Calder v Alberta, 2017 ABQB 162

Court of Queen’s Bench of Alberta Citation: Calder v Alberta, 2017 ABQB 162 Date: 20170307 Docket: 1401 09076 Registry: Calgary Between: William Arnold Calder, Mary Eileen Calder, Shaffeek Ali, Zobeeda Adheen, Thomas John De Beyer, Linda Mae Rogers, Faye Geraldine Douglas-Phillips, Hugh Clarence Phillips, Margaret Ruth Pointen-Willms, John Robert Willms, William Michael Stegmaier and Julia Mary Stegmaier Plaintiffs - and - Her Majesty the Queen In Right of the Province of Alberta and Alberta Pensions Services Corporation Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr.

Justice R.A. Neufeld _______________________________________________________ I. Introduction [ 1 ] 1994 was a pivotal year for public service pensions in Alberta. For managers, it marked the closure of a pension plan that had been in place for many years, and funded entirely by the defendant, the Province of Alberta (the “Province”), and the establishment of a new plan that would be funded by contributors.

The transition and rules governing pension entitlements were all prescribed by legislation – the Public Service Pension Plan Act , Alta Reg 368/1993 (“ PSPPA ”). [ 2 ] There is a small subset of past public service managers who qualify for pension under both the pre- 1994 Province funded plan (“Closed Plan”), and the post- 1994 employee funded plan entitled the Management Employees Pension Plan (“MEP” or “MEP Plan”).

This subset of individuals is comprised of approximately 25 employees who were employed as managers while the pre-1994 plan was in effect, who had left that employment prior to the MEP Plan coming into effect, and who had then returned to employment as a public service manager and became MEP Plan contributors. In some cases these individuals had left the employment of the Province

altogether before returning to work for the Province in a management capacity. In other cases, they had shifted from a management position to a non-management position within the Province prior to the transition, only to return to management later on. [ 3 ] In these reasons, I may sometimes refer to this subset of provincial employees as “Returning Managers”. All of the Plaintiffs in this action are Returning Managers or their spouses. [ 4 ] Both the Closed Plan and the MEP Plan are administered by the Defendant Alberta Pension Services Corporation (“APSC”), on behalf of the Minister of Finance.

As pension plan administrator, the APSC provides pension plan entitlement estimates to prospective retirees, as well as general information as to how such entitlements are calculated. Decisions made by APSC in administering the MEP Plan are subject to review by the MEP Board, pursuant to Ministerial Authorization 01/95 (passed under s.10 of

Schedule 6 of the PSPPA ). [ 5 ] This case concerns a decision by the APSC that had the effect of reducing entitlements under the Closed Plan for 23 of the 25 Returning Managers. In some cases, such as for Dr. & Ms. Calder, the decrease was substantial – from approximately $8,000/month to $2,000/month. [ 6 ] The decision was based on a new

interpretation of the provisions of the PSPPA governing how Closed Plan entitlements are to be calculated (the “2012

Interpretation”). The new

interpretation was made in 2012, and replaced an

interpretation made in 2009 by the APSC (the “2009

Interpretation”). In both cases, the

interpretation was made after consideration by APSC management and legal counsel. [ 7 ] There are three basic issues before the Court: 1. What is the correct

interpretation of the PSPPA ? 2. If the 2012

Interpretation was correct and the 2009

Interpretation is incorrect, is the APSC liable to the Plaintiffs under the laws of trust, contract or tort for the reduction in their pension plan entitlements? 3. If such liability exists, what is the appropriate measure of damages? [ 8 ] The Defendant APSC also argued that given the statutory scheme in place, there is a threshold question to be decided. That is, whether the actions constitute a collateral attack on jurisdiction of the MEP Board to review decisions made by the APSC. II. Procedural History [ 9 ] This action was originated by William and Mary Calder. Dr.

William Calder is a Returning Manager who worked for the Province from 1978 until 1986 when he accepted a position for the Province of Saskatchewan. In 1995 Dr. Calder returned to a managerial position with the Province. In 2010 Dr. Calder inquired with the managers of the Provincial pension plan about his pension entitlements should he choose to retire. Dr. Calder was given numerous representations that his pension would be determined, in accordance with the 2009

Interpretation. [ 10 ] On the basis of this information, Dr. Calder chose to officially retire on September 1, 2011. After his official retirement, however, Dr. Calder took a one and a half year contract position in which he would receive 70% of his prior compensation in order to finish a project he had begun. After the project finished, Dr. Calder did no additional work for the Province. [ 11 ] Dr. Calder received pension entitlements based on the 2009

Interpretation from the date of his retirement until August 1, 2014. On June 2, 2014 Dr. Calder was alerted of the Province’s prior error in calculating his pension entitlement, and notified him of his revised monthly entitlement. Dr. Calder’s revised pension entitlement was reduced from $8,417.09 to $2,232.16 per month. Dr. Calder and his wife, Mary, then brought suit against the APSC and the Province. [ 12 ] Dr. Calder was one of many individuals who were affected by the revised

interpretation. The other Plaintiffs in this action are some of those similarly affected pensioners who were seeking similar redress from the Province and the APSC. In May of 2015, the other Plaintiffs were added to Dr. Calder’s action. On August 25, 2015, in an order given by this Court, it was agreed by the parties involved that this trial would address solely the circumstances of the Calders, which would in turn serve as a “test case” for the claims of the other Plaintiffs. III.

Summary Answers • The correct

interpretation of the PSPPA is that salary associated with service after the establishment of the MEP Plan is not to be used in the calculation of benefits under the Closed Plan. The legislative

interpretation advanced in the APSC’s 2009

Interpretation produces an absurd result in the form of the double counting of inflationary effects. Such an

interpretation is to be avoided. • The APSC knew or ought to have known that communication of absurdly inflated estimates of pension entitlements would or could result in detrimental reliance on the part of prospective retirees. • The APSC’s conduct did not constitute a breach of fiduciary duty or a breach of contract. However it did constitute a series of negligent misrepresentations to Dr. & Ms. Calder pursuant to the Hedley Byrne principle and the Defendants are liable to the Plaintiffs

for damages occasioned by virtue of reliance on those negligent statements. • In assessing the status quo ante for retirees who relied upon the incorrect pension estimates and payments from 2009-2014, consideration must be given to the loss of optionality suffered by those retirees in preparing for all planning their retirement. Strict proof of the actions that would have been taken by prospective retirees is not necessary. In the case of Dr.

Calder a reasonable approximation of reliance damage can be made by assuming that he would have continued to work as a full time employee until April 1, 2014 had he not been misled as to his pension entitlement. • In view of the result, there is no need to determine whether these actions constitute an impermissible collateral attack on the APSC’s 2012

Interpretation, as it withstood review on a standard of correctness in any event. IV. Legislative Background [ 13 ] Prior to January 1, 1994, management employees of the Province of Alberta were members of the Public Service Management Pension Plan (“Old Plan”). This plan was established in 1972. It was governed by the Public Service Management Pension Act , RSA 1980 c P 34 (“Old Act”). [ 14 ] Funding for the Old Plan came directly from the Province, resulting over time in substantial unfunded plan liability. [ 15 ] In the early 1990’s, the Province undertook a broad review of public sector pension plans.

A number of changes were recommended, including moving to an employee funded plan, and instituting a guaranteed cost of living adjustment at 60% of inflation. [ 16 ] To effectuate the transition, the new PSPPA created two separate, but related plans. The first was the Public Service Management (Closed Membership) Pension Plan (“Closed Plan”). The second was the Management Employees Pension Plan (“MEP” or “MEP Plan”). [ 17 ] The creation of the two plans was effective as of January 1, 1994.

However, for certain purposes the PSPPA established August 1, 1992 as an “Inception Date”. [ 18 ] Upon enactment of the PSPPA members of the Old Plan who had ceased employment as managers and thereby stopped participating in the Old Plan prior to the August 1, 1992 Inception Date became members of the Closed Plan.

Employees who had been members of the Old Plan but who continued on as management employees became members of the MEP Plan only, while being credited with their years of service under the Old Plan. [ 19 ] The PSPPA contemplated that following transition to the MEP Plan, some former Province management employees (and members of the Closed Plan), might return to work for the Province in a management capacity. The PSPPA recognizes that such employees could return and upon doing so would be members of both the Closed Plan and the MEP plan.

The Plaintiffs fall within this group. [ 20 ] As defined benefits pension plans both the Closed Plan and the MEP Plan have certain common attributes. Generally, the calculation of benefits takes into account:

a) a member’s highest average salary over a 5-year period (“HAS”), based off a member’s “pensionable salary”;

b) length of pensionable service;

c) a cost of living adjustment (“COLA”), if applicable (provided for in the Closed Plan pursuant to s.11 of

Schedule 6 of the PSPPA ); and

d) an actuarial upgrade (“Actuarial Upgrade”), if a member chooses to postpone commencement of their pension after the date they become eligible to receive it (provided for in the Closed Plan pursuant to s. 24(2) of the Old Act). V. The Legislative

Interpretation Issue [ 21 ] At issue in this action is how the PSPPA is to be interpreted in calculating benefits owed to a Closed Plan member who after the closure of that plan returned to work for the Province as a MEP Plan member. A. The APSC

Interpretations [ 22 ] The Plaintiffs argue that the correct

interpretation of the PSPPA is the one that was put into place in 2009, following receipt by APSC of an internal legal opinion. That opinion concluded that under the PSPPA , such benefits would be calculated using:

a) the member’s highest average annual salary over a 5 year period (“HAS”) based off a members pensionable salary, including her or his entire career in management with the provincial public service (i.e. whether during the Closed Plan or the MEP Plan);

b) length of pensionable service (based on service under the Closed Plan);

c) a Cost of Living Adjustment (“COLA”), if applicable, pursuant to s.11 of

Schedule 6 of the PSPPA , and

d) an actuarial adjustment, if the member had chosen to commence her or his pension after the date of eligibility. [ 23 ] This

interpretation was later articulated in a training manual used by ASPC employees in advising current and prospective retirees, including Dr. Calder and others. [ 24 ] Prior to the 2009 opinion, one method used by APSC to calculate Closed Plan pensions was to use the higher of a member’s Closed Plan and MEP salaries, but to not apply COLA or Actuarial Upgrade if MEP salary was used. In 2009, it was determined that the legislation made it mandatory for COLA and an actuarial adjustment to be applied, and that this was to be done even if MEP salary was used.

From that point forward, the APSC continued to use the higher of Closed Plan and MEP salaries in determining HAS and in all cases applied a COLA and Actuarial Upgrade. [ 25 ] This had the effect of using relatively recent earnings to establish base pension entitlement in respect of pre-1994 service, and then applying a cost of living escalator and actuarial upgrade to arrive at a present day pension entitlement. As an example, Dr. Calder’s highest average annual salary during his first stint of employment with the Province of Alberta was approximately $40,000 prior to his departure in 1986.

His highest average annual salary after returning to work for the Province of Alberta from 1995 to 2011 was $140,650.73. On his retirement in 2011, Dr. Calder’s Closed Pension Plan calculation was arrived at using the following numbers, including his HAS during the 1995 to 2011 era:

a) Age at retirement – 65.474

b) Highest Average Salary (based on MEP salary) - $140,650.73

c) Closed Plan Service – 9.358 years

d) Actuarial Upgrade – 2.436931 (subsequently revised by APSC to 2.218428)

e) COLA – 1.530029 [ 26 ] Under the 2009

Interpretation, therefore, Dr. Calder (and others) were entitled to receive pension under the Closed Plan based not only on recent salary, but to also have a COLA (and Actuarial Upgrade) applied to that salary base, dating back to the date of closure of the plan in 1994. [ 27 ] In January 2012, Mr. Murray Ferguson, APSC’s in-house actuary, became aware of the method being used to calculate Closed Plan pension entitlement for Returning Employees, which he described as being totally inconsistent with anything he had seen before in the pension world. [ 28 ] Mr.

Ferguson said that upon learning of this, he was concerned about the “double dip” inherent in that approach: Q And what -- can you help with what you mean by double dip, or meant by double dip? A Well, I meant that you’re – you’re getting not only your current earnings, but you’re also getting COLA and upgrade that really applies during the same period. Q Okay. A That that shouldn’t be applied during the same period that you’re having earnings count. [(Trial Exhibit 1, Tab 5, Trial Transcript, pg. 367, ll. 8-18)] [ 29 ] After Mr.

Ferguson expressed concern regarding the “double-dip”, a series of discussions and e-mail exchanges took place within APSC. Initially, the inside legal counsel responsible for the 2009

Interpretation (Mr. Jasper), maintained his original opinion. Another Government of Alberta lawyer (Mr. Singer) who was involved in the drafting of the PSPPA expressed a different view, however, stating as follows: It is my opinion that the legislative intent was that all elements involved in the calculation of the benefits under the closed plan that had not already been closed beforehand became closed down as at the end of 1993. This includes the salary referred to in

section 2.1 (b),

Schedule 6, with respect to the limited number of people who, at whatever point after inception, became members of both plans. In other words the reference to salary “earned after inception” in that clause, which would have applied to people who were members of the closed plan but who also had post- inception pensionable service, was restricted to salary earned up to the end of 1993 (or the end of July 1993?).

In other words, salary earned after inception can be taken into account in assessing their benefits under the closed plan except that no salary earned after 1993 (or July 1993?) counted or counts for the purposes of the closed plan (only for the purposes of MEP). In short, it is my opinion, whether based on a literal construction of the legislation or on the purposive intent-based

interpretation, that salary earned after inception is not to be taken into account as salary under the old closed plan. But this is subject to the exception that salary between inception and some date in 1993 is to be taking into account as a result of

section 2.1 (b). Whether that date is July 31 or December 31 (or some other date in) 1993, I give no opinion on at the present time. Please let me know if you need this date to be further analyzed. [TRIAL EXHIBIT 1, TAB 44- DEREK SINGER EMAIL DATED JULY 27, 2011] [ 30 ] At that point, Mr. Jasper changed his opinion, agreeing with Mr. Singer. In February 2012, APSC adopted a new

interpretation based on the views expressed by Mr. Ferguson and Mr. Singer. Closed Plan members seeking estimates of pension entitlement were thereafter provided estimates based on the 2012

Interpretation. However, Closed Plan members who were already receiving benefits calculated in accordance with the 2009

Interpretation were not contacted until over two years later, due to a risk

assessment process undertaken by APSC. B. What is the Correct

Interpretation? [31] The primary legislative provision at issue is s. 2.1(

b) of

Schedule 6 of the PSPPA. It states that: 2.1 In calculating the amount of any benefit under [the Closed Plan] only pensionable service may be taken into account...but... (

b) salary earned after inception may be taken into account in determining the 5 best years of salary for the purpose of the pensioncalculation. [32] “Inception” is defined as the beginning of August 1, 1992; but the Act does not define “salary”. [33] The APSC argues that properly interpreted, the “salary earned after inception” that may be taken into account is not salaryearned while the employee was contributing to the MEP Plan, but rather salary earned between the August 1, 1992 inception date and theeffective date of the MEP Plan, on January 1, 1994. [34] The Plaintiffs argue, among other things, that such an

interpretation reads into s.2.1(

b) a limitation that the Legislature couldhave included but did not. They say that the plain language of s.2.1 (

b) allows those charged with calculation of benefits to take intoaccount all salary earned after inception, by virtue of the use of the word “may”. They argue that the APSC’s use of the highest 5 yearsof average annual salary during service while part of the MEP Plan in calculating benefits under the Closed Plan was a straightforwardexercise of statutory power vested in the APSC. Hence, the 2012 decision to adopt a new approach was an exercise in reading into adiscretionary power a statutory limitation that did not exist. [35] I agree with the Plaintiffs that, on the face of it, the language used in s.2.1 (

b) confers a permissive power to take into accountsalary earned after inception, with no expressed limitations on that power. I do not agree, however, that the exercise of such a permissivepower constitutes an open-ended discretion.

Rather, both the plan administrator and a reviewing Court can and should have regard for thebroad legislative scheme and purpose (R v Z (DA), (SCC), [1992] 2 SCR 1025 at para 26), and the need to avoid aninterpretation that produces absurd results (Re Rizzo & Rizzo Shoes Ltd, (SCC), [1998] 1 SCR 27 at para 27). [36] The pension scheme created under the PSPPA was intended, in part, to effectuate a transition from a government-backedpension plan with an unfunded liability to a more sustainable financial model.

Included in the “puts and pushes” of such a transition aremandatory cost of living adjustments, and actuarial upgrades, both of which benefit retirees. In my view, an

interpretation that enablesrecent salary to be used as the basepoint for a pension calculation that is already required to include a COLA and Actuarial Upgradecreates an absurd result in the form of double (if not triple) dipping. To illustrate such an absurdity, APSC showed that Dr. Calder,whose employment was interrupted by a nine year stint with the Government of Saskatchewan, would receive almost twice as muchpension under the 2009

Interpretation than he would have received if he had continuously worked for the Province throughout his career.Such a result could not have been the intention of the Legislature. Nor was it expected by Dr. Calder himself, who candidly admitted tohis surprise and happiness in hearing in 2010 that he would be receiving such a large pension. [37] The PSPPA came into effect for all purposes on January 1, 1994. The inception date for the elimination of the Closed Planand creation of the MEP Plan was defined as August 1, 1992.

The transition to the new pension regime therefore needed to deal with howthe August 1, 1992 to January 1, 1994 period would be accounted for in the determination of pension entitlement. S. 2.1(

b) does so byallowing the inclusion of salary earned during that time period in the determination of highest annual average salary under the ClosedPlan and it is during this time period only that salary earned following the creation of the Closed Plan and MEP Plan could be taken intoaccount in determining Closed Plan entitlement. This is both fair and logical given the delayed effective date of the legislation as awhole. [38] It is also noteworthy that the word “salary” is not defined in the PSPPA. This begs the question of what “salary” was intendedby the Legislature as potentially being taken into account in calculating Closed Plan benefits. Under the 2009

Interpretation and thatadvanced by the Plaintiffs, either Closed Plan or MEP earnings could be used for decades to come. The 2012

Interpretation however,links Closed Plan pensionable salary to salary earned under the Old Plan after inception but prior to the PSPPA coming into effect for allpurposes` on January 1, 1994. For reasons indicated earlier, it is my view that such an

interpretation is logical. It is no answer to say thatthe s. 2.1(

b) of the PSPPA does not specifically define salary or otherwise proscribe it in this way. Clearly, not all salary earned by Dr.Calder after the inception date of August 1, 1992 would be eligible for inclusion. On that date Dr. Calder was employed by theGovernment of Saskatchewan, and no one could reasonably argue that his salary in that position should or could be taken into account incalculating Closed Plan benefits. [39] It follows that even at the most basic level, the language used in s.2.1 (

b) was left to

interpretation and common senseapplication. The problem was that while APSC did indeed interpret the legislation in 2009, it failed to do so in a sensible way, leading toinflated pension entitlement calculations and inflated expectations by retirees until a correct

interpretation was implemented. VI. Consequences of APSC Misinterpretation [40] From at least 2009 to February 2012, the APSC employed an incorrect

interpretation of the PSPPA when calculating pensionentitlements for Returning Managers. It corrected its error in advising prospective retirees from that time forward. [41] For current retirees, however, it continued to make monthly pension payments based on what it had concluded to be incorrectinterpretation of the PSPPA while it conducted a “risk assessment”. It was not until June 2014 that affected retirees such as Dr. Calderwere notified of the mistake. On June 2, 2014 he received a letter from APSC which informed him that: • his monthly Closed Plan pension of $8,417.09 per month would be reduced and adjusted to $2,232.16 per month commencing

August, 2014; • the basis for the decrease in his Closed Plan benefit was a recent discovery that his current Closed Plan pension was calculatedusing an incorrect

interpretation of the Closed Plan salary rules; and • APSC would not be asking for payment of the overpayment from September, 2011 to July, 2014 on the condition that he provideAPSC and Alberta with a full release. [42] At the time, Dr. Calder was receiving was, on a gross basis, $3,228.94 per month under the MEP Plan. This monthly paymentwas unaffected by the new

interpretation. [43] Dr. Calder, therefore saw his monthly payments, including both Closed Plan and MEP Plan payments drop from $11,646.03 to$5,461.10. [44] The Plaintiffs advanced a variety of arguments in contending that Canadian pension law creates duties founded on the law oftrusts, contracts, and negligence, and results in a correspondingly broad range of remedies for aggrieved employees, all of which apply inthis case. I will turn to these next. A.

Vested Rights [45] The Plaintiffs argue that under Canadian pension law principles the APSC was precluded from re-interpreting the PSPPA, oradopting a new policy in respect of its application, if the effect would be to derogate from the vested rights of pensioners.

They say thatwhen changes are made to a plan, they must be made in a manner that protects vested rights, and that is consistent with the pensionadministrator’s contractual and fiduciary duties to beneficiaries of the plan, including an obligation to prefer the beneficiaries’ interestsover that of the administrator when that administrator is also a plan sponsor (Indalex Ltd (Re), 2011 Ont CA 265, reversed at 2013 SCC6; Quinn v New Brunswick (Minister of Finance) 2011 NBQB 182 , 2011 NB QB 182 at paras 90-91). [46] The Defendants respond by asserting that the duty of the Minister and his or her delegate, in this case the APSC, is toadminister the Closed Plan in accordance with the PSPPA.

They say that neither the law of trusts, nor the law of contract compels orempowers the APSC to calculate and pay benefits other than in accordance with the statute. Therefore, where a mistake has been made,the Administrator has no choice but to correct it – regardless of whether such a correction is to the detriment or benefit of beneficiaries. [47] I agree with the Plaintiffs that the APSC, as administrator of the plan should generally take the interests of plan beneficiariesinto account in making decisions.

It also has a degree of discretion in determining how changes to plan administration are to beundertaken, including for example refraining from pursuing recovery of overpayments, and how changes to pension calculations are tobe communicated. [48] In my view, however, neither the law of trusts nor the law of contract can be stretched so as to compel the APSC to continueindefinitely to apply a statutory

interpretation that has been determined to be incorrect, and to create absurd results. Such an obligationcannot reasonably be interpreted as a term of employment. Nor can it be properly characterized as a trust obligation owed by theadministrator. Nor can it be the foundation of a “vested” right as argued by the Plaintiffs. [49] Put simply, while remedies may exist to address the wrong committed here, they do not include requiring that an error of lawbe committed over and over again in the future. B.

Estoppel [50] The Plaintiffs argue that the Province is estopped from paying them less than the amount they were told they would receiveupon retirement. In effect, they would have the Court order that payments be made in accordance with calculations made under the 2009Interpretation of the PSPPA, irrespective of whether it was correct in law. [51] There are two reasons why the principle of estoppel cannot be applied in this manner. [52] First, estoppel is not a cause of action.

It is a defence against the enforcement of otherwise enforceable rights. [53] Second, even when estoppel is properly pled as a defence, it cannot be invoked to prevent application of an express legislativeprovision (Telus Communications Company v Canada (Attorney General), 2014 FC 11 47); R v Moulton, (TCC),[2002] 3 CTC 2483. [54] In Moulton, at para 11 the Court stated: The doctrine has no application where a particular

interpretation of a statute has been communicated to a subject by an official of thegovernment, relied upon by that subject to his or her detriment and then withdrawn or changed by the government. In such a case ataxpayer sometimes seeks to invoke the doctrine of estoppel. It is inappropriate to do so not because such representations give rise to anestoppel that does not bind the Crown, but rather, because no estoppel can arise where such representations are not in accordance with thelaw. Although estoppel is now a principle of substantive law it had its origins in the law of evidence and as such related to representationsof fact. It has no role to play where questions of

interpretation of the law are involved, because estoppels cannot override the law... The question is not whether the Crown is bound by an earlier

interpretation upon which a taxpayer has relied. It is more to the point tosay that the courts, who have an obligation to decide cases in accordance with the law, are not bound by representations, opinions oradmissions on the law expressed or made by the parties.

The Court went on to state at para 11: I agree that the result may seem a little shocking to taxpayers who seek guidance from government officials whom they expect to be able to give correct advice. Unfortunately such officials are not infallible and the court cannot be bound by erroneous department

interpretations. Any other conclusion would lead to inconsistency and confusion. [ 55 ] I agree with the findings made in Moulton . Estoppel cannot compel the Crown to perpetuate a mistaken

interpretation of the law. C. Breach of Fiduciary Duty [ 56 ] In argument, the Plaintiffs cited a number of cases and academic authority for the proposition that the Province and its delegate, the APSC, owe a fiduciary duty to beneficiaries of the Closed Plan.

In Burke v Hudson’s Bay Co. , 2010 SCC 34 , the Supreme Court of Canada commented as follows regarding the duty of an employee as administrator of an employee pension plan, at para 41: Subject to the text of the plan, the terms of the trust agreement, and relevant statutes, there is no doubt that HBC had wide discretion with respect to the pension plan, which it could exercise unilaterally and which could affect the interests of the employees, and to which exercise of discretion the employees were vulnerable.

Therefore, I agree with Gillese J.A. that in these circumstances HBC, as plan administrator, was a fiduciary and that a fiduciary relationship existed between HBC as administrator and the employees/beneficiaries under the pension plan.[...] [ 57 ] In Indalex Ltd (Re), 2011 ONCA 265 at para 119 , varied on other grounds, Sun Indalex Finance, LLC v United Steelworkers 2013 SCC 6 , the Ontario Court of Appeal stated: It is readily apparent that these characteristics exist in the relationship between the pension plan administrator and the plan members and beneficiaries.

The administrator has the power to unilaterally make decisions that affect the interests of plan members and beneficiaries as a result of its responsibility for the administration of the plan and management of the fund. Those decisions affect the beneficiaries' interests. The plan members and beneficiaries reasonably rely on the administrator to ensure that the plan and fund are properly administered. And, as these appeals demonstrate, they are peculiarly vulnerable to the administrator's exercise of its powers.

Thus, at common law, Indalex as the Plans' administrator owed a fiduciary duty to the Plans' members and beneficiaries to act in their best interests. [ 58 ] The Province and the APSC argue that there is no fiduciary duty owed to the plan beneficiaries.

They say that there is a fundamental difference between the duty owed by an administrator of a private pension plan (as was the case in Burke ) and an administrator of a public pension plan established by statute. [ 59 ] The distinction was described as follows in PIPSC v Canada (Attorney General) , 2012 SCC 71 at para 117-118 : The administrator/pension Plan member relationship was dealt with in Burke . This Court found that the indicia of an ad hoc fiduciary relationship were met. However, the authority of Burke on this point is limited to the private pension plan context.

Participants in public pension plans are not subject to the same vulnerabilities or risks as participants in private pension plans. The government stands behind the pension plans that it provides for its employees, and is not subject to the same sort of credit risks as are private entities.

Furthermore, the Court recognized in Elder Advocates that while the Crown is subject to the normal requirements for establishing as ad hoc fiduciary relationship, “the special characteristics of governmental responsibilities and functions mean that governments will owe fiduciary duties only in limited and special circumstances” (para. 37). [ 60 ] The Defendants also relied on this Court’s decision in Alberta Municipal Retired Police Officer’s Mutual Benefit Society v Alberta , 2010 ABQB 458 , wherein the Court found that there was no fiduciary duty on the part of the Province and Alberta Pension Services in administering the public pension plan in question, at para 45: The facts in this case are very different.

Here, the Province, through the APS, is responsible for administering the Plan at large. While the funds in question “belong” to the Plan in some sense, this is unlike the Authorson situation where the funds under administration were pension benefits that had been paid to, and were the identifiable property of, a specific individual veteran.

I note that the Court in Authorson pointed out at para. 79 that “The Crown accounted for the funds it administered by crediting them to a special purpose account held in the name of each veteran within the Consolidated Revenue Fund.” Moreover, the APS administers the Plan for all Plan members, rather themselves. In Authorson , the DVA was acting in a capacity rather akin to a trustee appointed under the Adult Guardianship and Trusteeship Act, S.A. 2008, c.

A-4.2 and it is not surprising that a fiduciary obligation would be found in those circumstances, just as it would be if a private citizen were acting in such a capacity. There is nothing in this case that suggests such an individualized obligation and I see no reason to extend the application of the fiduciary principle to this context. In my view, this case is not distinguishable from Gorecki .

Therefore, I am not satisfied that it is plain and obvious that there is no fiduciary duty on the Province in this case. [ 61 ] In PIPSC , the Supreme Court of Canada held that a public pension plan administrator was not a trustee (at para 115-116): Chief Justice McLachlin recently listed the per se fiduciary relationships in Elder Advocates of Alberta Society v Alberta , 2011 SCC 24 , [2011] 2 S.C.R. 261 (S.C.C.), identifying the following: trustee-cestui que trust , executor-beneficiary, solicitor-client, agent-principal, director-corporation, guardian-ward, and parent-child.

In this case, the government does not fall into any of these categories. The closest category (trustee-cestui que trust ) does not apply because the government is not a true trustee in equity in respect of any trust property held for the benefit of the Plan members...

[62] In my view, neither the Province nor its delegate, the APSC, owe a fiduciary duty to individual pension plan beneficiariessuch as Dr. Calder. I agree with the reasoning of Madame Justice Kent in the Alberta Municipal Retired Police Officer’s MutualBenefit Society v Alberta case, in this respect, as quoted earlier. [63] The Province, sponsor of the Closed Plan, owes a variety of duties to all Albertans. As owner of funds to be used in payingpublic service pensions, it owes a general duty of proper management and stewardship of the public purse. However, the way that it is todo so is specified by statute.

The statute, in this case the PSPPA, prescribes how pension entitlements for individual beneficiaries are tobe determined. It would be wrong to superimpose on that statutory regime an overarching fiduciary duty to act in the best interests ofindividual beneficiaries at the expense of the broader public interest. [64] In any event, even if the Province and the APSC did owe a fiduciary duty to the Plaintiffs, as discussed earlier, such a dutycannot extend to requiring or empowering them to adopt a legislative

interpretation that is incorrect in law and leads to an absurd result. D. Negligent Misrepresentation [65] In order to maintain an action for negligent misrepresentation, a plaintiff must show that: 1. A duty of care exists based on a special relationship between the representor and the representee. 2. A representation was made that was untrue, inaccurate or misleading 3. The representor acted negligently in making the representation. 4. The representee relied, in a reasonable manner, on the representation. 5. The reliance was detrimental to the representee in the sense that damages resulted. (Sharbern Holdings Inc v Vancouver Airport Centre Ltd,

(2011) S.C.R. 175, para 121; Queen v Cognos Inc, (1993) 1 SCR, para 33) [66] Under the law of negligence, a successful plaintiff is entitled to compensation that is sufficient to place her or him in the sameposition as if the tort had not been committed [67] While conceding that the first three elements from Sharbern Holdings were met in this case, the Defendants take issue withrespect of the fourth and fifth. The Province accepts vicarious liability for the negligence of the APSC, but argues that Dr. Calder did notreasonably rely on the erroneous pension estimates given to him prior to retiring in 2011.

It says that there were sufficient “red flags”apparent to, and recognized by Dr. Calder, regarding the accuracy of the Closed Plan pension estimate such that Dr. Calder could notreasonably have relied upon such estimates. [68] I do not accept the Province’s arguments on this issue. Dr. Calder was clearly skeptical about the Closed Plan estimates hewas receiving in the 2010-2011 timeframe. He had been regularly seeking such estimates in the years preceding his retirement, and thejump in Closed Plan estimates after 2009 was apparent. However, Dr.

Calder took all reasonable steps to verify the accuracy of thoseestimates, going so far as to arrange a meeting with APSC for that purpose, at which he was given assurances that the pension calculationwas correct. [69] Dr. Calder’s approach was cautious, and in the circumstances his reliance on the information imparted was reasonable, eventhough he may well have suspected that something was wrong. [70] The Province also argues that the misrepresentation made to Dr. Calder was not financially detrimental. It says that theevidence before the Court failed to show that Dr.

Calder’s financial position was worsened by the misrepresentations. Not only was Dr.Calder over compensated from retirement to July 2014, but his plans for retirement were not affected. [71] The Plaintiffs argue that the measure of damages for negligent misrepresentation is the amount of money that Dr. Calderwould have made had the calculation error not occurred in 2012. They provided expert evidence regarding the present value of Dr.Calder’s pension under the 2009 and 2012

Interpretations, and argue that the proper measure of damages is the difference between thoselump sum amounts. [72] I do not accept the Plaintiff’s argument on this issue. In a similar case involving an incorrectly inflated governmental pensionestimate, the New Brunswick Court of Appeal in Gauthier v HMQC, (2000) (NB CA), NBJ No 143, 225 NBR (2d)211 (NBCA), at para 27, stated: Mr. Gauthier has no right, contractual, statutory or otherwise, to a pension at the level that he received from February 19, 1988 toSeptember 1996.

What he is entitled to receive is an award of damages for the pecuniary loss he suffered as a result of the respondent’snegligent misrepresentation. The assessment of Mr. Gauthier’s pecuniary loss must take into account the negative financial repercussionsof his premature retirement as well as its positive effects on his financial situation. [73] I agree with the approach taken in Gauthier. Dr. Calder is not entitled to damages that would put him in the same position hewould have enjoyed had the misrepresentation been true.

He is entitled to restitution for the damages flowing the negligence of APSC ina communicating an inaccurate and misleading statement in the first place. [74] To illustrate: if a defendant lottery corporation had negligently misrepresented that the plaintiff had won a $10,000,000 dollarprize, the measure of damages would not be $10,000,000. It would be the financial loss suffered by the plaintiff in acting, to hisdetriment, on the misrepresentation, such as quitting a well-paying job, and even that amount would be subject to the duty to mitigate.

[75] In determining the issue of reliance in respect of inaccurate pension estimates it is useful to bear in mind the purpose forwhich such statements are typically sought. [76] A prospective retiree has two essential decisions to make. The first is whether and when she or he can afford to retire. Thesecond and related question is what she or he intends to do, post-retirement. [77] Dr. & Ms. Calder’s situation provides an example as to how such interrelated decisions are made. On being told that hisClosed Plan pension entitlement was more than expected, and after confirming that entitlement, Dr.

Calder decided to retire from his fulltime position within the next year. He then secured a one year 70% (hours and salary) contract from the Province allowing him tocomplete a project to which he was devoted. With additional income, and less time required at work during that contract year, theCalders were able to travel extensively, and help their children with certain expenditures. Dr. Calder then retired completely from work,and switched his focus to volunteer work, travel and family matters. [78] At trial, neither Dr. Calder nor Ms.

Calder stated what they would have done had they been properly advised as to Dr.Calder’s corrected Closed Plan pension entitlement. [79] In argument, the Province took the position that Dr. and Ms. Calder could have testified respecting how their plans wouldhave changed had they known of the correct

interpretation earlier, but did not do so. As a result, the Province argued that an adverseinference should be drawn. [80] In my view, the position of the Province in this respect is unreasonable. It is possible that the Calders’ might have had a “PlanB” in mind when they approached APSC for confirmation of pension entitlement of 2010. [81] It was open for either Defendant to have asked them whether such was the case during questioning for discovery or at trial.Apparently, neither did so at discovery, and neither did at trial.

More importantly, it seems to me that an answer to such a question wouldhave been speculative in any event. [82] An essential element of the Calders’ loss arising from the erroneous pension estimate, and their reliance on it, was optionality.Had they been properly advised they would have had different options available in deciding how and when to retire, and how to managetheir investments and spending habits before and after retirement. For example, Dr.

Calder could have continued full time employmentafter age 65; he could have sought an extended contract based on 70% time/salary, beyond one year; or he could have sought contractwork in the private sector. [83] He and Ms. Calder could have deferred vacation travel and financial assistance to their children in order to build more wealthfor retirement. They could have chosen a different spousal benefits package on retirement. [84] Accordingly, I am satisfied that Dr. and Mrs. Calder not only relied on the negligent misrepresentation sanctions of the APSC,but did so to their detriment. VII.

Quantum [85] Damages associated with negligent misrepresentation can be to quantify, as there is inherent uncertainty in determining howthe victim might have acted had the misrepresentation not been made. This difficulty has been addressed in favor of victims by reversingthe traditional onus of proof. [86] In Gauthier, the New Brunswick Court of Appeal put it this way (at para 21): [...] the author of a negligent misrepresentation bears the burden of displacing the representee's assertion that the status quo ante wouldhave continued but for the tort.

The rationale for such a reversal of the traditional burden of proof is explained by Justice Sopinka inRainbow Industrial Caterers Ltd. v. Canadian National Railway Co., (SCC), [1991] 3 S.C.R. 3, at pp. 15-16: Although the legal burden generally rests with the plaintiff, it is not immutable. [...] Valid policy reasons will be sufficient to reverse theordinary incidence of proof. In my opinion, there is good reason for such reversal in this kind of case. The plaintiff is the innocent victimof a misrepresentation which has induced a change of position.

It is just that the plaintiff should be entitled to say "but for the tortiousconduct of the defendant, I would not have changed my position".

A tortfeasor who says "Yes, but you would have assumed a positionother than the status quo ante", and thereby asks a court to find a transaction whose terms are hypothetical and speculative, should bearthe burden of displacing the plaintiff's assertion of the status quo ante. [87] For victims such as the Calders, the status quo ante included the option to work past the date when they actually retired,based on their reliance on the APSC’s misinformation. [88] The Province tendered expert evidence in the form of a report by Mr. John Slipp, an actuary with AON Hewitt. Mr.

Slipp’sreport opined on the capitalized value of salary and pension benefits to Dr. Calder under three scenarios. The first assumed that Dr.Calder would have worked full-time until September 1, 2011 (his actual date of retirement from full time service) and then received apension calculation under the 2012

Interpretation. Under that scenario, Mr. Slipp concluded that as of August 1, 2016, Dr. Calder wasahead of the game. He had actually received more after tax income between September 1, 2011 and August 1, 2016 than he would haveunder this scenario. [89] The second scenario assumed that Dr. Calder would have continued to work on a full-time basis until retiring on April 1,2013, and would then have had a pension, calculated under the 2012

Interpretation. Once again, this was compared to Dr. Calder’s actualearnings during the 2011-2016 time period. Under this scenario, Mr. Slipp estimated a net difference in the combined retroactive andprospective salary and pension benefits at $25,080.00, after tax, resulting in a grossed-up lump sum value of $36,685.00, that would needto be paid to keep Dr. Calder whole.

[ 90 ] In argument the Province advanced this scenario as one that could be used in calculation of damages if the evidence was “generously” construed. [ 91 ] The third scenario assessed by Mr. Slipp assumed that Dr. Calder would have postponed his retirement until age 68 (April 1, 2014). In this case, Mr. Slipp opined that the net after tax difference in the capitalized value of salary and pension benefits would be $165,285.00 in 2016. After gross-up for taxes a lump sum payment of $265,017.00 would be required to make Dr. Calder whole. [ 92 ] The Plaintiffs contend that none of the scenarios assessed by Mr.

Slipp properly reflect the damages suffered. They insist that damages must be based on the difference in value between pensions calculated using the 2009

Interpretation, and the 2012

interpretation respectively. [ 93 ] As discussed earlier, the Plaintiffs’ approach to calculation of damages is not appropriate. [ 94 ] In my view, the approach utilized by Mr. Slipp constitutes the best evidence before the Court regarding the appropriate measure of reliance damages. In determining which of the three scenarios ought to be used, however it is important to bear in mind that by virtue of the negligence of the APSC the Calders were not only misled regarding their pension entitlement, but were also not notified of the APSC’s mistake for over two years.

While enjoying the benefit of inflated pension payments during that time, they also lost an opportunity to adjust their retirement savings and spending patterns to ameliorate the impending reduction. [ 95 ] In the circumstances, it is fair to assume for the purpose of calculating reliance damages that had Dr. Calder been properly advised, he would have deferred retirement to April 1, 2014. This would have entailed working for three additional years on a full time basis rather than working for 1 ½ years on a 70% contract (time and salary), followed by taking on volunteer work in the community.

It would have also entailed deferment of vacation travel in order to provide a more secure financial future. Given Dr. Calder’s good health and high job satisfaction, I have no reason to doubt that he could have worked to age 68 had he needed to do so. [ 96 ] I therefore find that the proper measure of damages suffered by Dr. Calder (and his spouse) is that calculated in scenario three of the report of Mr. Slipp: $267,017.00, on a grossed-up basis. VIII.

Collateral Attack [ 97 ] The APSC asserts that the actions should be dismissed as constituting an impermissible collateral attack on the jurisdiction of the Management Employees Pension Board (“MEP Board”). It says that before bringing an action based on the APSC’s alleged 2012 misinterpretation of the PSPPA , the Plaintiffs were required to exercise their right to have the decision to reduce pensions reviewed by the MEP Board, pursuant to Ministerial Authorization 01/95 (passed under s. 10 of

schedule 6 of the PSPPA ). [ 98 ] As a general principle, parties who have a right to have a governmental decision reviewed by an administrative tribunal should exercise that right before initiating an action before the Courts. [ 99 ] The decision by the Plaintiffs to abandon (or in the case of Dr. Calder, not initiate) a review to the MEP Board ran contrary to that principle. Given the deadline for seeking review by the MEP Board, it created a risk that in the end result, no review of the APSC’s decision would have been available at all. It also put the Court in the position where its review of the correctness of the 2012

Interpretation had to be done without the benefit of a decision by the MEP Board on that point. This was unfortunate. [ 100 ] In the end result, however, the collateral attack issue is largely moot. The 2012

Interpretation upon which the decision to reduce Closed Plan benefits was made was legally correct. It was the previous 2009

Interpretation that was not only incorrect, but unreasonable due to absurdity of result, and which gave rise to liability in negligence. [ 101 ] In Canada (Attorney General) v TeleZone Inc , 2010 SCC 62 the Supreme Court of Canada held that if damages flow from a governmental decision recovery may be sought through the Courts, even if review of the decision was available by way of judicial review. This was subject to the proviso that the plaintiff must be prepared to accept the correctness of the impugned decision. [ 102 ] In the circumstances of this case, the Plaintiffs were not prepared to accept the correctness of the 2012

Interpretation, but they did present alternative claims and theories of liability for consideration by the Court. The end result is the same as it would have been had the Plaintiffs accepted the correctness of the 2012

Interpretation and proceeded with their action for negligent misrepresentation. It is therefore unnecessary to decide whether the Plaintiff’s challenge of the correctness of the decision was an impermissible collateral attack. The attack failed, and liability was determined on the basis that the impugned pension entitlement decision was legally correct. IX. Conclusion [ 103 ] In

summary, I find that the Defendants are liable in tort to the Plaintiffs Dr. and Ms. Calder, with damages set at $265,017.00, based on the evidence of Mr. Slipp, on behalf of the Defendant Province. By Consent Order of this Court dated August 25, 2016, it was directed that this “test case” would determine and conclusively bind the parties in respect of the statutory

interpretation issue, and resultant effect on benefit entitlement. [ 104 ] While this decision should settle the statutory

interpretation issue, it will remain for the parties to resolve, or litigate, the issues of liability and damages for negligent misrepresentation as they pertain to the Plaintiffs other than Dr. and Ms. Calder. It will be necessary to determine in each case whether such Plaintiffs relied to their detriment on retirement entitlement advice predicated on the incorrect, 2009

interpretation, and if so what damages resulted from that reliance. To the extent that there are disagreements regarding the next steps in that litigation, these should be brought back before me or the Case Management Justice assigned to this matter for resolution.

X. Costs [ 105 ] The Plaintiffs sought solicitor and client costs based in part on what they considered to be high-handed conduct by the Defendants - an allegation that I do not consider to be supported on the evidence. The Defendants did not join issue on the question of costs, requesting that they be permitted to reserve comment until a decision had been made. In my view, the Defendant’s reservation of comment was appropriate. [ 106 ] If the parties are not able to agree on costs after reviewing this Decision, they may bring that matter back to me for determination.

Heard on the 11 th , 13 and 14 th days of October, 2016. Dated at the City of Calgary, Alberta this 7 th day of March, 2017. R.A. Neufeld J.C.Q.B.A. Appearances: Norm Machida, Q.C. and Rita Richardson for the Plaintiff William Arnold Calder and Mary Eileen Calder Greg A. Harding, Q.C. and Matthew Turzansky for the Defendant Alberta Pension Services Marta Burns and Lisa Friesenhan for the Defendant Her Majesty the Queen In Right of the Province of Alberta