Court decision the ‘worst-case scenario’ for pensioners
Lawyers worry that recent Quebec decision means uncertainty for pensioners across the country
Benefits Canada has reported on a Quebec Superior Court decision that calls into question the effectiveness of pension protections granted by provincial legislation in situations where an insolvent employer is being liquidated under the federal Companies’ Creditors Arrangement Act (CCAA).
Wabash Mines had two defined benefit plans registered in Newfoundland and Labrador (NL). The plans covered employees who worked in NL and Quebec. as well as some federally regulated employees. The plans were $55 million in deficit and, after Wabash Mines filed for restructuring under the CCAA, it stopped making special payments, adding another $9 million to the amount owed to the plans.
After Wabash had sold its assets, it sought direction from the Quebec Court on whether the deemed trust in respect of the deficits and the outstanding special payments took priority over the claims of other creditors.
As Benefits Canada explains, the court held that the federal statute took precedence over the provincial statute, ruling that “the deemed trust that gives priority to pension claims under Newfoundland and Labrador’s Pension Benefits Act wasn’t effective in a liquidation scenario in a [CCAA] proceeding.”
Benefits Canada discusses some of the difficulties with the decision, and notes that it is unclear whether it would be upheld on appeal.
More generally, however, the article echoes Simon Archer’s view that, if the decision survives appellate review, it would be bad news for employees and pensioners.
“If we’re thinking about what type of pension protection retirees have, Wabush is the worst-case scenario,” says Simon Archer, a lawyer at Goldblatt Partners LLP in Toronto.