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					  Regulatory Update and
  New Case Developments
  In The Pension Area


  November 2, 2004

21334207


Caroline L. Helbronner    1
Decided Court Cases and
Ongoing Proceedings

(a)   Closing of Membership and Plan
      Termination
      (i) Buschau v. Rogers Communications
      –   Reviewed at last year’s client seminar.
      –   British Columbia Court of Appeal’s decision on the
          issue of whether plan members and beneficiaries
          can invoke the rule in Saunders v. Vautier to cause
          the termination of a pension trust.
      –   Leave to appeal to the Supreme Court of
          Canada denied.



                                                                2
Decided Court Cases and
Ongoing Proceedings (Cont’d)

(a)   Closing of Membership and Plan
      Termination (Cont’d)
      (ii) Bower v. Cominco Ltd.
      –   Reviewed at last year’s client seminar.
      –   Case related to the Pension Fund Society Plan
          (“PFS Plan”), which had been established in 1926.
      –   PFS Plan was closed in 1965.
      –   At that time, its members were members of
          successor plans established by Cominco.



                                                              3
Decided Court Cases and
Ongoing Proceedings (Cont’d)

(a)   Closing of Membership and Plan
      Termination (Cont’d)
      (ii) Bower v. Cominco Ltd. (Cont’d)
      –   Over time, assets and liabilities were
          transferred from the PFS Plan to the
          Successor Plans.
      –   Members argued that the assumption by the
          successor plans of the PFS Plan’s assets and
          liabilities led to a termination of the PFS Plan.




                                                              4
Decided Court Cases and
Ongoing Proceedings (Cont’d)

(a)   Closing of Membership and Plan
      Termination (Cont’d)
      (ii) Bower v. Cominco Ltd. (Cont’d)
      –   The trial court held that the PFS Plan did not
          terminate but, rather, merged with the
          successor Cominco plans.
      –   Decision upheld on appeal.
      –   Leave to appeal to the Supreme Court of Canada
          denied.




                                                           5
Decided Court Cases and
Ongoing Proceedings (Cont’d)
(b)   Corporate Reorganizations
      (i) Aegon Canada Inc. v. ING Canada
          Inc.
      –   Reviewed at least year’s client seminar.
      –   Case concerns breaches of certain warranties in a
          share purchase agreement.
      –   Assets transferred from Halifax Plan to NN Life
          Plan.




                                                              6
Decided Court Cases and
Ongoing Proceedings (Cont’d)
(b)   Corporate Reorganizations (Cont’d)
      (i) Aegon Canada Inc. v. ING Canada
          Inc. (Cont’d)
      –   Halifax assets and NN Life assets treated as a
          single fund for purposes of determining whether
          NN Life was required to make contributions to
          the NN Life Plan.




                                                            7
Decided Court Cases and
Ongoing Proceedings (Cont’d)
(b)   Corporate Reorganizations (Cont’d)
      (i) Aegon Canada Inc. v. ING Canada
          Inc. (Cont’d)
      –   Leave to appeal to the Supreme Court of Canada
          denied.
      –   Implications of the decision on future mergers and
          asset transfers.




                                                               8
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(c)   Partial Wind-up
      (i) Monsanto Canada Inc. et al v.
          Superintendent of Financial Services
          et al
      –   Supreme Court of Canada decision released on
          July 29, 2004.
      –   How will Monsanto affect plans which may or may
          not be registered in Ontario and which have
          members in provinces other than Ontario or
          federally regulated members?
      –   Position of Alberta Finance.


                                                            9
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(d)   Negligent Misrepresentation
      (i) Hembruff V. Ontario Municipal
          Employees Retirement Board
      –   Board of Trustees who administered the Ontario
          Municipal Employees Retirement Systems
          (“OMERS”) was found by the Ontario Superior
          Court to have negligently failed to keep members
          informed of potential plan amendments.




                                                             10
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(d)   Negligent Misrepresentation (Cont’d)
      (i) Hembruff V. Ontario Municipal
          Employees Retirement Board (Cont’d)
      –   Court also found that the Board had a fiduciary duty
          to disclose material amendments to plan members.
      –   Implications of the decision for plan administrators.




                                                                  11
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(e)   Retiree Benefits
      (i) Kranjcec v. Ontario and
          Markle v. City of Toronto
      –   2 actions started as class proceedings in Ontario.




                                                               12
  Decided Court Cases and
  Ongoing Proceedings (Cont’d)
(f)   Same Sex Survivor Benefits
      (i) Hislop v. Canada (Attorney General)
      –   Issue: Entitlement to survivors’ pensions by same-
          sex partners under the Canada Pension Plan.
      –   Case is noteworthy as it illustrates the enormous
          potential for class action litigation in the pension
          area.




                                                                 13
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(g)   Administrative Expenses
      (i) Bank of Canada
      –   Recent commencement of a class action.




                                                   14
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(h)   Demutualization Proceeds
      (i) N.A.I.T. Academic Staff Association
          v. NAIT
      –   Issue: Entitlement to proceeds on
          demutualization.
      –   Alberta Court of Appeal upheld the decision of the
          lower court that NAIT owed NASA a fiduciary duty
          and that a “constructive trust” existed.




                                                               15
 Decided Court Cases and
 Ongoing Proceedings (Cont’d)
(h)   Demutualization Proceeds (Cont’d)
      (i) N.A.I.T. Academic Staff Association
          v. NAIT (Cont’d)
      –   However, the Court of Appeal limited the lower
          court’s finding with respect to the ambit of the
          constructive trust.
      –   Leave to appeal to the Supreme Court of Canada
          denied.




                                                             16
  Decided Court Cases and
  Ongoing Proceedings (Cont’d)
(i)   Funding
      (i) Butler Brothers Supplies Ltd. v.
          British Columbia (Financial
          Institutions Commission)
      –   Issue: Can a plan sponsor deposit a letter of credit
          to address a solvency deficiency in a pension plan?
      –   Superintendent rejected this attempt and
          Superintendent’s decision upheld by
          British Columbia Supreme Court.




                                                                 17
Regulatory and Legislative
Activity

(a)   Alberta’s Class Proceedings Act.
(b)   EPPA Updates.
(c)   Discussion Papers Released by Alberta
      Finance.
(d)   Income Tax Act.
      - Focus on Income Trusts
(e)   CPP and EI.



                                              18
Pension Fund Deficits

(a)   Air Canada
      –   OSFI’s 2004 agreement with Air Canada.
      –   2004 regulatory changes -specific to
          Air Canada
      –   Implications for other federally-regulated plan
          sponsors.




                                                            19
CAPSA and Joint Forum Initiatives

(a)   Capital Accumulation Plan Guidelines
      –   Guidelines released on May 28, 2004.
      –   Application of the Guidelines.
      –   Guidelines are “voluntary”.
      –   Absence of a “safe harbour” for plan sponsors.
      –   Certain highlights of the Guidelines.




                                                           20
CAPSA and Joint Forum Initiatives
(Cont’d)



(b)        Proposed Model Pension Law
           –   CAPSA’s proposed approach.
           –   Certain highlights of the proposals:
                    • “Final Location”
                    • Plan Administrator
                    • Vesting
                    • Phased Retirement
                    • Partial Wind-up
                    • Reporting by Advisors
           –   “Next Steps”.


                                                      21
CAPSA and Joint Forum Initiatives
(Cont’d)



(c)        Pension Plan Governance Guidelines
           and Self-Assessment Questionnaire
           –   Released on October 25, 2004.
           –   CAPSA “expects that pension plan
               administrators will voluntarily take measures
               necessary to follow the guidelines”.




                                                               22
    AN OVERVIEW OF
MANDATORY RETIREMENT IN
        CANADA


      Patricia Fraser



                          23
I. Introduction
Bill 68 - The Mandatory Retirement Elimination Act, 2003

Alberta’s ban on mandatory retirement
The development of mandatory retirement in Canada

The patchwork quilt of legislation in Canada

Traditional justifications




                                                           24
II. History of Mandatory
    Retirement in Canada

The evolution of mandatory retirement

The decline of mandatory retirement
    –   Manitoba’s experience
    –   Other provinces




                                        25
III. The Elimination of Mandatory
     Retirement in Alberta

Alberta’s Human Rights, Citizenship and
     Multiculturalism Act (the “HRMCA”)

Current legislative framework
       – A prima facie case
       – Dickason v. The Governors of the University of
         Alberta
       – Ensign (bus driver case)




                                                          26
III. The Elimination of
     Mandatory Retirement in
     Alberta (cont’d.)
Is Mandatory Retirement banned in Alberta?
   – S. 11 Justifications
   – s.7(3) Bona Fide Occupational Requirement (“BFOR”)




                                                          27
IV. TRADITIONAL
    JUSTIFICATIONS
“Making room for younger workers”.

Declining job perfomrance/discipline and discharge

Certainty for pension and human resource planning




                                                     28
V. CONCLUSION

Basis to maintian mandatory retirement policies is
  tenuous:
   – Demographics       labour shortage


   – Current law is disproportionately felt by women and
     immigrants.


   – BFOR - difficult to support.




                                                           29
     PLAN SPONSORS AND SERVICE
     PROVIDERS - ALLOCATING
     RISKS AND RESPONSIBILITIES

     Recent Developments in Pension
     and Employee Benefits Law

     Calgary, November 2, 2004

21329117



    Jeremy J. Forgie                  30
Service Provider Liability - A big           31
Deal!

Litigation
    - Canada
    - U.S.
    - Multiple parties → service providers
Large liabilities relative to fees




                                                  31
                                                             32

Service Providers & Plan Sponsor

Plan Sponsor
  –   actuary → engagement letter
  –   auditor → engagement letter
  –   investment manager → agreement
  –   third party administrator → agreement
  –   funding agent → insurance policy, trust agreement or
      fees and services agreement




                                                                  32
                                                   33
Approaches For Limiting Service
Provider Liability
Clause which limits the duty or scope of duty
  undertaken
Clause which limits the amount of damages
  and/or time limit during which a claim can
  be made
Clause which is intended to exclude liability as
  a consequence of a breach (“exculpatory
  clause”)



                                                        33
                                34
Enforceability of Exculpatory
Clauses
Contractual relationships
Fiduciary relationships
   – commercial relationships
   – trustees




                                     34
                                                                   35
Enforceability of Exculpatory
Clauses
Contract law principles
   –   strict construction - contra proferentum
   –   unconscionability → not enforceable
   –   fraud → not enforceable
   –   bad faith/unfair dealing → not enforceable
   –   inequality of bargaining power - not sufficient by itself
       to challenge enforceability




                                                                        35
Enforceability of Exculpatory                         36

Clauses in Fiduciary Relationships
Is there a fiduciary relationship and to whom are
   the fiduciary obligations owed?
Contract law principles apply
Additional consideration - is there a core set of
   responsibilities from which the fiduciary cannot
   be relieved? - look to the trust law




                                                           36
Enforceability of Exculpatory                                37
Clauses by Trustees

Common law of trusts in Canada
   – trustee can be relieved from negligence but not gross
     negligence or fraud - followed in Alberta and Ontario
     (Re Poche (1984) and Edell v. Sitzer (2001))
Common law of trusts in U.K.
   – trustee can be relieved from negligence, possibly
     gross negligence but not fraud (Armitage v. Nurse
     (1997))




                                                                  37
                                                   38
Enforceability of Exculpatory
Clauses by Trustees
Pension trustee’s duties are limited to terms of
  trust instrument (Bohemier - Manitoba Court
  of Appeal (1999))




                                                        38
                                                    39
Enforceability of Exculpatory
Clauses by Trustees (continued)
Common law duty owed to beneficiaries is not
  unlimited and arises within the scope of the
  trustee’s engagement but there is an
  “overarching” duty to pay attention
  to the interests of the beneficiaries (Froese -
  B.C. Court of Appeal (1996))




                                                         39
                                               40

Service Provider’s Perspective

Best technique is to carefully and precisely
  describe limited scope of duties and
  responsibilities
Clauses limiting damages, exculpatory
  clauses and indemnities can also be used
  as a secondary means of protection




                                                    40
                                                 41

Plan Sponsor’s Perspective

Practical risk of “negotiating away” potential
  means of redress against service providers




                                                      41
                                                                   42
Plan Sponsor’s Perspective
(continued)
Inclusion of exculpatory provisions in service
  provider contracts - by agreeing to this, is
  the plan sponsor meeting its obligations
  under pension legislation and at common
  law?
   – U.S. position under ERISA
   – Relevance of market practice and other considerations
   – Potential relevance of U.S. experience for plans subject to
     the Employment Pension Plans Act (Alberta)




                                                                        42
Is It Privileged: Privilege
Issues in the Pension Field.




Ken Mills                      43
Rationale For Privilege
• Not a rule of evidence but a “substantive right”?
• Serves the public interest:
   – Encourages the observance of law.
   – Necessary to further the administration of justice.




                                                           44
Privilege Primer

• At least four types of privilege.
• Most Common:
   –   Solicitor/Client Privilege.
   –   Litigation Privilege.
   –   Without Prejudice.
   –   Communications in the Up Most confidence.




                                                   45
 Privilege Primer
Solicitor/Client Privilege.
• Essentially, legal advice privilege.
• Founded on the premise that persons have a right to
  protected communication for the purpose of obtaining
  legal advice.
Test:
   – Was the communication made to seek legal advice from an
     individual in their capacity as legal advisor.




                                                               46
Privilege Primer

Litigation Privilege.
• Concerned with perserving the integrity of the
  adversarial dispute resolution process.
• Test:
   – Were the documents and statements prepared or made for
     the dominant purpose of contemplated or ongoing litigation.




                                                                   47
Privilege Primer

Without Prejudice
• Arises in the context of settlement.
• Where parties are corresponding with a view to
  genuinely compromising a disputed claim such
  correspondence can not be used outside the
  settlement process.




                                                   48
 Privilege Primer
Communications in the Up Most Confidence
• Wigmore’s Criteria:
   – the communication must originate in confidence;
   – the element of confidentiality must be essential to the
     relationship of the parties;.
   – The relationship must be one which in the opinion of the
     community ought to be fostered;
   – The injury that would incur to the relationship by the disclosure
     of the communication must be greater than the benefit to the
     society in disclosure.




                                                                         49
Waiver of Privilege

Three ways of Waiving Privilege
• Voluntary Waiver.
   – Client chooses to waive the privilege.
• Four Part Test:
   –   knew of privilege.
   –   Had right to claim privilege.
   –   Clear intent to relinquish protection of privilege.
   –   Aware of consequences.
• “Without prejudice” communications require mutual
  waiver.



                                                             50
Waiver of Privilege

• Implied Waiver
   – Clients conduct, objectively considered, demonstrates an
     intention to waive privilege.
• Example:
   – placing privileged communications in the pleadings.
   – placing legal advice or knowledge in issue.




                                                                51
Waiver of Privilege

• Inadvertent Disclosure of Privileged
  Communications.
   – Privileged information is revealed accidentally.
   – Courts are reluctant to find that waiver has occurred in this
     context.
   – Doubts regarding the client’s intention are often resolved in
     favor of upholding privilege.




                                                                     52
Special Considerations - In House
Counsel
• In-House Legal Counsel are becoming increasingly
  important in the efficient functioning of modern
  corporations.
   – Provide easy access to legal advice.
   – Position in company often yields greater efficiency.
   – Knowledge of company puts In-House Legal Counsel in a
     position to provide, “preventative” legal advice.




                                                             53
Special Considerations - In House
Counsel
• Increased use of In-House Legal Counsel has led to
a blurring of their legal role.
   – Corporations typically require legal departments to perform
     broad responsibilities.
   – This results in most in-house lawyers performing both legal
     and business roles.




                                                                   54
   Special Considerations - In House
   Counsel
Privilege and In-House Legal Counsel
• Generally speaking In-House Legal Counsel are treated
  as outside lawyers for the purposes of solicitor/client
  privilege.
• Dangerous to assume that all communications with in-
  house lawyers will be privileged.
• Solicitor/client privilege only applies when In-House Legal
  Counsel is acting in their capacity as legal advisor.




                                                                55
Pension Issues

Role of Lawyers in Pension Matters
• Development of Pension Plan.
   – Involved in reviewing, drafting and negotiating the terms of
     the pension plan.
• Administration of the Pension Plan.
   – Statutory requirements.
   – Fiduciary requirements.
   – Pension governance.
       • Involved in the audit review process.
       • Compliance issues.




                                                                    56
Pension Issues

• Corporate Transactions
   – Provide advice on pension issues that arise in purchases,
     sales and reorganizations.
• Litigious Matters
   – More and more legal work related to pensions is being dealt
     with through litigation.




                                                                   57
    Pension Issues
Steps For Maintaining Privilege And Minimizing Loss Of Privilege
   Over Sensitive Communications.
   – Advice on Pension issues sought from In-House Legal Counsel should
     be legal in nature:
      • In providing responses in-house lawyers can make it clear that they
         are being asked for and are providing a legal opinion.
   – Claim the privilege:
      • Privileged communications between the corporation and In-House
         Legal Counsel should be labeled accordingly.




                                                                              58
  Pension Issues
– Copy In-House Legal Counsel on all communications which ultimately
  form part of a legal opinion.
– Ensure that the topic of a given meeting is known in advance of that
  meeting.
    • This will enable In-House Legal Counsel to advise what portions of
      the meeting will be protected by privilege.
– Ensure that privilege has not been waived.
    • This can be accomplished by ensuring that privileged information is
      only provided to those within the organization who require such
      information.




                                                                            59
Pension Issues
– Avoid providing communications of legal advice to third parties
  except after careful consideration and after consulting with legal
  counsel.
    • Try and establish “Common Interest Privilege” with third
      parties with the assistance of legal counsel.
– At a minimum, retain outside legal at the first sign of litigation
  trouble.




                                                                       60

				
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