Supreme Court of Nova Scotia Rules in Favour of Michelin in Pension Plan Proceedings

Since 1970, Michelin has operated manufacturing facilities in Nova Scotia. In 1972, Michelin established a pension plan for employees at these facilities. The plan originally provided that the employees would contribute a portion of their salaries to the plan, although this requirement was removed in 1987. The balance of the contributions, and contributions since 1987, have been made by Michelin. From 1984 to 1988 and from 1995 to 2001, Michelin took “contribution holidays” during which it did not contribute to the plan at all. It did so based on the advice of the plan actuary that the assets in the fund were more than sufficient to pay for the accrued benefits.

Everett Smith, a long-term Michelin employee, commenced an application in the Nova Scotia Supreme Court alleging that Michelin had failed, in various ways, to properly administer the pension plan. After an interlocutory application brought by Michelin, Mr. Smith's claim was pared down so that the only issue was whether the contribution holidays taken by Michelin were authorized under the terms of the plan. Mr. Smith claimed that the terms of the 1972 plan required Michelin to make contributions according to a fixed formula and did not permit contribution holidays, and that subsequent amendments that purported to authorize contribution holidays were invalid. The parties were in agreement that if Mr. Smith's claim was successful Michelin would have been required to contribute approximately $275 million to the plan. This claim was certified as a class proceeding, and the application was heard in May, 2007.

In a decision dated October 30, 2007, the Supreme Court of Nova Scotia comprehensively ruled in favour of Michelin. Madam Justice Hood held that: the contribution holidays were not a breach of trust; Michelin was never required to contribute according to a fixed formula; Michelin's translation of the original plan text, which was in French, was correct; under either translation of the original plan text, Michelin was authorized to take contribution holidays; subsequent amendments to the plan were permitted; and contribution holidays were permitted by the plan text, as amended.

Michelin was represented in-house by George Sutherland and by a legal team from Osler, Hoskin & Harcourt LLP including Brett Ledger and Alex Cobb (litigation) and Ian McSweeney and Evan Howard (pension & benefits), as well as by Peter McLellan, QC from Stewart McKelvey.

Paul Vogel and Iain Sneddon of Cohen Highley LLP, and Ronald Pink, QC of Pink Breen Larkin acted for Mr. Smith.