The Supreme Court of Canada''s June decision in Buschau v. Rogers Communications means that pension disputes are less likely to end up in the courts.
"The Supreme Court clearly lobbed the ball back at the regulators," says David Vincent of Ogilvy Renault LLP's Toronto office. "That's good news, because it enhances and clarifies the power of regulators, who are the experts, to deal with pension issues."
Buschau v. Rogers is best known for the high court's holding that the rule in Saunders v. Vautier, formulated in 1841, did not generally apply to pension trusts.
"The recent trend to apply traditional trust law principles to pension trusts without regard to their context has been halted or at least curtailed by the Supreme Court," says Kathryn Bush of Blake Cassels & Graydon LLP's Toronto office.
The court's decision defeated an attempt by 112 Rogers employees and former employees to have their pension plan terminated so they could access a surplus that currently exceeds $15 million.
But the decision did not leave the pensioners without a remedy. Indeed, the Supreme Court not only left it open to the B.C. Superintendent of Pensions to terminate the plan, but also strongly suggested that a wind-up was appropriate.
Still, Vincent sees Buschau as a positive development for employers.
"The prospect that pensioners could force a termination without the intervention of the regulator is frightening to employers because it results in vesting a huge amount of unintended authority in plan members," he says.
The decision in the British Columbia Court of Appeal, which confirmed that Saunders v. Vautier could operate to terminate the trust if the rule's conditions were met, had created an undercurrent of uncertainty.
"There was a fair amount of threatened litigation because of the Court of Appeal's ruling," Bush says.
Even before the Buschau saga, pensioners had preferred to have their claims determined in court rather than before regulators.
"We've seen a proliferation of cases where pensioners have tried to get relief from courts either because they can't get it from the regulator or have a better chance before the courts," Vincent says.
Part of the difficulty is that there is no privative clause governing appeals from the Financial Services Tribunal in Ontario.
"The right of appeal is automatic, unlike the situation at other administrative tribunals like the Ontario Securities Commission and the Ontario Labour Relations Board," says Vincent.
The reason for the disparity, he explains, may lie in the fact that the OSC and OLRB are full-time expert tribunals.
"The Financial Services Tribunal consists of a bunch of part-time people," Vincent says. "Some people believe that being part-time detracts from their credibility and that they don't deserve a privative clause."
Indeed, the earliest and most famous pension case, Dominion Stores, saw plan members convince Ontario courts to overturn a decision of the Ontario pension regulator consenting to the payment of $67 million to a company controlled by Conrad Black.
Other examples include:
• The 2005 decision of the Supreme Court in Boucher v. Stelco, where Quebec members of a partially wound-up pension plan registered in Ontario did not challenge the Ontario regulator's application of Ontario rules to their benefits but instead sued in the Quebec courts. The strategy proved unsuccessful when the courts ruled against them;
• In Burke's v. Hudson's Bay Co., some members of the company's pension plan who were transferred into a new pension plan after HBC sold its northern stores sought a court order that pension surplus attributable to them should be transferred to the new plan. The Ontario Superior Court agreed.
• Bisallon v. Concordia was a case where plan members tried to get the courts to overturn a pension arrangement between an employer and one of its unions on the grounds that it was unfair to members of other unions. Earlier this year, the Supreme Court of Canada ruled that the matter was within the scope of the grievance mechanism in the collective agreement and not within the court's jurisdiction.
Buschau's resuscitation of pension authorities' power likely means, then, that administrative decisions in the pension area will have more clout. Among the open issues are those relating to pension plan mergers and administrative and investment expenses.
"One of the reasons that the Supreme Court ruled that Saunders v. Vautier didn't apply was because there was a governing regulatory system that didn't exist when the courts adopted the rule," Bush says. "The analysis now becomes different from the historical examination of trust language and the real rules become what the Legislature says."
On the merger issue, the Supreme Court confirmed that plans can be merged when circumstances "demonstrate the legitimacy" of a merger, a conclusion that is consistent with the decision of the Ontario Court of Appeal in Ing and Heilig.
Buschau also brings into question whether trust language broadening entitlement to administrative and investment expenses is valid in the face of restrictive language in the Pension Benefits Act.
"The extent to which trust language can co-exist with legislation will be a significant issue in the future," Bush says. "Buschau is a welcome statement that it is not appropriate to interpret the rights of members and employers under a pension plan from a strict trust law perspective.
"In effect, the rights and interests of plan members and employers should be interpreted bearing in mind the pension legislation, business and economic factors articulated by the high court."