Law Times

Law Times • OcTOber 22, 2018 Page 7 www.lawtimesnews.com Deducting pension benefits in wrongful dismissals BY NIKOLAY Y. CHSHERBININ T he fundamental principle appli- cable to quantifying damages in wrongful dismissal cases is that the damages award should place an employee in the same economic posi- tion in which they would have been had they not been wrongfully dismissed. In determining damages, the court will typically include all of the compen- sation and benefits the employee would have earned during the proper notice pe- riod. A pension is a form of benefit that an employee has earned for their years of service. The calculation of a pension's value is often in contention. An employment case in point is Dussault v. Imperial Oil Limited, 2018 ONSC 4345, where the court was tasked with resolving whether the increase in the commuted value of the employee's pension that resulted from his dismissal should be deducted from his damages award and whether, given the increase, the employee should be entitled to the pen- sion contributions the employer would have made during the notice period. Both questions were answered in the negative, with helpful elucidations. In Dussault, Donald Dussault was em- ployed by Imperial Oil Limited for more than 39 years. On Sept. 2, 2016, Imperial gave Dussault notice of termination of his employment, which required him to work until Oct. 31, 2016. At the time of his dismissal, Dussault was 63 years old and served as a manager of real estate devel- opment. Following his dismissal, he sued Imperial for wrongful dismissal and, on a summary judgment motion, was awarded damages equal to 26 months' notice. The court had no sufficient infor- mation to calculate Dussault's damages and requested that the parties attempt to reach an agreement of the quantum of damages, which they were unable to do. The treatment of Dussault's pension was the most contentious issue between the parties and had significant financial conse- quences. Relying on an expert report, Imperial led evidence that the commuted value of Dussault's pension was $189,117 higher as a result of his dismissal than it would have been at the end of his 26 months' notice. Consequently, Imperial asserted that any damages awarded to Dussault should in- clude a deduction for the increase in the value of his pension. Otherwise, Dussault would be placed in a better economic po- sition than he would have been in had he not been dismissed. Dussault neither produced a com- peting expert report nor disagreed with Imperial's expert's conclusions. Instead, he argued that the Supreme Court of Canada decision IBM Canada Limited v. Waterman, 2013 SCC 70 is determina- tive of the issue of whether the increase in value of the pension attributable to the employee's dismissal should be deducted from the damages award. In response, Imperial argued that IBM was distin- guishable, because it focused on the de- duction of pension benefits, whereas, in its case, Imperial was focusing on the deduction of the in- crease in the commuted value of Dussault's pension. Sid- ing with Dussault, the court found Imperial's argument to be a distinction without a dif- ference. The court explained that, firstly, in IBM, the rationale for not deducting pension benefits was in part that pen- sions are not meant to be an indemnity against the loss of employment, but they are rather a benefit that employees have earned for their years of service. Secondly, the reason the value of Dussault's pension was higher at the time of dismissal is because he started receiv- ing benefits sooner. In other words, as of Oct. 31, 2016, Dussault's pension had more value, because he was expected to derive more money from it than he would have if he had stopped working on Oct. 26, 2018. The court saw no rational difference between seeking to claw back the benefits paid during the notice period and seeking to deduct the increase in value resulting from dismissal. Having dismissed Imperial's argu- ment, the court turned to consider Dussault's argument that he should be en- titled to receive the pension contributions that Imperial would have made during the notice period. Imperial argued that, given the increase in his pension's commuted value, Dussault suffered no pension loss and, as such, it should not be required to pay the pension contributions. Dussault retorted that Imperial should not be al- lowed to benefit from its wrongdoing, but led no evidence of any loss. Relying on the Court of Appeal for Ontario decisions in Peet v. Babcock & Wilcox Industries Ltd., 2001 CanLII 24077 and Paquette v. TeraGo Networks Inc., 2016 ONCA 618, the court refused to award damages on this ground, be- cause Dussault suffered no pension loss. Awarding damages under the guise of pension loss would serve to put Dussault in a more favourable economic position under the employment contract than had he not been dismissed, which would be contrary to the fundamental principle of compensation recognized in wrongful dismissal cases. Dussault is a welcome reminder that when assessing the difference in the value of a pension between the date of termina- tion and the date on which the employ- ment could have been terminated after proper notice, a court will consider the pension's commuted value. The differ- ence in value determines not only wheth- er a pension loss has occurred but also whether the employee should be awarded the amount equivalent to the pension payments during the notice period. For these reasons, prudent employers and employees should lead actuarial evidence in support of their positions. LT uNikolay Chsherbinin is an employment and immigration lawyer and author of The Law of Inducement in Canadian Employ- ment Law. He can be reached at 416-907- 2587 or by visiting nclaw.ca. Benjamin orders and estates BY JONATHAN FRIEDMAN E state trustees have several obligations and duties to the beneficiaries and the deceased including the fiduciary duty to fulfil the in- tentions and carry out the administration of the estate of the testator, as outlined in their last will and testament. But Ontario lawyers have had to confront is- sues if a beneficiary cannot be found. How can an estate trustee ensure that the deceased's wishes and intentions are fulfilled if they cannot locate a beneficiary? The answer for Ontario lawyers is in obtaining a Benjamin order or payment of a beneficiary's entitle- ment into court. In my view, Benjamin orders should remain a rare remedy for estate trustees and should be difficult to obtain. However, they are a necessity. Take the case of Steele v. Smith, 2018 ONSC 401. In this case, the estate trustee was a long-time friend of the deceased and applied to the court for a "Benjamin order" — an order declaring that a beneficiary prede- ceased the testator. Here, the estate trustee could not locate the de- ceased's brother William, entitled to one third of 60 per cent of the residue of the deceased's estate, after exten- sive efforts to locate him. These efforts included online searches, contacting family members and employing a U.K. tracing company. The estate trustee's application was opposed by the Office of the Public Guardian and Trustee, which sub- mitted that the share of the unlocatable beneficiary should be paid into court so the executor could take further steps to ascertain this beneficiary's where- abouts. The Office of the Public Guardian and Trustee submitted that William had other family — including an illegitimate son (John) conceived with a sister-in-law (Maureen) put up for adoption at birth — who could be contacted. A Benjamin order derives from the 1902 Chancery court decision in Neville v. Benjamin where the testa- tor was survived by 12 children. A 13th child, Philip, disappeared while on vacation after having embezzled funds from his employer. The court reasoned, in part, that, if Philip was alive, there was no reason why, due to the testator's death, Philip would not come forward. As such, the Benjamin order was granted. In Steele, Justice H.A. Rady noted that a Benjamin order is used to protect the estate trustee to wind up an estate without having to wait for the "unprovable to be proven." Once a Benjamin order is obtained and an estate administered, should the lost beneficiary come forward, they will still have the possibility of claiming what is right- fully theirs if any estate property remains undistributed. Of course, the inquiry made by the estate trustee to locate a beneficiary should be extensive and the court must consider and find that the inquiries by the estate trustee were sufficient given the specific facts of the case. In making a determination, Rady relied on the Saskatchewan decision of Wieckoski Estate 2013, fol- lowed by the 2014 Ontario Superior Court decision in Kapousouzian Estate v. Spink, which sets out a number of questions that would assist the court in de- termining the adequacy of those inquiries for which questions include: • How much time has passed since the testator died? • What steps have been taken to locate the lost benefi- ciary and over what time period? • What are the qualifications of the individual(s) mak- ing the inquiries? Who are they? • Do the inquiries consider the possible location of the missing person? • Are further inquiries likely to produce any additional information? • What is the amount the lost beneficiary is entitled to pursuant to the will? In considering whether to grant a Benjamin order, the court weighs protecting the estate trustee with de- parting from the intentions of the testator. The court should only grant Benjamin orders when it is satis- fied that the failure of the lost beneficiary to come forward is not the result of a choice not to be found. The evidence should show that there is nothing else that could be done and that it is highly likely that the lost beneficiary will not come forward and the estate trustee has used up all possible attempts at locating them. In Steele, in analyzing evidence, the court found that the estate trustee had gone to extensive lengths to determine William's whereabouts, that there is no reason why William would choose to not come for- ward, that 18 months have passed since the testator passed away and that the estate trustee had exhausted the available avenues of inquiry. In considering the submissions made by the Office of the Public Guard- ian and Trustee in opposition to the estate trustee's ap- plication, Rady found that Maureen would not speak about William and that John, being adopted at birth, has no information about William's whereabouts. As a result, the estate trustee was successful in its applica- tion and the Benjamin order was granted. In the normal course, if it was believed that William was still alive but for whatever reason was unwilling to come forward, the payment of the beneficiary's entitle- ment into court would likely be the remedy awarded by the court. However, most importantly, in Steele, the court held that where it is highly unlikely that they would be claimed there would be no useful purpose to paying the funds into court. The court should rarely depart from the testator's wishes in their last will and testament. However, con- trarily, when a beneficiary is not "officially" deceased, missing or lost for a considerable amount of time, the estate trustees need to have an avenue to pursue to fi- nalize the administration of the estate. LT uJonathan M. Friedman is a litigation lawyer primarily practising in estate litigation with Heft Law Professional Corporation. u SPEAKER'S CORNER COMMENT Labour Pains Nikolay Y. Chsherbinin

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