedy a mistake in a pension trust declaration by grating rectification. See Kraft Canada Inc. v. Pitsadiotis [2009] O.J. No. 885 at para. 23 per Lederman J.
(c) Standard of proof
[22] The leading authorities in Canada in dealing with rectification have held that “convincing proof” beyond that of a balance of probabilities is required. This was clearly stated by Binnie J. in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678 in which he stated:
The fourth hurdle is that all of the foregoing must be established by proof which this Court has variously described as "beyond reasonable doubt" (Ship M. F. Whalen, 1921 CanLII 57 (SCC), 63 S.C.R. 109, supra, at p. 127), or "evidence which leaves no 'fair and reasonable doubt'" (Hart, 1916 CanLII 631 (SCC), [1916] S.C.J. No. 84, supra, at p. 630), or "convincing proof" or "more than sufficient evidence" (Augdome Corp. v. Gray, 1974 CanLII 172 (SCC), [1975] 2 S.C.R. 354, at pp. 371-72). The modern approach, I think, is captured by the expression "convincing proof", i.e., proof that may fall well short of the criminal standard, but which goes beyond the sort of proof that only reluctantly and with hesitation scrapes over the low end of the civil "more probable than not" standard.
Some critics argue that anything more demanding than the ordinary civil standard of proof is unnecessary (e.g., Waddams, supra, at para. 343), but, again, the objective is to promote the utility of written agreements by closing the "floodgate" against marginal cases that dilute what are rightly seen to be demanding preconditions to rectification.
[23] This standard was accepted in Council of the Wasauksing First Nation v. Wasausink Lands Inc. supra. I expressed the view in TCR Holding Corp. v. Ontario (2010), 64 B.L.R. (4th) 139 that whether it remains good law today is questionable as a result of the decision in F.H. v. McDougall, [2008] 3 S.C.R. 413. In that case Rothstein J. canvassed at length the applicable standard of proof in a civil case and concluded that in civil cases there is only one standard of proof and that is proof on a balance of probabilities and that in all civil cases a trial judge must scrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred. In the course of his reasons Rothstein J. stated:
[40] Like the House of Lords, I think it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences. However, these considerations do not change the standard of proof.
[24] While I take the decision of Rothstein J. to be the controlling and binding authority in Canada as to the standard of proof, I will also consider the evidence in this case on the basis of that stated by Binnie J., i.e. whether the plaintiff established its case by convincing proof.
(d) Application of principles
[25] In my view it is clear from looking at the record on an objective basis that an unintended mistake was made in the amendment made by the 2005 restatement of the Hourly Plan. This is clear from the contemporaneous documents, the affidavit evidence and the way in which the Hourly Plan has been administered since the amendment was made. It would make no sense for Amcor to have intended, in amending the Hourly Plan to close the defined benefit module and to provide a defined contribution module to new hires, to provide the same pension benefits to early retiring hourly employees as for those employees who remained with Amcor and retired while in active service. I am satisfied Amcor had no such intention.
[26] While the pension plan and its amendments can be considered to have been unilaterally provided by Amcor, I agree with the comments of Lawrence Collins J. in Amp (UK) Ltd. plc v. Barker that the pension is not a gift from the company as the employees have worked for the right to a pension. I further agree with him, however, that the employees could not be considered to have given any consideration for the benefits caused by the mistake in drafting the amendment to the pension plan as “they gave no additional consideration for the “rights” which the rule changes mistakenly conferred on them.”
[27] There is no issue here of any hourly employee having relied on the mistaken language of the 2005 Hourly Plan restatement. None of the documentation sent to employees since then ever reflected the mistaken aspect of the change. Rather, all materials disseminated following the 2005 restatement reflected the intentions of Amcor and in no way referenced the erroneous amendment. Thus there can be no issue of estoppel or laches defeating the relief sought.
Conclusion
[28] Amcor is entitled to have the mistake in the 2005 Hourly Plan restatement rectified, and an order shall go accordingly.
Newbould J.
Released: October 31, 2012
COURT FILE NO.: CV-12-9804-00CL
DATE: 20121031
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
B E T W E E N:
IN THE MATTER OF AN APPLICATION UNDER RULE 14.05(3)(h) OF THE RULES OF CIVIL PROCEDURE
AND IN THE MATTER OF AN APPLICATION BY AMCOR PACKAGING CANADA, INC. WITH RESPECT TO THE RECTIFICATION OF THE PLAN TEXT OF THE AMCOR PACKAGING CANADA, INC. PENSION PLAN FOR HOURLY PAID EMPLOYEES
REASONS FOR JUDGMENT
Newbould J.
Released: October 31, 2012