Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services)

Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services)
Collection
Supreme Court Judgments
Date
2004-07-29
Neutral citation
2004 SCC 54
Report
[2004] 3 SCR 152
Case number
29586
Judges
McLachlin, Beverley; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Deschamps, Marie; Fish, Morris J.
On appeal from
Ontario
Subjects
Administrative law
Pensions
Notes
SCC Case Information: 29586
Decision Content
Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, 2004 SCC 54
Monsanto Canada Inc. Appellant
v.
Superintendent of Financial Services Respondent
and between
Association of Canadian Pension Management Appellant
v.
Superintendent of Financial Services Respondent
and
Attorney General of Canada, National Trust Company,
Nicole Lacroix, R. M. Smallhorn, D. G. Halsall,
S. J. Galbraith, S. W. (Bud) Wesley, Canadian Labour
Congress and Ontario Federation of Labour Interveners
Indexed as: Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services)
Neutral citation: 2004 SCC 54.
File No.: 29586.
2004: February 16; 2004: July 29.
Present: McLachlin C.J. and Iacobucci, Major, Bastarache, Binnie, Deschamps and Fish JJ.
on appeal from the court of appeal for ontario
Pensions — Pension plans — Partial wind-up — Rights and benefits on partial wind-up — Surplus — Whether pension benefits legislation requiring distribution of proportional share of actuarial surplus when defined benefit pension plan partially wound up — Pension Benefits Act, R.S.O. 1990, c. P.8, s. 70(6).
Administrative law — Judicial review — Standard of review — Financial Services Tribunal — Standard of review applicable to Tribunal’s interpretation of s. 70(6) of Pension Benefits Act, R.S.O. 1990, c. P.8.
As a result of a reorganization of Monsanto Canada Inc. (“Monsanto”), 146 active members of the pension plan (“Affected Members”) received notice that their employment with Monsanto would terminate. The Superintendent of Financial Services refused to approve Monsanto’s partial wind-up report, for failing to provide for the distribution of surplus assets related to the part of the pension plan being wound up. A majority of the Financial Services Tribunal disagreed with the Superintendent and ordered her to approve the report, holding that s. 70(6) of the Ontario Pension Benefits Act provides no more than a right to participate in surplus distribution when, if ever, the plan fully winds up. The Divisional Court set aside the Tribunal’s order and upheld the Superintendent’s decision. The Court of Appeal dismissed the appeal.
Held: The appeal should be dismissed.
When the relevant factors of the pragmatic and functional approach are properly considered, the appropriate standard of review applicable to the Financial Services Tribunal’s interpretation of s. 70(6) of the Pension Benefits Act is that of correctness.
Section 70(6) requires the distribution of a proportional share of actuarial surplus when a defined benefit pension plan is partially wound up. The ordinary and grammatical meaning of s. 70(6) indicates that the assessment of rights and benefits is to be conducted as if the pension plan was winding up in full on the effective date of partial wind-up. The realization of rights and benefits, including the distribution of surplus assets, then occurs for the part of the plan actually being wound up. Therefore, the Affected Members, if entitled, may receive their pro rata share of the surplus existing in the fund on a partial wind-up, as if the plan was being fully wound up on that day. The members affected by a partial wind-up are thus accorded the rights and benefits that are not less than the group would have if there were a full wind-up on the date of partial wind-up.
The scheme of the Pension Benefits Act and of the regulations also supports the ordinary and grammatical meaning of s. 70(6). Delaying the distribution would not be consonant with the provisions that make distribution of surplus assets an intended part of the wind-up process, whether the wind-up is in whole or in part. In addition, the statutory scheme makes an important distinction between continuing plans and winding-up plans. The interpretation of s. 70(6) herein proposed is consistent with the logic of this aspect of the statutory scheme and the legislature’s choice to treat partial wind-ups in the same manner as full wind-ups.
A purposive interpretation of s. 70(6) should be mindful of the legislative objective in the context of the statutory scheme surrounding surplus and partial wind-up. The Pension Benefits Act is public policy legislation that recognizes the vital importance of long-term income security. Its purpose is to establish minimum standards and regulatory supervision in order to protect and safeguard the pension benefits and rights of members, former members and others entitled to receive benefits under private pension plans. The Act seeks, in some measure, to ensure a balance between employee and employer interests that will be beneficial for both groups. Distribution of surplus on partial wind-up is unlikely to disrupt that balance or to compromise the continuing integrity of the pension fund. Policy and practical reasons also favour an interpretation requiring distribution upon partial wind-up. Since pension plans are theoretically intended to be indeterminate in nature, it is reasonable for Affected Members to be subject to the risks of the plan while they are a part of it, but not after they have been terminated from it. The most equitable solution is thus to distribute the fortunes of favourable markets at the time Affected Members are terminated. In this way, the windfall is related to their actual time and participation in the plan. Moreover, the increasingly mobile nature of labour should be recognized. The Affected Members should be able to know their status at the time of their termination so as to arrange their affairs accordingly and not be indefinitely tied to an employer that laid them off.
Cases Cited
Discussed: Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611; referred to: Barrie Public Utilities v. Canadian Cable Television Assn., [2003] 1 S.C.R. 476, 2003 SCC 28; Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc., [2001] 2 S.C.R. 100, 2001 SCC 36; Voice Construction Ltd. v. Construction & General Workers’ Union, Local 92, [2004] 1 S.C.R. 609, 2004 SCC 23; Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982; Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, 2003 SCC 20; Ross v. New Brunswick School District No. 15, [1996] 1 S.C.R. 825; National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324; GenCorp Canada Inc. v. Ontario (Superintendent, Pensions) (1998), 158 D.L.R. (4th) 497; Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817; Dr. Q v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226, 2003 SCC 19; Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42; R. v. Campbell, [1999] 1 S.C.R. 565; Firestone Canada Inc. v. Ontario (Pension Commission) (1990), 1 O.R. (3d) 122.
Statutes and Regulations Cited
Financial Services Commission of Ontario Act, 1997, S.O. 1997, c. 28, ss. 1 “regulated sector”, 6, 7, 20, 21(4), 22.
Pension Benefits Act, R.S.O. 1990, c. P.8 [am. 1997, c. 28], ss. 1 “partial wind up”, “surplus”, “wind up”, 68, 69 [am. 2002, c. 18 , Sch. H, s. 5(1)], 70, 73, 74(1), 77, 78, 79, 84(1) [am. 1999, c. 6, s. 53(20)], 91(1).
Pension Benefits Act, 1987, S.O. 1987, c. 35.
O. Reg. 103/66, s. 11 [am. O. Reg. 91/69, s. 3].
O. Reg. 708/87, ss. 7a [ad. O. Reg. 100/88, s. 1], 7c [ad. O. Reg. 412/90, s. 1].
R.R.O. 1980, Reg. 746, s. 21(2) [rep. & sub. O. Reg. 31/87, s. 1].
R.R.O. 1990, Reg. 909, ss. 1(2) “going concern valuation” [rep. & sub. O. Reg. 144/00, s. 1(2)], 4(1), 8 [am. O. Reg. 743/91, s. 1; am. O. Reg. 307/98, s. 4; am. O. Reg. 444/03, s. 1], 9 [rep. & sub. O. Reg. 665/94, s. 1], 10 [am. idem, s. 2; am. O. Reg. 307/98, s. 5], 10.1 [ad. O. Reg. 286/97, s. 1; am. O. Reg. 307/98, s. 6], 13(1) [am. O. Reg. 712/92, s. 9], (1.1) [ad. idem; am. O. Reg. 144/00, s. 8(1)], 16 [am. O. Reg. 712/92, s. 11; am. O. Reg. 144/00, s. 11], 25 [am. O. Reg. 629/92, s. 3; am. O. Reg. 712/92, s. 15; am. O. Reg. 307/98, s. 10], 26, 28(5) [am. O. Reg. 712/92, s. 16; am. O. Reg. 307/98, s. 12], (6) [am. O. Reg. 307/98, s. 12], 28.1 [ad. O. Reg. 144/00, s. 22].
Authors Cited
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.
Dewetering, June. Occupational Pension Plans: Selected Policy Issues. Background paper (BP-250E) prepared for the Library of Parliament, Research Branch, February 1991.
Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Gillese, Eileen E. “Pension Plans and the Law of Trusts” (1996), 75 Can. Bar Rev. 221.
Mercer Pension Manual, loose-leaf ed., by William M. Mercer Limited. Agincourt, Ont.: Carswell, 1988 (updated 2003, release 6).
Ontario. Legislative Assembly of Ontario. Hansard — Official Report of Debates, Nos. 85 and 108. First Session, 33rd Parliament, January 13, 1986 and February 4, 1986.
Ontario. Legislative Assembly of Ontario. Hansard — Official Report of Debates, Nos. 12, 19, 27, 55, 86 and 98. Second Session, 33rd Parliament, May 12, 1986 to February 4, 1987.
Ontario. Legislative Assembly of Ontario. Hansard — Official Report of Debates, No. 34. Third Session, 33rd Parliament, June 25, 1987.
Ontario. Royal Commission on the Status of Pensions in Ontario. Report of the Royal Commission on the Status of Pensions in Ontario, vol. I, Design for Retirement. Toronto: Government of Ontario, 1980.
Sullivan, Ruth. Sullivan and Driedger on the Construction of Statutes, 4th ed. Markham, Ont.: Butterworths, 2002.
APPEAL from a judgment of the Ontario Court of Appeal (2002), 62 O.R. (3d) 305, 220 D.L.R. (4th) 385, 166 O.A.C. 131, 29 B.L.R. (3d) 18, 21 C.C.E.L. (3d) 11, 32 C.C.P.B. 248, [2002] O.J. No. 4407 (QL), affirming a decision of the Superior Court of Justice (Divisional Court) (2001), 198 D.L.R. (4th) 109, 144 O.A.C. 204, 10 C.C.E.L. (3d) 257, 27 C.C.P.B. 82, [2001] O.J. No. 963 (QL), setting aside the order of the Financial Services Tribunal (2000), 3 B.L.R. (3d) 99, 50 C.C.E.L. (2d) 303, 23 C.C.P.B. 148. Appeal dismissed.
Freya Kristjanson and Markus Kremer, for the appellant Monsanto Canada Inc.
Jeffrey W. Galway and Randy Bauslaugh, for the appellant the Association of Canadian Pension Management.
Deborah McPhail and Leslie McIntosh, for the respondent.
Donald J. Rennie and Kirk Lambrecht, Q.C., for the intervener the Attorney General of Canada.
J. Brett Ledger and Lindsay P. Hill, for the intervener the National Trust Company.
William J. Sammon, for the intervener Nicole Lacroix.
Howard Goldblatt, Dona Campbell and Ethan Poskanzer, for the interveners the Canadian Labour Congress and the Ontario Federation of Labour.
Mark Zigler and Ari N. Kaplan, for the interveners R. M. Smallhorn, D. G. Halsall, S. J. Galbraith and S. W. (Bud) Wesley.
The judgment of the Court was delivered by
1 Deschamps J. — Pension law is a field which is gaining in importance as more and more people retire and look to their pensions to sustain them during their “golden years”. The complex exercise of actuarial accounting that determines how pensions should be funded is rivalled only by the complexity of the law determining the pension rights and obligations of employees and employers, which lies at the intersection of contracts, trust law, and statute law. This appeal is an attempt to bring some clarity to a relatively confined area of pension law, which has been the subject of much debate: when there is a partial wind-up of an Ontario-defined benefit pension plan, must the actuarial surplus be distributed at that time?
2 In particular, does s. 70(6) of the Ontario Pension Benefits Act, R.S.O. 1990, c. P.8 (“Act”), require the distribution of a proportional share of actuarial surplus when a defined benefit pension plan is partially wound up? The Superintendent of Financial Services answered this question in the affirmative. She refused to approve the partial wind-up report of the appellant, Monsanto Canada Inc. (“Monsanto”), for failing to provide for the distribution of surplus assets related to the part of the Pension Plan being wound up. A majority of the Financial Services Tribunal (“Tribunal”) disagreed with the Superintendent and ordered her to approve the report: (2000), 3 B.L.R (3d) 99. The majority held that s. 70(6) provides no more than a right to participate in surplus distribution when, if ever, the Plan fully winds up. The Ontario Divisional Court overturned the Tribunal on appeal ((2001), 198 D.L.R. (4th) 109) and the Court of Appeal agreed ((2002), 62 O.R. (3d) 305). Monsanto and the Association of Canadian Pension Management now appeal to this Court. The appeal, for the reasons that follow, should be dismissed.
I. Facts
3 The factual foundation of the legal question raised in the present appeal can be briefly stated. Monsanto originally maintained three separate pension plans in respect of various operations. Effective January 1, 1996, these plans were consolidated to form the Pension Plan for Employees of Monsanto Canada Inc. (“Plan”). As a result of a subsequent reorganization of Monsanto, involving a staff reduction program and a plant closure, 146 active members of the Plan (“Affected Members”) received notice that their employment with Monsanto would terminate between December 31, 1996 and December 31, 1998. Monsanto’s report to the Superintendent provided that the partial wind-up was to be effective May 31, 1997. As of that date, the information supplied to the regulator by the actuaries for the Plan showed that there was an actuarial surplus of some $19.1 million, representing the amount by which the estimated asset value exceeded the estimated liabilities. According to the evidence, the pro rata share of the surplus related to the part of the Plan being wound up is approximately $3.1 million.
4 One of the bases for the Superintendent’s refusal to approve Monsanto’s report was the failure to provide for the distribution of this surplus on partial wind-up, in accordance with s. 70(6) of the Act. This is the only ground still in issue before this Court as the other bases for refusal were not pursued on this appeal. Also noteworthy is the fact that this matter is preliminary to the question of surplus entitlement, which is not affected by this decision and will need to be determined at a later date.
II. Issue
5 The only issue in this appeal is whether the Tribunal properly interpreted s. 70(6) of the Act as not requiring distribution of the actuarial surplus on a partial plan wind-up. Thus, the analysis must proceed in two stages. First, the appropriate standard of review of the Tribunal’s decision must be determined. Second, the Tribunal’s interpretation of s. 70(6) must be measured against this standard. All of the relevant legislative provisions are annexed at the end of these reasons.
III. Standard of Review
6 The courts below found, and the appellants and respondent agreed, that the appropriate standard of review of the Tribunal’s decision was reasonableness. However, the standard of review is a question of law, and agreement between the parties cannot be determinative of the matter. An evaluation of the four factors comprising the pragmatic and functional approach is required to decide the appropriate level of deference this Court should grant in reviewing the decision.
A. Privative Clause
7 The legislature did not enact a privative clause to insulate the Tribunal’s jurisdiction. To the contrary, s. 91(1) of the Act provides for a statutory right of appeal to the Divisional Court. While not determinative, this factor suggests that the legislature intended less deference to be afforded to the Tribunal on judicial review (Barrie Public Utilities v. Canadian Cable Television Assn., [2003] 1 S.C.R. 476, 2003 SCC 28, at para. 11; Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc., [2001] 2 S.C.R. 100, 2001 SCC 36, at para. 27).
B. Nature of the Problem
8 The issue on appeal is a pure question of law, related to the interpretation of a section that has no specialized technical meaning. Statutory interpretation is an exercise in which the courts are well equipped to engage. The question here concerns the establishment of statutory rights by construing the legislature’s intention from the text of s. 70(6), the legislative purpose, and the statutory context in which it is situated. Generally speaking, such legal questions will attract a more searching standard of review as being clearly within the expertise of the judiciary, unless the legal question is “at the core” of the Tribunal’s expertise (Voice Construction Ltd. v. Construction & General Workers’ Union, Local 92, [2004] 1 S.C.R. 609, 2004 SCC 23, at para. 29; see also Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, at para. 34).
C. Relative Expertise
9 The expertise of the Tribunal relative to that of the courts must be evaluated in reference to the particular provision being invoked and interpreted and the nature of the Tribunal’s expertise (Barrie, supra, at paras. 12-13; Pushpanathan, supra, at para. 28). In other words, relative expertise must be evaluated in context and in relation to the specific question under review (Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, 2003 SCC 20, at para. 30).
10 On the one hand, we have to look at courts’ expertise and the subject matter which is, as discussed in the previous sections, the statutory interpretation of s. 70(6). On its face, the provision sets out the rule of parity between situations of partial wind-up and full wind-up. Except perhaps in demonstrating the practical implications of proposed interpretations, the issue is neither factually laden nor highly technical. In this case, as it is generally, statutory interpretation is “a purely legal question . . . ‘ultimately within the province of judiciary’” (Barrie, supra, at para. 16; see also Ross v. New Brunswick School District No. 15, [1996] 1 S.C.R. 825, at para. 28).
11 On the other hand, the Tribunal does not have specific expertise in this area. The Tribunal is a general body that was created under the Financial Services Commission of Ontario Act, 1997, S.O. 1997, c. 28 (“FSCOA”), s. 20, to replace the specialized Pension Services Commission. It is responsible for adjudication in a variety of “regulated sector[s]” (FSCOA, s. 1), including co-operatives, credit unions, insurance, mortgage brokers, loans and trusts, and pensions (FSCOA, s. 1). In addition, the nature of the Tribunal’s expertise is primarily adjudicative. Unlike the former Pension Services Commission or the current Financial Services Commission, the Tribunal has no policy functions as part of its pensions mandate (see FSCOA, s. 22). As noted in Mattel Canada, supra, and in National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, involvement in policy development will be an important consideration in evaluating a tribunal’s expertise. Lastly, in appointing members to the Tribunal and assigning panels for hearings, the statute advises that, to the extent practicable, expertise and experience in the regulated sectors should be taken into account (FSCOA, ss. 6(4) and 7(2)). However, there is no requirement that members necessarily have special expertise in the subject matter of pensions. The Tribunal is a small entity of 6 to 12 members which further reduces the likelihood that any particular panel would have expertise in the matter being adjudicated (FSCOA, s. 6(3)).
12 Overall, there is little to indicate that the legislature intended to create a body with particular expertise over the statutory interpretation of the Act. The Tribunal would not have any greater expertise than the courts in construing s. 70(6). Thus, this factor also suggests a lower amount of deference is required to be given to the Tribunal’s decisions on the issue of statutory interpretation.
D. Purposes of the Legislation and the Provision
13 The purpose of the Act was well stated in GenCorp Canada Inc. v. Ontario (Superintendent, Pensions) (1998), 158 D.L.R. (4th) 497 (Ont. C.A.), at p. 503:
[T]he Pension Benefits Act is clearly public policy legislation establishing a carefully calibrated legislative and regulatory scheme prescribing minimum standards for all pension plans in Ontario. It is intended to benefit and protect the interests of members and former members of pension plans, and “evinces a special solicitude for employees affected by plant closures” . . . .
14 On the one hand, the protection of the rights of vulnerable groups is a central and long-standing function of the courts. The protectionist aim of the legislation is especially evident in s. 70(6), which seeks to preserve the equal treatment and benefits between situations of partial wind-up and full wind-up. On the other hand, pension standards legislation is a complex administrative scheme, which seeks to strike a delicate balance between the interests of employers and employees, while advancing the public interest in a thriving private pension system. In this task, the regulatory body usually has a certain advantage in being closer to the dispute and the industry. In part, this factor led the Ontario Court of Appeal in GenCorp to conclude that the decisions of the Pension Services Commission should be reviewed on a standard of reasonableness.
15 Here, however, the Tribunal assumes a different role and function in relation to the statutory purpose of the particular provision at issue. The determination of the meaning of s. 70(6) is not “polycentric” in nature. In other words, s. 70(6) does not grant the Tribunal broad discretionary powers nor a range of policy-laden remedial choices that involve the balancing of multiple sets of interests of competing constituencies (see Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, at para. 56; Pushpanathan, supra, at para. 36; Dr. Q v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226, 2003 SCC 19, at paras. 30-31). Moreover, the issues raised in s. 70(6) are legal in nature, rather than economic, broad, specialized, technical or scientific in such a way as to substantially deviate from the normal role of the courts (Dr. Q, supra, at para. 31; Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at paras. 48-49). Therefore, this factor also seems to indicate less deference be accorded to the Tribunal’s interpretation.
E. Conclusion on the Standard of Review
16 As all four factors point to a lower degree of deference, a standard of review of correctness should be adopted in this case. There are no persuasive grounds for the Court to grant the Tribunal any deference on the pure question of law before us in this case (see also Barrie, supra, at para. 18, citing Pushpanathan, supra, at para. 37).
IV. Statutory Interpretation of Section 70(6)
17 I now turn to the essence of this appeal: the question of the interpretation of s. 70(6). The provision reads:
70. . . .
(6) On the partial wind up of a pension plan, members, former members and other persons entitled to benefits under the pension plan shall have rights and benefits that are not less than the rights and benefits they would have on a full wind up of the pension plan on the effective date of the partial wind up.
18 The appellants argue that the effect of the provision is to afford Affected Members a vested right, as of the effective date of partial wind-up, to participate in surplus distribution when, if ever, the Plan fully winds up, assuming they are so entitled under the Plan agreement. In contrast, the respondent contends that s. 70(6) requires that the distribution of the surplus actually occurs on the effective date of the partial wind-up. The main area of contention between the parties is the import of the last phrase: “on the effective date of the partial wind up”.
19 The established approach to statutory interpretation was recently reiterated by Iacobucci J. in Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42, at para. 26, citing E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
I will examine each of these factors in turn, beginning first with the background context.
A. Historical Context
20 Pension plans have a long history in Canada, first appearing in the late 19th century. However, it was not until after the Second World War that the development of pension plans flourished in tandem with the economic growth and prosperity of the era (see Report of the Royal Commission on the Status of Pensions in Ontario (1980), vol. I, at p. 35; R. L. Deaton, The Political Economy of Pensions: Power, Politics and Social Change in Canada, Britain and the United States (1989), at p. 79). In the early days, pensions were commonly regarded as gratuitous rewards for long and faithful service, subject to the discretion and financial health of the employer (see Report of the Royal Commission on the Status of Pensions in Ontario, supra, at p. 2; Mercer Pension Manual (loose-leaf ed.), at p. 1-9). However, particularly as pensions became a more familiar sight at the collective bargaining table, a competing conception as an enforceable employee right developed (see E. E. Gillese, “Pension Plans and the Law of Trusts” (1996), 75 Can. Bar Rev. 221, at pp. 226-27; Deaton, supra, at pp. 122-23). The enactment of minimum standards legislation in Ontario, first in 1963 and again in 1987, “considerably expanded the rights of plan members. It altered, again, the power balance between employers and employees in the matter of pensions” (Gillese, supra, at p. 228).
21 The notion of a pension fund actuarial surplus, by contrast, has had a much shorter history. Surpluses, in any noticeable form, generally did not appear before the early 80s when millions of dollars in actuarial surplus were developing in some funds (see, e.g., J. Dewetering, Occupational Pension Plans: Selected Policy Issues (1991), at p. 17; Deaton, supra, at p. 134). Surplus can only arise in defined benefit plans, like the one provided by Monsanto, because, in contrast to defined contribution plans, benefits or plan liabilities are not contingent on the level of nor the return on contributions. Members are guaranteed specific benefits at retirement in an amount fixed by a determined formula. Contributions are made each year on the basis of an actuary’s estimate of the amount which must be presently invested in order to provide the stipulated benefits at the time the pension is paid out (“current service cost”). These estimates are generally conservative in nature and based on a narrow range of assumptions consistent with actuarial standards and practices. This exercise is inherently somewhat speculative, and in the event of changes in market conditions or other unforeseeable future experience, the present value of the assets of the fund may actually be lower or greater than originally estimated.
22 If, in a given year, the assets of the fund, evaluated as a going concern, are found to be insufficient to cover the current service cost, there is said to be an “unfunded liability” and the employer will be called upon to make up the deficit through contributions (see, generally, s. 4(1) of the Pension Benefits Act General Regulations, R.R.O. 1990, Reg. 909). If the plan is underfunded on wind-up, then benefits will be reduced, subject to the application in Ontario of the Pension Benefits Guarantee Fund (ss. 77 and 84(1) of the Act). In contrast, if the value of the assets are greater than originally estimated, the fund is said to have a surplus, being “the excess of the value of the assets of a pension fund related to a pension plan over the value of the liabilities under the pension plan” (s. 1 of the Act). The surplus is considered “actuarial” because it has not yet been concretely realized through the liquidation of assets and the payment of liabilities.
23 Consequently, in the 80s, the surplus issue became a hotly contested one. Employers claimed the surplus as the result of their assumption of risk, while employees maintained that the fund, including the surplus, represented deferred wages belonging to them. It was in this context that the legislature re-enacted s. 70(6) as part of the Pension Benefits Act, 1987, S.O. 1987, c. 35, virtually unchanged from the previous version introduced in 1969 (O. Reg. 103/66, s. 11, as am. by O. Reg. 91/69, s. 3; see Legislative Assembly of Ontario, Hansard — Official Report of Debates, 33rd Parl., January 13, 1986 to June 25, 1987). Also at this time, definitions of “partial wind up” and “surplus” were included in the scheme. Concurrently, a moratorium was placed on surplus withdrawals from ongoing plans in 1986 (R.R.O. 1980, Reg. 746, s. 21(2), as am. by O. Reg. 31/87), which was extended to plans on wind-up in 1988 (O. Reg. 708/87, s. 7a (added by O. Reg. 100/88)). The surplus sharing regulation was enacted to replace the moratorium (O. Reg. 708/87, s. 7c (added by O. Reg. 412/90)), requiring that no payments be made from the surplus of a pension plan that is being wound up in whole or in part unless it is (a) made to or for the benefit of members, former members or persons other than the employer who are entitled to payments; or (b) made to the employer with the written agreement of a prescribed number of members (R.R.O. 1990, Reg. 909, s. 8(1)). This regulation, designed to encourage agreement and sharing between employers and employees, ceases to have effect after December 31, 2004 (Reg. 909, s. 8(3)).
24 This historical context, though not determinative, may provide some insight into the legislature’s intention regarding the effect of s. 70(6). Through its statutory interventions, the legislature has sought to clarify some aspects of the relationship between employers and employees in pension matters. Steps have been taken to improve many employee rights but the importance of maintaining a fair and delicate balance between employer and employee interests, in a way which promotes private pensions, has also been a consistent theme. It is in light of this background that the legal meaning of the provision must be interpreted in accordance with the accepted approach to statutory interpretation.
B. Grammatical and Ordinary Sense
25 As noted by the Court of Appeal, s. 70(6) specifies the timing, group and rights to which the section applies. First, the timing is the partial wind-up of a pension plan. Second, the specified group of “members, former members and other persons entitled to benefits under the pension plan” is generally meant to refer to the members affected by a partial wind-up (para. 41). Lastly, the rights accorded are those rights and benefits that are not less than the group would have if there were a full wind-up on the date of partial wind-up (para. 42). The parties agree with these propositions.
26 Where the disagreement lies is with regard to the timing of distribution following a partial wind-up of a plan in which there is an actuarial surplus. The respondent reasons that, since (i) s. 70(6) requires the rights and benefits on a partial wind-up to not be less than those available on full wind-up, and (ii) all parties agree that surplus distribution would occur on a full wind-up (Court of Appeal judgment, at para. 43; see also s. 79(4)), then (iii) s. 70(6) must require surplus distribution on a partial wind-up. In contrast, the appellants argue that, at most, s. 70(6) requires the vesting of the right to participate in surplus distribution in a potential future full wind-up because it is only on final wind-up that an actual, rather than actuarial, surplus can exist. In my opinion, the former interpretation accords better with the ordinary and grammatical meaning of the section.
27 First, the section mandates that the Affected Members “shall have”, on the effective date of the partial wind-up, the rights and benefits they “would have” on a full wind-up. This wording transposes the timing of the rights and benefits exigible on full wind-up up to the effective date of partial wind-up. It does not connote any delay until the future date of full wind-up before the exercise of acquired rights.
28 Second, the phrase “on the effective date” (emphasis added) suggests more immediacy than other possible alternatives, such as “as of”. If the provision was worded “shall have rights and benefits . . . as of the effective date”, this would be more indicative of a situation where rights were being vested presently but paid out in the future. The actual wording of “shall have rights and benefits . . . on the effective date” (emphasis added) indicates a more immediate realization of rights and benefits.
29 Third, the appellants’ proposed interpretation, as adopted by the majority of the Tribunal, in effect reads out this last phrase of the provision. In my opinion, without the phrase “on the effective date of the partial wind up”, it may have been open to read s. 70(6) as only vesting rights to be exercised on full wind-up. However, the presence of this phrase confirms that rights and benefits are not only measured but also realized on the effective date of partial wind-up.
30 Lastly, s. 70(6) acts as a residual deeming provision rather than being an independent delineation of substantive rights. As a matter of logic, if it equalizes the position of the full and partial wind-up groups, and it is clear that there is surplus distribution on full wind-up, then there should also be surplus distribution on partial wind-up.
31 In sum, the provision indicates that the assessment of rights and benefits is to be conducted as if the Plan was winding up in full on the effective date of partial wind-up. The realization of rights and benefits, including the distribution of surplus assets, then occurs for the part of the Plan actually being wound up. Therefore, the Affected Members, if entitled, may receive their pro rata share of the surplus existing in the fund on a partial wind-up, as if the Plan was being fully wound up on that day.
C. Scheme of the Act
32 The statutory scheme further supports this conclusion. First, the definitions of “wind up” and “partial wind up” in s. 1 of the Act closely parallel one another, both requiring a distribution of assets:
“partial wind up” means the termination of part of a pension plan and the distribution of the assets of the pension fund related to that part of the pension plan;
“wind up” means the termination of a pension plan and the distribution of the assets of the pension fund;
It then follows that s. 70(1)(c) requires the administrator to file as part of its full or partial wind-up report, “the methods of allocating and distributing the assets of the pension plan”. Similarly, s. 28.1(2) of Reg. 909 requires that the administrator of the Plan give to each person entitled to a pension a statement setting out, among other things: “[t]he method of distributing the surplus assets”, “[t]he formula for allocating the surplus among the plan beneficiaries” and “[a]n estimate of the amount allocated to the person.” Thus, delaying the distribution would not be consonant with these provisions that make distribution of surplus assets an intended part of the wind-up process, whether the wind-up is in whole or in part.
33 Second, the statutory scheme makes an important distinction between continuing plans and winding-up plans. The partial wind-up falls, for all purposes, in the latter group, even though there is a remaining part of the Plan that continues to exist. Under the scheme, in evaluating rights and procedural requirements, partial wind-up is treated the same as a full wind-up, which coincides with the purpose and effect of s. 70(6). For instance, in s. 78(1) the general rule is established that “[n]o money may be paid out of a pension fund to the employer without the prior consent of the Superintendent.” Sections 79(1) and 79(3) then provide for exceptions to this rule depending on whether the application for payment is being made with regard to a plan that is continuing or one that is winding up. As with the additional conditions set out in the regulations (Reg. 909, ss. 8 to 10 and 25 to 28.1), it is much more difficult to justify surplus withdrawal from a continuing plan than from a plan winding up in whole or in part. The interpretation of s. 70(6) herein proposed is consistent with the logic of this aspect of the statutory scheme and the legislature’s choice to treat partial wind-ups in the same manner as full wind-ups. As a result, a partial wind-up requires a full wind-up to notionally occur for the purposes of evaluating the pro rata share of the assets and liabilities related to the partial wind-up, followed by the continuation of the remainder of the Plan.
34 Lastly, in this statutory scheme, the role of s. 70(6) appears to be as a residual deeming provision reflecting the legislature’s intent of assuring that rights on partial wind-up are not less than those available on full wind-up, whether granted under the Act or under the terms of the Pension Plan. In almost every section where wind-up is mentioned, the legislature has already clarified that it is referring to wind-up “in whole or in part”. This is the case when referring to grow-in rights (s. 74(1)) and immediate vesting rights (s. 73(1)(b)). These are special rights that members affected by a wind-up acquire but that ordinary retirees or individuals leaving employment do not. Provisions regarding the procedural requirements on wind-up similarly specify application on wind-up both “in whole or in part” (see, e.g., ss. 68 to 70). One of the rare instances in the Act where both are not expressly included is with regard to transfer rights on wind-up, which only mentions “wind up” (s. 73(2)). The appellants seem to agree, correctly in my opinion, that those rights would still have effect on partial wind-up even though it is not explicitly mentioned. Presumably, this must result from the application of s. 70(6), and controverts any sort of expressio unius est exclusio alterius logic for s. 73(2).
35 As a last point, it is worth commenting on the approach of the majority judgment of the Tribunal in disregarding the regulations in construing the meaning of s. 70(6). While it is true that a statute sits higher in the hierarchy of statutory instruments, it is well recognized that regulations can assist in ascertaining the legislature’s intention with regard to a particular matter, especially where the statute and regulations are “closely meshed” (see R. v. Campbell, [1999] 1 S.C.R. 565, at para. 26; Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at p. 282). In this case, the statute and the regulations form an integrated scheme on the subject of surplus treatment and the thrust of s. 70(6) can be gleaned in light of this broader context.
36 In summary, the scheme of the Act and of the regulations supports the ordinary and grammatical meaning of s. 70(6) as requiring distribution of surplus at the time of partial wind-up.
D. Object of the Act
37 A purposive interpretation of s. 70(6) should be mindful of the legislative objective in the context of the