Telecommunications Employees Association of Manitoba Inc. et al. v. Manitoba Telecom Services Inc. et al., (2014) 454 N.R. 1 (SCC)

• Judge: McLachlin, C.J.C., LeBel, Fish, Rothstein, Cromwell, Moldaver and Karakatsanis, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 16, 2013
• Jurisdiction: Canada (Federal)
• Citations: (2014), 454 N.R. 1 (SCC);2014 SCC 11;[2014] 1 SCR 142

TEA v. Telecom Services Inc. (2014), 454 N.R. 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]

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Temp. Cite: [2014] N.R. TBEd. JA.016

Telecommunications Employees Association of Manitoba Inc. - International Federation of Professional & 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. and 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 (appellants) v. Manitoba Telecom Services Inc. and MTS Allstream Inc. (as successor to MTS Communications Inc., MTS Mobility Inc. and MTS Advanced Inc.) (respondents)

(34763; 2014 SCC 11; 2014 CSC 11)

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

Supreme Court of Canada

McLachlin, C.J.C., LeBel, Fish, Rothstein, Cromwell, Moldaver and Karakatsanis, JJ.

January 30, 2014.

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). As a result of the privatization, approximately 7,000 employees and retirees (plan members) of the Manitoba Telephone System and its subsidiaries had their assets and pension rights transferred to a new pension plan. The assets included a $43,364 million actuarial surplus (the Initial Surplus). The plan members were assured by the Government of Manitoba that the 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) and 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 (MOA) was negotiated and legislation passed respecting the pension situation (i.e., the Manitoba Telephone System Reorganization and Consequential Amendments Act (the Reorg. Act)). The provisions of the new pension plan made it virtually impossible for the plan members to ever receive any benefit funded by the Initial Surplus. Instead, MTS was able to use the Initial Surplus to take contribution holidays, which allowed it to offset contributions it would otherwise be required to make to the pension fund. Section 15(3) of the Reorg. Act 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 plan members 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 various forms of relief.

The Manitoba Court of Queen's Bench, in a decision reported at 248 Man.R.(2d) 31, held that the plan members were entitled to relief. The court held that Fox's March 5, 1997 opinion on equivalency was invalid and of no force and effect because he had not acted fairly or independently. Further, MTS's treatment of the Initial Surplus violated s. 15(2)(a) of the Reorg. Act, which required that the benefits provided under the new plan be "equivalent in value" to the old plan. Also, the inaccessibility of the Initial Surplus for enhancements violated para. 3 of the MOA. On those bases, the court ordered that the plan members were entitled to receive an amount equal to the Initial Surplus plus interest at the new plan's rate of return, which was "to be used to enhance pension benefits on the understanding that the enhanced benefits will not result in an increase of MTS's costs". The court ordered the plan members and MTS to negotiate and arrive at a mutually agreeable implementation process for the utilization of the funds. In all other respects, the plan members' claim was dismissed. MTS appealed the monetary judgment against it and the plan members cross-appealed in respect of certain of their claims for relief which had been dismissed.

The Manitoba Court of Appeal, in a decision reported (2012), 275 Man.R.(2d) 185;  538 W.A.C. 185, allowed MTS's appeal and set aside the monetary judgment. The court dismissed the plan members' cross-appeal. The appeal court disagreed with the trial judge on the s. 15(2)(a) issue and concluded that para. 3 of the MOA was not violated. The court held that at common law, the plan members had no right to any surplus generated under an ongoing defined benefit pension plan and the contribution holidays taken by MTS were permissible under pension law. The plan members appealed. At issue was whether MTS, by structuring the new plan such that the Initial Surplus would never be used to the plan members' benefit, violated legal duties that arose in accordance with: (1) the Reorg. Act; (2) the MOA it signed with representatives of the plan members; or (3) other written representations it made to the plan members prior to the privatization that any surplus transferred would not be used to reduce MTS's cost of, or contributions to, the pension plan.

The Supreme Court of Canada allowed the appeal with costs throughout, on a solicitor-and-client basis, to be paid out of the New Plan trust fund. The court concluded that MTS violated the terms of the Reorg. Act , that this conclusion was not inconsistent with the MOA, and that it was unnecessary to decide whether MTS's other written representations had legal effect and were breached. In light of deficiencies in the record and the financial complexity of the issues, the court reinstated the trial judge's order requiring MTS to make the $43.364 million in the Initial Surplus plus "interest at the New Plan rate of return from January 1, 1997 to the date of payment" available to the plan members to be used to pay for enhancements to their pension benefits.

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 (plan members) into a new pension plan - The Manitoba Telephone System Reorganization and Consequential Amendments 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 Supreme Court of Canada interpreted s. 15(2)(a) and in particular the phrase "equivalent in value" - The court concluded that the phrase "equivalent in value" used in s. 15(2)(a) required a comprehensive assessment of both the benefits and the funding used to provide those benefits under each plan to determine whether the new pension plan fulfilled the requirements of s. 15(2)(a) - That is, it was not enough just to compare the basic superannuation allowance payable to retired plan members under each plan - See paragraphs 57 to 74.

Master and Servant - Topic 1959

Remuneration - Pension or retirement benefits - Distribution or use of surplus funds - A Crown corporation, Manitoba Telephone System, was privatized and thereafter continued as Manitoba Telecom Services Inc. (MTS) - Consequently, Manitoba Telephone System employees and retirees (plan members) had their pension assets including a $43,364 million actuarial surplus transferred to a new pension plan - The plan members claimed that MTS violated its duty under s. 15(2)(a) of the Manitoba Telephone System Reorganization and Consequential Amendments Act (the Reorg. Act) to establish a plan that provided benefits of "equivalent in value" to those provided under the old plan - The Supreme Court of Canada held that since the $43,364 million of the plan members' contribution was not matched by MTS on the implementation, there was a prima facie violation of s. 15(2)(a), because the funding of the benefits under the two plans was not equal, thus the benefits were not equivalent in value - Only MTS benefited from the excess contribution - See paragraphs 75 to 87.

Words and Phrases:

Equivalent in value - The Supreme Court of Canada discussed the meaning of this phrase as it appeared in s. 15(2)(a) of the Manitoba Telephone System Reorganization and Consequential Amendments Act, S. M. 1996, c. 79 - See paragraphs 58 to 74.

Cases Noticed:

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. 75].

Nolan v. Kerry (Canada) Inc. - see Nolan et al. v. Superintendent of Financial Services (Ont.) et al.

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. 91].

Statutes Noticed:

Manitoba Telephone System Reorganization and Consequential Amendments Act, S. M. 1996, c. 79, s. 15(2)(a) [para. 57].

Authors and Works Noticed:

Hansard (Man.) - see Manitoba, Hansard, Legislative Assembly, The Standing Committee on Public Utilities and Natural Resources.

Kaplan, Ari, and Frazer, Mitch, Pension Law (2nd Ed. 2013), p. 93 [para. 78].

Manitoba, Hansard, Legislative Assembly, The Standing Committee on Public Utilities and Natural Resources, 2nd. Sess., 36th Leg., vol. XLVI, No. 7 (October 31, 1996), pp. 295, 296 [para. 24]; 298, 299 [para. 71].

Manitoba, Hansard, Legislative Assembly, The Standing Committee on Public Utilities and Natural Resources, 2nd. Sess., 36th Leg., vol. XLVI, No. 15 (November 7, 1996), p. 809 [para. 72].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), pp. 609, 612 [para. 70].

Counsel:

Brian J. Meronek, Q.C., Kris M. Saxberg, D. Tomas Masi, James Cameron and Andrew Astritis, for the appellants;

Kevin T. Williams, Paul B. Forsyth and Kyle Dear, for the respondents.

Solicitors of Record:

D'Arcy & Deacon, Winnipeg, Manitoba; Raven, Cameron, Ballantyne & Yazbeck, Ottawa, Ontario, for the appellants;

Taylor McCaffrey, Winnipeg, Manitoba, for the respondent.

This appeal was heard on May 16, 2013, before McLachlin, C.J.C., LeBel, Fish, Rothstein, Cromwell, Moldaver and Karakatsanis, JJ., of the Supreme Court of Canada. The following decision was delivered for the court on January 30, 2014, in both official languages, by Rothstein, J.