Burke et al. v. Hudson's Bay Co. et al., (2010) 268 O.A.C. 1 (SCC)

• Judge: McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ.
• Court: Supreme Court (Canada)
• Case Date: October 07, 2010
• Jurisdiction: Canada (Federal)
• Citations: (2010), 268 O.A.C. 1 (SCC);2010 SCC 34;324 DLR (4th) 498;[2010] EXPT 2234;[2010] 2 SCR 273;60 ETR (3d) 1;[2010] EXP 3280;[2010] SCJ No 34 (QL);EYB 2010-180092;[2010] ACS no 34;268 OAC 1;DTE 2010T-674;193 ACWS (3d) 1332;JE 2010-1818;406 NR 109

Burke v. Hudson's Bay Co. (2010), 268 O.A.C. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

.........................

Temp. Cite: [2010] O.A.C. TBEd. OC.062

Peter Christopher Burke, Richard Fallis and A. Douglas Ross, personally and in a representative capacity (appellants) v. Governor and Company of Adventurers of England Trading into Hudson's Bay and Investors Group Trust Company Ltd. (respondents)

(32789; 2010 SCC 34; 2010 CSC 34)

Indexed As: Burke et al. v. Hudson's Bay Co. et al.

Supreme Court of Canada

McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ.

October 7, 2010.

Summary:

Hudson's Bay Co. (HBC) had a contributory defined benefit pension plan for its employees. HBC sold one of its divisions. The successor employer for the 1,200 transferred HBC employees established a successor pension plan. HBC transferred enough of the pension fund ($12.6 Million) to ensure payment of the transferred employees' defined benefits. An additional $1.27 Million was transferred to cover early retirement benefits. None of the estimated actuarial surplus in the pension fund ($94 Million) was transferred. Transferred employees, as representative plaintiffs, sought a declaration that HBC had improperly taken contribution holidays and paid pension plan administration expenses out of the pension fund. The transferred employees also claimed that HBC was required to treat all employees with an even hand by transferring a pro rata share of the actuarial surplus into the successor pension plan.

The Ontario Superior Court, in a judgment reported [2005] O.T.C. 1076, allowed the action in part. HBC was entitled to take contribution holidays out of the actuarial surplus and pay pension plan administration expenses out of the pension fund. However, the transferred employees were entitled, based on equitable trust principles, to have their pro rata share of the HBC actuarial surplus transferred into the successor pension plan. HBC appealed the ordered transfer of a pro rata share of the surplus. The transferred employees cross-appealed the finding that HBC was entitled to pay the administration expenses out of the pension fund.

The Ontario Court of Appeal, in a judgment reported (2008), 236 O.A.C. 140, allowed the appeal and dismissed the cross-appeal. The transferred employees were not entitled to have a pro rata share of the HBC surplus transferred into the successor pension plan. The administration expenses were properly paid out of the pension plan. The transferred employees appealed.

The Supreme Court of Canada dismissed the appeal. The pension plan documentation permitted HBC to charge the administration expenses to the pension fund and HBC was not obligated to transfer a pro rata share of the actuarial surplus to the successor pension plan. The transferred employees were contractually entitled only to their defined benefits. The amount transferred by HBC was sufficient to ensure payment of those defined benefits.

Master and Servant - Topic 1953

Remuneration - Pension benefits - Costs or expenses payable from plan - Hudson's Bay Co. (HBC) had a contributory defined benefits employee pension plan - From 1961 to 1982, the plan was in deficit - HBC paid all pension plan administration expenses - From 1982 to 1986, because of actuarial surpluses, HBC paid administration expenses out of the plan - In 1987, HBC sold one of its divisions - The purchaser became the successor employer for the transferred employees and established a pension plan - HBC transferred enough of the pension fund to the successor pension plan to satisfy the transferred employees' defined benefits - The Ontario Court of Appeal rejected the transferred employees' submission that HBC was not entitled to pay the administration expenses out of the pension fund - Absent legislation governing payment of pension plan expenses, the issue was to be determined by interpreting the plan documentation - The original documentation and subsequent amendments entitled HBC to pay all plan and fund expenses out of the fund - The court stated that HBC "was at liberty from the Plan's inception to pay Plan administration expenses from the Fund. Despite that, it paid such expenses until 1982. In relation to trustee compensation and Fund management expenses, pursuant to art. 21 of the 1961 Trust Agreement, [HBC] was obliged to pay those expenses until 1971. In 1971, art. 21 was validly amended with the result that, thereafter, [HBC] was entitled to pay all Fund management expenses, apart from trustee fees, from the Fund. Nonetheless, [HBC] paid all trustee fees and Fund management expenses until 1982. Between 1982 and 1984, pursuant to the 1971 amendment, [HBC] was obliged to pay the trustee fees, which it did. However, Fund management expenses were paid from the Fund. After 1984, as a result of a further amendment of the trust agreement, all Plan and Fund expenses - including trustee fees - could be paid from the Fund and they were" - The Supreme Court of Canada agreed, stating that "absent a statutory or common law authority creating an obligation on the employer to pay for expenses, such an obligation must arise from the text and the context of the pension plan documents ... There was no statutory obligation on HBC to pay expenses." - The documentation entitled HBC to pay administration expenses out of the pension fund - See paragraphs 27 to 35.

Master and Servant - Topic 1959

Remuneration - Pension benefits - Distribution of surplus funds - Hudson's Bay Co. (HBC) had a contributory defined benefit pension plan for its employees - HBC sold one of its divisions - The successor employer for the 1,200 transferred HBC employees established a successor pension plan - HBC transferred enough of the pension fund to fund the transferred employees' defined benefits - None of the actuarial surplus in the pension fund was transferred - The transferred employees claimed that HBC was required to treat all employees with an even hand by transferring a pro rata share of the surplus into the successor pension plan - The trial judge held that the employees were entitled, based on equitable trust principles, to have their pro rata share of the surplus transferred into the successor pension plan - The Ontario Court of Appeal disagreed - The transferred employees were contractually entitled only to their defined benefits - The amount transferred by HBC was sufficient to fund those defined benefits -The pension plan documentation, which was not considered by the trial judge, did not entitle transferred employees to have a pro rata share of the surplus - The original Trust Agreement did not provide that HBC's contributions were irrevocable and did not preclude part of the fund reverting to HBC or being used other than for the exclusive benefit of employees - The original plan text limited employees to the commuted value of their defined benefits - A subsequent amendment provided for a refund of any surplus to HBC - The plan, as restated in 1985, did not alter the entitlement to benefits or surplus - The Supreme Court of Canada affirmed that HBC had no duty to transfer a pro rata share of the surplus to the successor pension plan - The equitable interests of the employees were limited to their defined benefits, they had no interest in or entitlement to the surplus and, accordingly, there was no duty of even-handedness applicable to the surplus - The court stated that "HBC's legal obligations with respect to its employees, including the fiduciary duties that it owed to the transferred employees, were satisfied in this case by protecting their defined benefits" - See paragraphs 36 to 95.

Cases Noticed:

Stearns Catalytic Pension Plans, Re, [1994] 2 S.C.R. 611; 168 N.R. 81; 155 A.R. 81; 73 W.A.C. 81, dist. [para. 26].

Schmidt v. Air Products of Canada Ltd. - see Stearns Catalytic Pension Plans, Re.

Monsanto Canada Inc. v. Superintendent of Financial Services (Ont.) et al., [2004] 3 S.C.R. 152; 324 N.R. 259; 189 O.A.C. 201; 2004 SCC 54, refd to. [para. 26].

Nolan et al. v. Superintendent of Financial Services (Ont.) et al., [2009] 2 S.C.R. 678; 391 N.R. 234; 253 O.A.C. 256; 2009 SCC 39, refd to. [para. 26].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 39].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 39].

Buschau et al. v. Rogers Communications Inc. et al., [2006] 1 S.C.R. 973; 349 N.R. 324; 226 B.C.A.C. 25; 373 W.A.C. 25; 2006 SCC 28, refd to. [para. 42].

Saunders v. Vautier (1841), 1 Cr. & Ph. 240; 41 E.R. 482 (Ch. D.), refd to. [para. 42].

Authors and Works Noticed:

Hepburn, Samantha J., Principles of Equity and Trusts (4th Ed. 2009), p. 63 [para. 54].

Kaplan, Ari N., Pension Law (2006), p. 43 [para. 10].

Snell's Equity (31st Ed. 2005), paras. 2-05 [para. 54]; 2-06 [para. 58]; 27-24 [para. 87].

Waters, Donovan W.M., The Law of Trusts in Canada (3rd Ed. 2005), pp. 42 [para. 39]; 966, 967 [para. 85]; 1203, 1204 [para. 87].

Counsel:

David C. Moore and Kenneth G.G. Jones, for the appellants;

J. Brett Ledger, Christopher P. Naudie and Craig T. Lockwood, for the respondents.

Solicitors of Record:

Bellmore & Moore, Toronto, Ontario, for the appellants;

Osler, Hoskin & Harcourt, Toronto, Ontario, for the respondents.

This appeal was heard on May 18, 2010, before McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ., of the Supreme Court of Canada.

On October 7, 2010, Rothstein, J., delivered the following judgment in both official languages for the Court.