Re Indalex: The confluence of pension, insolvency, and fiduciary law.
The landmark decision of the Supreme Court of Canada in Re Indalex Ltd. dealt with many issues, including both the treatment of a deemed trust prescribed under the Ontario Pension Benefits Act (“PBA”) in the context of insolvency proceedings under the Companies Creditors’ Arrangement Act (“CCAA”), and the fiduciary duty owed by a debtor company in its dual role as employer sponsor and administrator of pension plans. This paper analyzes and critiques the court’s handling of these two issues, arguing that the court’s holding that the PBA deemed trust continues to apply under the CCAA (subject to the doctrine of federal paramountcy) represents a departure from its prior decisions, raises troubling policy implications, and calls into question established jurisprudence on a related issue in Canadian insolvency law. In addition, this paper shows that the five justices who formed the majority in the result did not formulate a unified approach to ascertaining the nature and scope of the fiduciary duty of an employer-administrator of pension plans, though they were in agreement that the insolvent company’s decision to commence proceedings under the CCAA in and of itself did not create a conflict between the company’s self interest and its fiduciary duty as plan administrator. Finally, this paper argues that the interplay between the court’s holdings on the two issues leads to a legal contradiction for employer-administrators that are insolvent or nearing insolvency.
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