Quebec Court of Appeal Dismisses Retiree Class Action

The Quebec Court of Appeal released its decision on March 10, 2005 in the Hydro-Quebec Pensioners Association (the Association) class action against Hydro-Québec. The appeal was dismissed without costs by unanimous decision of the Court.

The Association was challenging amendments to the Hydro-Québec Pension Plan (the Plan) negotiated by Hydro-Québec with its unions during the 1993-1999 period. The amendments had improved early retirement benefits, authorized payment from the Plan fund of administration expenses and provided both Hydro-Québec and its participating employees with contribution holidays. The amendments had been funded from the Plan’s surplus.

The Association claimed these amendments had been made without the consent of the retirees and that Hydro-Québec had breached its fiduciary obligation to treat the retirees impartially. The Association was seeking an order for the payment, from the Plan surplus, of additional benefits to the retirees valued at $377.5 million.

The Court concluded that the consent of the retirees was not required in respect of the contested amendments whether pursuant to the Quebec Supplemental Pension Plans Act, the Quebec Civil Code, the Plan terms or employment law.

The Court ruled the retirees’ benefits under the Plan continued to be governed by the employment contract in effect when they retired. Neither the collective labour agreement nor the individual contract of employment in effect when they retired supported the retirees’ claim for additional benefits nor did it allow them to challenge the improved benefits granted to active employees.
The Court also stated that, though the members of the Plan had a “conditional” right to the Plan’s surplus upon termination of the Plan, such right was uncertain and was dependant on four future and uncertain events occurring, namely (i) the termination of the Plan (ii) the existence of a surplus on Plan termination; (iii) each member being entitled to benefits upon termination of the Plan; and (iv) the allocation of surplus to the Plan members pursuant to an agreement to share the surplus or an arbitration award. Because of the nature of the retirees’ right to surplus, the Court concluded the retirees were not entitled to ask for a distribution of surplus while the Plan was ongoing.

The Court considered the Association’s claim that Hydro-Québec had breached its fiduciary obligation to treat the retirees impartially in respect of the benefit improvements negotiated with its unions. The Court ruled that Hydro-Québec was acting as employer when it negotiated the benefit improvements and was not acting as trustee of the Plan fund. It therefore did not have any obligation to ensure the improvements to the Plan would be equitable vis-à-vis the retirees.
Lastly, the Court examined the Plan amendments providing Hydro-Québec with a contribution holiday and authorizing the payment of administration expenses from the Plan fund. Relying on the Supreme Court of Canada decision in Air Products, the Court concluded that contribution holidays and the payment of administration expenses from the Plan fund did not constitute an appropriation by Hydro-Québec of the Plan fund, nor a reduction of the fund’s assets.

A petition for leave to appeal has been filed with the Supreme Court of Canada.
Hydro-Québec was represented by Michel Benoit and Josée Dumoulin of Osler, Hoskin & Harcourt LLP, and by in-house counsel Nicole Lemieux. The Association was represented by Marcel Rivest and Guy Desautels of Rivest Schmidt.