COURT FILE NO.: 8044/12
DATE: 2014/07/23
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DAVID GARCIA
D.P. Jacobs and S.G. Bosnick, for the Applicant
Applicant
- and -
JIM MACKINNON IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST, BRANDON MACKINNON IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST, TOM DOOL IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST and JOE LIBERATORE IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST and GLOBAL BENEFIT PLAN CONSULTANT INC.
L.A. Richmond and C. Sinclair, for the Respondents
Respondents
HEARD: March 7 and 13, 2014
MITCHELL, J.
I. Nature of the Application
[1] The applicant, David Garcia, is a former member of the Labourers’ International Union of North America (the “Labourers’ Union” or “LIUNA”) Local 1059 (“Local 1059”). Mr. Garcia (“Garcia”) seeks an order permitting him to make claims against the Benefit Plan (defined below) for so long as he has a balance in his Dollar Bank Account (defined below) or alternatively wants a return of the Dollar Bank Balance (defined below).
[2] Garcia claims to be a beneficiary of a trust created by an Agreement and Declaration of Trust Establishing the LIUNA Local 1059 Benefit Trust (the “Benefit Trust”) dated May 10, 2007 between Local 1059, London and District Construction Association (“LDCA”) and London and District Concrete Forming Contractors Association (the “Trust Agreement”).
[3] The trustees of the Benefit Trust are alleged to have breached their fiduciary duties owed to Garcia as a beneficiary of the Benefit Trust.
[4] Garcia seeks an award of punitive damages against the respondent trustees, Jim MacKinnon (“Jim”) and Brandon MacKinnon (“Brandon”)[^1], arising from their alleged breach of fiduciary duty.
II. Background Facts and Prior Proceedings
A. The Construction Industry
[5] Some discussion of the nature of the construction industry is needed in order to understand and resolve the issues at the heart of this litigation. A helpful summary of some of the unique features of the construction industry has been provided by Henry J. in Arlington Crane Service Ltd. v. Ontario (Minister of Labour)[^2].
[6] Comparing unionized employment in the construction industry with unionized employment in other industries, Henry J. commented as follows:
Our standard notions of industrial relations and of labour law have been shaped by the typical work and employment arrangements in a manufacturing plant. There, a sizeable group of employees are hired by a single employer to work regularly and indefinitely in a particular plant, usually mass-producing goods for use and sale elsewhere.
Life in the construction industry is entirely different in character, especially in the industrial, commercial and institutional sector which has been the major focus of special legislative provisions in Canada.
[In the construction industry] there is no opportunity for the kind of tenured status which employees enjoy under most collective agreements outside of the construction industry. As well, there is no basis for the kind of enduring association which a group of employees can develop in an industrial bargaining unit. Any one job for the construction worker is usually short and fleeting, and he must be prepared to be highly mobile, shifting from project to project across a wide geographic area.
Since the relationship between employer and employee in construction is typically episodic rather than enduring in character, a special form of union organization has merged to fill this vacuum. The major craft specialties have all developed their own trade unions; the union is the body with which the individual tradesman tends to have the most salient relationship in the industry. The union has often taken the lead in the development and operation of apprenticeship programmes which are necessary to train newcomers in the skills of the trade. As well, the union collects and administers the funds for the worker’s vacation pay, health and welfare benefits, and retirement pensions (with the money coming from the numerous contractors for whom the tradesman may have worked during the year, at a defined contribution level for each hour worked).[^3]
[7] The structure of providing benefits to employees engaged in the construction industry using the vehicle of a trust fund paired with a benefit plan is well established. Moreover, it is established practice to have union board members appointed as trustees of the benefit trust.[^4]
[8] Against that backdrop, I consider the issues on this application.
B. Overview
[9] Jim, is the business manager of Local 1059. Brandon is the president of Local 1059.
[10] Prior to May 10, 2007, Local 1059 and LDCA were parties to a trust agreement between various associations and union locals dated September 13, 1980 (the “Labourers’ Multi-Local Welfare Trust Fund of Ontario”).
[11] The Labourers’ Multi-Local Welfare Trust Fund of Ontario provided health and welfare benefits to employees of the Labourers’ Union and their dependents.
[12] In, 2007, Local 1059 and LDCA withdrew from the Labourers’ Multi-Local Welfare Trust Fund of Ontario for purposes of creating a new trust for employees of Local 1059 and their dependents for purposes of providing health and welfare benefits.
[13] As settlors of the Benefit Trust, Local 1059 and the employer associations appointed the trustees who are responsible for administering the Benefit Trust.
[14] Article 4 of the Trust Agreement provides that Local 1059 shall appoint two trustees and each employer association shall appoint one trustee. The business manager of Local 1059 (in this case, Jim) is required to be appointed as one of the two Local 1059 appointments.
[15] Both Jim and Brandon were appointed trustees of the Benefit Trust.
[16] Pursuant to section 2.01 of the Trust Agreement, the Benefit Trust is to be administered by the trustees for the purpose of providing health and welfare benefits in accordance with the terms of the Trust Agreement and the Benefit Plan.
[17] The trustees adopted the LIUNA Local 1059 Benefit Trust, Benefit Plan Text, dated May 24, 2009 (the “Benefit Plan”).[^5]
C. The Dual Union Policy
[18] Garcia became a member of Local 1059 in 1999.[^6]
[19] On October 4, 2010, Garcia joined the United Brotherhood of Carpenters and Allied Workers (the “Carpenters’ Union”) following which time Garcia did no further work for employers bound by collective agreements with the Labourers’ Union.
[20] The Carpenters’ Union and the Labourers’ Union are rival trade unions.
[21] In November 2010, the Labourers’ Union was engaged in a fight with the Carpenters’ Union over the performance of formwork. Local 1059 was attempting to capture the jurisdiction for all form building in all sectors of the construction industry in its territory.
[22] In furtherance of its objective to provide more form-work opportunities to its members, the executive board of Local 1059 adopted a “dual union policy”.
[23] The Dual Union Policy and Rules – Carpenters[^7] (the “Dual Union Policy”), provides in part as follows:
No member of Local 1059 can also be a member of any affiliate of the Carpenters Union. Any such member must resign his membership in the Carpenters Union within 60 days of the adoption of this policy. A member who fails to do so is in violation of this policy and subject to expulsion from membership in Local 1059.
[24] On January 10, 2011, the membership of Local 1059 voted to adopt the Dual Union Policy.
D. Prior Proceedings
[25] In December 2010, the Carpenters District Counsel of Ontario through its legal counsel, Watson, Jacobs, McCreary LLP, filed an application with the Ontario Labour Relations Board (“ORLB”) having OLRB File Number 3035-10-U (the “ORLB Proceedings”) challenging the validity of Local 1059’s prohibition on dual unionism as contemplated by the Dual Union Policy claiming it was in violation of the Labour Relations Act (Ontario).
[26] The issue before the ORLB was whether the treatment of Garcia by the Labourers’ Union, including the threat to deny him his accrued benefits if he did not resign from the Carpenters’ Union, violated s. 76 of the Act. Section 76 of the Act provides as follows:
- No person, trade union or employers’ organization shall seek by intimidation or coercion to compel any person to become or refrain from becoming or to continue to be or cease to be a member of a trade union or of an employer’s organization or to refrain from exercising any other rights under this Act or from performing any obligations under this Act.
[27] On February 2, 2012, the OLRB issued its decision in the OLRB Proceedings.[^8]
[28] The ORLB dismissed the complaint of the Carpenters’ Union.
[29] The Carpenters’ Union brought an application pursuant to s. 96 of the Act asking the OLRB to reconsider its decision.
[30] On November 20, 2012, the OLRB referred the Carpenters’ Union’s application for reconsideration for hearing with a related application in OLRB File Number 3719-11-U (the “Related OLRB Proceedings”). The Related OLRB Proceedings involved some of the same parties and related issues.[^9]
[31] On May 17, 2013, the OLRB released its decision with respect to both the OLRB Proceedings and the Related OLRB Proceedings.[^10] Both applications of the Carpenters’ Union were dismissed. With respect to its dismissal of the Related OLRB Proceedings, the OLRB made the following findings:
“To allow the second application to proceed ‘would nonetheless violate principles such as judicial economy, consistency, finality and the integrity of administration of justice.’”
[32] On February 1, 2011, Jim sent Garcia notice that he was in violation of the Dual Union Policy and must resign his membership in the Carpenters’ Union by March 9, 2011 failing which he would be expelled as permitted under the terms of Local 1059’s constitution (the “Constitution”) and by-laws.
[33] Despite this notification, Garcia did not resign his membership in the Carpenters’ Union.
[34] On April 7, 2011, Jim filed charges against Garcia, alleging breaches of the Constitution and the Dual Union Policy for failing to resign from the Carpenters’ Union (the “LIUNA Proceedings”).
[35] On June 3, 2011, a trial was conducted by the LIUNA Trial Board (the “Trial Board”) to determine whether Garcia was in breach of the Dual Union Policy and whether Local 1059 had satisfied certain procedural requirements (the “LIUNA Proceedings”). During the LIUNA Proceedings, Garcia was represented by legal counsel for the Carpenters’ Union.
[36] On June 15, 2011, the Trial Board ruled that the Dual Union Policy had been properly adopted by Local 1059, that Garcia had received proper notice of the Dual Union Policy and that Garcia had failed to comply with the terms of the Dual Union Policy.[^11]
[37] In its decision, the Trial Board noted that no evidence had been filed by Garcia to support a claim that other members holding dual membership in the Carpenters’ Union and the Labourers’ Union had not been charged.
[38] The Trial Board ordered that Garcia had until July 31, 2011 to resign his membership in the Carpenters’ Union failing which he was to be expelled from the Labourers’ Union.[^12]
[39] Garcia did not resign his membership in the Carpenters’ Union.
[40] On July 14, 2011, Garcia, through his counsel, appealed the decision of the Trial Board in the LIUNA Proceedings.
[41] On July 5, 2012, Global Benefits as the Benefit Plan administrator, notified Garcia that his benefits had been suspended effective February 3, 2012.
[42] On July 27, 2012, the LIUNA Appellate Officer affirmed the decision of the Trial Board and dismissed Garcia’s appeal of the Trial Board decision.[^13]
[43] Garcia did not appeal the decision of the LIUNA Appellate Officer.
[44] Garcia issued this application on August 21, 2012.
E. Garcia’s Dollar Bank Account
[45] While employed with various employers bound to collective agreements with Local 1059, amounts were contributed by these employers to the Benefit Trust as required by the terms of the Trust Agreement. These amounts were notionally held by the trustees in a dollar bank account to the “credit” of Garcia (the “Dollar Bank Account`).
[46] At the date of his expulsion from Local 1059 the balance of credits in the Dollar Bank Account totaled approximately $20,000 (the “Dollar Bank Balance”).
III. Issues
[47] The issues raised on this application are as follows:
(a) Who are the beneficiaries of the Benefit Trust?
(b) Is Garcia a beneficiary of the Benefit Trust?
(c) Are the beneficiaries of the Benefit Trust entitled to call for a distribution of the trust funds?
(d) Is Garcia entitled to a return of the Dollar Bank Balance?
(e) Is Garcia entitled to coverage under the Benefit Plan to the extent of the Dollar Bank Balance?
(f) Did Brandon and Jim breach their fiduciary duty as trustees in enacting the Dual Union Policy and laying charges against Garcia for violating the policy?
(g) Is Garcia entitled to an award of punitive damages against Jim and/or Brandon?
IV. Analysis
A. Who are the beneficiaries of the Benefit Trust?
[48] The applicant acknowledges that in order to have a valid trust, three certainties must be met:
(i) certainty of objects;
(ii) certainty of subject matter; and
(iii) certainty of intention to create a trust.
The parties agree on (ii) and (iii); however, disagree on (i).
[49] Garcia takes the position that the beneficiaries of the Benefit Trust are comprised of all those persons to whom employers have made contributions to the extent the dollar bank has funds extant. The respondents counter that only those persons falling within the definition of “Employees” contained within the Trust Agreement[^14] at the time a claim is made under the plan, are beneficiaries.
[50] Both parties agree that the term “beneficiaries” is not specifically referenced and defined in the Trust Agreement. Neither party takes the position the trust fails for lack of certainty. Instead, each party asks that I apply canons of construction to arrive at a reasonable interpretation of the settlors’ intention as to the beneficiaries of the Benefit Trust.
[51] The applicant maintains that a reasonable interpretation of the Trust Agreement allows a finding consistent with his position. Garcia claims that the court may not look beyond the Trust Agreement for assistance in determining the issue. In particular, he says the court is forbidden from looking to the Benefit Plan for assistance.
[52] Garcia submits that the court may only refer to the Trust Agreement to determine who is entitled to the benefit of the trust funds as this is a matter exclusively within the domain of the settlors of the trust. That is, the court may not look to the provisions of the Benefit Plan for assistance because until such time as a trust has been established, the Benefit Plan has no effect. The Benefit Plan comes into existence only once the trust has been created.
[53] The respondents do not necessarily disagree with that position. The respondents argue that there is no need to look beyond the Trust Agreement since the intention of the settlors is clear; however, a reading of the Benefit Plan leaves no doubt on the issue and simply bolsters the respondents’ interpretation of the Trust Agreement. The respondents take the position that the Trust Agreement and Benefit Plan must be read together.
[54] The applicant says that the beneficiaries of the Benefit Trust must extend beyond those persons coming within the definition of “Employee” set forth in the Trust Agreement.
[55] The applicant reasons that the settlors must have intended that persons not engaged in employment at the time of their benefit claim were intended to be covered since certain types of benefits are designed for persons who are no longer contributing.[^15] The applicant goes farther to say that non-union members who are ineligible to contribute to the trust, such as Garcia, are also beneficiaries of the Benefit Trust for so long as they have credits in their dollar bank account.
[56] Conversely, the respondents take the position only “Employees” are beneficiaries. Respondents’ counsel points to the definition of “Employee” and argues that the definition extends beyond membership in Local 1059, but that for purposes of the issues on this application and Garcia’s ineligibility to claim benefit coverage, membership in Local 1059 is the key criteria for consideration.
[57] I agree that the settlors’ intention as to the intended beneficiaries of the Benefit Trust must be determined by the Trust Agreement and not the Benefit Plan. Both counsel have conceded that the Trust Agreement has been poorly drafted.
[58] Regardless of the quality of the trust document, it is the court’s job to apply the usual cannons of constructions and if that proves unsuccessful to exercise its judicial knowledge and experience and innate common sense to make sense of the obscure and ambiguous language of the trust document.[^16]
[59] I now turn to the Trust Document. Although “beneficiaries” is not a defined term, the Trust Agreement does expressly provide for whose benefit the trust was created.
[60] The second paragraph of the preamble states: “…all the parties hereto deem that it is desirable to continue to provide identical or better benefits, through a new Trust for Employees and their dependents”. (emphasis added)
[61] Furthermore, reference is made to the intended beneficiaries in section 5.01 dealing with the powers of trustees. Therein it is stated that the trustees are authorized and empowered “to adopt, amend and administer the Benefit Plan for the benefit of the Employees, their beneficiaries and or dependents. The Benefit Plan will set forth in writing the conditions of eligibility for Benefits, the terms of payment therefore and such other items as the Trustees deem necessary.”(emphasis added)
[62] “Employee” is a defined term in the Trust Agreement which incorporates by reference other defined terms. Those terms are reproduced below:
(i) 1.08 “Employee” means any of the following:
(a) Any person covered by the Collective Agreement who is engaged in employment with respect to which the Employer is obligated by a Collective Agreement to make Contributions to the Trust;
(b) Any person who is engaged in employment with respect to which the Employer is making Contributions to the trust, as provided in a Collective Agreement;
(c) Any person employed by the Employer who has signed a memorandum of understanding incorporating by reference the provisions of a Collective Agreement or of this Agreement;
(d) Any person who is not covered by a Collective Agreement but on whose behalf an Employer is otherwise obligated to make Contributions to the Trust;
(e) Any person who is employed by the Union and on whose behalf the Union make payments to the Trust, in such manner and amount as the Trustees by resolution determine;
(f) Any person on whose behalf Contributions are made voluntarily by the Employer, in such manner and amount as the Trustees by resolution determine;
(g) Any person who is a member of the Union and who is permitted by the terms of the Benefit Plan to make Contributions to the Trust;
(h) Any person who is a member of the Union and on whose behalf Contributions are made to the Trust, pursuant to Article 1.07(d) herein;
(i) Any person who is an employee of an Association and on whose behalf Contributions are made to the trust, pursuant to Article 1.07(e) herein.
(ii) 1.09 “Employer” means any of the following:
(a) Any employer who is bound by a Collective Agreement;
(b) Any employer who is a party to or is bound by a memorandum of understanding incorporating by reference the provisions of the Collective Agreement or [the Trust Agreement];
(c) Any employer who voluntarily makes Contributions to the Trust in such manner and amount as the Trustees by resolution determine;
(d) Any employer who is a Union and who makes Contributions on behalf of its Employees in such manner and amounts as the Trustees by resolution determine;
(e) Any employer who is an Association and who makes Contributions on behalf of its Employees in such manner and amounts as the Trustees by resolution determine.
(a) 1.12 “Union” means Labourers’ International Union of North America, Local 1059 and any other local union which has been accepted as a participant in the Trust, pursuant to Article 3.
(b) 1.06 “Collective Agreement” means any written collective agreement with any amendments, supplements, modifications and renewals thereof by and between the Union on the one hand, and an Employer or an Association on the other hand, which provides, among other things, for Contributions to the Trust, or to a Trust which will be designated by the Union.
(c) 1.03 “Association” or “Associations” means any organization, including the Settlor Associations, acting on behalf of Employers who may be bound from time to time by a Collective Agreement.
[63] During argument both counsel focused their submissions on whether or not a beneficiary is required to be a current employee or whether beneficiaries include former employees.
[64] Counsel for the applicant argued that the class of beneficiaries extended to former employees including those, like Garcia, who were no longer members of Local 1059, retired member employees and member employees on long term disability.
[65] That approach to the issue is too narrow. The definition of “Employee” in the Trust Agreement extends the group beyond current employees. It also includes all persons having a connection to Local 1059 whether indirectly through their employer who is bound by the terms of a collective agreement with Local 1059 or otherwise connected with Local 1059 or directly as an employee of Local 1059. Specific reference is made to members who are not working but are entitled to make contributions under the Benefit Plan, for example, retired employees.
[66] The Trust Agreement creates the Benefit Trust and imposes an obligation on all “Employers” to contribute a percentage of each Employee’s earnings to that Employee’s dollar bank account to be held as assets of the Benefit Trust to be used in accordance with the terms of the Benefit Plan.
[67] The Trust Agreement must be read together with the Benefit Plan. Without the Benefit Plan, the Benefit Trust could not be administered. The Benefit Plan is a necessary corollary to the Trust Agreement. To read these two documents together does not offend principles of trust law as suggested by counsel for the applicant.
[68] Pursuant to the terms of the Benefit Plan, coverage under the plan (premiums in respect of which are funded by contributions to the Benefit Trust) is terminated if a person ceases to be a member of Local 1059 or an “Employee” unless such person is retired from the construction industry.
[69] Aside from very limited circumstances, to be an “Employee” requires that the person be a member of Local 1059. To be an “Employee” does not require that the person be currently employed by an “Employer” (as that term is defined by the Trust Agreement).
[70] Therefore, in order to come within the definition of “Employee” a connection between the individual and Local 1059 must be established. Retired members of Local 1059 and members of Local 1059 on long term disability, to give but two examples, maintain their nexus with Local 1059 whether or not capable of being employed by an employer bound by the terms of a collective agreement with Local 1059.
[71] The law requires that, where the language of the trust document is ambiguous or unclear, I apply common sense to interpret what was intended by the settlors. I find that “Beneficiaries” includes all “Employees”[^17] as that term is defined in the Trust Agreement, which status must be maintained for so long as the Benefit Trust remains in existence. It is not sufficient to have been an Employee at the time the Contributions were made but not at the time coverage under the plan is sought.
[72] To find otherwise would lead to an absurd result. The settlors could not have intended that all prior members now members of other unions and likely receiving coverage under such other unions’ benefit plans would also be permitted to receive benefits under Local 1059’s Benefit Trust. In that situation, the corpus of the trust would be quickly exhausted with no funds available to fund benefits for current and future members of Local 1059.
C. Is Garcia a beneficiary of the Benefit Trust?
[73] Once expelled from Local 1059, Garcia’s connection with Local 1059 was severed and, thus, he no longer came within the definition of “Employee”.
[74] Therefore, upon expulsion, Garcia was no longer a “beneficiary” of the Benefit Trust.
C. Are the beneficiaries of the Benefit Trust entitled to call for a distribution of the balance in their dollar bank account?
[75] The Trust Agreement does not provide for access by an Employee to his or her dollar bank account to remove funds in excess of the minimum credits required to ensure coverage. In fact, the Trust Agreement is clear that no Employee has any right, title or interest in or to the assets of the Benefit Trust except as specifically provided by the Benefit Plan other than for the return of contributions made by a mistake of fact.[^18]
[76] Arguably, the beneficiaries may be entitled to a distribution on wind-up of the Benefit Trust. That situation is not before me although bears consideration if only to highlight the limited rights of the beneficiaries under the Trust Agreement.
[77] The Trust Agreement provides that it may be terminated by mutual written agreement of the parties who are still participating in the Trust Agreement at the time of wind-up. Once terminated, the trustees have 6 months in which to terminate and wind-up the Benefit Trust.[^19]
[78] For the sake of completeness, this leads me to the next logical question: upon wind-up of the Benefit Trust would a beneficiary be entitled to a distribution of the trust assets?
[79] The answer to that question is no. Section 11.02 of the Trust Agreement requires the trustees upon winding-up the Benefit Trust to “distribute the balance, if any, of the Trust, in such manner as will in the opinion of the Trustees best effectuate the purpose of the Trust; or in such other manner as may be prescribed by the relevant laws of the Province of Ontario; provided, however that no part of the Trust will be used or diverted to purposes other than for the exclusive benefit of the Employees eligible under the Benefit Plan” .(emphasis added)
[80] A similar issue was considered by the court in Provincial Plasterers’ Benefit Trust Fund (Board of Trustees) v. Provincial Plasterers’ Benefit Trust Fund[^20]. In that case, the court was asked to provide direction to the trustees as to the appropriate distribution of dormant trust funds. In 1958, Local 117 established the Local 117 Welfare Trust Fund by an agreement and declaration of trust between Local 117 and an employer association and various trustees. Similar to the facts at hand, contributions to the trust came from the employers. Over the years, membership in Local 117 declined to the point such that by 1984 no members of Local 117 remained.
[81] Former members of Local 117 asked for an order distributing the balance of the funds in the trust fund equally among them arguing that the purposes of the trust failed such that any remaining funds form a resulting trust to be returned to those who gave value for it. That, they claimed, would be all former members of Local 117.
[82] Osborne J. held that the resulting trust argument failed since the former members were not the actual contributors to the trust fund (the employers were). Only the employers could claim a resulting trust had that right not been specifically excluded in the trust agreement.[^21]
[83] As was the case in Provincial Plasterers’ Benefit Trust Fund (Board of Trustees), the Employers are excluded from claiming any interest or right in the trust funds.
[84] In Provincial Plasterers’ Benefit Trust Fund (Board of Trustees), the court ordered the remaining funds to be transferred to the trust fund of a Local of which many of the former members were now members in an effort to best implement the original trust.
[85] Therefore, if the Benefit Trust was wound up, the beneficiaries of the Benefit Trust would not be entitled to a distribution of the trust funds.
D. Is Garcia entitled to a return of the Dollar Bank Balance?
[86] In order to resolve this issue, a consideration of the concept of “dollar bank account” must be undertaken.
[87] A dollar bank account is the mechanism by which the administrator of the Trust Fund[^22] is able to determine the eligibility of a beneficiary to claim under the group insurance policy.
[88] Funding of an “Employee’s” dollar bank account is the intermediary step between the contribution by the Employer on behalf of the “Employee” and the payment of the premium to the group insurance coverage provider[^23].
[89] Eligibility for payment of benefits is determined based on the balance in the Employee’s dollar bank account. For example, an Employee is only eligible to make a claim under the group insurance policy provided he or she has sufficient funds accumulated in his or her dollar bank account to fund two months’ deductions (i.e. the Employee’s share of the premiums payable by the administrator to the group insurance provider).[^24]
[90] There is no limit to the credits which are permitted to be held in an Employee’s dollar bank account.[^25] This is particularly attractive to an Employee as it permits the Employee to build up credits in the account during periods of consistent and regular employment, which will then be available for benefits coverage through periods of little or no employment.
[91] The only purpose of the dollar bank account is to establish a minimum number of credits required before an Employee is entitled to make a claim under the group insurance policy.
[92] This type of approach makes sense given the nature of employment in the construction industry. As noted earlier in these reasons, employment in the construction industry is often short term. In industries with stable, long term employment, a probationary period prior to eligibility takes the place of the dollar bank/credits system. In circumstances of more transient employment like that found in the construction industry, a contribution threshold is a more appropriate mechanism by which to determine eligibility.
[93] The only meaningful way to assess whether or not any given Employee has reached his or her minimum threshold for eligibility is to have a notional separate account for each Employee, i.e., a dollar bank account.
[94] The applicant’s position presupposes that his dollar bank account is a self-funding/insured benefits account whereby the Employee is entitled only to benefits having a dollar value equal to the amount of his or her contributions credited to his or her dollar bank account. That is not the situation here and makes little sense. Query how an Employee could self-fund long term disability payments using this approach?
[95] Group insurance is predicated on premiums being paid by each individual comprising the group for the benefit of the group, not the individual. When individuals cease employment (in the case of non-unionized employment) or cease to be union members (in the case of unionized employment), they are no longer members of the “group” and are no longer covered by group insurance. Any contributions made or premiums paid to that date are non-refundable to the individual; rather, fund the future benefits and claims of the balance of the individuals comprising the group. Membership in the group is fluid and evolving.
[96] The Employees are eligible to receive group insurance coverage provided coverage has not been terminated.
[97] Unlike more static industries, union members in the construction industry are entitled to group insurance coverage whether or not actively engaged in employment provided they remain members of the union and/or are subject to the collective agreement to which Local 1059 is a party, such as situations where the individual is between jobs, has retired, or is on short or long term disability.
[98] There is no separate account that has been maintained by the Trustees for Garcia’s contributions. A “dollar bank account” is a notional concept. It is largely a fiction insofar as any interest therein may be asserted.
[99] Accordingly, Garcia’s claim to a return of the Dollar Bank Balance must fail.
E. Is Garcia eligible for coverage under the Benefit Plan to the extent of the Dollar Bank Balance?
[100] The applicant has misconstrued the nature of the dollar bank account. Claims are not paid from the amounts notionally contributed to the dollar bank account. Its only purpose is to determine eligibility for coverage and not the quantum of coverage.
[101] As noted above, the trust funds comprised of contributions made by Employers under the Trust Agreement are used to fund premiums in connection with the group policy insured by Manulife.
[102] Accordingly, Garcia’s claim to coverage under the plan to the extent of the balance in the Dollar Bank Account must also fail.
F. Did Brandon and Jim breach their fiduciary duty as trustees in enacting the Dual Union Policy and laying charges against Garcia for violating the terms of the policy?
[103] Pursuant to the terms of the Trust Agreement, the trustees must ensure the funds, once deposited, are used in a manner consistent with the terms of the Benefit Plan and are administered in accordance with the terms of the Benefit Plan.
[104] Funds may not be used for the benefit of persons not eligible for coverage.
[105] Eligibility for coverage is determined by reference to the Benefit Plan.
[106] With respect to the issue of eligibility, the relevant provisions of the Benefit Plan are as follows:
(a) 1.09 “Dollar Bank” means an account established for each Member to which contributions made by an Employer are credited.
(b) 1.21 “Plan Member” or Member” means a Union Member or Employee who has satisfied the eligibility requirements for coverage under the Plan and who continues to be a Union Member or Employee at the time a benefit is claimed and paid.
(c) 1.10 “Employee” means an employee within the definition of employee in the Trust Agreement.
(d) 1.27 “Trust Agreement” means the Agreement and Declaration of Trust establishing the LIUNA Local 1059 Benefits Trust as amended from time to time.
(e) 1.28 “Union Member” means an individual who holds membership in Labourers’ International Union of North America, Local 1059 under the Local’s constitution and by-laws.
(f) 3.03 Effective the first day of the month in which a Member becomes eligible for benefits, and each month thereafter, credits sufficient to maintain eligibility for coverage are withdrawn from the Member’s Dollar Bank.
(g) 5.02 Any balance remaining in a former Plan Member’s Dollar Bank will be cancelled after a 12 month period following the date of termination if no contributions are made to the Dollar Bank during that time and such balance shall become part of the general funds of the Plan.
[107] Garcia claims that he is the owner of the funds comprising the Dollar Bank Balance and that as beneficial owner of these funds, the respondents, as trustees of the Benefit Trust, breached their fiduciary duties owed to Garcia when they enacted the Dual Union Policy, which resulted in the Dollar Bank Balance being “confiscated”.
[108] At the time the Dual Union Policy was enacted, Garcia was a member of Local 1059, an Employee for purposes of the Trust Agreement and the Benefit Plan and eligible to receive benefits under the Benefit Plan.
[109] At the time the Dual Union Policy was adopted, Garcia was a beneficiary of the Benefit Trust.
[110] I am not prepared to reconsider whether or not the Dual Union Policy arose from the proper exercise of Local 1059’s power and authority under its Constitution and bylaws or whether it was properly adopted through due process. Those issues have been addressed by the OLRB and the Trial Board, respectively.
[111] The ORLB held that it is not contrary to the Act for trade unions to make rules regarding membership in other unions, and to enforce those rules through their internal processes. With respect to LIUNA’s application of the Dual Union Policy to Garcia’s membership status, the OLRB had this to say:
The position Mr. Garcia has been put in regarding giving up his membership in the Carpenters, and as a result losing his employment with Ellis Don, is simply a consequence of the Labourer’s [sic] enforcing a rule that they have the authority to make and enforce. This creates a difficult dilemma for Mr. Garcia given that he must choose between employment with Ellis Don and the benefits he has accrued with the Labourers. This may appear unfair, but the harsh nature of the choice he is confronted with does not alter the legal foundation of the Labourers’ position. They are simply enforcing the rules of membership. In the Board’s view, there is no reasonable likelihood that the applicant can establish a violation of the Act on this basis.[26]
[112] Accordingly, I accept that the Dual Union Policy was properly adopted through due process[^27] and was enacted for a legitimate labour relations purpose that does not violate the Act.
[113] It is trite law that all trustees have a fiduciary role.
[114] As fiduciaries, the duties owed by the trustees to the beneficiaries include the duties of loyalty, good faith and the duty to avoid conflicts of duty and pursuit of self-interest.[^28]
[115] Garcia submits that Jim and Brandon, trustees of the Benefit Trust, owed a fiduciary duty to all beneficiaries of the Benefit Trust.
[116] I agree. At the time the Dual Union Policy was adopted by LIUNA’s executive board, Garcia was a beneficiary of the Benefit Trust. Both Jim and Brandon are members of LIUNA’s executive board.
[117] The applicant says that Jim’s role in initiating charges against Garcia and Brandon’s role in adopting the Dual Union Policy that led to Garcia’s expulsion were within their roles as members of LIUNA’s executive board but placed them in a conflict of interest as trustees when they used the Dual Union Policy to effect the confiscation the Dollar Bank Balance.
[118] The trustees did not apply the Dual Union Policy for purposes of confiscating Garcia’s Dollar Bank Balance. Quite the opposite. The trustees would have preferred that Garcia denounce his membership in the Carpenters’ Union and continue as a beneficiary under the Benefit Trust. Garcia refused to do so.
[119] The nature and scope of fiduciary duties depend on the particular context in which the relationship exists, and must be “assessed in the legal framework governing the relationship and any applicable legislation”.[^29]
[120] The legal framework in which the nature and scope of fiduciary duties will be assessed and determined is established by the trust documents governing the relationship and any applicable legislation.[^30]
[121] Under the Trust Agreement, the trustees are given broad powers to administer the trust in accordance with the terms of the Trust Agreement and the Benefit Plan. Among other things, the trustees are empowered to adopt, amend and administer the Benefit Plan for the benefit of employees, their beneficiaries or dependents. The trustees are to pay or provide for payment of benefits to eligible persons, as defined in the Benefit Plan. The Trust Agreement governs the trustees’ dealings with insurance companies, banks and other financial institutions; establishing reserve funds; entering into agreements and reciprocal arrangements with other trusts; investing portions of the trust; leasing land or other property; maintaining accounts and records and collecting contributions. These tasks and duties create the legal framework within which the nature and scope of the trustees’ fiduciary role and obligations are defined.
[122] Another important aspect of the legal framework in this case, especially insofar as Jim’s duties may be concerned, is that the Trust Agreement requires him to act in the dual role of business manager of Local 1059 and as trustee of the Benefit Trust. This requirement must be considered in determining the nature and scope of Jim’s fiduciary duties.[^31]
[123] Where fiduciary obligations stem from a legal framework which allows or requires the same person or entity to hold dual roles, a conflict of interest or duty does not arise merely because the entity or individual makes a decision in its non-trustee role (for example as employer or, here, as business manager/trustee or union president) that could potentially affect the rights of plan beneficiaries. Rather, a conflict occurs “when there is a substantial risk that the [business manager/trustee’s] representation of plan beneficiaries would be materially and adversely affected by the [business manager/trustee’s] duties to the [union]”, always bearing in mind that a trustee’s fiduciary obligations to plan members do not exist at large, but arise only in relation to those tasks and duties stemming from the legal framework established by the trust documents and any applicable statutory scheme.[^32]
[124] To determine whether a conflict of interest arises, it is useful to consider what the fiduciary obligations to plan members would be if there was a separate independent benefit plan administrator and whether those obligations are in conflict with the business manager’s duties or interests.
[125] In Indalex, the majority of the Supreme Court of Canada held that no conflict arose from the employer/administrator having sought insolvency protection under the Companies’ Creditors Arrangement Act (the “CCAA”) without notice to plan beneficiaries since, among other things, the duties and authority of a pension plan administrator did not extend to ensuring the solvency of the corporation. Consequently, an independent administrator could not reasonably expect to be consulted about the decision to commence CCAA proceedings.[^33]
[126] However, the Supreme Court of Canada found that a conflict did arise when the employer/administrator sought and obtained an order granting first-ranking debtor-in-possession (“DIP”) financing without notice to employees since that order gave priority to the DIP lender for advances made under the DIP facility ahead of the statutory trust granted to the plan beneficiaries for plan funding deficiencies.[^34] No such conflict of interest arises in this case.
[127] The duties and authority of the trustees under the Trust Agreement do not relate to the protection of Local 1059’s work jurisdiction or with the terms of requirement for membership in Local 1059. Their duties and authority, as set out in the Trust Agreement and the Benefit Plan (i.e., the trust documents), relate to amending and administering the plan, ensuring contributions are made, purchasing insurance policies, making investments, paying premiums, etc. The trustees’ fiduciary obligations are connected to these duties; they do not exist at large.
[128] The adoption of the Dual Union Policy did not affect the administration of the trust, the terms of the trust documents, the nature or level of benefits, eligibility requirements or the funding of the Benefit Trust. Accordingly, I find that the adoption of the Dual Union Policy did not give rise to a conflict with any of the duties of the trustees of the Benefit Trust.
[129] If the Benefit Trust had been administered by an entirely independent board of trustees when the Dual Union Policy was adopted, there could be no reasonable expectation that the trustees would have been consulted about the policy since their duties and authority under the Trust Agreement do not involve determining the terms upon which membership in the union should be allowed, restricted or revoked.[^35]
[130] A conflict of interest does not necessarily arise simply by an employer’s exercise of management power in circumstances where that employer also stands in a fiduciary position. Moreover, the existence of a conflict of interest and duty does not necessarily constitute a breach of that fiduciary duty.[^36]
[131] Similarly, Local 1059’s decision to apply the Dual Union Policy to Garcia did not create a conflict of interest or duty on the part of any trustee, including Jim. A decision to bring proceedings against a member for violation or breach of the union’s Constitution and bylaws does not relate in any way to the administration of the Benefit Trust by the trustees.
[132] The applicant submits that the application of the Dual Union Policy to the payment of benefits mandated by the Trust Agreement in this case was the application of an extraneous consideration “alien” to the Trust Agreement.
[133] I do not agree. The application of the Dual Union Policy resulted in the expulsion of Garcia from Local 1059. It was not the application of the policy to the payment of benefits rather it was Garcia’s status as a non-member which terminated his coverage under the Benefit Plan.
[134] The Trust Agreement and the Benefit Plan must be read together as a single comprehensive and cohesive document. The Trust Agreement expressly empowers the Trustees to make rules governing eligibility.[^37]
[135] Given the powers and duties of the trustees under the Trust Agreement, they were required to terminate Garcia’s coverage and transfer the Dollar Bank Balance to the general trust funds as provided in the Benefit Plan.
[136] I find that the adoption of the Dual Union Policy by the executive board of Local 1059 did not place Jim and/or Brandon, as trustees, in a position of conflict.
[137] Even if the adoption of the Dual Union Policy created a conflict of interest, it does not automatically mean that trustees are in breach of their fiduciary duties to the beneficiaries of the Benefit Trust. The mere existence of a conflict does not, by itself, breach any fiduciary obligation. Rather, it is the failure to address the conflict that may result in a breach of fiduciary duty.[^38] In that instance, the trustees would be obligated to ensure that beneficiaries’ interests were protected as if the Benefit Trust was being administered by an independent group of trustees.
[138] I find that adequate measures were taken by the trustees to ensure that the interests of the beneficiaries were protected. All members of Local 1059 were provided with notice of the Dual Union Policy and all members of Local 1059 were given an opportunity to vote on the Dual Union Policy and did, in fact, vote to adopt the Dual Union Policy.
[139] Once adopted, each member of Local 1059 holding dual membership in the Carpenters’ Union had the right to choose between the privileges associated with membership in the Carpenters’ Union and the privileges associated with membership in the Labourers’ Union, including entitlement to coverage under the Benefit Plan.
[140] Garcia ignores the many choices he was given. Local 1059 gave Garcia the opportunity to resign from the Carpenters’ Union and maintain his status as member of Local 1059 and thus his benefit coverage. Garcia chose not to resign and instead chose to challenge the constitutionality of the Dual Union Policy and the charges laid against him for choosing not to resign. Garcia lost that challenge.
[141] On June 15, 2011, the Trial Board gave Garcia the opportunity to resign from the Carpenters’ Union by July 31, 2011. Garcia chose not to resign and instead chose to appeal the decision of the Trial Board. Garcia lost that appeal and still did not resign from the Carpenters’ Union.
[142] This right to elect membership in either the Carpenters’ Union or the Labourers’ Union protects the interests of those beneficiaries negatively impacted by the Dual Union Policy, including Garcia. This right to choose is analogous to the plan members’ right to receive notice of the proceedings in which the employer/plan administrator in Indalex sought to obtain a DIP charge ranking ahead of the plan members’ statutory trust.
[143] There is no basis upon which to find there has been a breach of fiduciary duty by the trustees or any of them. Similarly, there was no evidence presented to support a finding that the respondent, Global Benefits, as independent administrator of the Benefit Plan, breached any fiduciary duty owed to beneficiaries of the Benefit Trust.
G. Is Garcia entitled to an award of punitive damages against Jim and/or Brandon?
[144] Garcia seeks an award of punitive damages against Jim and Brandon arising from their breach of fiduciary duty.
[145] Punitive damages may be awarded where the conduct of the respondents is so malicious, oppressive and high-handed that it offends the court’s sense of decency.[^39]
[146] Having found that Jim and Brandon did not breach their fiduciary duty, an award of punitive damages cannot be sustained.
V. Conclusion
[147] The Dual Union Policy has a legitimate labour relations purpose. Its objective is to increase the formwork opportunities for its members. The policy was adopted through due process. Local 1059’s executive board adopted the Dual Union Policy and more importantly - from a fairness perspective – the members of Local 1059 adopted the Dual Union Policy. The Dual Union Policy was not adopted for purposes of punishing Garcia as part of a vendetta.
[148] Union membership has its privileges and with it corresponding obligations. Rules attach to union membership. The collective interests of the membership as a whole are paramount. The Dual Union Policy is in the best interests of the “whole” of the Labourers’ Union.
[149] Garcia has provided no evidence that claims not covered by the Benefit Plan remain outstanding and unpaid. Therefore, it is difficult to comprehend why he would personally pursue this costly litigation. Surely, if he had a true vested interest in the outcome he would have attended at the hearing of this application. He was conspicuously absent. I find that the real party to have been aggrieved by the enactment of the Dual Union Policy is the Carpenters’ Union. This finding is supported by the fact that counsel for Garcia on this application is the same counsel who represented the Carpenters’ Union before the Trial Board, the Appellate Officer and the OLRB.
[150] For the foregoing reasons, the application is dismissed. I am hopeful that this decision will bring closure to the issues between the Labourers’ Union and the Carpenters’ Union respecting the Dual Union Policy. Surely, union funds and resources would be better spent on endeavours more beneficial to the members of these two unions.
[151] Unless the parties are able to reach an agreement as to the payment of costs of the application, the respondents shall file their costs submissions within 15 days and thereafter the applicant shall file his responding submissions within 10 days. The respondents shall file any reply submissions 5 days thereafter.
“Justice A. K. Mitchell”
A. K. Mitchell, J.
Released: July 23, 2014
COURT FILE NO.: 8044/12
DATE: 2014/07/23
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DAVID GARCIA
Applicant
- and -
JIM MACKINNON IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST, BRANDON MACKINNON IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST, TOM DOOL IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST and JOE LIBERATORE IN HIS CAPACITY AS TRUSTEE OF THE LIUNA LOCAL 1059 MEMBERS BENEFIT TRUST and GLOBAL BENEFIT PLAN CONSULTANT INC.
Respondents
REASONS FOR JUDGMENT
Justice A. K. Mitchell
Released: July 23, 2014
[^1]: During submissions, counsel for the Applicant advised the Court that the Applicant was not pursuing an award of punitive damages against the Respondents, Tom Dool, Joe Liberatore and Global Benefit Plan Consultant Inc.
[^2]: 1988 CanLII 4802 (ON SC), [1988] O.J. No. 2060 (H.C.J.)
[^3]: Ibid. at paras.12, 13, 18 and 21.
[^4]: See Mainway Industrial Installations Inc. [1997] O.L.R.D. No. 3382; Manshield (Ont.) Construction Inc. [2005] O.L.R.D. No. 1176; C & D Ltd. [2004] O.L.R.D. No. 1328; Drycoustic Construction Ltd. [1993] O.L.R.D. No. 558; Helm Interiors Ltd. [1989] O.L.R.D. No. 1702; and Vima Group Inc. [2006] O.L.R.D. No. 4106.
[^5]: Benefit Plan, Exhibit “C”, Affidavit of Jim MacKinnon sworn November 19, 2012, the “Act”, Responding Record.
[^6]: Garcia continued as a member of the Labourers’ Union until his expulsion effective July 31, 2011.
[^7]: Dual Union Policy, Exhibit “G”, Affidavit of David Garcia sworn October 17, 2012, Application Record.
[^8]: Carpenters’ Dist. Council of Ontario v. Labourers Int’l Union of N Am., 2012 CanLII 4286 (Ontario Lab. Rel. Bd. Feb. 2, 2012),
[^9]: Decision of the OLRB dated November 20, 2012, Exhibit “G”, Supplemental Affidavit of David Garcia sworn November 22, 2012, Supplemental Application Record.
[^10]: Decision of the OLRB dated May 17, 2013, Exhibit “E”, Affidavit of Vanessa Payne sworn February 26, 2014, Respondents’ Supplementary Record.
[^11]: Trial Board Decision dated June 15, 2011, Application Record, Tab 2-H, pages 3-10.
[^12]: In recognition of Garcia being the first member charged under the Dual Union Policy, Local 1059 asked that Garcia be given a further opportunity to resign before expulsion became effective.
[^13]: LIUNA Appellate Officer Decision dated July 27, 2012, Tab 2-Q, Application Record.
[^14]: Section 1.08.
[^15]: For example, long term disability benefits and medical and dental coverage for retirees.
[^16]: Whishaw v. Stephens, [1970] A.C. 508 (H.L.) at 522.
[^17]: And their dependents.
[^18]: Section 2.03(b).
[^19]: Article 11.
[^20]: (1990), 71. O.R. (2d) 558 (H.C.J.)
[^21]: See section 11.02(c) of the Trust Agreement which provides for a similar restriction on distribution to Employers.
[^22]: The respondent, Global Benefits, is the administrator of the trust fund.
[^23]: The benefits provider was Manulife.
[^24]: See “Eligibility Requirements” contained in LIUNA Local 1059 Benefit Trust Members Booklet, Exhibit “A”, Affidavit of David Garcia sworn October 17, 2012 (the “Benefit Plan Booklet”).
[^25]: See Eligibility Requirements – Maintaining Coverage section of the Benefit Plan Booklet.
[^26]: Supra at para. 27.
[^27]: See Decision of the LIUNA Trial Board dated June 15, 2011, Exhibit “H”, Affidavit of David Garcia sworn October 12, 2012, Application Record.
[^28]: Canadian Aero Service Ltd. v. O’Malley, 1973 CanLII 23 (SCC), [1974] S.C.R. 592 at para. 24.
[^29]: Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6, [2013] 1 S.C.R. 271 (“Indalex”)at paras 185-186 per Cromwell J,
[^30]: Ibid. at para.187.
[^31]: Ibid. at para. 188.
[^32]: Ibid. at paras. 197-198, 201 per Cromwell J.; See also para.70 per Deschamps J.
[^33]: Ibid. at para. 206 per Cromwell J. an, and para. 70 per Deschamps J.
[^34]: Ibid. at paras. 213-214 per Cromwell J., and paras. 68 and 73 per Deschamps J.
[^35]: Ibid. at para. 206 per Cromwell J.
[^36]: Ibid at para 215.
[^37]: Article 5.01(a), Trust Agreement.
[^38]: Supra at para. 213-124 per Cromwell J., and paras. 66 and 73 per Deschamps J.
[^39]: Commercial Union Life Assurance Co. of Canada v. John Ingle Insurance Group Inc. (2000), 2000 CanLII 50972 (ON SC), 22 CCLI (3d) 221 (Ont. SCJ) at paras. 373 and 378 aff’d (2002), 2002 CanLII 45028 (ON CA), 217 DLR (4th) 178 (Ont. CA) at 77.