MacKinnon v. Retirement Bd.,

• Jurisdiction: Ontario
• Judge: Laskin, Gillese and Blair, JJ.A.
• Neutral Citation: 2007 ONCA 874
• Citation: 2007 ONCA 874,(2007), 232 O.A.C. 3 (CA),88 OR (3d) 269,288 DLR (4th) 688,42 BLR (4th) 157,[2007] OJ No 4860 (QL),162 ACWS (3d) 917,232 OAC 3,62 CCEL (3d) 191,[2007] O.J. No 4860 (QL),232 O.A.C. 3,288 D.L.R. (4th) 688,88 O.R. (3d) 269,(2007), 232 OAC 3 (CA)
• Date: 28 June 2007
• Court: Court of Appeal (Ontario)

MacKinnon v. Retirement Bd. (2007), 232 O.A.C. 3 (CA)

MLB headnote and full text

Temp. Cite: [2007] O.A.C. TBEd. DE.071

Wyman MacKinnon (plaintiff/appellant/respondent) v. Ontario Municipal Employees Retirement Board, Borealis Capital Corporation , Borealis Real Estate Management Inc., Ian Collier, R. Michael Latimer and Michael Nobrega (defendants/respondents/appellant)

(C46215; C47044; 2007 ONCA 874)

Indexed As: MacKinnon v. Municipal Employees Retirement Board (Ont.) et al.

Ontario Court of Appeal

Laskin, Gillese and Blair, JJ.A.

December 13, 2007.

Summary:

In 2002, the Ontario Municipal Employees Retirement System (OMERS) plan (the Plan) outsourced the management of its real estate assets to BREMI, a wholly owned subsidiary of BCC, a company in which OMERS had a 27% interest. Collier, Nobrega and Latimer, who had been working for OMERS, had their employment transferred to BCC and became shareholders. The outsourcing arrangement was improvident in that OMERS paid excessive management fees and other fees to BCC or BREMI. The arrangement was terminated. OMERS had to pay cancellation fees and buy-out amounts. OMERS, BCC, BREMI, Collier, Nobrega and Latimer were sued by MacKinnon, who was a member of the Plan, and Ryan, who was an executive with the Canadian Union of Public Employees, the collective bargaining agent for many Plan members. The suit was brought on behalf of the Plan. The plaintiffs sought redress for alleged acts of serious maladministration, including breaches of trust and of fiduciary duty. The plaintiffs moved under rule 10 to have themselves appointed as representative plaintiffs on behalf of all Plan members. The defendants moved under rule 21 of the Rules of Civil Procedure (Ont.) to have the action struck on the basis that it did not disclose a reasonable cause of action. On the rule 10 motion, a motions judge ruled that only MacKinnon could be a representative plaintiff. On the rule 21 motion, the motions judge found that he was unable to determine whether the statement of claim disclosed reasonable causes of actions against the various defendants. The motions judge granted MacKinnon leave to deliver an amended statement of claim without prejudice to the defendants' right to renew their rule 21 motion. The plaintiff delivered an amended statement of claim seeking the following relief: declarations that the defendants had acted negligently and committed various breaches of fiduciary and trust duties; a declaration that the individual defendants had been unjustly enriched at the expense of the OMERS pension fund (the Fund); an accounting for all monies improperly paid by OMERS to the other defendants pursuant to a series of agreements and transactions; an order for equitable tracing of all monies improperly paid by OMERS to the defendants; an order that various agreements under which the monies had been paid were void by reason of illegality; and, alternatively, damages for breach of fiduciary duty and unjust enrichment, which monies were to be returned to the Fund. The defendants renewed their rule 21 motion.

The Ontario Superior Court, in a decision reported [2006] O.T.C. Uned. 821, allowed the motion in part. The court struck: (1) all claims against BCC; (2) all claims against Nobrega and Collier; (3) all but two claims against BREMI; and (4) all claims against Latimer save for the claim based on his alleged participation in the negotiation of the Management Services Agreement. The motions judge did not strike any claims against the OMERS Board. As for costs, the court held that no costs were payable in respect of the rule 10 motion. The court ordered costs of the rule 21 motion in favour of BCC, Collier and Nobrega, payable from the Fund. BREMI's and Latimer's costs were reserved to the trial judge. MacKinnon appealed against those paragraphs in the Order that struck the action as against the various defendants. BCC also appealed. It sought to set aside paragraph 6 of the Order, which permitted the plaintiff to pursue the remedies sought against it. MacKinnon sought leave to appeal the costs order. He asked that his full costs on both the rule 10 and rule 21 motions be ordered payable by the defendants or the Fund. BCC cross-appealed the costs order, asking that the costs ordered in its favour be payable by MacKinnon, rather than the Fund.

The Ontario Court of Appeal allowed the MacKinnon appeal in part and dismissed the BCC appeal. The court granted leave to appeal the costs order and allowed the costs appeal. The court dismissed the cross-appeal on costs.

Equity - Topic 3652

Fiduciary or confidential relationships - Breach of fiduciary relationship - Liability of third parties or accessories (incl. doctrines of knowing receipt or assistance) - [See Equity - Topic 3656.1 and Trusts - Topic 6153 ].

Equity - Topic 3656.1

Fiduciary or confidential relationships - Breach of fiduciary relationship - By pension board - In 2002, the Ontario Municipal Employees Retirement System (OMERS) plan (the Plan) outsourced the management of its real estate assets (the Management Agreement) to BREMI, a wholly owned subsidiary of BCC, a company in which OMERS had a 27% interest - Collier, Nobrega and Latimer, who had been working for OMERS, had their employment transferred to BCC and became shareholders - The outsourcing arrangement was improvident in that OMERS paid excessive management fees and other fees to BCC or BREMI - The arrangement was terminated - OMERS had to pay cancellation fees and buy-outs - OMERS, BCC, BREMI, Collier, Nobrega and Latimer were sued for maladministration, including breaches of trust and of fiduciary duty - They sought to have the action struck for want of a reasonable cause of action - The motion was allowed in part - The Ontario Court of Appeal held: "I would strike the claims against BCC for breach of fiduciary duty with the exception of the claim based on s. 22 of the PBA [Pension Benefits Act (Ont.)] [respecting agents] and which relate to the performance of the various agreements, not their negotiation - I would permit the breach of fiduciary claims against BREMI based on the common law, s. 22 and the related party provisions in [the Federal Investment Regulations (FIR)] to proceed in relation to the performance of the management agreement - I would permit the claims against Latimer in relation to the negotiation of the Management Agreement to proceed on all bases (duties owed at common law, pursuant to s. 22 of the PBA and pursuant to the related party provisions of FIR) - I would strike the breach of fiduciary obligation claims against Collier and Nobrega" - The claim against Latimer was allowed to proceed - See paragraphs 1 to 67.

Master and Servant - Topic 1953

Remuneration - Pension or retirement benefits - Costs or expenses payable from plan - In 2002, the Ontario Municipal Employees Retirement System (OMERS) plan (the Plan) outsourced the management of its real estate assets - The outsourcing arrangement was improvident in that OMERS paid excessive management fees and other fees - The arrangement was terminated - OMERS had to pay cancellation fees and buy-out amounts - OMERS, and others were sued for maladministration by MacKinnon, who was a member of the Plan, and Ryan, who was an executive with the Canadian Union of Public Employees, the collective bargaining agent for many Plan members - The suit was brought on behalf of the Plan - The plaintiffs moved under rule 10 to have themselves appointed as representative plaintiffs on behalf of all Plan members - The defendants moved under rule 21 of the Rules of Civil Procedure (Ont.) to have the action struck on the basis that it did not disclose a reasonable cause of action - On the rule 10 motion, the motions judge ruled that only MacKinnon could be a representative plaintiff - The motions judge allowed the rule 21 motion in part - The motions judge did not award MacKinnon costs of the motions payable from the OMERS pension fund on a full indemnity basis - The Ontario Court of Appeal ruled that the motions judge erred respecting the costs award because the action was brought to ensure the due administration of the pension trust fund and the proceedings were taken on behalf of all beneficiaries - See paragraphs 85 to 92.

Restitution - Topic 62

Unjust enrichment - General - What constitutes - [See Trusts - Topic 6153 ].

Trusts - Topic 6153

The trustee - Breach of trust - Liability of stranger to trust (incl. accessory liability principle) - In 2002, the Ontario Municipal Employees Retirement System (OMERS) plan (the Plan) outsourced the management of its real estate assets (the Management Agreement) to BREMI, a wholly owned subsidiary of BCC, a company in which OMERS had a 27% interest - Collier, Nobrega and Latimer, who had been working for OMERS, had their employment transferred to BCC and became shareholders - The outsourcing arrangement was improvident in that OMERS paid excessive management fees and other fees to BCC or BREMI - The arrangement was terminated - OMERS had to pay cancellation fees and buy-out amounts - OMERS, BCC, BREMI, Collier, Nobrega and Latimer were sued for maladministration, including breaches of trust and of fiduciary duty - Claims of knowing receipt of trust property, knowing assistance and unjust enrichment were made against the non-OMERS defendants - Ruling on appeal from a decision on a motion to strike the action for want of a reasonable cause of action, the Ontario Court of Appeal held that the knowing receipt, knowing assistance and unjust enrichment claims should not be struck - See paragraphs 68 to 83.

Cases Noticed:

Hunt v. T & N plc et al., [1990] 2 S.C.R. 959; 117 N.R. 321, refd to. [para. 19].

Hunt v. Carey Canada Inc. - see Hunt v. T & N plc et al.

Citadel General Life Assurance Co. et al. v. Lloyd's Bank of Canada et al., [1997] 3 S.C.R. 805; 219 N.R. 323; 206 A.R. 321; 156 W.A.C. 321, refd to. [para. 68].

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384, refd to. [para. 76, footnote 5].

Nolan et al. v. Superintendent of Financial Services (Ont.) et al. (2007), 229 O.A.C. 82; 282 D.L.R.(4th) 625, refd to. [para. 86].

Statutes Noticed:

Pension Benefits Act, R.S.O. 1990, c. P-8, sect. 22 [para. 54].

Pension Benefits Standards Act Regulations (Can.), Pension Benefits Standards Regulations, SOR/87-19, sect. 6, sect. 7, sect. 7.1, sect. 7.2 [para. 48, footnote 3]; sect. 17 [para. 62, footnote 4]; Schedule III [para. 48, footnote 3].

Pension Benefits Standards Regulations - see Pension Benefits Standards Act Regulations (Can.).

Counsel:

Mark Zigler, Jonathan Ptak and Anthony Guindon, for Wyman MacKinnon, the appellant/respondent to the Borealis Capital Corporation appeal;

Peter H. Griffin and Eli S. Lederman, for the respondents, Ontario Municipal Employees Retirement Board, Borealis Capital Corporation and Borealis Real Estate Management Inc. and for the appellant, Borealis Capital Corporation;

R. Bruce Smith and Evan Atwood, for Ian Collier, R. Michael Latimer and Michael Nobrega, respondents in the MacKinnon appeal.

This appeal was heard on June 28, 2007, by Laskin, Gillese and Blair, JJ.A., of the Ontario Court of Appeal. The decision of the Court of Appeal was delivered by Gillese, J.A., and released on December 13, 2007.