Sutherland et al. v. Hudson's Bay Co. et al., 2011 ONCA 606

• Judge: Gillese, MacFarland and Rouleau, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: March 31, 2011
• Jurisdiction: Ontario
• Citations: 2011 ONCA 606;(2011), 281 O.A.C. 355 (CA)

Sutherland v. Hudson's Bay Co. (2011), 281 O.A.C. 355 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. SE.021

Ronald Sutherland and John Scott on their own behalf and on behalf of the current members, retirees and other beneficiaries of the defined benefit component of the Dumai Pension Plan, CCRA Registration Number 0358572 (formerly, the Simpsons, Limited Supplementary Pension Plan) who were members of the Simpsons, Limited Supplementary Pension Plan as of January 1, 1988 (plaintiffs/respondents by way of cross-appeal) v. Hudson's Bay Company, Royal Trust Corporation, and Investors Group Trust Co. Ltd., and Pamela Bhikhari, John English, Gerald V. Garossino, Edward E. Shier, Helen Frizzel, Gale Ritchie and Angela Hosmar (defendants/appellants by way of cross-appeal)

(C47636; 2011 ONCA 606)

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

Ontario Court of Appeal

Gillese, MacFarland and Rouleau, JJ.A.

September 22, 2011.

Summary:

In 1971 Simpsons Ltd. established a defined benefit pension plan for its employees. In 1994 and 1998, HBC, as the successor to Simpsons under the pension plan, amended the plan by adding a defined contribution section to the plan and introduced employees of its wholly owned subsidiaries (Zellers and Kmart) to the plan, which was also renamed. Between January 1, 1994, and December 31, 2006, approximately $111 million of surplus assets in the plan was applied to pay employer annual defined contribution costs for Zellers and Kmart employees. Simpsons retirees who were members of the Simpsons pension plan (the plaintiffs) commenced a class action against HBC, alleging, inter alia, that HBC improperly used surplus funds that had accrued in the trust fund for the Simpsons pension plan to pay for the employer contributions to the defined contribution pensions of Zellers and Kmart employees.

The Ontario Supreme Court, in a decision reported [2007] O.T.C. Uned. G75, ruled, among other things, that: the plan assets were impressed with a trust in favour of the plan members; HBC was not a beneficiary of the trust; and, on plan termination, the plan members were entitled to any surplus assets in the trust fund. The plaintiffs appealed and HBC cross-appealed, but only HBC's cross-appeal was pursued. HBC, relying on Burke v. Hudson's Bay Co. (SCC 2010), challenged the trial judge's conclusions that HBC was neither a beneficiary of the plan nor entitled to any surplus assets remaining on plan termination.

The Ontario Court of Appeal, Rouleau, J.A., dissenting, dismissed the cross-appeal, affirming that the HBC was not entitled to the surplus funds.

Master and Servant - Topic 1959

Remuneration - Pension benefits - Distribution of surplus funds - The Supreme Court of Canada's decision in Burke v. Hudson's Bay Co. (2010) involved the law governing ownership of surplus pension funds - At issue on this appeal was whether that decision changed the law, and in particular the framework for determining the question of surplus ownership of pension plans as set out in Schmidt v. Air Products Canada Ltd. (SCC 1994) (sub nom Stearns Catalytic Pension Plans, Re) - The Ontario Court of Appeal stated that rather than changing the law, Burke affirmed it - The framework for analysis did not change - See paragraphs 1 and 2, 96 and 128.

Master and Servant - Topic 1959

Remuneration - Pension benefits - Distribution of surplus funds - In 1971 Simpsons Ltd. established a defined benefit pension plan for its employees - In 1994 and 1998, HBC, as the successor to Simpsons under the pension plan, amended the plan by adding a defined contribution section to the plan and introduced employees of its wholly owned subsidiaries (Zellers and Kmart) to the plan, which was also renamed - The plaintiffs (retired plan members) alleged, inter alia, that HBC was not entitled to make those amendments nor was it entitled to utilize surplus trust funds to fund contributions for Zellers and Kmart employees - The Ontario Court of Appeal, applying the analytical framework set out in Schmidt v. Air Products Canada Ltd. (SCC 1994), held that the plan assets were impressed with a trust in favour of the plan members and it was the plan members who were entitled to any surplus assets in the trust fund on plan termination and wind up - Amendments purporting to strip the employees of that right were invalid - The HBC was not entitled to the surplus trust funds - See paragraphs 1 to 98.

Cases Noticed:

Burke et al. v. Hudson's Bay Co. et al., [2010] 2 S.C.R. 273; 406 N.R. 109; 268 O.A.C. 1, dist. [para. 1].

R. v. Wilson, [1983] 2 S.C.R. 594; 51 N.R. 321; 26 Man.R.(2d) 194, refd to. [para. 37].

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

Stearns Catalytic Pension Plans, Re, [1994] 2 S.C.R. 611; 168 N.R. 81; 155 A.R. 81; 73 W.A.C. 81, appld. [para. 45].

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. 101].

Bundy of Canada Ltd. v. Canada Trust Co., [1997] O.A.C. Uned. 190; 17 C.C.P.B. 12 (C.A.), refd to. [para. 102].

Authors and Works Noticed:

Chitty on Contracts (29th Ed. 2004), pp. 738, 739 [para. 102].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (5th Ed. 2006), p. 457 [para. 102].

Counsel:

Mark Zigler and Anthony Guindon, for the appellants;

Jeff W. Galway and Kathryn Bush, for the Hudson's Bay Company and Investors Group Trust Co. Ltd.;

Warren S. Rapoport, for John English, Gerald V. Garossino and Edward E. Shier;

Laura C. Young, for Pamela Bhikhari and Gale Ritchie.

This appeal was heard on March 31, 2011, before Gillese, MacFarland and Rouleau, JJ.A., of the Ontario Court of Appeal. The following decision was released on September 22, 2011, including the following opinions:

Gillese, J.A. (MacFarland, J.A., concurring) - see paragraphs 1 to 98;

Rouleau, J.A., dissenting - see paragraphs 99 to 132.