On April 8, 2010, the Supreme Court of Canada refused leave to appeal from the decision of the Federal Court of Appeal in Buschau et al. v. Rogers Communications Inc., 2009 FCA 258. This decision is the latest chapter in a 15-year saga of protracted and complex litigation involving three separate proceedings, one decided on its merits in the Supreme Court of Canada. The latest appellate decision affirms the existence of a broad policy-laden role for the Superintendent of Financial Institutions in relation to the administration of pension plans and, in particular, their termination. In order to place this ruling in context, some background is required.
In 1974, a defined benefit pension plan was established by Premier Cablesystems Ltd. Members of the plan were entitled to any surplus existing on plan termination. Premier was acquired by Rogers and subsequently amalgamated with various Rogers companies. In 1984, the Premier plan was closed to further membership as Rogers had decided to offer another plan to new employees. In 1992, Rogers amended the Premier plan to merge it with the company's consolidated plan for other employees. The Premier plan had accumulated a sizable actuarial surplus by this time. A full merger of the two plans would have allowed the assets of the Premier plan to be used to fund benefits for the members of the consolidated plan.
In 1995, the members of the Premier plan brought an action in BC Supreme Court (Buschau #1), which included a claim that the 1992 merger was unlawful. The BC Court of Appeal ultimately ruled, relying on overriding trust law principles, that the amendment power in the Premier plan did not permit Rogers to merge the pension trusts in a manner that would adversely affect the existing trust rights of the Premier plan members.
In Buschau #1, the members had argued that one of their protected rights was to terminate the Premier plan by invoking the rule in Saunders v. Vautier (which permits all beneficiaries of a trust, acting together, to require that the trust be terminated and the trust assets distributed). The Court of Appeal held that if the members had a Saunders v. Vautier right to terminate the Premier plan, it would “remain unaffected by the merger.” The court did not, however, decide that the rule in Saunders v. Vautier applied. Nor did the Court of Appeal decide whether Rogers would be entitled to reopen the closed Premier plan to new members. The members sought leave to appeal, which was refused by the Supreme Court of Canada.
The members then brought a petition in the BC Supreme Court to terminate the Premier plan under the rule in Saunders v. Vautier (Buschau #2). Their object was to obtain the accumulated surplus in the plan, to which they would only be entitled if the Premier plan was terminated. Rogers determined not to proceed with any amendments to reopen the Plan until that legal issue was resolved.
In Buschau #2, the Court of Appeal decided that the rule in Saunders v. Vautier was available to the members and that it would be an act of bad faith for Rogers to reopen the Premier plan to new employees as this would defeat the members' right to terminate the plan under the rule. This decision was overturned by the Supreme Court of Canada in June 2006.
The Supreme Court held that the rule in Saunders v. Vautier did not apply to employee pension trusts and that the members did not have the power to terminate the Premier plan on their own. The majority held that the Superintendent of Pensions (now the Superintendent of Financial Institutions) had the power under the Pension Benefits Standards Act, 1985 (PBSA) to terminate a pension plan at the request of the members and over the objection of the employer in circumstances where the employer was taking lawful contribution holidays. The minority held that the taking of lawful contribution holidays did not give the Superintendent the power to terminate a plan.
Speaking for the majority, Justice Marie Deschamps observed, having regard to the comments of the Court of Appeal, that reopening the plan may be problematic, but held that the questions of whether the plan could be reopened or whether it should be terminated should be left to the Superintendent. Justice Deschamps identified the key question for the Superintendent as whether there was “any legitimate purpose in keeping the Plan. …” In the circumstances, if the Superintendent did not approve a future amendment to reopen the plan, it may well have been difficult to find such a legitimate purpose. Justice Deschamps also noted that “[t]he Superintendent can rule on questions of both fact and law” and that “The provisions of the PBSA and the regulations concerning the duties of the employer are well within the Superintendent's interpretive jurisdiction.”
On June 30, 2006, the members applied to the Superintendent for termination of the plan. The legal question of the applicability of the rule in Saunders v. Vautier having been decided, Rogers proceeded with amendments to the Premier plan. Rogers rescinded the 1992 merger amendment and then reopened the previously merged but now separate Premier plan to new employees of Rogers Cable Communications Inc., the successor employer to Premier Cablesystems. Rogers submitted to the Superintendent that the termination request should be considered in light of these amendments.
Before the Superintendent, the members' primary submission was that Buschau #1 had decided that the amendments were unlawful and that Buschau #2 had essentially directed a termination of the plan. In response, Rogers argued that Buschau #1 had considered the validity and effect of the merger amendment, but that an amendment to reopen the plan to future employees of the successor employer (made in July 2006) was not before the court and was not decided. Rogers argued that Buschau #2 had raised the issue of Rogers's power to reopen, but did not decide the question, preferring to leave it to the Superintendent. Rogers submitted that the amendments could not be a breach of trust, since the provision of pension benefits to such employees was contemplated by the original plan and trust documents.
In April 2007, the Superintendent decided that the amendments were lawful and that the continued existence of the plan was “a worthy goal.” She then considered the request for termination in light of the approved amendments and held that the circumstances did not warrant termination.
It was not enough, in the Superintendent's view, that termination would lead to a surplus distribution to the current members of the plan.
One might have thought this would be the end of the story, but not so. The members brought a petition for judicial review of the Superintendent's decision (Buschau #3). The arguments concerning Buschau #1 and #2 were reiterated by the parties in the Federal Court.
The Federal Court Trial Division held that the Superintendent's decision was unreasonable and remitted the matter back to her. The Federal Court of Appeal allowed an appeal from that decision and dismissed the application for judicial review, holding that the prior decisions in Buschau #1 and 2 had not decided the amendment issue in favour of the members and that it was open for the Superintendent to decide the issue.
The Federal Court of Appeal noted that the Superintendent's decision was “grounded in her assessment of the policy and objectives of the PBSA,” and specifically, that those objectives were best served by “ensuring the continued existence of a properly funded, properly supervised pension plan ….” It held that it was “difficult to see how winding up the plan and the trust would represent a more faithful adherence to the objectives of the PBSA than the measures approved by the Superintendent.” Applying a test of reasonableness, the Court of Appeal found no grounds for interfering with the Superintendent's interpretation of the relevant provisions of the Act.
Counsel for the applicants has applied again to the Superintendent to review the matter.
As noted at the outset of this article, the Supreme Court of Canada's 2006 decision in Buschau #2, coupled with its recent ruling refusing leave to appeal in Buschau #3, confirms the broad policy role of the Superintendent in relation to a plan termination. It is also now clear that the Superintendent has the power to address questions of law and fact that bear on the exercise of a discretion to terminate a pension plan and that, with few exceptions, the standard of review will be reasonableness.
Finally, the judgment of the Supreme Court in Buschau #2 and the decision of the Superintendent (as affirmed by the Federal Court of Appeal), recognize a societal value in encouraging employers to establish pension plans for their existing and future employees. In that context, it is both understandable that the Superintendent would view the reopening of the Premier plan and its continuation as a “worthy goal.”
Irwin Nathanson, QC, and Stephen Schachter, QC, of Nathanson, Schachter & Thompson LLP represented the respondent, Rogers Communications Inc.
Sally Gomery of Ogilvy Renault LLP acted as agent for the respondent.
John Laxton, QC, and Robert Gibbens of Laxton Gibbens represented the applicants, Sandra Buschau et al.
Brian Crane, QC, of Gowling Lafleur Henderson LLP acted as agent for the applicants.
In 1974, a defined benefit pension plan was established by Premier Cablesystems Ltd. Members of the plan were entitled to any surplus existing on plan termination. Premier was acquired by Rogers and subsequently amalgamated with various Rogers companies. In 1984, the Premier plan was closed to further membership as Rogers had decided to offer another plan to new employees. In 1992, Rogers amended the Premier plan to merge it with the company's consolidated plan for other employees. The Premier plan had accumulated a sizable actuarial surplus by this time. A full merger of the two plans would have allowed the assets of the Premier plan to be used to fund benefits for the members of the consolidated plan.
In 1995, the members of the Premier plan brought an action in BC Supreme Court (Buschau #1), which included a claim that the 1992 merger was unlawful. The BC Court of Appeal ultimately ruled, relying on overriding trust law principles, that the amendment power in the Premier plan did not permit Rogers to merge the pension trusts in a manner that would adversely affect the existing trust rights of the Premier plan members.
In Buschau #1, the members had argued that one of their protected rights was to terminate the Premier plan by invoking the rule in Saunders v. Vautier (which permits all beneficiaries of a trust, acting together, to require that the trust be terminated and the trust assets distributed). The Court of Appeal held that if the members had a Saunders v. Vautier right to terminate the Premier plan, it would “remain unaffected by the merger.” The court did not, however, decide that the rule in Saunders v. Vautier applied. Nor did the Court of Appeal decide whether Rogers would be entitled to reopen the closed Premier plan to new members. The members sought leave to appeal, which was refused by the Supreme Court of Canada.
The members then brought a petition in the BC Supreme Court to terminate the Premier plan under the rule in Saunders v. Vautier (Buschau #2). Their object was to obtain the accumulated surplus in the plan, to which they would only be entitled if the Premier plan was terminated. Rogers determined not to proceed with any amendments to reopen the Plan until that legal issue was resolved.
In Buschau #2, the Court of Appeal decided that the rule in Saunders v. Vautier was available to the members and that it would be an act of bad faith for Rogers to reopen the Premier plan to new employees as this would defeat the members' right to terminate the plan under the rule. This decision was overturned by the Supreme Court of Canada in June 2006.
The Supreme Court held that the rule in Saunders v. Vautier did not apply to employee pension trusts and that the members did not have the power to terminate the Premier plan on their own. The majority held that the Superintendent of Pensions (now the Superintendent of Financial Institutions) had the power under the Pension Benefits Standards Act, 1985 (PBSA) to terminate a pension plan at the request of the members and over the objection of the employer in circumstances where the employer was taking lawful contribution holidays. The minority held that the taking of lawful contribution holidays did not give the Superintendent the power to terminate a plan.
Speaking for the majority, Justice Marie Deschamps observed, having regard to the comments of the Court of Appeal, that reopening the plan may be problematic, but held that the questions of whether the plan could be reopened or whether it should be terminated should be left to the Superintendent. Justice Deschamps identified the key question for the Superintendent as whether there was “any legitimate purpose in keeping the Plan. …” In the circumstances, if the Superintendent did not approve a future amendment to reopen the plan, it may well have been difficult to find such a legitimate purpose. Justice Deschamps also noted that “[t]he Superintendent can rule on questions of both fact and law” and that “The provisions of the PBSA and the regulations concerning the duties of the employer are well within the Superintendent's interpretive jurisdiction.”
On June 30, 2006, the members applied to the Superintendent for termination of the plan. The legal question of the applicability of the rule in Saunders v. Vautier having been decided, Rogers proceeded with amendments to the Premier plan. Rogers rescinded the 1992 merger amendment and then reopened the previously merged but now separate Premier plan to new employees of Rogers Cable Communications Inc., the successor employer to Premier Cablesystems. Rogers submitted to the Superintendent that the termination request should be considered in light of these amendments.
Before the Superintendent, the members' primary submission was that Buschau #1 had decided that the amendments were unlawful and that Buschau #2 had essentially directed a termination of the plan. In response, Rogers argued that Buschau #1 had considered the validity and effect of the merger amendment, but that an amendment to reopen the plan to future employees of the successor employer (made in July 2006) was not before the court and was not decided. Rogers argued that Buschau #2 had raised the issue of Rogers's power to reopen, but did not decide the question, preferring to leave it to the Superintendent. Rogers submitted that the amendments could not be a breach of trust, since the provision of pension benefits to such employees was contemplated by the original plan and trust documents.
In April 2007, the Superintendent decided that the amendments were lawful and that the continued existence of the plan was “a worthy goal.” She then considered the request for termination in light of the approved amendments and held that the circumstances did not warrant termination.
It was not enough, in the Superintendent's view, that termination would lead to a surplus distribution to the current members of the plan.
One might have thought this would be the end of the story, but not so. The members brought a petition for judicial review of the Superintendent's decision (Buschau #3). The arguments concerning Buschau #1 and #2 were reiterated by the parties in the Federal Court.
The Federal Court Trial Division held that the Superintendent's decision was unreasonable and remitted the matter back to her. The Federal Court of Appeal allowed an appeal from that decision and dismissed the application for judicial review, holding that the prior decisions in Buschau #1 and 2 had not decided the amendment issue in favour of the members and that it was open for the Superintendent to decide the issue.
The Federal Court of Appeal noted that the Superintendent's decision was “grounded in her assessment of the policy and objectives of the PBSA,” and specifically, that those objectives were best served by “ensuring the continued existence of a properly funded, properly supervised pension plan ….” It held that it was “difficult to see how winding up the plan and the trust would represent a more faithful adherence to the objectives of the PBSA than the measures approved by the Superintendent.” Applying a test of reasonableness, the Court of Appeal found no grounds for interfering with the Superintendent's interpretation of the relevant provisions of the Act.
Counsel for the applicants has applied again to the Superintendent to review the matter.
As noted at the outset of this article, the Supreme Court of Canada's 2006 decision in Buschau #2, coupled with its recent ruling refusing leave to appeal in Buschau #3, confirms the broad policy role of the Superintendent in relation to a plan termination. It is also now clear that the Superintendent has the power to address questions of law and fact that bear on the exercise of a discretion to terminate a pension plan and that, with few exceptions, the standard of review will be reasonableness.
Finally, the judgment of the Supreme Court in Buschau #2 and the decision of the Superintendent (as affirmed by the Federal Court of Appeal), recognize a societal value in encouraging employers to establish pension plans for their existing and future employees. In that context, it is both understandable that the Superintendent would view the reopening of the Premier plan and its continuation as a “worthy goal.”
Irwin Nathanson, QC, and Stephen Schachter, QC, of Nathanson, Schachter & Thompson LLP represented the respondent, Rogers Communications Inc.
Sally Gomery of Ogilvy Renault LLP acted as agent for the respondent.
John Laxton, QC, and Robert Gibbens of Laxton Gibbens represented the applicants, Sandra Buschau et al.
Brian Crane, QC, of Gowling Lafleur Henderson LLP acted as agent for the applicants.
