Pension Law and the Supreme Court

Until just over 20 years ago, pension litigation was uncommon at any level of the judicial system in Canada, let alone the Supreme Court. While the trial courts and provincial appellate courts heard increasing numbers of pension cases (most often on surplus entitlement questions) from the mid-1980s on, the SCC would routinely deny permission to appeal those cases up to Ottawa. One reason for that seeming neglect may have been the Court’s intense preoccupation with constitutional law issues in the decade or so immediately following the 1982 adoption of the Canadian Charter of Rights and Freedoms.

The first significant Supreme Court pronouncement on private pension plans in the “modern” era was the 1994 decision in Schmidt v. Air Products of Canada Ltd. That decision set down a number of broad principles governing surplus withdrawal on plan termination and use of surplus for contribution holidays, at least in the common law provinces. After Air Products, however, the Court reverted to its previous lack of interest in pension law. For instance, it declined to hear an appeal of the leading Quebec case on surplus entitlement and contribution holidays, the 1995 Singer decision.

The next significant pension decision rendered by the Supreme Court came a full 10 years after Air Products, namely the 2004 Monsanto decision on distribution of surplus in the event of a partial plan wind-up. Monsanto appears to have sparked an awareness at the Court of the growing legal and economic importance of pension matters.

In the four short years since Monsanto was released, the Court has decided Boucher v. Stelco and Bisaillon v. Concordia University on jurisdiction relating to pension plan disputes, Buschau v. Rogers Communications on trust principles in plan termination, and GMAC v. TCT Logistics, which tangentially addressed pension issues in insolvency. The Supreme Court also agreed to hear the Ivaco appeal, which would have addressed pension issues in insolvency much more squarely, but that case settled out of court prior to being heard. And now, Kerry.

So the question arises: with this flurry of activity, what hath the Supreme Court wrought?

Air Products was certainly a promising beginning. That ruling laid down an approach to both surplus entitlement and contribution holidays, which contained a little something for both plan sponsors and plan members, and it has more or less stood the test of time.

Recent experience, however, has been decidedly mixed. In particular, and with respect, the Monsanto decision (with its reliance on a single, obscure 1989 academic study on the importance of pension plans in labour relations) seemed almost naive in its application to the “real world” of contemporary pension stakeholders. Some of the latest decisions out of the Supreme Court (notably Buschau and Bisaillon) reveal a developing split on the bench, between a minority of justices with a more hard-headed and practical understanding of pension issues on the one hand and a slender majority of justices with a somewhat mushier approach to pension law on the other.

Even these latter, more disappointing decisions have contained some encouraging nuggets, though. One example is the statement in Monsanto about the importance of carefully calibrating and balancing the pension interests of employers and employees. Another is the beginning in Buschau of an end to the prior rote application to defined benefit pension plans of ancient trust law principles.

With the addition of Kerry to the docket, the SCC has given itself a fresh opportunity to bring some unsentimental, clear-headed judicial thinking to pension issues. A number of very recent decisions in the lower courts, not least the Ontario Court of Appeal decision in Kerry itself which is now to be reconsidered, have offered evidence of a tentative judicial trend in that direction. Let us hope that the Supreme Court will put an exclamation mark on that promising trend by dismissing the appeal in Kerry.

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