Piliotis v. Ontario Municipal Employees'
Vassilios Piliotis and Robert Dureno, Applicant, and
Ontario Municipal Employees' Retirement Board,
Dale Richmond the President and C.E.O. of Ontario
Municipal Employees' Retirement System, Respondent
 O.J. No. 6236
Court File No. 1403
Ontario Superior Court of Justice - Divisional Court
R.T.P. Gravely, G.I. Pardu and D.J. Nadeau JJ.
Heard: January 10, 2005.
Judgment: January 14, 2005.
Mr. R.G. Colautti, for the Applicant
Mr. T.J. O'Sullivan and Amy L. Block for the Respondent Ontario Municipal Employees' Retirement Board
Mr. D.A, Stamp and Mr. C. Corlett for the Respondent Dale Richmond the President and C.E.O. of Ontario Municipal Employees' Retirement System Services
The following judgment was delivered by
1 THE COURT (endorsement):-- The applicants challenge by way of judicial review a decision of the Ontario Municipal Employees' Retirement System Board to the effect that an early retirement incentive paid to them in the form of an increased salary over the last months of their employment did not qualify as "contributory earnings" because they were "payments made as retirement bonuses or otherwise as a result of retirement" as described in Ontario Municipal Employees' Retirement System Regulations, s. 1(1)(b).
2 The Greater Essex County District School Board (the employer) was faced with a surplus number of management employees following amalgamation with another school board. It approached the applicants Piliotis and Dureno to see whether they would be interested in an early retirement package.
3 Mr. Dureno advised the employer,
I am proposing to retire on December 1, 1999 if I receive an early retirement incentive of eighteen (18) months salary. This incentive along with current contract commitments would be paid between July 1, 1998 and December 31. 1999 in such a way as to maximize my pension and minimize my income tax obligations.
4 Mr. Piliotis wrote to the employer and proposed,
That the Board grant me a financial incentive of not less than one and one half times my salary and that I be allowed to use this financial incentive to increase my pension.
5 The employer agreed to offer Early Retirement Incentive Packages of 9 months salary to Mr. Piliotis and 18 months salary to Mr. Dureno, and that these commitments "be paid in a manner to facilitate the retirement and maximizing of the pension of the employee".
6 Dureno's early retirement incentive of 78 weeks pay was paid out to him in a newly negotiated salary calculated by adding the retirement incentive to his former salary over a 12 month period ending June 30, 1999, when he retired. Mr, Piliotis' early retirement incentive of 39 weeks pay was spread out over the 19 months preceding his retirement on December 31, 1999, also paid as a newly calculated salary incorporating the former salary and the retirement incentive.
7 Both employees wanted the retirement incentive structured this way because they believed that while a lump sum retirement incentive would not qualify as contributory earnings for the purposes of calculating their retirement pensions, retirement incentives would qualify as "contributory earnings" if structured as salary payments before retirement. The payment of the early retirement incentive in this fashion substantially increased the applicants' contributory earnings over the last 12 - 18 months of their employment and directly affected the calculation of their pensionable earnings, based on the best 5 years of contributory earnings.
8 Other members of the Ontario Municipal Employees' Retirement System pension plan complained and the Ontario Municipal Employees' Retirement System wrote to Dureno on September 20, 1999 to advise,
We are writing in regards to inform you that some questions have arisen with respect to your contributory earnings that form the basis of your monthly pension calculation.
As a result, Ontario Municipal Employees' Retirement System is completing a further analysis to determine if an error has been made in calculating your monthly pension amount. If this is the case, we wanted to alert you that a reduction in your monthly pension amount and an overpayment recovery may be required.
9 A copy of the letter was sent to Mr. Piliotis, who had not yet retired. On February 24, 2000 the president wrote to Piliotis and Dureno to indicate, Under Ontario Municipal Employees' Retirement System Regulation,
I have the authority to determine the amount of a benefit that is payable. I shall be making a determination on this matter on April 25, 2000.
According to Ontario Municipal Employees' Retirement System Regulation s. 4(1)(c) the president,
Shall determine whether or not a benefit is payable, the amount of a benefit that is payable and to whom a benefit is payable under this Regulation.
10 The president issued a decision dated April 25, 2000, that "the reported earnings did in fact include retirement bonuses or "financial incentives" as a result of retirement or termination of employment" and directed that the contributory earnings be re-calculated excluding those amounts for both applicants.
11 Section 4(2) of the Regulation provides,
Any person aggrieved by a determination made by the president or by the failure of the president to make a determination under clause (1)(e) or (f) or under any other provision of this Regulation relating to an approval, consideration or direction to be given or other action to be taken by the president may appeal to the Board for such determination or failure to make a determination and the decision of the Board is final.
12 The appeals sub-committee of the Board dismissed the applicants' appeal, holding,
The Committee is unanimously of the view that the evidence overwhelmingly indicates that the payments made to the Appellants attributable to their ERIP arrangements should be excluded from pensionable earnings. Those payments fall outside of the definition of "contributory earnings" in the OMERS Regulation as properly interpreted.
We find that the exclusion from contributory earnings of payments made as retirement bonuses or otherwise as a result of retirement or other termination of employment ..." applies to the situation of both Appellants. The evidence is clear that the Appellants and the Board entered into an arrangement which was designed to induce and facilitate the retirement of the Appellants from the active employ of the Board in a way which artificially inflated the salaries of the Appellants for a brief period of time for the purpose of increasing their pension to something approaching what it might have been had they remained as employees until normal retirement age. These payments, which were in addition to the regular salary being paid to the Appellants were, in our opinion, clearly payments made "as a result of retirement or other termination of employment" within the meaning of the exclusion.
While we accept that the Appellants and the Board honestly believed that they had entered into an arrangement which had legitimately circumvented the provisions of the OMERS Regulation, we do not believe that effect should be given to such an arrangement which, while attempting to create the appearance of formal compliance, appears to us to be at odds with the purpose of the OMERS Act and the OMERS Regulation. We adopt as our own the statement from Driedger on the Construction of Statutes (at p. 115) that "if subjects are permitted to circumvent the spirit of legislation, the object sought by the legislature will not be achieved and the legislation will end in failure."
While the arrangements entered into by the Appellants and the Board appear to be genuinely and legally effective as between themselves. we believe their purpose, at least in part, was the avoidance of the intended application of the OMERS Regulation. We believe that to permit such an avoidance scheme to succeed is unfair and would add to the burden carried by other compliant members of OMERS.
For the foregoing reasons, we find that the portion of the salary for the Appellants attributable to the Early Retirement Incentive arrangements entered into with the Board should be excluded from contributory earnings for OMERS pension purposes.
13 Section 1(1)(b) of the Ontario Municipal Employees' Retirement Board regulation expressly excludes from the definition of "contributory earnings", "payments made as retirement bonuses or otherwise as a result of retirement or other termination of employment whether in respect of long service or otherwise".
14 The applicants argue that the Board erred in five respects:
1) It failed to determine their salary and disregarded the express terms of the contract.
2) It ignored the wide definition of "earnings" in s. 1 of the Ontario Municipal Employees Retirement System Act which included perquisites.
3) It deprived the applicants of the ability to adduce evidence of past practices of the Board and erred in refusing to allow them to rely on estoppel and their legitimate expectations.
4) It ignored the mandatory prohibition in The Pension Benefits Act against retroactive changes to pension plans.
5) It erred in failing to conclude that the president was functus once the pension payments began.
They argue that these errors were so serious as to deprive the Board of jurisdiction and that the standard of review should therefore be "correctness".
15 Factual findings as to the nature of payments made to employees and interpretation of "contributory earnings" lie at the heart of the Board's expertise in managing and administering pension funds. The Ontario Municipal Employees' Retirement System Act does not contain a privative clause, but there is no right of appeal. The context of this dispute does not justify a different standard of review than was appropriate in Metropolitan Toronto Police Services Board v. Ontario Municipal Employees' Retirement System1 and Martin v. Ontario Municipal Employees' Retirement System2, namely "reasonableness".
16 There is no basis to relate these issues to the Board's jurisdiction, and impose a higher standard of "correctness".
17 In our view, the decision of the Ontario Municipal Employees' Retirement System Board that the early retirement incentive payments equivalent to 18 and 9 months pay, but paid in the form of an increased salary over the last months of the applicants' employment were "payments made as retirement bonuses or otherwise as a result of retirement" was reasonable. The Ontario Municipal Employees' Retirement System Board is bound to administer the pension plan fairly for the benefit of the membership as a whole, and it does not err in looking at the true nature and substance of the salary arrangements, as opposed to their form.3
18 The Ontario Municipal Employees' Retirement System Board is not tied to the characterization of the nature of a payment agreed upon by an employer and employee who are presumably looking after their own interests and not those of the pension plan members as a whole.
19 The applicants argue that the Ontario Municipal Employees' Retirement System Board was estopped from treating the retirement incentive paid as an increased salary as excluded from contributory earnings because the manual prepared by Ontario Municipal Employees' Retirement System to assist employers in administering the pension contributions stated that "lump sum retirement payments" were excluded from contributory earnings and that this led the applicants to believe that such payments structured in the form of an increased salary paid periodically would so qualify. The manual does not make this assertion, but is silent on that issue. The Board decision did not amount to a reversal of position expressed in the manual.
20 In any event, as noted in Canada (Minister of Employment and Immigration v. Lidden,  2 F.C. 621 (C.A.)
The doctrine of estoppel cannot be invoked to preclude the exercise of a statutory duty - here, the duty of the officer to deal with the application as it was presented - or to confer statutorily defined status on a person who clearly does not fall within the statutory definition.
21 The Ontario Municipal Employees' Retirement System Board has the duty to determine whether payments to the applicants fall within (he definition of "contributory earnings". As noted by the Supreme Court of Canada in Baker v. Canada (Minister of Citizenship and Immigration) (1999) 174 D.L.R. (4th) 193 at para. 26,
The doctrine of legitimate expectations cannot lead to substantive rights outside the procedural domain.
22 The applicants cannot use the silence of the manual regarding the retirement incentive paid to them as a foundation for pension benefits not accorded by the Ontario Municipal Employees' Retirement System Act and Regulations.
23 For the same reason, opinions expressed to the applicants by former Board members of Ontario Municipal Employees' Retirement System cannot constrain the Board's interpretation of the regulation.
24 The Board's decision did not prevent the applicants from introducing evidence of past practices as a guide to interpretation of "contributory earnings", however the Board's refusal to allow the representations attributed to the manual and former Ontario Municipal Employees' Retirement System Board members to found arguments based on estoppel, legitimate expectations or negligent misrepresentation did not deprive the applicants of natural justice because these matters could not alter the Board's statutory duty to interpret the regulation.
25 The applicants argue that the Board's decision deprived them of "vested pension rights" however the applicants were entitled at all times to a pension calculated according to the Ontario Municipal Employees' Retirement System Act and Regulations. There was no retroactive alteration of the terms of the pension as is prohibited by s. 14 of the Pension Benefits Act R.S.O. 1990 c.p. 8.
26 Finally, the applicants argue that the president was functus officio when he decided that the retirement incentive should be excluded from contributory earnings. Mr. Dureno had by then been receiving his pension for about three months and Piliotes for one month. The applicants argue that the president having initially decided they were entitled could not re-decide the matter.
27 In most cases the calculation of contributory earnings will not be controversial. Section 1(1) of the Regulation creates a presumption that the amount of contributory earnings reported by the employer is accurate and provides,
... unless the contrary is established to the satisfaction of the president, the contributory earnings of a member shall be deemed to be the contributory earnings that would be represented by the amount of contributions actually received by the Fund in respect of the member.
28 This enables the Ontario Employees' Retirement System Board to begin immediate payment of the pension based on the amount of contributory earnings reported. In the event new information is provided to the president which calls into question the calculation of contributory earnings, it is entirely appropriate that he reassess the calculation. This is not a re-hearing of the same dispute in the sense described in Chandler v. Alberta Association of Architects,  2 S.C.R. 848. Otherwise there would be effectively no one who could protect the interests as a whole of pension members. Neither the employer nor employee would be likely to do so in circumstances like these. The initial use of the presumption to permit immediate payment does not involve the resolution of any dispute. In that sense the president is not re-hearing the same matter if new information causes him or her to re-examine the calculation of "contributory earnings". Sopinka J. indicated in Chandler v. Alberta. Association of Architects, that the principle of functus officio applies to administrative tribunals but noted at page 862,
To this extent, the principle of functus officio applies. It is based, however, on the policy ground which favours finality of proceedings rather than the rule which was developed with respect to formal judgments of a court whose decision was subject to a full appeal. For this reason I am of the opinion that its application must be more flexible and less formalistic in respect to the decisions of administrative tribunals which are subject to appeal only on a point of law.
29 In any event the applicants appealed to the Ontario Municipal Employees' Retirement System Board which held a full de nova hearing, on the merits and did not improperly re-visit or re-open its decision.
30 According, the applications are dismissed. Counsel may make brief written submissions as to costs within 15 days.
R.T.P. GRAVELY J.
G.I. PARDU J.
D.J. NADEAU J.
1 (2000), 45 O.R. (3d) 622 (C.A.)
2 (2002), 47 Admin. L.R. (3d) 100 (Ont. Div. Ct.)
3 Sullivan, Driedger on the Construction of Statutes (3d) Toronto, Butterworths, 1994 at p. 120