Sutherland v. Hudson's Bay Company, 2011 ONCA 606

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
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Zarya Cynader, Mary Phan & Kai Sheffield
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Ladner v. Wolfson, 2011 BCCA 370

The British Columbia Court of Appeal held that the test for the imposition of a good conscience trust, as articulated in Soulos v. Korkontzilas, requires a direct proprietary nexus between the contributions said to give rise to the trust and the property over which the trust is claimed. Madam Justice Garson held that while Soulos may be authority for the imposition of a good conscience trust irrespective of a finding of unjust enrichment, this does not mean that the imposition of a good conscience trust no longer requires a proprietary connection.

The respondent wished to claim a constructive trust over life insurance proceeds payable to her deceased husband’s estate. The Court of Appeal found that the conditions required for the imposition of the good conscience trust, as articulated in Soulos, had not been met. According to Justice Garson, Soulos is authority for the proposition that a finding of unjust enrichment is not essential for the imposition of a constructive trust. However, a connection between the defendant’s duty-breaching activities and the property to which a trust is claimed is required. The trial judge found that the life insurance policies that the respondent claimed a constructive trust over were not the ones contemplated by the separation agreement. Accordingly, the necessary proprietary connection between the wrongful act and the insurance policies was not present.

Finally, Roberts v. Martindale was considered as allowing for a possible relaxation of the Soulos conditions. The court chose to distinguish Roberts on the basis that unlike in Roberts, Mr. Ladner’s estate was not receiving property to which it was not entitled, and accordingly was not being unjustly enriched. Further, Roberts is a case where a clear proprietary nexus was present.

September 8, 2011
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Steve Holinski & Kelly Ng
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