In Sutherland v. Hudson's Bay Company, the Ontario Court of Appeal addressed the ownership of surplus funds in a company pension plan, holding that such funds were subject to the same equitable principles governing the pension fund itself, even though provisions in the plan documentation provided that the surplus funds could revert to the company in certain cases.
The respondents, former employees of Hudson's Bay Company ("HBC"), alleged that HBC had misappropriated surplus pension funds that were properly due to the employees as plan beneficiaries. HBC, relying on the result in Burke v. Hudson's Bay Company, argued that it was a beneficiary and entitled to the surplus under the plan's terms. Justice Gillese (MacFarland J.A. concurring) dismissed the appeal. Following the analysis set out in Schmidt v. Air Products of Canada Ltd., Gillese J.A. found that the pension fund in question was the subject of an irrevocable trust which explicitly extended to any surplus. Accordingly, as per Schmidt, equitable principles must prevail to the extent of any conflict with the plan documentation – including the provisions on which HBC purported to rely. Although it did not change the Schmidt framework, Burke was distinguished from the present case, as the plan at issue in Burke clearly limited the employees’ interest in their defined benefits only.
Justice Rouleau, dissenting, would have allowed the appeal. While agreeing that Schmidt remained authoritative and had not been altered in principle by Burke, he considered the former to be distinguishable. In the present case, as in Burke, he would have read the plan documentation in its entirety, so as to reduce or eliminate conflict, as a matter of contractual interpretation. Read in this way, he suggested, the documentation entitled HBC to the surplus.
September 22, 2011
Link to Decision
Zarya Cynader, Mary Phan & Kai Sheffield
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