Hinds v. Ontario (Superintendent of Pensions)

Hinds v. Ontario (Superintendent of Pensions) Collection Decisions of the Court of Appeal Date 2002-02-14 Docket numbers C35897 Judges Abella, Rosalie Silberman; Feldman, Kathryn N.; MacPherson, James C. Subject Civil Decision Content DATE: 20020214 DOCKET: C35897 COURT OF APPEAL FOR ONTARIO ABELLA, FELDMAN AND MACPHERSON JJ.A. BETWEEN: ) ) JOHN HINDS, WILLIAM PUGH, GEORGE ROFFEY and WILLIAM STANLEY, on their behalf and on behalf of all members and former members of the Colgate-Palmolive Canada Inc. Pension Plan for Salaried and Non-Union Hourly Employees (the “Plan”) with service under the Plan prior to 1990 ) ) ) ) ) ) ) ) ) Mark Zigler and Ari Kaplan, for the appellants Deborah McPhail, for the respondent Superintendent of Pensions ) Applicants (Appellants) ) - and - ) ) ) ) Ronald Walker and Christine Tabbert, for the respondent Colgate-Palmolive Canada Inc. ) ) SUPERINTENDENT OF PENSIONS (now known as the SUPERINTENDENT OF FINANCIAL SERVICES), COLGATE-PALMOLIVE CANADA INC., and BRISTOL-MYERS SQUIBB CANADA INC. ) ) ) ) ) ) ) Barbara Grossman and Paul Baston, for the respondent Bristol-Myers Squibb Canada Inc. ) Respondents ) Heard: November 19, 2001 On appeal from the judgments of the Ontario Superior Court of Justice (Divisional Court) (J. L. MacFarland, E. P. Hartt and P. J. Cosgrove JJ.) dated November 17 and 29, 2000. MacPherson J.A.: A. INTRODUCTION [1] When a company sells its business and assets to another company, one of the components of the sale is often a transfer of the vendor company’s pension plan liabilities and assets to the purchaser company. In turn, this will often lead to a merger of the pension plans of the two companies. [2] The transfer of the pension plan from the vendor company to the purchaser company must be approved by the Superintendent of Pensions (the “Superintendent”). [1] The Superintendent must withhold consent to a transfer “that does not protect the pension benefits . . . of the members and former members of the employer’s pension”: s. 80(5) of the Pension Benefits Act, R.S.O. 1990, c. P. 8 (the “PBA”). In other words, the Superintendent has a statutory responsibility to consider and protect the accrued pension benefits of the employees of the vendor or exporting company before approving the transfer. [3] The principal question posed by this appeal is whether the Superintendent has any duty to consider the interests of the employees of the purchaser or importing company before approving the transfer. Specifically, is the Superintendent required to give notice of the proposed transfer to the employees of the importing company so that they will have the opportunity to inform the Superintendent of their views on the proposed transfer? B. FACTS (1) The parties and the events [4] In 1990, Bristol-Myers Squibb Canada Inc. (“Bristol-Myers”) sold its Javex business to Colgate-Palmolive Canada Inc. (“Colgate”). As part of the transaction, Colgate agreed to assume the accrued pension liabilities for the Javex employees upon the transfer of $4,047,705 from the Bristol-Myers Pension Plan to the Colgate Pension Plan. [5] In July 1991, the Superintendent was advised that Colgate had purchased the Javex operations from Bristol-Myers in April 1990 and that certain pension assets and liabilities were proposed to be transferred from the Bristol-Myers plan to the Colgate plan. Bristol-Myers made an application for the Superintendent’s approval of the transfer. [6] For some reason not clear from the record, the Superintendent took more than four years to make his decision. His initial decision, made on October 3, 1995, was a refusal to consent to the transfer on the basis that “I am not satisfied that the proposed transfer of assets protects the pension benefits and other benefits of the members and former members”. [7] Bristol-Myers responded almost immediately in a letter dated October 17, 1995, and explained its actuarial assumptions in support of a transfer amount of $4,047.705. It would appear that the Superintendent accepted this explanation because on December 21, 1995 he approved the transfer of assets in this amount. [8] That could have been the end of the matter. Bristol Myers and its employees, who knew of the proposed transfer, were satisfied. So was Colgate. However, that left the employees and former employees of Colgate. On December 21, 1995, they knew nothing about the transfer; no one had informed them about it. [9] John Hinds was an employee at Colgate from 1951 to 1989 when he retired. In 1997, when he became aware of the transfer, he decided to investigate its implications for members of the Colgate Pension Plan. He formed the view that the liabilities potentially attributable to the Javex employees were more than $6 million, approximately $2 million more than the amount of the transfer. This differential had the potential, he thought, to reduce the surplus in the existing Colgate plan which might be available for distribution to the current and former employee members of the plan. (2) The litigation [10] Based on Mr. Hinds’ analysis, he and the other appellants brought an application to the Divisional Court seeking to quash the decision of the Superintendent dated December 21, 1995. They also sought an order requiring Bristol-Myers and Colgate to provide appropriate notice of the application to them and an order requiring the Superintendent to provide them with an opportunity to make submissions on the amended application. [11] In support of their application, the appellants filed an affidavit sworn by Mr. Hinds in which he set out his involvement in the matter and attached various exhibits, including an internal Colgate actuarial valuation dated February 1991 which he believed supported his concern about a potential $2 million shortfall in the amount transferred from the Bristol-Myers plan to the Colgate plan. The respondent Bristol-Myers filed an affidavit by Leo Pygiel, an actuary who had prepared the report establishing a transfer value of $4,047,705. [12] The appellants brought a motion seeking to strike out the Pygiel affidavit. The respondents Bristol-Myers and Colgate brought contingent cross-motions seeking to strike out virtually all of the Hinds affidavit. In a decision dated November 17, 2000, the Divisional Court (MacFarland, Hartt and Cosgrove JJ.) granted all three motions. The Pygiel affidavit was struck in its entirety and most of the Hinds affidavit was struck. [13] The application for judicial review of the decision of the Superintendent was then heard by the same panel of the Divisional Court on November 29, 2000. On the same date, the panel dismissed the application. [14] The appellants appeal from both of the Divisional Court’s decisions. The respondents make a contingent cross-appeal. They say, as they did in the Divisional Court, that if the Hinds affidavit should have been admitted on the application, then so too should the Pygiel affidavit have been admitted. C. ISSUES [15] The issues on the appeal are: (1) Did the Divisional Court err by concluding that most of the affidavit of John Hinds and all of the affidavit of Leo Pygiel should be struck from the record relating to the application for judicial review? (2) Did the Divisional Court err by dismissing the application for judicial review of the decision of the Superintendent of Pensions? D. ANALYSIS (1) The Divisional Court’s evidentiary decision [16] As part of its application record in the Divisional Court, the appellants filed an affidavit sworn by John Hinds, a former Colgate employee. In the affidavit, Mr. Hinds described his investigation of the transfer of pension plan assets and liabilities from Bristol-Myers to Colgate. He also attached as exhibits a copy of the formal amendment to the Colgate Pension Plan assuming the liabilities accrued under the Bristol-Myers plan and an internal Colgate actuarial report which, on its face, cast doubt on the solvency of the Colgate plan after the transfer. He also described the closure of a Colgate plant in Toronto in 1992 and challenged the partial wind-up of the pension plan that flowed from that event, including its approval by the Superintendent in 1994. Finally, he detailed the fact that he and other members of the Colgate Pension Plan received no notice of any of these developments and were given no opportunity to make submissions to the Superintendent about his decision on December 21, 1995 to approve the transfer. [17] In response to the Hinds affidavit, Bristol-Myers filed an affidavit sworn by Leo Pygiel, the actuary who had prepared the report in support of the transfer application to the Superintendent. Mr. Pygiel’s affidavit responded to only one of the matters dealt with in the Hinds affidavit, namely, the actuarial basis for the transfer amount of $4,047,705. [18] The appellants brought a motion to strike out the Pygiel affidavit in its entirety. Bristol-Myers and Colgate brought motions to strike out the Hinds affidavit on all matters except the inability of the appellants to make submissions to the Superintendent before the Superintendent made his approval decision pursuant to s. 80(4) and (5) of the PBA. These companion motions were made with an eye to this court’s decision in Re Keeprite Workers’ Independent Union et al and Keeprite Products Inc. (1980), 29 O.R. (2d) 513 (“Keeprite”) which had cautioned against the admissibility of affidavit evidence on a judicial review application. As expressed by Morden J.A., at p. 521: I would express the view . . . that the practice of admitting affidavits of this kind should be very exceptional, it being emphasized that they are admissible only to the extent that they show jurisdictional error. [19] The appellants took the view that there was nothing in the Pygiel affidavit relevant to any jurisdictional error committed by the Superintendent. Bristol-Myers and Colgate submitted that the only admissible portions of the Hinds affidavit were those paragraphs which laid a foundation for the appellants’ claim that they should have been afforded an opportunity to make submissions before the Superintendent made his decision whether or not to approve the transfer. [20] The Divisional Court agreed with these submissions and struck out all of the Pygiel affidavit and all but paragraphs 1 and 11 and part of paragraph 8 of the Hinds affidavit. In doing so, the court referred to Keeprite and analyzed the affidavits in terms of their relevance to the appellants’ jurisdictional argument anchored in receipt of notice and opportunity to make submissions. [21] The appellants challenge two components of the Divisional Court's decision. First, they submit that all of paragraph 3 of the Hinds affidavit and Exhibit “A” attached to the affidavit should have been admitted because they placed before the Divisional Court a copy of the amendment of the Colgate plan to assume the liabilities under the Bristol-Myers plan. In oral argument, counsel for the Superintendent conceded that this document should have been part of the record the Superintendent put before the Divisional Court. Since he did not do so, it would be appropriate, counsel acknowledged, for the document to be introduced through paragraph 3 of the Hinds affidavit and Exhibit “A” attached thereto. Accordingly, I would allow this aspect of the appeal. [22] Second, the appellants challenge the component of the Divisional Court’s order striking out several words from paragraph 8 of the Hinds affidavit. In its original form, paragraph 8 stated: I was not notified of any of the matters set out in paragraphs 3 to 7 above, nor was I given an opportunity to make submissions with respect to the Superintendent’s decision dated December 21, 1995. Based on my conversations with other members and retirees of the Colgate Salaried Plan, I understand that none of the members or retirees were notified of the matters set out in paragraphs 3 to 7 above, nor were they given an opportunity to make submissions with respect to the Superintendent’s decision dated December 21, 1995. [23] The Divisional Court struck out the words “I was not notified of any of the matters set out in paragraphs 3 to 7 above” but left intact the rest of paragraph 8. I can see why the court made this excision; most of paragraphs 3 to 7 of the Hinds affidavit deal with background leading up to, or matters completely extraneous to, the Superintendent’s decision on December 21, 1995. In any event, and in my view importantly, the remaining portion of paragraph 8 is sufficient to set out the appellants’ factual foundation for this appeal, namely that they did not receive notice of the transfer application being considered by the Superintendent and did not have an opportunity to make submissions to the Superintendent before he made his decision. Accordingly, in my view, the Divisional Court's understanding and application of Keeprite were correct. I would, therefore, dismiss this aspect of the appeal. The contingent cross-appeals by Bristol-Myers and Colgate do not then arise. (2) The Divisional Court’s decision on the merits of the Superintendent’s approval of the transfer (a) Introduction [24] The appellants challenge the Superintendent’s decision on December 21, 1995 approving the transfer of assets and liabilities from the Bristol-Myers plan to the Colgate plan. Their position is that their interests in their pension plan were affected by the transfer. Hence the Superintendent had a legal duty to give them notice of the transfer application and to provide them with an opportunity to make submissions about the proposed transfer. [25] Transfers of pension assets and liabilities are dealt with in s. 80 of the PBA. Section 80(1) permits such transfers. Section 80(4) requires the Superintendent to provide prior consent to the transfer. Section 80(5) provides: 80(5) The Superintendent shall refuse to consent to a transfer of assets that does not protect the pension benefits and any other benefits of the members and former members of the employer’s pension plan or that does not meet the prescribed requirements and qualifications. [Emphasis added.] [26] It is common ground that the word ‘employer’s’ in this provision means the vendor or exporting company, in this case Bristol-Myers. [27] It is also common ground that in many cases, including this one, an approved transfer of pension assets and liabilities from one employer’s plan to another employer’s plan will be followed by an application to amend the plan of the importing employer. The Superintendent must approve an amendment to an existing pension plan: PBA, ss. 12-18. Section 26 of the PBA deals with the notices the Superintendent must or may (depending on the circumstances) give concerning an application for a proposed amendment of a plan. Colgate has in fact made an application to amend its pension plan in light of the transfer of Bristol-Myers employees and their pension entitlements into the Colgate orbit. There is no suggestion that the appellants, current and retired Colgate employees, will not receive notice of the Colgate application and will not have an opportunity to make submissions about the proposed amendment to the Superintendent. [28] However, the appellants say that submissions at this second stage might be too late, especially if insufficient funds are transferred to cover the liabilities for the transferred Bristol-Myers employees. They want to be able to challenge the transfer, not just the amendment to their plan which will flow later. Accordingly, they contend that the Superintendent was required to provide them with notice of the transfer and an opportunity to make submissions relating to it. [29] The Divisional Court rejected this argument. The crux of its reasoning on this point was: In our view, there was no breach of natural justice on the record before us. The Superintendent, in approving the transfer of assets and liabilities for the Javex employees under s. 80 of the P.B.A., was only obliged, at that stage, to consider the interests of the exporting employer, here Bristol-Myers. The proposal could have no impact on the applications until a request was made for the amendment of the Colgate Plan (here the importing employer) under s. 26 of the Pension Benefits Act. [Emphasis in original.] (b) Standard of review [30] I begin my analysis with a brief word about the standard of review of decisions of the Superintendent. The Divisional Court said: “The issue of the standard of review was not seriously argued before us”. The appellants did not argue this issue before us, either in their factum or in oral argument. All of the respondents submit that the standard of review of the decision of the Superintendent on the questions of notice and submissions should be reasonableness simpliciter, which is a standard between correctness and patently unreasonable: see Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748 at 775-77. [31] I agree with this submission. In Gencorp Canada Inc. v. Ontario (Superintendent of Pensions), (1998), 39 O.R. (3d) 38 (C.A.) (“Gencorp”), this court held that a decision of the Pension Commission of Ontario upholding an order of the Superintendent should be reviewed on a reasonableness simpliciter standard. Robins J.A. said, at p. 44: Given the purposes of this Act, the public policy ramifications inherent in its administration and regulation, the experience and expertise of the Commission and the broad regulatory authority conferred upon it, decisions of the Commission clearly warrant a considerable degree of curial deference. The purposes of the Act are best served by deference to the decision of the Commission which, by and large, is in a better position than the courts to decide issues arising under the statute in a manner consistent with and in furtherance of the policy underlying the statute. An expert tribunal of this nature, charged as it is with this kind of legislative mandate, is as the Supreme Court of Canada determined in Southam, supra, at pp. 775-77, to be held to a standard of reasonableness simpliciter. A court reviewing the tribunal’s decision must therefore inquire whether the decision was reasonable. If it was, the decision must stand. [32] In my view, what Robins J.A. said in Gencorp about decisions of the Commission applies with equal force to decisions by the Superintendent. There is a great deal of overlap in the PBA between the decision-making role of the Superintendent and the Commission. Indeed, the Superintendent’s decision in the present case could have been reviewed by the Commission. The identity of the decision-maker under the PBA is not a distinguishing feature for purposes of standard of review analysis. [33] As well, I do not think that the fact that the Superintendent’s decision in the present case related, at least in part, to procedural and even natural justice considerations should elevate the standard of review relating to that decision. In Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, L’Heureux-Dubé J. said, at p. 840: [T]he analysis of what procedures the duty of fairness requires should also take into account and respect the choices of procedure made by the agency itself, particularly when the statute leaves to the decision-maker the ability to choose its own procedures, or when the agency has an expertise in determining what procedures are appropriate in the circumstances: Brown and Evans, supra, at pp. 7-66 to 7-70. [34] In my view, this passage is applicable to the present case. The Superintendent must make a wide array of decisions relating to the pension plans of many employers and employees. There are a few procedural provisions in the PBA, including notice provisions. As long as the Superintendent complies with those provisions, he should be given some leeway with respect to the procedures he adopts to assist him in fulfilling his statutory decision-making mandate. A standard of review of these decisions of reasonableness simpliciter strikes an appropriate balance. (c) Merits [35] In making the decision to approve the transfer of pension assets and liabilities from the Bristol-Myers plan to the Colgate plan, the Superintendent focussed on s. 80(5) of the PBA, the relevant portion of which I set out again for ease of reference: 80(5) The Superintendent shall refuse to consent to a transfer of assets that does not protect the pension benefits and any other benefits of the members and former members of the employer’s pension plan . . . . [36] The Superintendent took his own steps to give some effect to this statutory mandate by issuing a policy statement dealing with, inter alia, notice. The document, dated July 28, 1988 and entitled Transfer of Assets from Sale of a Business (Policy Statement 2), provides: (6) Prior to the proposed transfer of assets and liabilities from the employer’s pension plan, notice by the employer shall be transmitted to the transferred members . . . the notice shall contain, at least, the following information: (a) The name of the employer’s pension plan and its provincial registration number; (b) the name of the successor employer’s pension plan and its provincial registration number, if any; (c) the review date of the report filed with the application; (d) notice that copies of the report, filed with the Superintendent, in support of the transfer of asset request . . . are available for review at the offices of either the employer or the successor employer and information on how copies of the report may be obtained; and (e) a description of the benefits of the transferred members for which the successor employer has assumed responsibility and a description of the benefits of the transferred members for which the employer has retained responsibility. (7) The Superintendent shall not permit a transfer of assets from a pension plan of an employer to a pension plan of a successor employer unless a certified copy of the notice referred to in subsection (6) has been filed with the Superintendent together with a statement that subsection (6) has been complied with, and indicating the last date the notice was transmitted. [37] There is no suggestion that Bristol-Myers did not comply with these notice requirements. Moreover, it is clear that the Superintendent’s focus on his mandate to protect the members of the Bristol-Myers plan was, on the record, a real, not a cursory focus. There was a fair amount of correspondence between the Superintendent and Bristol-Myers about the amount of money Bristol-Myers would transfer to Colgate to protect the pensions of the transferring Bristol-Myers employees. Indeed, at one juncture the Superintendent refused his consent when he was not satisfied about the amount of money Bristol-Myers proposed to transfer. The Superintendent’s approval on December 21, 1995 came only after he was convinced on this score. [38] The appellants, members of the importing Colgate pension plan, say that the Superintendent paid no attention to their interests. On the record, I am prepared to accept this factual assertion, limited to the Superintendent’s decision on the transfer application. [39] The appellants then assert that, as a matter of law, the Superintendent was required to take their interests into account before approving the transfer because the transfer would inevitably lead to an amendment to their (the Colgate) plan. Accordingly, the Superintendent was required, in effect, to consider the interests of both the Bristol-Myers and Colgate employees before approving the transfer. [40] In making this submission, the appellants rely heavily on Re Collins and Pension Commission of Ontario (1986), 56 O.R. (2d) 274 (Div. Ct.) (“Collins”), in which the court quashed a decision of the Pension Commission allowing the employer to remove surplus funds from a pension plan funded in part by employee contributions. The employees received no notice of the employer’s application and attempts by the employees to obtain information about the application from the Commission failed. The court criticizied this conduct. Reid J. concluded, at pp. 289-90: The result must be, in my opinion, that the commission owes a duty of fairness to those whose interest may, or will, be affected by its decision. What that duty requires, in procedural terms, will depend on the circumstances, as Dickson J. points out [in Martineau v. Matsqui Institution Disciplinary Board, [1980] 1 S.C.R. 602]. The appropriate procedure in any given case might run from a full and formal hearing, at one end of the spectrum, down to simple, even informal notice, and an opportunity to respond, as in Nicholson, supra. In my opinion, at the very least, the commission should have required Dominion to give notice of its application to the members of their plan or their union . . . . The object of requiring notice, would be, of course, to give the union or plan members an opportunity to defend their interest. [2] [41] The appellants submit that similar reasoning in the present case should lead to the conclusion that the Superintendent, and/or Bristol-Myers, is required to provide notice of the transfer application to the employees of both the exporting and importing companies so that they will have “an opportunity to defend their interest”. [42] I agree with the appellants that the Superintendent owes a high duty to employees with Ontario pension plans. Indeed, on that issue I would adopt the particularly eloquent language used by Reid J. in Collins, at p. 285: [I]t appears that the commission was established to ensure that certain interests were protected. While there is no doubt that those interests included the employer’s, there appears to be equally no doubt that the commission was established to safeguard the plan members’ interests as well . . . While the commission may not, strictly speaking, be a trustee for the members, for it holds no money belonging to the plan, it would be artificial to conclude that the commission’s obligation to members is lower than the high standard of fiduciary obligation imposed on trustees. [43] My problem, however, with the appellants’ argument is that I do not see how either the provisions of the PBA, especially s. 80(4) and (5), or the procedure followed by the Superintendent in making a decision on a transfer application, infringes on the appellants’ rights or interests. [44] The PBA deals in entirely separate parts with pension asset transfers in a sale of business context and amendments to pension plans. The statutory focus of the former is s. 80 of the Act, and especially s. 80(5) which requires the Superintendent to pay strict attention to the pension rights of the employees of the exporting employer. The statutory focus of the latter is ss. 12-18 and 26 of the Act which require the Superintendent to protect the pension rights of all employees who will be subject to an amended pension plan if the Superintendent approves the application for an amendment. [45] It is true that in many cases, including this one, there will be an overlap between or, perhaps more accurately, a flow through from transfer to amendment. Obviously, once a transfer takes place, the importing plan will almost always require amendment. Therefore, there would be nothing wrong if the PBA required, or even if the Superintendent decided as a matter of procedure, that transfer and amendment applications be dealt with together. [46] However, the PBA is not structured in that fashion. It envisions and establishes separate applications, procedures and decisions in the two domains of transfer and amendment. The procedure adopted by the Superintendent, as reflected in the 1988 policy statement, is entirely consistent with the structure of the PBA. [47] In the end, this case is different from Collins in a fundamental respect. In Collins, the Commission’s procedure gave no role at any point to the employees. Their voices would not be heard on a major issue affecting their pensions. In the present case, the voices of the appellants, the Colgate employees, will be heard at, in effect, the second stage of the process, in the context of Colgate’s application to amend its plan. [48] The appellants say that this might be too late because if the Superintendent approves a transfer with insufficient funds, the insolvency of the merged plan may be irreparable. This strikes me as nothing more than speculation. In the context of an amendment application, the Superintendent will have the same high duty to protect the interests of the Colgate employees - all of them - that the Superintendent had when the interests of only the Bristol-Myers employees were before him on the transfer application. Pursuant to s. 26(1) of the PBA, the appellants will receive notice of the proposed amendment and they will be able to make submissions concerning it. If the Superintendent accepts those submissions, he has broad authority under s. 18 of the PBA to make an appropriate order. [49] In summary, it would be entirely reasonable for the Superintendent to decide, as a matter of procedure, that he will consider transfer and amendment applications together. In many cases, that might make good sense. [50] However, I cannot say that a decision by the Superintendent to consider transfer and amendment applications separately, in effect in two stages, is unreasonable. Indeed, this procedure is supported by the structure of the PBA which deals quite separately with transfers and amendments, including different interests to be protected and different notice requirements. E. DISPOSITION [51] I would allow, in part, the appeal from the Divisional Court’s judgment dated November 17, 2000, so as to admit paragraph 3 of the Hinds affidavit and Exhibit “A” attached to the affidavit. [52] I would dismiss the appeal from the Divisional Court’s judgment dated November 29, 2000. [53] Because the issue raised in the appeal of the Divisional Court’s judgment dated November 29, 2000 was important and somewhat novel and because the joint conduct of the Superintendent and the two employers has resulted in a remarkable passage of more than a decade since the original Bristol-Myers sale to Colgate without the resolution of all pension issues, I would not award costs of the appeals to the respondents. RELEASED: February 14, 2002 “J.C. MacPherson J.A.” “I agree R. S. Abella J.A.” “I agree K. Feldman J.A.” [1] Now called the Superintendent of Financial Services. [2] I note, parenthetically, that the Superintendent’s policy statement in 1988, set out earlier in these reasons, appears to be a direct response to Collins.