Supreme Court Confirms Need for Insolvency Law Reform

Court's decision demonstrates how existing legislation allows employers to disregard commitments to pensioners

TORONTO, Feb. 1, 2013 /CNW/ - A Supreme Court of Canada decision has confirmed that federal insolvency legislation must be reformed to better protect pensioners, the United Steelworkers (USW) union says.

"The Supreme Court has ruled that even when an insolvent company breaches its fiduciary duty to its pensioners it does not have to satisfy its pension obligations," said USW Canadian Director Ken Neumann.

"There can be no clearer confirmation of the need for fundamental reform of federal insolvency laws and we call on the federal government to act quickly to defend the rights of pensioners," Neumann said.

"After a lifetime of work, Canadians must know that their pensions are protected. Our government must put the rights of pensioners above those of other creditors."

The Supreme Court released a decision today that overturned a 2011 landmark ruling by the Ontario Court of Appeal involving Toronto-based manufacturer Indalex Limited and the Steelworkers union, which represented Indalex workers.

Indalex had filed for protection under the Companies' Creditors Arrangement Act (CCAA) in 2009. The company obtained interim financing to continue operations before selling substantially all of its assets in a court-approved sale.

The Steelworkers union had argued in court that the company failed to deal with its pension obligations during the restructuring and sale process. The union argued the company should use proceeds of the sale to satisfy pension plan deficiencies.

The Ontario Court of Appeal agreed with the union, ruling that Indalex breached its fiduciary duty as pension plan administrator, and imposing a constructive trust on the sales proceeds to cover the pension plan funding deficiencies.

On Friday, the Supreme Court justices also ruled - unanimously - that Indalex breached its fiduciary duties as pension plan administrator.

"The Supreme Court concurred with our union's contention that Indalex breached its fiduciary duties as pension plan administrator," Neumann noted.

"Despite this unanimous finding, the Supreme Court justices failed to hold Indalex financially liable for its breaches as a fiduciary," Neumann said. "Here we have a significant breach of the law, but no remedy for those affected. Clearly, the law must be changed to protect pension plan members."

As a result of the Supreme Court decision, 170 Indalex pensioners will suffer pension cuts, as $6.75 million is put into the pockets of Indalex and its debt financer, Neumann said.

"This is a devastating blow to these pensioners who are the ones who must suffer because their employer cannot be penalized for breaching its fiduciary duties," he said.

"Until the law is reformed, corporations will be allowed to continue to disregard their commitments to workers and pensioners."

SOURCE: United Steelworkers (USW)

For further information:

Ken Neumann, USW National Director for Canada, 416-544-5951
Rob Champagne, USW Legal Counsel, 416-544-5989,
Bob Gallagher, USW Communications, 416-434-2221,

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