Telecommunication Employees Association of Manitoba Inc. et al. v. Manitoba Telecom Services Inc. et al., 2012 MBCA 13

• Judge: Chartier, Beard and MacInnes, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: February 10, 2012
• Jurisdiction: Manitoba
• Citations: 2012 MBCA 13;(2012), 275 Man.R.(2d) 185 (CA)

TEA v. Telecom Services Inc. (2012), 275 Man.R.(2d) 185 (CA);

      538 W.A.C. 185

MLB headnote and full text

Temp. Cite: [2012] Man.R.(2d) TBEd. FE.027

Telecommunication Employees Association of Manitoba Inc. - International Federation of Professional and Technical Engineers, Local 161, Communications, Energy and Paperworkers Union of Canada, Local 7, International Brotherhood of Electric Workers, Local Union 435, Harry Restall, on his own behalf and on behalf of certain retired employees or the widows/widowers thereof of Manitoba Telecom Services Inc., MTS Communications Inc., MTS Mobility Inc. and MTS Advanced Inc., and Larry Trach, on his own behalf and on behalf of all Unionized Employees of Manitoba Telecom Services Inc., MTS Communications Inc., MTS Mobility Inc., MTS Advanced Inc. and all Unionized Employees of MTS Media Inc. who were transferred to Yellow Pages Group Co. pursuant to a sale on October 2, 2006 (plaintiffs/respondents) v. Manitoba Telecom Services Inc. and MTS Allstream Inc. (as successor to MTS Communications Inc., MTS Mobility Inc. and MTS Advanced Inc.) (defendants/appellants)

(AI 10-30-07355; 2012 MBCA 13)

Indexed As: Telecommunication Employees Association of Manitoba Inc. et al. v. Manitoba Telecom Services Inc. et al.

Manitoba Court of Appeal

Chartier, Beard and MacInnes, JJ.A.

February 10, 2012.

Summary:

On January 1, 1997, Manitoba Telephone System, a Crown corporation, was privatized, and thereafter continued as Manitoba Telecom Services Inc., MTS Communications Inc., MTS Mobility Inc. and MTS Advanced Inc. (together MTS). The privatization forced the employees/retirees of the Manitoba Telephone System to change pension plans. They were assured by the Government of Manitoba that the new pension plan (new plan) would have benefits which were at least equivalent in value to those enjoyed under the old pension plan established under the Civil Service Superannuation Act (old plan). Moreover, as the employees/retirees were transferring more assets into the new plan than was MTS, they claimed that they were promised that the "initial surplus" would be used for their benefit and would not be used by MTS to reduce its cost or share of contributions to the new plan. A Memorandum of Agreement was negotiated and legislation passed respecting the pension situation (i.e., the Manitoba Telephone System Reorganization and Consequential Amendments Act). Section 15(3) required the Provincial Auditor to appoint an independent actuary to review the plan and determine whether the benefits under the new plan were equivalent in value to the old plan. An independent actuary (Fox) was appointed pursuant to s. 15(3), who filed a report wherein he concluded that the benefits provided under the new plan were at least equivalent in value to the benefits under the old plan. The plaintiffs (employees/retirees) claimed that neither of the assurances or promises respecting equivalency or the handling of the initial surplus were met and sued the defendants (MTS), seeking the following redress:

"(a) payment of $43.343M plus interest at the New Plan rate of return since January 1, 1997 to be used to enhance pension benefits on the understanding that the enhanced benefits will not result in an increase of MTS's costs;

"(b) maintain a separate accounting for the COLA [cost of living] account so that surpluses resulting from employee contributions from time to time are available to enhance pension benefits on the understanding that those enhancements do not increase MTS's costs;

"(c) a declaration that Fox's [i.e., the independent actuary's] March 5, 1997 opinion on equivalency is invalid and of no force and effect;

"(d) a declaration that the New Plan is to be governed on the basis of consensus through the operation of a two-thirds vote of the Pension Committee with respect to all changes to the plan that would impact on benefits."

The Manitoba Court of Queen's Bench, in a decision reported at 248 Man.R.(2d) 31, declared that (a) Fox's March 5, 1997 opinion on equivalency was invalid and of no force and effect because he had not acted fairly or independently; and (b) the plaintiffs should receive payment from the defendants in the amount of $43,343,000 plus interest at the new plan rate of return since January 1, 1997 to date of payment which was to be used to enhance pension benefits on the understanding that the enhanced benefits would not result in an increase of MTS's costs. In all other respects, the plaintiffs' claim was dismissed. The defendants appealed the monetary judgment against it and the plaintiffs cross-appealed in respect of certain of their claims for relief which had been dismissed.

The Manitoba Court of Appeal allowed MTS's appeal and set aside the judgment against it for the $43,343,000 plus interest. The court dismissed the plaintiffs' cross-appeal.

Administrative Law - Topic 2664

Natural justice - Denial - Remedies - Substitution of court's decision in place of decision being reviewed - The plaintiffs (employees/retirees) sued the defendants for various relief arising from their alleged loss of pension rights and benefits upon the privatization of the Manitoba Telephone System - The trial judge, inter alia, set aside a statutorily mandated report by an independent actuary as to equivalency in the value of pension benefits, finding that it was invalid for procedural fairness issues - Rather than remit the matter to another actuary, the trial judge substituted his own decision for that of the actuary on certain issues - The defendants appealed, arguing that the trial judge erred in failing to remit - The Manitoba Court of Appeal disagreed - The trial judge's decision to substitute his opinion was a discretionary decision for which the standard of review was one of great deference - As to jurisdiction, there was more to this case than a judicial review thus engaging the trial court's original jurisdiction and therefore expanding the remedial options available - Thus the decision on whether to remit or to decide the case on the merits himself was ultimately a decision within the jurisdiction and discretion of the trial judge - The judge correctly exercised his discretion in deciding not to remit in this case - See paragraphs 40 to 64.

Courts - Topic 567.2

Judges - Powers - Substitution of court's decision in place of decision being reviewed instead of remittal - [See Administrative Law - Topic 2664 ].

Master and Servant - Topic 1941.1

Remuneration - Pension or retirement benefits - Interpretation - Manitoba Telephone System was privatized and thereafter continued as Manitoba Telecom Services Inc. (MTS), forcing employees/retirees (plaintiffs) into a new pension plan - The Manitoba Telephone System Reorganization Act (Reorg. Act), s. 15(2)(a), provided that "the new plan which shall provide for benefits which on the implementation date are equivalent in value to the pension benefits to which employees have or may have become entitled under the Civil Service Superannuation Act [CCSA]" - The plaintiffs claimed that they lost pension rights and benefits upon the privatization - The trial judge decided that the "benefits" referred to in s. 15(2)(a) of the Reorg. Act included issues of surplus, both initial and ongoing, as well as issues of governance - The defendants appealed, arguing that the trial judge misinterpreted the meaning of "benefits" in s. 15(2)(a) - The Manitoba Court of Appeal agreed - The judge erred because he did not focus on the relevant legislation to determine exactly what "benefits" meant - The appeal court held that there was no ambiguity in s. 15(2)(a) - "Benefits" was to equate to the "pension benefits" under the CSSA, which meant monthly superannuation payments - Neither governance nor surplus was included in that definition - See paragraphs 66 to 97.

Master and Servant - Topic 1943.1

Remuneration - Pension or retirement benefits - Contribution by employer - Contribution holiday - The Manitoba Court of Appeal summarized the common law principles applicable to a defined benefit pension plan - The court stated, inter alia, that "When an actuarial surplus is determined to exist, the employer may take a contribution holiday, in which event the surplus is used to cover the employer's contribution obligations to the fund. Contribution holidays may be taken in such a circumstance so long as the legislation and plan documentation permit. Even when not expressly permitted to do so by the legislation and plan documentation, where the plan documentation provides that funding requirements will be determined by actuarial practice, the employer may take a contribution holiday unless other plan wording or legislation prohibits it. To take a contribution holiday does not reduce the corpus of the fund, nor does it amount to applying the monies contained in the fund to something other than the exclusive benefit of the employees. The entitlement of the trust beneficiaries is not affected by a contribution holiday. Their entitlement is to receive from the trust fund upon retirement the defined benefits guaranteed them under the pension plan from the trust and, depending upon the terms of the trust, to receive a share of any surplus remaining upon termination of the plan" - See paragraph 148.

Master and Servant - Topic 1943.1

Remuneration - Pension or retirement benefits - Contribution by employer - Contribution holiday - [See second Master and Servant - Topic 1959 ].

Master and Servant - Topic 1953.1

Remuneration - Pension or retirement benefits - Audits or actuarial analysis - [See Administrative Law - Topic 2664 , first Master and Servant - Topic 1943.1 and both Master and Servant - Topic 1959 ].

Master and Servant - Topic 1959

Remuneration - Pension or retirement benefits - Distribution or use of surplus funds - The Manitoba Court of Appeal summarized the common law principles applicable to a defined benefit pension plan - The court stated, inter alia, that "While a plan which takes the form of a trust is in operation, any surplus is simply an actuarial surplus. Neither the employer nor the employees have a specific interest in this amount, since it only exists on paper. It results from actuarial calculations and is a function of the assumptions used by the actuary at the time of valuation. It is only when a defined benefit pension plan is terminated or wound up that the assets and liabilities of the pension plan crystallize and the existence of a surplus, if any, can be calculated and/or determined. Such a surplus is an actual surplus as distinct from an actuarial surplus as described above. The employees may then become entitled to some right to such actual surplus, depending upon the terms of the plan/trust. When an actuarial surplus is determined to exist, the employer may take a contribution holiday, in which event the surplus is used to cover the employer's contribution obligations to the fund" - See paragraph 148.

Master and Servant - Topic 1959

Remuneration - Pension or retirement benefits - Distribution or use of surplus funds - A Crown corporation, Manitoba Telephone System (Man. Tel.), was privatized and thereafter continued as Manitoba Telecom Services Inc. (MTS) - The Man. Tel. Reorganization Act forced employees/retirees (plaintiffs) out of their Civil Service Superannuation Act pension plan and into a new plan - The plaintiffs claimed that they lost pension rights and benefits because of the privatization - The trial judge ordered MTS to pay the employees $43,343,000, representing what he determined to be an "initial surplus" when the new plan was created - The judge ruled that by taking contribution holidays, MTS had effectively taken the initial surplus, thereby breaching a memorandum of understanding (MOA) that the surplus would go to cost of living adjustment (COLA) payments or other pension benefits - MTS appealed - The Manitoba Court of Appeal allowed the appeal - The trial judge misinterpreted the MOA and misdirected himself on the law relating to defined benefit pension plans (esp. surpluses) - Since the prior plan was not terminated, at common law the initial surplus was simply an actuarial surplus in an ongoing defined benefit pension plan such that neither the employees nor MTS had any legal entitlement to it - While the MOA imposed extra obligations upon MTS respecting COLA, it did unconditionally mandate enhancement to the employees' pension benefits by use of the initial surplus - MTS fully complied with its obligations under the MOA by setting up a COLA account and the initial surplus had been notionally credited to that account - That account was maintained even during the years it took contribution holidays - See paragraphs 104 to 217.

Practice - Topic 8804

Appeals - General principles - Duty of appellate court regarding discretionary orders - [See Administrative Law - Topic 2664 ].

Cases Noticed:

Towers Ltd. v. Quinton's Cleaners Ltd. et al. (2009), 245 Man.R.(2d) 70; 466 W.A.C. 70; 2009 MBCA 81, refd to. [para. 47].

Montgomery Agencies Ltd. v. Krischke (1989), 76 Sask.R. 143 (Q.B.), refd to. [para. 60].

Pfeil v. Simcoe & Erie General Insurance Co. and McQueen Agencies Ltd., [1986] 2 W.W.R. 710; 45 Sask.R. 241 (C.A.), refd to. [para. 60].

Sport Maska Inc. v. Zittrer, [1988] 1 S.C.R. 564; 83 N.R. 322; 13 Q.A.C. 241, refd to. [para. 60].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 89].

King v. Operating Engineers Training Institute of Manitoba Inc. (2011), 270 Man.R.(2d) 63; 524 W.A.C. 63; 2011 MBCA 80, refd to. [para. 100].

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. 146].

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, refd to. [para. 147].

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; 2010 SCC 34, refd to. [para. 147].

Burke et al. v. Hudson's Bay Co. et al. (2008), 236 O.A.C. 140; 2008 ONCA 394, refd to. [para. 149].

Moore (Geoffrey L.) Realty Inc. v. Manitoba Motor League (2003), 173 Man.R.(2d) 300; 293 W.A.C. 300; 2003 MBCA 71, refd to. [para. 171].

Statutes Noticed:

Manitoba Telephone System Reorganization and Consequential Amendments Act, S.M. 1996, c. 79, sect. 15(2)(a), sect. 15(3), sect. 15(4) [para. 89].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (2nd Ed. 1983), p. 87 [para. 15].

Counsel:

C.R. Huband, P.B. Forsyth and K.T. Williams, for the appellants;

B.J. Meronek, Q.C., K.M. Saxberg, L.R. Bernas and D.T. Masi, for the respondents, excluding Communications, Energy and Paperworkers Union of Canada, Local 7;

R.L. Zaparniuk and D.R. Kochan, for the respondents, Communications, Energy and Paperworkers Union of Canada, Local 7.

This appeal was heard from December 13 to 15, 2011, before Chartier, Beard and MacInnes, JJ.A., of the Manitoba Court of Appeal. The following decision was delivered by MacInnes, J.A., for the court, on February 10, 2012.