COURT FILE NO.: 08-004/12
DATE: 20131016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1271655 ONTARIO INC. (formerly known as JEMPAK CANADA INC.),
Applicant
– and –
ROYAL TRUST CORPORATION OF CANADA (as trustee of the Supplementary Retirement Plan Trust Fund of JEMPAK CANADA INC.), Respondent
Respondent
Bonnie Roberts Jones, Counsel the Applicant
Dana M. Peebles and
Shanique M. Lake, Co-Counsel for the Respondent
Iqbaal Ahmad Khan, A Pensioner and Member of the Retirement Plan, in person
Kuying It Park, in person, Widow of Maracuz Moonkyu Park, a Deceased Pensioner
HEARD: SEPTEMBER 12, 2013
ENDORSEMENT: GREER J.:
[1] The Applicant, 1271655 Ontario Inc., (formerly Jempak Canada Inc.) (“the Company”), makes application for various forms of declaratory relief and substantive relief with respect to pension funds being administered by Royal Trust Corporation of Canada, (“the Trustee”), in its capacity as the Trustee of the Supplementary Retirement Plan trust fund (“the Trust Fund”) of Jempak Canada Inc.
[2] The major substantive relief being requested by the Company is to have the Court order that the net assets of the Trust fund being administered by the Trustee be distributed to it.
[3] The Trustee has refused, on a number of occasions, on written requests by the Company, to distribute the Trust Fund to it. The Company then, by Application, requested an Order to terminate the Trust Fund. The Trustee does not oppose the Application but refuses to consent to such an Order.
[4] The two issues for the Court to decide in this Application are:
A. Are any of the participants listed on Schedule “A” to the retirement compensation agreement entitled to any further payments from the Trust Fund?
B. If the answer to A. is “no”, should the balance of the Trust Fund be paid to JemPak?
Some background facts
[5] In December of 1997, Jempak Canada Inc. (“Jempak”), purchased assets from Witco Canada Inc. Employees from Witco eventually came over from Witco in 1999 to work at JemPak. They are known as the “Transferred Employees”. While working at Witco, these employees had participated in its defined benefit pension plan. Once they were at Jempak, they had a choice to either begin participation in its defined contribution pension plan or remain in Witco’s defined benefit pension plan.
[6] A scheme was devised by JemPak through an “Arrangement” developed by Mercer Human Resources Consulting Inc., to create a reserve fund to be used to pay a Transferred Employee on his or her termination or retirement from JemPak, if he or she qualified under its terms. The difference, if any between what the Transferred Employee would have received under the Witco plan and what he or she would now receive from the JemPak Plan, would be taken into account on any payment made out of that Fund.
[7] In order to ensure that the Transferred Employees would not be adversely affected by the transfer, JemPak entered into a retirement compensation arrangement (“RCA”) trust agreement with Royal Trust Corporation of Canada (“the Trustee”) dated December 29. 1998. A list of 20 participants with potential entitlement was drawn up and that list was attached as an appendix to the RCA.
[8] On or about December 30, 1998, JemPak contributed $203,709.50 to the Trust Fund, which was set up to be administered by the Trustee, as part of the Arrangement. An identical amount was remitted to the Canada Revenue Agency (“CRA”) as a refundable tax. As of December 2011, CRA sent a notice that it held $241,816.40 in respect of refundable tax pursuant to the RCA.
[9] JemPak says it informed all employees of their entitlement under the CRA and assured that it would not adversely affect their pension entitlements. In a letter dated May 27, 1999, Jempak informed each Transferred Employee “…that, upon their retirement or termination of their employment, the balance in their account under the JemPak Plan plus the value of any pension payable under the Witco Plan would be compared to the value of the pension the Transferred Employee would have earned had they continued to participate in the defined benefit component of the Witco Plan.”
[10] Prior to this taking place, Witco had actuaries determine the amount of “top-up” that would be required to ensure that the Transferred Employees’ pension entitlements would be adversely affected by the transfer. The calculation of the “top-up” amounted to approximately a total of $250,000 for the Transferred Employees collectively. Witco decided to provide proportionate shares of this top-up for each of the Transferred Employees by augmenting the values transferred from the Witco Plan to the JemPak Plan. Each Transferred Employee signed a release to permit the transfer of their topped-up benefits to the JemPak Plan.
[11] Around August, 2002, the JemPak Plan was converted into Registered Retirement Savings Plans that were to be managed under the individual direction of each such employee. The Company says that at this point, “JemPak lost control over the comparison between the employees’ entitlements under the Witco Plan and the JemPak plan.”
[12] By 2005, all of the Transferred Employees were either retired or were terminated by Jempak. After that date, JemPak had no employees and it had ceased commercial activities. It retained its corporate status through the Company and the Trust Fund remained intact.
The Company’s Position
[13] The Company says that there was no need for JemPak to establish the Trust Fund at all since Witco had already “topped-up” the Transferred Employees pensions before they transferred employment to JemPak. It says that none these Transferred Employees would need access to the Trust Fund monies. It further says that none of the Transferred Employees, when they retired or their employment was terminated, contested their pension entitlement upon leaving JemPak.
[14] The Company says, “”the Trust Fund no longer serves any useful purposes. The rainy day never came.” Therefore, their position is the Trust Fund should be wound up and the remaining assets of the Trust Fund can be returned to “JemPak”, which is now part of the Company.
[15] The Company admits that with the passage of time, there is a lack of documentation relating to some of the events material to this Application. With respect to the RCA made between JemPak and Witco, it points to one paragraph of it as follows:
Payment out of the Trust Fund—[…] After all payments required to be made to the all [sic] of the Participants…have been made or provided for and no Participant shall be entitled to receive further payments from the Trust Fund, the balance of the Trust Fund shall be promptly be [sic] paid to the Company.
[16] The Company says that the Transferred Employees were informed by way of a letter from JemPak dated May 27, 1999, that the Trust Fund was intended to be a vehicle for parking funds to keep them whole upon their termination or retirement. The Company says that none have responded to that letter.
[17] The Company says that since JemPak did not create a supplementary pension plan document for the Transferred Employees, it is indicative “of the fact that the Arrangement was somewhat tentative or ill-defined.” It further says that the Arrangement was “abandoned” because Witco had already “topped up” the Transferred Employees’ pension entitlements before the Transferred Employees pensions were transferred to the JemPak Plan.
[18] The Company says that the set up of the RRSP’s as noted for some Transferred Employees, “JemPak ceased to have any control over the sufficiency of the amounts in the employees’ plans, and was unable to perform any further comparisons.” It maintains that at that point, the Trust Fund became “orphaned” from the rest of the Transferred Employees’ pension entitlements.
The Position of the Trustee
[19] The Trustee has received a number of letters from the Company over the years asking that the Trust Funds be paid out to it. The Trustee refused to do so, it says, because the Company failed to provide sufficient evidence to prove that assertion. Because of this, the Company brought on the Application.
[20] The Application was originally set to be heard in May 2013 before Mr. Justice McEwen. It was adjourned because the parties were recently served with an affidavit from Iqbaal Khan, (“Khan”), one of the Transferred Employees. He appeared that day and asked that the matter proceed. Since his affidavit raised serious questions as to whether the Company was entitled to the relief sought, the Judge adjourned it. He ordered the parties to have their actuaries to make certain determinations. He ordered Khan to provide copies of his tax returns between 1999-2007, within 15 days of the Order. He was also to use his best effort to provide his tax return for 2008 as soon as possible.
[21] When JemPak retained Royal Trust Corporation to act as the Trustee of the Trust Fund, there were 20 eligible employees transferring from Witco to JemPak. The Trust Agreement, entered into by JemPak and the Trustee, says in part:
(a) Royal Trust must administer the Trust Fund “in the manner and for the purposes provided in [the] Trust Agreement”;
(b) Royal Trust cannot use the Trust Fund for “purposes other than those provided for under the terms of [the] Trust Agreement:’ and
(c) Royal Trust may require JemPak “to submit to it any information, data, reports or documents reasonably relevant to and suitable for the purposes of administering the Trust Fund”.
The commuted value of the Trust Fund, in or around 1998, as valued by JemPak’s actuaries, was in the range of up to $407,418. In December of 1998, as already noted herein, JemPak deposited the $203,709.50 in the Trust Fund. The Trustee has administered the Trust Fund since that date with no further contributions being made to it.
[22] Under the terms of S.5.02 of the Trust Agreement, the request by JemPak for payment of the funds out to it requires the written consent of all the Participants in the plan or a determination by the Trustee that all Participants have received all payments to which they are due under the retirement plan.
[23] The Trustee says that JemPak has never contacted the Participants in the fashion set out in the Trust Agreement. The Trustee now knows that Witco made the “top-up” of $250,000 to the pension benefits of the Participants, prior to the transfer of their assets to the JemPak Plan. It is for this reason that JemPak denies that it ever owed a financial obligation to the Participants.
[24] On April 19, 2012, the Trustee wrote to JemPak’s solicitors, stating that it had received no evidence or documentation from JemPak’s own records or from Witco or Mercer (the actuaries) or Buck Consultants or the Participants or any other source to even prove the “top-up” was made “… or if any contributed as is said was made, it eliminated the commitment made by JemPak to compensate every Participant for any shortfall at termination of their employment.” In these circumstances, the Trustee says it could not consent to the transfer of the Trust Fund to the Company.
[25] The Trustee then began to try to trace the whereabouts of the 20 participants. Eleven of those contacted the Trustee. They were each advised that they were entitled to attend and make submissions regarding entitlement to any portion of the Trust Fund, with evidence to support. Ten were served with the Application Record. The Trustee says that three contacted it but none were able to provide any specific information about the existence or quantum of the “top-up” described by JemPak.
[26] The Trustee says it was concerned at the first hearing of the Application that there was no contemporaneous evidence of the top-up. There no evidence as to whether any shortfall occurred despite the top-up. Therefore, it could take no position beyond its refusal to consent to JemPak’s request for disbursement of the entire Trust Fund.
[27] Since that adjournment, Khan has provided new evidence which the Trustee says “appears to prove that whether there was a top-up or not, Mr. Khan sustained a shortfall.” His documents show that on December 1998, the commuted value of his transfer was $32,285. Two years later, while administered by Clarica Life, that amount was now valued at $35,679.
[28] The Trustee says that the Mercer actuary, working with Khan’s figures and the sum as it was calculated on October 2000, concluded that as of July 1, 2005, when JemPak sold its assets to another entity, Khan’s shortfall in his accumulated entitlement under the Witco plan is projected to be $22,582. Although JemPak has since sold its assets, it remained in control of the Trust Fund being administered by the Trustee.
The Evidence of Mr. Khan
[29] Khan served and filed an Amended Affidavit dated May 13, 2013. It contained a treasure-trove of documentary evidence, which supports his position that he is entitled to a payment out of the Trust Fund. He says that in December 1996, when given a choice to convert to the new defined contribution plan or remain in the defined benefit plan, he chose to remain in the defined benefit component of the plan, saying that the funds transferred in his name would be “topped up.” The documents attached to his Affidavit as Exhibits are:
(a) A Witco Plan Conversion at December 31, 1996 Choices Enrollment Form.
(b) Pension Statement Retirement Plan for Employees of Witco Canada Inc.
(c) Retirement Plan for Employees of Witco Canada Inc.—Plan Conversion at December 31, 1996 –Illustration of Projected Benefits.
(d) JemPak letter of May 27, 1999 addressed “Dear Employee” respecting Notice of Conversion, noting as of December 13, 1998, that the employee became a member of the JemPak Canada Inc. pension plan. It sets out how the new benefit will be calculated.
(e) Retirement Plan for Employees of Witco Canada Inc. Statement of Benefits and Options on Plan conversion as at December 12, 1998. An Election form is at the end of the Statement. Khan elected to have his $32,265.78 remain in the defined benefit plan.
(f) Witco letter of October 3, 1996 to all Witco Canada Salaried and Non-union hourly employees, regarding changes to the pension plan.
(g) Letter from JemPak Canada Inc. dated January 9, 1998, with offer of employment with JemPak.
(h) Letter of JemPak Canada Inc. dated June 30, 2005 to JemPak and Gustin Kramer employees, on the merger of the two companies’ assets.
[30] Khan says that he declined the offer of the “top up” and remained in the Witco Defined Benefit Plan until it closed effective December 12, 1998. He also says that Mohammad Rafiek Chaudhry did the same. He says that the Information Letter sent by Richard O’Kopniak dated May 27, 1999, assures the Transferred Employees who elected in this fashion that they would receive under the JemPak plan what they would have received under the Witco plan at termination or retirement.
[31] Khan says that he was never made aware of the RCA but now believes that any funds to which he is now entitled should come from the RCA. He also relies on the letter dated January 1, 1998, as assuring him that on the transfer to JemPak, he would continue to have the same salary, benefits and vacation entitlement as he had at Witco.
[32] Khan left Jempak in May 2008 at the age of 57, after 27 years combined service to the 3 different companies. He says he is not retired and has not applied for his CPP. He is now 62 years of age and says that he is aware that he can now apply for his pension in accordance with the rules of the Witco/JemPak plan. He now asks that he be considered retired as of April 30, 2013. He further asks that he be given an actuarial calculation of his entitlement.
[33] Khan asks the Court to order that the Company be directed to satisfy its obligations as described in the documents it sent to the Transferred Employees, to obtain a current actuarial calculation of the present value of the Witco Defined Benefit, to which he and other Transferred Employees are entitled.
Analysis
[34] In an Affidavit of Service of Christina Khanson, an employee with counsel for the Company, she sets out the names and addresses of 9 Transferred Employees, other than Khan, and not including Chaudhry, who were served with copies of the Application Record. She says an attempt to serve Chaudhry was unsuccessful, with his last known address as being in Pakistan. Seven of those same persons were served with the Amended Notice of Application. Two of those not served with that document, either could not be located or was deceased. Attached as “Schedule A” to this Endorsement is a copy of the names of the Transferred Employees who are participants who may have an interest in the Trust Fund.
[35] The Transferred Employees who had been located were served with a copy of the Responding Motion Record of the Trustee.
[36] The company filed an Affidavit of Lorraine Gignac dated August 30, 2013. She is Principal with the firm of Mercer (Canada) Limited and an Actuary. She provided her opinion with respect to the potential entitlement of Khan to any payments from the Trust Fund to which he may be entitled.
[37] Barbara Cunningham (“Cunningham”), one of those Transferred Employees whose name appears on Schedule A, contacted counsel to act for her and on February 22, 2013. The Company received a letter from the law firm of Polley Faith LLP. It says it was in the process of being retained one or more of the retirees of JemPak to represent them at the hearing. It also served a Notice of Appearance on her behalf. The February hearing date for the Application was adjourned. The Company was then informed that the law firm was no longer acting for Cunningham.
[38] There is, however, evidence in 2000 from Cunningham, in the form of e-mails from her to Richard O’Kopriak of JemPak, asking questions about the defined benefit component of the Witco Pension Plan. She sets out her understanding about how the transfer of the pension funds worked and that “value of any shortfall will be paid to one from assets held in a trust fund that has been set up by JemPak Canada Inc.”
[39] Kuying In Park (“Park”), the widow of Moonkyu Park, a now deceased Transferred Employee, also contacted the Company before the February Application was adjourned. She was advised that she could attend and make submissions if she wished to. She was informed of the February and later May adjournments. She attended on the hearing before me but made no submissions.
[40] Khan did provide the Trustee with copies of his Income Tax Returns as set out in the Order of Mr. Justice McEwen. The Trustee also reports that Real Renaud (“Renaud”) was also contacted by its solicitors, along with Cunningham and Khan but was unable to provide any information about the “top-up” which took place when the Transferred Employees left Witco to work for JemPak.
[41] In my view, it is imperative that the Trustee obtain as much information as possible about these three other Participants, now that Khan has produced the documents that each would have received. The Trustee shall therefore arrange to have the same actuarial calculations made for Park, Cunningham and Renaud, and for any others who may now have come forth, to determine each’s calculated shortfall, if any.
[42] Rule 14.05(3) gives the Court the power, in certain defined proceedings, to direct a Trustee as to the appropriate steps to be taken where the relief claimed is for the opinion advice or direction of the court on a question affecting the rights of a person in respect of the execution of a trust. In the case at bar, the trust is a pension trust. The Trust Fund is set up in accordance with the trust. It is being administered by the Trustee for the benefit of the 20 Transferred Employees and in particular for those of them who have made their existence known to the Company and/or to the Trustee. See: McKay Estate v. Love (1991), 1992 CanLII 7508 (ON SC), 6 O.R. (3d) 511 (Div. Ct.); aff’d, 1991 CarswellOnt 360 (CA).
[43] The answer, is “Yes”, to the Company’s first question with respect to the Application, as to whether any of those participants listed in “Schedule A” are entitled to any further payments from the Trust Fund is what each may receive depends on the actuarial calculations to be obtained by the Trustee. After any payments made, the balance of the Trust Fund shall continue to be held in trust pending any further Order of this Court.
[44] Royal Trust has undertaken to formulate and submit a plan to the Court for its approval once all steps have been taken by it to come forward with a plan of distribution of the Trust Fund. It would only be after that the Trustee could make a determination if any balance remaining after the plan has been acted upon. It is only then that JemPak could bring on a new Application for the payment out to it for the balance of the Trust Fund.
[45] The current Application of JemPak is therefore dismissed without prejudice to it bringing on a fresh Application as noted after the Court determines that no further monies from the Trust Fund can be distributed to the Transferred Employees or to their Estates, as the case may be.
[46] All Orders shall go accordingly.
Costs
[47] In the circumstances of this proceeding, the Company shall bear its own Costs. The Trustee shall have its Costs paid on a substantial indemnity basis out of the capital of the Trust Fund, on providing the Court with its Bill of Costs plus time dockets and any case law on which it may rely within 30 days of this Order. These submissions shall be sent to me care of Judges’ Administration, 1st floor, Court House, 361 University Avenue.
[48] Mr. Khan shall have his Costs paid out of the capital of the Trust Fund by sending to me a written outline of his disbursements and HST connected therewith and the time he has spent on drafting, filing and serving his Affidavit and Amended Affidavit and his attendance at Court. These shall also be sent to me to the address as noted above. I will then determine the quantum to be paid to each party.
Greer J.
Released: October 16, 2013
SCHEDULE “A” TO THE TRUST AGREEMENT MADE
AS OF THE 29th DAY OF DECEMBER, 1998
BERGERON, ROBERT
BOUCHARD, DENIS
CAMPEAU, LAURENT
CHAMPAGNE, LOUIS
CHAUDRY, MOHAMMAD RAFIQ
CUNNINGHAM, BARBARA
DO, TRACH HUU
GENEST, PIERRE
HOULE, GEORGES
KHAN, IQBAAL A.
LAFLEUR, SYLVAIN
LEBLANC, DAVID
NORMANDEAU, STEPHANE
PARK, MOONKYU MARCUS
RIVARD, LISE
SZUCS, RONALD JULIUS
THOMPSON, CATHERINE
ZYLBERMAN, MICHAEL
CONLEY, JASMINE
RENAUD, REAL
COURT FILE NO.: 08-004/12
DATE: 20131016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1271655 ONTARIO INC. (formerly known as JEMPAK CANADA INC.),
Applicant
– and –
ROYAL TRUST CORPORATION OF CANADA (as trustee of the Supplementary Retirement Plan Trust Fund of JEMPAK CANADA INC.), Respondent
Respondent
ENDORSEMENT
Greer J.
Released: October 16, 2013