Date of Release: January 14, 1991
No.C892801
VANCOUVER REGISTRY
IN THE SUPREME COURT OF BRITISH COLUMBIA
BETWEEN: )
)
CECIL JAMIESON MERRITT, TERRY )
BRYAN EVANCIO, JACOB ENNS, RONALD )
E. BOYES, THOMAS ESSEX, BEN S. )
HANSON, DONALD BRUCE SHARP, )
ROBERT C. MARTIN, RONALD E. BAILEY )
CARL H. ALGUIRE, ELAINE M.CALLAGHAN)
DOUGLAS W. OSBORNE, THOMAS R. )
LANKESTER, THOMAS RICHARD HELLIER )
HARPER, HAROLD NASH, COLIN J.LAWLER)
PAUL E. MATEAR, RICHARD G. PARKER, )
RAYMOND J. WIEST, B.F. McPHALEN ) REASONS FOR JUDGMENT
R. COTTERILL, ERIC E. BLAMEY, PAUL )
M. HEATON, G. SEMKE and RICHARD E. )
TOLHURST on their own behalf and on)
behalf of all other retired members)
members, former members, widows and) OF THE HONOURABLE
children of deceased members and )
all other person who are bene- )
ficiaries of THE GENSTAR SALARIED )
EMPLOYERS RETIREMENT PLAN )
) THE CHIEF JUSTICE
PLAINTIFFS )
)
)
)
AND: )
)
IMASCO ENTERPRISES INC., THE )
CANADA TRUST C0MPANY/LA SOCIETE )
CANADA TRUST and GENSTAR )
CORPORATION - CORPORATION GENSTAR )
)
DEFENDANTS )
DATE AND PLACE OF HEARING: October 29, 30, 1990
Vancouver, British Columbia
COUNSEL FOR THE PLAINTIFFS: I. G. NATHANSON, Q.C.
S. R. SCHACHTER
COUNSEL FOR THE DEFENDANTS, C. O. D. BRANSON, Q.C.
IMASCO ENTERPRISES INC.
and GENSTAR CORPORATION
COUNSEL FOR THE DEFENDANT, W. B. McALLISTER, Q.C.
THE CANADA TRUST COMPANY
COUNSEL FOR THE DEFENDANT, D. C. HARBOTTLE
INTERNATIONAL TRUST COMPANY
_______________________________________________________
This action concerns the Genstar Salaried Employees Retirement Plan. The question, one which has generated much litigation in the past decade, is whether the employer was lawfully entitled to withdraw from the funds of the plan amounts considered "surplus" to the amount required to maintain the plan. Of the many Canadian cases dealing with this interesting subject, the following are amongst the more prominent:
Reevie v. Montreal Trust Co. of Canada (1984), O.R. (2d) 667, affirmed 53 O.R. (2d) 595, 25 D.L.R. (4th) 312;
Heilig v. Dominion Securities Pitfield Ltd. (date) 67 O.R. (2d) 577;
King Seagrave Ltd. and Canada Permanent Trust Co., Re (1985), 51 O.R. (2d) 667, affirmed 13 O.A.C. 305;
Sulpetro Ltd. Retirement Plan Fund (Trustee of) v. Sulpetro Ltd. (Receiver of) (1989), 57 D.L.R. (4th) 120, varied [1990] 4 W.W.R. 173, 66 D.L.R. (4th) 271 (Alta.)
Hockin v. Bank of British Columbia et al. (1989), 36 B.C.L.R. (2d) 220, affirmed (1990), 46 B.C.L.R. (2d) 382.
This action was begun by 25 named plaintiffs on their own behalf and in a representative capacity on behalf of all members and beneficiaries of the Genstar plan. The action was begun in June 1989. A trial date was fixed for March 1991 but it is common ground that the action will not be ready for trial at that date. What is before me are a number of applications, some of which seek to use part of the time reserved in March 1991 for the trial of certain issues.
The first application is one by the plaintiffs seeking this relief:
(1)an Order pursuant to Rule 39(22) of the Rules of Court that there be a trial of the following issue before a trial of all other issues:
"Do the provisions of the 1975 Trust Agreement and the 1975 Retirement Plan entitle Genstar Limited to withdraw money for its own benefit from the trust fund?"
(b)an Order pursuant to Rule 5(14) of the Rules of Court declaring that the Plaintiffs represent all the members and beneficiaries of the Genstar Salaried Employment Retirement Plan in respect of the issue.
The notice of motion was filed prior to the rule amendments of July 1, 1990 in which Rule 39(22) became Rule 39(29). It reads:
39(29)The court may order that one or more
questions of fact or law arising in an action be tried and determined before the others, and upon the determination a party may move for judgment, and the court, if satisfied that the determination is conclusive of all or some of the issues between the parties, may grant judgment.
Rule 5(14) reads:
5(14) In a proceeding concerning
(a)the administration of the estate of a deceased person,
(b)property subject to a trust, or
(c)the construction of a written instrument, including an enactment,
the court may appoint one or more persons to represent a person, including an unborn or unascertained person, or the members of a class of persons who have a present, future, contingent or un-ascertained interest in, or who may be affected by the proceeding, and who, or some of whom, cannot readily be ascertained or found.
The defendants IMASCO and Genstar seek an order that this proceeding not be continued by the plaintiffs as a representative action and that the action stand as a personal action brought on behalf of the named plaintiffs. That application is based on Rule 5(11) which reads:
5(11) Where numerous persons have the same
interest in a proceeding, other than a proceeding referred to in subrule (17), the proceeding may be commenced and, unless the court otherwise orders, continued by or against one of more of them as representing all or as representing one or more of them.
As an alternative to that application, Genstar and IMASCO seek an order under Rule 39(29) to have the following issue tried before all others:
Are the Plaintiffs entitled to commence this action on their own behalf and on behalf of all other members, retired members, former members, widows and children of deceased members and all other persons who are beneficiaries of The Genstar Salaried Employees Retirement Plan?
The defendants IMASCO and Genstar also apply to compel
delivery of particulars from the plaintiffs.
BACKGROUND FACTS:
The Genstar Plan, which became effective January 1, 1975, consists as is usual of the trust agreement and the pension plan. The trust agreement entered into in 1975 provided that the trust funds were to be held for the exclusive benefit of the members and that no amendment could authorize any part of the trust funds to be diverted to purposes other than for the exclusive benefit of the members and their beneficiaries. The pension plan provided that no amendment could adversely affect the rights of members prior to the date of such amendment.
In 1982, Genstar removed $8 million from the trust fund. The defendants say that that was done with regulatory approval, the applicable regulatory body at that time being a division of the Alberta Department of Labour. The plaintiffs say that there was no basis in law for Genstar to appropriate to itself that sum from the trust fund.
The trust agreement was amended in July 1984, and again in January 1985, by Genstar. The effect of the amendments, the defendants say, was to remove the provisions requiring the trust fund to be used exclusively for the benefit of members and beneficiaries, and to permit Genstar to take any surplus funds for its own uses. The plaintiffs allege that those amendments were unlawful and void. After the January 1985 amendment, again with regulatory approval, Genstar removed $42 million from the trust funds.
Canada Trust was the agent of the trustees of the pension plan in 1982 when the $8 million was removed by Genstar. The International Trust Company became the corporate trustee in December 1985 when the $42 million was removed from the trust fund.
The Genstar Plan originally covered the employees of three companies: Seaspan, BACM and Sogemines. Additional employees associated with Genstar joined the Genstar Plan subsequent to 1975 and their employees became covered by the Genstar Plan. Some of these companies ceased to be members of the Genstar Plan between 1975 and 1986. In 1982 there were approximately 1,700 members of the Genstar Plan and in 1985 there were approximately 1,300.
According to a chart prepared by the defendants IMASCO and Genstar, the plans in which the plaintiffs had been members from time to time have been consolidated and diversified as follows:
The events of October 1, 1986, are said by the defendants have been particularly important. On that date, CBR Cement Canada acquired many of the companies which were participating employers in the Genstar Plan, and is said to have become the employer of the employees of those companies. The defendants contend that what took place was a hostile take-over and that Genstar, having no choice in the matter, turned over to CBR Cement Canada a fully funded pension plan in respect of which that company accepted the responsibility. They also say that some, perhaps all, of the named plaintiffs are now employees of CBR, fully covered by the plan created by that company and thus without any legitimate interest in any funds removed from the Genstar Plan, or in the question whether the removals were lawful.
The representative class is made up of numerous persons who, the defendants say, break down into a number of sub-classes having different interests. The potential classes identified by Genstar include ten or more groups who were members of earlier plans, four groups who were members of the 1975 plan but whose interests may be different depending on the date on which they joined, four groups who are employees of companies which joined the 1975 plan after 1975, and employees of 24 companies which have withdrawn from the plan. They say that within the Genstar Plan there are at least eight membership classes and they identify many more classes which they say were created by the events alleged by the plaintiffs. They also refer to administrative and political classes, that being a reference to the various provincial jurisdictions which have a link to the many employers involved, some of which are involved through regulatory enactments and some of which are not. The history of the employers, the plans and the employees, is undoubtedly a complex and confusing one. When all that is sorted out, many of the distinctions relied on by the defendants as creating separate classes may well prove to be of no real significance. On the other hand, there is no doubt that, within the broad class described in the style of cause, there are some whose interests are potentially in conflict with the interests of others. Indeed, counsel for the plaintiffs concedes that conflicts will arise if it is found that the withdrawals by the defendants for their own purposes were illegal. But in relation to the question whether the withdrawals were illegal, he submits that there can be no conflict ---- it is in the interests of all members past and present to establish that as a fact. Therefore, he says, at this stage it is proper for the 25 named defendants to represent all of those who may have claims.
STATEMENT OF CLAIM:
A concise, not unduly sympathetic but apparently reasonably accurate summary of the statement of claim is provided by Mr. Branson in paragraphs 24 - 32 of his brief:
24. The operative parts of the Amended Statement of Claim in which allegations are made on behalf of the Plaintiffs as a class are to be found in paragraphs 38 through 57 inclusive.
25. Paragraphs 38 and 39 allege that the amendments of 31 July, 1984 were made contrary to the Original Trust and are therefore unlawful, in breach of trust and null and void.
26. Paragraphs 41 through 43 allege that the Amended Trust of 1 January, 1985 was contrary to the terms of the Original Trust, unlawful, in breach of trust and void.
27. Paragraphs 47 through 49 allege the removal of $42,000,000 out of the trust fund in 1985 pursuant to a deliberate and mala fide joint strategy to facilitate Imasco's takeover of Genstar. If proven this could well result in a termination of the Plan according to the decisions rendered in Heilig v. Dominion Securities, supra, and Re National Trust Co. and Sulpetro Ltd., supra.
28. Paragraphs 54 and 55 allege that Genstar withdrew or retained for the purpose of later withdrawal approximately $18,000,000 of Pension Funds and this was unlawful, in breach of trust, in breach of fiduciary duty and negligent.
29. Having listed the above wrongs, without distinction as to their effect, the Plaintiffs then plead in paragraph 56 "that the Original Trust and the Plan have been terminated by either Genstar, Imasco or both and that the Plaintiffs are, in any event, entitled to the entire trust fund including any amounts which were unlawfully removed".
30. Paragraph 57 alleges unidentified further removal of trust funds in breach of the Defendants' obligations to the Plaintiffs.
31. In their Prayer for Relief the Plaintiffs seek an order that the money be paid directly to them and not that the money go back into the Fund.
32. The pleadings and the affidavit of Beaulieu show that the persons within the putative class pleaded in paragraph 25(a) were employees of Employing Companies under the 1975 Plan at various times between 1 January, 1975 and the date of the commencement of this proceeding, but that none of the named individual Plaintiffs were such subsequent to 30 September, 1986.
THE PLAINTIFFS' APPLICATION FOR A PRELIMINARY QUESTION OF LAW:
The application by the plaintiffs to try a preliminary question of law is closely connected to the defendants' application that the proceeding not be continued by the plaintiffs. While not conceding the appropriateness of the point for preliminary determination, the defendants rely more strongly on the contention that in any event it is not one which can be determined in the action as presently constituted.
On this question, their initial position is that it is wrong in principle to allow the action to proceed as a representative one merely to try a preliminary issue or issues; that it is either a properly constituted representative action or it is not. While some support is to be found in the authorities for that position, I do not accept that as being the law of British Columbia at present. Hockin v. Bank of British Columbia is authority, binding on me, to the contrary. The reported reasons of Spencer, J. and the Court of Appeal are cited supra (p. 2). The unreported reasons to which I will refer are in B.C.S.C. Action No. C870459 (Van. Reg.)
In that case, in which the broad issues are of the same kind as those in the case at bar, the parties agreed to try as preliminary questions the issues whether:
a)What is the quantum of surplus funds contained within the Bank of British Columbia Pension Plan?
b)At the time The Bank of British Columbia settled the trust did it irrevocably alienate its interest to the fund?
That agreement was incorporated in a consent order pronounced by McEachern, C.J.S.C. (as he then was) in February 1987. Before the preliminary issue was tried there was extensive consideration of the effect of that order in relation to parties who had not been directly represented in February 1987, and additional defendants joined after that date. See the reasons of Southin, J. (as she then was) pronounced May 19, 1987, and those of Taylor, J. (as he then was) pronounced August 27, 1987. It is unnecessary to go into the detail of the rather complex issues considered by those two learned judges. The significance of their reasons is that, on full consideration, each was of the view that it would be appropriate to try the preliminary issues before all questions of representation were decided. At p. 12 of her reasons, Southin, J. said:
Perhaps it is only fair that I should express my tentative view, having heard so much argument. It is this: Once Mr. Laxton's clients are defendants in the Hockin action, they cannot properly have thrust upon them the representation order which the Chief Justice made. They are entitled to make their own arguments but I do not see any reason why the two questions should not be tried first.
At p. 7 of his reasons, Taylor, J. said:
While it is obvious that the decision of the Chief Justice does not bind the new personal defendants and the proposed additional defendants, and being a pre-trial procedural direction would probably be open to later variation in any event, I am not prepared to make an alternative direction at this stage----before parties have been settled and pleadings exchanged. The matter should be deferred for determination when it is apparent what questions can usefully be severed.
When that issue is settled it may be appropriate to make a further representation order for the purpose of determining at least some of the issues as between the beneficiar-ies as a whole, on the one hand, and the bank and trustee on the other, as was done in Appleyard v. McInnis Equipment Ltd. (1986) 11 C.C.E.L. 285 (Ont.H.C.). Other issues between them might then have to be decided on the basis of the representation described above or, perhaps, some larger groupings of those classes. Full representation may prove necessary only for determination of the distribution issues between the claimants.
In the end, only the second question, that as to whether the Bank had irrevocably alienated its interest in the fund, was tried as a preliminary issue. That issue, I note, is similar in its nature to that proposed in the present case. Spencer, J. held that the Bank had not irrevocably alienated its interest in the fund and that decision was upheld by the Court of Appeal. The result is that the action continues in respect of other issues----had the question been answered in the opposite sense, that would as I understand it have decided the final outcome. Because the result did not finally determine the outcome, the present defendants (some of whose counsel were counsel in the Hockin case) point to it as an example of the futility of attempting to resolve cases on preliminary issues. Had they been successful in relation to that question, they would, I think, have seen that matter differently. In any event, it is not clear that the effort devoted to resolving the preliminary issue in that case was wasted----an important issue has been resolved and that may enhance the chance of settlement or shorten the proceedings. I therefore take Hockin v. Bank of British Columbia as authority for the proposition that a representation order can be made which is applicable only to certain preliminary issues, and I take the result as illustrating that such an order may be useful in reducing the expenditure in time and money which, in litigation of this class, is necessarily substantial. But neither that case, nor any other cited to me, is by any means conclusive in favour of the application by these plaintiffs to try a preliminary issue.
For convenience, I repeat here the preliminary question as set out in the plaintiff's notice of motion:
Do the provisions of the 1975 Trust Agreement and the 1975 Retirement Plan entitle Genstar Limited to withdraw money for its own benefit from the trust fund?
In the course of submissions, supplemented after the hearing by memoranda from counsel, it became clear that the plaintiffs seek to have tried as a preliminary question a much broader question. In the course of the hearing, Mr. Nathanson indicated that, to be useful, the question would have to be expanded to include the 1975 Trust Agreement and the 1975 Retirement Plan as amended in 1984, and as further amended in 1985. The defendants, while opposing any preliminary question, concede that to be useful the question would have to embrace those amendments and thus be, in effect, three separate questions. After the hearing, Mr. Nathanson submitted that the question should be expanded further to embrace the question whether the amendments of 1984 and 1985 were lawfully made so as to make the amended provision effective between the parties. Such further broadening of the scope of the question is vigorously resisted by the defendants. At this point, they submit, the inappropriateness of allowing the present plaintiffs to represent all possible claimants becomes obvious. In particular, they press the significance of the question whether there has been a termination of the plan. The proposed preliminary questions make no reference to termination but the defendants say that it is crucial, in deciding whether the defendants acted lawfully, to determine whether the plan was terminated and, if it was, when. I note that the plaintiffs, in paragraph 54 of their statement of claim, have pleaded that the plan has been terminated "by either Genstar, IMASCO, or both" but do not specify when or by what means the termination came about. The defendant IMASCO has asked for particulars of that plea. Mr. Nathanson concedes that the defendants are entitled to those particulars but says that he cannot give them at this time because this is an issue in respect of which different groups of members have different and conflicting interests. He submits, however, that he seeks only an interpretation of the language of the documents and that those matters can be decided without deciding whether there has been a termination. I am not persuaded that that is correct and therefore cannot be satisfied that there is not a present element of conflict which renders it inappropriate for the action to continue as now constituted.
That being so, I conclude that the application for trial of a preliminary issue must be refused and that the defendant IMASCO's application for an order that the proceeding not be continued as a representative action and stand only as a personal action on behalf of the named plaintiffs be allowed. IMASCO's application for particulars is also allowed. If counsel find it necessary to have the court fix a time for delivery of those particulars, that may be spoken to or dealt with by way of a memorandum from counsel through the Registry.
I have not overlooked the plaintiffs' contention that the defendants should not now be allowed to attack the representative nature of the action because they had an opportunity to do so at an earlier stage when IMASCO applied to strike out the statement of claim under Rule 19(24), the ultimate result being that the plaintiffs amended to remedy the defect. As a general rule, the court will discourage serial attacks on pleadings. But in this case the earlier application was not directly connected to the question whether the action was properly constituted as a representative one. In the particular circumstances, including the somewhat confused manner in which the amendment came about and the fact that not all of the present defendants were then party to the action, I cannot find that the earlier application should preclude the bringing of these applications by the defendants.
There was some discussion during the hearing of these applications of the possibility of using some of the time presently scheduled for the trial of this action for the purpose of settling classes. I do not know whether any of the possible claimants other than those for whom Mr. Nathanson acts are represented or, indeed, whether they have any interest in pursuing claims. But if counsel are of the view that there is a basis for a proceeding to settle classes, that may be brought back before the Court. I do not consider that the question is presently before me. I should note, in view of the ground upon which I have refused to order the trial of a preliminary issue, that I do not think that refusal necessarily precludes a later application to try such an issue.
There will be an order dismissing the plaintiffs' applications and allowing those of the defendants as previously set out.
"W.A. ESSON, C.J.S.C."
Vancouver, British Columbia
January 14, 1991