Alberta Court Holds Provincial Pension Plan Administrator Liable for Negligent Misrepresentation
February 22, 2018
Calder v Alberta, 2017 ABQB 162
On March 7, 2017, Justice Neufeld of the Court of Queen’s Bench of Alberta released his decision regarding an overpayment from a pension payable in accordance with the Public Service Pension Plan Act (the “PSPPA”). The Plaintiffs sought to have the overstated pension continued based on various causes of action. Ultimately, Justice Neufeld held that the Defendants, the Province of Alberta and the Alberta Pension Services Corporation (APSC), were liable to the Plaintiffs for negligent misrepresentation to the tune of $265,017.00.
Dr. William Calder (Dr. Calder), had worked as a manager for the Province of Alberta from 1978 to 1986, he then resigned and took a job in Saskatchewan. He later returned to work for the Province of Alberta in 1995. In the intervening years the Province closed the original pension plan and opened a new one. Dr. Calder commenced his pension in September 2011, initially receiving a total of $11,646.03 per month, $8,417.09 of which was attributable to the original plan. On June 2, 2014, Dr. Calder was informed by the APSC that there had been an error in the calculation of his pension from the original plan and his actual entitlement was only $2,232.16 per month, rather than $8,417.09. The APSC adjusted Dr. Calder’s pension effective August 2014 but did not seek to be reimbursed for the overpayment. There were 23 other pensioners who were receiving pensions from both the original and new plan and were similarly impacted. The claim by Dr. Calder was to serve as a ‘test case’ for the claims by the others that were impacted.
The correction to Dr. Calder’s pension was based on a 2012 interpretation of the provisions of the PSPPA governing how entitlements are to be calculated. Dr. Calder’s (and others’) entitlement had been calculated based a prior 2009 Interpretation under which pensions from the original plan were based on recent salary, with a COLA applied to that salary, dating back to the closure of the original plan in 1994. Justice Neufeld labeled this interpretation as absurd in that it resulted in a double counting of inflationary effects. He thus rejected the Plaintiff’s assertion that the 2009 Interpretation was in fact correct.
Alternative to the 2009 interpretation being correct, the Plaintiffs argued that they had a vested right to the higher amount. Justice Neufeld rejected this claim, holding that “neither the law of trusts nor the law of contract can be stretched so as to compel the APSC to continue indefinitely to apply a statutory interpretation that has been determined to be incorrect, and to create absurd results” (para 48). Justice Neufeld also rejected the Plaintiff’s estoppel argument on the basis that estoppel is not a cause of action and, while it can be pled as a defence, it cannot be used to prevent the application of express legislative provisions.
The Plaintiffs also argued that the Province and the APSC owed a fiduciary duty to plan beneficiaries. The Defendants conceded that administrators of private pension plans owe a fiduciary duty but distinguished the present case from prior jurisprudence on the basis that the plan in question was a public plan established by statute. Justice Neufeld held that the Province owes a general duty to all Albertans to properly manage the public purse and that, in this context, that meant following the provisions of the PSPPA. While Justice Neufeld did not specifically make note of the fact that the plans governed by the PSPPA are exempt from the Employment Pension Plans Act, he did state that it would be wrong to superimpose an overarching fiduciary duty on the PSPPA that would require the Province to prefer interests of beneficiaries over the broader public. Further, even if there was a fiduciary duty, it could not require the adoption of an interpretation that lead to an absurd result.
Finally, the Plaintiffs made a claim of negligent misrepresentation. The Defendants conceded the first three elements of the test, which included conceding that the representor acted negligently in making the representation. However, the Defendants took the position that it was not reasonable for Dr. Calder to rely on those representations. Justice Neufeld found that Dr. Calder took reasonable steps to verify the estimates he was given and that his reliance was reasonable, even if he suspected something was wrong. Justice Neufeld found that the essential element of the Plaintiff’s reliance was their “optionality” – i.e., had they been properly advised they may have made a number of different choices, including continuing to work. The Plaintiffs relied on the information they were given to forgo other options and thus their reliance was to their detriment.
On the issue of quantum, the Plaintiffs claimed damages based on the difference in value of a pension based on the 2009 Interpretation as compared to the 2012 Interpretation. Justice Neufeld rejected this approach. The Plaintiffs did not present any evidence as to how they would have conducted themselves had they been properly advised, and thus did not prove damages. However, Justice Neufeld held that it was fair to assume that, had Dr. Calder been properly advised, he would have continued to work until age 68. Therefor, based on the evidence of the Defendant’s actuary, damages were assessed at the net after tax difference in the capitalized value of salary and pension benefits and then grossed-up for taxes to a lump sum of $265,017.00.
