St. Marys Paper Inc. (Bankrupt), Re, (1996) 206 N.R. 81 (SCC)

• Judge: La Forest, L'Heureux-Dubé, Gonthier, Cory, McLachlin, Iacobucci and Major, JJ.
• Court: Supreme Court (Canada)
• Case Date: January 22, 1996
• Jurisdiction: Canada (Federal)
• Citations: (1996), 206 N.R. 81 (SCC);131 DLR (4th) 606;38 CBR (3d) 88;26 OR (3d) 416;96 OAC 321;206 NR 81;[1996] 1 SCR 3;1996 CanLII 246 (SCC)

St. Marys Paper Inc. (Bankrupt), Re (1996), 206 N.R. 81 (SCC)

MLB headnote and full text

[French language version follows English language version]

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

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Ernst & Young Inc., Trustee in Bankruptcy (appellant) v. Price Waterhouse Ltd., in its capacity as Administrator of the Pension Plan for Participating Unions of St. Marys Paper Inc. and the Pension Plan of Non-Union Employees of St. Marys Paper Inc., Former Employees of St. Marys Paper Inc. and the Communications, Energy and Paperworkers Union of Canada and Locals 47-0, 67, 69 and 133 thereof (respondents) and Pension Commission of Ontario (intervener)

(File No. 24259)

Indexed As: St. Marys Paper Inc. (Bankrupt), Re

Supreme Court of Canada

La Forest, L'Heureux-Dubé, Gonthier, Cory, McLachlin, Iacobucci and Major, JJ.

January 22, 1996.

Summary:

St. Marys Paper Inc. was placed in bank­ruptcy. Ernst & Young was appointed trustee. Ernst & Young decided to keep the mill running in the hope of attracting a better price should the assets be sold. Ernst & Young rehired the employees on a week to week basis. Ernst & Young also agreed to continue the pension funds. However, Ernst & Young made it clear that it would not be liable for any obligations of St. Marys in­cluding unfunded pension fund liabilities. The employees agreed to the arrangements. Some three months later, the administrator of the pension funds informed Ernst & Young that it was liable for the unfunded liabilities on the ground that it was an "employer" within the meaning of the Pension Benefits Act. Ernst & Young applied for a declaration that it was not liable for the unfunded obli­gations.

The trial court, in a decision reported (1993), 15 O.R.(3d) 359; 107 D.L.R.(4th) 715; 1 C.C.P.B. 27, held that Ernst & Young had made itself the "employer" and was liable for the unfunded obligations. Ernst & Young appealed.

The Ontario Court of Appeal, Abella, J.A., dissenting, in a decision reported 73 O.A.C. 1, dismissed the appeal. Ernst & Young appealed.

The Supreme Court of Canada held that the appeal was moot and dismissed the appeal.

Major, J., took no part in this decision.

Bankruptcy - Topic 2708

Trustees - Liability - Personal - Unfunded obligations of pension fund - St. Marys Paper Inc. (St. M.) was placed in bankruptcy - Ernst & Young (EY) was appointed trustee - EY decided to continue to operate St. M.'s paper mill - EY agreed to rehire the employees and to continue the pension funds - However, EY made it clear that it would not be liable for any obligation of St. M.'s regarding, inter alia, unfunded pension fund liabilities - Subsequently, the pension fund's adminis­trator advised EY that by rehiring the employees, it had become an "employer" within the meaning of the Pension Benefits Act and was liable for the pension funds' unfunded liabilities - The Ontario Court of Appeal held that EY was liable for the unfunded liabilities - The Supreme Court of Canada dismissed EY's appeal after holding that the appeal was moot.

Constitutional Law - Topic 3614

Paramountcy of federal statutes - Over­lapping legislation - Conflict - What constitutes - St. Marys Paper became a bankrupt - Ernst & Young (EY) was the trustee - EY decided to rehire the employees and operate the mill - EY agreed to keep the pension funds going but stated that it would not be liable for any unfunded liability - Subsequently, the administrator of the pension funds claimed against EY for the plans' unfunded liabil­ities on the ground EY was the "employer" under the Pension Benefits Act, R.S.O. 1990, c. P-8 - EY submitted that it could not be the "employer" under the Pension Benefits Act because it would conflict with the federal Bankruptcy and Insolvency Act by elevating a claim provable in bank­ruptcy to the prior­ity reserved for the expenses of the trustee - The Ontario Court of Appeal held there was no consti­tutional conflict - The Supreme Court of Canada dismissed EY's appeal after hold­ing that the appeal was moot.

Master and Servant - Topic 1943

Remuneration - Pension benefits - Con­tribution by employer - Trustee in bank­ruptcy as employer - [See Bankruptcy - Topic 2708 ].

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not raised on application or at trial or in pleadings or in prior proceedings - An administrator of certain employees' pension plans claimed that the trustee in bankruptcy was liable for the plans' unfunded liabilities - On appeal, the trustee raised for the first time the issue of constitutional conflict in that the administrator was attempting to use the Ontario Pension Benefits Act to change the priority scheme set forth in the federal Bankruptcy and Insolvency Act - The Ontario Court of Appeal considered the issue even though it was first raised on appeal - The Court of Appeal found there was nothing to suggest that the trustee failed to raise the issue at trial in the hope of gaining an advantage in the event of an appeal - The Supreme Court of Canada dismissed the trustee in bankruptcy's appeal after holding that the appeal was moot.

Cases Noticed:

Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342; 92 N.R. 110; 75 Sask.R. 82; 38 C.R.R. 232; 57 D.L.R.(4th) 231; 47 C.C.C.(3d) 1; 33 C.P.C.(2d) 105; [1989] 3 W.W.R. 97, refd to. [para. 1].

Counsel:

Lyndon A.J. Barnes and R. Gordon Mar­antz, Q.C., for the appellant;

No one appearing for the respondent, Price Waterhouse Ltd., in its capacity as Ad­ministrator of the Pension Plan for Par­ticipating Unions of St. Marys Paper Inc. and the Pension Plan of Non-Union Employees of St. Marys Paper Inc.;

Chris G. Paliare and Clifton P. Prophet, for the respondents, the Former Employees of St. Marys Paper Inc. and the Communications, Energy and Paper­wor­kers Union of Canada and Locals 47-0, 67, 69 and 133 thereof;

Robert W. Staley, Paul Dempsey and Jacqueline Hatherly, for the intervener.

Solicitors of Record:

Osler, Hoskin & Harcourt, Toronto, Ontario, for the appellant;

Fasken, Campbell, Godfrey, Toronto, Ontario, for the respondent, Price Water­house Ltd., in its capacity as Adminis­trator of the Pension Plan for Participat­ing Unions of St. Marys Paper Inc. and the Pension Plan of Non-Union Employees of St. Marys Paper Inc.;

Gowling, Strathy & Henderson, Toronto, Ontario, for the respondents, the Former Employees of St. Marys Paper Inc. and the Communications, Energy and Paper­workers Union of Canada and Locals 47-0, 67, 69 and 133 thereof;

Bennett, Jones, Verchere, Toronto, Ontario, for the intervener.

This appeal was heard before La Forest, L'Heureux-Dubé, Gonthier, Cory, McLach­lin, Iacobucci and Major, JJ., of the Supreme Court of Canada.

On January 22, 1996, the fol­lowing judg­ment was delivered in both official lan­g­uages for the Supreme Court of Canada by La Forest, J.