



COURT OF APPEAL FOR ONTARIO

CITATION: Tibbett & Britten Group Canada Inc. v. Sobeys
    Inc., 2016 ONCA 861

DATE: 20161116

DOCKET: C 61918

Blair, Epstein and Huscroft JJ.A.

BETWEEN

Tibbett & Britten Group Canada Inc.

Respondent

(Applicant)

and

Sobeys Inc.

Appellant

(Respondent)

Jennifer McAleer, for the appellant

Peter Griffin and Kelly Hayden, for the respondent

Heard: November 1, 2016

On appeal from the order/judgment of Justice H.J. Wilton-Siegel
    of the Superior Court of Justice, dated March 1, 2016.

ENDORSEMENT

[1]

This appeal arises out of a dispute over whether Sobeys is contractually
    obligated to fund the deficit in an employee pension plan following the wind-up
    of that plan.

[2]

The wind-up was triggered when agreements for which Sobeys and Tibbet
    & Britten Group Canada Inc. are now responsible were terminated. Those
    agreements provided for the sale of certain warehouse assets by Sobeys
    predecessor to Tibbetts predecessor, and a corresponding agreement by
    Tibbetts predecessor to provide transportation services from those warehouses.

[3]

Justice Wilton-Siegel held that Sobeys was obliged by its contractual
    relations to fund the pension deficit directly. Sobeys contests that decision
    and appeals.

[4]

For the following reasons, we dismiss the appeal.

Factual Background

[5]

The complex facts are detailed in the application judges thorough
    reasons. We need not repeat them all here, but touch on the following for the
    purposes of this endorsement.

[6]

In an asset sale transaction in January 1995, a company known as Oshawa
    Foods (Sobeys predecessor) sold its warehousing and distribution assets in two
    of its warehouses to a company known as Surelink (Tibbetts  predecessor). In a
    parallel warehouse and transportation service transaction at the same time,
    Surelink agreed to provide warehousing and transportation services to Oshawa in
    connection with that companys food distribution business.  Under the
    warehousing and transportation agreement (the WTA) Surelink assumed
    responsibility for the former employees of Oshawa who were working in the
    warehouses, including responsibility for the benefits under the existing
    Pension Plan. The extent to which those obligations reverted to Sobeys (as Oshawas
    successor) on termination of the agreement is what was contested on the
    application.

[7]

Following its acquisition of Oshawa in 1999, Sobeys terminated the
    agreements  for reasons open to it under the agreements  and resumed its own
    warehousing and transportation functions. As a result, all of the positions of
    the Surelink employees at the two warehouses were terminated, thereby
    triggering a wind-up of the Plan effective March 5, 2000. Surelink took certain
    steps to further the winding-up process, with the assistance of the Plans
    actuaries, Aon Consulting, and in conjunction with the Financial Services
    Commission of Ontario (FSCO) under the
Pension Benefits Act
, R.S.O.
    1990, c. P.8 (the PBA).

[8]

Tibbetts position (as Surelinks successor) is that by June 2001, Sobeys
    had undertaken by agreement to take over both the administration of the Plan
and
the obligation to fund the deficit in the Plan
    directly. Tibbett submits that Sobeys assumption of the administration of and
    responsibility for the Plan continued with little or no further involvement of
    Tibbett and with the direct involvement of Aon until April 2013, when Tibbett
    says it first learned that Sobeys was refusing to comply with its contractual
    obligation to fund the Plan deficit.

[9]

The application judge held that:

(i)

the termination provisions of
    the WTA required Sobeys to reimburse Tibbett for the amount required to fund
    the deficit that arose on the wind-up of the Plan; and that,

(ii)

Sobeys and Tibbett had reached
    an agreement pursuant to which Sobeys agreed to be responsible for directly funding
    the Plan deficit.

[10]

Sobeys does not contest that it is obliged to reimburse Tibbett for the
reasonable
costs incurred in funding the Plan deficit. It submits, however, that this
    obligation does not render it liable to reimburse Tibbett for the entirety of
    the present Plan deficit (this ties in with an argument that Tibbett is
    responsible for some contributory fault in contract).

[11]

The application judge found the reimbursement obligation to arise by virtue
    of the termination provisions in the WTA which called for the parties to settle
    their financial obligations within 30 days of termination, including the
    settlement of Employee Termination Payments which embraced as well the
    pension obligations relating to the terminated Surelink (Tibbett) employees at
    the two warehouses. Section 9.12(c)(i) of the WTA addressed the settlement of
    those payments:

[Sobeys] shall reimburse Surelink for all other reasonable
    costs and expenses suffered or incurred by Surelink in connection with the
    expiration or termination of this agreement, including without limitation all
    Employee Termination Payments.

[12]

Employee Termination Payments were defined in Schedule A to the WTA to
    include pension benefits:

Employee Termination Payments shall include any and all
    reasonable payments required to be made by Surelink to any pension or other
    employment benefit plans  in respect of Surelink Employees or former Surelink
    Employees

[13]

The application judge found that his interpretation of the foregoing
    provisions, holding Sobeys responsible to reimburse Tibbett for the amounts
    required to fund the Plan deficit, was supported by the business context in
    which the asset sale and the WTA arrangements had been made and by the
    post-contractual conduct of the parties. As noted above, Sobeys does not
    contest its obligation to reimburse under the WTA but does contest the extent
    of that obligation.

[14]

Sobeys vigorously attacks the application judges finding that it agreed
    to assume responsibility for directly funding the Plan deficit, however.

Discussion

[15]

On the appeal, Ms. McAleer advanced four primary arguments. In her
    submission, the application judge erred in finding or holding that:

(i)

the parties had entered into a
    new agreement in or around August, 2001, whereby Sobeys would assume
    responsibility for the administration of the Plan and for directly funding the
    Plan deficit;

(ii)

Sobeys contractual obligation
    to fund the reasonable costs of employee termination rendered it responsible
    for the entirety of the present Plan deficit;

(iii)

the doctrine of contributory
    fault in contract did not apply; and in any event, that,

(iv)

Tibbetts claim, either under
    the WTA or pursuant to any new agreement, was not statute barred under the
Limitations
    Act, 2002
, S.O. 2002, c. 24 Sch. B.

[16]

We reject these submissions, essentially for the thorough and careful
    reasons provided by the application judge, with which we agree.

[17]

During the application the parties acknowledged that the documentary and
    evidentiary foundation for the application did not fully tell the story. It is
    accepted that there may have been documents created during the termination and
    post-termination period that could not be located. Entities had changed at
    Sobeys and Tibbett/Surelink, and at Aon, and personnel had come and gone. The
    parties gathered and put forth the evidence they could and the application
    judge was required to make his findings and draw inferences of fact on the
    basis of the record before him.

[18]

In doing so, he conducted a comprehensive review of both the available
    documentary evidence and affidavit testimony, and he based his analysis and
    conclusions regarding the issues on the application on the results of that
    exercise.

[19]

As noted above, his interpretation of the provisions of the WTA
    grounding Sobeys liability to reimburse Tibbett for the costs of funding the
    Plan deficit were buttressed by his appraisal of the business context in which
    the asset sale and the WTA  and the termination of these agreements  took
    place, and on his consideration of the post-termination conduct of the parties.
    His interpretation of the WTA and his finding that Sobeys and Tibbett had
    entered into a new agreement with respect to the funding of the Plan in
    conjunction with the settlement of their financial affairs after termination,
    were based on a detailed examination of the record before him, including the
    foregoing.

[20]

We see no palpable and overriding error in his findings of fact or of
    mixed fact and law. They were all open to him on the record.

The New Agreement and
    the Requirement for Written Amendments

[21]

We do not agree that the application judge erred in finding the parties
    entered into a further agreement  following the performance of their
    obligations upon termination of the WTA  that pertained to the ongoing
    administration of the Plan, including the wind-up of the Plan and the Plan
    deficit. This finding is consistent with his earlier determination that there
    had been a financial closing of all matters pertaining to the termination of
    the WTA in or about August, 2001, and that this closing incorporated matters
    relating to the funding of the Plan and the Plan deficit as at that time.

[22]

This analysis is supported, as the application judge found, by
    documentation created at the time of the financial closing, most notably: (a)
    the July 2001 Reconciliation setting out the balance sheet treatment of the
    closing out of the financial relations (which contained an entry CO [Company]
    Portion of pension clearing: $547,449.22); (b) a Credit Note from Surelink to
    Sobeys (reflecting the transfer of that amount from Surelink to Sobeys; and (c)
    an internal Sobeys email exchange confirming the transfer. The application
    judge concluded that the $547,449.22 represented the return to Sobeys of money
    paid to Surelink for which Surelink accrued, but did not pay, a liability and
    that the crediting of those amounts to Sobeys was associated with a
    quantification of the Plans funding requirements and the expenses of the Plan
    wind-up as at that time.

[23]

This finding was amply supported on the record, not only by the
    foregoing documentation but also by the fact that Sobeys thereafter accrued a
    liability on its books for the pension deficit, until it decided  without
    communicating that decision to anyone apparently  that it was not responsible
    to fund the deficit directly and reversed the entry in February 2009. In
    addition, the application judge found validation for his finding in business
    logic (it was to Sobeys advantage to take direct responsibility and thereby be
    able to control the outcome, particularly since a number of the warehouse
    employees had returned to Sobeys); in the fact that Sobeys exercised all
    control over the Plan investments post-2001; and in the fact that Aon accepted
    and acted upon Sobeys instructions only thereafter, with no subsequent
    correspondence or conduct between Aon and Tibbett/Surelink or between Sobeys
    and Tibbett/Surelink on the subject.

[24]

All of this provided the basis for the application judges determination
    that the parties had finalised all matters relating to the WTA, including
    matters pertaining to the wind-up expenses and the funding of the Plan deficit
    to that point in time as of August, 2001, and had terminated that agreement and
    entered into a further one respecting the ongoing administration of the Plan
    and the finalization of the wind-up and the deficit.

[25]

It follows from this as well that the application judge did not err in
    determining that the provision in the WTA requiring any modification or
    amendment of the WTA to be by an agreement in writing was not engaged.  There
    was no modification or amendment of the WTA. The parties entered into a new
    agreement.

[26]

While it may be that the application judges statement in the
    penultimate paragraph of his reasons  that Tibbett is entitled to a
    declaration under section 9.12 of the WTA  is confusing, it is clear from the
    wording of his order itself that the declaratory relief granted is based both
    on s. 9.12 and the new agreement.  The Order provides for a declaration that
    Sobeys is to pay the Plan deficit to the Plan. The Order does not provide for
    Sobeys to reimburse Tibbett for the amount of the deficit, which is what would
    have been consistent with the language of section 9.12(c)(i) itself.

The Limitation Period
    Argument

[27]

Sobeys submits that Tibbetts claim is barred by the two-year limitation
    period provided for in the
Limitations Act
.

[28]

The argument is based on the submission that Tibbett knew or ought
    reasonably to have known that the Plan deficit had not been funded nor the
    wind-up completed within the requisite five-year period, namely by March 5,
    2005 and accordingly that the limitation period began to run at that point. This,
    in turn, is founded on the argument that Tibbett retains the statutory
    obligation to fund and to wind-up the Plan under the PBA, that Tibbett was
    therefore responsible for knowing that the wind-up and funding were not
    completed by March 2005, and that accordingly Tibbett must reasonably have
    known that these matters were still outstanding because Sobeys had not
    performed its contractual obligations and had disavowed them at least as early
    as 2009.

[29]

There are a number of difficulties with this position, as the application
    judge noted.

[30]

First, Tibbetts statutory obligations with respect to the Plan under
    the PBA were not the issue on the application (the application judge found, and
    Tibbett does not contest, that it remains subject to those obligations). What
    was at issue was the nature of the contractual obligations as between Sobeys
    and Tibbett whereby Sobeys undertook to fulfill those obligations. In the
    absence of some indication to the contrary, Tibbett was entitled to assume that
    Sobeys was doing so and we see no error in the application judges conclusion
    that, in these circumstances, Sobeys was not entitled in law to convert
    Tibbetts statutory obligation into a
de facto
contractual duty to
    Sobeys to ensure that Sobeys complied with its contractual obligations,
    particularly in the absence of any notice to Tibbett that something was amiss.

[31]

Secondly, there was no such notice. Sobeys concedes that it did not
    advise Tibbett, or Aon, or FSCO, that the Sobeys Pension Committee had
    determined at a meeting in February 2009 that Sobeys was not responsible for
    the Plan and that Sobeys shortly thereafter reversed its balance sheet
    liability for the Plan deficit. Aon became concerned about the growing size of
    the deficit in 2010, but there was no communication between Sobeys or Aon and
    Tibbett until Aon advised Tibbett in a letter dated April 17, 2013 that there
    remained outstanding issues pertaining to the Plan. The application judge
    accepted this evidence, as he was entitled to do.

[32]

Finally, in a finding relating also to Sobeys contributory fault
    argument, the application judge determined that Tibbett had not failed to act
    with due diligence in connection with its wind-up and deficit-funding
    obligations. That finding was open to him on the record.

[33]

Based on the foregoing, as more fully canvassed in his reasons, the
    application judge found that the limitation period did not begin to run until
    April 17, 2013.  Tibbetts application was therefore timely.

Reasonable Costs and
    Contributory Fault

[34]

Although Sobeys accepts that it is liable to reimburse Tibbett for the reasonable
    costs and expenses in relation to the wind-up and Plan deficit, it submits
    that this responsibility does not extend to reimbursement of the entire amount
    of the present Plan deficit. There appear to be two components to this
    position.

[35]

Sobeys submits, first, that Tibbett/Surelink acted unreasonably and
    without the requisite due diligence in its approach to winding up the Plan and
    dealing with the Plan investments. As a result, the amount sought by Tibbett 
    either on a reimbursement or direct funding basis  does not constitute a
    reasonable payment as required under section 9.12(c)(i) of the WTA. Secondly,
    Sobeys submits that the application judge should have found Tibbett/Surelink
    responsible for contributory fault in contract.

[36]

Both of these submissions are essentially factually-based, however, and
    the application judge made a finding, for reasons explained in his decision,
    that Tibbett had acted with due diligence. He was entitled to make this
    determination on the record and we see no basis for interfering with it. The
    reasonable payment and contributory fault ground of appeal cannot succeed.

Disposition

[37]

The appeal is dismissed.

[38]

The respondent is entitled to its costs of the appeal fixed in the
    amount of $22,000 inclusive of disbursements and all applicable taxes.

[39]

We understand that one issue remains to be determined by the application
    judge in terms of the costs of the application, namely whether it is entitled
    to its costs on a full indemnity basis under the WTA. Nothing in this order is
    intended to affect the resolution of that outstanding issue.

R.A. Blair J.A.

Gloria
    Epstein J.A.

Grant
    Huscroft J.A.


