Supreme Court Grants Leave in Burke
The Supreme Court of Canada has granted leave in Burke v. Hudson’s Bay Company.
As you may recall, the case involved the sale of a division of the Hudson’s Bay Company (HBC) and the related transfer of pension plan members, along with assets equal to these members' liabilities, to the purchaser’s new pension plan. The transferred plan members commenced a civil action, arguing that they also were entitled to a pro rata share of the surplus in the HBC plan. Additionally, the transferred plan members sought an order requiring HBC to repay to the fund amounts that had been used to take contribution holidays and to pay plan expenses from 1982 to 1986.
At trial, the judge decided that not including surplus with the transfer of assets to the new plan amounted to a breach of trust, and ordered that a further sum of money be transferred from the HBC plan to the purchaser’s plan. However, the trial judge determined that HBC was entitled to use plan funds for paying plan expenses and taking contribution holidays.
HBC appealed the decision with respect to the transfer of surplus issue, while the transferred plan members cross-appealed the trial judge’s decision that plan expenses may be paid from the fund.
The Ontario Court of Appeal stated that the issue relating to the transfer of surplus could be resolved by determining whether the transferred employees had any entitlement to the surplus based on the plan documents at the time of the sale. Upon review of the plan documents, the Court held that the plan members, including the transferred members, were not entitled to the surplus, and the failure to transfer a portion of the surplus was not a breach of trust.
With respect to the plan expense issue, the Court of Appeal applied its decision in Kerry (Canada) Inc. v. DCA Employees Pension Committee, and held that since the plan text had been silent on plan expenses from its inception until 1985, when the plan was amended to explicitly authorize payment of administrative expenses from the fund, HBC was always permitted to pay plan administration expenses from the fund. Subsequent amendments permitting trustee and fund management fees to be paid from the fund were also valid.
The case is expected to be heard by the Supreme Court in late 2010.
