TRUSTEES OF RETIREMENT PLAN FOR EXECUTIVE EMPLOYEES OF ANTHONY CAPITAL CORPORATION v. PARTICIPATING COMPANIES, 2021 NLSC 91

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION In Bankruptcy and Insolvency Citation : Anthony Capital Corporation (Re) , 2021 NLSC 91 Date : June 24, 2021 Docket : 202101G0338 In The Matter of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.

B-3 , as amended (the “ BIA ”); And In The Matter of the bankruptcy of Anthony Capital Corporation Between: TRUSTEES OF RETIREMENT PLAN FOR EXECUTIVE EMPLOYEES OF ANTHONY CAPITAL CORPORATION AND PARTICIPATING COMPANIES ApplicantS And: BANK OF MONTERAL First Respondent And: PRICEWATERHOUSECOOPERS LLP CANADA, IN ITS CAPACITY AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF ANTHONY CAPITAL CORPORATION Second Respondent Before: Justice Robert P. Stack Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: May 31, 2021 and June 22, 2021

Summary: The applicants, Trustees of Retirement Plan for Executive Employees of Anthony Capital Corporation and Participating Companies,sought an order directing the first respondent, Bank of Montreal (“BMO”), to release funds held in trust by its solicitors from themortgage sales by BMO of two properties formerly owned by Anthony Capital Corporation (“ACC”). ACC was the employer and original plan administrator for a retirement plan for its executive employees (the “Pension Plan”). OnJanuary 14, 2019, ACC went into bankruptcy pursuant to the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”).

Thesecond respondent, PricewaterhouseCoopers LLP Canada, is the Trustee in Bankruptcy of ACC. As of the date of bankruptcy,approximately $571,900 was owed to the Pension Plan by ACC. The applicants submitted that the funds owing to the Pension Plan are protected by a common law trust and therefore fall outside theproperty of ACC pursuant to section 67(1)(

a) of the BIA. In the alternative, the applicants submitted that amounts owing to the PensionPlan for the normal cost and special payments have super-priority status pursuant to

section 81.5 of the BIA. In the further alternative, theapplicants claimed that any amounts owing to the Pension Plan that fall outside the scope of

section 81.5 of the BIA, constitute a valid,secured claim over the assets of ACC pursuant to the Pension Benefits Act, 1997, S.N.L. 1996, c. P-4.01 (the “PBA”). It was held that: 1. The common law trust claim failed because the applicants did not establish certainty of subject matter. The amounts due to thePension Plan cannot be traced to the proceeds from the mortgage sales; 2. The normal cost due to the Pension Plan enjoys super-priority under

section 81.5 of the BIA, but the special payments do not; and 3. The pension plan administrator is not a secured creditor for the purposes of the BIA. As a result, the secured interest granted bysection 32(4) of the PBA does not survive bankruptcy. Appearances: Denis J. Mahoney and Andrea N. Williams Appearing on behalf of the Applicants Sarah M. Learmonth and Andrew A. Fitzgerald Appearing on behalf of the First Respondent Allison J. Philpott Appearing on behalf of the Second Respondent, the Trustee in Bankruptcy Authorities Cited: CASES CONSIDERED: R. v. Anthony Capital Corp. (October 8, 2019), St.

John’s 0118A01792 and 0118A01893 (N.L. Prov. Ct.);The Superintendent of Pensions v. Anthony Capital Corporation (January 24, 2018), St. John’s 201701G2538 (N.L.S.C. (T.D.));Reference re

Section 32 of the Pension Benefits Act, 1997, Re, 2018 NLCA 1; British Columbia v. Henfrey Samson Belair Ltd., (SCC), [1989] 2 S.C.R. 24; The Guarantee Company of North America v. Royal Bank of Canada, 2019 ONCA 9; EdmontonPipe Industry Pension Plan Trust Fund (Trustee of) v. 350914 Alberta Ltd., 2000 ABCA 146; Fortis Trust Corp. v. Deloitte & ToucheInc. (1997), (NL CA), 159 Nfld. & P.E.I.R. 91, 492 A.P.R. 91 (Nfld. C.A.); Royal Bank v. Sparrow Electric Corp.,

(SCC), [1997] 1 S.C.R. 411; Toronto-Dominion Bank v. Canada, 2020 FCA 80; General Chemical Canada Ltd., Re,2007 ONCA 600, leave to appeal denied 252 O.A.C. 396, 385 N.R. 395 (S.C.C.) STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; Pension Benefits Act, 1997, S.N.L. 1996, c. P-4.01;Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.); Bank Act, S.C. 1991, c. 46; Pension Benefits Standards Regulations, 1985, S.O.R./87-19;Companies’ Creditors Arrangement Act, R.S.C. 1985, c.

C-36 REASONS FOR JUDGMENT Stack J.: INTRODUCTION [1] The applicants, Trustees of Retirement Plan for Executive Employees of Anthony Capital Corporation and ParticipatingCompanies, seek an order directing the first respondent, Bank of Montreal (“BMO”), to release funds that are currently being held intrust by its solicitors. [2] The funds in question are the proceeds from mortgage sales by BMO of two properties formerly owned by Anthony CapitalCorporation (“ACC”). [3] ACC was the employer and original plan administrator for a retirement plan for its executive employees (the “Pension Plan”).On January 14, 2019, ACC went into bankruptcy pursuant to the Bankruptcy and Insolvency Act, R.S.C. 1985, c.

B-3 (the “BIA”). Thesecond respondent, PricewaterhouseCoopers LLP Canada (“PWC”), is the Trustee in Bankruptcy of ACC.

As of the date of bankruptcy,approximately $571,900 was owed to the Pension Plan by ACC. [4] On January 29, 2019, the Superintendent of Pensions appointed the applicants, Harold Snelgrove and Mike Mills, the onlyretiree beneficiaries under the Pension Plan, as its trustees and administrators. [5] Affidavit evidence suggests that because the Pension Plan is currently severely underfunded, without access to the mortgageproceeds, its managers will seek to reduce the monthly payout to the two beneficiaries by approximately 80%. [6] PWC and BMO agree that

section 32 of the Pension Benefits Act, 1997, S.N.L. 1996, c. P-4.01 (the “PBA”) creates a deemedtrust for the amounts owing to the Pension Plan. They also agree that pursuant to

section 81.5 of the BIA, the Pension Plan has super-priority over all other creditors to the extent of the normal cost owed to the Pension Plan ($454,100) and that the other amounts owed tothe Pension Plan constitute a secured claim by virtue of section 32(4) of the PBA. [7] What remains to be determined is whether all of the amounts owed to the Pension Plan are protected by a common law trustsuch that they fall within section 67(1)(

a) of the BIA and, therefore, are outside the scope of the bankruptcy of ACC and the securitygranted by it to BMO. If not, do other amounts owing to the Pension Plan beyond the normal cost enjoy the benefit of the

section 81.5BIA super-priority? Finally, if the other positions put forth by the applicants fail, given that ACC is a bankrupt, do they have a securedclaim pursuant to section 32(4) of the PBA? the pension plan [8] The evidence establishes that as of the date of bankruptcy of ACC on January 14, 2019, there was approximately $571,900owed to the Pension Plan in respect of its termination as declared by the Superintendent of Pensions on November 15, 2016.

The PensionPlan is a defined benefit pension plan, and I am advised that because of the volatility associated with such plans, any amounts referred toin this decision are subject to verification by the Pension Plan actuary prior to distribution. [9] The amounts due to the Pension Plan can be itemized as follows: 1.

Aggregate of normal actuarial cost and special payments that have accrued to the date of bankruptcy: approximately $499,400 [10] This amount represents contributions that have accrued to the Pension Plan prior to the bankruptcy date but have not beenremitted by ACC. [11] As noted in the Morneau Shepell Actuarial Report for the Retirement Plan for the Executive Employees of Anthony CapitalCorporation and Participating Companies updated on April 25, 2019, the contributions receivable at the wind-up date may besummarized as follows: Contributions receivable in respect of the period prior to declaredwind-up date (including interest) $ 454,100 Contributions receivable in respect of special payments owing asestablished at wind-up (including interest) 45,300 [12] For the purposes of this decision, the $454,100 represents the normal cost and the $45,300 represents special payments. 2.

Residual wind-up deficit in the Pension Plan required to complete its termination as ordered November 15, 2016: approximately

$42,500 [ 13 ] This amount represents an estimate of the additional amount required to complete the Pension Plan wind-up and is representative of the cost (over and above the contributions in arrears) of purchasing annuities for the plan members as required under the PBA . 3. Estimated wind-up expense for actuarial, financial, and legal support: approximately $30,000 [ 14 ] In accordance with paragraph 6(5) (

a) of the PBA , the cost of administering the Pension Plan is to be paid by the employer. The wind-up expenses for actuarial, financial, and legal support to complete the plan termination are estimated at $30,000, subject to confirmation at the time of plan wind-up. issues [ 15 ] The issues before me are as follows:

(1) Are the amounts owed to the Pension Plan protected by a trust created by section 32(1) of the PBA such that they fall outside the property of ACC pursuant to section 67(1) (

a) of the BIA ?

(2) In the alternative, do the normal cost and special payments owed to the Pension Plan enjoy a super-priority under

section 81.5 of the BIA ?

(3) In the further alternative, do the amounts owing to the Pension Plan that do not enjoy the

section 81.5 super-priority constitute a secured claim in accordance with section 32(4) of the PBA ? analysis 1. Are the amounts owed to the Pension Plan protected by a trust created by

section 32 of the PBA such that they fall outside the property of ACC pursuant to section 67(1) (

a) of the BIA ? [ 16 ] The amounts owed to the Pension Plan are readily identifiable and ascertainable. They were identified in a judgment and order of the Provincial Court of Newfoundland and Labrador ( R. v. Anthony Capital Corp. (October 8, 2019), St. John’s 0118A01792 and 0118A01893 (N.L. Prov. Ct.) and were acknowledged by ACC in a consent order from this Court ( The Superintendent of Pensions v. Anthony Capital Corporation (January 24, 2018), St. John’s 201701G2538 (N.L.S.C. (T.D.)). [ 17 ]

Section 32 of the PBA provides: 32.

(1) An employer or a participating employer in a multi-employer plan shall ensure, with respect to a pension plan, that (

a) the money in the pension fund; (

b) an amount equal to the aggregate of (

i) the normal actuarial cost, and (ii) any special payments prescribed by the regulations, that have accrued to date; and (

c) all (

i) amounts deducted by the employer from the member's remuneration, and (ii) other amounts due under the plan from the employer that have not been remitted to the pension fund are kept separate and apart from the employer's own money, and shall be considered to hold the amounts referred to in paragraphs (

a) to (

c) in trust for members, former members, and other persons with an entitlement under the plan.

(2) In the event of a liquidation, assignment or bankruptcy of an employer, an amount equal to the amount that under subsection (1) is considered to be held in trust shall be considered to be separate from and form no part of the estate in liquidation, assignment or bankruptcy, whether or not that amount has in fact been kept separate and apart from the employer's own money or from the assets of the estate.

(3) Where a pension plan is terminated in whole or in part, an employer who is required to pay contributions to the pension fund shall hold in trust for the member or former member or other person with an entitlement under the plan an amount of money equal to employer contributions due under the plan to the date of termination.

(4) An administrator of a pension plan has a lien and charge on the assets of the employer in an amount equal to the amountrequired to be held in trust under subsections (1) and (3). [18] It is conceded by the respondents that section 32(1) of the PBA creates a deemed trust for amounts owing to a pension plan,including the amounts owing in this case (Reference re

Section 32 of the Pension Benefits Act, 1997, Re, 2018 NLCA 1, at paras. 26-27).Accordingly, say the applicants, all amounts due to the Pension Plan as of the date of wind-up, including the normal cost, specialpayments, and wind-up deficits, fall within a common law trust and therefore do not form part of the property of ACC pursuant to section67(1)(

a) of the BIA. The respondents say, however, that the PBA creates a statutory trust, not a common law trust, and as a result, thepriority of the amounts owing is determined by

section 81.5 of the BIA, which limits the right of recovery to the normal cost due to thePension Plan. [19] Section 67(1)(

a) of the BIA provides that any property held in trust by a bankrupt for another person does not form part of itsproperty and therefore is not divisible among its creditors. [20] The applicants acknowledge that statutory deemed trusts do not automatically fall within the scope of section 67(1)(

a) of theBIA. Nevertheless, they submit that the trust for the Pension Plan is a trust within the meaning of

section 67. [21] The applicants also acknowledge that the monies owing to the Pension Plan were not kept separate from ACC's other monies asrequired by the PBA. The applicants submit that although this is evidence of ACC's poor administration, it does not destroy the trust. Thisis the crux of the matter as I must determine whether the mortgage proceeds held by the solicitors are impressed with a common lawtrust for the benefit of the Pension Plan. [22] In British Columbia v.

Henfrey Samson Belair Ltd., (SCC), [1989] 2 S.C.R. 24, the Supreme Court of Canadaheld that trusts established by provincial law which meet the general principles of the law of trusts will be excluded from the bankrupt'sestate pursuant to section 67(1)(

a) of the BIA. Henfrey repeats the well-established requirements to establish such a trust: certainty ofintention, certainty of subject matter, and certainty of object. Here, the applicants have established certainty of intention and certainty ofobject. Their claim to certainty of subject matter requires the proceeds from the two mortgage sales to be subject to the trust. In effect,the applicants say that the monies that were subject to the trust can be traced to the mortgaged properties and their sale by BMO. [23] In the decision of the Ontario Court of Appeal in The Guarantee Company of North America v.

Royal Bank of Canada, 2019ONCA 9, Sharpe J.A. considered the effect on a statutory trust of the co-mingling of amounts subject to the trust with other monies of thetrustee. At paragraph 99, he concluded that in that case: 99 I am fortified in that conclusion by a considerable body of authority in addition to Henfrey that stands for the proposition thatcommingling alone will not destroy the element of certainty of subject matter under the general principles of trust law. I have alreadymentioned Graphicshoppe where this court clearly rejected that proposition. A.H.

Oosterhoff, Robert Chambers & Mitchell McInnes,Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed. (Toronto: Carswell, 2014), at pp. 207-208, states that when trust propertyis deposited into a mixed account, “the trust is not necessarily defeated. The rules of tracing allow the beneficiary to assert a proprietaryinterest in the account.” In B.M.P. Global Distribution Inc. v.

Bank of Nova Scotia, 2009 SCC 15, [2009] 1 S.C.R. 504 (S.C.C.), theSupreme Court held that mixing of the funds does not necessarily bar recovery and that it is possible to trace money into bank accountsas long as it is possible to identify the funds: at para. 85. The funds are identifiable if it can be established that the money deposited inthe account was the product of, or substitute for, the original thing: at para. 86. As the Alberta Court of Queen’s Bench recently held, inImor Capital Corp v. Horizon Commercial Development Corp, 2018 ABQB 39, 56 C.B.R. (6th) 323 (Alta.

Q.B.), at para. 58: ... [the bankrupt’s] co-mingling of trust funds with its own is not fatal to the trust. It must be determined whether, despite the co-mingling, the trust funds can be identified or traced. [Additional case citations omitted.] [24] A similar result was reached in Edmonton Pipe Industry Pension Plan Trust Fund (Trustee of) v. 350914 Alberta Ltd., 2000ABCA 146 at paras. 24-31, where a collective agreement provided that the employer would make contributions to various trust funds,including a pension trust fund. The employer went bankrupt.

The trustees of the trusts brought a motion for a declaration that the monieswere trust funds and so did not form part of the bankrupt's estate. It was held that the co-mingling of the trust monies with other moniesof the employer did not defeat the trust claim. [25] Based upon the authorities referred to above, I am satisfied that where pension trust funds can be identified or traced, co-mingling them with other funds of an employer will not be fatal to the claim.

Therefore, the fact that money owing to the Pension Planwas co-mingled with other monies of ACC does not necessarily mean that a common law trust has not been established. [26] In this case, however, we are not dealing with a bank account of the bankrupt in which trust monies were deposited togetherwith other funds of the bankrupt. The pool of funds over which the applicants wish to assert a trust are the net proceeds from the sale oftwo properties secured by real property mortgages granted by ACC to BMO.

The applicants provided no authority for the propositionthat amounts subject to a statutory trust can be traced to the proceeds from a sale under a legal mortgage of real property. [27] To consider the ability to trace a trust to the proceeds from a mortgage sale, one must consider the nature of the conveyance oflegal title under a real property mortgage. In Fortis Trust Corp. v. Deloitte & Touche Inc. (1997), (NL CA), 159Nfld. & P.E.I.R. 91, 492 A.P.R. 91 (Nfld.

C.A.), Marshall J.A. held at paragraph 167, “As a matter of form, a mortgage involves theconveyance of the legal title to the mortgagee, subject to the proviso for redemption. The equitable title remains with the mortgagor untilit is foreclosed or other remedies such as sale are exercised on default.” Here, the legal titles to the properties were conveyed to BMOwhen ACC granted it the two mortgages. Subsequently, BMO exercised its sale remedies pursuant to the mortgages, thereby

extinguishing the equity of redemption. [28] The effect of legal title to property being held by a bank vis-a-vis a statutory trust is addressed in Royal Bank v. SparrowElectric Corp., (SCC), [1997] 1 S.C.R. 411. The case involved the proceeds of a liquidation sale of inventory and adetermination of priority between a deemed statutory trust and various security instruments. In particular, the court determined thepriority status of a deemed trust under section 227(4) and (5) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), versus a bank’sasserted priority under both a general security agreement and an assignment of inventory under

section 427 of the Bank Act, S.C. 1991, c.46. The majority held, per Iacobucci J., at paragraph 42: 42 I begin from the observation that Parliament, in enacting s. 227(4) and (5), has chosen to secure Her Majesty’s claims tounremitted payroll deductions through employing the concept of a deemed trust. Therefore, the proper analysis to follow in determiningwhether Her Majesty is entitled to priority pursuant to these subsections must utilize principles of property law.

For this reason, itbecomes relevant and indeed essential to scrutinize the nature of the interests which compete with Her Majesty’s trust in order todetermine whether and to what extent such interests have title in the disputed fund. As I mentioned previously, Her Majesty’s trust canattach to the disputed collateral only to the extent that that collateral is not in law the property of a party other than the tax debtor at thetime the deemed trust is engaged.

More specifically, subject to the application of the licence theory, if it is found that legal title in thecollateral is in the bank, and not Sparrow, Her Majesty’s deemed trust could only attach to Sparrow’s equity of redemption: seeHomeplan Realty Ltd. v.

Avco Financial Services Realty Ltd., supra, at p. 706. [29] At paragraph 65, Iacobucci J. addressed the effect on the deemed trust of the bank holding legal title to the inventory: 65 It follows from these observations that where, as here, a secured creditor holds a fixed charge over a debtor’s inventory, thatcharge will have the effect of ensuring the creditor has legal title to any and all inventory subject to the charge at any given point in time.This, of course, is subject to the caveat (not operative in this case) that no outstanding statutory payroll deductions had in fact been madeprior to the attachment of the fixed charge.

Thus, in the present case, the inventory which was subject to the liquidation sale belonged inlaw to the respondent bank: both under its GSA and its BAS the bank held a fixed charge over Sparrow’s inventory. As such, all that HerMajesty’s beneficial interest could attach to, before its sale, was Sparrow’s equity of redemption in the property: Homeplan Realty Ltd. v.Avco Financial Services Realty Ltd., supra; Canadian Imperial Bank of Commerce v. Klymchuk (1990), 1990 ABCA 141 , 74Alta.

L.R. (2d) 232 (C.A.), at p. 240. [30] It follows by analogy from Sparrow that because BMO held legal mortgages over the two properties, all that the PBA trustcould attach to, before the mortgage sales, was ACC’s equity of redemption. [31] Sparrow was considered recently by the Federal Court of Appeal in Toronto-Dominion Bank v.

Canada, 2020 FCA 80, whereDawson, J.A. wrote for the court at paragraph 26: 26 In Sparrow, the majority of the Supreme Court held that the deemed trust that then arose in favour of the Crown by operation ofsubsection 227(4) of the Income Tax Act did not take priority over the security interests that the Royal Bank possessed under the BankAct, S.C. 1991, c. 46 and the Personal Property Security Act, S.A. 1988, c. P-4.05 (reasons, paragraph 89).

The deemed trust did not havethe effect of undoing an existing security interest; rather, it was “a device for going back in time and seeking out an asset that was not, atthe moment the income taxes came due, subject to any competing security interest.” (reasons, paragraph 99). This said, the majorityemphasized that it was open to Parliament to use clear language to “assign absolute priority to the deemed trust.” (reasons, paragraph112). [32] This is exactly what Parliament did with respect to pensions. By enacting

section 81.5 of the BIA, Parliament created a deemedtrust to which it assigned absolute priority for the normal cost due to a pension plan. As a result, as is conceded by the respondents, thenormal cost due to the Pension Plan ranks ahead of the claims of secured creditors, including the claim of BMO under its mortgages.That, however, is as far as Parliament went. Consequently, I find that the deemed trust created by section 32(1) of the PBA cannot betraced to the proceeds from the mortgage sales for the remaining amounts due to the Pension Plan.

Although the applicants may haveestablished the trust necessities of intention and object, they have not established certainty of subject matter. As a result, their commonlaw trust argument fails. 2. Do the normal cost and special payments owed to the Pension Plan enjoy a "super-priority" under

section 81.5 of the BIA? [33] The respondents have conceded that the normal cost owing to the Pension Plan in the amount of $454,100 enjoys a super-priority pursuant to

section 81.5 of the BIA. [34] The applicants go further, however, and submit that on the facts of this case the amount owed to the Pension Plan for specialpayments in the amount of $45,300 also enjoys super-priority status pursuant to

section 81.5. Because this issue was first raised insubmissions, the parties were permitted to file supplemental briefs, and a further hearing date was set to address the applicants’ position. [35]

Section 81.5 of the BIA provides in relevant part: 81.5

(1) If the bankrupt is an employer who participated or participates in a prescribed pension plan for the benefit of the bankrupt'semployees, the following amounts that are unpaid on the date of bankruptcy to the fund established for the purpose of the pension planare secured by security on all the assets of the bankrupt: (

a) an amount equal to the sum of all amounts that were deducted from the employees' remuneration for payment to the fund; …

(

c) in the case of any other prescribed pension plan, (

i) an amount equal to the amount that would be the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985 , that the employer would be required to pay to the fund if the prescribed plan were regulated by

an Act of Parliament , (ii) an amount equal to the sum of all amounts that would have been required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985 , if the prescribed plan were regulated by

an Act of Parliament, and (iii) an amount equal to the sum of all amounts that would have been required to be paid by the employer in respect of a prescribed plan, if it were regulated by the Pooled Registered Pension Plans Act .

(2) A security under this

section ranks above every other claim, right, charge or security against the bankrupt's assets, regardless of when that other claim, right, charge or security arose, except (

a) rights under sections 81.1 and 81.2; (

b) amounts referred to in subsection 67(3) that have been deemed to be held in trust; and (

c) securities under sections 81.3 and 81.4. [Emphasis added.] [ 36 ] For the purpose of

section 81.5(1) (c)(

i) of the BIA , s ection 2(1) of the Pension Benefits Standards Regulations, 1985 , S.O.R./87-19 (the “ Regulations ”) defines “normal cost” as follows, “normal cost means the cost of benefits, excluding special payments , that are to accrue during a plan year, as determined on the basis of a going concern valuation” (emphasis added). [ 37 ] The applicants submit that, like the normal cost owing to the Pension Plan, the amounts classified as “special payments” accrued and were overdue as of the date of bankruptcy. Therefore, they argue, both amounts enjoy the super-priority granted by

section 81.5 of the BIA . [ 38 ] The flaw in the applicants’ position, however, is that the terms “normal cost” and “special payments” are both referred to in the definition of normal cost in the Regulations . Special payments are expressly excluded from the definition of normal cost. The super- priority granted by

section 81.5 is for the normal cost only, to the exclusion of special payments. It is the nature of the amount owing to the Pension Plan that is determinative, not when the obligation to pay accrued. As a result, the special payments of $45,300 are not included in the amount granted a super-priority by

section 81.5 of the BIA . 3. Do the amounts owing to the Pension Plan that do not enjoy the

section 81.5 super-priority constitute a secured claim in accordance with the PBA ? [ 39 ] The respondents concede that the amounts owing to the Pension Plan that do not fall under the super-priority constitute a secured claim in accordance with section 32(4) of the PBA . Based upon the decision in Reference re Pension Benefits Act , I agree that they do, at least in the absence of a bankruptcy.

Because ACC is a bankrupt, however, that secured claim does not survive. [ 40 ] The applicants rely upon section 32(4) of the PBA to establish the secured claim: 32(4) An administrator of a pension plan has a lien and charge on the assets of the employer in an amount equal to the amount required to be held in trust under subsections (1) and (3). [ 41 ] In Reference re Pension Benefits Act , in confirming the secured status afforded by section 32(4) of the PBA , the Court of Appeal expressly did not address the issue of insolvency.

A determination of whether the secured status conferred by the PBA would survive under the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 (“ CCAA ”) was left to another day. The court wrote at paragraph 50: 50 Finally, the effect of section 32(4) of the Act in relation to the operation of the Companies’ Creditors Arrangement Act is not addressed because that question was not included in the Reference. In any event, such a question, and particularly the question of

priorities under that Act , would require an analysis based on a specific factual scenario such as arises in litigation between parties, a matter outside the scope of the Reference. Accordingly, it is not necessary to deal with the submissions by counsel for the intervenor, the representative beneficiaries of the Wabush salaried pension plan, as to the reasons why the decision in General Chemical Canada Ltd., Re , 2007 ONCA 600 (Ont.

C.A.) , which held that an administrative lien and charge was ineffective in a bankruptcy situation, should not apply because this case involves different statutory definitional language under the Companies’ Creditors Arrangements Act . [ 42 ] This case involves a bankruptcy and not an application under the CCAA . Both the BIA and the CCAA are federal insolvency statutes. Because the case before me is a proceeding under the BIA , the effect of a proceeding under the CCAA on section 32(4) of the PBA remains to be determined.

In the case of a bankruptcy, however, I adopt the reasoning of Goudge J.A. in General Chemical Canada Ltd., Re , 2007 ONCA 600 , leave to appeal denied 252 O.A.C. 396, 385 N.R. 395 (S.C.C.) . That case found that statutory language substantially to the same effect of section 32(4) of the PBA did not make a pension plan administrator a secured creditor within the meaning of “secured creditor” for the purposes of the BIA . [ 43 ] General Chemical was heard before the adoption by Parliament of

section 81.5 of the BIA granting a super-priority to the normal cost owing to a pension plan. It also held that there was no common law trust based upon the ruling in Henfrey . Consequently, the decision is of little assistance to me on those two issues given the statutory and case law developments discussed above.

Nevertheless, it does set forth the approach to be taken by a court when considering the provisions of pension legislation purporting to grant a lien in light of a bankruptcy. [ 44 ] Goudge J.A., at paragraph 22, begins the discussion as to whether there is a secured claim by the pension administrator where the employer is bankrupt: 22 The critical definition in the BIA is that of “secured creditor” defined in s. 2 .

It reads: “secured creditor” means a person holding a mortgage, hypothec, pledge, charge or lien on or against the property of the debtor or any part of that property as security for a debt due or accruing due to the person from the debtor , … [Emphasis in original.] [ 45 ] As to the argument that the secured claim survives bankruptcy, Goudge J.A. wrote at paragraphs 26 to 32: 26 For this argument to succeed, however, the first step is that, as holder of a s. 57(5) [Ontario PBA ] statutory lien, the Administrator must meet the definition of secured creditor in the BIA . 27 In my view, it cannot do so.

The Administrator does not hold a charge or lien as security for a debt due or accruing due to the Administrator from the debtor GCCL. … 30 None of these provisions [in the Ontario PBA ] suggest that the contributions owed by GCCL are a debt due to the Administrator. Rather, GCCL’s legal obligation was to make the contributions to the pension funds that were required under the pension plans. Nor is there even any indication that the contributions are owed to the Administrator to be held in trust for the pension funds.

Rather, the legislation contemplates that those contributions are owed to the pension funds pursuant to the pension plans, and are not the property of the Administrator. 31 The Administrator’s right to commence legal proceedings simply permits it to seek to compel the employer to pay the contributions to the pension funds due under the pension plans. 32 The consequence of this is that the lien and charge accorded to the Administrator secures the employer’s obligation to pay the unpaid contributions required by the pension plans to the pension funds. It does not secure a debt owed to the Administrator.

Hence s. 57(5) does not qualify the Administrator as a secured creditor for the purposes of the BIA . [ 46 ] For the reasons articulated by Goudge J.A. in General Chemical , I find that the applicants as administrators of the Pension Plan are not secured creditors within the meaning of the BIA . DISPOSITION [ 47 ] At the conclusion of the hearing, an issue arose regarding the applicants’ entitlement to pre-judgment interest. This issue was not raised in the original or supplemental briefs that were filed. A determination of the pre-judgment interest issue may depend on the result of this decision.

Consequently, as discussed with counsel, I declined to decide the matter. If, following a review of this decision, a party wishes to have the interest issue adjudicated, they can make application to the Court. [ 48 ] It is ordered that the applicants enjoy a super-priority for the normal cost due to the Pension Plan pursuant to

section 81.5 of

the BIA . The claims by the applicants for a common law trust, for

section 81.5 super-priority for special payments, and for a secured claim pursuant to section 32(4) of the PBA are dismissed. [ 49 ] Because the results are mixed, the parties shall bear their own costs. _____________________________ Robert P. Stack Justice