The Ontario Court of Appeal is upholding a decision that stated the Financial Services Regulatory Authority of Ontario’s efforts to block a settlement over pension indexing in the Brewers Retail Inc.’s pension plan aren’t valid.

In June 2022, an Ontario Superior Court judge awarded Brewers Retail Inc. $210,000 in costs against the FSRA. A veteran litigator, who spoke on condition of anonymity at the time because the case was still before the courts, told Benefits Canada the decision is possibly the largest costs award against a pension regulator in Canadian history and the “most damning indictment of regulatory disregard of plan members’ rights” since 1986, when Dominion Stores Ltd. (now Metro Inc.) was ordered to return $37.9 million that it withdrew from its employee pension plan.

“On a practical level, this case involves a unique fact pattern relating to a single-employer pension plan and the possibly non-compliant aspects of pension indexing provisions which first came into effect in 1974,” says Randy Bauslaugh, a lawyer at Bauslaugh Pensions & Benefits Law, who represented Brewers Retail.

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In the case, Brewers Retail Inc. v. Campbell, the matter was triggered by the filing of amendments starting in 2008 to terminate future pension indexing. “In many respects, the history of the indexing provisions and their administration created a sort of broken egg situation as there is no rules-based solution to these facts that could ever put that egg back together again,” he says.

Here, the employer and affected plan members were able to agree on a principled approach to resolve the dispute. The case originally involved the prior regulator, the Financial Services Regulatory Authority of Ontario, which provided tentative written approval just before the FSRA took over in 2019, says Bauslaugh.

Before starting a court proceeding to implement the solution agreed to with the FSCO, the employer and members advised the FSRA. “We were not seeking approval; we were simply being polite and transparent,” he says.

After first stepping back, the FSRA then started taking steps to oppose any solution that didn’t comply with its view of the letter of the law. “From my perspective, FSRA’s purported concern appears to be that our negotiated solution was going to use a court process to do an end run around both the minimum legislative standards and the regulatory oversight and tribunal processes.”

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The FSRA issued a notice of intended decision, which the employer and members appealed to the Ontario Financial Services Tribunal. In a preliminary motion, it ordered a delay to enable the employer and members to determine if a court would even be willing to entertain the class proceeding necessary to implement the solution. The Ontario Superior Court of Justice was prepared to permit a class proceeding to be initiated over the formal objections of the FSRA.

The decision has implications not only for the pension regulatory and legal system, but the pension industry generally, says Bauslaugh. “What this case is fundamentally about is preserving an open mind to resolving complex long-term pension issues.”

However, he notes, the approach taken by the FSRA doesn’t seem to be driven by principle, it seems to be driven by a rules-based approach. “The pension bar has been collaborative and inventive in resolving potentially acrimonious disputes in a manner that is prudent, transparent and safe.”

This works because of the respect “we all seem to have for each other and the respect we all have for the interests and concerns of employers, plan participants, our regulators and the significant importance of workplace pensions to society as a whole and to individual workers.”

Writing in the court of appeal decision, Appeal Justice Eileen E. Gillese said the FSRA contention is that the Pension Benefits Act “establishes a comprehensive framework for the regulation of pension plans and that the issues raised in the dispute are within the exclusive jurisdiction of the FST.”

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The FSRA maintains that, if left uncorrected, the orders will undermine the carefully calibrated legislative and regulatory scheme that governs the regulation of pension plans and employers will be able to commence collateral court proceedings instead of engaging with the regulator in accordance with the statutory review process.

However, the judge also said the scheme of the PBA doesn’t oust the court’s jurisdiction. “The PBA is not comprehensive legislation; it provides minimum standards that pension plans must meet for registration in Ontario,” she said, adding the courts have repeatedly exercised jurisdiction over a variety of pension disputes.

Further, Gillese doesn’t accept the FSRA’s overarching contention that permitting the proceeding to continue will undermine the regulatory scheme governing the regulation of pension plans and allow employers to commence court proceedings instead of engaging with the regulator.

“On the contrary, the decade-long negotiation process unequivocally shows that Brewers Retail and the committee (pension stewardship steering committee formed by the affected plan members) understood and respected the role of the pension standards regulator and the need for compliance with the PBA.”

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