Tibbett & Britten Group Canada Inc. v. Sobeys Inc., 2016 ONSC 643
CITATION: Tibbett & Britten Group Canada Inc. v. Sobeys Inc., 2016 ONSC 643 COURT FILE NO.: CV-14-10572-00CL DATE: 2016-03-01
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Tibbett & Britten Group Canada Inc., Applicant AND: Sobeys Inc., Respondent
BEFORE: Mr. Justice H.J. Wilton-Siegel
COUNSEL: P Griffin and D. Varah, for the Applicant J. McAleer, for the Respondent
HEARD: July 16, 2015
REASONS FOR JUDGMENT
[1] On this application, the applicant, Tibbett & Britten Group Canada Inc. ("Tibbett"), seeks, among other relief, an order that the respondent, Sobeys Inc. ("Sobeys"), is responsible for funding a deficit that arose on the wind-up of a pension plan for employees at certain warehouses of Oshawa Holdings Limited that were operated by the subsidiary and predecessor of Tibbett, SWO Distribution Centres Ltd. ("Surelink"), pursuant to a warehousing and transportation agreement described below.
Background
[2] Sobeys is the successor of Oshawa Holdings Limited ("Oshawa"), having acquired the shares of Oshawa in 1999.
The Purchase Agreement
[3] Pursuant to an asset purchase agreement dated January 29, 1995 between Surelink and Oshawa (the "Purchase Agreement"), Oshawa sold certain warehouse assets to Surelink in respect of two warehouses of Oshawa from which Surelink agreed to provide warehousing and transportation services to Oshawa pursuant to a warehousing and transportation agreement, also dated January 29, 1995, between Surelink and Oshawa (the "WTA").
[4] The Purchase Agreement provided in section 6.1 that Surelink would offer employment to all employees of Oshawa at the two warehouses on terms and conditions similar to their employment with Oshawa. Section 6.2 provided that Surelink would become the successor employer under the collective agreements covering the warehouse employees. Section 6.3 required Surelink to establish a registered pension plan to cover the hired employees in respect of service with Surelink. In this regard, section 6.2(c) provided that:
(c) Effective as of the Closing date, the Hired Employees shall cease to accrue benefits under the Pension/Benefit Plans and shall commence participating in and accruing benefits under the Purchaser’s Plans in accordance with the terms thereof and all applicable laws.
The Plan
[5] In accordance with section 6.2(a) of the Purchase Agreement, Surelink established the "Surelink Retirement Income Plan for Teamsters "local" 419 Union Employees", effective January 29, 1995 (the "Plan"). The Plan provided that Surelink was both the employer and the administrator of the Plan. There was no reference to Oshawa in the Plan.
[6] Section 14.01 of the Plan required that Surelink contribute to the Plan:
Based upon the estimates of the Accuracy and subject to Section 14.03, each Participating Company will contribute to the Fund such amounts as are required in accordance with, and within the time limits specified in, Applicable Pension Laws. Subject to Applicable Pension Laws, the liability of each Participating Company at any time will be limited to the maximum of such contributions as required by the Plan and Applicable Pension Laws. Notwithstanding the foregoing, contributions made to the Plan by each Participating Company shall only be made if they are eligible contributions in accordance with Revenue Rules.
[7] Section 2.26 of the Plan provided that a "Participating Company" for purposes of the Plan meant Surelink and any company associated with Surelink designated by the board of directors of Surelink. Sobeys was not a Participating Company. The Plan did not provide for contributions to the Plan otherwise than by a Participating Company.
[8] Sections 2.03 and 18.01 of the Plan identified Surelink as the Plan Administrator.
[9] Article 17 of the Plan contemplated that the Plan may be terminated at any time.
The WTA
[10] The WTA contemplated the provision by Surelink of warehousing and transportation services at the Oshawa warehouse locations on a "cost-plus" arrangement, including employee salaries and benefits. Surelink and Oshawa agreed on an initial budget for operational costs and all subsequent annual budgets were to be agreed by the parties subject to Oshawa's right to terminate if a proposed budget could not be agreed upon.
[11] Oshawa relied on section 9.9 of the WTA as the basis for the termination of the WTA described below:
9.9 Other Termination – If, at any time during the term of this agreement, Surelink and the Client are unable, acting reasonably and after having used their respective best efforts, to settle an annual Approved Budget and list of Controllable and Non-Controllable Costs as contemplated in Section 3.4, either party shall have the right, exercisable on not less than 45 days’ prior written notice to the other party given at any time after the expiration of 15 business days from the date on which the dispute has been referred to mediation, to terminate this agreement.
[12] Section 9.12(a) of the WTA provided that on termination:
Within 30 days following the effective date of any expiration or termination of this agreement, for any reason whatsoever, all financial obligations between the parties shall be settled to the effective date.
[13] Section 9.12(c)(i) of the WTA specifically addressed settlement of "Employee Termination Payments":
(c) In addition, within the 30 day period referred to in Section 9.12(a):
(i) the Client shall reimburse Surelink for all other reasonable costs and expenses suffered or incurred by Surelink in connection with the expiration or termination of this agreement, including without limitation all Employee Termination Payments. Surelink shall use commercially reasonable efforts to redeploy such employees in its other operations;
[14] For the purposes of section 9.12(a), "Employee Termination Payments" were defined as follows in Schedule A to the WTA:
“Employee Termination Payments” means, collectively, all reasonable pay in lieu of notice, termination and severance payments and like amounts, and all other reasonable costs and expenses relating to the termination of any Surelink Employees. For greater certainty, Employee Termination Payments shall include any and all reasonable payments required to be made by Surelink to any pension or other employment benefit plans (or to the funding agent or insurer of such plans) in respect of Surelink Employees or former Surelink Employees and any and all costs incurred by Surelink of providing vested benefits to Surelink Employees or former Surelink Employees.
Termination of the WTA
[15] Oshawa terminated the WTA effective March 1, 2000 by letter dated November 17, 1998 (the "Termination Letter"). Surelink acknowledged receipt of, and agreed to, the Termination Letter.
[16] Following the Termination Letter, all of the Surelink employees at the two warehouses were terminated. The closure of the warehouses triggered a wind-up of the Plan as of March 5, 2000 (the "Wind-up").
[17] Following the Termination, and in accordance with section 68(2) of the Pension Benefits Act, R.S.O. 1990, c. P.8 (the "PBA"), Surelink took a number of steps in connection with the Wind-up of the Plan between January 2000 and May 2001. At all times, Surelink was assisted by Aon Consulting ("Aon"), which was the Plan’s actuary.
[18] During this period, Surelink’s actions included notification of the Wind-up to all affected employees and former employees, delivery through Aon to all employees of an "Election of Option" form detailing the forms of pension payments available to such employees, execution of a Certificate of Employer with respect to the Plan on April 17, 2001, and notification of the Wind-up to the Financial Services Commission of Ontario ("FSCO"). FSCO, in turn, sent several letters to Surelink as the Plan "administrator" regarding its obligations in respect of the Wind-up. In addition, by resolution dated May 16, 2001, the Surelink board of directors terminated and declared a wind-up of the Plan, effective March 5, 2000. Lastly, on May 18, 2001, Surelink filed the required wind-up report with FSCO (the "Wind-up Report").
[19] There is no evidence that Sobeys had knowledge of, or participated in, any of the foregoing actions at the time of their occurrence. In particular, there is no mention of Sobeys in the Wind-up Report, nor is there any evidence that Sobeys received or commented on the Wind-up Report before it was filed.
Sobeys’ Involvement with the Administration of the Plan
[20] As is described further below, Sobeys’ relationship to, and involvement in, the Plan changed in or about June 2001. It is clear that during 2001 Sobeys assumed responsibility for the administration of Plan benefits, including, in particular, payment of benefits to members of the Plan in connection with the Wind-up. However, the parties dispute the extent of the responsibilities assumed by Sobeys. Sobeys says that its involvement was limited to administration of Plan benefits to the members of the Plan. Tibbett says that Sobeys took over the entire administration of the Plan, including completion of the Wind-up and the direct funding of any Plan deficit in connection therewith.
[21] In support of their respective positions, each party relies on particular documents that have been located principally dating from the period 2001 to 2010. Rather than segregating and separately discussing the documentation upon which each party has relied in making their submissions, I will review all of the material documentation in chronological order and set out my assessment of the significance to be attached to such documentation later in these Reasons.
Events Giving Rise to this Proceeding
[22] As is described in greater detail below, the existence of a Plan deficit was communicated by Aon to Sobeys in correspondence over the period 2001 to 2010, during which period the Plan deficit grew substantially. However, neither Tibbett nor Sobeys funded the Plan deficit. Aon did not address the situation after 2010 until it became concerned about the significant excess of Plan liabilities over Plan assets in 2014 after an internal review identified the Plan deficit.
[23] In an affidavit sworn May 26, 2014, Stefanie Cesaritti (“Cesaritti”), the current Director of Compensation, Benefits and Retirement for Tibbett, testified that she had been unaware of any outstanding issues pertaining to the Plan since the commencement of her employment with Tibbett in 2008 prior to receiving a letter from Aon dated April 17, 2013. At that time, Aon advised Tibbett that the Plan deficit had not been fully funded and the Plan was therefore not wound up under the PBA. Aon also advised that it estimated that the Plan only had sufficient funding for the next ten months and that, failing agreement between the parties, Aon must notify FSCO of the state of the Plan.
[24] Subsequently, after apparently having been contacted by Aon in or about November 2013, FSCO addressed the situation in a letter dated February 24, 2014, in which FSCO sought further information regarding the status of the Plan. FSCO sent this letter to Cesaritti, David Tutty, the Director, National Pension Programs and Services for Sobeys, (“Tutty”), Aon and Sun Life Financial, which holds the Plan assets.
[25] In a further letter dated March 21, 2014, FSCO advised Cesaritti and Tibbett’s legal counsel that, in its view, Tibbett remained the “employer” for the purposes of the Plan and therefore had the primary obligation to fund the Plan. FSCO also stated that it considered Tibbett to be the “administrator” of the Plan for the purposes of the PBA and, therefore, considered Tibbett to be responsible for completing the Wind-up. FSCO demanded immediate action of Tibbett in regard to each matter.
[26] After reviewing this documentation, Tibbett commenced this application on May 29, 2014. Pending a determination of this application, it is understood that the parties have entered into an arrangement respecting the funding of the Plan.
The Nature of this Proceeding
[27] This application is brought by Tibbett under Rules 14.05(3)(d), (g) and (h) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It seeks, among other things, a declaration that Sobeys is in breach of its contractual obligations under section 9.12 of the WTA to fund the Plan deficit as “Employee Termination Payments”.
[28] The events giving rise to this proceeding occurred principally in the period 2000 to 2002. The evidence before the Court consists principally of certain documentation located by the parties or Aon Hewitt Consulting Inc., the successor to Aon. It is highly likely that more documentation existed but has been destroyed or otherwise lost. The parties are agreed, however, that there is no likelihood of finding any further documentation. There are also only a few parties available to provide evidence regarding the dealings between Sobeys and Surelink/Tibbett in the relevant period.
[29] Tibbett’s institutional knowledge of the relevant events is principally set out in the following affidavits: (1) an affidavit sworn May 30, 2014 of Larry Sylvester, the Regional Director, Human Resources, East and Central and the Director of Compensation and Benefits for Tibbett in the period 2000 to 2002 (“Sylvester”); and (2) affidavits sworn January 27 and April 29, 2015 of Matthew Keough, the Director of Finance, Eastern Region for Tibbett at such time.
[30] Sobeys’ institutional knowledge is principally set out in an affidavit sworn November 21, 2014 of Tutty. Tutty assumed certain responsibilities for administering Plan benefits in March 2002 and assumed full responsibility for overseeing the Plan in 2005, as described below.
[31] Given the limited evidence before the Court, the Court proceeded on this application to draw inferences of fact on a balance of probabilities standard, with the concurrence of the parties. In this regard, I would note that the Court relied principally on its analysis of the documentation set out below and only secondarily on the above-mentioned affidavits. As the parties themselves emphasized, the affidavit evidence is very general and, in the case of Tutty, was limited by the fact that he had no involvement in the events that occurred in the period prior to March 2002 and only limited involvement thereafter until 2005.
The Positions of the Parties
[32] The following summarizes the positions of the parties on the principal issue of liability for the Plan deficit.
Tibbett
[33] Tibbett submits that the evidence demonstrates that Sobeys agreed to assume direct responsibility for funding the Plan deficit and that it failed to do so. It says that the evidence of Sylvester and Keough, who were employed by Tibbett at the time, should be preferred to that of Tutty, who had no involvement in the events of 2001 and could not consult with anyone at Sobeys who did. It says that Sobeys’ assumption of the responsibility for the Plan Wind-up, including direct funding of the Plan deficit, is consistent with the business arrangement between the parties in the WTA. It also says that Sobeys’ conduct beginning in late 2001 is consistent with its assumption of the Plan deficit and that the documentation in existence is also consistent with this position.
Sobeys
[34] Sobeys acknowledges that it agreed to assume responsibility for the administration of the Plan, including signing off on payments out of the Plan, but it says that the available documentation does not evidence its assumption of responsibility for the Plan deficit.
[35] Sobeys submits that the onus of establishing that Sobeys agreed to fund the Plan deficit directly and to wind up the Plan rests with Tibbett and that Tibbett has failed to discharge this onus. It says that neither the WTA nor the Termination Agreement provided for such an obligation, and that there is no evidence of any contract to such effect after the effective date of the termination, being March 5, 2000.
[36] In addition, Sobeys asserts a number of more technical defences, including: (1) that Sobeys was neither the “employer” nor the “administrator” of the Plan for the purposes of the PBA, nor was it an agent of Surelink/Tibbett; (2) that the amount sought by Tibbett in payment of the Plan deficit is unreasonable; (3) that Tibbett’s claim is barred by the provisions of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B; and (4) that the WTA required an agreement in writing to any amendment to its provisions.
Analysis and Conclusions Regarding the Documentary Evidence
[37] In this section, I propose to review the documentation before the Court in chronological order and to set out certain preliminary observations regarding the context and significance of such documentation. I will then set out my conclusions regarding the principal issues in this proceeding based on this review and the supplemental materials provided in the affidavits referred to above.
Review of the Documentary Evidence
[38] The two principal issues in this proceeding are: (1) whether Sobeys was obligated to reimburse Surelink for the amount required to fund the Plan deficit under the terms of the WTA; and (2) whether Sobeys agreed to assume direct responsibility for the Wind-up, including funding of the Plan deficit. The following discussion reviews the relevant documentation in the record pertaining to these issues in chronological order broken into time periods.
The Relevant Contractual Documentation
[39] With respect to the first issue, the relevant documentation has been set out above, being the Purchase Agreement and the WTA. For the reasons set out below, I conclude that the WTA required Sobeys to reimburse Surelink the amount required to fund the Plan deficit that arose on the Wind-up of the Plan.
[40] I would add that, in my view, the parties — including Sobeys in particular — acted in a manner that was entirely consistent with this obligation in the period after termination of the arrangements under the WTA, as set out in the remainder of this section.
[41] This determination does not mean, however, that Sobeys was directly responsible for funding the Plan deficit. That requires a determination of the second issue. The remainder of this section addresses the documentation relative to this issue.
The Period to the End of 2000
[42] There is limited documentation dating from the years 1999 and 2000. The relevant documentation begins with correspondence for 1999 and 2000 from Aon that is directed solely to personnel at Surelink, being Carla Stone, Director of Finance of Surelink at the time, Sharon De’Athe, Manager Compensation and Benefits of Surelink at the time, and Matthew Keough.
[43] In addition, a document entitled “Surelink Closure Budget” includes an amount for the estimated cost of winding up the Plan of $290,000. It is probable that this document was prepared by one or both of the parties to reflect the matters to be addressed in a closing of the financial arrangements between the parties pertaining to the termination of the WTA. The amount of $290,000 is set out in an Aon letter of August 24, 1999, and it is repeated in an Aon letter of January 20, 2000. The absence of any amount for a deficit in the Plan assets is consistent with the information available regarding the Wind-up costs as of the first half of 2000, rather than indicative of the absence of any obligation of Sobeys to fund the deficit directly or by way of reimbursement of Tibbett. In addition, in an email dated April 29, 2000 from an Aon representative to Keough, Aon recommended that the Plan assets be taken out of a balanced fund and invested in a money market fund to minimize on-going losses.
The Year 2001
[44] There is also limited documentary evidence for the first six months of 2001. All of this correspondence involves communications between Aon and Surelink/Tibbett. In a letter from an Aon actuary to Keough on January 10, 2001, Aon estimated the Plan deficit at that time to be at least $500,000 and possibly as high as $600,000. In a further email from Wilson Young (“Young”) of Aon to Sylvester dated May 22, 2001, Young advised of the filing of the Wind-up Report with FSCO and provided an update of the financial position of the Plan as of March 5, 2001.
[45] In a meeting held on May 24, 2001, Young advised De’Athe and Sylvester that the updated estimate of the Plan deficit was approximately $764,000. Significantly, Young’s description of the meeting included a reference to a discussion of alternatives to funding the Plan deficit with the further observation that “[t]he ultimate decision on the funding will be made by Sobeys”. This note is suggestive of an understanding that Sobeys would be taking over responsibility for the Wind-up, including the funding of the Plan deficit.
[46] Consistent with this understanding is correspondence dated June 20, 2001. In an email of that date, Young responded to a request of Sylvester that he set out a list of all pertinent items that Tibbett should discuss with “its client, Sobeys” regarding the Wind-up. In this email, Young estimated the Plan deficit to be between $673,000 and $773,000, or between $698,000 and $808,000 inclusive of professional and other fees.
[47] In a letter of the same date, from Sylvester to Bill Dawson, the Vice-President, Human Resources of Sobeys (“Dawson”), Sylvester enclosed “a summary of the financial implications of the windup using the [Surelink] triggering date [being March 5, 2000]…”. This summary was Young’s email to Sylvester of the same date, as discussed below. The Sylvester letter also refers to Sobeys having taken back administration of retiree benefits. Whether this refers to benefits under the Plan, as well as other post-employment benefits, is unclear.
[48] From this point forward, there is continuing evidence of Sobeys’ involvement in the Plan Wind-up, including the Plan deficit. In particular, there are three significant documents dating from the summer of 2001.
[49] The first is a document entitled “Surelink to Sobeys as at 31 July 2001” (the “July 2001 Reconciliation”). While there is some uncertainty regarding the origin of this document, I think it is probable that this is a Sobeys document that sets out the balance sheet treatment of a closing out of the financial arrangements between the parties pertaining to the termination of such arrangements. Among other matters, the document contemplates a payment on account of Surelink’s portion of the pension wind-up liability in the amount of $547,449.22 as the “CO Portion of pension clearing”. The source of this number is unknown. However, the footnote refers to the Sylvester letter to Dawson of June 20, 2001 enclosing the Wilson letter to Sylvester of that date which estimated the deficit to be in the range of $698,000 to $908,000. The footnote also includes the statement: “[t]he balance represents the provision that had been set aside to cover the deficit in the defined benefit plan”.
[50] This document is followed by a credit note from Surelink to Sobeys signed by Keough (the “Credit Note”). From the notation at the bottom of this page, it is clear that Surelink was expecting to pay the amount shown on this credit note, being $1,353,207.45, and sought confirmation for its records when the monies were received by Sobeys. Tibbett would not have required a confirmation from Sobeys if Tibbett had been the party receiving the funds. It is significant that the amounts on this document are identical to the amounts on the July 31 Reconciliation.
[51] Third, in an email of August 31, 2001, an internal auditor of Sobeys sought information regarding “[t]he money we got back from TBG” in order to post the appropriate prepaid accounts (the “Internal Audit Email”). This is consistent with Tibbett having transferred the monies reflected in the Credit Note to Sobeys on behalf of Surelink.
[52] The July 31 Reconciliation, the August 2001 Credit Note and the Internal Audit Email are consistent with the parties having closed out the financial arrangements between themselves pertaining to the termination of the entirety of their arrangements under the WTA, including management of the Plan and the Wind-up, effective on or about August 22, 2001. In particular, they are consistent with Sobeys having assumed direct responsibility for the funding of any Plan deficit after that date.
[53] Consistent with this conclusion, almost all of the documentation after this date in the record evidences the involvement of Sobeys, but not Surelink, in the Wind-up. In this regard, the following documentation is relevant.
[54] First, in a note dated September 24, 2001, Keough advised John Deinum, who is understood to be an Aon representative, that “Sobeys has now taken over the management of the Pension Plan Windup” and that all future charges are to be invoiced “in respect of this matter” to [Pierre] Boivin at Sobeys. Pierre Boivin ("Boivin") was the Director of Logistics Analysis and Reporting at Sobeys at that time. Boivin appears to have been responsible at Sobeys for the financial aspects of the termination of the WTA. Boivin was also the principal, if not the only, contact at Sobeys for Aon in respect of the Wind-up until he left Sobeys in 2007.
[55] Second, in a letter dated October 12, 2001, Young advised Boivin of Aon’s response to a FSCO letter of August 27, 2001 regarding the Wind-up Report. Significantly, Young included a copy of the Wind-up Report, as well as the FSCO letter. In addition, Young’s letter included a recommendation that the Plan assets should be moved into a money market fund to preserve capital and a further recommendation regarding an appropriate accrual amount on Sobeys’ books to account for its liability for the Plan deficit:
Since May, the market value of assets has declined further by about $400,000. The assets are still invested in a balance fund, although our recommendation was to switch the assets to money market fund for preservation of capital.
If you need to make an accounting entry for the Company liability for the deficit, a reasonable approximation would be $1.3 to 1.5 million deficit. Given that the wind-up date issue is still not resolved, I would wait until FSCO rules on this point before revaluing the benefits and estimating the new deficit.
[56] The Aon recommendation to Sobeys also suggests that Sobeys assumed responsibility for the Plan deficit. There would have been no reason for Aon to have raised its recommendation with Sobeys if Aon had believed that such responsibility continued to rest with Tibbett. Further, as is discussed later, Sobeys did accrue an amount on its balance sheet as a liability for the deficit in the Plan. I accept that such accrual by itself could also represent Sobeys’ estimate of its reimbursement obligation in favour of Tibbett/Surelink. However, the combination of Sobeys’ control of the investment of the Plan assets and the accrual of a liability for the Plan deficit provides further support for the conclusion that Sobeys assumed complete responsibility for the Plan after the financial closing on August 22, 2001, including the responsibility for direct funding of the Plan deficit.
[57] Third, by letter dated November 29, 2001, FSCO advised De’Athe at Surelink that FSCO had approved the Wind-up Report with a wind-up date of March 5, 2001. Shortly thereafter, on December 5, 2001, Young advised Boivin that FSCO had approved the Wind-up Report, enclosing a copy of the FSCO letter. Young also advised Boivin that Sobeys had to fund the pro forma deficit, in the amount of $40,284 as of March 3, 2000, before benefits would be paid out under the Plan. By a subsequent undated letter, Boivin forwarded a cheque in that amount “with respect to the funding of the deficit for the plan”. The invoice for the cheque was dated December 5, 2001. The letter also referred to this amount as “a pro forma deficit as at March 3, 2000”, as determined by Young at Aon.
[58] Sobeys argues that this letter does not acknowledge any responsibility on behalf of Sobeys to fund the Plan deficit or to complete the Wind-up, and therefore contradicts any such suggestion. I think the contrary is correct. The payment of funds is more consistent with the parties having closed out their financial arrangements regarding the Plan on or about August 22, 2001 as described above. On that basis, Sobeys’ payment of the pro forma deficit reflects its on-going financial obligations in regard to the Plan deficit after that date. In such circumstances, the absence of any such acknowledgement supports, rather than contradicts, the conclusion that Sobeys had assumed the responsibility to fund the Plan deficit directly. Given that Sobeys was making the payment, it is more significant that Sobeys failed to include a qualification or denial regarding any obligation in respect of the Plan deficit. It is noteworthy that Boivin characterized the payment as being made on account of “the deficit of the Plan”, rather than on account of the pro forma deficit. While Boivin may well have misunderstood the extent of the Plan deficit, as is discussed further below, any such confusion on his part is not material for the issue on this application.
The Year 2002
[59] The only documentation in 2002 is correspondence between Boivin and Aon. It is consistent with Sobeys having assumed responsibility for funding the Plan deficit directly.
[60] In a letter dated July 5, 2002, Young provided Boivin with an update of the financial position of the Plan as of June 30, 2002. He advised that the Plan deficit was $1,137,000 as of that date and explained the reasons for the growing deficit. He further advised funding $637,000 of the Plan deficit, to be invested in money market funds, and leaving the balance to be invested later.
[61] On September 3, 2002, Boivin emailed Aon regarding its fee and stated “I will be bringing the project to conclusion with you” and “I believe that this project should be completed by calendar year end at the latest.” Apparently, Boivin also called Young to express his concern at the delay in winding up the Plan. In a letter dated September 18, 2002, Young set out a number of factors that he considered were contributing to the delay in the Wind-up and the additional costs. In the concluding paragraph of that letter, Young also asked if Sobeys had made any decision regarding the funding of the Plan deficit referred to in his letter of July 5, 2001.
[62] There are notations on one of the copies of this letter in the record with initials “WY” apparently referring to a conversation on September 29, 2002. The notation includes the following: “Pierre B, advised that – “Sobeys will not pre-fund potential deficit; run down funds before they resume contributions…” As Sobeys relies on this notation in its Factum, I have proceeded on the basis that the Court can rely on this notation as the notes of a conversation between Young and Boivin pertaining to the Wind-up of the Plan. I do not think there is any doubt regarding the reference to the “project” as Sobeys suggests. I note that the notation appears to contradict Sobeys’ position that it did not assume responsibility for the funding of the Plan deficit directly.
The Period 2003 to 2005
[63] The relevant documentation commencing after 2002 can be described briefly.
[64] There is no further documentation in the record, apart from one email in January 2002 from Cheryl Fullerton, then Director of Compensation at Sobeys (“Fullerton”), to Boivin, and certain Aon accounts discussed below, prior to 2005.
[65] In 2005, Aon began sending annual financial updates for the Plan to Sobeys showing the Plan deficit as of the previous year-end. The update as of December 31, 2004 was sent by Young to Boivin by letter dated March 14, 2005. It was followed by a further letter of Young dated March 16, 2005, which set out additional information explaining the increase in the amount of the Plan deficit from 2003 to 2004.
[66] In addition, on April 7, 2005, Young sent a memorandum to both Boivin and Tutty dealing with Plan matters. The first matter dealt with the commuted value of the benefit for a particular member, which is presumably the reason for including Tutty as an addressee. The remainder of the letter dealt with the Plan deficit. Young addressed the reasons for the increase of the Plan deficit over the pro forma deficit as March 5, 2000, which Boivin had caused to be funded as described above. Whether Boivin had understood these circumstances before this date is unclear. The memorandum also dealt with the manner of completion of the Wind-up and settlement of all benefits, which necessarily raised the amount of the Plan deficit that Sobeys would need to fund. Young calculated the Plan deficit had risen to approximately $1,663,400.
[67] As is discussed further below, Boivin transferred responsibility for the Wind-up to Tutty in June 2005. In an email dated June 1, 2005 that Boivin sent to initiate this process, he referred to “having brought the liability up to the recommended level by the pension consultants Aon” and that it was appropriate that the issue of the Plan liability “should be managed by the H.R. pension experts such as you”. In a responding email of June 14, 2005, Tutty agreed to the transfer of responsibilities. He also referred to the matters addressed in Young’s memorandum of April 9, 2005, expressing dissatisfaction with Young’s response regarding the issue of the commuted value of the individual member’s benefit. Tutty went on to say that he would be looking to Aon “for a more comprehensive review of the liability in the not too distant future” and that he had spoken to another individual, apparently within Sobeys, and that “he has agreed to have an account set up here for the liability”, about which Tutty would liaise with Boivin. I think this refers to transferring the pension liability that was accrued earlier by Boivin in his regional accounts to the corporate account at Sobeys’ head office in Nova Scotia.
[68] Consistent with this conclusion, and more generally with the conclusion that Sobeys assumed responsibility for funding the Plan deficit directly in connection with the closing of the financial arrangements pertaining to the WTA, there is a significant email exchange in May 2008 between Tutty and Heidi Jamieson, the corporate controller of Sobeys (“Jamieson”). In her email of May 20, 2008, Jamieson refers to the Plan liability on the corporate books of Sobeys in the amount of $1,988,000 and asks if there have been any changes associated with the Plan or whether it has been wound up. The amount of the liability reflects the amount of the Plan deficit as of December 31, 2006 as set out in the Aon letter dated May 7, 2007. Tutty responded that there had been no changes and that “the windup was approved years ago but completing the process means full funding of the deficit.” He also indicates that he had asked Aon for an update as of December 31, 2007, which was received shortly thereafter. Of significance, there is no suggestion in this letter that Tibbett is responsible for the growing deficit.
The Period After 2005
[69] The financial updates regarding the Plan for the years ended December 31, 2005, 2006, 2007, 2008 and 2009 were all sent to Tutty. They reflected a growing deficit. There are no further updates after the financial update for the year ended December 31, 2009.
[70] In addition, the matter of the Wind-up was brought to the attention of the Sobeys Pension Committee on a number of occasions between 2006 and 2010.
[71] In this regard, Tutty prepared a memorandum dated May 17, 2006 for the Sobeys Pension Committee which briefly summarized the background to the Plan and its status as of December 31, 2004, including the Plan deficit. The memorandum described the fact that the Plan deficit at the date of approval of the Wind-up Report had risen to approximately $1,000,000 from the amount of the pro forma deficit at March 5, 2000. The memorandum also states that “[t]he decision was made not to pursue the windup”.
[72] The record includes redacted minutes of meetings of the Sobeys Pension Committee in February 2009 and June 2010 updating the status of the Plan, including the Plan deficit, at such times. In his cross-examination, Tutty testified that, at its meeting on February 9, 2009, the Pension Committee determined that Sobeys was not responsible for the Plan, but acknowledged that the basis of that decision was unclear. Tutty also testified that, following that meeting, Sobeys reversed its balance sheet liability for the Plan deficit but did not advise FSCO, Aon or Tibbett.
[73] In 2006, Sobeys hired a new Vice-President, Compensation, David McMaster (“McMaster”), who had a relationship with Aon. In a memorandum dated April 26, 2009 from Tutty to McMaster regarding personnel who had been involved with the Plan in the past, Tutty concluded: “…so between Cheryl [Fullerton], Bill [Dawson] and Pierre [Boivin] there certainly seemed to be a broad understanding that Sobeys was responsible for making decisions about this plan.”
[74] The only other documentation in the record consists of a number of accounts of Aon for services rendered in connection with the Plan. The accounts for the period prior to September 1, 2001 or October 1, 2001 appear to have been addressed to Tibbett and refer to services provided to Tibbett. The accounts after that period were addressed to Boivin, and later Tutty, at Sobeys, but refer to services provided to Tibbett and Sobeys. The last account in the file pertains to a period in 2006. Thereafter, Aon sent its accounts to McMaster and later another individual and omitted any reference to Tibbett in its description of the services provided. I do not place great weight on these invoices, although I note that the change in the addressee of the accounts after August 31, 2001 is consistent with Sobeys having assumed responsibility for all financial matters pertaining to the Plan.
Analysis and Conclusions Regarding the Principal Issues on the Application
[75] There is no doubt that Tibbett, as the successor to Surelink, is liable under the PBA for any Plan deficit that arose as a result of the Wind-up of the Plan. The issue on this application is whether Sobeys is contractually liable to Tibbett to fund the amount of Plan deficit as it exists today. I propose to address this issue by considering the following two questions:
Was Sobeys, as the successor to Oshawa, contractually liable under the WTA to fund any deficit in the Plan arising as a result of the Wind-up of the Plan?
Did Sobeys assume responsibility for funding the Plan deficit directly?
Is Sobeys Contractually Liable to Fund the Deficit Under the WTA
[76] I am satisfied that the WTA required Sobeys to reimburse Surelink the amount required to fund the deficit that arose on the Wind-up of the Plan. I reach this conclusion for the following reasons.
[77] First, the language of section 9.12(a) of the WTA, and the definition of “Employee Termination Payments” for such purposes, is clear on its face. Any deficit in the Plan arising as a result of the Wind-up of the Plan would appear to comprise “payments required to be made by Surelink to any pension…plans in respect of Surelink Employees or former Surelink Employees”.
[78] Second, such interpretation is consistent with the business context in which the WTA was negotiated and executed. The business deal between the parties was a cost-plus arrangement under which Oshawa was to bear all the operational costs of the particular warehouses and Surelink would earn a fee net of those expenses. This arrangement was evidenced by the annual budget for such expenses that required the agreement of both parties at the beginning of each fiscal year.
[79] In this regard, it does not appear to be disputed that Surelink’s contributions to the Plan on an on-going basis were included in the annual budget for which it was reimbursed by Oshawa. There is no logical basis for distinguishing such on-going liability under section 14.01 of the Plan and an obligation to fund any Plan deficit arising on a winding-up of the Plan in order to satisfy the obligations to members under the Plan.
[80] Third, Sobeys suggests that the absence of a reference to the Plan deficit in Schedule B to the Termination Letter is evidence that Sobeys had no responsibility for the Plan Wind-up, including the funding of any Plan deficit. However, Schedule B is directed to outstanding obligations at the date of the Termination Letter, not to obligations as of the date of termination, or in respect of the termination, of the WTA.
[81] Fourth, Sobeys’ post-contractual conduct is also supportive of this conclusion. The evidence demonstrates that Sobeys funded the pro forma deficit in January 2002 upon advice by Aon of the relevant amount. Further, and very significantly, Sobeys accrued a liability in its accounts for the Plan deficit which was transferred in 2005 to the Sobeys corporate accounts. While this accrual was reversed in 2009, there is no evidence that there was any documentary evidence before the Pension Committee to justify that decision.
Did Sobeys Assume Responsibility for the Plan Deficit?
[82] The principal issue on this application is whether Sobeys and Tibbett reached an agreement under which Sobeys assumed direct responsibility for the Wind-up including funding the Plan deficit. I conclude on a balance of probabilities that it did. I find that the evidence is more consistent with a finding that Sobeys agreed with Tibbett to be responsible for directly funding the Plan deficit than with a finding that Tibbett remained responsible for such funding with Sobeys’ obligation being restricted to reimbursing Tibbett for the amount of any such payment after the Wind-up was completed. In this regard, the following considerations, certain of which have already been mentioned in the review of the documentary evidence in this matter, are relevant.
[83] First, the evidence points to a financial closing of all the matters pertaining to the termination of the WTA on or about August 22, 2001. As a business matter, there was a need to close out all the arrangements with a final reconciliation payment, given the number of issues involved in such termination arrangements. Moreover, such a closing would have been consistent with the provisions of section 9.12(a) of the WTA, apart from the timing set out therein which, as mentioned, was not realistic.
[84] It is probable that the Plan arrangements would have been included in such financial closing. For the reasons set out above, I am satisfied that “Employee Termination Payments” includes any amount paid on account of a Plan deficit in the Plan arising as a result of the Wind-up of the Plan. Inclusion of payments of such amounts in the financial closing would therefore have been consistent with the WTA, specifically section 9.12(c)(i) which addressed Employee Termination Payments and provided that the reconciliation contemplated by section 9.12(a) would include such payments.
[85] The evidence for the conclusion that the financial closing included arrangements pertaining to the Plan, including any Plan deficit, consists principally of documentary evidence. The July 2001 Reconciliation, the Credit Note and the Internal Audit Email support the conclusion not only that the parties closed out the financial arrangements pertaining to the WTA on or about August 22, 2001, but also that such closing included all matters pertaining to the Plan. In addition, the accrual of a liability for the Plan deficit, which continued on the Sobeys corporate accounts until 2009, provides further support for this conclusion.
[86] There is also secondary support for such conclusion in Sylvester’s testimony in his affidavit that he believed that there had been a global settlement and that operations under the WTA were not terminated for approximately eighteen months after the notice of termination became effective on March 5, 2000. I think it is clear that Sylvester understood the financial closing to include the financial arrangements pertaining to the Plan.
[87] Second, there is an evident business logic to an agreement under which Sobeys assumed direct liability for funding any Plan deficit given Sobeys’ obligation to fund such Plan deficit as an “Employee Termination Payment”. By assuming direct responsibility for such obligation, rather than simply reimbursing Tibbett/Surelink for the final deficit, Sobeys could manage the outcome. Such an agreement also provided Sobeys with other options, given that it had its own pension plans, as is evidenced by Boivin’s apparent decision not to fund the Plan deficit immediately. Moreover, Sobeys had an interest in ensuring that the Plan was dealt with properly given that a certain number of the employees involved had returned to work for Sobeys. Conversely, Surelink had no continuing relationship with its former employees and the relationship between Sobeys and Surelink was such that a reimbursement process might have led to protracted and expensive dispute resolution.
[88] In this regard, it is also important that the evidence establishes that Sobeys exercised control over the investments of the Plan assets after 2001. As mentioned above, the combination of Sobeys’ control of the investment of the Plan assets and the accrual of a liability for the Plan deficit also indicates that Sobeys assumed complete responsibility for the Plan after the financial closing on August 22, 2001, including responsibility for the Plan deficit.
[89] Third, the cessation of correspondence between Aon and Tibbett/Surelink after September 2001 reflects the fact that Aon apparently accepted and acted on Keough’s direction that Sobeys was henceforth responsible for the Plan, including the Plan deficit. This is an important consideration given Aon’s professional responsibility for the Wind-up.
[90] Fourth, the absence of any communications between Sobeys and Tibbett concerning the Wind-up and, in particular, regarding the Plan deficit, also favours the conclusion that Sobeys had assumed the responsibility for funding the Plan deficit directly. If either Boivin or Fullerton had understood that Tibbett remained liable to fund the Plan deficit, I think it is probable that either or both of them would have raised the fact of the growing deficit, if only to protect Sobeys’ position that it was not liable to reimburse Tibbett for such deficit on the grounds that the increasing deficit resulted from Tibbett’s inaction.
[91] I agree with Sobeys that particular individual statements in various emails are not necessarily evidence that Sobeys agreed to fund the Plan deficit. I also accept that merely being copied on correspondence in 2001 is not sufficient to make such a finding. However, viewed as a whole, I think the email evidence much more strongly favours the conclusion that Sobeys agreed to assume responsibility for the Plan deficit rather than the conclusion that Tibbett continued to remain responsible for funding the Plan deficit with Sobeys’ obligation being restricted to reimbursing Tibbett for the amount of such payment. As mentioned, among other things, if that had been the case, I am satisfied that Sobeys would have taken some action to protect itself in the face of a growing deficit that it would have attributed to Tibbett’s inaction.
[92] Fifth, the evidence regarding the involvement of the Sobeys personnel dealing with the Wind-up does not contradict this conclusion in any persuasive manner.
[93] The evidence suggests that Boivin and Fullerton did not understand what Young intended in referring to the Plan pro forma deficit as at March 5, 2000. It is clear from an internal email dated January 24, 2002 from Fullerton to Boivin that each of these individuals proceeded, at least as late as early 2002, on the basis that "a full wind-up" had been approved by FSCO and that no additional funding was required from Sobeys. In addition, Tutty says that Fullerton informed him in March 2002, when he assumed responsibility for pension services administration, that his only obligation was to authorize the benefits to Plan members. This is quite consistent with an understanding on her part that the Plan deficit had been fully funded by payment of the pro forma deficit as of March 5, 2000. Even if Fullerton intended to convey no more than a description of Tutty's services at the time, I think that it is probable that she would have mentioned the Plan deficit, which had continued to grow, if she had been aware of it at the time.
[94] For these reasons, I do not see how the state of knowledge of Fullerton or Tutty constitutes evidence that Sobeys did not assume responsibility for the Wind-up, including funding the Plan deficit. The fact that Fullerton understood this to be the case is not, by itself, supportive of Sobeys’ position. As mentioned, Fullerton was not responsible for the financial aspects of the termination of the WTA on behalf of Sobeys. Similarly, the fact that Tutty says that he did not understand that Sobeys had assumed an obligation to fund the Plan deficit is not supportive. Tutty acknowledges that he received his information solely from Fullerton. Moreover, while Tutty was made aware of the existence of the Plan deficit in 2005 when Boivin transferred responsibility for the Wind-up to Tutty, he mistakenly believed for some time thereafter that the Plan was an Oshawa pension plan that Sobeys had inherited on its purchase of Oshawa.
[95] If there is evidence of Sobeys’ personnel that supports Sobeys’ position, Boivin would be the knowledgeable individual. Within Sobeys, Boivin had responsibility for the financial closing pertaining to the WTA. He was the principal contact with Aon dealing with the Wind-up in the period 2001 to 2005, including the funding of the Plan and the investment of Plan assets. Aon made Boivin aware of the existence of a growing deficit commencing in 2002. However, there is no evidence from Boivin. There is also no evidence as to whether he would be available to testify and, if so, why he did not provide evidence.
[96] I would also note that the fact that Fullerton and later Tutty had responsibility for the continuing administration of the Plan and that there is little evidence of contact between Boivin and these other parties, particularly with Tutty who worked in a different location and in a different department, may suggest an institutional explanation for the circumstances that have given rise to this proceeding. I do not, however, base the determinations herein on such speculation. I rely on these circumstances only to the extent of concluding that the evidence of Tutty regarding his understanding of the liability of Sobeys in regard to the Plan deficit is not probative in the present circumstances.
[97] Nor is the fact that Sobeys Pension Committee determined in 2009 to reverse the accrual in the Sobeys financial accounts for the Plan deficit of any probative value. By 2009, Sobeys’ institutional knowledge of the circumstances giving rise to the deficit was limited to Tutty, who himself was working on second-hand knowledge. Moreover, Young had apparently left Aon and thus was unavailable to explain the circumstances giving rise to the continuing existence of the Plan. By this time, the Plan deficit had become material. In these circumstances, it is not surprising that Sobeys chose to believe that it had no responsibility for the Plan deficit and reversed the accrual in its accounts associated with the Plan deficit, notwithstanding the absence of any basis for that conclusion.
[98] Sixth, Sobeys argues that the absence of any representations by Tibbett/Surelink to FSCO or Clarica/Sun Life Financial that Sobeys was responsible for the Plan deficit is significant. I do not agree. There was no evident need to tell FSCO, as Tibbett could not relieve itself of its statutory liabilities. Nor was there a need to describe the arrangements between Sobeys and Tibbett/Surelink in the Wind-up Report, if indeed they had been finalized by the date of the Report, as Tibbett remained liable under the PBA. Moreover, Aon, rather than Sobeys, had the responsibility for communications with FSCO regarding the Wind-up. For the same reasons, I do not consider the absence of any amendment to the Plan to substitute Sobeys as the “employer” is meaningful. There was also no reason why Clarica/Sun Life Financial needed to know that Sobeys would be contractually liable to Tibbett for the Plan deficit. Moreover, in view of Boivin’s payment of the amount of the pro forma deficit in December 2001, Clarica/Sun Life Financial effectively learned of Sobeys’ involvement.
[99] There was, however, a need for Aon to know if decisions regarding the Plan were going to be taken by Sobeys on a going-forward basis. Accordingly, the fact that Tibbett told Aon in September 2001 that Sobeys was going to be responsible for management of the Plan going forward is significant and is supportive of the conclusion that Sobeys assumed direct responsibility for funding the Plan.
[100] Lastly, based on the review of the documentation above, in my opinion, the only material, unexplained issue is the significance of the item in the amount of $547,449.22, shown as “CO Portion of pension clearing” on the July 31 Reconciliation and the Credit Note. The source of this item, as well as the basis for the amount of the item, is open to conflicting interpretations. However, the most probable explanation is Keough’s explanation that this amount represented the return to Sobeys of moneys paid to Surelink for which Surelink accrued, but did not pay, a liability. Moreover, the size of the amount and the footnote to the July 2001 Reconciliation suggest that this amount was associated with a quantification of the Plan funding requirements and the expenses of the Plan Wind-up.
[101] Based on the foregoing, I therefore find that Sobeys is liable to fund the Plan directly in the amount of the Plan deficit as it exists today.
Analysis and Conclusions Regarding Additional Arguments of Sobeys
[102] In its Factum and at the hearing, Sobeys made a number of additional submissions that I will address in turn below.
Sobeys’ Legal Relationship
[103] First, Sobeys argues that neither the facts nor the provisions of the PBA support a finding that it was the employer or administrator of the Plan. I agree. At all times, Tibbett remained the “employer” and the “administrator” of the Plan for the purposes of the PBA and was subject to the statutory obligations thereunder in such capacities.
[104] However, the issue on this application is different. The issue is whether, as a contractual matter between Sobeys and Tibbett or Surelink, Sobeys agreed to assume and perform Surelink’s obligations as the “employer” of the Plan under the PBA.
[105] Second, Sobeys says it was not an agent of Tibbett for any purpose relating to the Plan. To the extent it was an agent for purposes of administration of the Plan, Sobeys says such agency did not extend to an obligation to fund the Plan deficit.
[106] Again, the issue in this proceeding is not one of agency but whether or not Sobeys contractually agreed to fund the Plan deficit directly. The extent to which it assumed any administrative functions with respect to the Plan is suggestive, but by no means dispositive, of whether Sobeys agreed to fund the Plan deficit directly.
Is the Deficit Amount Sought by Tibbett a "Reasonable Payment"?
[107] The definition of “Employee Termination Payments” obligated Oshawa to pay "any and all reasonable payments required to be made by Surelink to any pension or other benefit plan…". In its Factum, although not at the hearing of this application, Sobeys submitted that the Plan deficit amount sought by Tibbett is not reasonable for three reasons which will be addressed in turn.
[108] First, Sobeys says that Surelink's failure to file the Wind-up Report until May 18, 2001 had the effect of increasing the Plan deficit. It says Tibbett was required to file the Wind-up Report within six months of the proposed wind-up date, being March 5, 2000, pursuant to section 29(3) of General Regulation, R.R.O. 1990, Reg. 909 under the PBA. Accordingly, Tibbett was required to file the Wind-up Report by September 5, 2000.
[109] There is, however, no evidence that Tibbett acted unreasonably in its approach to filing the Wind-up Report. To the contrary, there is evidence that the preparation of the Report was delayed as a result of a dispute with the union that represented the affected employees regarding the appropriate date of the Wind-up. There is also no evidence that the delay in filing the Wind-up Report should be regarded as unreasonable given the customary practice in the pension industry.
[110] Second, Sobeys says Surelink failed to move the assets of the Plan out of market-based funds and into a long-term bond fund or other stable investment in a timely fashion which would have reduced losses in the Plan. Sobeys points to an increasing Plan deficit in each year from 1998 to and including 2000. It also highlights advice from Aon, with respect to its valuation as of January 1, 1999, that Surelink should transfer the Plan assets to a long-term bond fund to immunize the Plan against future losses.
[111] It is probable that the failure to move the assets of the Plan into a long-term bond fund or other stable investment in a timely fashion contributed to the growing deficit in the Plan. However, given the determination above that Sobeys assumed responsibility for funding the Plan directly from and after August 22, 2001, any such submission must be limited to any Plan deficit arising in the period prior to that date.
[112] The submission must be rejected for the following reasons. Any such action is clearly barred by the statutory limitation period under the Limitations Act, 2002. More importantly, if there had been such a claim, I have no doubt that it would have been asserted in connection with the financial reconciliation on the termination of the WTA. In fact, it is possible that the $547,449.22 transfer to Sobeys on August 22, 2001 shown as “CO Portion of pension clearing” on the July 31 Reconciliation and the Credit Note includes an amount in respect of a compromise of such claim. In any event, as set out above, there is evidence that Sobeys participated in the decisions regarding the investment of the Plan assets. In addition, in the absence of the assertion of any such claim in any contemporaneous documentation, I do not think that there is any evidence in the record that Tibbett acted unreasonably in its management of the Plan assets prior to August 22, 2001.
[113] Third, Sobeys says that Tibbett failed to comply with the terms of the WTA in respect of funding the Plan deficit. Sobeys argues that sections 9.12(a) and 9.12(c) of the WTA required Tibbett to fund the Plan deficit within thirty days following the effective date of the expiration of the termination of the WTA and then request a reimbursement from Sobeys of such amount.
[114] There is, however, no evidence that Sobeys asserted such a claim at the time. Therefore, there is no evidence that Sobeys considered at the time that Tibbett acted unreasonably in including the financial obligations pertaining to the Wind-up in the financial reconciliation of the WTA operations that closed on August 22, 2001. In effect, Sobeys has waived any claim it might otherwise have had on this basis. More significantly, as discussed below, I consider that the parties, in effect, entered into a new agreement regarding their relationship pertaining to the Wind-up as of that date under which any such claim was subsumed.
Limitation Period Defence
[115] Sobeys argues that Tibbett ought to have known that the Plan had not been funded or wound up long before April 7, 2013, when Cesaritti says she, and therefore Tibbett, first learned of the status of the Plan deficit as described above, and therefore “discovered” the claim for the purposes of the Limitations Act, 2002.
[116] Sobeys relies on the provisions of section 5(2) of the Limitations Act, 2002. It says that, because section 75 of the PBA required the Plan employer to meet its funding obligations within five years from the wind-up date, being March 5, 2000, the Plan deficit had to be funded by March 5, 2005. It says that Tibbett failed to take any steps to verify whether the deficit had been funded and the Plan wound up within this time frame or to require Sobeys to take such action. It argues that such inaction constitutes a failure to exercise due diligence as required under section 5(2). In effect, Sobeys argues that Tibbett had a statutory obligation to take such action and, had it complied with such obligation, Tibbett would have discovered the Plan deficit on or prior to March 5, 2005. Sobeys argues on this basis that Tibbett’s claim in this application ought to have been discovered before March 5, 2005 and is, therefore, now statute barred.
[117] This submission involves two separate issues that, in my opinion, have been conflated.
[118] First, Tibbett had an undisputed statutory obligation to fund the Plan deficit and to wind up the Plan by March 5, 2005. There is no doubt that Tibbett should have ensured that Sobeys funded the Plan deficit and completed the Wind-up by that date. It could not relieve itself of such obligations by arranging for Sobeys to perform them. Tibbett did not comply with these obligations. There may well be regulatory consequences as a result of such inaction. However, that is not the issue on this application.
[119] In this proceeding, Sobeys seeks, in effect, to convert Tibbett’s statutory obligations into a de facto duty to Sobeys to ensure that Sobeys complied with its contractual obligations to Tibbett. While there may be an argument that this would be good policy, there is no authority for such a proposition. Further, the parties did not canvass any policy implications of such a determination on this application. It would be inappropriate for the Court to do so on its own. Accordingly, I do not accept this aspect of Sobeys’ argument.
[120] Second, setting aside Tibbett’s statutory obligations, Sobeys argues that Tibbett was not duly diligent insofar as it did not police Sobeys’ performance of Sobeys’ contractual obligations. Again, I know of no authority for such an argument.
[121] Sobeys argues that Tibbett had all the facts, or ought to have had all the facts, regarding the matters upon which its claim is based. This is correct regarding the facts pertaining to its obligations in respect of winding up the Plan, including funding any Plan deficit. However, it is not correct regarding the facts pertaining to Sobeys’ breach of its agreement with Tibbett to be directly responsible for the Wind-up, including direct funding of the Plan deficit. Sobeys’ argument proceeds on the basis that Tibbett should have known that Sobeys would fail to honour its own contractual commitment to Tibbett and, accordingly, Tibbett should have been vigilant in policing Sobeys’ compliance. I do not think that this is a reasonable basis for the assertion of a lack of due diligence. Accordingly, I also reject this aspect of Sobeys’ submission.
[122] On the basis of the foregoing, I conclude that the Limitations Act, 2002 does not operate to bar Tibbett’s claim in this application.
[123] As a related matter, Sobeys also argued that Tibbett’s inaction as described above, and its failure to maintain any contact or oversight with either Aon or Clarica/Sun Life Financial after FSCO approved the Wind-up Report, contributed to the Plan deficit or increased the Plan deficit. It relies on the doctrine of “contributory fault” in contract.
[124] I have concluded above that Sobeys has not established that Tibbett failed to act with due diligence. For the same reason, I am of the view that Sobeys cannot establish that Tibbett contributed to the Plan deficit such that its claim against Sobeys should be reduced. Sobeys was, or ought to have been, equally aware of the requirements under the PBA with respect to funding of the Plan deficit and the winding up of the Plan. It did not require any action on the part of Tibbett to complete such actions within the necessary timeframe. It was also made aware of the increase in the Plan deficit, and the reasons for such increase, in the Aon reports for the years ended December 31, 2004 to December 31, 2009 inclusive.
[125] In these circumstances, I see no basis for a finding of contributory fault on the part of Tibbett. Sobeys failed to perform its contractual obligations with knowledge, or constructive knowledge, of the financial consequences of failing to do so even without communications from Tibbett.
The Agreement in Writing Clause
[126] Lastly, Sobeys says that it cannot be held to have “assumed” the obligations to fund the Plan deficit without an agreement in writing between the parties to the WTA. This argument is based on section 13.5 of the WTA, which provided as follows:
No modification of or amendment to this agreement shall be valid or binding unless in writing and duly executed by both of the parties and no waiver of any breach of any term or provision of this agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, shall be limited to the specific breach waived.
[127] I do not accept this argument for two reasons. First, the provisions of sections 9.12(a) and (c) of the WTA were manifestly incapable of performance in accordance with the timelines provided therein. The parties necessarily had to depart from the express terms of the WTA. Sylvester stated in his affidavit that it can take up to two years from the notice of termination to wind up operations under arrangements of the nature contemplated by the WTA. There is also no evidence that Sobeys ever objected to the failure to complete the financial arrangements between them pertaining to the termination of the WTA within thirty days of the effective termination date. In these circumstances, although I suspect that there was a global settlement that has been lost as Sylvester suggested, the exchange of documentation between the parties constitutes evidence of a written agreement.
[128] Second, and more important, the arrangements in or about August 22, 2001, under which Sobeys assumed the obligation to fund the Plan deficit directly, rather than reimbursing Tibbett, constitute the entering into of a new agreement rather than an amendment of the WTA.
[129] Effectively, as of August 22, 2001, the parties completed the termination arrangements under the WTA. In other words, the obligations under the WTA were performed by the parties and the agreement was spent. What remained was the need for an arrangement for the ongoing administration of the Plan, including the Wind-up and the funding of the Plan deficit. This was the subject of a further agreement between the parties, as described above, for which consideration was given by Surelink in the amount shown on the Credit Note. I think such agreement is best conceptualized as a new agreement between the parties under which Sobeys assumed all decision-making authority, and all financial obligations, in respect of the Plan.
[130] Accordingly, I do not think that the provisions of section 13.5 of the WTA are applicable in the present circumstances.
Conclusion
[131] Based on the foregoing, I conclude that Tibbett is entitled to a declaration that Sobeys is obligated to pay the current amount of the Plan deficit to the Plan pursuant to its obligations under section 9.12 of the WTA.
[132] If the parties are unable to agree on the costs of this proceeding, it is the Court’s understanding that the parties will advise the Court in order that the Court can fix a schedule for the delivery of costs submissions.
Wilton-Siegel J.
Date: March 1, 2016