



COURT OF APPEAL FOR ONTARIO

CITATION: Garcia v. Labourers International Union of North
    America, Local 1059, 2015 ONCA 230

DATE: 20150408

DOCKET: C59265

Doherty, Gillese and Lauwers JJ.A.

BETWEEN

David Garcia

Applicant (Appellant)

and

Jim MacKinnon in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust,

Brandon MacKinnon in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust,

Tom Dool in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust

and Joe Liberatore in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust

and Global Benefit Plan Consultant Inc.

Respondents (Respondents)

David P. Jacobs and Steven G. Bosnick, for the appellant

Lorne Richmond and Charles Sinclair, for the respondents

Heard:  February 5, 2015

On appeal from the order of Justice Alissa K. Mitchell of
    the Superior Court of Justice, dated July 23, 2014, with reasons reported at
    2014 ONSC 4410.

Lauwers J.A.:

[1]

This appeal and the underlying application are steps in an ongoing turf
    war between two rival trade unions in the Ontario construction industry. The
    appellant, David Garcia, is a member of the United Brotherhood of Carpenters and
    Joiners of America (the Carpenters), which is supporting this appeal. The
    respondents are associated with the Labourers International Union of North
    America, Local 1059 (Local 1059).

[2]

Mr. Garcia was a long-time member of Local 1059 until he was expelled in
    2012. He claims to be a beneficiary of a benefit trust and benefit plan administered
    by Local 1059, which are described in more detail below.

[3]

Mr. Garcia applied for an order permitting him to make claims against the
    benefit plan after the termination of his union membership by Local 1059. The
    application judge dismissed his application. For the reasons set out below, I
    would dismiss his appeal.

A.

FACTS

(1)

The Context

[4]

As aptly noted by the application judge, an understanding of the context
    of this case  the Ontario construction industry  is necessary to resolve the
    issues raised at trial and now on appeal. In
Arlington Crane Service Ltd.
    v. Ontario (Minister of Labour)
, (1988) 67 O.R. (2d) 225 (H.C.J.), Henry
    J. made a number of apposite observations about the unique nature of the
    construction industry. In particular, at p. 234, he contrasted the episodic and
    erratic nature of employment in the construction industry with the long-term
    employment typical in other industrial contexts:

There is no opportunity for the kind of tenured status which
    employees enjoy under most collective agreements outside of the construction
    industry. As well, there is no basis for the kind of enduring association which
    a group of employees can develop in an industrial bargaining unit. Any one job
    for the construction worker is usually short and fleeting, and he must be
    prepared to be highly mobile, shifting from project to project across a wide
    geographic area.

[5]

Labour law in Ontario has adapted to the structure of the construction
    industry, as shown by the numerous provisions of the
Labour Relations Act
,
1995
, S.O. 1995, c. 1, Schedule A (
LRA

),

devoted
    especially to the industry. In particular, as described by Henry J. at pp. 234-35
    of
Arlington Crane
, the unique nature of construction work has led to
    an equally unique form of union organization in the industry:

Since the relationship between employer and employee in
    construction is typically episodic rather than enduring in character, a special
    form of union organization has emerged to fill this vacuum. The major craft
    specialties have all developed their own trade unions; the union is the body
    with which the individual tradesman tends to have the most salient relationship
    in the industry  the union collects and administers the funds for the worker's
    vacation pay, health and welfare benefits, and retirement pensions (with the
    money coming from the numerous contractors for whom the tradesman may have
    worked during the year, at a defined contribution level for each hour worked).

[6]

This allocation of responsibilities, whereby unions rather than
    employers administer benefits, is a unique feature of the construction industry,
    and is recognized in s. 150 of the
LRA
. In most other sectors,
    employers are responsible for the administration of employee benefits: George
    W. Adams,
Canadian Labour Law
,
2d ed. (loose-leaf, consulted on
    23 February 2015), (Aurora: Canada Law Book, 1993), ch. 15 at para. 10. It is
    in this unique labour relations context that this case arose.

(2)

The Dual Union Policy

[7]

Mr. Garcia joined Local 1059 in 1999. On October 4, 2010, he also
    joined the Carpenters, following which time, he did no further work for
    employers bound by collective agreements with Local 1059.

[8]

In early 2011, as part of its battle with the Carpenters over formwork
    in its territory, the membership of Local 1059 voted to adopt a Dual Union Policy.
    Thereafter, no member of Local 1059 could also be a member of any affiliate of
    the Carpenters, on pain of expulsion from Local 1059.

[9]

Contrary to the Dual Union Policy, Mr. Garcia did not resign his
    membership in the Carpenters. Instead, he supported the Carpenters in issuing a
    challenge to the validity of the Policy before the Ontario Labour Relations
    Board (the OLRB).

[10]

Local
    1059 sought Mr. Garcias expulsion from its membership before the Trial Board,
    the unions internal dispute mechanism. The board granted the expulsion on the
    basis that Mr. Garcia was in violation of his obligations under the Local 1059s
    Constitution: first, by maintaining his membership in the Carpenters, Mr.
    Garcia violated his obligation to abide by Local 1059s polices; and second, by
    allowing the Carpenters to challenge the policy before the OLRB, he violated
    his obligation to respect the right of the union to adopt and enforce such
    policies, and to refrain from interfering with Local 1059s performance of its
    lawful obligations.

[11]

This
    decision was subsequently upheld by the unions internal Appellate Officer.

[12]

On
    February 2, 2012, the OLRB dismissed the Carpenters allegation that the Dual Union
    Policy violated s. 76 the
LRA
, finding that 
it is
    not intimidation or coercion to expel a person from membership on the basis
    that they support another union. Rather,
making and enforcing
    membership rules are internal union matter[s] not the subject of Board
    supervision:
Carpenters (United Brotherhood of Carpenters and Joiners of
    America) v. Labourers International Union of North America
, 2012 CanLII
    4286, at para. 27.

[13]

Immediately
    after this OLRB decision, which confirmed Local 1059s authority to expel Mr.
    Garcia, Local 1059 suspended Mr. Garcias benefits under its benefit plan,
    which I will now describe in more detail.

(3)

The Benefit Trust and the Benefit Plan

[14]

Local
    1059 and two associations of employers are the settlors of a trust (the
    Benefit Trust) created by the Agreement and Declaration of Trust Establishing
    the LIUNA Local 1059 Benefit Trust, dated May 10, 2007 (the "Trust
    Agreement"). It is substantially identical to the trust agreement to which
    Local 1059 was a party prior to 2007: the Labourers Multi-Local Welfare Trust
    Fund of Ontario (the LML Plan).

[15]

The
    trustees of the Benefit Trust comprise two representatives of Local 1059 
    Brandon MacKinnon, who is the President of Local 1059, and Jim MacKinnon, who
    is the Business Manager  and one representative from each affected employer
    association.

[16]

The
    trustees adopted the LIUNA Local 1059 Benefit Trust, Benefit Plan Text, dated
    May 24, 2009 (the Benefit Plan or the "Benefit Plan Text").

[17]

Explained
    in broad terms, the Benefit Trust and the Benefit Plan operate as follows: Employers
    bound by collective agreement with Local 1059 are required, by the terms of the
    collective agreement and the Trust Agreement, to contribute amounts, for each Local
    1059 member whom they employ, to the Benefit Trust. The contributed amounts are
    pooled and used by the trust administrator to purchase group insurance that
    provides members with entitlements under the Benefit Plan.

[18]

The
    Benefit Plan administrator determines employees eligibility for benefits using
    the accounting concept of a Dollar Bank Account for each employee. An
    employees Dollar Bank Account tracks the contributions made by each employer
    for whom that employee has worked. This is the mechanism by which the administrator
    determines an employees eligibility to obtain and maintain coverage under the
    Plan.

[19]

The
    Dollar Bank Account is uniquely suited to the exigencies of the construction
    industry, in which workers experience short-term engagements and periods of
    little or no employment. To be eligible for benefits, an employees Dollar Bank
    Account must have a positive balance by way of attributed employer
    contributions large enough to fund the employees share of the monthly insurance
    premium. Since there is no cap on the amount that can be attributed to the
    employees Dollar Bank Account, coverage can be maintained for periods of
    unemployment by the contributions made during periods of employment.

[20]

To
    summarize, the Dollar Bank Account is a conceptual device used to determine
    eligibility for benefits; there is no
actual
Dollar Bank Account for
    any employee, nor are there segregated funds attributable to any particular
    employee other than for the purpose of determining eligibility for benefits. Rather,
    all funds contributed by employers are at all times part of the general funds
    of the Benefit Plan.

[21]

At
    the date of Mr. Garcias expulsion from Local 1059, the notional balance in his
    Dollar Bank Account was about $20,000.

[22]

The
    Benefit Plan administrator advised Mr. Garcia on July 5, 2012 that his benefits
    had been suspended effective February 3, 2012. Since that date, Mr. Garcia
    has not incurred any expenses that would ordinarily have been covered by the
    Benefit Plan as he has been covered by the equivalent Carpenters plan. He is,
    therefore, not out-of-pocket.

B.

DECISION BELOW

[23]

After
    his expulsion from Local 1059, Mr. Garcia brought an application before the
    Superior Court of Justice, seeking an order that he was permitted to make
    claims against the Benefit Plan for so long as he has an adequate balance in his
    Dollar Bank Account. In the alternative, he sought a cash payment in the amount
    of his Dollar Bank Account balance.

[24]

The
    application judge dismissed Mr. Garcias application. She concluded that Mr.
    Garcia ceased to be a beneficiary of the Benefit Trust upon his expulsion from
    Local 1059. He was therefore no longer eligible for coverage under the Benefit
    Plan, regardless of the balance in his notional Dollar Bank Account, nor was he
    entitled to a return of the balance. In addition, the application judge held
    that Brandon MacKinnon and Jim MacKinnon were not in a conflict of interest and
    therefore did not breach their fiduciary duty as trustees in adopting and
    enforcing the Dual Union Policy.

[25]

I
    discuss the reasons of the application judge in further detail in my analysis
    below.

C.

ISSUES

[26]

The
    appellant argues that the application judge made legal errors in her decision
    dismissing his claim, which distill into three issues:

1)

Is Mr. Garcia a
    beneficiary of the Benefit Trust, entitled to claim benefits so long as there
    is an adequate positive balance in his Dollar Bank Account?

2)

Did the trustees of
    the Benefit Trust give Mr. Garcia adequate notice that he would lose access to
    the Benefit Plan if he were expelled from Local 1059?

3)

Did union officials
    Jim MacKinnon and Brandon MacKinnon breach their fiduciary duties as trustees
    under the Benefit Trust by adopting and enforcing the Dual Union Policy?

[27]

I
    address each issue in turn.

D.

ANALYSIS

(1)

Is the Appellant a beneficiary of
    the Benefit Trust entitled to claim benefits so long as there is an adequate
    balance in his Dollar Bank Account?

[28]

The
    appellant argues that unless the beneficiaries of the Benefit Trust are defined
    to include those, like him, on whose behalf contributions have been made to
    the Trust, the Trust will be void for uncertainty of objects (beneficiaries). He
    argues that the need to refer to the Benefit Plan Text to identify the
    beneficiaries of the Benefit Trust imports a fatal uncertainty into the Trust
    because it makes eligibility under the Trust discretionarily amendable by the
    trustees. In other words, as the appellant asserts in his factum, The Court cannot
    rely on an exercise of a power by the trustees in attempting to ascertain the
    beneficiaries of the trust because that would render that exercise of the power
    of the trustees beyond curial review.

[29]

I
    disagree.

[30]

The
    appellant is correct in asserting that the Trust Agreement gives powers to the
    trustees to determine the conditions of eligibility for beneficiaries,
    including when eligibility will terminate. Article 2.01 provides that the Trust
    will be administered by the trustees for the purpose of providing Benefits in
    accordance with the terms of this Agreement and the Benefit Plan. Article 5.01(a)
    of the Trust Agreement authorizes the trustees to adopt and administer the
    Benefit Plan. It specifically provides that the Benefit Plan will set forth in
    writing the conditions of eligibility for the Benefits, the terms of payment
    therefore such other terms as the Trustees deem necessary. Further, paragraph
    (g) empowers the trustees to adopt such procedures, by-laws, rules, and
    regulations consistent with the terms of this Agreement, deemed necessary or
    advisable to carry out the trusts conferred upon them. Articles 5.01 and 5.02
    of the Benefit Plan Text implement these powers.

[31]

In
    my view, contrary to the appellants argument, it is permissible to read the
    Trust Agreement together with the Benefit Plan Text in order to determine the
    identity of the beneficiaries. The appellant concedes that it is entirely
    possible to identify the beneficiaries of the Trust with certainty, at any time,
    by applying the extended definition of employee in the Trust Agreement together
    with the termination provisions in the Benefit Plan text, as the application
    judge did. Therefore, there is no factual uncertainty about the identity of the
    beneficiaries at any point in time.

[32]

I
    note that the appellant has provided no authority for his proposition that a
    fatal uncertainty is imported into the Benefit Trust simply because reference
    must be made to the Benefit Plan Text in order to identify the beneficiaries of
    the Benefit Trust.

[33]

Therefore,
    the application judge did not err in reading the Trust Agreement and the
    Benefit Plan Text together to determine the beneficiaries of the Benefit Trust,
    and find that those who cease to be members of Local 1059 pursuant to article
    5.01(a) of the Benefit Plan Text are no longer beneficiaries and, under article
    5.02, the notional balance in the Dollar Bank Account attributed to them become
    part of the general funds of the Plan. There is no conflict between the
    provisions in the Trust Agreement that confer benefits on Mr. Garcia, and the
    operation of articles 5.01 and 5.02 of the Benefit Plan Text that terminated
    his access to the benefits on the ending of his membership in Local 1059. (In
    reaching this conclusion, I do not rely on the application judges unsupported finding,
    at para. 72, that the corpus of the Trust would be quickly exhausted if
    members of other unions were permitted to receive benefits from it).

(2)

Did the trustees give Mr. Garcia adequate notice that he would lose
    access to the Benefit Plan if he were expelled from Local 1059?

[34]

There
    is no merit to the appellants argument that he did not receive adequate notice
    that he would lose access to the Benefit Plan if he were expelled from Local
    1059. The evidence is that he was fully aware that his expulsion from Local
    1059 would lead to this result. The crux of the appellants complaint is that when
    the Dual Union Policy was adopted, it was already too late for lawful notice because,
    by that time, he had accumulated a positive balance in the Dollar Bank Account,
    had an interest in those trust funds, and could not be deprived of that beneficial
    interest.

[35]

I
    reject this submission for two reasons. First, article 2.03(b) of the Trust
    Agreement provides that no beneficiary will have any right, title or interest
    in or to the assets of the Trust except as specifically provided by the Benefit
    Plan and the applicable rules and regulations thereunder adopted by the Trustees.
    No provision gives the appellant the beneficial interest he asserts in the
    balance of his Dollar Bank Account.

[36]

Second,
    article 5.01 of the Benefit Plan Text replicates an equivalent provision from
    the LML Plan, under which the appellant worked for many years and accumulated a
    positive balance that was carried forward into the new Benefit Plan. Both plans
    always provided for the termination of benefits when a person ceased to be a
    union member. This feature of the Benefit Plan was not new.

[37]

I
    would give no effect to the appellants argument that the loss of benefits is inconsistent
    with the LIUNA Local 1059 Benefit Trust Members Booklet. Although the Booklet
    does not list termination of union membership as one of the reasons that a
    members coverage would terminate, the Booklet does not purport to be
    exhaustive. It states clearly in the introduction that the Benefit Trust was
    created  for the Members of Local 1059. Common sense suggests that the
    termination of employment ordinarily results in the loss not only of wages, but
    also of employment benefits. Applying this logic to the employment structure in
    the construction industry suggests that termination of union membership  the
    gateway to employment in the industry  similarly results in the loss of
    employment benefits.

[38]

I
    find the appellants other submissions related to notice to be similarly unpersuasive.
    First, the appellant submits that, Jim MacKinnons failure to respond, at the
    Trial Board hearing, to counsels proposition that the appellant would not be
    deprived of his earned benefits if he were expelled,  led the appellant to
    believe this would be the case. There is no legal entitlement that flows from
    this conduct.

[39]

The
    appellant also points out that the OLRB hearing, after Jim MacKinnon had
    already directed the plan administrator to cease benefits to the appellant,
    Local 1059 averred that Mr. Garcias Dollar bank was still extant. This
    proposition is literally true since, at that point, the Trial Boards decision
    was still under appeal and it remained open to the appellant to resign his
    membership in the Carpenters and return to the fold as a Local 1059 member.
    Under the terms of the Benefit Plan Text, he could have returned and
    reactivated his Dollar Bank Account for a limited time. Again, there is no
    legal entitlement that flows from this point.

[40]

There
    is no doubt that the appellant could have avoided the claimed loss by staying
    with Local 1059; he was aware of that opportunity throughout and chose to
    forego it. Accordingly, there is no merit to his argument that he did not have
    adequate notice that he would lose his benefits if he were expelled.

(3)

Did union officials Jim MacKinnon and Brandon MacKinnon breach their
    fiduciary duties as trustees of the Benefit Trust by adopting and enforcing the
    Dual Union Policy?

[41]

The
    appellant argues that because of their status as trustees of the Benefit Trust,
    the MacKinnons were legally disabled from participating as union officials in
    three critical actions: adopting the Dual Union Policy; prosecuting the
    internal union charges against the appellant; and directing the Benefit Plan administrator
    to confiscate Mr. Garcias Dollar Bank.

[42]

The
    appellant concedes that Jims role in initiating charges against him and
    Brandons role in adopting the Dual Union Policy were within their roles as
    members of Local 1059s executive. However, the appellant submits that these
    actions of the MacKinnons as union officials placed them in a conflict of
    interest when, as trustees, they used the Dual Union Policy to effect the
    confiscation of his Dollar Bank Account balance; the MacKinnons thereby breached
    their fiduciary duties to the appellant as a beneficiary of the Benefit Trust. In
    particular, the appellant asserts that [t]rustees breach their duties to
    beneficiaries by forcing a choice between a diminution of the rights they held
    on accruing their interest in trust funds and the loss of beneficial ownership
    of such funds.

[43]

The
    application judge found that there was no conflict of interest, and that the
    functions of union management and benefit trust administration did not overlap
    in this factual context. In particular, she found, at para. 128, that the adoption
    of the Dual Union Policy did not affect the administration of the trust, the
    terms of the trust documents, the nature or level of benefits, eligibility
    requirements or the funding of the Benefit Trust. Further, the application
    judge found, at para. 131, that Local 1059s decision to bring proceedings
    against a member for violation or breach of the unions Constitution and by-laws
    does not relate in any way to the administration of the Benefit Trust by the
    trustees. Once Local 1059 decided to expel Mr. Garcia, it was the trust
    administrators duty to terminate his coverage.

[44]

In
    reaching her decision, at para. 123, the application judge paraphrased and
    relied on the approach to the conflict of interest issue taken by Cromwell J.
    in
Sun Indalex Finance, LLC v. United Steelworkers
, 2013 SCC 6, at
    paras. 197-98, 201. The appellant submits that the trial judge erred in relying
    on Cromwell J.s structural approach as it differed from what he views as the
    majority contextual approach to the conflict of interest issue.

[45]

For
    the reasons below, I find that the application judges analysis and conclusion with
    respect to the conflict of interest contain no legal error. My analysis
    involves: (a) a short discussion of the
Indalex
decision; (b) a description
    of the contextual approach to deciding whether a conflict of interest exists;
    (c) a review of the relevant contextual factors in this case; and, (d), an
    application of the contextual approach to the facts of this case.

(a)

The
Indalex
Decision

[46]

Indalex
found itself in financial
    difficulties and determined that it should seek protection from its creditors
    under the
Companys Creditors Arrangement Act
, R.S.C. 1985 c. C-36 (
CCAA
).
    Indalex was both the corporate employer and  the administrator of two employee pension
    plans. Such a dual role is permissible under s. 8(1)(a) of the
Pension
    Benefits Act
, R.S.O. 1990, c. P.8 (
PBA
), which also provides, in
    s. 22(4), that a plan administrator must not permit its interests to conflict
    with its duties in respect of the pension fund.

[47]

A
    corporate decision to seek protection under the
CCAA
gives rise to the
    prospect that the corporate employers financial interests could conflict with
    the interests of the pension beneficiaries, thus jeopardizing the corporate
    employers ability discharge its fiduciary duties properly as the plan
    administrator.

[48]

Acknowledgment
    of this permissible dual role which could potentially result in a conflict of
    interest, was the common starting point for all three
Indalex
judgments.
    As Deschamps J. observed, at para. 64, the ability of a corporate employer to
    act as plan administrator is based on the assumption that not all decisions
    taken by directors in managing a corporation will result in conflict with the
    corporations duties to the plans members. Cromwell and Lebel JJ. make
    similar observations at paras. 197-98 and 272, respectively.

[49]

At
    bottom,
Indalex
was about the respective priorities of creditors and
    pension beneficiaries when an enterprise is no longer operating in the ordinary
    course of business, but is under the
CCAA
and heading for bankruptcy. The
    issue that divided the Supreme Court was the point at which Indalex was
    required to address the conflict between its corporate duties and its duties as
    pension administrator, and what it ought to have done to address the conflict.

[50]

I
    agree with the appellant that the court must take a contextual approach to
    determine whether a conflict of interest arose that led to a breach of
    fiduciary duties. However, as I see it, this is the conventional approach to
    cases of this sort, to which
Indalex
made no relevant legal change.

[51]

In
    my view, all three judgments in
Indalex
took a contextual approach. Each
    paid close attention to the statutory structure of the
PBA
, to the
    plan documents, and to the particular circumstances of the parties. Deschamps
    J. commented, at para. 69, I would stress that factual contexts are needed to analyse
    conflicts between interests. Although Cromwell J.s reasons are more
    discursive on the conflict of interest issue, I do not detect a substantive difference
    between his reasoning and that of Deschamps J. that is relevant to the conflict
    analysis in this case.

[52]

I
    therefore reject the appellants argument that the application judge wrongly followed
    Cromwell J.s structural approach rather than the contextual approach
    adopted by Deschamps and LeBel JJ.

(b)

The Contextual Approach

[53]

The
    duty of a fiduciary to avoid conflicts of interest may be modified by statute
    or agreement:
Indalex
, at para 186. Therefore, relevant statutory
    provisions and plan documents are important contextual factors in determining the
    extent of any such modification.

[54]

Indalex
provides a useful example. The
PBA
statutory scheme tolerates what
    this court described in
Indalex Ltd
.
(Re)
, 2011 ONCA
    265, at para.128, as the two hats metaphor, to capture the duties of the
    corporate employer who is also the pension administrator. As this court explained,
    at para 129:

The "two hats" analogy in Imperial Oil assists in
    understanding the parameters of the dual roles of an employer who is also the
    administrator of its pension plan. The employer, when managing its business,
    wears its corporate hat. Although the employer qua corporation must treat all
    stakeholders fairly when their interests conflict, the directors' ultimate duty
    is to act in the best interests of the corporation: see
BCE Inc. v. 1976
    Debentureholders
, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, at paras.
    81-84. On the other hand, when acting as the pension plan administrator, the
    employer wears its fiduciary hat and must act in the best interests of the
    plan's members and beneficiaries.

[55]

In
Indalex
, Cromwell J. pointed out, at para. 198, that [t]he employer,
    within the limits set out in the plan documents and the legislation generally,
    has the authority to amend the plan unilaterally and even to terminate it.
    These steps may well not serve the best interests of plan beneficiaries. The
    obvious inference arising from this statement is that by taking such permitted steps,
    the employer does not fall into a conflict of interest.

[56]

The
    issue of unilateral amendment by the employer also arose in
Imperial Oil Ltd.
    v. Ontario (Superintendent of Pensions)
(1995), 18 C.C.P.B. 198, where the
    Pension Commission of Ontario permitted Imperial Oil to amend two employee
    pension plans to reduce the availability of enhanced early retirement benefits.
    The Commission noted, at para. 35, Another way of looking at the matter would
    be to see that the power of amendment contained in the Plans is an express agreement
    that for the purpose of making amendments, Imperial Oil would be acting in its
    capacity as employer. The existence of such an agreement recognizes an employers
    two hats and modifies the duty to avoid conflicts; this is part of the
    contextual approach and applies with necessary modification to this case.

[57]

Nothing
    in the Supreme Courts
Indalex
decision contradicts this approach. I
    agree with Deschamps J.s comment, at para 65, that once the conflict is plain
    because the trust is heading toward termination, the two hats metaphor ceases
    to have utility  but that is not the situation here.

(c)

The Context of this Case

[58]

In
    alleging a conflict of interest, the appellant relies on
Indalex
to
    posit a sharp disjunction between the role of a union official in union
    business and the role of a trustee under a benefit trust. However, a number of
    important contextual factors differentiate this case from
Indalex

and
    are relevant to determining whether the MacKinnons were in a conflict of
    interest.

[59]

First,
    unlike Indalex, which was facing bankruptcy proceedings, Local 1059 and the Benefit
    Trust were carrying out their respective functions in the ordinary course of
    business. In contrast to the situation in
Indalex
, there is no
    prospect of termination or shortfall in the present case; the Benefit Trust is
    not in extremis. Therefore, the two hats metaphor has reasonable application.

[60]

Second,
    in this case, the statutory context is provided by the
LRA
. Local 1059
    is a trade union within the meaning of the Act. Its main function is to bargain
    wages, benefits and working conditions collectively on behalf of its members. As
    a result, members rights related to benefits are largely contractual. There is
    no statutory overlay in this case, as in
Indalex
, where the public
    policy goals of the
PBA
were in possible conflict with the goals of
    the
CCAA
.

[61]

Third,
    and perhaps most importantly, in the unique context of labour relations in the
    construction industry, employees stand in a somewhat different relationship
    with the administrator of their benefits. Article 4.01(b) of the Trust
    Agreement stipulates that Local 1059 shall appoint its Business Manager and
    another individual as the two union-appointed trustees responsible for
    administering the Benefit Trust. The MacKinnons, as members of the Local 1059 leadership,
    were appointed as trustees pursuant to this provision.

[62]

Since
    union members have democratic control over the union leadership, the usual power
    imbalance between an employer-administrator (like Indalex) and an employee is
    not truly reflected in the relationship between a union-administrator (like
    Local 1059) and a union member.

[63]

Further,
    any collective agreement the union negotiates is subject to ratification by the
    membership, including the balance between the employers contribution to wages
    on the one hand, and to benefits on the other. It is open to the union to
    negotiate collectively for wage and benefit improvements, and it is also open
    to the union to negotiate freezes or reductions in difficult economic times. In
    either case, benefits, while important, are only one part of the overall
    compensation package to be negotiated, and the union members collectively
    decide how they should be prioritized.

[64]

Finally,
    unions have duties to their members which employers do not have toward their
    employees, including the duty of fair representation, the duty of fair
    referral, and the duty to refrain from intimidation and coercion:
LRA
,
    ss. 74-76. These duties, combined with the democratic power of union members
    over the union executive and the collective bargaining process, create a more
    balanced and non-adversarial relationship than that in the usual situation between
    employees and an employer that administers their benefits plan.

[65]

Bearing
    these important contextual factors in mind, I now consider whether a conflict
    of interest arises in this case.

(d)

The Application of the Contextual Approach to this Case

[66]

To
    begin, I note that the conflict of interest issue in this case is, in general
    terms, a proxy for an inter-union rivalry. In legal terms, however, the dispute
    is between Mr. Garcia and Local 1059. That dispute has been exhaustively
    pursued through Local 1059s internal grievance process and the OLRB. The court
    should not be quick to take up the same fight couched in somewhat different
    terms.

[67]

In
    any event, if the strict approach to conflicts of interest proposed by the
    appellant were to be followed, it is hard to see how a union could function in
    this area. However, the appellant and the Carpenters do not, and plainly would
    not, argue that union officials who are also benefit trust trustees are, by
    that fact alone, disabled from collectively bargaining, even though benefits
    may be at risk in the bargaining process.

[68]

Instead,
    the appellant argues, first, that the adoption of the dual union policy after he
    joined the Carpenters created a clear conflict because it would lead to his
    expulsion when he had accrued the earnings in trust for him. However, as I explained,
    at para. 36 above, the appellant had no beneficial interest in the funds under
    the terms of the Trust.

[69]

Second,
    the appellant argues that trustee Jim MacKinnon was legally disabled from
    laying charges and proceeding with the prosecution before the Trial Board
    because the appellant was a trust beneficiary. This is where the two hats
    metaphor has particular salience. I agree with the application judges analysis,
    at para. 123:

Where fiduciary obligations stem from a legal framework which
    allows or requires the same person or entity to hold dual roles, a conflict of
    interest or duty does not arise merely because the entity or individual makes a
    decision in its non-trustee role (for example as employer or, here, as business
    manager/trustee or union president) that could potentially affect the rights of
    plan beneficiaries. Rather, a conflict occurs "when there is a substantial
    risk that the [business manager/trustee's] representation of plan beneficiaries
    would be materially and adversely affected by the [business manager/trustee's]
    duties to the [union]", always bearing in mind that a trustee's fiduciary
    obligations to plan members do not exist at large, but arise only in relation
    to those tasks and duties stemming from the legal framework established by the
    trust documents and any applicable statutory scheme. [citing
Indalex
, at
    paras. 197-198, 201 per Cromwell J.; See also para. 70 per Deschamps J.]

[70]

The
    functions of union management and benefit trust administration did not overlap
    in the factual context. Jim MacKinnon, as trustee, owed the appellant no
    specific and individualized duty that was engaged by his prosecution for
    violation or breach of the unions Constitution and by-laws. That prosecution
    did not relate in any way to the administration of the Benefit Trust by the
    trustees.

[71]

Third,
    the appellant argues that trustee Jim MacKinnon was legally disabled from
    directing the trust administrator to confiscate Mr. Garcias Dollar Bank. The
    letter, dated February 3, 2012, provides:

Please be advised that [David Garcia] is no longer a member of
    the Labourers International Union of North America, Local 1059 therefore,
    please suspend his benefits effective this date and transfer the balance of his
    welfare bank to the Surplus Fund.

[72]

The
    appellant submits that [i]t was the responsibility of the Trustees,
    collectively, to decide what effect, if any, Mr. Garcias expulsion from Local
    1059 for joining the Carpenters Union would have on his benefits, which they
    abdicated. I reject this argument. There is no doubt that the appellant was
    expelled by Local 1059 by a process, and with an outcome, that are not
    challenged before us. Therefore, I accept the OLRBs conclusion that Local 1059
    was entitled to adopt and enforce the Dual Union Policy. Once the appellant was
    properly expelled, the role of the trustees is limited; they have no overriding
    discretion to provide benefits to a person who is no longer a beneficiary.

[73]

Fourth,
    the appellant submits that the Benefit Plan Booklet suggests that ceasing to
    be a member of Local 1059 would not lead to the confiscation of his Dollar
    Bank; this disabled the MacKinnons from participating in a decision of the
    trustees to adopt a provision in the Benefit Plan purporting to have the
    opposite effect. I have already rejected this argument for the reasons set out
    at para 38.

[74]

Finally,
    I observe that the consequences of any breach in this case are minimal. The
    appellant has experienced no shortfall of benefits and is not out-of-pocket in
    relation to benefits.

[75]

In
    my view, the application judge did not err in taking the approach she did on
    the issue of conflict of interest. I agree with her that no conflict of
    interest existed on the facts of this case.

E.

Disposition

[76]

I
    would dismiss the appeal with costs to the respondents fixed in the amount of
    $32,000, all inclusive.

Released:  April 8, 2015
    DD                       P. Lauwers J.A.

I
    agree Doherty J.A.

I
    agree E.E. Gillese J.A.


