Court's decision demonstrates how existing legislation allows employers
to disregard commitments to pensioners
TORONTO, Feb. 1, 2013 /CNW/ - A Supreme Court of Canada decision has
confirmed that federal insolvency legislation must be reformed to
better protect pensioners, the United Steelworkers (USW) union says.
"The Supreme Court has ruled that even when an insolvent company
breaches its fiduciary duty to its pensioners it does not have to
satisfy its pension obligations," said USW Canadian Director Ken
"There can be no clearer confirmation of the need for fundamental reform
of federal insolvency laws and we call on the federal government to act
quickly to defend the rights of pensioners," Neumann said.
"After a lifetime of work, Canadians must know that their pensions are
protected. Our government must put the rights of pensioners above those
of other creditors."
The Supreme Court released a decision today that overturned a 2011
landmark ruling by the Ontario Court of Appeal involving Toronto-based
manufacturer Indalex Limited and the Steelworkers union, which
represented Indalex workers.
Indalex had filed for protection under the Companies' Creditors
Arrangement Act (CCAA) in 2009. The company obtained interim financing
to continue operations before selling substantially all of its assets
in a court-approved sale.
The Steelworkers union had argued in court that the company failed to
deal with its pension obligations during the restructuring and sale
process. The union argued the company should use proceeds of the sale
to satisfy pension plan deficiencies.
The Ontario Court of Appeal agreed with the union, ruling that Indalex
breached its fiduciary duty as pension plan administrator, and imposing
a constructive trust on the sales proceeds to cover the pension plan
On Friday, the Supreme Court justices also ruled - unanimously - that
Indalex breached its fiduciary duties as pension plan administrator.
"The Supreme Court concurred with our union's contention that Indalex
breached its fiduciary duties as pension plan administrator," Neumann
"Despite this unanimous finding, the Supreme Court justices failed to
hold Indalex financially liable for its breaches as a fiduciary,"
Neumann said. "Here we have a significant breach of the law, but no
remedy for those affected. Clearly, the law must be changed to protect
pension plan members."
As a result of the Supreme Court decision, 170 Indalex pensioners will
suffer pension cuts, as $6.75 million is put into the pockets of
Indalex and its debt financer, Neumann said.
"This is a devastating blow to these pensioners who are the ones who
must suffer because their employer cannot be penalized for breaching
its fiduciary duties," he said.
"Until the law is reformed, corporations will be allowed to continue to
disregard their commitments to workers and pensioners."
SOURCE: United Steelworkers (USW)