Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
Legal Update: Have the Courts been
Inconsistent in the Application of Trust
Law?
Kathryn Bush
Partner
Blake, Cassels & Graydon LLP
I.
The Supreme Court Lays the Foundation in
Schmidt v. Air Products of Canada Ltd.
2008 General Meeting
Assemblée générale 2008
1.
2.
What happened in Schmidt
Rules Emanating from Schmidt
i.
ii.
iii.
iv.
v.
Trust v. Contractual Analysis
The Trust is the Prevailing Document
A Pension Trust is not a Purpose Trust
Powers to Change Surplus Rights are
Limited
A Resulting Trust is Unlikely to Arise
II.
The Application of Trust Law Post-Schmidt
1.
Hockin v. Bank of British Columbia


2008 General Meeting
Assemblée générale 2008
2.
Crownx Inc. v. Edwards


3.
trust
surplus return and right to charge expenses
against the fund denied
contract
surplus return permitted
Markle v. Toronto (City)


trust
right to charge expenses against the fund
denied
4.
Anova Inc. Employee Retirement Pension
Plan (Administrator of) v. Manufacturers
Life Insurance Co.


2008 General Meeting
Assemblée générale 2008
5.
trust
benefit improvements were denied
Aegon Canada Inc. v. ING Canada Inc.


trust
merger prohibited
III. The Supreme Court Clarifies Schmidt:
Buschau v. Rogers Communications Inc.
1.
What happened in Buschau


2008 General Meeting
Assemblée générale 2008
2.
Buschau #1



3.
trust
merger prohibited
trust
merger prohibited
members retain distinct rights
Buschau #2



trust law principles applied
application of Saunders v. Vautier
designated beneficiaries consent required
4.
Buschau #3


2008 General Meeting
Assemblée générale 2008
5.
SCC
Saunders v. Vautier found not to apply in
this case therefore not all trust principles
apply to pension trusts
Important Comments from SCC in Buschau
i.
ii.
Employers have rights in pension plans
Pension Plans are intended to be long-term
instruments
iii. Pension benefits serve broader social goals
iv. Pension Plans are only a vehicle for holding
and managing funds
v. Pension Plans are heavily regulated
6.
Review Process Mandated by SCC in
Buschau
2008 General Meeting
Assemblée générale 2008
i.
On the facts were the assets of the plan
impressed with a trust? If yes move on to
(ii) and (iii).
ii. Which principles of trust law are
applicable? Taking into consideration the
context and purpose of pension plans, the
terms of the particular plan documents and
the specific legislation governing the
pension plan.
iii. How do the applicable trust law principles
apply to the pension plan in question?
7.
Where is Buschau now?


2008 General Meeting
Assemblée générale 2008

Superintendent refused to order the
termination of the pension plan
Federal Court ordered the Superintendent to
reconsider
On appeal to Federal Court of Appeal
IV. The Application of Trust Law Post-Buschau:
1.
Kerry (Canada) Inc. v. DCA Employees
Pension Committee
2008 General Meeting
Assemblée générale 2008
Facts:
- trust
- 2000 Pension Plan converted to dc for
new members
- language of the plan changed to permit
expenses to be charged to the pension
plan
Result: - can added beneficiaries to a trust and dc
or db benefits are permitted
- silence does not mean that the plan
sponsor must pay plan expenses
2008 General Meeting
Assemblée générale 2008
2.
Sutherland v. Hudson’s Bay Company
Facts: - trust
- 1991 HBC acquired Simpsons
- 1994 and 1998 Simpsons Pension Plan was
amended to permit affiliates to participate
in the pension plan
Result: - Court permitted the addition of the
affiliated company employees
- contribution holidays permitted – even for
dc benefits
Appeal scheduled for December 1 and 2, 2008
2008 General Meeting
Assemblée générale 2008
3.
Burke v. Hudson’s Bay
Facts: - trust
- 1987 asset sale
- pension asset transfer did not include
surplus
Result: - trial decision held it was a breach of trust
not to transfer surplus
- Court of Appeal reversed the lower court
decision – no obligation to transfer surplus
Leave to Appeal to SCC is pending
2008 General Meeting
Assemblée générale 2008
4.
Lennon v. Rockwell Automation Canada Inc.
Facts: - trust
- 1997 amalgamation of companies and
sought to merge the pension plans
- Superintendent permitted the merger
Result: - Financial Services Tribunal and Ontario
Divisional Court found that exclusive
benefit trust language did not prohibit a
merger
2008 General Meeting
Assemblée générale 2008
5. Lomas v. Rio Algom Ltd.
Facts: - trust
- employees seeking the right to
terminate a pension plan
Result: - Divisional Court refused to strike the
claim
Appeal pending
6. Professional Institute of the Public
Service of Canada v. Canada Attorney
General
2008 General Meeting
Assemblée générale 2008
–
–
–
no trust
statutory plans
surplus and investment of pension plans
were not subject to trust rules
7.
Montreal Trust
–
–
–
2008 General Meeting
Assemblée générale 2008
–
trust
79(3)(b) of PBA (Ontario) requires that the
pension plan provide for the payment of surplus
Superintendent refused to approve a surplus
sharing arrangement due to s. 79(3)(b)
an appeal to the Financial Services Tribunal has
been argued and a decision is pending