Buschau v. Rogers Communications Inc.

Buschau v. Rogers Communications Inc.
Collection
Supreme Court Judgments
Date
2006-06-22
Neutral citation
2006 SCC 28
Report
[2006] 1 SCR 973
Case number
30462
Judges
McLachlin, Beverley; Bastarache, Michel; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Charron, Louise
On appeal from
British Columbia
Subjects
Pensions
Notes
SCC Case Information: 30462
Decision Content
SUPREME COURT OF CANADA
Citation: Buschau v. Rogers Communications Inc., [2006] 1 S.C.R. 973, 2006 SCC 28
Date: 20060622
Docket: 30462
Between:
Rogers Communications Incorporated
Appellant
and
Sandra Buschau et al.
Respondents
and
National Trust Company
Respondent
AND BETWEEN:
National Trust Company
Appellant
and
Sandra Buschau et al.
Respondents
and
Rogers Communications Incorporated
Respondent
Coram: McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish, Abella and Charron JJ.
Reasons for Judgment:
(paras. 1 to 59)
Concurring Reasons:
(paras. 60 to 104)
Deschamps J. (LeBel, Fish and Abella JJ. concurring)
Bastarache J. (McLachlin C.J. and Charron J. concurring)
______________________________
Buschau v. Rogers Communications Inc., [2006] 1 S.C.R. 973, 2006 SCC 28
Rogers Communications Incorporated Appellant
v.
Sandra Buschau, Sharon M. Parent, Albert Poy, David Allen,
Eileen Anderson, Christine Ash, Frederick Scott Atkinson,
Jaspal Badyal, Mary Balfry, Carolyn Louise Barry, Raj Bhamber,
Evelyn Bishop, Deborah Louise Bissonnette, George Boshko,
Colleen Burke, Brian Carroll, Lynn Cassidy, Florence K. Colbeck,
Peter Colistro, Ernest A. Cottle, Ken Dann, Donna de Freitas,
Terry Dewell, Katrin Dolemeyer, Elizabeth Engel, Karen Engleson,
George Fierheller, Joan Fisher, Gwen Ford, Don R. Fraser,
Mabel Garwood, Cheryl Gervais, Rose Gibb, Roger Gilodo,
Murray Gjernes, Daphne Goode, Karen L. Gould,
Peter James Hadikin, Marian Heibloem‑Reeves, Thomas Hobley,
John Iannantuoni, Vincent A. Iannantuoni, Ron Inglis,
Mehroon Janmohamed, Michael J. Jervis, Marlyn Kellner,
Karen Kilba, Douglas James Kilgour, Yoshinori Koga,
Martin Kosuljandic, Ursula M. Kreiger, Wing Lee, Robert Leslie,
Thomas A. Lewthwaite, Holly Li, David Liddell, Rita Lim,
Betty C. Lloyd, Rob Lowrie, Che‑Chung Ma, Jennifer MacDonald,
Robert John MacLeod, Sherry M. Madden, Tom Makortoff,
Fatima Manji, Edward B. Mason, Glenn A. McFarlane, Onagh Metcalfe,
Dorothy Mitchell, Shirley C. T. Mui, William Neal,
Katherine Sheila Nimmo, Gloria Paiement, Lynda Pasacreta,
Barbara Peake, Vera Piccini, Inez Pinkerton, Dave Podworny,
Doug Pontifex, Victoria Prochaska, Frank Radelja, Gale Rauk,
Ruth Roberts, Ann Louise Rodgers, Clifford James Roe,
Pamela Mamon Roe, Delores Rose, Sabrina Roza‑Pereira,
Sandra Rybchinsky, Kenneth T. Salmond, Marie Schneider,
Alexander C. Scott, Inderjeet Sharma, Hugh Donald Shiel,
Michael Shirley, George Allen Short, Glenda Simoncioni,
Norm Smallwood, Gilles A. St. Dennis, Geri Stephen,
Grace Isobel Stone, Mari Tsang, Carmen Tuvera, Sheera Waisman,
Margaret Watson, Gertrude Westlake, Robert E. White,
Patricia Jane Whitehead, Aileen Wilson, Elaine Wirtz,
Joe Wuychuk, Zlatka Young and National Trust Company Respondents
and
National Trust Company Appellant
v.
Sandra Buschau, Sharon M. Parent, Albert Poy, David Allen,
Eileen Anderson, Christine Ash, Frederick Scott Atkinson,
Jaspal Badyal, Mary Balfry, Carolyn Louise Barry, Raj Bhamber,
Evelyn Bishop, Deborah Louise Bissonnette, George Boshko,
Colleen Burke, Brian Carroll, Lynn Cassidy, Florence K. Colbeck,
Peter Colistro, Ernest A. Cottle, Ken Dann, Donna de Freitas,
Terry Dewell, Katrin Dolemeyer, Elizabeth Engel, Karen Engleson,
George Fierheller, Joan Fisher, Gwen Ford, Don R. Fraser,
Mabel Garwood, Cheryl Gervais, Rose Gibb, Roger Gilodo,
Murray Gjernes, Daphne Goode, Karen L. Gould,
Peter James Hadikin, Marian Heibloem‑Reeves, Thomas Hobley,
John Iannantuoni, Vincent A. Iannantuoni, Ron Inglis,
Mehroon Janmohamed, Michael J. Jervis, Marlyn Kellner,
Karen Kilba, Douglas James Kilgour, Yoshinori Koga,
Martin Kosuljandic, Ursula M. Kreiger, Wing Lee, Robert Leslie,
Thomas A. Lewthwaite, Holly Li, David Liddell, Rita Lim,
Betty C. Lloyd, Rob Lowrie, Che‑Chung Ma, Jennifer MacDonald,
Robert John MacLeod, Sherry M. Madden, Tom Makortoff,
Fatima Manji, Edward B. Mason, Glenn A. McFarlane,
Onagh Metcalfe, Dorothy Mitchell, Shirley C. T. Mui, William Neal,
Katherine Sheila Nimmo, Gloria Paiement, Lynda Pasacreta,
Barbara Peake, Vera Piccini, Inez Pinkerton, Dave Podworny,
Doug Pontifex, Victoria Prochaska, Frank Radelja, Gale Rauk,
Ruth Roberts, Ann Louise Rodgers, Clifford James Roe,
Pamela Mamon Roe, Delores Rose, Sabrina Roza‑Pereira,
Sandra Rybchinsky, Kenneth T. Salmond, Marie Schneider,
Alexander C. Scott, Inderjeet Sharma, Hugh Donald Shiel,
Michael Shirley, George Allen Short, Glenda Simoncioni,
Norm Smallwood, Gilles A. St. Dennis, Geri Stephen,
Grace Isobel Stone, Mari Tsang, Carmen Tuvera, Sheera Waisman,
Margaret Watson, Gertrude Westlake, Robert E. White,
Patricia Jane Whitehead, Aileen Wilson, Elaine Wirtz,
Joe Wuychuk, Zlatka Young and
Rogers Communications Incorporated Respondents
Indexed as: Buschau v. Rogers Communications Inc.
Neutral citation: 2006 SCC 28.
File No.: 30462.
2005: November 15; 2006: June 22.
Present: McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish, Abella and Charron JJ.
on appeal from the court of appeal for british columbia
Pensions — Pension plan — Trust — Termination — Pension plan indicating that trust surplus to be distributed amongst remaining pension plan members in event of termination — Pension plan and trust agreement not providing for termination of trust by pension plan members — Whether members can rely on rule in Saunders v. Vautier to terminate trust — Whether recourse available to members under federal pension benefits standards legislation — Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp .), s. 29(2) , (11) .
The individual respondents are members of a pension plan (“Plan”). The Plan and the trust were established in 1974 as a defined benefit plan funded solely by the employer for the benefit of employees of a company that RCI acquired in 1980. It provided that, in the event of termination, the surplus remaining in the trust was to be distributed amongst the remaining members, but neither the trust agreement nor the Plan provided, at any time, for termination of the trust by employees. The Plan developed a large actuarial surplus. In 1981, RCI amended the Plan so that any surplus funds remaining on termination would revert to RCI and, in 1984, it closed the Plan to new employees. RCI began taking contribution holidays the following year and was refunded $968,285 from the surplus. In 1992, it merged the Plan retroactively with other RCI pension plans. The Plan members initiated a first action against RCI and the Court of Appeal concluded (1) that the merger was valid but did not affect the existence of the Plan trust as a separate trust; and (2) that the members were at liberty to institute proceedings to terminate the trust based on the rule in Saunders v. Vautier, to the extent that it was applicable. According to that rule, the terms of a trust can be varied or the trust can be terminated if all beneficiaries of the trust, being of full legal capacity, consent. The court also concluded that the members retained the right to distribution of the surplus upon termination. Relying on the common law rule, the members initiated a second action and succeeded in obtaining order terminating the Plan. The Court of Appeal set aside a part of the chambers judge’s decision, finding that a court did not have the power under the Trust and Settlement Variation Act to consent on behalf of contingent sui juris beneficiaries. The court found that, provided that all the required consents were obtained, the members will be at liberty to invoke the common law rule. It also found that RCI could not amend the Plan to permit the addition of new members. Since questions could arise concerning the “mechanics” of the termination, the trustee would have to satisfy itself that all the conditions and all statutory requirements had been met.
Held: The appeal should be allowed.
Per LeBel, Deschamps, Fish and Abella JJ.: The members of the Plan cannot invoke the rule in Saunders v. Vautier to terminate the trust. That rule is not easily incorporated into the context of employment pension plans. Such plans are heavily regulated. The Pension Benefits Standards Act, 1985 (“PBSA ”) deals extensively with the termination of plans and the distribution of assets, and it is clear from this explicit legislation that Parliament intended its provisions to displace the common law rule. To the extent that the PBSA provides a means to reach the distribution stage, it should prevail over the common law. Moreover, a pension trust is not a stand‑alone instrument. In this case, the trust is explicitly made part of the Plan. It cannot be terminated without taking into account the Plan for which it was created and the specific legislation governing the Plan. The conclusion that the common law rule does not generally apply to traditional pension funds is reinforced by the fact that the PBSA provides mechanisms that protect members from inappropriate conduct by plan administrators. [2] [27-33]
The PBSA is not a complete code, but when it provides recourse to pension plan members, they should use it. Here, the members of the Plan want the trust fund to be collapsed and distributed directly to them, but the available recourse is subject to the provisions of the PBSA . The Superintendent of Financial Institutions, who is responsible for the application of the PBSA , is in a position to deal with issues relating to termination or winding up. He can rule on questions of both fact and law, and all parties can make appropriate recommendations to him. He is also in the best position to monitor the orderly termination of the Plan in accordance with the PBSA , which is a condition precedent to distribution. Because all contributions ceased in 1984, the Superintendent could consider the Plan terminated under s. 29(2) , which is not limited to solvency issues, and could decide whether the facts warrant winding up the part of the RCI pension plan that relates to the Plan pursuant to s. 29(11) of the PBSA , which would have the effect of terminating the trust. Contribution holidays, although legitimate for funding purposes, can nevertheless be considered illegitimate if they hide an improper refusal to terminate a plan. Determining the validity of a reason given for not terminating a pension plan lies with the Superintendent and properly falls within his s. 29(2) (a) power. Whether RCI can amend the Plan to open it to new members is a question best left to the Superintendent. [2] [29] [ 35-36] [44‑57]
Per McLachlin C.J. and Bastarache and Charron JJ.: The rule in Saunders v. Vautier does not apply in the circumstances of this case, and any application regarding the termination of the Plan and the trust must be dealt with in accordance with the terms of the Plan and the provisions of the PBSA . [100]
The PBSA is a comprehensive statutory scheme which contains detailed provisions for the termination of pension plans and the distribution of plan assets. It recognizes that employers are generally, as in the case at bar, entitled to terminate a pension plan, but it also empowers the Superintendent of Financial Institutions to terminate such plans in specified situations, including those referred to in s. 29. The Superintendent’s supervisory focus is primarily on matters affecting the solvency or the financial condition of a pension plan. There is no provision in the PBSA for plan beneficiaries to terminate a pension plan or for any party to terminate a trust under which pension fund contributions are held as security for the payment of plan benefits prior to, and independent of, the termination of the plan. Beneficiaries may request that the Superintendent exercise his discretionary power under s. 29(2) , but he does not have a general discretion to terminate pension plans and may comply with such a request only where the stipulated pre‑conditions are met. In the instant case, none of the statutory grounds for termination of the Plan are present. The words “suspension or cessation of employer contributions” in respect of the Superintendent’s power to terminate a pension plan under s. 29(2) (a) must be construed as referring to an employer’s failure to make required contributions; they do not extend to contribution holidays where the employer is relieved from making contributions by reason of a surplus in the plan. [79-88]
Because the Plan members have only a contingent interest in the trust surplus, the rule in Saunders v. Vautier cannot be invoked to terminate the trust. It requires that beneficiaries seeking early termination possess the sum total of vested, not contingent, interests in the trust corpus. The members do not have absolute entitlement to the surplus until the Plan and trust are terminated. Furthermore, the common law rule also requires the consent of all parties who have an interest in the trust property. Since both the PBSA and the Plan include survivor rights, those rights cannot be overridden by the consent of present Plan members and other beneficiaries, or by the courts. Nor can s. l(b) of the Trust and Settlement Variation Act assist in this respect. The court does not have the power to consent on behalf of current spouses and common law partners who are of full legal capacity, nor can consent be given on behalf of unascertainable future spouses and common law partners, since the termination of the Plan would presumably not be in their best interests. [90] [98-99]
Trust law cannot in the present case prevail over the contract and the governing legislation. Applying the rule in Saunders v. Vautier would contradict the reasonable contractual expectations of the parties, since the terms of the Plan do not give rise to a reasonable expectation that the trust could be terminated by the members over RCI’s objections so that the members might obtain the surplus. Such a result would permit members of a pension plan to vary its terms without the employer’s consent. Applying the common law rule would disregard the employer’s unique role in respect of the Plan and the trust, circumvent the terms of the contract at the root of the trust, and make the legislative framework irrelevant. In particular, applying it would disregard s. 29(9) and permit the termination of the Plan and the trust without the involvement of the employer as plan administrator, and without the Superintendent’s approval. Finally, introducing the rule in Saunders v. Vautier into the private pension system would disrupt the fair and delicate balance between the interests of the employer and employees, and would be contrary to the legislative objective of encouraging the establishment and maintenance of private pension plans. [92-94] [97]
A court has no authority to assign the responsibilities of the administrator and the Superintendent to the trustee contrary to the legislative scheme, under which a process for terminating a pension plan has been established. [95]
RCI’s powers of amendment were not forfeited or estopped because of the closure of the Plan. Any termination of the Plan and any amendments to it must be examined in light of to the applicable provisions of the Plan and the PBSA . In the special context of pension plans, employers who administer such plans on behalf of their employees must always act in accordance with the spirit, purpose and terms of the plans, and in such a way as to ensure the protection of employees’ pension benefits, not to reduce, threaten or eliminate them. [102-103]
Cases Cited
By Deschamps J.
Not followed: Saunders v. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482; referred to: Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611; Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, 2004 SCC 54; Huus v. Ontario (Superintendent of Pensions) (2002), 58 O.R. (3d) 380.
By Bastarache J.
Not followed: Saunders v. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482; referred to: Halifax School for the Blind v. Chipman, [1937] S.C.R. 196; Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611; Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, 2004 SCC 54; Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd., [1991] 2 All E.R. 597.
Statutes and Regulations Cited
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 56(1) , 146(8) , 147.1(11) , (13) .
Income Tax Regulations, C.R.C. 1978, c. 945, ss. 8501(1), 8502.
Office of the Superintendent of Financial Institutions Act, R.S.C. 1985, c. 18 (3rd Supp.), Part I .
Pension Benefits Standards Act, S.C. 1966‑67, c. 92, s. 12.
Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp .), ss. 2(1) “termination”, “winding‑up”, 5, 7.4, 8(3), (10), 9(1), 9.2, 11(1), (2), 11.1, 12, 22, 29.
Pension Benefits Standards Act, 1985, S.C. 1986, c. 40.
Pension Benefits Standards Regulations, 1985, SOR/87‑19, rr. 6 to 10, 16, 24.
Trust and Settlement Variation Act, R.S.B.C. 1996, c. 463, s. 1.
Trustee Act, R.S.B.C. 1996, c. 464, s. 86.
Authors Cited
Canada. Office of the Superintendent of Financial Institutions. Guidelines to Administrators for Plan Terminations, November 25, 1992 (rev. July 1, 1993) (online: http//:www.osfi‑bsif.gc.ca/app/DocRepository/1/eng/pension/guides/92‑11‑15b_e.html).
Deaton, Richard Lee. The Political Economy of Pensions: Power, Politics and Social Change in Canada, Britain and the United States. Vancouver: University of British Columbia Press, 1989.
Gillese, Eileen E. “Pension Plans and the Law of Trusts” (1996), 75 Can. Bar Rev. 221.
Hayton, David J. Underhill and Hayton Law Relating to Trusts and Trustees, 14th ed. London: Butterworths, 1987.
Kaplan, Ari N. Pension Law. Toronto: Irwin Law, 2006.
Nachshen, Gary. “Access to Pension Fund Surpluses: The Great Debate”. In Meredith Memorial Lectures 1988, New Developments in Employment Law. Cowansville: Yvon Blais, 1989, 59.
“Pension Underfunding Still Widespread, Yet . . .” Business & Legal Reports, October 1, 2003 (online: http://comp.blr.com/display.cfm?id=150239).
Rienzo, Douglas. “Trust Law and Access to Pension Surplus” (2005), 25 E.T.P.J. 14.
Waters, Donovan W. M., Mark R. Gillen and Lionel D. Smith, eds. Waters’ Law of Trusts in Canada, 3rd ed. Toronto: Thomson Carswell, 2005.
APPEAL from a judgment of the British Columbia Court of Appeal (Newbury, Low and Thackray JJ.A.) (2004), 24 B.C.L.R. (4th) 85, 236 D.L.R. (4th) 18, [2004] 5 W.W.R. 10, 6 E.T.R. (3d) 236, 193 B.C.A.C. 258, 316 W.A.C. 258, 39 C.C.P.B. 247, [2004] B.C.J. No. 297 (QL), 2004 BCCA 80, and (2004), 27 B.C.L.R. (4th) 17, 239 D.L.R. (4th) 610, [2004] 7 W.W.R. 218, 9 E.T.R. (3d) 221, 197 B.C.A.C. 279, 323 W.A.C. 279, [2004] B.C.J. No. 991 (QL), 2004 BCCA 282, with supplementary reasons (2004), 35 B.C.L.R. (4th) 248, 241 D.L.R. (4th) 766, [2005] 2 W.W.R. 67, 197 B.C.A.C. 279 at 287, 323 W.A.C. 279 at 287, [2004] B.C.J. No. 1321 (QL), 2004 BCCA 369, reversing decisions of Loo J. (2002), 100 B.C.L.R. (3d) 327, 44 E.T.R. (2d) 177, 30 C.C.P.B. 167, [2002] B.C.J. No. 865 (QL), 2002 BCSC 624, and (2003), 13 B.C.L.R. (4th) 385, [2003] 7 W.W.R. 341, 35 C.C.P.B. 199, [2003] B.C.J. No. 1025 (QL), 2003 BCSC 683, granting an application for termination of a pension plan. Appeal allowed.
Irwin G. Nathanson, Q.C., and Stephen R. Schachter, Q.C., for the appellant/respondent Rogers Communications Inc.
Jennifer J. Lynch and Joanne Lysyk, for the appellant/respondent National Trust Co.
John N. Laxton, Q.C., and Robert D. Gibbens, for the respondents Sandra Buschau et al.
The judgment of LeBel, Deschamps, Fish and Abella was delivered by
1 Deschamps J. — The 112 respondents are pension plan members who have been litigating for over 10 years to gain access to their pension trust fund. This case is about whether and how the fund can be distributed to them.
2 By 2002, the plan for which the trust was created, the Premier pension plan (“Plan”), had a surplus evaluated at $11 million. The Supreme Court and the Court of Appeal for British Columbia accepted the members’ arguments and found that the trust used to fund the Plan (“Trust” or “Premier Trust”) could be collapsed under the common law rule in Saunders v. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482 (Ch. D.). According to that rule, the terms of a trust can be varied or the trust can be terminated if all beneficiaries of the trust, being of full legal capacity, consent. For the reasons that follow, I am of the view that the common law rule does not apply to the Trust in the case at bar. The context and the purpose of pension plans do not generally lend themselves well to the common law rule. Moreover, a pension trust is not a stand-alone instrument. The Trust is explicitly made part of the Plan. It cannot be terminated without taking into account the Plan for which it was created and the specific legislation governing the Plan. Any recourse available to the members here is subject to the provisions of a federal statute, the Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp .) (“PBSA ”). In my view, the Superintendent of Financial Institutions (“Superintendent”), who is responsible for the application of the PBSA , is in a position to resolve the impasse that the members would face if the interpretation suggested by my colleague Bastarache J. were adopted.
3 In order to explain the particular context in which the termination of the Trust is sought, a few facts will have to be elicited to situate the dispute between the members and their former employer. Then, to explain why the common law rule does not apply, it will be useful to briefly review pension plans in general and the Plan itself. Finally, I will comment on the relevant provisions of the PBSA that would allow the members to make a proper request to the Superintendent.
I. Facts
4 The Plan was established in 1974 for the employees of Premier Communication Ltd. It provides for defined benefits and is funded by the employer only. It states that the company expects to continue the Plan indefinitely, but that in the event of termination, the surplus remaining in the trust fund is to be distributed amongst the remaining members:
GENERAL RULE SEVEN – AMENDMENT OR TERMINATION OF PLAN
. . .
2. While the Company expects to continue the Plan indefinitely, it must and does reserve the right to terminate the Plan, if, at any time in the future, conditions should arise that indicate the necessity of such action.
In the event of the termination of the Plan, the benefits being paid to Retired Members will be continued as provided for under the terms and provisions of the Plan. The balance of assets remaining in the Trust Fund, after all liabilities to Retired Members have been satisfied, will be distributed by the Committee among the remaining Members on the basis required under the provisions of Section 12 of the Pension Benefits Standards Act.
5 In 1980, Rogers Cablesystems Inc. (which later became Rogers Communications Inc. (“Rogers”)) acquired Premier Communication Ltd. In September 1983, the Plan’s actuary was of the view that a surplus evaluated at approximately $800,000 could be used to improve benefits for members. On April 12, 1984, the actuary actually recommended improvements to the benefits. The actuary was replaced on May 22, 1984. On July 1, 1984, the Plan was closed to future employees. On July 11, 1984, Rogers asked the then trustee, Canada Trust, for a refund of part of its contributions. Canada Trust required a legal opinion before doing so. On October 31, 1984, Canada Trust was replaced by National Trust. On July 15, 1985, Rogers requested that the new trustee, National Trust, refund $968,285 to it, which National Trust did. By December 31, 1986, Rogers had also taken contribution holidays evaluated at $842,000. In December 1992, Rogers amended the Plan to merge it retroactively with four other pension plans in the Rogers Communications Inc. Pension Plan (“RCI Plan”). The views of the employees with respect to such a merger were known to Rogers, as can be seen from an internal memorandum dated July 16, 1990:
It is clear that [the Premier employee representative] is not in favour of folding the Premier Plan into the RCI plan unless we can show clear benefit (unlikely scenario).
6 The long-term goal pursued by Rogers with respect to the Plan is stated in another internal memorandum dated April 22, 1993:
You asked for an update on the status of the Premier Pension Plan. As you are aware, our objectives related to this plan were (i) to get at the surplus the plan had and (ii) minimize our administration (i.e. eliminate an audited statement and an annual regulatory filing, etc.).
We were able to accomplish the objectives above by the amalgamation of all of the defined benefit plans into one plan. Therefore, the need to do anything further was redundant.
7 The members initiated the litigation against Rogers in 1995. They requested the return of the trust funds paid to Rogers in 1985 and a declaration that the funds belonged to them. The trial judge dismissed the claim on most of the issues ((1998), 54 B.C.L.R. (3d) 125). The members appealed. The Court of Appeal found that trust law imports its own rules that apply in addition to, and in precedence over, the law of contract and the rules of construction of contracts. To this extent and in view of Rogers’ concession that the merger was not complete as regards the Plan, members of the Plan retained rights that were distinct from those of members of the other plans that had been merged with it in the RCI Plan. The Court of Appeal concluded that the merger of the Plan with the RCI Plan was valid but did not affect the existence of the Trust as a separate trust. The members were also at liberty to institute proceedings to terminate the Trust based on the rule in Saunders v. Vautier or on the Trust and Settlement Variation Act, R.S.B.C. 1996, c. 463, to the extent that either may be applicable. The Court of Appeal held that the employer’s withdrawal of substantial funds from the surplus in 1985, which was admitted to have been in breach of trust, had been properly repaid to the trustee. Thus, the Plan’s members retained the right to distribution of the surplus upon termination ((2001), 83 B.C.L.R. (3d) 261, 2001 BCCA 16 (“Buschau No. 1”), at paras. 63-68). This Court denied leave to appeal that decision, [2001] 2 S.C.R. vii.
8 In 2001, the members applied to the Supreme Court of British Columbia for an order terminating the Plan. Loo J. ordered termination on the basis that the rule in Saunders v. Vautier was applicable and that s. 1(b) of the Trust and Settlement Variation Act provided the court with the jurisdiction to consent on behalf of those missing beneficiaries who were sui juris ((2002), 100 B.C.L.R. (3d) 327, 2002 BCSC 624). Rogers appealed.
9 The Court of Appeal found that the members were at liberty to invoke the rule in Saunders v. Vautier provided that the consents of all members and beneficiaries had been obtained. It set aside a part of the chambers judge’s decision based on the Trust and Settlement Variation Act, finding that a court did not have the power to consent on behalf of contingent sui juris beneficiaries. However, it provided the members with an opportunity to show that all the required consents had been obtained ((2004), 24 B.C.L.R. (4th) 85, 2004 BCCA 80 (“Buschau No. 2”)). After receiving additional evidence and representation, the Court of Appeal found that the rule in Saunders v. Vautier could operate to terminate the trust. It recognized that questions could arise concerning the “mechanics” of the termination, but it was of the opinion that the trustee would have to satisfy itself that “[all] the conditions have been met and that all statutory requirements — including the payment of applicable taxes — have been complied with” before distributing the trust assets ((2004), 27 B.C.L.R. (4th) 17, 2004 BCCA 282 (“Buschau No. 3”), at para. 17). Rogers and the trustee appealed to this Court.
10 Rogers submits that the rule in Saunders v. Vautier does not apply. National Trust does not take issue with the Court of Appeal’s order inasmuch as it determines the rights of Rogers or of the members. However, the trustee claims that the order places it in an untenable position by devolving upon it the authority and legal responsibility to give effect to and administer the termination of the Premier Trust, although this authority is not provided for by the terms of the Trust or by statute. The members maintain that the rule in Saunders v. Vautier applies but argue, in the alternative, that Rogers should terminate the Plan pursuant to its fiduciary duty under the PBSA . At the end of the hearing before this Court, the parties were asked to provide their views on the application of the PBSA to the termination of a plan by the Superintendent. Rogers takes the position that the Superintendent does not have the right to terminate the Plan because his role is limited to solvency issues. The members submit that the Superintendent has a discretionary power and that, as a result, they do not have a clear recourse. In their view, the rule in Saunders v. Vautier is not ousted by the PBSA .
11 It is clear from the history of the litigation that some of the issues are now res judicata. One of them is that the merger of the Plan with the RCI Plan did not affect the Trust. As the Court of Appeal noted at the time, this peculiar situation may present some conceptual difficulties (Buschau No. 1, at para. 66). Nonetheless, these facts must be interpreted with the help of the general principles of pension law. For this reason, it will be useful to review some background information concerning pension plans in general and the Plan in particular.
II. Pension Plans in General
12 Pension plans have a complex history and constitute a response to a multitude of needs. As R. L. Deaton puts it:
. . . [employee] benefits [initially] served multiple purposes, including attracting a labour supply and reducing turnover, serving as an investment in human capital by improving morale, increasing productivity and efficiency by rationalizing the human element in the work process, promoting loyalty to the firm, preventing or forestalling unionization, preventing government intervention with respect to compulsory social insurance, maximizing the tax position of certain benefits by increasing non-taxable compensation to employees, minimizing the cost per unit of benefit through group arrangements, thereby compensating for imperfect individual knowledge of insurance markets, and creating a favourable corporate public relations image.
(The Political Economy of Pensions: Power, Politics and Social Change in Canada, Britain and the United States (1989), at pp. 119-20)
He adds that in recent years many sophisticated employers have adopted a compensation approach based on the “total value of labour remuneration, wages and fringes having become interchangeable costs” (p. 122). Thus, what some may still view as a gratuitous reward for employees remains a powerful long-term human resources management tool as well as an undeniable benefit for aging employees. Employees rightly see their pension benefits as part of their overall compensation. How important pension benefits are to employees, and how sensitive employees are about such benefits, is even clearer in the present context of corporate mergers and acquisitions.
13 Pension benefits also serve broader social goals, which were recognized by the Court of Appeal (Buschau No. 2, at para. 47), citing approvingly E. E. Gillese (now a justice of the Ontario Court of Appeal), “Pension Plans and the Law of Trusts” (1996), 75 Can. Bar Rev. 221, at pp. 232-34. Together with government programs and individual savings, pension plans provide an aging population with invaluable financial support. In recognition of the social value of such an investment, pension contributions receive special tax treatment. The social component of private pension plans plays a crucial role in an era in which public pension programs have not yet been reformed to ensure adequate funding (see Deaton, at pp. 136-37, for an outline of the increase in contributions that would be required to conform to international standards). Courts do not make social policy, but the social role of pension plans might prove relevant when it comes time to decide whether the rule in Saunders v. Vautier can be employed to terminate a pension trust.
14 In Canada, defined benefit plans are usually funded in one of two ways: the funds are either held by an insurance company or held in trust (D. Rienzo, “Trust Law and Access to Pension Surplus” (2005), 25 E.T.P.J. 14; G. Nachshen, “Access to Pension Fund Surpluses: The Great Debate”, in Meredith Memorial Lectures 1988, New Developments in Employment Law (1989), 59, at p. 64). In an insured plan, the insurance company receives an agreed payment and, bearing the risk of a shortfall, undertakes to pay the pension benefits to the members. When a plan is funded through a trust, the employer contracts with a trust company. The trust company holds and invests the pension contributions, subject to instructions under the trust agreement. The contributions are generally adjusted following an evaluation by an actuary who determines the level of funding needed to meet the solvency requirement under the applicable legislation. Here, the Plan is and always has been funded through a trust, so the discussion can be limited to trust-related issues.
15 A defined benefit plan can fall into deficit or accumulate a surplus. Pension underfunding is a cause for concern. Almost 70 percent of major corporate pension plans were in deficit positions in the late 1970s. In the early 1980s, however, the situation reversed. Surpluses were generated by high levels of investment earnings coupled with lower wage increases and widespread layoffs, while employer contributions were left in the funds as employees forfeited their future pension rights: Deaton, at pp. 133-34, and Nachshen, at pp. 66-67. The situation reverted to one of deficits in the late 1990s. The magnitude of the underfunding problem has only recently started to emerge in legal commentaries (“Pension Underfunding Still Widespread, Yet . . .”, Business & Legal Reports, October 1, 2003 (online)). However, a surplus or deficit position reflects only a snapshot of a fund at a specific point in time. Since a pension plan is usually viewed as an ongoing instrument, time and sound actuarial advice are supposed to allow for secure funding while preventing the unnecessary accumulation of surpluses. Although the existence of deficits or surpluses is not an anomaly since actuaries cannot perfectly predict the future, in an ideal world, each plan would always be funded to the exact amount required to discharge its obligations.
16 Surpluses have not always been dealt with explicitly in pension plans or pension trusts. In Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611, the Court, dealing with issues relating to the distribution of a surplus, held that “when a trust is created, the funds which form the corpus are subjected to the requirements of trust law. The terms of the pension plan are relevant to distribution issues only to the extent that those terms are incorporated by reference in the instrument which creates the trust” (p. 639). The Court also stated that “[w]hen a pension fund is impressed with a trust, that trust is subject to all applicable trust law principles” (p. 643 (emphasis added)). It is thus necessary to determine which trust law principles are applicable before considering how they apply.
17 Before termination of a plan, a surplus is only an actuarial concept. While the plan is in operation, individuals entitled to the surplus assets do not have a specific interest in them. A pension surplus can be used to justify a contribution holiday if this is permitted by the plan, but the surplus can also disappear if investment earnings are lower than anticipated. Since pension plans are usually established for indefinite terms, issues relating to surpluses are not usually relevant to plan members while the plan is in operation. As the Court said in Schmidt, “[t]he right to any surplus is crystallized only when the surplus becomes ascertainable upon termination of the plan” (p. 654). Entitlement is determined by consulting the Plan, the Trust agreement (Schmidt, at p. 639) and the relevant legislation (Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, 2004 SCC 54, at para. 39).
18 Pension plans are heavily regulated. At this juncture, it is worth looking at the legislative scheme applicable to the issue.
III. The Pension Benefits Standards Act, 1985
19 The complex statutory and regulatory framework to which pension plans are subject cannot be overlooked. Recognizing the economic and social importance of pension plans, Parliament and the vast majority of provincial and territorial legislatures have adopted legislation regulating them. The first federal pension benefits standards legislation came into force on March 23, 1967 (S.C. 1966-67, c. 92). The current statute, the PBSA , was initially enacted in 1986 (S.C. 1986, c. 40). Under it, an important role of control and supervision is assigned to the Superintendent (see A. N. Kaplan, Pension Law (2006), for analysis on the analogous role of the Superintendent under the Ontario legislation). The Superintendent administers the PBSA , collects information and conducts studies concerning pension plans and their operation (s. 5 ). Strict investment and solvency standards are imposed on plan administrators (s. 9(1) and Pension Benefits Standards Regulations, 1985, SOR/87-19, rr. 6 to 10), who must also file documents and information required by the PBSA (ss. 7.4 and 12 ). A plan administrator also acts as a trustee for the employer, the members of the plan, and any persons entitled to pension benefits. The Superintendent can issue a direction of compliance if he is of the view that an administrator or an employer is pursuing a course of conduct that is contrary to sound financial practices, or that a pension plan is not being administered in accordance with the PBSA (s. 11(1) and (2) ). If the Superintendent’s direction is not complied with, the pension plan’s registration may be revoked (s. 11.1 ). The Superintendent also plays a key role at the termination and distribution stage (ss. 9.2 and 29 , and rr. 16 and 24). For example, his consent must be obtained before a surplus can be distributed (r. 16(2) (d)). Guidelines and instruction guides are published by the Superintendent to assist in the administration and termination of plans and trusts. Specific attention is paid to the rights of beneficiaries upon a request for distribution of a surplus. The Guidelines to Administrators for Plan Terminations make it clear that a delay in winding up will not be accepted simply because the administrator prefers to manage the funds.
20 In essence, the Superintendent plays a crucial role in the protection of beneficiaries. Although most of his interventions relate to supervision of the solvency requirements, he also acts as a gatekeeper for the distribution of a pension fund. The Superintendent has unique duties and responsibilities vis-à-vis beneficiaries that may make it possible to avoid resorting to a common law rule that was designed for an environment totally different from that of pension law.
IV. The Rule in Saunders v. Vautier
21 The common law rule in Saunders v. Vautier can be concisely stated as allowing beneficiaries of a trust to depart from the settlor’s original in