COURT OF APPEAL FOR ONTARIO

CITATION: Lacroix v. Canada Mortgage and Housing Corporation, 2012 ONCA 243

DATE: 20120418

DOCKET: C53012 & C53034

Doherty, Laskin and Simmons JJ.A.

BETWEEN

Nicole Lacroix and Rosie Ladouceur

Plaintiffs (Appellants)

and

Canada Mortgage and Housing Corporation and Marc Rochon, Claude Poirier-Defoy, Jim Millar, Karen Kinsley, Gerald Norbraten, Jean-Guy Tanguay, David Metzak and Brian Knight being the Trustees of the Canada Mortgage and Housing Corporation Pension Fund

Defendants (Respondents)

BETWEEN

Frank McCann and David Guffie

Plaintiffs (Appellants)

and

Canada Mortgage and Housing Corporation and Marc Rochon, Claude Poirier-Defoy, Jim Millar, Karen Kinsley, Gerald Norbraten, Jean-Guy Tanguay, David Metzak and Brian Knight being the Trustees of the Canada Mortgage and Housing Corporation Pension Fund

Defendants (Respondents)

William J. Sammon and James B. Barnes, for the appellants, Nicole Lacroix and Rosie Ladouceur

Paull N. Leamen and Tara M. Sweeney, for the appellants, Frank McCann and David Guffie

J. Brett Ledger, Andrea Laing and Lauren Tomasich, for the respondents

Heard: July 13, 2011

On appeal from the judgment of the Divisional Court (Wilson, Karakatsanis and Bryant JJ.), dated June 16, 2010, with reasons reported at 2010 ONSC 65, 90 C.P.C. (6th) 169.

Laskin J.A.:

[1]          The central question on these appeals is whether a court has jurisdiction to order the Canada Mortgage and Housing Corporation to partially terminate its pension plan or to award damages based on a partial termination.

A.           overview

[2]          Between 1995 and 2000 CMHC laid off half of its workforce.  Many, though not all, laid-off employees elected to take the commuted value of their pension benefits out of the CMHC pension plan and leave the plan.

[3]          A few years after CMHC began to reduce its workforce, it decided to use part of the surplus in its pension plan to enhance the benefits of plan members.  CMHC gave two benefit enhancement packages, the first at the beginning of 1999, and the second at the beginning of 2001.  However, those employees who had left the plan were not eligible for these enhanced benefits.  Their exclusion spawned the two class proceedings now before this court.

[4]          Nicole Lacroix and Rosie Ladouceur represent a group of former CMHC employees who did not receive either package of benefit enhancements.  Initially, they claimed that CMHC committed a breach of trust and breach of fiduciary duty by depriving them of these benefit enhancements.  Common issues relating to their benefit enhancement claim have already been certified. 

[5]          Frank McCann and David Guffie represent a group of former employees who received the first benefit enhancement package, but not the second package.  Their action has not yet been certified as a class action. 

[6]          On the motions that give rise to these appeals, each set of plaintiffs now seek to certify common issues relating to their claim that CMHC contravened the conflict of interest provisions of the federal Pension Benefits Standard Act, 1985, R.S.C. 1985 (2nd Supp.), c. 32, by failing to partially terminate its pension plan.  As a remedy for this contravention, the plaintiffs ask the court to order partial termination or damages premised on a partial termination.  In addition, McCann/Guffie seek to certify a common issue relating to their claim that CMHC misrepresented to them that it would give only one package of benefit enhancements.

[7]          The motion judge, Charbonneau J., declined to certify any of these proposed common issues.  He held that the issues relating to the partial termination claim did not give rise to a viable cause of action.  He also held that the other requirements for certification under s. 5(1) of Ontario’s Class Proceedings Act, 1992, S.O. 1992, c. 6, had not been met.  He refused to certify the misrepresentation claim because it did not raise a common issue.[1]  Finally, he rejected the plaintiffs’ request that their costs be paid out of the pension fund.[2]

[8]          The Divisional Court dismissed the plaintiffs’ appeals.  In addition to upholding the findings of the motion judge, the Divisional Court concluded that a court has no jurisdiction to order CMHC to effect a partial termination of its pension plan and has no jurisdiction to award damages based on a partial termination. 

[9]          The plaintiffs obtained leave to appeal to this court.  On their appeal they raise four issues, of which the first is by far the most important and took up most of the oral argument:

(a)     Does the claim relating to partial termination disclose a cause of action under s. 5(1)(a) of the Class Proceedings Act?

(b)     Did the motion judge err in concluding that the issues proposed for certification do not meet the requirements of s. 5(1)(b),(c) and (d) of the Class Proceedings Act?

(c)     Did the Divisional Court err in upholding the motion judge’s finding that the misrepresentation claim advanced by McCann/Guffie does not raise a common issue?

(d)     Did the motion judge err in failing to award the appellants their costs from the CMHC pension fund?

B.           factual history

[10]       The factual history giving rise to these class proceedings is thoroughly set out in the reasons of the motion judge and the Divisional Court.  Here, I will briefly summarize those facts necessary to understand the issues on appeal.

(a)         The CMHC Pension Plan

[11]       CMHC is a federal crown corporation.  It is the settlor and sponsor of the CMHC pension plan, and the administrator of the plan.  The individual defendants are the trustees of the plan. 

[12]       CMHC’s pension plan was established by a trust agreement, which was made in 1960 and later amended in 1992.  The plan is a defined benefit plan.  And it is an ongoing plan, which is federally regulated under the Pension Benefits Standards Act, S.C. 1985 (2nd Supp.), c. 32.

(b)         CMHC downsized its workforce starting May 1995

[13]       Two programs, by which CMHC cut its workforce in half, are relevant to these proceedings.   The first – called the Workforce Adjustment Program – occurred from May 1995 to 1996.  The second – called the Transition – began in January 1997 and continued for several years.

[14]       Employees dismissed under either program who were not eligible for or did not choose early retirement were given three options:

Take the commuted value of their CMHC pension benefits;

Transfer their pension contributions and service into the pension plan of a new employer; or

Remain in the CMHC pension plan as inactive members, and receive a deferred pension payable at age 60.

[15]       The plaintiffs representing the two classes in these proceedings elected the first option – to take the commuted value of their pension benefits – although at different times.

(c)         CMHC’s surplus decisions and its two benefit enhancement packages

[16]       By the 1990s, CMHC’s pension plan moved into a surplus position.  The surplus came about because of increases in the actuarial value of the assets of the pension fund.  Initially the actuarial surplus was quite small, less than $10 million.  However, it grew to $64.8 million by 1995, to $101.3 million by 1996, to $123.7 million by 1998, and to nearly $200 million by 1999.

[17]       CMHC’s Board of Directors decided to apply a portion of the actuarial surplus to enhance the pension benefits for plan members.  It did so by two benefit enhancement packages.

[18]       The first package of benefits was given to all those who were members of the pension plan on January 1, 1999.  The Board allocated $128.7 million of the actuarial surplus for benefit enhancements.  This sum included $100 million to be notionally “shared” between CMHC and the plan members based on their respective contributions to the pension fund over the history of the plan. 

[19]       The second package of enhanced benefits was given to all those who were members of the pension plan on January 1, 2001.  This time, the CMHC Board allocated $124.5 million of the actuarial surplus for increased benefits.  This amount again was shared with the plan members based on historic contribution rates to the fund. 

[20]       Two critical facts about these surplus decisions underlie this litigation.  First, no CMHC employee who had left the pension plan before the effective date of each benefit enhancement package received the enhanced pension benefits. 

[21]       Second, while the plan members benefited from the allocation of the actuarial surplus to these two packages, so too did CHMC.  Although CHMC did not actually withdraw any money from the pension plan, it used its allocated share of the actuarial surplus to offset the costs of some of the benefit enhancements, to forgive a $59.4 million corporate debt that it owed to the pension fund, and to implement contribution holidays for the company and the remaining plan members.  CMHC then allocated what was left of its share of the actuarial surplus for its future benefit.

[22]       At the heart of the class plaintiffs’ complaint is their allegation that in making these surplus decisions, CMHC acted in its own interest and in the interest of the remaining plan members, but at the expense of the interest of the departing plan members.  To remedy what they say is CMHC’s unfair treatment of them, the plaintiffs seek access to the surplus in the plan, and a pro rata share in the distribution of that surplus.

(d)         The class plaintiffs

[23]       Nicole Lacroix and Rosie Ladouceur are the representative plaintiffs in the first class proceeding.  Both were long-time employees of CMHC, who lost their jobs when CMHC downsized.  Both elected to take the commuted value of their pension benefits and leave the plan before January 1, 1999.  They, therefore, did not receive either of the two benefit enhancement packages given by CMHC to its remaining employees. 

[24]       Frank McCann and David Guffie are the representative parties in the second class proceeding.  They too were long serving employees of CMHC, who lost their jobs during the corporation’s downsizing.  Both McCann and Guffie received the first benefit enhancement package but then elected to take the commuted value of their pension and leave the plan before January 1, 2001.  They, therefore, did not receive the second benefit enhancement package. 

(e)         OSFI did not declare a partial termination of the CMHC pension plan

[25]       OFSI, the Office of the Superintendent of Financial Institutions, oversees federally regulated pension plans.  As my colleague Gillese J.A. discussed in Lomas v. Rio Algom Ltd., 2010 ONCA 175, 99 O.R. (3d) 161, the Superintendent’s role in determining whether a pension plan should be wound-up – in whole or in part – is a key aspect of a “carefully calibrated” legislative scheme.[3]

[26]       The evidence in the record in these proceedings shows that OSFI has never declared what the appellants seek – a partial termination of a pension plan.  However, the evidence stopped short of showing any policy whereby OSFI defers decisions on partial termination to plan administrators.

[27]       Moreover, as the Divisional Court noted at para. 49 of its reasons, OFSI considered and decided against ordering a partial termination of the CMHC pension plan.  Instead, the Superintendent approved CMHC’s surplus sharing decisions and its two benefit enhancement packages.  The appellants did not seek judicial review of OFSI’s determination not to declare a partial termination.

C.           relevant legislation

[28]       Two pieces of legislation are relevant to this litigation: the federal Pension Benefits Standards Act (PBSA) and the provincial Class Proceedings Act, S.O. 1992, c. 6.

(a)         The Pension Benefits Standard Act

[29]       In these appeals the important provisions of the PBSA are those dealing with conflicts of interest and plan terminations. 

[30]       Section 8(10) addresses conflicts of interest.  Where an entity is both an employer and an administrator of a pension plan and the two roles come into conflict, s. 8(10)(b) requires the administrator to act in the best interests of the plan members:

8(10) If there is a material conflict of interest between the role of an employer who is an administrator, or the role of the administrator of a simplified pension plan, and their role in any other capacity, the administrator

(a)     shall, within thirty days after becoming aware that a material conflict of interest exists, declare that conflict of interest to the pension council or to the members of the pension plan; and

(b) shall act in the best interests of the members of the pension plan.

[31]       Where an administrator breaches s. 8(10), s. 8(11) gives the Superior Court broad jurisdiction to fashion an appropriate remedy:

8(11) If an administrator contravenes subsection (10), a court of competent jurisdiction may, on application by the Superintendent or any other interested person, make any order on such terms as the court considers appropriate.

[32]       The appellants contend that as CMHC acknowledged a breach of s. 8(10) for the purpose of the motions before Charbonneau J., as a remedy for that breach the Superior Court of Justice either should order CMHC to partially terminate its pension plan or should itself order a partial termination.

[33]       Under s. 29 of the Act, both the Superintendent and an administrator can partially terminate a pension plan but plan members have no right to seek a partial termination.[4]

[34]       Section 29(2) of the Act gives the Superintendent authority to declare a whole or partial termination of a pension plan, provided specified criteria are met:

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;

(b) the employer has discontinued or is in the process of discontinuing all of its business operations or a part thereof in which a substantial portion of its employees who are members of the pension plan are employed; or

(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).

[35]       The appellants accept that none of the criteria in s. 29(2) has been established, and therefore that the Superintendent cannot declare a partial termination of the CMHC pension plan under s. 29(2).

[36]       However, s. 29(5)[5] of the Act also gives the administrator of a pension plan authority to terminate the whole or part of a pension plan:

29(5) An administrator who intends to terminate the whole or part of a pension plan or wind up a pension plan shall notify the Superintendent in writing of that intention at least sixty days before the date of the intended termination or winding-up.

[37]       Finally, s. 29(12) specifies the rights of plan members on a partial termination:

29(12) Where a plan is terminated in part, the rights of members affected shall not be less than what they would have been if the whole of the plan had been terminated on the same date as the partial termination.

[38]       The appellants say that there is an “interplay” between s. 8(11) and s. 29(5).  They argue that s. 8(11) gives the court the power to review an administrator’s failure to terminate a plan under s. 29(5).  The appellants submit that CMHC has contravened s. 8(10) of the Act, and therefore, under s. 8(11), the court should order it to partially terminate its pension plan in accordance with s. 29(5).

(b)         The Class Proceedings Act

[39]       Section 5(1) of the Class Proceedings Act sets out the requirements for certification:

5(1)  The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,

(a)     the pleadings or the notice of application discloses a cause of action;

(b)     there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;

(c)     the claims or defences of the class members raise common issues;

(d)     a class proceeding would be the preferable procedure for the resolution of the common issues; and

(e)     there is a representative plaintiff or defendant who,

(i)      would fairly and adequately represent the interests of the class,

(ii)      has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and

(iii)     does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

[40]       With the exception of the misrepresentation claim asserted by McCann and Guffie, my reasons focus on the requirement in s. 5(1)(a): do the appellants’ pleadings disclose a cause of action?  The misrepresentation claim turns on whether it meets the requirement in s. 5(1)(c): does it raise a common issue? 

D.           the appellants’ conflict of interest allegation

[41]       In their pleadings the appellants allege that they beneficially own the surplus in the pension plan.  They then say that CMHC was in a conflict of interest under s. 8(10) of the PBSA between its role as employer and its role as plan administrator.  Because CMHC was in a conflict of interest, it was required to act in the best interests of the plan members.  According to the appellants, CMHC could only do so by partially terminating its pension plan.  Instead, CMHC kept the entire surplus in the plan and used part of it for its own benefit and the benefit of the remaining plan members, at the expense of the departing plan members.  CMHC thus contravened s. 8(10).

[42]       For the purpose of the appellants’ certification motions and its own jurisdiction motion,[6] CMHC has acknowledged that the appellants can establish the necessary facts to prove a contravention of s. 8(10) of the Act.  CMHC’s acknowledgment has largely narrowed the parties’ debate in these appeals to a single but fundamental question: assuming CMHC contravened s. 8(10) of the Act, does the court have jurisdiction under s. 8(11) to order it to partially terminate its pension plan or to award damages premised on a partial termination?  Although in his ruling on the earlier jurisdiction motion brought by CMHC, the motion judge accepted that the court might have jurisdiction, the Divisional Court concluded that the court did not have this jurisdiction.

[43]       If the court does not have jurisdiction, the partial termination claim does not disclose a cause of action, and the proposed common issues relating to that claim should not be certified.

E.           judicial history of these proceedings

[44]       The judicial history of these proceedings has been lengthy and complicated.  That history is best understood in the context of the two theories of liability put forward by the appellants: one, the appellants were wrongly excluded from the benefit enhancement packages, and two, CMHC breached its statutory and fiduciary duty by failing to partially terminate its pension plan.  The following is a summary of the previous decisions of the motion judge in these proceedings, his decisions that are under appeal and the decision of the Divisional Court.

(a)         The previous proceedings before the motion judge

In 2000, in the Lacroix/Ladouceur action, the motion judge certified, on consent, common issues that challenged the propriety of CMHC’s decision to refuse to give the two benefit enhancement packages to those employees who elected to take the commuted value of their pension benefits and leave the plan.  Appendix A lists these common issues that have been certified on consent.

In 2003, Lacroix/Ladouceur successfully moved to expand their existing claim by adding former members of the plan who had taken the first benefit enhancement package, but left the plan before receiving the second benefit enhancement package (the McCann/Guffie class plaintiffs).

Also, in 2003, Lacroix/Ladouceur moved to certify additional common issues relating to CMHC’s failure to partially terminate the pension plan.  That motion was dismissed by the motion judge.  Appeals to the Divisional Court and this court were dismissed.  The Supreme Court of Canada refused leave to appeal.

In 2007, the motion judge ordered that the claims of McCann/Guffie be severed from those of Lacroix/Ladouceur and that they be asserted in a separate proceeding.

Also, in 2007, the motion judge permitted Lacroix/Ladouceur to amend their statement of claim and again seek certification of issues relating to CMHC’s failure to partially terminate the pension plan.

In 2008, CMHC moved under r. 21.01(3)(a) or (d) to stay the Lacroix/Ladouceur action on the ground that the court has no jurisdiction either to order a partial termination for breach of s. 8(10) of the PBSA or to award damages for CMHC’s failure to partially terminate the plan.  The motion judge dismissed CMHC’s motion.  In doing so, he relied on the decision of the Divisional Court in Lomas v. Rio Algom (2008), 89 O.R. (3d) 130.  He said at paras. 27 and 29:

I agree with the plaintiffs that section 8 may be interpreted as granting to the Superior Court jurisdiction to deal with clear cases of breach of conflicts in proper circumstances.  The defendants [have] the onus on this motion to convince the court that it is clear that the Superior Court has been completely deprived of its inherent jurisdiction to deal with breaches of legal duties in similar factual circumstances.  I am not convinced that this is the case.  This is particularly so on the very restricted evidentiary record before me.

…

The issue in Lomas (supra) is more similar to the issue in this case.  Moreover, the remedy sought by the plaintiffs in this case is not a declaration of partial termination as in the Lomas case but an award of damages which has no direct incidence on the pension plan itself and which is the remedy usually contemplated for breaches of legal obligations.

(b)         The decisions of the motion judge under appeal

[45]       The decisions of the motion judge now under appeal arise from motions brought by each of the class plaintiffs.  Lacroix/Ladouceur again brought a motion to certify additional common issues relating to CMHC’s failure to partially terminate its pension plan.  Appendix B lists these proposed additional common issues.  McCann/Guffie brought a companion motion to certify common issues relating to partial termination in their action.  Appendix C lists these proposed common issues. 

[46]       In the Lacroix/Ladouceur action, the motion judge declined to certify the proposed additional common issues relating to partial termination, though he did certify as a common issue a claim for punitive damages in relation to the benefit enhancement claim.  In the McCann/Guffie action, the motion judge declined to certify any of the proposed common issues.

[47]       In respect of both motions, the motion judge found significant deficiencies under all five branches of the test for certification in s. 5(1) of the Class Proceedings Act.  He concluded:

The claim based on CMHC’s duty to partially terminate the plan or for damages for its failure to do so did not constitute a viable cause of action.  The motion judge so held, even though he had ruled in CMHC’s 2008 jurisdiction motion that the court may have jurisdiction over a partial termination;

The class definition irrationally excluded members and former members of the CMHC pension plan, and lacked a rational connection to the proposed common issues;

The proposed issues relating to partial termination are not common, and, if certified, would create conflicts among class members;

The appellants failed to show that a class proceeding was preferable; and

The appellants’ proposed litigation plan was inadequate.

[48]       The motion judge also addressed the misrepresentation claim in respect of the second benefit enhancement package that was unique to the McCann/Guffie action.  He did not certify that claim as, in his view, it did not raise a common issue.  There was no common representation and no class-wide reliance.  Thus, the claim “can only be resolved by individual trials.”

[49]       After receiving written submissions on costs, the motion judge ordered the appellants to pay the respondents the costs of the motions.  He also declined to award the appellants their own costs from the CMHC pension fund.

(c)         The decision of the Divisional Court

[50]       The Divisional Court upheld the conclusions of the motion judge and dismissed the appellants’ appeals.  Moreover, the Divisional Court gave an additional reason for dismissing these appeals: the court has no jurisdiction over the proposed issues relating to partial termination.  This added reason was based on this court’s decision in Rio Algom, which reversed the Divisional Court’s decision in that case, and which was released after the motion judge’s decision.

(d)         Current status of the claims

[51]       Pending our decision, Lacroix/Ladouceur have a certified action for common issues relating to their benefit enhancement claim. 

[52]       McCann/Guffie do not have a certified action because, as they admitted before the Divisional Court, their proposed common issues entirely depend on their assertion that CMHC breached its duty under s. 8(10) by failing to partially terminate its pension plan.  The respondents have agreed to consent to an order certifying common issues relating to a benefit enhancement claim similar to that advanced by Lacroix/Ladouceur, but so far McCann/Guffie have not pleaded that claim.

F.           Concurrent jurisprudential developments

[53]       These proceedings have been ongoing for over a decade, and still have not progressed past the certification stage.  At various times the Lacroix/Ladouceur plaintiffs have amended their pleadings to reformulate an identifiable class, to advance new claims and, most important, to put forward a new theory of liability – the partial termination theory – for which they seek to certify several additional common issues. 

[54]       In large part, it seems to me, the appellants have attempted to recast their lawsuits and their submissions to meet the obstacles to their claims presented by developments in the jurisprudence, and especially the obstacle presented by two cases from this court, Hembruff v. Ontario Municipal Employees Retirement Board (2005), 78 O.R. (3d) 561 and Rio Algom. 

[55]       When these proceedings began, the case law was well settled that individual plan members have no claim to payment or distribution of the surplus from an ongoing pension plan.  The right to the surplus crystallizes on the termination of a plan because only then does the surplus become ascertainable:  see Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611.  However, the appellants did seem to have a claim for damages for breach of trust and breach of fiduciary duty arising out of CMHC’s failure to give departing plan members either or both of the benefit enhancement packages.  Common issues relating to that claim were certified in the Lacroix/Ladouceur action in 2000.

[56]       Then, in 2005, this court released its decision in Hembruff.  In that decision, Gillese J.A. concluded that plan members who take the commuted value of their pension benefits and leave the plan give up any entitlement to future benefit enhancements.  She wrote at para. 123:

Mr. Lyon admitted that he read and understood that statement, and understood that he would no longer be a member of OMERS if he withdrew his CVP.  In my view, it is self-evident that if an individual ceases membership in the OMERS pension plan, he or she gives up eligibility for any benefit enhancements that might be implemented thereafter.  Having chosen to withdraw their funds from the plan and invest those funds elsewhere, such individuals cannot later be heard to complain that they are not receiving additional benefits from the plan they chose to leave.  As Cumming J. stated in McMaster University v. Robb, [2001] O.J. No. 5480, 37 C.C.P.B. 252 (S.C.J.) at para. 11:

Anyone choosing to remove the commuted value of his/her benefits would be well aware that s/he is giving up any continuing claim to any benefits under the Plan.  A choice is made on a basis of what is assumed will be financially best for the individual for the future and expert advice can be obtained to assist in making that choice.  Individuals are responsible for the choices they make.

[57]       Hembruff thus put in jeopardy the Lacroix/Ladouceur benefit enhancement claim, and likely prompted the appellants to focus their claim on issues relating to CMHC’s failure to partially terminate its pension plan.  Soon after it was advanced, that claim found some support in the majority reasons of the Divisional Court in Rio Algom, which I referred to earlier, and which at least held that it was not plain and obvious that the court lacked jurisdiction to order a partial termination. 

[58]       Moreover, in Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), 2004 SCC 54, [2004] 3 S.C.R. 152, the Supreme Court of Canada had already held that members of a pension plan affected by a partial termination may, depending on the terms of the plan, be entitled to their pro rata share of the surplus from the date of partial termination on the same basis as if the plan were fully terminated on that date.  Thus, the Divisional Court’s decision in Rio Algom and the Supreme Court of Canada’s decision in Monsanto together seemed to provide the appellants and the class members they represent with a route to access the surplus in the CMHC pension plan. 

[59]       Then, in 2010 this court released its decision in Rio Algom.  In that case, in the context of a pension plan regulated under Ontario’s Pension Benefits Act, R.S.O 1990, c. P-8, Gillese J.A. wrote that the court had no authority to order an employer to commence proceedings to wind-up a pension plan.  As I said in reviewing the judicial history of these proceedings, the Divisional Court relied on this court’s ruling in Rio Algom to conclude that the common issues relating to partial termination, which the appellants propose for certification, do not disclose a cause of action.

[60]       I turn now to the issues on the appeals.

G.          analysis

(a)         Does the claim relating to partial termination disclose a cause of action under s. 5(1)(a) of the Class Proceedings Act?

[61]        To be certified as a class proceeding, the pleading must disclose a cause of action.  In the Lacroix/Ladouceur proceeding, common issues relating to the claim for benefit enhancements have already been certified.  McCann/Guffie have not proposed common issues relating to a separate or stand alone benefit enhancement claim.  On these appeals, the issues proposed for certification – though worded somewhat differently by each set of appellants – relate to the claim for partial termination.[7]

[62]       Thus, the fundamental question on these appeals is whether the court has jurisdiction to order a partial termination, or to order CMHC to effect a partial termination of its pension plan.  As I understand their argument, the appellants put their position on both bases.  However, they stress the argument that the court has jurisdiction under s. 8(11) of the PBSA to order CMHC to partially terminate its pension plain in accordance with s. 29(5) of the Act.  I use the two formulations of the question interchangeably.  For the purpose of determining the court’s jurisdiction they amount to the same question:  see Rio Algom (C.A.), at para. 30. 

[63]       If the court does not have this jurisdiction, then the claim of each set of appellants relating to partial termination does not disclose a cause of action, and the common issues relating to that claim cannot be certified.  The “plain and obvious” test applies to the question of the court’s jurisdiction.  Unless it is plain and obvious that the court has no jurisdiction to order a partial termination, the plaintiffs will have met this branch of the test for certification.  See Cloud v. Canada (A.G.) (2005), 73 O.R. (3d) 401 (C.A.).

[64]       The submissions of the parties on the question of the court’s jurisdiction raise the following issues:

(i)      As a matter of statutory interpretation, does the court have jurisdiction under s. 8(11) of the PBSA to order CMHC to partially terminate its pension plan?

(ii)      Does this court’s decision in Rio Algom apply to the appellants’ partial termination claims?

(iii)     Should Rio Algom be reconsidered in the light of the Supreme Court of Canada’s decisions in Burke v.  Hudson’s Bay Co., 2010 SCC 34, [2010] 2 S.C.R. 273, and Monsanto, and the minority opinion of Bastarache J. in Buschau v. Rogers Communications Inc., 2006 SCC 28, [2006] 1 S.C.R. 973?

(iv)     Does the court have jurisdiction under s. 8(11) of the PBSA to award damages equivalent to a pro rata share of the distribution of the surplus on a partial termination?

(v)     Did the CMHC effect a “backdoor” partial termination of its pension plan, or “crystallize” the surplus, by using a portion of the surplus for its benefit and the benefit of the remaining plan members?

(vi)     Should the court’s choice of remedy for the breach of s. 8(10) of the PBSA be certified as a common issue?

(i)           As a matter of statutory interpretation, does the court have jurisdiction under s. 8(11) of the PBSA to order CMHC to partially terminate its pension plan?

[65]        For convenience I reproduce the key provisions of the PBSA – s. 8(10) and (11), and s. 29(2) and (5):

8(10) If there is a material conflict of interest between the role of an employer who is an administrator, or the role of the administrator of a simplified pension plan, and their role in any other capacity, the administrator

(a) shall, within thirty days after becoming aware that a material conflict of interest exits, declare that conflict of interest to the pension council or to the members of the pension plan; and

(b) shall act in the best interest of the member of the pension plan

8(11) If an administrator contravenes subsection (10), a court of competent jurisdiction may, on application by the Superintendent or any other interested person, make any order on such terms as the court considers appropriate.

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;

(b) the employer has discontinued or is in the process of discontinuing all of its business operations or a part thereof in which a substantial portion of its employees who are members of the pension plan are employed; or

(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).

29(5) An administrator who intends to terminate the whole or part of a pension plan or wind up a pension plan shall notify the Superintendent in writing of that intention at least sixty days before the date of the intended termination or winding-up.

[66]       The essence of the debate between the parties on the question whether the court has jurisdiction to order partial termination may be put as follows:

On the one side, the appellants say that s. 8(11) gives the court broad jurisdiction to remedy a contravention of s. 8(10) – a jurisdiction that includes the power to order a partial termination in an appropriate case.  If Parliament had intended to preclude the court from ordering partial termination it could have said so expressly.

On the other side, the respondents say that s. 29 contains specific provisions governing plan termination – provisions that recognize the expertise of the Superintendent and vest the office of the Superintendent with exclusive jurisdiction to supervise the whole or partial termination of a pension plan.  This specific regime for plan termination in s. 29 shows that Parliament could not have intended the court to use its general remedial authority in s. 8(11) to order an employer to terminate its pension plan.

[67]       Each side of the debate has merit if ss. 8 and 29 are each looked at in isolation.  However, at bottom, the debate raises an issue of statutory interpretation.  And statutory interpretation requires the court to look at provisions of a statute, not in isolation, but in their entire context.  In doing so, the court tries to determine the most appropriate interpretation, one that best reflects the intent of the legislation scheme.

[68]       The starting point is Elmer Driedger’s modern principle of statutory interpretation, a principle the Supreme Court of Canada has repeatedly applied to interpret legislation:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament.

See, for example, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; and Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559.

[69]       When ss. 8 and 29 are looked at in the light of the scheme and object of the PBSA, it is evident that Parliament did not intend to give courts the authority to order employers to terminate their pension plans.

Scheme of the Act

[70]       In s. 29 Parliament has provided that only two persons may initiate the termination of a pension plan.  First, under s. 29(2), the Superintendent has discretion to terminate a pension plan if the enumerated criteria are met.  Second, under s. 29(5), an administrator may initiate the termination of a pension plan.  That the statute recognizes an employer’s right to terminate a plan is to be expected because in Canada pension plan coverage is voluntary in the sense that employers may choose whether to establish one for their employees.  However, an administrator’s right to terminate a plan under s. 29(5) is subject to the supervision of the Superintendent, who must be given advance notice of any termination proposed by an administrator.

[71]       Two points that flow from s. 29 are important for deciding whether courts can order a plan termination.  First, s. 29 shows that Parliament has given supervisory authority over all plan terminations to the Superintendent.  Undoubtedly, it has done so because it recognizes that the termination of a plan, either in whole or in part, is a complex and highly technical matter, and thus a matter that demands specialized expertise.  The office of the Superintendent has this expertise; courts do not.[8]

[72]       Second, Parliament has not given plan members the right to seek the termination of a pension plan.  Their right, if aggrieved, is to ask for the Superintendent’s assistance.

[73]       Having regard to the detailed regime for plan termination in s. 29 – a regime that recognizes the expertise of the Superintendent and does not recognize a right of employees to ask for a termination – it makes little sense to say that Parliament intended courts to have jurisdiction to order the termination of a plan at the instance of disaffected employees.

[74]       The scheme of the Act thus shows that impliedly, though not expressly, Parliament has excepted terminations from the remedies available to the court under s. 8(11) of the PBSA.  The wording of s. 8(11) supports this conclusion.  One of the parties that may apply for relief under s. 8(11) for a contravention of s. 8(10) is the Superintendent.  I cannot accept that Parliament could have intended to permit the Superintendent to circumvent the carefully tailored mandate for plan termination in s. 29 by resorting to s. 8(11) to terminate a plan.

Object of the Act

[75]       The object of the PBSA, like its scheme, supports the respondents’ position.  The case law is replete with discussion about the object of pensions and pension legislation:  see, for example, Monsanto, Buschau, and Rio Algom.

[76]         A main object of pensions is to provide long-term financial security to workers after their withdrawal from active employment.  Pension legislation, such as the PBSA, establishes expert regulatory supervision over and minimum standards for pension plans.  The overall aim of the legislation is to protect and safeguard the pension rights and benefits of current and former plan members.  In the words of Deschamps J. in Monsanto at para. 38 (speaking of the Ontario legislation):

The Act thus seeks, in some measure, to ensure a balance between employee and employer interests that will be beneficial for both groups and for the greater public interest in established pension standards.

[77]       Giving the court jurisdiction to order an employer to partially terminate its pension plan on the application of a group of former employees undermines these important objects of the statute.  Doing so would disregard the regulatory expertise of the Superintendent.  It would threaten the balance between employers and employees.  And ultimately, it could put the long term survival of pension plans at risk.  As Bastarache J. noted in Buschau, at para. 97, if a plan can be terminated by the action of members or other beneficiaries, then “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.”

[78]       For these reasons, I conclude that as a matter of statutory interpretation, courts have no jurisdiction under s. 8(11) of the PBSA to order CMHC to effect a partial termination of its pension plan.

(ii)         Does this court’s decision in Rio Algom apply to the appellants’ partial termination claims?

[79]       The respondents submit that the court’s decision in Rio Algom provides an additional and compelling ground to dismiss these appeals.  They say that the Divisional Court correctly applied Rio Algom to reject the appellants’ claims relating to partial termination.  The appellants submit that Rio Algom does not govern the question whether the court has jurisdiction over partial termination under s. 8(11) of the PBSA.

[80]       Rio Algom was decided under the provincial Pension Benefits Act.  A group of aggrieved employees sought the wind-up of Rio Algom’s pension plan.  By the time the case reached this court, the employees had conceded that the court could not directly order the wind-up or termination of a pension plan.[9]  However, they contended that the court could order the employer to commence wind-up proceeding under s. 68(1) of the provincial statute, a provision similar to s. 29(5) of the PBSA.

[81]       Gillese J.A., writing for the court, rejected the employees’ contention.  In doing so, she relied on the Supreme Court of Canada’s decision in Bushau.  In Buschau, the Supreme Court held that the common law rule in Saunders v. Vautier – which allows trust beneficiaries to terminate a trust in certain circumstances – does not apply to pension trusts.

[82]       However, Gillese J.A. concluded that Buschau stood not merely for this narrow proposition, but for the broader proposition that a court cannot compel an employer to commence proceedings to wind up a pension plan.  She concluded that ordering an employer to commence wind-up proceedings “is tantamount to” ordering the wind-up of a pension plan.  As the court cannot make the latter order, it cannot make the former order.  In her words, at para. 78:  “If the court were to order Rio Algom to commence wind up proceedings, it would violate the legislative scheme and amount to an unauthorized usurpation of the authority delegated to the Superintendent and Tribunal.”

[83]       In these appeals, the appellants are, in substance, asking the court to do what the employees in Rio Algom asked the court to do: order the employer to begin proceedings to terminate – here partially terminate – the pension plan.[10]  This court rejected the relief sought by the employees in Rio Algom; the respondents submit that we should similarly reject the relief the appellants seek on these appeals.  The appellants, however,  attempt to avoid the impact of Rio Algom on the ground that it was decided under the provincial Pension Benefits Act while the present appeals are to be resolved under the federal PBSA.   The appellants point out that s. 8(10), and especially s. 8(11), have no counterpart in the provincial Act.

[84]       I accept that to be so.  The provincial statute contains no provision giving the court the broad remedial power found in s. 8(11) of the PBSA.  However, the absence of such a power in the provincial statute is of no consequence in these appeals.  The analysis in Rio Algom still applies to the partial termination claim put forward by the appellants for three reasons.

[85]       First, Gillese J.A. noted at para. 34 of her reasons in Rio Algom, on matters pertaining to plan termination, the two statutes do not markedly differ.

[86]       Second, Buschau, which Gillese J.A. relied on in concluding that a court cannot compel an employer to wind up or terminate a pension plan, was decided under the PBSA.  Indeed, in Buschau, the Supreme Court of Canada said that s. 29(2) of the PBSA dictates the circumstances when partial termination should be declared.  Plan members dissatisfied with the actions of their employer may ask the Superintendent to intervene.  In short, their recourse is to the Superintendent, not the court. 

[87]       Gillese J.A. applied similar reasoning in holding that a court cannot order an employer to commence wind up proceedings under s. 68 of the Ontario Pension Benefits Act at the request of a plan member.  Moreover, at para. 59 of her reasons, she expressly referred to Buschau.  She said:

The core reasoning in Buschau is that the members of a pension plan do not have the right to compel an employer to wind up the pension plan.  The decision in Buschau is not confined to the methods by which wind up is to take place. [Emphasis added.]

Thus, it matters not that the appellants seek a partial termination under s. 8(11) of the PBSA, a provision without an equivalent in the Ontario statute.  As Gillese J.A. said, employees have no right to compel an employer to terminate (or partially terminate) a pension plan, no matter what route they use to try to obtain that result.

[88]       Third, the policy reasons that underlie the conclusion of Gillese J.A. in Rio Algom are the same as those that underlie the Supreme Court of Canada’s decision in Buschau.  On this point, I agree with the following passage from para. 60 of the reasons of the Divisional Court:

Both Rio Algom and Buschau v. Rogers Communications Inc., [2006] 1 S.C.R.  973 rely upon similar policy considerations.  Pension plans serve broad and long-term societal functions in providing economic support during retirement.  Before a pension plan is wound up, surplus is only an actuarial concept and individuals entitled to the surplus assets do not have a specific interest in them.  Members should not be able to deprive future employees of the benefit of a pension plan and often have only a passive and limited right with regard to employer decisions concerning the future of their plan and trust fund.  They are not without recourse because they can alert the Superintendent of their concerns, who can act in an appropriate case: see Buschau at paras. 17, 31, 34.

[89]       I conclude that although Rio Algom was decided under a different statutory regime, its reasoning and rationale apply to the appellants’ claims for partial termination under the PBSA.  Rio Algom is therefore a compelling authority in support of the respondents’ position on these appeals unless it is open to reconsideration.

(iii)       Should Rio Algom be reconsidered in the light of the Supreme Court of Canada’s decisions in Burke and Monsanto and the minority opinion of Bastarache J. in Buschau?

[90]       The appellants contend, in the alternative, that if Rio Algom applies to terminations under the PBSA, it should nonetheless be reconsidered because it is at odds with the Supreme Court of Canada’s unanimous decisions in Burke and Monsanto and with Bastarache J.’s minority reasons in Buschau.  I would reject this contention.

Burke

[91]       The appellants fasten on the statement of Rothstein J., at para. 45, that “pension legislation is not a complete code”; rather its purpose is to establish minimum standards and regulatory supervision to protect those entitled to pension benefits.  The appellants then argue that a higher standard than that found in the PBSA will be needed to protect their equity in the surplus.

[92]       Burke does not assist the appellants.  In that case, the Supreme Court had to decide whether an employer or plan administrator was required to transfer pension surplus to a successor plan on the sale of a division of the company’s business.  As Rothstein J. noted, this was a novel issue that could not be resolved by the pension legislation alone.

[93]       However, Rothstein J. was careful to distinguish the case before him, and for example, the situation in Buschau.  At para. 46 of his reasons, he said:  “By contrast, in Buschau, the application of the trust rule in Saunders would have allowed the employees to circumvent the statutory procedure and defeat the objective of the legislative scheme”.

[94]       The reasons in Burke are thus entirely consistent with Gillese J.A.’s statement in Rio Algom at para. 59: “I accept that Buschau dictates that where a statutory scheme exists for the termination and wind up of pension plans, it must be followed.  The statutory process … is not to be circumvented by the courts.”  Here, the appellants seek to use the court to circumvent the scheme for plan termination in s. 29 of the PBSA.  In Burke, unlike these two appeals, the statutory scheme did not yield a complete answer.

Monsanto

[95]       The appellants argue that a court ordered partial termination is consistent with the policy considerations underlying the Supreme Court of Canada’s decision in Monsanto.  The appellants say that we should prefer these policy considerations to those relied on in Rio Algom.  I do not agree because Monsanto was an entirely different case from the one we must resolve.

[96]       Monsanto did arise in the context of a large downsizing and a surplus, as do the appeals before us.  But, Monsanto does not deal with the question before us: whether there should be a partial termination.  In Monsanto a partial termination had already taken place.  The Supreme Court had to decide a different question: how the individual rights of the plan members on a partial termination affected the timing of the distribution of surplus.

[97]       Deschamps J. held that the best interests of plan members required that they receive their pro rata share of the surplus on partial termination, rather than waiting for a full wind up of the plan.  She cited the following policy considerations in support of her conclusion:[11]

No unfairness to plan members would result as the fund would still be in surplus after distribution;

Not recognizing the beneficial interest of the downsized employees at the time of partial termination would put them in a worse position than the ongoing employees, as they have lost their jobs and their level of pensionable earnings has been reduced;

The downsized workers should be subject to the risks of the plan while they are part of it but not after termination;

If the downsized employees are required to wait for a full wind up at an indeterminate date in the future, some may no longer be reachable; and

Because the actuarial surplus becomes an actual surplus and vests in the plan members upon plan termination, distribution on partial wind up is consistent with the trust principles outlined in Schmidt v. Air Products.

[98]       These policy considerations assume that a partial termination has taken place and explain why surplus should be distributed at that time.  These policy considerations do not apply when a partial termination has yet to take place.  Instead, the policy considerations at play in Rio Algom (and Buschau) – which stress the importance of pensions in providing long-term income security – govern the two appeals before us.

Buschau

[99]       The appellants rely heavily on the minority reasons of Bastarache J. in Buschau.  As I said, in that case, the court unanimously held that the members of a pension plan regulated under the PBSA could not invoke the common law rule in Saunders v. Vautier[12] to terminate the plan.

[100]    Deschamps J., writing for the majority, held that Parliament intended the provisions of the PBSA dealing with plan termination to displace the common law rule.

[101]    Bastarache J., writing for the minority, largely agreed with the reasons of Deschamps J.  He held that allowing plan members to unilaterally terminate a pension plan would be inconsistent with the objective of the Act.  He concluded at para. 100: “The unilateral right of members to terminate the Plan simply does not exist in this case.”  To this extent, his reasons are consistent with those of Gillese J.A. in Rio Algom.

[102]    However, at the end of his reasons, in a section headed “The Issue of Good Faith”, Bastarache J. discusses plan members’ right to ask for a distribution of the surplus and an employer’s obligation to act in accordance with s. 8(10).  In the following passage at para. 103, he seems to suggest that a court might review a decision about plan termination to ensure that it complied with s. 8(10)(b) of the PBSA:

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.”

[103]    It seems to me, however, that this passage is of little help to the appellants.  It is obiter.  And, Bastarache J.’s reasons as a whole support the paramountcy of the PBSA regime for plan terminations.  Moreover, even in this passage, Bastarache J. does not go so far as to say that a court can order an employer to effect a partial termination.  Thus, I am not persuaded that his minority reasons cast doubt on this court’s decision in Rio Algom.

(iv)        Does the court have jurisdiction under s. 8(11) of the PBSA to award damages equivalent to a pro rata share of the distribution of the surplus on a partial termination?

[104]    The appellants put forward an alternative position: they are not asking the court to order a partial termination, instead, they are simply asking the court to award damages, a power the court undoubtedly has.  They contend that their claim is fundamentally a damages claim.  However, the damages the appellants seek are a pro rata share of the surplus that would be distributed to them on a partial termination.

[105]    The Divisional Court rejected the appellants’ position.  It concluded, at para. 71, “that a court does not have jurisdiction to grant damages based upon the hypothetical distribution of surplus on wind up following a partial termination of the pension plan.”  The Divisional Court explained at para. 72 of its reasons that a damage award would amount to an indirect partial termination:

On partial termination and wind up, distribution comes from the surplus assets of the plan. An order for damages comes out of the employer’s funds. However the surplus (to which the employer has contributed) would remain in the fund. Presumably, such an order would result in either a windfall to other plan members, or would result in a surplus that is not attributable to any plan members. If the damage award comes from the fund, or if the employer seeks recovery from the fund, in fact the court has indirectly ordered a partial termination. The essence of the claim is for a share of the surplus, even though characterized as damages.  An order of damages that uses a hypothetical partial termination as a measure for damages is effectively an indirect partial termination order.

[106]    I agree.  Again, as Gillese J.A. said in Rio Algom, at para. 30, the court cannot do indirectly what it cannot do directly.  As the court has no jurisdiction to order a partial termination of CMHC’s pension plan, it has no jurisdiction to award damages premised on a partial termination.

(v)         Did CMHC effect a “backdoor” partial termination of its pension plan, or “crystallize” the surplus, by using a portion of the surplus for its own benefit and the benefit of the remaining plan members?

[107]    Lacroix/Ladouceur also argue that by sharing $253.2 million of a $432 million surplus between itself and the remaining employees to the exclusion of the laid off employees, CMHC effected a “backdoor” partial termination.  McCann/Guffie essentially make the same argument, claiming that CMHC’s action “crystallized” the surplus.  In effect, they say, when CMHC used the surplus it converted a fluctuating actuarial calculation into a discrete sum of money.  Implicitly the appellants ask the court to declare that this is what has occurred.  Neither argument was made before the motion judge or the Divisional Court.

[108]    I do not agree with either argument.  As CMHC points out, the arguments are backwards.  A surplus may be said to “crystallize” on a partial termination because only on termination (or wind up) can plan members be entitled to share in the surplus.[13]  But, the converse is not true.  An employer’s decision to use actuarial surplus to fund benefit enhancements for plan members does not result in a partial termination, or convert an actuarial surplus into a “crystallized” surplus.

[109]    Put differently, an employer’s use of surplus in an ongoing plan does not by itself impose an obligation to declare a partial termination or change the rights of plan members.  To say that it did would have the perverse effect of discouraging employers from implementing benefit enhancements.  Rothstein J. made this point in Burke, at para. 83:

The fact that an employer may voluntarily choose to increase pension benefits out of surplus funds or otherwise, does not change the nature of the employees’ interest in the pension fund or extend fiduciary obligation to voluntary actions of the employer.  The employees’ equitable interest is limited to their defined benefits.

[110]    For these reasons, the arguments on backdoor partial termination or crystallization of the surplus cannot succeed.

(vi)        Should the court’s choice of remedy for the breach of s. 8(10) of the PBSA be certified as a common issue?

[111]    Having determined that the court cannot order a partial termination, I now turn to the appellants’ final alternative argument.   They submit that the court should simply certify as a common issue the choice of remedy for a breach of s. 8(10), and leave it to the trial judge to fashion the appropriate order.  I do not agree with this submission.

[112]    If the appellants prove a breach of s. 8(10), then the court will have to decide the appropriate remedy.  However, on my assessment of the law, that remedy cannot include an order for partial termination or an award of damages premised on partial termination.  As discussed above, that assessment is consistent with the opinion of Gillese J.A. in Rio Algom, at paras. 85-87.  Thus, I see no merit in leaving to the trial judge as a common issue the choice of an appropriate remedy.  The question of remedial jurisdiction should be resolved now, at the certification stage.

[113]    I have concluded that it is plain and obvious the court has no jurisdiction under s. 8(11) of the PBSA to grant the appellants the remedies they seek.  Accordingly, their claim for partial termination or damages based on a partial termination does not disclose a cause of action.  On that ground alone I would not certify their proposed common issues relating to partial termination.  Nevertheless, I will briefly address the remaining branches of the test for certification under s. 5(1) of the Class Proceedings Act.

(b)         Did the motion judge err in concluding that the issues proposed for certification do not meet the requirements of s. 5(1)(b),(c) and (d) of the Class Proceedings Act?

[114]     In addition to holding that the appellants’ claims did not constitute a viable cause of action, the motion judge found that the appellants had failed to satisfy the other requirements for certification.  Specifically, in respect of s. 5(1)(b) of the Act, he found that the proposed class plaintiffs did not have a rational relationship with the proposed common issues and irrationally excluded individuals with the same claim.

[115]    In respect of s. 5(1)(c) of the Act, the motion judge found that the proposed issues relating to the partial termination claim were not common issues and, if certified, would create conflicts among class members.

[116]    In respect of s. 5(1)(d) of the Act, the motion judge found that a class proceeding was not the preferable procedure to resolve issues relating to the partial termination claim because that claim raised “many technical issues inextricably linked to the PBSA regime.”  In short, “[t]he Superintendent acting under the purview of the statutory framework is the preferable procedure to decide those issues”: Lacroix v. Canada Mortgage and Housing Corp. (2009), 68 C.P.C. (6th) 111 (S.C.), at para. 146.

[117]    Finally, the motion judge also concluded in respect of s. 5(1)(e) of the Act, that the appellants’ “litigation plan is vague and incomplete and the proceedings will soon become unmanageable.”

[118]    Although the Divisional Court did not expressly address the motion judge’s findings on s. 5(1)(b), (c), (d) and (e) of the Act, it did uphold his findings.

[119]    In this court, the appellants submit that the motion judge erred in his findings on s. 5(1)(b), (c) and (d) of the Act, and that their litigation plan can be restructured to make it workable.  In response, CMHC submits the motion judge reasonably found that the appellants had not set out a properly identifiable class, had not proposed issues relating to partial termination that were common and had not met their onus of showing that a class proceeding would be a preferable procedure.  The motion judge’s findings, CMHC argues, are entitled to substantial deference, especially as they were upheld in the Divisional Court.  As the Supreme Court of Canada said in Ontario (Attorney General) v. Bear Island Foundation, [1991] 2 S.C.R. 570, at p. 574, the principle of appellate deference is “all the stronger in the face of concurrent findings of both courts below.”

[120]    I find considerable merit in the position of CMHC.  However, as I would dismiss these appeals on the ground that the partial termination claims does not disclose a cause of action, a restructuring of the litigation plan does not assist the appellants and it is unnecessary to resolve definitely whether the motion judge’s findings on s. 5(1)(a), (b), (c) and (d) of the Act should be upheld. 

(c)         Did the Divisional Court err in upholding the motion judge’s finding that the misrepresentation claim advanced by McCann/Guffie does not raise a common issue?

[121]     The McCann/Guffie claim alleges CMHC misrepresented to the class that there would be only one package of benefit enhancements – in other words, it would be a “one time only” benefit.  The motion judge refused to certify issues relating to their claim because he found no evidence of a common misrepresentation and no evidence from which reliance – an essential element of the cause of action – could be inferred on a class wide basis.  The Divisional Court deferred to his findings.  McCann/Guffie submit that the Divisional Court erred in doing so.  I do not accept their submission.

[122]    The motion judge’s findings on the misrepresentation claim were findings of fact, and they were firmly grounded in the record.  The alleged common misrepresentation on which McCann/Guffie relies occurred when the first package of benefit enhancements was distributed.  At the time CMHC’s Board explained that it did not intend to make regular use of surplus for the benefit of members, and that this package was an unusual circumstance.  McCann/Guffie maintain that the Board’s explanation amounts to a “one time only” representation.  However, for example, in his cross-examination, Mr. Guffie acknowledged that he did not believe that CMHC literally meant “one time only.”  Indeed, he understood that should the fund again be in a surplus position, CMHC could similarly enhance the benefits of plan members.  Mr. Guffie’s evidence alone undermines the McCann/Guffie assertion that the alleged misrepresentation was a common misrepresentation.

[123]    Similarly, the evidence in the record undermines the notion that class-wide reliance can be inferred or assumed.  Mr. Guffie himself elected to take the commuted value of his benefits before the alleged misrepresentation occurred.  And, he conceded that he would have made the same decision regardless of the misrepresentation.  Other class members, too, may have elected to take the commuted value of their pension before the alleged misrepresentation, and still other class members may have made their election without regard to what the CMHC Board represented.

[124]    Reliance need not always be treated as an individual issue in class proceedings.  In some cases, class-wide reliance may be inferred from the facts.  See O.P.S.E.U. v. Ontario, 13 C.P.C. (6th) 178 (S.C.), at para. 68, per Cullity J.; and CC&L Dedicated Enterprise Fund (Trustee of) v. Fisherman (2001), 18 B.L.R. (3d) 260 (S.C.), per Cumming J.  This, however, is not one of those cases.  On the record before him, the motion judge reasonably found that reliance was very much an individual issue.

[125]    The motion judge also reasonably held that even if CMHC had a “duty to notify the plan members that they had a right to share in an eventual distribution of surplus and that they would forgo that right if they left the plan”, and that, therefore, its breach of this duty amounted to a misrepresentation by omission, still class-wide reliance could not be inferred.  CMHC would be entitled to defend the claim on the basis that individual members’ decisions to leave the plan were unconnected to the misrepresentation:  see Plaza Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co. (1994), 18 O.R. (3d) 663 (C.A.).

[126]    For all these reasons, the Divisional Court did not err in upholding the motion judge’s finding that the McCann/Guffie’s “one time only” misrepresentation claim did not raise a common issue.  I would not give effect to this ground of appeal.

(d)         Did the motion judge err in failing to award the appellants their costs from the CMHC pension fund?

[127]     The motion judge rejected the appellants’ request that their full indemnity costs be paid out of the CMHC pension fund.

[128]    In this court, the appellants submit, as they did in the Divisional Court, that the motion judge erred in denying their request.  They put their case for costs from the fund on two bases: they contend that the question who owns the surplus lies at the heart of their actions and that the answer to this question will benefit all plan members; and they contend that this litigation “concerns the due administration of the trust by CMHC.”

[129]    The Divisional Court noted that, in accordance with the decisions of this court, public policy permits costs to be payable out of a pension fund in two categories of cases: first, where proceedings are brought to ensure the due administration of the pension trust fund; or where proceedings are brought for the benefit of all beneficiaries.  However, the Divisional Court did not agree that these proceedings fell under either category.  It deferred to the motion judge’s exercise of discretion on costs, at para. 124:

In our view, the certification judge correctly articulated the law, exercised his discretion and made no error in principle. Nor did he misapprehend the facts. His decision makes sense based on the history of this case and the nature of the claim. We see no basis to interfere with the exercise of his discretion.

[130]    I, too, see no basis to interfere with the motion judge’s refusal to award the appellants their costs from the fund.  In addition to attracting significant deference, the motion judge’s determination is consistent with the Supreme Court of Canada’s decision in Nolan v. Kerry (Canada) Inc., 2009 SCC 39, [2009] 2 S.C.R. 678.  There, Rothstein J. for the majority upheld this court’s refusal to order that the costs of former employees of a pension plan be paid out of the pension fund.  He noted, at paras. 121-127, that costs of litigation should be paid from a pension fund only where (a) the litigation is concerned with the due administration of the trust, and there exists some legitimate uncertainty about how to administer the trust; and (b) where the dispute is not adversarial.

[131]    This litigation does not meet either of these two criteria.  This litigation is not aimed at ensuring the proper administration of pension funds in an ongoing plan.  It will not benefit all plan members.  Rather, it is an attempt by a group of former plan members to gain access to the surplus, and extract a portion of that surplus for their own benefit.  Viewed in this light, the appellants’ objective in this litigation cannot possibly benefit existing plan members, or concern the due administration of the fund.

[132]    Moreover, this litigation is highly adversarial.  In both proceedings, the appellants have called into question the appropriateness of CMHC’s actions.  They have asserted breaches of trust, and of fiduciary and statutory duties, and have even sought punitive damages.  This is not in any sense a non-adversarial dispute.

[133]    I would not give effect to this ground of appeal.

H.           conclusion

[134]    The Divisional Court was correct in concluding that a court has no jurisdiction to order CMHC to partially terminate its pension plan or to award damages premised on a partial termination of the plan.

[135]    The Divisional Court did not err in upholding the motion judge’s decision that the misrepresentation claim advanced by McCann/Guffie does not raise a common issue.

[136]    The motion judge did not err in refusing to award the appellants their costs out of the pension fund.

[137]    Therefore, I would dismiss both appeals.  In accordance with the agreement of the parties, I would order that the appellants pay to the respondent CMHC its costs of the appeal in the amount of $20,000, inclusive of disbursements and applicable taxes.  The appellants shall determine their respective contributions to this amount.

Released: “DD” Apr 18, 2012                                  “John Laskin J.A.”

                                                                             “I agree Doherty J.A.”

                                                                             “I agree Janet Simmons J.A.”

 

 

appendix a

Common Issues Certified on Consent as listed by the Divisional Court at para. 31:

1.  Do members of the proposed class have an equitable and/or beneficial interest in the pension fund surplus which entitled them to an equitable share of what the defendants have characterized as "benefits enhancements" funded out of surplus?

2.  If the answer to 1 is yes, did the election by the members to take the commuted value of their pension terminate any beneficial right or interest they might have had in the surplus by virtue of the trust and/or fiduciary relationship?

3.  If the answer to 2 is no, did the failure of the defendants to include members of the class to the extent of their equitable share in what the defendants have characterized as "benefits enhancements" funded from surplus amount to breach of trust or fiduciary duty?

4.  If the answer to 3 is yes, are the class members entitled to any remedy and, if so, on what basis?

5.  If the answer to 2 is yes, should those class members

a)  whose commuted value transfer election was reduced by the amount of the maximum income tax limit, but

b)  who were permitted by CMHC to leave any commuted value balance over such limit in the plan to be received as a transfer restriction annuity rather than a residual cash payment (TRD sub-class), nevertheless be entitled to have any beneficial right or interest in the surplus determined as if their commuted value transfer had not occurred or only to the extent of the value of the transfer restriction annuity as was done by CMHC.

appendix B

The Lacroix/Ladouceur plaintiffs proposed the following additional common issues before Charbonneau J.:

(i)  Does the surplus in the CMHC pension fund belong to the plan members?

(ii)  If the answer to (i) is yes, did CMHC breach its trust, fiduciary and/or statutory duties to the class members by failing to declare a partial termination of the pension fund trust pursuant to s. 29(5) of the PBSA for the benefit of the class members and if so, what is their remedy?

(iii) (If the election by the class members to take the commuted value of their pension terminated any beneficial right or interest in the surplus), are the defendants estopped by their conduct from alleging same, assuming reliance?

(iv) Were the defendants guilty of conduct that justifies an award of punitive and/or exemplary damages?

appendix c

The McCann/Guffie plaintiffs proposed the following common issues before Charbonneau J.:

(i)  Did CMHC hold the pension fund surplus in trust for the class members?

(ii)  Did CMHC breach its trust, fiduciary and/or statutory duty by failing to pay the class members their full pro rata share of surplus when it distributed surplus on the 1st day of January, 1999?

(iii)  Did CMHC breach its trust, fiduciary and/or statutory duty by failing to pay the class members their full pro rata share of surplus when it distributed surplus on the 1st day of January, 2001?

(iv) Did CMHC and the Trustees breach their trust, fiduciary and/or statutory duty to the class members by allowing CMHC to allocate for itself approximately 60% of the surplus that was distributed on the 1st January 1999 and the 1st January 2001?

(v)  Did CMHC breach its trust, fiduciary and/or statutory obligations to the class members by failing to declare partial termination of the pension plan fund trust pursuant to s. 29(5) of the PBSA?

(vi) Did the Defendant Trustees breach their trust, fiduciary and/or statutory obligations by failing to ensure that CMHC declared a partial termination of the pension fund trust pursuant to s. 29(5) of the PBSA for the benefit of the class members?

(vii) Did CMHC make a common representation and/or warranty to the class members that the surplus distribution that occurred on the 1st January 1999 was to be one time only?

(viii) If the answer to (vii) is yes, will reliance on such representation and/or warranty by the class members be assumed?

(ix) If the answers to any one of common issues (i)(ii)(iii)(iv) and (v) are yes, to what remedy are the plaintiffs entitled?

(x) Are the class members entitled to exemplary and/or punitive damages and, if so, in what amount?