Case Summary: IBM Canada Limited v. Dario Ceci and Jacinthe Ratelle, 2024 ONSC 1771
April 23, 2024
IBM Canada Limited v. Dario Ceci and Jacinthe Ratelle, 2024 ONSC 1771
IMB Canada Limited (“IBM”) sponsors the IBM Retirement Plan (the “Plan”). During the Plan's restatement in 2014, certain errors were made affecting provisions related to the accrual of pension benefits during periods of disability leave.
These errors led to the accrual of additional benefits for disabled defined benefit and non-contributory defined contribution members, while adversely affecting disabled contributory defined contribution members.
Upon discovery of these errors in 2019, IBM amended the Plan prospectively and subsequently applied for rectification of the Plan's provisions from January 1, 2014 to June 30, 2019. IBM promptly provided notice of the application to all 210 affected members, directing them to independent counsel, and allocating funds to cover their legal fees.
Following the notification, a group of affected members retained counsel and initiated negotiations with IBM, culminating in a settlement agreement on March 6, 2023. The agreement specified that IBM was to establish a settlement fund for distribution among affected members based on an agreed-upon payment formula, and affected members were to consent to IBM's rectification efforts.
During the application, the court determined that the errors were entirely unintended, given the following evidence:
- The Plan had been administered as if the drafting errors had not occurred from the 2014 restatement until its correction in 2019.
- There were no business reasons or legislative requirements prompting IBM to alter benefit accrual rules; the 2014 restatement aimed solely to consolidate amendments and update the Plan to align with unrelated legislative requirements.
- Miscommunications with third-party consultants occurred while drafting the 2014 restatement.
- Changes resulting from the errors were not communicated to Plan members.
- No member requested or expected alterations in accordance with the drafting errors.
- Plan summary materials accurately reflected the intended terms of the 2014 restatement, not the drafting errors.
The court recognized that both the Plan from its establishment and the 2014 restatement were unilateral instruments, as they occurred without negotiation and afforded IBM the power to amend. Acknowledging the common practice of rectification for errors within unilateral pension texts, the court deemed rectification suitable in this case. It emphasized that, with such unilateral instruments, the intention of the maker is the primary concern. Consequently, the application was approved, and rectification was granted.
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