The Supreme Court Sides With Employer In The Kerry Case

The August 7, 2009 decision of the Supreme Court of Canada in

the Kerry decision1 relating to pension plans

essentially upholds the findings of the Ontario Court of Appeal

from 2007. The highlights are as follows:

Provided that (i) there is a single, ongoing pension plan with

both a DB and a DC feature, (ii) the members of both parts are

beneficiaries of the pension trust fund,2 and (iii) the

employer may lawfully take contributions holidays in respect of the

DB feature, then it is not unlawful under the Pension Benefits

Act (Ontario) or the common law to also apply the surplus in

the trust fund to take employer contribution holidays in respect of

the DC members of the plan.

Vis-à-vis payment of pension plan expenses, unless an

employer has clearly committed to paying a plan expense, it is not

obliged to pay plan expenses and it is not unlawful to charge

reasonable and bona fide plan expenses to the pension

trust fund (in this case Kerry (Canada) Inc. had committed to

paying trust expenses and had continued to do so, but the expenses

in dispute related to plan expenses such as actuarial, legal,

accounting etc. in the administration of the plan).

The amendment of a pension plan to allow the employer to charge

pension plan expenses to the trust fund is not prohibited merely

because the trust agreement or pension plan (or both) contains an

"exclusive benefit" clause. However, expenses incurred to

review the plan terms in support of a decision to add a DC

provision was for the sole benefit of the employer and should not

be charged to the pension plan.

With respect to cost awards in litigation of this type, the

court upheld the ruling that the Financial Services Tribunal has no

jurisdiction to order litigation costs payable from a pension fund

where the fund is not a party to the proceeding (as it was not

here) and that while a court has authority to order litigation

costs be paid from a pension trust fund in some cases, where the

litigation is not for the advantage of all of the beneficiaries of

the pension plan, then the matter is "adversarial" and

such costs should not be awarded from the pension trust fund.

The foregoing is necessarily an abbreviated highlight of the

decision and it must be remembered that all cases turn on their

individual facts. Also, seven Justices of the Supreme Court of

Canada heard this matter and while five of them supported the

Ontario Court of Appeal decision in concluding that the DC

contribution holidays were not...