CITATION: Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2010 ONCA 657
	DATE: 20101008
DOCKET: C48158
COURT OF APPEAL FOR ONTARIO
Laskin, Gillese and Juriansz JJ.A.
BETWEEN
Professional Institute of the Public Service of Canada, Canadian Merchant Service Guild, Federal Government Dockyard Trades and Labour Council (East), International Brotherhood of Electrical Workers, Federal Government Dockyard Chargehands Association, Research Council Employees’ Association, Association of Public Service Financial Administrators, Professional Association of Foreign Service Officers, Federal Government Dockyard Trades and Labour Council (West), The Canadian Association of Professional Radio Operators, Canadian Air Traffic Control Association, Canadian Military Colleges Faculty Association, and Federal Superannuates National Association
Plaintiffs (Appellants)
and
Attorney General for Canada
Defendant (Respondent)
DOCKET: C48157
AND BETWEEN
Public Service Alliance of Canada
Plaintiffs (Appellants)
and
Attorney General for Canada
Defendant (Respondent)
DOCKET: C48161
AND BETWEEN
The Armed Forces Pensioners’/Annuitants’ Association of Canada, L’Association Des Membres De La Police Montée Du Québec, The British Columbia Mounted Police Professional Association, The Mounted Police Association of Ontario, and The Canadian Association of Professional Employees
Plaintiffs (Appellants)
and
Attorney General for Canada
Defendant (Respondent)
Paul J. J. Cavalluzzo, Hugh O’Reilly and Amanda Darrach, for the appellants, Professional Institute of the Public Service of Canada et al.
Andrew Raven and James Cameron, for the appellants, Public Service Alliance of Canada and the Armed Forces Pensioners’/Annuitants’ Association of Canada et al.
Donald J. Rennie, Dale Yurka and Christine Mohr, for the respondent
Heard: April 19-21, 2010
On appeal from the judgment of Justice A. de Lotbinière Panet of the Superior Court of Justice, dated November 20, 2007, with reasons reported at (2007), 66 C.C.P.B. 54.

	INDEX	Paragraph
I.	OVERVIEW	1
II.	THE BACKGROUND	6
A.	The Pension Plans	6
B.	Amortization of the Surplus	23
C.	Bill C-78	30
D.	The Parties’ Positions at Trial	37
III.	THE TRIAL DECISION	42
IV.	THE ISSUES	46
V.	DO THE SUPERANNUATION ACCOUNTS CONTAIN ASSETS?	47
VI.	IS THE PSSA A COMPLETE CODE?	66
VII.	WERE THE PLAN MEMBERS’ INTERESTS PROTECTED BY A FIDUCIARY DUTY?	80
	A.     Was the Government a Fiduciary under the Common Law	84
	B.     Was the Government, as the Administrator of the Plans, a Fiduciary?	97
VIII.	IS A CONSTRUCTIVE TRUST AVAILABLE?	102
IX.	DID BILL C-78 EXTINGUISH THE PLAN MEMBERS’ INTEREST IN THE SURPLUS?	109
X.	DISPOSITION	114
	SCHEDULE “A” Public Service Superannuation Act, R.S.C. 1985, c. P-36, as am., ss. 43(2), 44 (9) – (13), 44.1 and 44.2

Gillese J.A.:

I.            OVERVIEW

[1] Can an employer take contribution holidays?  Withdraw surplus funds from the pension plan?  In the past two decades, the courts have wrestled with these questions in the context of private sector pension plans.  The present appeals raise those same questions with one significant difference:  the employer is the Government of Canada (the Government). 

[2] Unions and associations representing federal government employees, the RCMP and Canadian Forces personnel (the appellants) brought actions against the Government in which they effectively sought an order requiring the Government to return over $28 billion to their pension plans.  They alleged that the money had been improperly taken by way of contribution holidays and/or withdrawal of surplus.    

[3] The trial judge heard the actions together.  He dismissed the claims. 

[4] On appeal, this court is asked to reverse the trial decision and order the Government to repay the monies it withdrew, at least to the extent of the employees’ contributions plus the interest that was credited on those contributions.

[5] For the reasons that follow, I would dismiss the appeals.

II.            THE BACKGROUND

A.     The Pension Plans

[6] The Government provides pensions[1] for substantially all those who are employed in the federal public service, members of the RCMP, and the regular force of the Canadian Forces.  A separate pension plan was established, by statute, for each group (the Plans): the Public Service Superannuation Act[2] (PSSA); the Canadian Forces Superannuation Act[3] (CFSA); and the Royal Canadian Mounted Police Superannuation Act[4]  (RCMPSA) (collectively, the Superannuation Acts). 

[7] Each of the Superannuation Acts has legislative antecedents dating back to the late 19^th or early 20^th centuries.  As currently enacted, they date from the coming into force of the present Superannuation Acts – January 1, 1954 for the PSSA[5] (PSSA 1954); March 1, 1960 for the CFSA;[6] and April 1, 1960 for the RCMPSA.[7]

[8] The Plans are the same in all aspects relevant to these proceedings.  For ease of reference, at times I will refer only to the PSSA but the analysis and conclusions apply equally to the CFSA and the RCMPSA.

[9] There are two relevant time periods in these appeals.  The first period is up to and including March 31, 2000.  It precedes the coming into force of Bill C-78, legislation that amended the Superannuation Acts and, thus, the Plans.  The second period begins on April 1, 2000, when Bill C-78 came into effect. 

[10]        The Superannuation Acts set out the terms of the Plans.  They establish contributory, defined benefit pension plans. 

[11]        A contributory plan is one in which the employees must contribute towards the cost of their pensions.  While the contribution rates for these Plans varied, employees generally contributed 5% or 6% of their salaries.  The money was deducted monthly from their pay cheques.

[12]        The defined benefit to which an employee is entitled under the Plans is a function of the number of years of pensionable service and the employee’s average annual salary over a particular period.  For example, since 1999 the basic pension has been two per cent per year of pensionable service (to a maximum of 35 years) multiplied by the average of the best five consecutive years of salary.    

[13]        The terms of the Plans are not subject to collective bargaining.[8]  Nor are they subject to the Pension Benefits Standards Act, 1985.[9]   

[14]        Participation in the Plans is mandatory for all eligible public service employees, members of the RCMP and the regular force of the Canadian Forces. 

[15]        The Superannuation Acts established corresponding Superannuation Accounts.[10]   

[16]        Amounts collected for the Plans are subject to the Financial Administration Act[11] (FAA) and the applicable Superannuation Act.  Employee contributions to the Plans were required to be deposited into the Consolidated Revenue Fund (CRF).  The amount of those contributions was reflected as a credit in the appropriate Superannuation Account.  Amounts payable pursuant to the Superannuation Acts were paid from the CRF and charged to the appropriate Superannuation Account.  In short, the Superannuation Accounts tracked the amounts received and paid under the Plans but it was the CRF that actually received and disbursed money. 

[17]        Prior to April 1, 2000, all required contributions under the Plans were recorded as credits to the appropriate Superannuation Accounts.  Accordingly, the contributions of the employees and the Government were recorded as credits in those accounts.

[18]        Under the Superannuation Acts, the Government was required to make four types of contributions to the Plans: 1) matching contributions equal to employee contributions; 2) amounts to cover actuarial deficits; 3) past service contributions, where plan members elected to buy-back pensionable service; and 4) interest on the balance in the Superannuation Accounts at the rate prescribed by regulation.  Interest was credited to the Superannuation Accounts on the contributions of both the employees and the Government.

[19]        The FAA requires the Public Accounts of Canada to be tabled before the House of Commons in each fiscal year.  The Public Accounts reflect the value of the assets and liabilities of Her Majesty in Right of Canada.  They are the Government of Canada’s main financial reporting document.  Pursuant to s. 64 of the FAA, they are prepared for each fiscal year by the Receiver General and laid before the House of Commons by the President of the Treasury Board.    

[20]        The two principal statements in the Public Accounts are the Statement of Financial Position, which sets out the assets and liabilities of the Government (Statement of Assets and Liabilities), and the Statement of Operations and Accumulated Deficit, which sets out the Government’s revenues and expenditures (Statement of Revenues and Expenses).

[21]        The transactions and balances in the Superannuation Accounts are reported annually in the Public Accounts.  The Government’s annual contributions made pursuant to the Superannuation Acts are shown as a Government expense in the Statement of Revenues and Expenses.  The total amount set out in the Superannuation Accounts as being necessary to meet pension obligations under the Plans is shown as an ongoing liability of the Government in the Statement of Assets and Liabilities.  The Superannuation Accounts have been classified as “Specified Purpose Accounts” under the liabilities section of the Statement of Assets and Liabilities since the 1980-81 fiscal year.   

[22]        Through actuarial valuations mandated by the Superannuation Acts[12]and the Public Pensions Reporting Act,[13] estimates are made of the value of the “assets” in the Superannuation Accounts and of the cost of the pension liabilities.  The difference between the two amounts constitutes an actuarial surplus or deficit.  An actuarial surplus may arise during the operation of an ongoing plan, whereas an actual surplus only results on the termination of a pension plan.[14]

B.    Amortization of the Surplus

[23]        Beginning in the early 1990s, the Public Accounts disclosed that the amounts credited to the Superannuation Accounts exceeded the actuarial liabilities of the Plans; that is, the Public Accounts showed that there was an actuarial surplus in the Superannuation Accounts.  The surplus arose as a result of a combination of factors, including low inflation rates, high interest rates, Government-imposed restraints on salaries, the capping of indexing benefits in the 1980s, and changing assumptions in calculating the actuarial liability of the Plans. 

[24]        The surplus in the three Superannuation Accounts reached $16.6 billion by December 1992, climbing to $23.4 billion in March 1996 and $30.9 billion in March 1999.

[25]        In the 1990-91 fiscal year, the Government began to “amortize” the actuarial surplus in the Superannuation Accounts.  During the 1990s, the Government amortized a total of $18.6 billion, with further amounts being amortized after the year 2000. 

[26]        The amount amortized each year was recorded in a separate account known as the Estimate of Pension Adjustments.  The amortized amount was “booked” into the fiscal framework and applied to effectively reduce the annual pension expense of the Government, as disclosed in the Statement of Revenues and Expenses.  The amortized amount also reduced the liability disclosed in the Statement of Assets and Liabilities for the Superannuation Accounts, thus reducing the Government’s annual budget deficit. 

[27]        The amortization of these amounts did not affect the balances shown in the Superannuation Accounts.   

[28]        During the entire period in which the Plans were in surplus, employees continued to make their statutorily required contributions to the Plans.  An attribution analysis giving the Government the full benefit of all of its contributions to the Superannuation Accounts demonstrated that between 36.9% and 42.2% of the surplus in the Public Service Superannuation Account[15] was attributable to employee contributions and interest thereon.

[29]        The Government also continued to make its required contributions to the Plans during this period.  However, while the operation of the Superannuation Accounts continued to be done in accordance with the requirements of the Superannuation Acts, as I have explained, the Government made use of the surplus assets by means of amortization, applying a portion of the surplus to offset its annual pension expense.   

C.    Bill C-78

[30]        In 1999, Parliament enacted the Public Sector Pension Investment Board Act[16]  (Bill C-78).  Bill C-78 came into force on April 1, 2000.  It made significant changes to the Superannuation Acts.  It created a new pension fund for each plan (the Pension Funds) to receive all employee[17] and Government pension contributions made after April 1, 2000.  Pursuant to amendments to the Superannuation Acts made by Bill C-78, certain amounts were deposited into the Pension Funds.[18]  The Pension Fund for each Plan effectively replaces the Superannuation Accounts from April 1, 2000 forward. 

[31]        Bill C-78 also established an investment board[19] to manage the assets in the Pension Funds.  One of the objects of the investment board is to manage the amounts that are transferred to it, pursuant to the amended Superannuation Act, “in the best interests of the contributors and beneficiaries under those Acts”.[20]  Under Bill C-78, amounts deposited in the Pension Fund are to be invested externally.[21]

[32]        Bill C-78 added subsections 44(9) to (13) to the PSSA.[22]  These subsections provide that the Minister must debit any amount that exceeds 110 per cent of the amount estimated to be required to meet the cost of benefits payable.[23]  The Minister is also given the discretion to debit amounts from the Superannuation Account that are not estimated to be required to fulfill future pension obligations.[24] 

[33]        Bill C-78 provided that after January 1, 2004, employee contribution rates would no longer be set by legislation but would be set at the discretion of the Treasury Board, subject to certain restrictions.[25]  Employees faced a legislated increase of 15-33% in contribution rates in the years from 2000 to 2003.  In 2005, the Treasury Board announced further increases.  Employees can expect to face a 38-60% increase in contribution rates in the years from 2005 to 2013.[26]   

[34]         In addition, Bill C-78 changed the basis for the Government’s annual contributions.  Instead of being required to make contributions matching those made by employees, the Government’s contributions are now determined by the President of the Treasury Board, based on the actuarial valuations for each plan.[27]    

[35]        All benefits for pensionable service prior to April 1, 2000, when paid, are charged to the appropriate Superannuation Account.  However, benefits paid for service thereafter are paid from the appropriate Pension Fund.    

[36]        Between 2001 and 2004, the Government relied on Bill C-78 to remove over $28 billion from the Superannuation Accounts.  Due to the previous amortization of these amounts, this removal had no effect on the Public Accounts.

D.    The Parties’ Positions at Trial

[37]        The appellants brought actions in which they effectively sought an order requiring the Government to return over $28 billion to the Plans.  They maintained that the Government had breached its trust and fiduciary duties by amortizing the surplus amounts and by later removing those amounts from the Superannuation Accounts, rendering them unavailable for pension use. 

[38]        The appellants made three broad claims at trial.  The first claim related to the Government’s actions between 1990 and 2000, in which it amortized approximately $18 billion of actuarial surplus.  The appellants claimed that they had an equitable interest in the Superannuation Accounts, at least to the extent of their own contributions and the interest that has been credited on those contributions.  Consequently, they submitted that it was improper for the Government to have amortized the surplus during those years. 

[39]        The second broad claim related to Bill C-78.  Between 2001 and 2004, the Government withdrew slightly over $28 billion from the Superannuation Accounts.  The appellants claimed that Bill C-78 did not authorize the Government to withdraw that money.    

[40]        Third, the appellants claimed that Bill C-78 violated their equality rights under the Charter.  No appeal has been taken from the trial judge’s rejection of this claim.  Consequently, no more will be said about this claim.      

[41]        The Government contended that the Superannuation Accounts do not hold assets capable of being the subject of legal or equitable interests and that, in any event, plan members have no legal or equitable interest in the amounts in the Superannuation Accounts.  It argued that even if plan members did have such interests, those interests were validly extinguished by Bill C-78. On its interpretation of Bill C-78, the Government is authorized to debit surplus amounts in the Superannuation Accounts.

 III.            THE TRIAL DECISION

[42]        The trial judge dismissed the appellants’ claims.  He held that the members of the Plans have no interest in the Superannuation Accounts.  In reaching this conclusion, he found that there could have been no breach of trust on the Government’s part because the amounts recorded in the Superannuation Accounts were not trust funds.  In that regard, he determined that the legislation contained no intent to establish a trust and that there was no certainty of subject matter.

[43]        The trial judge further held that the PSSA was a complete code, in that it set out all of the rights and obligations of the Government and plan members.  Accordingly, he concluded that the Government had no scope to exercise discretion and, therefore, it was not a fiduciary. 

[44]        Finally, the trial judge found that the Government had complied with all of its duties under the PSSA and that there had been no breach of duty in amortizing the surplus.     

[45]        The trial judge held that Bill C-78 authorized the Government to remove surplus from the Superannuation Accounts.  As he had concluded that the plan members had no legal or equitable interest that had been breached by the Government’s amortization of surplus in the Superannuation Accounts, he found that Bill C-78 did not expropriate such interests.  However, he went on to hold that even if the plan members did have an interest in the surplus, Bill C-78 gave the Government the discretion to debit surplus from the Superannuation Accounts.     

  IV.            THE ISSUES

[46]        The appellants raise five issues on appeal.  They submit that the trial judge erred in:

           1.  determining that there were no assets in the Superannuation Accounts;

           2.  determining that the PSSA constitutes a complete code;

           3.  concluding that the plan members’ interest in the Superannuation Accounts     was not protected by a fiduciary duty;

           4.  concluding that the plan members’ interest in the Superannuation Accounts was       not protected by a constructive trust; and

           5. concluding that Bill C-78 extinguished the plan members’ interest in the     surplus.

 V.            DO THE SUPERANNUATION ACCOUNTS CONTAIN ASSETS?

[47]        The short answer to this question is “no”.  As the trial judge found, there are no assets in the Superannuation Accounts.

[48]        The appellants submit that the trial judge erred in so finding because he failed to give proper consideration to the language of the various statutes, the information tabled in Parliament, the information provided to employees, decades of internal government communications, and the expert evidence given at trial.

[49]        The appellants correctly point out that in numerous places, including the legislation, the amounts in the Superannuation Accounts are referred to as “assets”.[28]  Nonetheless, it is clear that the Superannuation Accounts do not hold assets and the sloppy use of language cannot change that reality.  

[50]        In essence, the Superannuation Accounts are legislated ledgers.  Among other things, the Superannuation Accounts are designed to: (1) record the amounts to be credited to the Plans, including the contributions of employees and the Government; and (2) set out an estimate of the Government’s liability to provide the benefits promised by the Plans.  The information contained in the Superannuation Accounts is necessary for a number of reasons, including monitoring and reporting.  However, it remains that the amounts shown in the Superannuation Accounts are only information or bookkeeping entries.      

[51]        I appreciate that it is counterintuitive to find that there are no assets in the Superannuation Accounts.  After all, money is deducted from employees’ pay cheques each month as contributions towards their pensions.  That is real money.  If it had not been deducted from their pay cheques, that money would have gone into the employees’ hands.  So where did the money go, if not into the Superannuation Accounts?  

[52]        The answer is that the money went into the CRF.[29]  The amount of the employees’ contributions was then recorded as a credit in the appropriate Superannuation Account.  Real money (i.e. the employee contributions) went into the CRF and real money was paid out of the CRF for pensions.  However, it is only the amount of the contributions and the cost of the pension obligations that are reflected in the Superannuation Accounts. 

[53]        As part of the CRF, employee contributions form part of the aggregate of all public monies.  Once monies become part of the CRF, they are public monies to be used by the Government for public purposes.  As such, the Plans are very unlike private sector pension plans, in which pension monies are generally held in trust or as segregated pools of funds. 

[54]        The various reasons why funds in private sector pension plans are held in trust do not apply when the Government is the employer.  For example, private sector plans are funded to avoid the risk that there will be insufficient funds to provide the promised benefits if the employer becomes insolvent or has financial difficulties.  That risk does not exist for these Plans – the Government will not cease to exist nor will it become unable to meet its pension obligations.   

[55]        I do not accept the appellants’ argument that there must be assets in the Superannuation Accounts because the pensions are regularly said to be “fully funded”.  Understood in context, that phrase simply means that the value of credited contributions in the Superannuation Accounts is sufficient to fully discharge the Government’s liability for all promised pension benefits. 

[56]        Nor do I accept that the classification of the Superannuation Accounts as “Specified Purpose Accounts” in the Public Accounts proves that the Superannuation Accounts were funded.  The description of the Accounts as “Specified Purpose Accounts” is no more than an accounting classification.  The classification is referred to only in Government Policy circulars and was not introduced into accounting policy until 1980-81, long after the Superannuation Accounts were established in the CRF by statute. 

[57]        Further, the trial judge’s finding that there were no assets in the Superannuation Accounts is not in conflict with the expert evidence given at trial.  The experts acknowledged that there was no separate pool of assets in the Superannuation Accounts.[30] 

[58]        The trial judge was entitled to reject the experts’ theory that the Government borrowed from the Superannuation Accounts the difference between the contributions plus interest and the pension obligations and then owed the borrowed amounts to the Superannuation Accounts.  On this theory, the Government owes a debt to the Superannuation Accounts and the primary asset of each account is a receivable from the Government.  As the trial judge stated, there was no such borrowing, no debt owing and no assets in the Superannuation Accounts.    

[59]        The appellants rely on the Supreme Court of Canada’s recent decision in Ermineskin Indian Band and Nation v. Canada, [2009] 1 S.C.R. 222 for the general proposition that funds held in the CRF on behalf of a particular group are, in fact, borrowed by the Government.  However, the circumstances of the present appeals are very different from those of Ermineskin.

[60]        In Ermineskin, the Crown received money on behalf of the Ermineskin and Samson Indian Bands.  The money was comprised mainly of royalties derived from oil and gas reserves found beneath the surface of the Samson Reserve and Pigeon Lake Reserve in Alberta.  It had been necessary for the bands to surrender their interests in the reserves to the Crown so that the Crown could enter into arrangements with third parties to exploit the resources.  The statutory scheme governing the handling of Indian money, including the oil and gas royalties, involved the Indian Act,[31] the FAA, and the Indian Oil and Gas Act.[32]  In accordance with the statutory scheme, although the Crown received the royalties “in trust” for the bands,[33] it was to deposit the royalties in the CRF and pay interest on the money in accordance with rates set by Order in Council.        

[61]        The bands alleged that the Crown’s fiduciary obligations required it to invest the royalties as a prudent investor would, that is, in a diversified portfolio.  They argued that the Crown’s failure to invest in that fashion deprived them of hundreds of millions of dollars.  Their claims were dismissed.

[62]        The Supreme Court held that the relationship between the Crown and the bands is a fiduciary one that is “trust-like in nature”[34] and that the Crown held the funds on behalf of the bands.  It found that the Crown was required to deposit the royalties in the CRF and, although the Crown borrowed the bands’ money from the CRF, the borrowing was required by legislation.  The Court reiterated that a fiduciary acting in accordance with legislation cannot be said to be in breach of its fiduciary duty.[35]    

[63]        As I explain below, the relationship between the Government and the plan members is not a fiduciary one nor is it trust-like in nature.  This makes the situation very different from that in Ermineskin.       

[64]        Finally, contrary to the appellants’ submission, Bill C-78 does not support the contention that the Superannuation Accounts contain assets.  Bill C-78 established a Pension Fund for each Plan.  The provisions in Bill C-78 make it clear that the Pension Funds hold assets.[36]  By contrast, prior to April 1, 2000, there were no separate funds in which assets were held.  The Superannuation Accounts held no physical assets of any sort – no money, stocks, bonds, real estate or other investments.  The Superannuation Accounts simply reflected ledger entries.  No monies were ever transferred into the Superannuation Accounts, including from the CRF.     

[65]        Accordingly, I would dismiss this ground of appeal. 

 VI.            IS THE PSSA A COMPLETE CODE?

[66]        The trial judge held that the PSSA established a complete code with respect to the rights and obligations of the Government and the plan members.  He concluded that the Government had only a public law duty to fulfill the obligations expressly set out in the PSSA.  As the Government’s obligations were expressed in the legislation, he concluded that it had no discretion. 

[67]        The appellants submit that the trial judge erred in concluding that the PSSA is a complete code.  They argue that the PSSA does not supercede the plan members’ residual equitable rights or the Government’s corresponding equitable obligations in respect of the Plans. 

[68]        The appellants contend, in reliance on Wells v. Newfoundland, [1999] 3 S.C.R. 199, that public service employees have the same private law rights as other employees.  Consequently, they say, the Government owes its employees the same obligations as those of a private sector employer, unless those obligations are specifically superceded by statute.  The appellants argue that while the PSSA imposes certain rights and obligations on the parties, those rights and obligations are supplemented by the rights and obligations established by the common law and in equity, except where those rights and obligations have been specifically superceded by legislation.  As the PSSA does not explicitly supercede the plan members’ equitable obligations, it is not a complete code.        

[69]        The appellants also submit that the PSSA could not constitute a complete code because prior to Bill C-78, the legislation failed to address the treatment of actuarial surplus in the Superannuation Accounts.    

[70]        The respondent submits that the rights and obligations of plan members and the Government are entirely spelled out in the PSSA.  The PSSA covers the method of calculating the pension benefit, the scope of membership, the nature and extent of service, eligibility requirements, penalties for early retirement and the responsibility of the Government to credit interest and make actuarial liability credits.  Thus, the respondent contends, there is no scope within the legislative scheme for plan members to have equitable rights.

[71]        In my view, there can be no question but that prior to April 1, 2000, the PSSA was not a complete code.  The respondent correctly lists the parties’ rights and obligations created by the PSSA.  However, that does not mean that the PSSA was a complete code.  As the appellants point out, the fundamental question raised by this litigation is what powers and obligations the Government had in respect of the actuarial surplus.  As prior to the enactment of Bill C-78 the PSSA did not deal with the parties’ rights and obligations in that regard, it cannot be said to have been a complete code.  A comparison of this case with Gladstone v. Canada (A.G.), [2005] 1 S.C.R. 325, illustrates this point.

[72]        In Gladstone, the Department of Fisheries and Oceans lawfully seized and sold herring spawn which the respondents had harvested, allegedly in violation of the Fisheries Act.[37]  The Crown held the sale proceeds pending the outcome of litigation.  Ultimately, the Crown paid the proceeds to the respondents, who then made a claim for interest. 

[73]        The Supreme Court of Canada held that the Crown did not owe interest because the Fisheries Act constituted a complete code in respect of the disposition and return of seized property and that code imposed no obligation on the Crown to pay interest or any other amount in addition to that which was set out in the legislation.

[74]        In Gladstone, the statutory scheme dealt completely and exhaustively with the return of seized property.  In the present case, however, the rights and obligations of the parties in respect of the amounts in the Superannuation Accounts are not fully dealt with.  The PSSA established how amounts were to be credited to the Superannuation Accounts, based on credits for contributions by the Government and employees.  It dealt with the situation of an actuarial deficit, that is, where the pension liabilities exceeded the pension credits, by requiring the Government to make additional credits to the Superannuation Accounts.   But it did not deal with the situation of an actuarial surplus, where the amounts credited to the Superannuation Accounts were greater than the pension liabilities.  When an actuarial surplus arose, what rights and obligations did the parties have?  The PSSA was silent on that matter, prior to Bill C-78.  Consequently, as I have said, it could not have been a complete code. 

[75]        Accordingly, in my view, the trial judge erred in holding that the PSSA was a complete code. 

[76]        What follows from concluding that the PSSA was not a complete code?  The appellants assert that there are two consequences to this determination.  First, they say that the plan members’ equitable rights must prevail in respect of the actuarial surplus.  Second, they maintain that as the PSSA did not codify the Government’s rights and obligations in respect of the actuarial surplus, the Government was under a fiduciary duty when it dealt with it.  The second alleged consequence is discussed in Section VII, below, so no more is said on it here. 

[77]        As for the first consequence, I question whether the plan members have any equitable rights in the actuarial surplus.  Under the PSSA, plan members are entitled to certain specified pension benefits.  There is no language in the PSSA akin to that found in many private sector plans to the effect that all amounts contributed to the pension plan are done so “irrevocably to the benefit” of the plan members.  In fact, there is nothing in the PSSA to suggest that the plan members are entitled to anything more than their promised pension benefits.  Moreover, and very importantly, there were no segregated funds, there was no trust and, as explained above, there were no assets in the Superannuation Accounts. 

[78]        In Wells, at para. 30, the Supreme Court makes it clear that although the terms of employment in the public civil service may be dictated in whole or in part by statute, the relationship remains contractual in nature, unless specifically superceded by terms in the legislation.  As the PSSA said nothing about the actuarial surplus prior to Bill C-78, it could not have superceded whatever rights the employees may have had in relation to it.  Based on Wells and in the absence of assets in the Superannuation Accounts, contract principles must be applied to determine those rights.  On that basis, the plan members’ rights are only to the contractually promised benefits. 

[79]        Accordingly, if the plan members have any equitable rights to the actuarial surplus, they do not flow from the PSSA. Nor do they flow from the employment relationship.  Nor do they flow from trust principles.  If they exist, they must flow from the Government’s role as plan administrator, the subject of the following section. 

VII.            WERE THE PLAN MEMBERS’ INTERESTS PROTECTED BY A FIDUCIARY DUTY?         

[80]        The trial judge held that the PSSA contained a complete code, the Government met all its obligations under the PSSA, and the Government had no discretion in the way in which it fulfilled its obligations under the Plans.  Because the exercise of discretion is a prerequisite for a fiduciary relationship, the trial judge found that the Government was not a fiduciary.

[81]        The appellants submit that the trial judge erred in failing to find that the plan members’ interest in the Superannuation Accounts was protected by a fiduciary duty.  They say that the Government was a fiduciary and, therefore, obliged to use the amounts in the Superannuation Accounts (at least to the extent of the members’ contributions and interest thereon) for the purpose for which they were contributed, namely, the provision of pension benefits to plan members.  Such benefits could take the form of benefit increases, contribution decreases or protection against future contribution increases.  Amortizing and later removing the surplus from the Superannuation Accounts had the effect of rendering the surplus unavailable for use in a manner that would benefit plan members.  These acts, the appellants contend, were breaches of the Government’s fiduciary obligation.    

[82]           The appellants give two reasons for contending that the Government was a fiduciary.  First, they submit that the factors the common law has identified as establishing a fiduciary relationship exist in the present case.  Second, they say that just as private sector employers who administer pension plans are fiduciaries when acting in that role, so too is the Government.           

[83]        In analyzing this issue, I will consider only the Government’s acts of amortizing the surplus, not its withdrawal.  It will be recalled that the surplus withdrawal only took place after April 1, 2000, when Bill C-78 came into force.  As I explain later in these reasons, Bill C-78 authorizes the Government to withdraw surplus from the Superannuation Accounts.  Thus, even if the Government was a fiduciary when it withdrew the surplus, it cannot be said to be in breach of its fiduciary duty as it acted in accordance with legislation.[38]  Consequently, when considering whether the Government was a fiduciary, I will consider only its acts pre-April 1, 2000, in which it amortized – but did not withdraw – the surplus. 

A.     Was the Government a Fiduciary under the Common Law?

[84]        The common law has identified three factors that assist in determining whether a fiduciary relationship exists: (1) scope for the exercise of power or discretion over the property of another; (2) an ability to exercise that power or discretion unilaterally in a way that affects the beneficiary’s legal or practical interests; and (3) a peculiar vulnerability to the exercise of that power or discretion.[39]     

(1)  Scope for the exercise of power or discretion over the property of another

[85]        Unlike the trial judge, in my view, the Government had the scope for the exercise of power or discretion in this case.  The fact that the Government met its obligations under the PSSA overlooks the discretion that the Government exercised in managing the credited amounts in the Superannuation Accounts.  The Government was under no obligation to deal with the actuarial surplus.  Rather, the Government made the decision to deal with the actuarial surplus by amortizing it.  In my view, that amounts to the exercise of discretion (the Discretion). 

[86]        But, the question becomes, was the Discretion exercised over property of the plan members?  Plan members have a proprietary interest in the money deducted from their pay cheques, which form their contributions to the pension plans.  The appellants argue that, at the very least, the Government had control over those contributions and, thus, over property belonging to the plan members.    

[87]        This contention is not borne out factually.  Employee contributions were deposited into the CRF.  At that point, the contributions became public funds.  As explained above, there was no body of assets – that is, no property belonging to the plan members – that was affected by the exercise of the Discretion.  When the Government amortized the surplus, it recorded the amount that was amortized in a separate account known as the Estimate of Pension Adjustments.  The amortized amount was then booked into the fiscal framework and applied to effectively reduce the Government’s annual pension expense.  The liability disclosed in the Statement of Assets and Liabilities for the Superannuation Accounts was also reduced, thereby reducing the Government’s annual budget deficit.  In short, amortization of the actuarial surplus was a series of ledger entries that altered the amount of actuarial surplus but did not actually affect property.

(2)   An ability to exercise that power or discretion unilaterally in a way that affects the beneficiary’s legal or practical interests 

[88]        In my view, the Government did have the ability to exercise the Discretion unilaterally in a way that affected the plan members’ practical interests. 

[89]        There is no question but that the Government acted unilaterally when it amortized the surplus.  Did amortization affect the plan members’ practical interests?  In my view, it did. 

[90]        I acknowledge that the exercise of Discretion did not affect the rights of plan members to their promised pension benefits.  However, it appears that the exercise of Discretion led to the situation where the employees were obliged to contribute more towards the cost of their pensions.  While that may not amount to an effect on the plan members’ legal interests, it certainly amounts to an effect on their practical interests.        

(3)       A peculiar vulnerability to the exercise of that power or discretion 

[91]        Again, in my view, this requirement is met. 

[92]        The Government had the power to make the ledger entries that resulted in the amortization of the actuarial surplus.  The plan members were powerless in regard to the exercise of that power.  The terms of the Plans are not subject to collective bargaining.[40]  And, unlike private sector pension plans, there is no regulatory oversight or protection because the Plans are not subject to the Pension Benefits Standards Act, 1985.[41]  The plan members’ vulnerability is demonstrated by the effects the amortization ultimately had on their contribution rates.

Additional Considerations

[93]        Although the latter two factors for a fiduciary relationship are present in this case, the first is not.  Consequently, I conclude that the Government was not under a fiduciary duty when it exercised the Discretion.  Two additional considerations fortify this conclusion. 

[94]        The common law factors set out above are not determinative of whether a fiduciary relationship exists.  They provide assistance in deciding that question.  At its core, a fiduciary relationship arises where, given all the surrounding circumstances, one party could reasonably have expected that another would act in the former’s best interests:  see Hodgkinson v. Simms, at pp. 409-10.   

[95]        In the circumstances of these appeals, I do not view it as reasonable for the members of the Plans to have expected the Government to act in their best interests when exercising the Discretion.  There is nothing in the language of the Superannuation Acts (or other legislation affecting the Plans and the exercise of the Discretion) that requires the Government to act solely for the benefit, or in the best interests, of the members of the Plans.  By way of contrast, Parliament makes it clear in s. 4(1)(a) of Bill C-78 that amounts transferred to it must be managed in the “best interests of the contributors and beneficiaries” under the Superannuation Acts.  Nor did the Government enter into any type of agreement or undertaking to the effect that it would act solely for, or in the best interests of, plan members.  Certainly the employment relationship between the Government and the plan members does not give rise to such an obligation.       

[96]        Further, a fiduciary relationship is unlikely to exist where it would place the Crown in a conflict between its responsibility to act in the public interest and its obligation to act in the best interests of the beneficiaries:  see Harris v. Canada, [2002]  2 F.C. 484 (T.D.), at para. 178, relying on Fairford First Nation v. Canada (A.G.), [1999] 2 F.C. 48 T.D.), at para. 67.  The Government was in just such a situation when it amortized the actuarial surplus and thereby reduced the annual deficit.  If the Government were held to be a fiduciary in terms of the exercise of the Discretion, it would be placed in direct conflict with its responsibility to act in the public interest.     

B.    Was the Government, as the Administrator of the Plans, a Fiduciary?

[97]        The appellants make two arguments in support of its contention that the Government, as the administrator of the Plans, was a fiduciary. 

[98]        First, they say that the fiduciary position of pension plan administrators has been codified in provincial and federal pension benefits legislation.  This argument goes nowhere as the Plans are not subject to such legislation.

[99]        Second, they point to Ault v. Canada, [2004] 1 F.C. 410, at para. 35, to say that the Federal Court has already established that the Government is a fiduciary in the context of the PSSA.  Again, this argument must fail.    

[100]    In Ault, the question was whether the Minister had the discretion to require Ms. Ault to execute a release and indemnity as a condition of permitting her to revoke her request for a transfer payment and begin receiving a pension.  The statement at para. 35 of Ault, to the effect that the Minister was a fiduciary, is made in reference to the Minister’s role in seeing that pensions are accessible by contributors.  That is a very different situation from the one in the present appeals. 

[101]    I would dismiss this ground of appeal.     

VIII.            IS A CONSTRUCTIVE TRUST AVAILABLE?

[102]    The appellants argue that a constructive trust should be ordered either because it would satisfy the requirements of good conscience or because the Government has been unjustly enriched by its use of the surplus assets in the Superannuation Accounts.

[103]    I accept neither submission. 

[104]    For a constructive trust to be awarded based on good conscience, among other things, there must be a finding that the Government was under an equitable obligation at the time it amortized the surplus.[42] As I have explained above, it was not. 

[105]    The requirements for unjust enrichment are trite law.  There must be an enrichment, a corresponding deprivation and the absence of a juristic reason for the enrichment: see Peter v. Beblow, [1993] 1 S.C.R. 980, at p. 987. 

[106]    I do not see the Government as having been enriched by the amortization and removal of the surplus.  When the Government’s actions were limited to amortizing the actuarial surplus through an allowance account, while maintaining the amounts shown as credits in the Superannuation Accounts (i.e. pre Bill C-78), whatever benefit there was to such actions enured to all Canadian taxpayers.  After 2000, withdrawal of the surplus was done pursuant to the provisions of Bill C-78.[43]  If there was an enrichment as a result of withdrawal of the surplus, Bill C-78 is a juristic reason for it. 

[107]    As for deprivation, the respondent argues that there has been none because all benefits mandated by the Superannuation Acts have been paid.  It appears to me that the Government’s actions were detrimental to plan members if for no other reason than the fact that those actions apparently led to increases in plan member contribution rates.  However, in light of my conclusions on the other requirements for unjust enrichment, I need not finally decide that matter. 

[108]    I would dismiss this ground of appeal.

 IX.            DID BILL C-78 EXTINGUISH THE PLAN MEMBERS’ INTEREST IN THE SURPLUS?

[109]    It will be recalled that the trial judge concluded that even if the plan members had an interest in the actuarial surplus, that interest was extinguished by Bill C-78.  The appellants submit that the trial judge erred in this conclusion.  They say that the trial judge failed to properly apply the presumption against expropriation – that is, the presumption that the legislature does not intend to expropriate property interests, without compensation, except where the legislation uses express statutory language disclosing such an intent.  They say that Bill C-78 does not explicitly disclose an intent to expropriate the plan members’ interest in the surplus.  They further argue that such an intent is repudiated by a consideration of the broader legislative context, which demonstrates that Parliament proceeded on the assumption that the Government already owned the surplus.  They say that their position is confirmed by the legislative debates on this issue.  Accordingly, they submit that Bill C-78 does not displace the plan members’ interest in the surplus.

[110]    In my view, the purpose and intent of enacting the changes to the Superannuation Acts in 2000 through Bill C-78 was to authorize the Government to debit amounts from the Superannuation Accounts that were in excess of its liabilities under the Plans.  This can be clearly seen in ss. 44(9) to (13) of the PSSA, as amended by Bill C-78.[44]  Subsection 44(13) requires the Minister to debit from the Superannuation Accounts any amount that exceeds 110 percent of the amount estimated to be required to meet the cost of benefits payable.  Furthermore, s. 44(9) gives the Minister the discretion to debit from the Superannuation Accounts any additional surplus disclosed in the actuarial valuation report.

[111]    Absent a constitutional restriction on Parliament’s right to enact those provisions, the meaning and effect of those provisions must prevail.[45]  As previously mentioned, no appeal has been taken from the trial judge’s determination that Bill C-78 does not infringe the appellants’ Charter rights.  As there is no constitutional challenge to the validity of Bill C-78, the court’s role is to interpret and apply that legislation.[46]  

[112]    Because the meaning and intent of Bill C-78 is clear, it is unnecessary to resort to comments found in Hansard.  Even if those comments are considered, however, they affirm that the intent of the legislation was to authorize the Government to debit, for its own purposes, actuarial surpluses in the Accounts.  The President of the Treasury Board made it clear that it was his party’s intention to remove the actuarial surplus.[47]  Furthermore, statements made during the debates show that all Members of Parliament were aware of the underlying dispute about the ownership of the surplus.[48]    

[113]    I would dismiss this ground of appeal. 

    X.            DISPOSITION

[114]    Accordingly, I would dismiss the appeals. 

[115]    If the parties are unable to agree on costs, they may make brief written submissions on the same within fifteen days of the date of the release of these reasons. 

RELEASED:  OCT 08 2010 (“J.I.L.”)

“E. E. Gillese J.A.”

“I agree J. I. Laskin J.A.”

“I agree R. G. Juriansz J.A.”

SCHEDULE “A”

Public Service Superannuation Act, R.S.C. 1985, c. P-36, as am., ss. 43(2), 44 (9) – (13), 44.1 and 44.2, current to September 7, 2010.

s. 43 (2)	The amounts deposited in the Public Service Superannuation Investment Fund under subsection 44.1(2) shall be transferred to the Public Sector Pension Investment Board within the meaning of the Public Sector Pension Investment Board Act to be dealt with in accordance with that Act.
ss. 44 (9)	Following the laying before Parliament of any actuarial valuation report pursuant to section 45 that relates to the state of the Superannuation Account and the Public Service Superannuation Investment Fund, there may be debited from the Account, at the time and in the manner set out in subsection (11), an amount that in the opinion of the Minister exceeds the amount that the Minister estimates, based on the report, will be required to be to the credit of the Account and the Public Service Superannuation Investment Fund at the end of the fifteenth fiscal year following the tabling of that report or at the end of a shorter period that the Minister may determine, in order to meet the cost of the benefits payable under this Part and Part III in respect of pensionable service that is to the credit of contributors before April 1, 2000.
(10)	If the total of the amounts in the Account and in the Fund referred to in subsection (9) exceeds, following the laying of the report referred to in that subsection, the maximum amount referred to in subsection (13), there shall be debited from the Account, at the time and in the manner set out in subsection (11), the amount of the excess.
(11)	Subject to subsection (12), the amount that may be debited under subsection (9) and the amount that must be debited under subsection (10) shall be debited in annual instalments over a period of fifteen years, or a shorter period that the Minister may determine, with the first such instalment to be debited in the fiscal year in which the actuarial valuation report is laid before Parliament.
(12)	When a subsequent actuarial valuation report is laid before Parliament before the end of the period applicable under subsection (11), the instalments remaining to be debited in that period may be adjusted to reflect the amount that is estimated by the Minister, at the time that subsequent report is laid before Parliament, to be the amount that will, together with the amount that the Minister estimates will be to the credit of the Superannuation Account and the Public Service Superannuation Investment Fund at the end of that period, meet the cost of the benefits payable under this Part and Part III in respect of pensionable service that is to the credit of contributors before April 1, 2000.
(13)	At the end of the period, the total of the amounts that are to the credit of the Superannuation Account and the Public Service Superannuation Investment Fund must not exceed one hundred and ten percent of the amount that the Minister estimates is required to meet the cost of the benefits payable under this Part and Part III in respect of pensionable service that is to the credit of contributors before April 1, 2000.
s. 44.1 (1)	The Public Service Superannuation Investment Fund is established.
(2)	The following amounts shall be deposited into the Public Service Superannuation Investment Fund:
(a)		the amounts in the Superannuation Account transferred on or after April 1, 2000 that the Minister of Finance determines, in the manner and at the times that that minister determines; and
(b)		the income from the investment of the amounts referred to in paragraph (a) plus profits less losses on the sale of the investments.
(3)	If there are insufficient amounts in the Superannuation Account to pay the costs of the administration of this Act with respect to benefits payable under this Act in respect of pensionable service that is to the credit of contributors before April 1, 2000, those costs shall be paid out of the Public Service Superannuation Investment Fund.
(4)	The Minister of Finance may, after consultation with the Public Sector Pension Investment Board within the meaning of the Public Sector Pension Investment Board Act, transfer to the Superannuation Account amounts in the Public Service Superannuation Investment Fund that he or she determines, in the manner and at the times that that minister determines.
s. 44.2 (1)	The Public Service Pension Fund is established.
(2)	The following amounts shall be deposited in the Public Service Pension Fund:
(a)		the amounts determined by the Minister under subsection (3);
(b)		all other amounts required by this Act to be paid into the Fund; and
(c)		the income from the investment of the amounts referred to in paragraphs (a) and (b) plus profits less losses on the sale of the investments.
(3)	There shall be deposited into the Public Service Pension Fund, in each fiscal year, in respect of every month, no later than thirty days after the end of the month in respect of which the deposit is made
(a)		an amount that is determined by the Minister, based on actuarial advice, to be required to provide for the cost of the benefits that have accrued in respect of that month in relation to current service and that will become payable out of the Public Service Pension Fund; and
(b)		an amount that is determined by the Minister in relation to the total amount paid into the Public Service Pension Fund during the preceding month by way of contributions in respect of past service.
(4)	In determining amounts for the purposes of paragraph (3)(a), the Minister may take into account any surplus in the Public Service Pension Fund as shown in the most recent actuarial valuation report referred to in section 45 on the state of the Fund.
(5)	The amounts deposited in the Public Service Pension Fund shall be transferred to the Public Sector Pension Investment Board within the meaning of the Public Sector Pension Investment Board Act to be dealt with in accordance with that Act.
(6)	All amounts required for the payment of benefits for which this Part and Part III make provision shall be charged to the Public Service Pension Fund and paid out of the assets of the Public Sector Pension Investment Board if the benefits are payable in respect of pensionable service that comes to the credit of a contributor on or after April 1, 2000.