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                                                 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 SEVENAMENDMENT 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.



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 intentions provided that they are of full legal capacity and are together entitled to all the rights of beneficial ownership in the trust property. More formally, the rule is stated as follows in Underhill and Hayton Law Relating to Trusts and Trustees (14th ed. 1987), at p. 628:

 


If there is only one beneficiary, or if there are several (whether entitled concurrently or successively) and they are all of one mind, and he or they are not under any disability, the specific performance of the trust may be arrested, and the trust modified or extinguished by him or them without reference to the wishes of the settlor or the trustees.

 

According to D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’ Law of Trusts in Canada (3rd ed. 2005), at p. 1175, the rule was developed in the 19th century and originated as an implicit understanding of Chancery judges that the significance of property lay in the right of enjoyment. The idea was that, since the beneficiaries of a trust would eventually receive the property, they should decide how they intended to enjoy it.

 

22                               The members argue that this rule allows them to terminate the Trust fund even though the employer, upon agreeing to the Trust, stated that only he could terminate it.  The terms of the Plan and its Trust fund are the key to the analysis.  I will now turn to them.

 

V. The Plan and Its Trust Fund

 


23                               The Plan, as stated in 1974, provided for the assets to be held in accordance with the terms of a Trust agreement.  A committee known as the Retirement Committee was appointed by the company to administer the Plan. All employees hired after January 1, 1974 were required to become members of the Plan, while the other employees were eligible to join it under certain conditions (General Rule Two). The benefits were not to exceed the maximum permitted under the prevailing legislation and were payable upon retirement (the normal retirement age was 65 years). Although entitled to make additional contributions, employees were not required to contribute to the regular funding of the Plan (Special Rule Four (1)). The employer’s contribution was calculated by the actuary appointed under the Plan (General Rule Four (2)). Benefits were to be paid to the member for the remainder of his or her life and then to the member’s beneficiary for any remaining portion of a “guaranteed period”.  A lump sum could be paid, but only to a member, if the benefit was less than $10 per month, and even so this was at the Retirement Committee’s discretion. The committee could decide all matters in respect to the operation, administration and interpretation of the provisions of the Plan (General Rule Six (12)). The company had the right to amend the Plan provided that the amendment did not affect rights acquired or benefits earned as at the date of the amendment. Upon termination, benefits were to be paid as provided for in the Plan, and the balance of assets remaining in the trust fund, after all liabilities had been satisfied, were to be distributed by the Committee among the remaining members on the basis of s. 12 of the former Pension Benefits Standards Act (General Rule Seven).

 

24                               The Trust agreement was entered into for the specific purpose of creating a Trust fund for the Plan.  The fund was to be held and administered for the benefit of employees and of beneficiaries under the Plan.  The trustee was to follow directions given by the company. The company also had the right to terminate the Trust agreement (art. V(2)).


 

25                               Rogers purported to amend the Plan to give itself the right to the surplus in 1992, but the Court of Appeal found (Buschau No. 1, at para. 59) that the amendments had not affected the members’ rights; its judgment in that case is now binding on the parties.

 

26                               Thus, neither the Trust agreement nor the Plan provides for termination of the Trust by employees. The members consequently rely on the rule in Saunders v. Vautier.  Does it apply? Like my colleague Bastarache J., I conclude that it does not. My reasons are slightly different, however.

 

VI. Non-Application of the Rule in Saunders v. Vautier

 

27                               There are many reasons why the rule is not easily incorporated into the context of employment pension plans.

 

28                               First, pension plans are heavily regulated.  The PBSA regulates the termination of a plan and the distribution of the fund and the trust assets.  I accept the following comment of the Court of Appeal (Buschau No. 2, at para. 47):

 


It must be acknowledged that the application of the rule in Saunders v. Vautier to pension trusts does involve different and more complicated factors, financial and legal, than an ordinary legacy or gift in trust. As already noted, pension trusts are part of the complex of rights and obligations (not only equitable, but also contractual and statutory) between employers and employees, and obviously serve broad societal and economic purposes.

 

However, the Court of Appeal’s order (Buschau No. 3) defies the application of the PBSA  because it allows for the operation of the rule in Saunders v. Vautier without regard to the obligations to report to the Superintendent and to provide for the payment of pension benefits before distribution of the trust fund.  The PBSA deals extensively with the termination of plans and the distribution of assets.  It is clear from this explicit legislation that Parliament intended its provisions to displace the common law rule. To the extent that it provides a means to reach the distribution stage, the PBSA  prevails over the traditional rule in Saunders v. Vautier.

 


29                               Second, a family or testamentary trust is generally a stand-alone instrument. It does not usually depend on any other instrument for its operation.  No indirect effect results from the application of the rule in Saunders v. Vautier in such cases. In contrast, a pension trust serves only as a vehicle for holding and managing the funds required by the pension plan.  In the instant case, the Trust agreement is expressly “made a part of the Plan” (art. I(1)) and the Plan is attached to that agreement (preamble to the Trust agreement). The Trust agreement is therefore dependent on the Plan for which it was created. The Premier Trust cannot be collapsed without regard to the Plan itself.  The two instruments are therefore indissociable. This particular situation was not dealt with in Schmidt, which focussed on the distribution of trust assets, not the termination of a trust agreement that had been expressly made part of a plan. In the case at bar, despite the link between the Plan and the Trust agreement, the judgment of the Court of Appeal purports to authorize the members to resort to the rule in Saunders v. Vautier, but does not provide for termination of the Plan. And yet, termination of the Plan in accordance with the prevailing PBSA  is a condition precedent to distribution. This awkward juridical status illustrates why the common law rule is not an easy fit in the pension law context.

 

30                               Third, employers establish plans because it is in their interest to do so.  Under normal circumstances, they have the right not to have their management decisions disturbed. In contrast, the common law trust allows no room for the settlor’s interest.  Although the particular circumstances of this case may lead to the conclusion that the employer no longer has a legitimate interest in the continuation of the Plan, a blanket statement that the employer has no interest conflicts with the usual expectations of parties to a pension plan. 

 

31                               Fourth, gift or legacy trusts are gratuitous, and accelerating the date of the beneficiaries’ entitlement has no broad social consequences. Pension trusts funds, however, are no longer generally viewed as being gratuitous: either employees contribute directly or their entitlement is regarded as remuneration deferred until the date of their retirement. The capital of the pension trust fund cannot be distributed without defeating the social purpose of preserving the financial security of employees in their retirement by allowing them to receive periodic payments until they die.

 


32                               Thus, this case amply demonstrates the difficulties associated with applying the rule in Saunders v. Vautier to a pension trust.  The Court of Appeal issued an order stating that the members were at liberty to invoke the rule in Saunders v. Vautier.  All the reporting and approval mechanisms that must precede termination by virtue of the PBSA  were disregarded.  They were treated as issues relating merely to “mechanics” (Buschau No. 3, at para. 17). According to the Court of Appeal, the Premier Trust may be collapsed without regard to its purpose of providing a means to defer income. No order was made to provide for annuities as required by the PBSA . Moreover, while the Court of Appeal held that the Premier Trust may be terminated pursuant to the rule in Saunders v. Vautier, no corresponding provision was made for terminating the trustee’s obligations to the members under the merged RCI Plan.

 

33                               I therefore conclude that the impediments to applying the rule in Saunders v. Vautier are numerous. The rule is not easily applicable to pension trusts and not even the length of time elapsed since the beginning of the proceedings can allow the members to bend the rule to fit it to their case. I do not exclude the possibility that the common law rule might apply to very small pension plans, the kind offered to a few officers of a corporation, but in general the fit is wrong. 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.  Since my colleague Bastarache J. does not share my opinion on this point, I feel that I should elaborate on it.

 


VII. Members’ Recourse

 

34                               I have already noted that neither the Plan nor the Trust agreement grants members a direct right to terminate the Plan.  There is a reason for this. Historically, employers created plans for their own purposes, without much input from employees. Of course, plans benefited employees, but they were essentially human resources management tools. Where possible, employers stated terms that allowed them to control the operation of the plans, thereby protecting their interests. Employer control is tempered, in a unionized context, by undertakings resulting from collective agreements and, outside of the collective bargaining context, by individual contracts of employment.  However, wording reserving the employers’ right to terminate is still common. A plan is also seen as being, if not a permanent instrument, at least a long-term one.  However, the participation of any individual member is ephemeral: members come and go, while plans are expected to survive the flow of employees and corporate reorganizations. In an ongoing plan, a single group of employees should not be able to deprive future employees of the benefit of a pension plan. Thus, members often have only a passive and limited right with regard to employer decisions concerning the future of their plan and trust fund. However, they are not left without recourse should the employer infringe the PBSA  or their plan. They can alert the Superintendent and trigger action if and when required.

 


35                               The PBSA is not a complete code.  However, when recourse is available to plan members, they should use it.  Termination is dealt with explicitly in the PBSA . When asked to submit representations on the remedies afforded by the PBSA , the members took the position that the remedy afforded by the statute could not cover all their claims.  They also stated that the Superintendent could have intervened on his own.

 

36                               This answer is not satisfactory.  The members wanted the Trust fund to be collapsed and distributed directly to them.  A trust can in fact be automatically terminated and distributed in this way pursuant to the rule in Saunders v. Vautier. As mentioned above, however, such a distribution does not accord with the terms of the Plan and with the spirit of the social scheme, the purpose of which is to provide periodic payments during members’ lifetimes, not to distribute the capital in a lump sum.  Moreover, the members’ position is not compatible with the PBSA  and it puts them at risk of attracting undesirable tax consequences (Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 56(1), 146(8), 147.1(11) and (13); Income Tax Regulations, C.R.C. 1978, c. 945, ss. 8501(1) and 8502).  Also, the Superintendent can hardly be expected to be familiar with details of the management of a particular pension plan. The members could have asked him to step in. 

 


37                               A clear illustration of the Superintendent’s potential role can be found in the facts that gave rise to the members’ original action. In 1985, the trustee, at Rogers’ request, transferred close to $1 million to Rogers out of the Plan’s Trust fund. Rogers eventually acknowledged that the transfer was improper and reimbursed the amount in the course of that initial proceeding. However, the members could have asked the Superintendent to exercise his powers under the PBSA .

 

38                               Under s. 8(3) of the PBSA , plan members can object to an administrator’s conduct if it is in breach of its fiduciary duty to them.  Also, under s. 8(10) , an employer who is an administrator is forbidden to put itself in a material conflict of interest. The Superintendent could have directed Rogers to return the money to the Trust (s. 29(11) and s. 11(1) of the PBSA ).

 

39                               Here, the members claim to be entitled to distribution of the surplus.  For them to be entitled to distribution, the Plan must first be terminated.  Since the Plan does not provide for them to terminate it, the Superintendent could order a distribution if he were faced with circumstances falling within the parameters of the PBSA .

 


40                               Is that the case?  I mentioned earlier that clauses allowing employers to control terminations are common.  However, the traditional pension plan analysis does not apply in the instant case. Rogers conceded that the 1992 amendments entitling it to any surplus on termination were “invalid as against the [members]” (Buschau No. 1, at para. 38).  The Court of Appeal found (Buschau No. 1, at paras. 63 and 66) that the merger was incomplete as regards the Plan and that the members retained rights that were distinct from those of members of the other plans that were merged in the RCI Plan.  Buschau No. 1 is now binding on Rogers.  Although the members do not have a specific interest in the surplus before termination, the findings in Buschau No. 1 limit Rogers’ rights to use it.

 

41                               One circumstance that could justify delaying the termination of the Plan (as incompletely merged with the RCI Plan) and the incidental distribution of the Premier Trust fund would be if Rogers had a right to amend the Plan to open it to new members. However, the possibility of reopening the Plan is problematic and has been commented on by the courts below.

 

42                               In the second action, the chambers judge interpreted the Court of Appeal’s conclusion in Buschau No. 1 concerning the distinct right of the Plan members to the surplus as preventing Rogers from using its power to amend the Plan to reopen it to new members. Dealing with Rogers’ argument that the rule in Saunders v. Vautier could not apply because it had the right to amend, the chambers judge found, in her 2002 reasons, that Rogers could not use its amending power to do what it could not do through a merger (at para. 29):

 

The Court of Appeal could only have granted liberty to the Members to terminate the trust on the basis that the trust was closed and that no further beneficiaries would be added. In my view, based on the evidence before me, the first time RCI gave any thought to re‑opening the Plan to allow new members was in response to efforts by the Members to terminate the Plan and have the surplus paid to them. For these reasons, RCI’s argument that the rule cannot apply because it may amend the Plan to allow new members, must fail.

 

 


43                               The Court of Appeal left this finding undisturbed (Buschau No. 2, at para. 61):

 

The particular circumstances of this case make it impossible in my view that RCI could now exercise its right to “re‑open” the Plan to new Members, entitling them to share with the existing Members in the benefits of the Trust, including the surplus. The Plan was declared closed in 1984 and as the Chambers judge found, “the first time RCI gave any thought to re‑opening . . . was in response to efforts by the Members to terminate the Plan and have the surplus paid to them.” Any move now to re‑open the Plan to other RCI employees would, given what has gone on before, rightly be regarded as no different from the stratagem adopted by RCI some years ago to avail itself of the benefit of the actuarial surplus in the Premier Trust — the purported “merger” of the Plan with other plans that were not in surplus positions. A similar result would ensue: because of its breach of trust or obligation of good faith, the employer would be required to account to the existing Members as if the Plan had not been re‑opened.

 

44                               If Rogers could amend the merged RCI Plan to open it to new members, it is questionable whether the Premier Trust fund could be used to fund benefits owed to new members without infringing the judgment that is binding on Rogers. Using the Premier Trust fund to fund benefits for new members or to fund benefits owed to members of a merged plan have been considered analogous by the courts below.  I do not need to give a definite answer on the possibility of amending the Plan because, except to the extent that Rogers is bound by Buschau No. 1, the matter is best left to the Superintendent.

 


45                               The members can ask the Superintendent to partially terminate the RCI Plan insofar as it relates to the Plan. The Superintendent can assess the facts and deal with any new arguments Rogers or the members may raise. He is in the best position to monitor the orderly termination of the part of the RCI Plan that relates to the members.

 

46                               If the Superintendent decides that Rogers cannot amend the Plan to open it to new members, there may be no point in continuing the Plan if pension benefits can be provided by a third party such as an insurance company through annuities of the kind provided for upon termination of any plan under the PBSA .

 

47                               The Superintendent could consider the Plan terminated because all contributions ceased in 1984. He could find that this cessation is, in the circumstances, a termination as that word is defined in the PBSA :

 

2. (1) In this Act,

 

                                                                   . . .

 

“termination”, in relation to a pension plan, means the cessation of crediting of benefits to plan members generally, and includes the situations described in subsections 29(1) and (2);

 

According to the guidelines issued by the Office of the Superintendent, winding up must not be delayed without the Superintendent’s consent, and the administrator wanting to manage the fund is not an acceptable reason for delay. Moreover, the trust Fund, according to its terms, must be administered for the benefit of the employees and the beneficiaries, not the employer.

 


48                               It is up to the Superintendent to decide whether the circumstances surrounding the cessation of the contribution make the definition of “termination” mentioned above applicable and whether  the delay in winding up is justified (s. 11.1).

 

49                               If the cessation is a termination and if the delay is not justified, the Superintendent can direct that the plan be wound up in part in accordance with s. 29(11), which reads as follows:

 

29. . . .

 

(11) Where the whole of a pension plan has been terminated and the Superintendent is of the opinion that no action or insufficient action has been taken to wind up the plan, the Superintendent may direct the administrator to distribute the assets of the plan in accordance with the regulations made under paragraph 39(j), and may direct that any expenses incurred in connection with that distribution be paid out of the pension fund of the plan, and the administrator shall forthwith comply with any such direction.

 

50                               It is also possible that the Superintendent could exercise his power of termination.  Section 29(2)(a) provides as follows:

 

29. . . .

 

(2) The Superintendent may declare the whole or part of a pension plan terminated where

 

(a) there is any suspension or cessation of employer contributions in respect of all or part of the plan members;

 

 


51                               Obviously, not every cessation of contributions will result in a direction by the Superintendent.  Such a direction is not, however, restricted to cases in which the trust fund no longer meets the solvency requirements.  The Superintendent’s power in relation to solvency issues is governed by s. 29(2)(c), which reads as follows:

 

(c) the Superintendent is of the opinion that the pension plan has failed to meet the prescribed tests and standards for solvency in respect of funding referred to in subsection 9(1) [proper funding].

 

Since s. 29(2)(c) deals with solvency requirements, s. 29(2)(a) must cover circumstances in which the cessation of contributions does not put the funding of a plan at risk.

 

52                               Just as mergers of plans and trust funds can properly be approved when the circumstances demonstrate their legitimacy, they can be objected to if they violate statutory, trust or plan provisions.  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 plan lies with the Superintendent and properly falls within his s. 29(2)(a) power.

 


53                               Most of the facts that the members presented to the courts in their quest to have the rule in Saunders v. Vautier applied could have been submitted to the Superintendent. I do not need to deal with the members’ allegations that Rogers acted in bad faith, which the lower court judges stopped short of finding. Rogers did indeed attempt to appropriate the surplus.  Its resistance to the actuary’s recommendation to improve employee benefits, its replacement of the less malleable actuary and trustee, the internal notes, and the improper amendments to the Plan amply demonstrate that Rogers did what it could to get at the surplus. However, past conduct is relevant only if it helps to answer the forward-looking question: is there any legitimate purpose in keeping the Plan or should it be terminated and wound up?  The Superintendent can rule on questions of both fact and law, and all parties can make appropriate recommendations to him. The provisions of the PBSA  and the regulations concerning the duties of the employer are well within the Superintendent’s interpretative jurisdiction.

 

54                               Rogers argues that the Superintendent’s role is limited to solvency issues.  This position disregards his supervisory role with respect to the protection of members and beneficiaries.  It also overlooks s. 29(2)(a), which does not mention solvency and which must cover a more diverse set of circumstances than s. 29(2)(c), a provision that  deals solely with solvency issues.

 


55                               The Superintendent’s broad power under s. 29(2)  is clear.  It was given judicial consideration in Huus v. Ontario (Superintendent of Pensions) (2002), 58 O.R. (3d) 380 (C.A.).  In that case, the employer intended to consolidate a number of plans in Canada and the United States. It asked the Superintendent for permission to transfer the assets of a plan which had a surplus of $4.2 million. The employees asked, based on a provision of the Ontario Pension Benefits Act, R.S.O. 1990, c. P.8 (s. 69(1)(a)), similar to s. 29(2) (a) of the PBSA , that their pension plan be wound up on the basis that the employer had ceased contributing to the pension plan about 20 years before the consolidation application. The facts are strikingly similar to those in the instant case. The Ontario Court of Appeal affirmed the Divisional Court’s decision, stating that due to the failure to consider the employees’ request for a partial wind up prior to, or in conjunction with, the decision on the transfer application, the Superintendent’s consent to the transfer was unreasonable. The following note from the reasons is worth mentioning (at para. 31, note 5):

 

I note in passing that none of the appellants takes the position that a wind-up order can flow only from an application by the employer. Although s. 68 of the [Pension Benefits Act] envisions a wind-up process initiated by the employer, s. 69 is not limited in this fashion. Indeed, the steps the Superintendent took in this case, to be discussed below, indicate that the Superintendent regarded it as his duty to deal with a wind-up request from the respondent retirees.

 

56                               I agree with the Ontario Court of Appeal, and it is my view that the Superintendent’s power under s. 29(2) (a) of the PBSA  becomes almost a duty when employees ask him to act.  His power must be exercised in conformity with the remedial purpose of the provisions of the PBSA .

 


57                               In the case at bar, the contributions ceased in 1984 and the Plan has since been closed. The Superintendent can review all the circumstances and decide whether the facts warrant winding up the part of the RCI Plan that relates to the Plan, which would have the effect of terminating the Trust.  He can take into account the findings of fact made in the judgment that are binding on the parties.

 

58                               Although the appeal is allowed, Rogers’ arguments have not prevailed. As a result, the members should not be required to pay Rogers’ costs. In addition, Rogers should bear the trustee’s costs.  The Court of Appeal’s order as to costs should however be left undisturbed. 

 

59                               For these reasons, I would allow the appeal, order Rogers to pay National Trust’s costs in this Court and set aside the order of the Court of Appeal with the exception of the order as to costs, which I would affirm.

 

The reasons of McLachlin C.J. and Bastarache and Charron JJ. were delivered by

 

Bastarache J.

 

1.  Introduction

 


60                               This appeal concerns a decision of the British Columbia Court of Appeal holding that the respondents Sandra Buschau et al. (“respondents”) are entitled to terminate an ongoing employee pension trust by invoking the rule in Saunders v. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482 (Ch. D.), a 19th century doctrine that arose in connection with the postponement of gifts in private trusts. The rule was considered by this Court in Halifax School for the Blind v. Chipman, [1937] S.C.R. 196, where, at p. 215, in concurring reasons (for himself and Rinfret J.), Crocket J. addressed the origins and rationale of the rule in these terms:

 

It is true that in Saunders v. Vautier; Gosling v. Gosling; Wharton v. Masterman, and other cases, to which we were referred by the appellant’s counsel, where there were absolute vested gifts of real estate and capital funds, entitling the donees to complete ownership and possession at a future event, the courts disregarded express directions of the testators to accumulate the rents and income in the meantime. . . .

 

Various reasons have been ascribed for its [the rule’s] establishment. Lindley, L.J., in Harbin v. Masterman, which went to the House of Lords on appeal under the name of Wharton v. Masterman, above cited, described it as “a remarkable exception” to “the general principle that a donee or legatee can only take what is given him on the terms on which it is given.” He explained it as follows:

 

Conditions which are repugnant to the estate to which they are annexed are absolutely void, and may consequently be disregarded. . . .

 

Herschell, L.C. said:

 

The point seems, in the first instance, to have been rather assumed than decided.  It was apparently regarded as a necessary consequence of the conclusion that a gift had vested, that the enjoyment of it must be immediate on the beneficiary becoming sui juris, and could not be postponed until a later date unless the testator had made some other destination of the income during the intervening period.

 

Lord Davey said:

 

The reason for the rule has been variously stated. It may be observed, however, that the Court of Chancery always leant against the postponement of vesting or possession, or the imposition of restrictions on the enjoyment of an absolute vested interest. [Footnotes omitted.]

 


61                               The Court of Appeal relied on the judgment of this Court in Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611, as holding that the rule in Saunders v. Vautier was applicable to pension trusts, based on the finding in Schmidt that pension trusts are “classic” trusts which are subject to “all applicable trust law principles” ((2004), 24 B.C.L.R. (4th) 85, 2004 BCCA 80 (“Buschau No. 2”), at para. 52). The appellant employer, Rogers Communications Inc. (“RCI”), now appeals that decision of the Court of Appeal, arguing that the respondents cannot invoke the rule in Saunders v. Vautier to terminate the pension trust. The respondents’ purpose in seeking to terminate the pension trust was to crystallize and obtain the actuarial surplus,  to which they would not otherwise be entitled unless the pension plan was terminated in some other way, such as by the employer pursuant to the terms of the Plan. A previous decision of the Court of Appeal had determined that despite the amendments to the trust made by RCI, the respondents retained the right to any actual surplus upon termination ((2001), 83 B.C.L.R. (3d) 261, 2001 BCCA 16 (“Buschau No. 1”)). It should also be noted that the pension plan itself provided that any surplus remaining upon termination after payment of the defined benefits would be distributed among the plan members.

 

62                               The decision of the Court of Appeal also raises questions regarding the nature and content of an employer’s obligation of good faith in a pension plan setting. In particular, it asks to what extent an employer is entitled to act in its own interests in the administration of a pension plan, consistent with its obligation to act in good faith. In Buschau No. 2, the Court of Appeal held that RCI’s good faith obligation would preclude an amendment to re‑open the Rogers Communications Inc. pension plan (“RCI Plan”), which was closed to new members in 1984.

 


63                               National Trust Co., trustee of the pension trust under consideration in the main case (the “Trust”), also appeals the Court of Appeal’s decision. It asks this Court to overturn the order made in the supplementary reasons of the Court of Appeal issued on May 18, 2004, wherein that court ordered National Trust to “tur[n] over the Trust assets, after the payment of all necessary debts and expenses, to the petitioners” ((2004), 27 B.C.L.R. (4th) 17, 2004 BCCA 282 (“Buschau No. 3”), at para. 16). National Trust argues that the effect of the decision of the Court of Appeal is to devolve upon it the authority and legal responsibility to give effect to and administer the termination of the Trust, an authority it says it does not possess under the terms of the RCI Plan or any applicable statute. National Trust argues that it is in no position to reconcile the decision of the court with the various legislative standards and requirements applicable to the termination of the Plan and Trust. It asks this Court to reverse the decision to impose on it duties and responsibilities it is not authorized to undertake pursuant to the Trust agreement, such duties and responsibilities belonging to the employer RCI or the Superintendent of Financial Institutions (“Superintendent”), pursuant to the applicable legislation and/or the terms of the Plan.

 

2.  Background

 

64                               RCI and respondents both provided a description of the events leading to the present appeal to establish the factual background for dealing with this case. I reproduce here the essence of their descriptions. It must be noted however that there is some disagreement concerning, in particular, the actual number of members in the Plan and the role played by the trustee National Trust, also an appellant.

 

65                               The corporate predecessor of RCI established the Premier Pension Plan as a non‑contributory defined benefit plan in January 1974 by means of two documents, a trust agreement and a plan document. Eventually, as a result of corporate acquisitions and mergers, the Premier Plan was one of several pension plans administered by RCI for the benefit of employees of RCI and its corporate affiliates.


 

66                               Membership in the Premier Plan was compulsory for all full-time employees over the age of 25 having completed one year of service. In 1984, RCI amended the Premier Plan to close it to employees hired after July 1, 1984. The following year, RCI withdrew $968,285 from the Plan surplus and began taking contribution holidays on the recommendation of their actuary, T.I. Benefits. In 1992, RCI merged the Premier Plan with four other RCI plans by amending the plan documents to create a common plan text. No steps were taken to amend the separate Premier Trust agreement or formally merge the Premier Trust with the trusts established for the other RCI plans, but the amendments provided that any surplus funds remaining on termination would revert to RCI instead of the members. The respondents say that the merger was a device to use the Premier Plan surplus to compensate for deficits in some of the other merged plans.

 

67                               Pursuant to the provisions of the Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32 (2nd Supp .) (“PBSA ”), and the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), the merged pensions plan (the RCI Plan) was registered with the Superintendent and the Canada Customs and Revenue Agency.

 


68                               The respondents sued RCI in 1995 seeking various forms of relief, including a declaration that the merger of the Premier Plan with other plans forming the RCI Plan was unlawful and the return of the money taken out of the Trust. This action came to trial in 1998 and the merger was held to be lawful. The trial judge found that the members were entitled to the benefits they were promised under the original Plan, including the right to any surplus existing on termination of the merged plan:  (1998), 54 B.C.L.R. (3d) 125. On January 11, 2001, the Court of Appeal upheld the finding that the merger was valid but held that the merger of the pension plans did not affect the existence of the Premier Trust as a separate trust. The court ordered that “the members of the Premier Plan shall be at liberty to undertake proceedings in the Supreme Court of British Columbia to terminate the Premier Trust, based either 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 either may be applicable”. The Court of Appeal held that RCI had no “interest” in the Trust and that its consent was therefore not necessary under the rule in Saunders v. Vautier (see Buschau No. 1).  RCI paid back the surplus that it had removed before judgment was delivered. While the decision of the Court of Appeal on this issue is not under appeal, I would note at the outset that the court’s finding in Buschau No. 1 that the Plan (and fund) and Trust can be severed and dealt with independently is no doubt responsible in large part for the difficulties posed in this appeal.

 

69                               On May 24, 2001, the respondents petitioned the Supreme Court of British Columbia for an order terminating the Premier Trust. This was the commencement of the present proceeding. The respondents sought, inter alia, an order “that the Premier Pension Plan be terminated or, alternatively, that the surplus portion of the Premier Pension Plan be terminated”.

 

70                               Loo J. heard the petition in two stages. Following the first hearing in November 2001, she held that the applicability of the rule in Saunders v. Vautier was decided by the previous decision of the Court of Appeal, and that the rule was applicable. She ordered RCI to provide to the respondents information pertaining to the Plan “so they can obtain the necessary consents to terminate the Plan” ((2002), 100 B.C.L.R. (3d) 327, 2002 BCSC 624, at paras. 12 and 33).


 

71                               On January 7, 2003, the respondents came to court with consents executed by the 144 members of the Plan. The respondents lacked, however, the consent of approximately 25 of the beneficiaries designated by the members pursuant to the plan provisions. The respondents could not rely on the rule in Saunders v. Vautier to terminate the Premier Trust because it requires the consent of all possible beneficiaries. They therefore sought to have the court consent to the termination, on behalf of the designated beneficiaries, pursuant to s. 1 of the Trust and Settlement Variation Act, R.S.B.C. 1996, c. 463.

 

72                               In reasons issued on May 1, 2003 ((2003), 13 B.C.L.R. (4th) 385, 2003 BCSC 683), Loo J. held that the respondents were entitled to terminate the Premier Trust and gave the court’s consent on behalf of the designated beneficiaries to such termination.

 

73                               Newbury J.A. issued reasons for judgment on behalf of the Court of Appeal on February 20, 2004. She held, at paras. 11 and 22 of Buschau No. 2, that:

 

(a)               Loo J. erred in holding that the applicability of the rule in Saunders v. Vautier was decided by the previous judgment of the Court of Appeal. The conclusion that Saunders v. Vautier applied was, however, correct;

 

(b)               The respondents were not entitled to terminate the Premier Trust under the rule in Saunders v. Vautier because they lacked the consent of all designated beneficiaries;

 


(c)               Loo J. erred in holding that the court had jurisdiction, under the Trust and Settlement Variation Act, to consent to a termination of the Premier Trust on behalf of capacitated designated beneficiaries;

 

(d)               It was not possible that RCI could reopen the Premier Plan to new members “since such a step could not, in the particular circumstances of this case, be taken in good faith by this employer vis-à-vis the existing beneficiaries”.

 

74                               The court held that “normally” the appeal would be allowed but, in this case, the court would withhold entering judgment for three months to give the respondents an opportunity, as suggested by the court, to revoke the designations of existing beneficiaries (who were not before the court), gather further consents and make further submissions (paras. 11 and 103).

 

75                               Subsequently, the Court of Appeal received motions for judgment from RCI and the respondents. In an order issued by the Court of Appeal on May 18, 2004 in Buschau No. 3, the court held that the appeal should be allowed but made, inter alia, the following orders:

 

THIS COURT ORDERS that the appeal is allowed, that the order of Loo, J. be set aside, and that the petition brought pursuant to the Trust and Settlement Variation Act be dismissed;

 

THIS COURT FURTHER ORDERS that the appellant, Rogers Communications Inc. (“RCI”), does not have an “interest” in the Trust that would make its consent to the termination under Saunders v. Vautier necessary;

 


THIS COURT ORDERS that, provided the consents of all Members and those persons who are now designated beneficiaries have been obtained for the termination of the Trust, the petitioners shall be at liberty to proceed to invoke the rule in Saunders v. Vautier;

 

. . .

 

THIS COURT FURTHER ORDERS that RCI cannot amend the Premier Pension Plan to permit the addition of new members.

 

76                               As of March 31, 2002, the portion of assets in the master trust allocated to the Premier Trust was approximately $11 million greater than the actuarial liabilities for the Premier Plan members (RCI’s factum, at para. 24).

 

77                               The Court of Appeal further decided that the Trustee would have to satisfy itself that the conditions under the rule in Saunders v. Vautier had been met and that all statutory requirements had been complied with before distribution. If necessary, the Trustee could seek direction under s. 86 of the Trustee Act, R.S.B.C. 1996, c. 464. The court also rejected the submission that proceedings under the Trust and Settlement Variation Act would be required, given that the Trust could be terminated under the rule in Saunders v. Vautier itself (Buschau No. 3).

 

78                               At the hearing of this appeal on November 15, 2005, this Court requested that the parties provide further written submissions regarding the interface between the rule in Saunders v. Vautier and the PBSA . This decision followed a discussion between various members of the Court and counsel concerning possible conflicts between the rule in Saunders v. Vautier and the PBSA . I might also add that the same concerns had been raised by National Trust in its factum.

 

3.  Analysis

 


79                               The PBSA is a comprehensive statutory scheme structured to further the public policy objective of enhanced financial security for workers upon their withdrawal from the active workforce. The PBSA, together with the Pension Benefits Standards Regulations, 1985, SOR/87-19, facilitates pension contributions from workers and employers, and protects and preserves pension funds and maximizes pension benefits, all in the interest of providing income security for workers in retirement.

 

80                               Within this comprehensive scheme, s. 29 and the regulations enacted in relation thereto contain detailed provisions for the termination of pension plans and the distribution of plan assets.

 

81                               Given the voluntary nature of the private pension plan system, employers are generally entitled to terminate a pension plan, as expressed in most plan documents, including the Plan at issue here. This right is recognized in s. 29(5)  of the PBSA , which refers to the intention of a plan administrator (who in most cases will be the employer) to terminate a pension plan. But the Superintendent is also given power to terminate pension plans in other certain specified situations. He has the power to revoke a pension plan’s registration for failure to comply with directions (s. 11.1 ). Directions of compliance can be issued where the Superintendent is of the opinion that an administrator or employer is acting in a manner “contrary to safe and sound financial or business practices” (s. 11(1) ), or that a pension plan, or the administration of a pension plan, is not compliant with the PBSA  or regulations (s. 11(2) ). If registration is revoked, a plan is deemed to have been terminated (s. 29(1) ).

 


82                               In addition to deemed termination in consequence of the revocation of a plan’s registration, s. 29(2)  stipulates three other situations in which the Superintendent has power to directly order the termination of a plan. The Superintendent may exercise this power when there has been: (a) cessation or suspension of employer contributions; (b) discontinuance of the employer’s business operations; or (c) the employer’s failure to fund the plan in accordance with prescribed standards of solvency. In each case, the power is directed to circumstances in which the security of the promised pension benefits is threatened.

 

83                               This is consistent with the statute governing the Office of the Superintendent which states that the objects of the Office, in respect of pension plans, are: (a) to supervise pension plans in order to determine if they meet minimum funding requirements or are complying with the other requirements of the legislation; (b) if not, to advise the administrator and take, or advise the administrator to take, necessary corrective measures; and (c) to promote the adoption by administrators of policies and procedures designed to control and manage risk (see the Office of the Superintendent of Financial Institutions Act, R.S.C. 1985, c. 18 (3rd Supp.), Part I ). It is apparent from the statutory objects of the Office that the supervisory focus of the Superintendent is primarily on matters affecting the solvency or financial condition of pension plans. It is worth noting here that National Trust invokes the PBSA  in its appeal, arguing at para. 70 of its factum that “[t]he judgment of the British Columbia Court of Appeal turns this statutory scheme on its head and places the Trustee in the role that by statute has been assigned to the administrator and to the Superintendent.”

 


84                               There is no provision in the PBSA  for plan beneficiaries to terminate a pension plan. Furthermore, there is no provision in the PBSA  for any party (employer, administrator, trustee, Superintendent, plan members or other beneficiaries) to terminate the Trust under which the 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 the Superintendent’s power to terminate a plan is available only where the stipulated pre‑conditions are met. The Superintendent does not have a general discretion to terminate pension plans.

 

85                               “[T]ermination” in relation to a pension plan is defined in the PBSA  as the cessation of the crediting of benefits to plan members generally (s. 2(1) ). Termination of a pension plan is distinguished from “winding-up” which refers to the distribution of the assets of a terminated pension plan. The PBSA provides that the pension fund assets are only to be distributed after the Superintendent approves a report filed by the plan administrator on the termination of a plan. The report must set out the nature of the benefits to be provided under the plan and describe the methods of allocating and distributing those benefits (s. 29(9)  and (10) ).

 

86                               A major issue in this appeal is whether termination of the Plan must logically precede the termination of the Trust. According to RCI, the judgment of the British Columbia Court of Appeal reverses the legislative scheme by permitting the beneficiaries of the Premier Plan to terminate the Trust and distribute the Trust assets, which were being held as security for the pension benefits accruing under the Plan, outside the legislative scheme and prior to the termination of the pension plan itself. It argues at para. 18 of its supplemental factum that

 


[i]n enacting the PBSA , 1985, Parliament intended to devise a comprehensive scheme for dealing with issues of pension plan regulation, including the circumstances of their termination and the winding up and distribution of assets held in pension funds. If it had contemplated granting additional rights to plan members to act on their own initiative to terminate pension trusts and distribute plan assets, it would have done so.

 

87                               It would appear that none of the statutory grounds for termination of a pension plan are present in this case. The Premier Plan is fully funded and there is no threat to the solvency of the Plan or the security of the pension benefits. There is no issue that the RCI Plan is being administered in a manner contrary to safe and sound financial or business practices, nor of non‑compliance with the requirements of the legislation.

 

88                               RCI has suspended contributions to the Plan. However, these contribution holidays are authorized by the terms of the Plan and have been approved by the courts. The reference to “suspension or cessation of employer contributions” in s. 29(2) (a) of the PBSA  must be construed as referring to situations where an employer does not make required contributions. It does not extend to contribution holidays where the employer is relieved from making contributions by reason of a surplus in the Plan.

 

3.1  The Applicability of the Rule in Saunders v. Vautier

 


89                               RCI recognizes that there may be circumstances in which it is appropriate to apply common law trust principles to resolve issues regarding pension plans which have not been directly addressed in the legislation. I agree. This was the approach taken in Schmidt with respect to the question of ownership of surplus on termination of a pension plan. In that case, it was acknowledged that there was a gap in the legislation and the provisions of the statute did not provide guidance on this issue. However, RCI argues that, in the present case, s. 29 contains detailed provisions regarding the circumstances and manner in which pension plans may be terminated. RCI concludes that the legislation has “occupied the field” on this issue and there is no room for the operation of a common law rule.

 


90                               Pension trusts are not the same as traditional trusts, as stated by the Court of Appeal at paras. 1-2 in Buschau No. 1. In employment pension trusts, there is a legal relationship between the parties apart from the trust and continuing obligations on the part of the administrator. In the present case, in view of its very terms (see General Rule Seven (2)),  there is no entitlement to an actuarial surplus while the Plan is ongoing. As stated by the Court of Appeal, the Trust Agreement and the Plan form an “integrated whole” (Buschau No. 2, at para. 13). Moreover, this is a defined benefit plan, i.e., a plan that is entirely funded by the employer, where members have an equitable interest in the trust assets, a right in personam against the trustee to require proper administration of the trust assets, and a contingent interest to the trust assets existing on plan termination if they are alive and members at the date of termination. The employer assumes the risk in such a plan; when interest rates and investment returns are high, a surplus will be realized, and when the economy changes, unfunded liabilities will often result. The goal is to require contributions by the employer that are sufficient to provide the defined benefits over long periods of time in spite of market fluctuations. To permit termination of the Plan when a surplus has been realized independently of the terms of the Plan is not consistent with its object or the applicable statutory regime. The contract clearly contemplated a continuing plan supported by a permanent Fund; segregation of the Fund by “closing” the Premier Plan was not possible. It is therefore an error to infer that the rule in Saunders v. Vautier can in effect create a manner of realizing on  the actuarial surplus (the Fund) in violation of the terms of the Plan; in the case of this pension Plan, absolute entitlement to the surplus would only occur once the surplus became real, that is, once the Plan and Trust had been terminated. This is because the members only have a contingent interest in the Trust surplus, which does not vest until the Plan is terminated. This is reinforced by the statement in Schmidt, at p. 655: “When the plan is terminated, the actuarial surplus becomes an actual surplus and vests in the employee beneficiaries” (emphasis added) (see also p. 654). As a result, the rule in Saunders v. Vautier cannot be invoked here, since the rule requires that the beneficiaries seeking early termination possess the sum total of vested, not contingent, interests in the trust corpus: see D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’ Law of Trusts in Canada (3rd ed. 2005), at p. 1178. The question then is whether termination of this Plan can occur outside the boundaries of the PBSA . The Court of Appeal reasoned that Schmidt had implicitly accepted that the rule in Saunders v. Vautier could apply independently of the PBSA  and of any contract. The real question is whether trust law can in effect prevail over the contract and governing legislation in the present case (Buschau No. 2).

 

91                               It is important to take note of the terms of the Plan and Trust documents. As I have previously stated, these are not distinct. The terms of the Plan are very specific and somewhat atypical of plans adopted in later years. In particular, art. V(1) of the Trust Agreement reserves to the employer

 

the right at any time and from time to time to amend, in whole or in part, any or all of the provisions of the Plan (including [the Trust] Agreement) provided that no such amendment which affects the rights, duties, compensation, or responsibilities of the Trustee shall be made without its consent and provided further that without the approval of the Minister of National Revenue no such amendment shall authorize or permit any part of the [Trust] to be used for or diverted to purposes other than for the exclusive benefit of such persons and their estates as from time to time may be designated in or pursuant to the Plan . . . .

 

 

 


General Rule Five permitted, but did not oblige, the employer to allocate additional pensions or pension entitlements to plan members, retired or otherwise, if the Plan had an actuarial surplus. General Rule Six permitted members to designate a beneficiary, and to alter or revoke that designation within the bounds of the law. General Rule Seven gave the employer the right to amend, modify or change the Plan, provided that the changes did not affect certain of the members’ rights or benefits. It also gave the employer the right to terminate the Plan if necessary. It went on to say:

 

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 the 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.

 

92                               The Plan clearly states then that it is the employer who may amend and terminate the Plan and that it is the employer’s expectation that the Plan and Trust will continue indefinitely. In such circumstances, there could be no reasonable expectation on the part of RCI or the members that the Trust could be terminated by the members, over RCI’s objections, in order that the members might obtain the surplus. The application of the rule in Saunders v. Vautier would contradict the reasonable contractual expectations of the parties because beneficiaries who can collapse a trust under Saunders v. Vautier can, with the consent of the trustees, collectively agree to vary its terms. The rule would permit members of a pension plan to unilaterally vary its terms without the employer’s consent.

 


93                               It is also very important to consider the legislative context in which modern pension plans operate. It would appear that, in her 2003 decision, Loo J. disregarded the provisions of the PBSA  regarding termination, but applied the Trust and Settlement Variation Act where it was necessary to circumvent the difficulty in obtaining all consents necessary under the rule in Saunders v. Vautier. In Buschau No. 3, the Court of Appeal noted that the rule in Saunders v. Vautier could result in the termination of the Plan if all of the preconditions of the rule were met, without regard for the legislative scheme and in particular s. 29(9) which provides that on termination of a plan, the administrator must file a report with the Superintendent

 

setting out the nature of the pension benefits and other benefits to be provided under the plan and a description of the methods of allocating and distributing those benefits and deciding the priorities in respect of the payment of full or partial benefits to the members.

 


94                               This means that the rule in Saunders v. Vautier would permit the termination of the pension plan and Trust without the involvement of the employer as plan administrator and without the approval of the Superintendent. The only logical explanation for this conclusion is that the Court of Appeal had accepted that the Trust was independent of the Plan and could be dealt with solely by reference to the Trust itself, notwithstanding, in particular, that the PBSA  (and the terms of the Plan, at art. IX(3)) provided special protections for spouses and common law partners. The terms of the Plan could be totally disregarded. At para. 54 of its reasons in Buschau No. 2, the Court of Appeal seems to accept that the Trust and the Plan constitute an “integrated whole”, but nevertheless concludes that this whole is subject to trust law principles and to the resulting “disappearance” of the employer’s rights and powers on the sole initiative of the plan members. This is very different from the decision to apply the rule only where there is no conflict with the legislative scheme as in Schmidt. In my view, the unique role of the employer in respect of the pension plan and pension Trust cannot be ignored; and the terms of the contract at the root of the Trust cannot be circumvented; as well, the legislative framework cannot be made irrelevant by applying the rule in Saunders v. Vautier.

 

95                               In the context of the appeal brought by National Trust, particular regard must be given to s. 8(3)  of the PBSA , which states:

 

8.  . . .

(3)  The administrator shall administer the pension plan and pension fund as a trustee for the employer, the members of the pension plan, former members, and any other persons entitled to pension benefits or refunds under the plan.

 

It is clear that a court has no authority to assign to National Trust the responsibilities of the administrator and of the Superintendent contrary to the legislative scheme which has determined a process to terminate a pension plan. But here I believe the Court of Appeal was defining a role for National Trust in light of the distinction it had made between the termination of the Plan and the termination of the Trust, only the former being subject to the terms of the Plan and provisions of the PBSA .

 


96                               The underlying social policy objective of the legislation is to promote the establishment and maintenance of private pension plans in order to provide income security for employees and their families in retirement. As this Court recognized in Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, 2004 SCC 54, at para. 38, modern pension statutes are public policy legislation that recognize the “vital importance of long‑term income security”. The “locking-in” provisions, portability provisions, as well as the termination and winding-up provisions are all part of the objective of ensuring retirement income security. This is not consistent with the operation of the rule in Saunders v. Vautier, as applied by the Court of Appeal in this case, which is based on an entirely different policy objective.

 

97                               The introduction of the Saunders v. Vautier principle without qualification or restriction into the private pension system would constitute a very significant derogation from an employer’s right to voluntarily choose to offer or continue a pension plan. An employer motivated by labour market factors to create and maintain a pension plan for its employees for the business benefits it may derive may not be so motivated when a plan instituted for such reasons can be terminated by the unilateral action of members and other beneficiaries, without consideration of the employer’s business interests. In these circumstances, the “fair and delicate balance between  employer and employee interests” (Monsanto Canada, at para. 24) will be disrupted in a manner which is contrary to the legislative objective of encouraging the establishment and maintenance of private pension plans.

 


98                               The rule in Saunders v. Vautier requires the consent of all parties who have an interest, or who own rights of enjoyment, in the trust property. The Court of Appeal held that the rule could be applied with the consent of all members (by which they surely meant to include former members) of the Premier Plan and those persons who are now designated beneficiaries (Buschau No. 2). But s. 22 of the PBSA  requires that, absent a written waiver in prescribed form, any pension benefit paid after January 1, 1987 to a member or former member who has a spouse or common law partner on the date that the first payment is made shall be a joint and survivor pension benefit, entitling the surviving spouse to a benefit of at least 60 percent of the joint benefit. This requirement is reflected in the terms of the Premier Plan (art. IX(3)). The inclusion of survivor benefits was a policy choice of the Legislature that must be honoured. These statutory 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. The current spouses and common law partners who have a present contingent interest are sui juris.  As such, they could give their consent to termination of the Plan, and the court does not have the power to consent on their behalf unless they are legally incapacitated.

 


99                               As for the interests of future possible spouses and common law partners, whose consent would also be required for termination pursuant to Saunders v. Vautier, those interests are more problematic in that their direct consent cannot be obtained, and asking a court to consent on their behalf would raise serious questions. RCI notes at para. 37 of its supplementary factum that, “the court may only consent on behalf of a beneficiary if the proposed trust variation is in the interests of that party. It is difficult to conceive of a circumstance in which termination of a pension trust would be in the interests of future spouses or common law partners.” Consenting to the termination of the Plan on behalf of future unascertainable spouses and common law partners would presumably not be in their best interests. If plan members who are not currently married or in a common law relationship were allowed to terminate the Plan and obtain the surplus, but were then to enter into a marriage or common law relationship in the future, their future spouses or common law partners would not enjoy their statutory right to the joint and survivor benefit to which they would have been entitled had the Plan been ongoing and not terminated. Thus, even if this was sufficient, valid consents to termination of the Plan in order to satisfy the pre-conditions of the Saunders v. Vautier rule have not been and cannot be obtained from all possible beneficiaries here; more importantly, while the current spouses and common law partners of plan members are able to consent to termination, future spouses and common law partners who are currently unascertainable cannot give such consent, and a court would likely be reluctant to give its consent on their behalf.

 

100                           For these reasons, I would conclude that the rule in Saunders v. Vautier does not apply in the circumstances of this case and that any application regarding the termination of the Plan and Trust must be dealt with in accordance with the terms of the Plan and the provisions of the PBSA . The respondents’ suggestion that the absence of a procedure in the PBSA  permitting a unilateral termination of the Plan by the members justifies the action under the rule of Saunders v. Vautier cannot be accepted. The rule simply does not apply. Members’ rights are determined by the Plan itself and the PBSA ; as indicated above, neither the terms of the Plan itself nor the provisions of the PBSA  grant the members a right to terminate the Plan. The unilateral right of members to terminate the Plan simply does not exist in this case.

 

3.2  The Issue of Good Faith

 

101                           The Court of Appeal decided, at para. 61 of its reasons in Buschau No. 2, that the obligation of good faith of the employer precluded RCI from adopting any amendments to the Plan and Trust opening it to new members following its closure in 1984; it related this to what it termed the “stratagem” adopted by RCI years earlier to benefit from the actuarial surplus by merging different pension plans. The Court of Appeal then continued with a discussion of the employer’s “interest” in the Plan and Trust.

 


102                           It is quite obvious that the whole discussion concerning good faith had to do with fair conduct as administrator of the Plan. RCI insists that there is nothing uncommon about closed pension plans or the decision to rationalize funding and the provision of benefits after mergers. In its view, the proposed creation of an integrated pension scheme was a rational business decision that should not raise any issue regarding good faith when done within the parameters of the Plan’s terms. RCI says there is no stratagem, only the exercise of a power to amend in the context — and this is fundamental — of a defined benefit plan. RCI says that “the analysis of good faith in respect of the exercise of a discretionary power in a contractual context begins with careful consideration of the parties’ reasonable contractual expectations” (factum, at para. 75). It is a prohibition against acting in a manner “calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee” unless the employer has “reasonable and proper cause” (para. 80, quoting Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd., [1991] 2 All E.R. 597 (Ch. D.), at p. 606). The respondents reject the contractual perspective and say that nothing done by the employer should affect or dilute their entitlements under the Plan; equitable principles should apply. I do not consider it necessary to arbitrate this debate. Section 8(10)  of the PBSA  provides sufficient guidance. The special context of pension plans requires employers who administer pension plans on behalf of their employees to always act in accordance with the spirit, purpose and terms of the pension plan; employers must always act in such a way as to ensure the protection of employees’ pension benefits, not in a way that would reduce, threaten or eliminate them (see Imperial Group).

 


103                           It seems clear to me that the conclusion of the Court of Appeal on the issue of good faith is premised on its earlier decision that the amendment would deprive the beneficiaries of the Premier Trust of their right to terminate it under the rule in Saunders v. Vautier. I have found that the respondents cannot terminate the Trust pursuant to Saunders v. Vautier. But of course the parties could not ignore the Court of Appeal’s decision in Buschau No. 1. As a result of that decision, a separate accounting was required for the Premier Trust. RCI then considered the possibility of making the Plan eligible to new membership so that similarly situated employees who were members of non-contributory defined benefit plans could be integrated into the Premier Plan. This is what the Court of Appeal rejected. Its reasoning is however driven by the idea that the Plan members were promised more than their pensions under the Plan, i.e., the right to ask for distribution of the Trust surplus, providing they satisfied the conditions set out in Saunders v. Vautier. The decision regarding bad faith cannot stand where it is without a foundation. I am of the view that RCI’s powers of amendment were not forfeited or estopped because of the closure of the Plan. Any termination of the Plan and amendments to it must be examined on the basis of its terms and conditions, in consideration of the applicable provisions of the PBSA . What would constitute an abuse of the employer’s power or would otherwise offend community standards of reasonableness in the contemplated use of the Premier Plan assets for the benefit of present and future employees of RCI  must be determined on that basis alone. In essence then, what is permitted and what is abusive will have to be determined in future proceedings according to the standard set in s. 8(10) (b) of the PBSA  which states that “[w]here the employer is the administrator pursuant to paragraph 7(1) (c), if there is a material conflict of interest between the employer’s role as administrator and the employer’s role in any other capacity, the employer . . . (b) shall act in the best interests of the members of the pension plan.”

 

4.  Disposition

 


104                           The appeal is allowed and the order of the Court of Appeal is set aside with costs in all courts to RCI and in this Court to National Trust.

 

Appeal allowed.

 

Solicitors for the appellant/respondent Rogers Communications Inc.:  Nathanson, Schachter & Thompson, Vancouver.

 

Solicitors for the appellant/respondent National Trust Co.:  Blake, Cassels & Graydon, Vancouver.

 

Solicitors for the respondents Sandra Buschau et al.:  Laxton & Company, Vancouver.

 

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