Class Proceedings In The Pension And Benefits Context

This paper was prepared for the Western Canadian Forum on Pension Law, Litigation and Governance held on May 16 & 17, 2007 in Calgary, Alberta. The writers wish to acknowledge the very capable assistance of Jordan Schultz, Articled Student of Fraser Milner Casgrain LLP in writing this paper.

INTRODUCTION

A class action "is a procedural mechanism to provide an efficient means to achieve redress for widespread harm or injury by allowing one or more persons to bring the action on behalf of the many."1 When that definition is considered, it is clear why individuals with pension and benefit claims will view the class proceeding as a particularly effective and efficient means by which to pursue their claim.

In British Columbia, class proceedings legislation2 was introduced on August 1, 1995. Class proceedings legislation was subsequently introduced in Saskatchewan on January 1, 2002; in Manitoba on July 25, 2002; and in Alberta on April 11, 2004. Since class proceedings legislation has been available for a relatively short period of time in Western Canada, it is not known how effective this process will be for the resolution of pension and benefits claims. However, in light of the success that has been achieved in the use of class proceedings legislation to advance group claims generally, it is likely that class proceedings will continue to be increasingly viewed as a preferred way in which to advance claims by groups of individuals.

The introduction of class proceedings legislation comes at a time when the courts have increasingly expanded the nature of the duties and obligations, employers, pension plan administrators and others who are involved in pensions. Pension plan administration and the governance of pension plans will be the subject of scrutiny and possible class proceedings by those who wish to challenge decisions for their validity and correctness. In the past, those decisions were less likely to be challenged for various reasons including the state of the law, the nature of the litigation process and the significant burden of an individual pursuing such a claim. Although a process for a "representative proceeding" was available under the Rules of Court before the introduction of class proceedings legislation, the difficulty associated with administering a large group of claimants meant that such proceedings were infrequently pursued.

In some Canadian jurisdictions, legal costs, jurisdiction issues and other process issues are significant obstacles to the effective use of class proceedings legislation to resolve disputes. As a result, the law in this area continues to develop and the full extent to which class proceedings will be utilized in the area of pension and benefits is not known at this time. Nevertheless, the availability of the class action as a means of resolving disputes needs to be reflected in how employers and pension plans manage and administer funds and satisfy their obligations in connection with the use of those funds.

This paper will review the use of class proceedings legislation to pursue pension and benefit claims, identifying the nature of success achieved by plaintiffs to date and the nature of issues and defences raised. In this way, we hope that our paper will assist employers, pension plans and others involved in the pension area to avoid class action litigation.

OBJECTIVES OF THE LEGISLATION

The Three Objectives

It is helpful to first understand the objectives that underlie class actions legislation. Courts have identified three objectives of the legislation, and consistently applied these objectives in determining if an action should proceed by way of class proceeding. The Supreme Court of Canada in Hollick v. Toronto (City)3 described these objectives as follows4:

class actions provide three important advantages over a multiplicity of individual suits. First, by aggregating similar individual actions, class actions serve judicial economy by avoiding unnecessary duplication in fact-finding and legal analysis. Second, by distributing fixed litigation costs amongst a large number of class members, class actions improve access to justice by making economical the prosecution of claims that any one class member would find too costly to prosecute on his or her own. Third, class actions serve efficiency and justice by ensuring that actual and potential wrongdoers modify their behaviour to take full account of the harm they are causing, or might cause, to the public.

These objectives are usually easily met in the context of a pension class action, and demonstrate how well suited a class action is for pursuing a pension and benefits claim.

Class Actions in the Pension Context

(a). Judicial Economy

The beneficiaries under a pension are usually in the same or a similar position. The majority of pension actions focus on the unilateral actions of the sponsoring employer, plan administrator, trustee or plan actuary. As a result, the factual and legal issues that need to be determined are likely to be the same for all beneficiaries. Certification ensures that these issues are resolved for all beneficiaries in one proceeding, which frees judicial resources and reduces the litigation costs of both the plaintiff and, at least theoretically, the defendant. It has also been noted that economies are achieved because class actions encourage global or multi-jurisdictional settlement.5

(b) Access to Justice

Pension class actions make it possible for beneficiaries to pursue claims that previously were not pursued because of the amount of the claim and expense of pursuing the claim. Pension claims often involve complex legal issues regarding contract, tort and fiduciary duties. This type of claim often raises factual issues that require expert actuarial evidence. This makes the claim costly to litigate. At the same time, the recovery for the individual plaintiff may be modest. Class actions enable plaintiffs to spread the cost of litigating the action across all class members, making it feasible to pursue the claim. Class proceedings legislation also provides that plaintiffs will not be liable for cost awards, a barrier that a plaintiff pursuing an individual action would usually face6.

(c) Behaviour Modification

By ensuring that individuals will pursue claims that would not otherwise be economical, pension class actions also ensure that pension sponsors, administrators, trustees and professional advisors are held accountable. In this regard, it has been noted:

pension and benefits class actions ideally have resulted, and will continue to result, in changes to the way employers, administrators, trustees, actuaries, investment managers and other professionals behave with respect to plans and their administration. Fiduciaries and professional service providers must act properly or they may be named as defendants in a proceeding, which is something to be avoided.7

As class proceedings legislation is to be "construed generously to give full effect to it benefits"8, the foregoing three objectives often influence the courts' determination of whether or not a class action should be certified.

History of Class Proceedings

In recent years the resources pension funds are dedicating to litigation defence have increased.9 By far, the majority of these actions have been commenced in British Columbia and Ontario. However, a review of case decisions reveals that pension class actions have been filed in all of the western provinces.

The rise of pension class actions is largely due to the nature of pension arrangements, and the disputes that arise under them. The nature of a pension arrangement is such that many disputes are almost predisposed to meeting the base criteria necessary for certification. For example, in Ormrod v. Etobicoke (City) Hydro-Electric Commission10, Winkler J. stated, "[t]his is a case where the advantages of a class proceeding are so apparent as to be uncontrovertible."

Overview of the Legislation

Quebec was the first Canadian province to enact class proceedings legislation in 1978. Similar legislation has since been adopted by most provinces, including the western provinces: British Columbia11, Alberta12, Saskatchewan13 and Manitoba14. Where legislation has not been enacted, the procedural advantages conferred by the legislation are still available to plaintiffs, as they have been "read into" rules respecting representative actions.15 What follows is a brief summary of some of the main features of class proceedings legislation. Where there are material differences in the legislation between the provinces, these differences are noted.

A Focus on Procedure

At the outset, it is important to note that the legislation provide...