BARRIE

COURT FILE NO.: CV-12-1172

DATE: 20130107

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SCOTT FORBES

Applicant

– and –

CANADIAN TIRE CORPORATION LIMITED

Respondent

P. Krysiak, for the Applicant

J. Blackburn and R. Hargovan, for the Respondent

HEARD: December 21, 2012

REASONS FOR DECISION

DiTOMASO J.

THE APPLICATION

THE APPLICATION

1The Applicant Scott Forbes (“Mr. Forbes”) seeks an order directing the Trustees of Canadian Tire Corporation Limited, Deferred Profit Sharing Plan, to pay Mr. Forbes the amount of $150,000 net of income taxes withheld from his Deferred Profit Sharing Plan account (“the Plan”). Canadian Tire Corporation Limited (“CTC”) is opposed to the Application on the grounds that Mr. Forbes is not eligible to receive payment pursuant to the terms of the Plan.

OVERVIEW

OVERVIEW

2Mr. Forbes is an employee of CTC and a participant in the Plan.

3As of the date of the Application, Mr. Forbes’ Plan had a value in excess of $259,490.87.

4Mr. Forbes asserted that he was experiencing severe financial distress whereby he could no longer purchase daily living necessities and could no longer pay his debt obligations as they became due. He was cross-examined on his Affidavit. This is in dispute.

5On an urgent basis, Mr. Forbes requested that a portion of the funds in his Plan be paid to him in the amount of $150,000 so that he could purchase daily living necessities and to pay his creditors. Mr. Forbes submits the Plan allows for trust funds to be paid to Mr. Forbes pursuant to a valid Court Order.

6CTC submits that the Plan constitutes a retirement fund for employees of CTC. It is akin to a pension plan. The Trustee of the Plan is circumscribed by the Trust Deed which provides very limited circumstances in which Plan participants can make a pre-retirement withdrawal. Mr. Forbes does not meet those criteria. The Trust Deed does not provide the Trustee with general discretionary power to pay funds from the Plan. If the Court were to conclude that the Trustee had discretion under the Trust Deed to pay out funds, the Trustee has decided not to make any such payment to Mr. Forbes. In these circumstances, CTC submits that the Court should not interfere with the exercise of any purported discretion on the part of the Trustee.

7To the contrary, Mr. Forbes submits that the court has discretion to order payment out of the Plan to him and seeks that the Court exercise its discretion in his favour ordering a payment to him in the amount of $150,000 from the Plan.

ISSUES

ISSUES

8There are three issues to be determined on this Application:

(a) whether CTC is the proper Respondent and whether an order made against CTC would be effective to cause a payout of funds from the Plan?

(b) even if CTC is the proper Respondent, do the terms of the Trust Deed provide for payment to Mr. Forbes in the present circumstances?

(c) even if CTC is the proper Respondent and the Court determines that there is a proper legal basis for payment to be paid out of the Plan, is the evidence of Mr. Forbes sufficient to establish a case of hardship?

POSITIONS OF THE PARTIES

POSITIONS OF THE PARTIES

Position of the Applicant Forbes

Position of the Applicant Forbes

9Mr. Forbes submits that he is experiencing severe financial distress and requires a payment of a portion of the funds in his CTC Plan in the amount of $150,000 to purchase daily living expenses and to pay his creditors. He submits that the Plan allows for the trust funds to be distributed to him pursuant to a valid Court Order. He further submits that this Court should exercise its discretion to make such an Order in his favour.

Position of the Respondent CTC

Position of the Respondent CTC

10CTC submits that it is not the proper Respondent and that no Order made against CTC would be effective to cause a payout of funds from the Plan. Although CTC is named as the sole Respondent, CTC is not the Trustee that legally administers the Plan. Therefore, it is submitted that any Order which a Court may make against CTC would not be sufficient to permit the payment of money out of the Plan. Only an Order made against the Trustee would be effective to provide the relief that Mr. Forbes seeks. In this case, the Trustee is not a party and has received no notice of this Application.

11In addition, CTC submits that the terms of the Trust Deed do not give Mr. Forbes a right to payment. He does not qualify for a payment under the pre-retirement withdrawal provisions of the Trust Deed. Neither is he eligible under the more commonly used retirement, death and disability payment provisions of the Deed.

12Although Mr. Forbes relies upon Article 7.12 of the Trust Deed, CTC submits that such provision does not create a separate stand-alone power to pay out funds under any circumstances that the Trustee deems appropriate. It merely permits (but does not mandate) the Trustee, if faced with a Court Order directing payment, to make such payment without incurring potential liability for breach of trust. This provision does not grant general discretionary power to the Trustee to pay out funds from the Plan because that section is subject to a Court Order.

13If the Court were to conclude that the Trustee has a discretion under Article 7.12 to pay out funds, the Trustee has not decided to make any payment and the Court should not interfere with the exercise of any purported discretion on the part of the Trustee.

14Lastly, CTC submits that the Application can be dismissed based upon either of the two principle submissions noted above. However, if the Court decides that CTC is the proper Respondent and either (a) the Trust Deed permits payment to Forbes in these circumstances or (b) the Trustee had a discretion and failed to appropriately exercise it, this Application should still fail based on the lack of compelling evidence filed by Mr. Forbes that he is in financial need.

ANALYSIS

ANALYSIS

15CTC is a general and sporting goods retailer with numerous retail and gasoline outlets across Canada.

16Mr. Forbes is a vehicle comptroller in the supply chain division who works at a CTC transportation facility in Brampton, Ontario. Mr. Forbes is a fulltime employee and has worked at CTC since October 3, 1983. He is 47 years of age.

CTC’S Preferred Profit Sharing Plan (“The Plan”)

CTC’S Preferred Profit Sharing Plan (“The Plan”)

17It is important to understand the nature, structure and operation of the Plan. The Plan is registered as a deferred profit sharing plan pursuant to section 147 of the Income Tax Act R.S.C., 1985, c.1(5th supp.) The Plan rewards employees and officers of CTC and certain subsidiaries and encourages them to participate in the Company’s growth, development and success over time. The Plan constitutes a retirement fund for employees of CTC.

18The Plan was established under a Trust Deed dated January 1, 1968, amended and restated as of January 1, 2001 and thereafter further amended (“the Trust Deed”) on October 4, 2012. CTC approved further amendments to the Trust Deed which took effect as of December 14, 2012. On October 12, 2012 the Trustees of the Plan at that time approved the same amendments. The Plan as amended can be found in the Responding Application Record as Exhibits to the Affidavit of Eleni Damianakis. The most recent amendment and restated Trust Deed dated December 14, 2012 can be found at Exhibit E. Ms. Damianakis was not cross-examined on her Affidavit.

19Sun Life Financial Trust Inc. (“the Trustee”) was appointed as the sole institutional trustee of the Plan effective immediately following the amendment of the Plan on December 14, 2012 and currently serves in this capacity.

20The Damianakis Affidavit describes at paragraph 14 how certain CTC employees serve as members of CTC’s Capital Accumulation Plan Committee (“the CAP Committee”). This Committee oversees CTC’s Capital Accumulation Plans including the Deferred Profit Sharing Plan. The CAP Committee acts only in an advisory capacity and not as a decision making capacity for decisions related to the Plan. Apart from establishing the terms of the Plan and appointing the Trustee, the CAP Committee and two of the three members of the Plan CAP Committee, CTC has no direct control over the administration of the Plan or the decision of whether or not to pay money to beneficiaries such as Mr. Forbes. The Plan and its assets are controlled by the Trustee, subject to the direction of the DPSP CAP Committee for most decisions.

21The Damianakis Affidavit at paragraph 17 further describes how each year CTC makes a payment to the Trustee equal to at least one percent of the Company’s previous year’s net profits after income tax. CTC designates the amount to be allocated to each of the employees and officers participating in the Plan. Within the Plan, a minimum of ten percent of a base amount allocated to each employee or officer is invested in a CTC Share Fund (“the Share Fund”) the balance invested as directed by each participant.

22Further, the money and securities held in connection with the Plan (the “Plan Property”) are transferred on a regular basis by the Trustee to Sun Life Assurance Company of Canada (“Sun Life”). In turn, Sun Life has issued a Group Annuity Policy providing for substantially the same benefits to participants as would have been the case if the transfers had not taken place. The Plan property is divided into units and each participant is allocated a number of units based on the value of the contributions made on his or her behalf by CTC (“Participant Holdings”). A portion of the Plan property consists of the units in the Share Fund, with the balance of the Plan property invested in the manner elected by participants from a variety of funds managed by a number of fund managers. After two full years of employment, all of the units held for Plan participants vest.

23When participants turn 71, they receive the net asset value of all units that have been allocated to them. Participants who (i) die, (ii) retire after they turn 65, or (iii) leave their job because they have a permanent physical or mental disability or in certain circumstances because their job is eliminated, are entitled to (a) receive an amount equal to the net asset value of all units that have been allocated to them, (b) direct the transfer of this amount to certain registered plans, or (c) purchase an annuity with this amount, whether or not the units have vested. (see Damianakis Affidavit at para. 19)

24If, however, participants leave their job due to other circumstances, including resignation or termination of their employment with or without cause, they will receive (or can direct payment of) the net asset value of only those units which are held for them and which have vested.

Limited Terms on which The Plan Participants can make a Pre-Retirement Withdrawal

Limited Terms on which The Plan Participants can make a Pre-Retirement Withdrawal

25The Plan permits participants to withdraw funds before they turn 65 in certain limited circumstances (“Pre-Retirement Withdrawal”). In order to be eligible under the Pre-Retirement Withdrawal provisions of the Trust Deed, a participant’s Plan holdings must have a market value greater than would be required to provide the participant annual salary payments for a period of 20 years after the participant attains age 65.

26Article 7.6 of the Trust Deed, which governs Pre-Retirement Withdrawal, provides:

Prior to attaining age 65, a Participant may exercise pre-retirement withdrawal rights in accordance with the provisions of Schedule A hereto on such terms as are approved by CTC from time to time.

(see Damianakis Affidavit paras. 21 and 28 and Exhibit E Responding Record, Tab E at page 104)

27Schedule A of the Trust Deed provides the method for calculating how much, if anything, a Plan participant is entitled to withdraw from the Plan pursuant to Article 7.6 (“Schedule A Calculations”). Specifically, Schedule A outlines methods for calculating:

(a) the amount of present day holdings in the Plan required to ensure that the participant could receive payments from the Plan in an amount equivalent to his/her salary for 20 years after age 65 (“Salary Value”) and,

(b) the current market asset value of the participant’s plan holdings (“Asset Value”).

28Schedule A of the Trust Deed also specifies that the amount by which the Asset Value exceeds the Salary Value determines the total excess holdings which may be withdrawn from the Plan prior to retirement (“Excess Amount”). The Excess Amount may be withdrawn over a period of one to seven years (“Withdrawal Period”). The further the participant is from age 65 (i.e., the younger the participant is), the less the participant will be able to withdraw per year (“Withdrawal Amount”). If more than one year’s worth of Excess Amount is withdrawn, the participant is not eligible to make another withdrawal under after the end of the Withdrawal Period.¹

29Beyond the Pre-Retirement Withdrawal provisions, the Trustee is entitled to distribute Plan Property under a valid court order pursuant to Article 7.12 (formerly Article 7.10) of the Trust Deed. The provision reads as follows:

Notwithstanding any other term of this Trust Deed, the Trustees shall be entitled to distribute Trust Property on behalf of a Participant pursuant to the terms of a decree, an order or a judgment of a competent tribunal.²

30In past practice, Article 7.12 has provided authority to the Trustees of the Plan to disburse Plan Property under court orders obtained where the payment of funds out of the Plan had been ancillary to other legal proceedings which determine entitlement to property. Such disbursements have occurred upon the division of net family property in cases of marital breakdown. In these situations, a spouse of a Plan participant has asserted a claim to some or all of the assets held in trust for the Plan participant and a court has directed that such assets be paid out of the Plan as part of the overall transfers of property provided for in family law proceedings.³

31Neither the past Trustees of the Plan, or CTC have been party to or have been required to appear at a hearing regarding the release of funds from the Plan. In other words, such court orders have been obtained without past Trustees or CTC having had any opportunity to make submissions about whether funds should be paid out of the Plan. The past Trustees were simply third parties which were affected by an order made without notice to them. In a limited number of cases, however, CTC has commented on what wording should sufficiently describe the amount of funds to be paid out of the Plan on a marital breakdown (i.e. whether or not the amount of funds sought is before or after tax).⁴

The Case of Scott Forbes

The Case of Scott Forbes

32Prior to June 2012, Mr. Forbes enquired about withdrawing some of his Participant Holdings from the Plan. CTC maintains that Mr. Forbes did not quality to receive payment under the Pre-Retirement Withdrawal provisions or any other terms of the Trust Deed.

33As at May 31, 2012, Mr. Forbes had a Salary Value of $296,057.75 and an Asset Value of $254,634.27. I accept the evidence of CTC that because the Asset Value was lower than the Salary Value, Mr. Forbes had an Excess Amount of $0 and was ineligible for a Pre-Retirement Withdrawal. I further find that even as of the date of the Application, Mr. Forbes remained ineligible for a Pre-Retirement Withdrawal. As at November 30, 2012, Mr. Forbes had a Salary Value of $354,161.04 and an Asset Value of $269,268.14. His excess amount was still zero.

34Mr. Forbes in June of 2012 contacted CTC Consultants to find out what requirements were necessary to seek a payment from the Plan under a Court Order.

35In August of 2012, at the request of Mr. Forbes, he was provided with a letter confirming his participation in the Plan and summarizing the limited circumstances under which a withdrawal of Participant Holdings could occur. The letter further confirmed that Mr. Forbes did not qualify to receive payment under any of the provisions of the Trust Deed.

36I would dismiss Mr. Forbes’ application for the following reasons.

(a) Whether CTC is the proper Respondent and whether no order made against Canadian Tire or CTC would be effective to cause a payout of funds from the Plan?

(a) Whether CTC is the proper Respondent and whether no order made against Canadian Tire or CTC would be effective to cause a payout of funds from the Plan?

37I find that although the Application has named CTC as the sole Respondent, the Trustee legally administers the Plan. Further, any Order which a Court may make against CTC would not be sufficient to permit the payment of money out of the Plan. Only an Order made against the Trustee would be effective to provide the relief that Mr. Forbes seeks. The Trustee is not a party and has received no notice of this Application. I determine this issue in favour of CTC.

(b) Even if CTC is the proper Respondent, do the terms of the Trust Deed provide for payment to Mr. Forbes in the present circumstances?

(b) Even if CTC is the proper Respondent, do the terms of the Trust Deed provide for payment to Mr. Forbes in the present circumstances?

38In respect of the second issue, I find that Mr. Forbes does not qualify for Pre-Retirement Withdrawal. In addition, even if the Trustee has discretion to pay monies out of the fund in circumstances other than those provided in the Trust Deed, this Court should not interfere with the Trustee’s decision not to exercise such discretion.

39Assuming that CTC is the proper Respondent, this Application still fails because under the terms of the Trust Deed, Mr. Forbes is not entitled to payment. Not only is Mr. Forbes not entitled to payment under the Pre-Retirement Withdrawal provisions of the Trust Deed, he is also not eligible under the more commonly used retirement, death, and disability payment provisions of the Trust Deed. The terms of the Trust Deed do not give Mr. Forbes a right to payment of $150,000.

40Mr. Forbes relies on current Article 7.12 of the Trust Deed which states as follows:

Notwithstanding any other term of this Trust Deed, the Trustees shall be entitled to distribute Trust Property on behalf of a Participant pursuant to the terms of a decree, an order or a judgment of a competent tribunal.

41It is submitted on behalf of Mr. Forbes that this provision provides the Trustee with the discretion to distribute Trust Property on behalf of the participant pursuant to a Court Order. It is further submitted that the Court has the ultimate discretion pursuant to this provision to order payment, especially in the circumstances advanced by Mr. Forbes where he seeks payment on an equitable basis.

42I find that Article 7.12 of the Trust Deed does not create a separate stand-alone power to pay out funds under any circumstances the Trustee deems appropriate. It permits the Trustee, if faced with a Court Order directing payment, to make such a payment without incurring potential liability for breach of trust. The Trustee does not have broad ranging discretionary powers to make payments to Plan participants. To the contrary, the Trust Deed constrains the Trustee in limited and specific circumstances to pay monies out to the Plan participants. In the past, circumstances have arisen where Court Orders have been made in respect of the Plan without notice to the Plan or CTC. Past Trustees of the Plan have decided to allow payment in those circumstances because they were ordered to do so. Article 7.12 of the Trust Deed is not a catch-all or basket provision otherwise giving the Trustee discretion where the Trust Deed clearly dictates what the Trustee can or cannot do.

43I find that Article 7.12 does not grant a general discretionary power to the Trustee to pay out funds from the Plan. Article 7.12 specifically speaks to the payment out only pursuant to the terms of a Court Order.

44CTC submits that even if the Court were to conclude that the Trustee has a discretion under Article 7.12 to pay out funds, the Trustee has not decided to make any payment. The Court should not interfere with the exercise of any purported discretion on the part of the Trustee.

45Ontario courts have steadfastly refused to interfere with a Trustee’s discretion except in limited circumstances. The Ontario Superior Court of Justice considered and refused to interfere with the discretionary power of a Trustee to vary terms of a Trust in Edell v. Sitzer (2001), 2001 27989 (ON SC), 55 O.R. (3d) 198 (SCJ). Also cited in Edell at para. 159 is the case of Fox Estate (1996), 1996 779 (ON CA), 28 O.R. (3d) 496 (C.A.).

46The cases stand for the proposition that Trustees must act in good faith and be fair as between beneficiaries in the exercise of their powers. Further, the Court should not interfere with the good faith exercise of discretion by a Trustee unless (a) the Trustee has achieved an outcome unauthorized by the power conferred upon him or (b) it is clear that the Trustee would not have acted as he did (i) had he not taken into account considerations which he should not have taken into account, or (ii) had he not failed to take into account considerations which he ought to have taken into account.⁵

47Given the facts of this Application, there is no basis to support the Court interfering with the discretionary decision of the Trustee. There is no allegation and no evidence that the Trustee or its predecessors lack good faith or possessed mala fides. Quite to the contrary, I accept the submission on behalf of CTC that the past Trustees of the Plan have conducted themselves with the utmost regard for their duties to the Plan and to the Plan participants under the Trust Deed.

48I have found that the provisions of the Trust Deed do not provide for payment to Mr. Forbes in the present circumstances. However, even if the Trustee had some discretion in this circumstance (which I have found the Trustee did not) there is no basis for Mr. Forbes to attack the Trustee’s failure to make payment. I find that the Trustee’s position not to make payment to Mr. Forbes from the Plan is consistent with the Trust Deed. There is no evidence that past Trustees of the Plan either took improper considerations into account or failed to take into account proper considerations.

49In respect of the second issue, I find in favour of CTC. The Trustee has no discretion to make payments to Plan participants such as Mr. Forbes in these circumstances. Mr. Forbes does not qualify for Pre-Retirement Withdrawal. His Asset Value is lower than his Salary Value as specified by Schedule A of the Trust Deed. His excess amount is zero which makes him ineligible for Pre-Retirement Withdrawal. Further, there is no basis upon which this Court should interfere with the Trustee’s decision not to pay Mr. Forbes the sum of $150,000 as requested by him.

(c) Even if CTC is the proper Respondent and the Court determines that there is a proper legal basis for payment to be paid out of the Plan, is the evidence of Mr. Forbes sufficient to establish a case of hardship?

(c) Even if CTC is the proper Respondent and the Court determines that there is a proper legal basis for payment to be paid out of the Plan, is the evidence of Mr. Forbes sufficient to establish a case of hardship?

50There is a dispute as to whether or not Mr. Forbes has provided adequate financial disclosure to the Court supporting his position that he is in dire financial straits and requires the payment of $150,000. Mr. Forbes was cross-examined on his Affidavit with the result that a number of his claims were undermined. Regardless, assuming but not deciding that Mr. Forbes is in dire financial straits, this Court is still not persuaded that Mr. Forbes’ financial situation entitles him to payment of $150,000 from the Plan.

51It is clear from an examination of the Trust Deed and the workings of the Plan that the Plan constitutes a retirement fund for employees of CTC. It is akin to a pension plan. It is not like a bank account where a participant can withdraw on demand any amount at any time. Rather, under the terms of the Trust Deed, Plan participants only have a right to withdraw funds before retirement in a very specific and limited circumstances. Mr. Forbes did not meet those criteria.

52It was submitted on behalf of Mr. Forbes that in previous circumstances such as in the Hall v. Hall family law case, the Courts have in the past ordered payment out of the Plan. The Hall case is not analogous to the case at bar. The Order relied upon by Mr. Forbes can be found in his Supplementary Affidavit at Tab 7 and in the Responding Application Record at p.86. The Order relied upon is a consent order in a family law matter directing the Trustees of CTC, Deferred Profit Sharing Plan to pay $70,000 net of income taxes withheld from the Plan to Mr. Hall. The circumstances in Hall are not analogous to the facts of this case. There is no Order on consent compelling the Trustee of the Plan to pay any monies to Mr. Forbes. Quite to the contrary, this Application is opposed, fully argued by the parties and the subject of this decision. This is not a situation analogous to past circumstances where funds have been paid out pursuant to a consent Court Order in a family law proceeding.

53Lastly, even if it is assumed but not decided that Mr. Forbes is in dire financial straits, his personal circumstances do not override the clear terms of the Trust Deed which does not provide for payment of funds to Mr. Forbes on the facts of this case.

54In respect of the third issue, I also find in favour of CTC that there is no proper legal basis for monies to be paid out of the Plan assuming that Mr. Forbes was able to establish a case of hardship.

CONCLUSION

CONCLUSION

55For these reasons, I dismiss this Application. Because the Application raises novel issues, neither side seeks costs. Accordingly, the Application is dismissed without costs.

DiTOMASO J.

Released: January 7, 2013

Footnotes

1. 1Damianakis Affidavit at para. 23
2. 2Damianakis Affidavit at paras. 24 and 31
3. 3Damianakis Affidavit at para. 25
4. 4Damianakis Affidavit at para. 26
5. 5Edell v. Sitzer (supra) at para. 159, aff’d (2004) 2004 654 (ON CA), 187 O.A.C. 189; Fox v. Fox Estate, (supra) at p. 5 (Q.L.)